Strategic Human Resource Management - Essay Example

Strategic HRM Contents Introduction 3 Discussion 4 Conclusion 11 References 13 Bibliography 15 Introduction Strategic Human Resource Management (HRM) defines the intentions and plans of an organization to manage the human resources of the business in a suitable and beneficial manner. It is aimed at defining the plans of how the business can achieve its core objectives through the appropriate management and employment of the available human resources. Strategic HRM is a concept developed on the basis of three main principles. The first principle states that human capital in an organization is a major source of competitive advantage creation. The second principle signifies that it is the work force of an organization which actually implements the strategic plan of the organization in the practical scenario. The third principle reflects that a systematic approach should be developed by an organization in terms of human resource management for defining the objectives of the organization and the plans as to how these objectives can be attained. This report is prepared with the aim of identifying the core strategic issues in one of the fastest growing and largest companies operating in the Electronics Manufacturing Services (EMS) industry, Foxconn Technology Group. The core strategic issues in the company which have acted as impediments in the way of successful management of the company are identified and evaluated with the use of established strategic HRM theories and concepts. The report also includes the identification of suitable solutions for the existing strategic problems in the company which are presented as recommendations to the management. The report is concluded with a summary of the overall case study analysis. Discussion Strategic HRM is a process which includes the formulation of suitable approaches for developing human resource strategies in an organization (Smit and Trigeorgis, 2004). The development of strategic human resource systems and processes is important for every organization because strategic HRM is considered to be a major source of generating competitive advantage. Also, the human resource strategies can be vertically integrated with the business and corporate strategies and horizontally integrated among the different groups of strategic HRM strategies. These strategies are aimed at defining the plans of the organization with respect to the specific business considerations like people management, organizational effectiveness, employee relations management, reward and appraisal systems, learning and development, resource management etc. (CCH Australia, 2011). Foxconn Technology Group is a leading electronics manufacturing company and is one of the main suppliers of Apple Inc. The company operates with low pricing schemes. The low pricing of the company acts as the main differentiating factor and competitive advantage for Foxconn. It can be identified that the company is able to quote competitive prices on the basis of reduced operational costs facilitated by the low labor wages in parts of China where the factories of Foxconn are located. The core issue identified from the case study circulates around the rising employee dissatisfaction of the human resources working in Foxconn Technology Group. The rising number of suicides of the employees of Foxconn in 2010 indicates at the unsettling human resource management problems within the company. It can be seen from the case study that the labor conditions in the company are extremely poor. Foxconn Technology Group is identified to be using sweatshop practices and has been severely criticized because of this. According to a number of surveys conducted by different organizations and media, the working conditions in the factories of Foxconn are extremely adverse. The employees are treated in an unethical manner, the work pressure is tremendously high, the work hours are highly extended with the average working hour being more than 14 hours a day and also, the basic necessities and facilities of work are not provided with. All these factors add to the psychological and physical problems of the workers in the factories of the company. Foxconn is much criticized because of the harsh treatment of the labors and the low wages that it pays to the workers. Most of the labors of Foxconn include the people who are migrators in China, especially in Shenzhen. The company has its main factory in the Longhua Science and Technology Park which employs more than 400,000 employees. Another 3400,000 of the employees are housed by other factories of Foxconn in and around Shenzhen. Terry Gou, the founder of Foxconn Technology Group is known for his autocratic and overly strict leadership. He has set up his factories in many locations of China. In each of the factories, he has established strict work measures focusing on giving more priority to the benefits of the company than the personal benefits of the workers. In this process, he has established work guidelines which are known to affect human physiological systems in the long term. The established dormitories of the factories are in poor condition and are unhygienic for living. Also, the company pays extremely low wages to the labors in the factories. The labor groups consist of mainly the migrated groups who have little scopes to work in the country (Caplan, 2008). Foxconn paid wages of around USD 90 in 2007 which it increased to USD 132 in 2010. However, both of these wages are identified to be extremely low in the respective times and left the workers of Foxconn with no scope of building a secured future. The low wages, harsh treatment, extreme work overload and adverse work conditions create much mental and physical exhaustion for the employees which was one of the main causes for driving the suicides incidents of the labors one after another. The company has been forced to raise the wages of the labors due to the intense pressure caused by the external environment after the labor suicide incidents. However, increasing the labor wages to a high extent would mean more difficulty for Foxconn to compete in the Electronics Manufacturing Industry (EMS). The electronics manufacturing industry is already a highly competitive industry. According to the Porters five force analysis, both the bargaining powers of buyers and suppliers in this industry are extremely high. The intensity of competitive rivalry is also very high (Vroom, 2006). The factor of threat of substitute goods is medium while the threat of new entrants is low. Since the company operates in an intensely competitive environment, it so very important for Foxconn to maintain its competitive advantage to secure its position in the industry (Ding and Waner, 2001). As mentioned earlier, the main competitive advantage of Foxconn is its low price offering which is possible because of the low operational costs of the company. An increase in the labor wagers would mean and increase in the operational costs of Foxconn. This would directly impact the pricing strategies of Foxconn as a result of which the company may lose its competitive advantage for operating efficiently in this industry. Strategic HRM is an important approach for supplying a perspective on the methods in which critical issues related to people in the organization can be resolved and addressed. Also, strategic HRM helps to provide strategic decisions that can have major impacts on the success of the organization in the long term (Mello, 2001). The fundamental aim of this management concept is to support the development of the strategic capability of an organization through the creation of a base of well-motivated, committed and skilled employees who would help the organization to achieve and maintain sustained competitive advantage. This is highly relevant to the case of Foxconn. The company is currently experiencing a turbulent environment in which the workers are dissatisfied and agitated. This has created a negative work environment within the company which is a barrier in the way of competitive advantage creation. Strategic HRM can help Foxconn to overcome this turbulent situation and also provide a sense of direction to the company. Foxconn needs to implement strategic human resource management policies in order to create a unifying and integrated human resource management framework that would add value to the existing human resources of the company. Human resources are undoubtedly the most critical and valuable resources that can be available to an organization. Tapping in the human resources rightly helps an organization to go a long way on creating beneficial conditions for itself. Thus, Foxconn should focus on taking into consideration the interests of the management as well as the employees of the organization in order to create a competitive position for the business in the electronics manufacturing industry. For this purpose, Foxconn should focus on soft strategic HRM as well as hard strategic HRM. Soft strategic HRM refers to the human resource management putting more emphasis on labor and human relations aspects of people management (Fish, Schoenfeldt and Shaw, 2003). This would include factors like communication development, physiological and physical development of the employees, improvement of work life balance, improvement of work life quality, security of the employees, job satisfaction and motivation of the employees etc. On the other hand, hard strategic HRM would focus more on results which can be attained by managing the human resources and which are more in line with the interests of the organization rather than the interests of the employees. Strategic HRM aims at creating a proper balance between soft strategic HRM and hard strategic HRM so that the organization can achieve its goals by managing the people resources efficiently and effectively (Kazmi and Ahmad, 2001). Like every organization, Foxconn also operates with the aim of making profits. As such, the primary goals of the company are to increase its margins and competitive advantage which is possible by reducing the operational costs. However, in addition to this, Foxconn should also consider the human aspects of management which are included in the concepts of soft strategic HRM. Investing in human resource management would help the company to align the interest of the people with the interest of the organization and help it to achieve results more easily. It can be identified that Foxconn has focused extensively on strategic HRM concepts which are in line with the interests of the business. In this process it has left behind the requirements of the human resources of the organization. This has resulted in the development of an agitated and unsettled environment in the company. This can be solved by taking suitable steps to ensure that the interest and benefits of the labors are also considered by the management of Foxconn. Foxconn is in a situation in which it has to improve the satisfaction and motivation level of the employees without having to increase the operational costs. This would be possible if Foxconn engages in efforts to improve the labor relations by managing the work environment efficiently (Bratton, 2012). Creating value for the employees would make it possible for Foxconn to create a satisfied group of labors without having to directly increase the labor wages. The Storey’s typology model of HRM can be implemented in this case (Boselie, 2010). Figure 1: Storeys HR role model According to the Storey’s HR role model, the HR managers can assume 4 major roles which are advisors, handmaidens, regulators and changemakers. The company currently has managers who are regulators. They focus on formulation and observance of employee rules. In the present situation, the HR managers have to assume the role of changemakers who would enhance the employee relations according to the changing needs of the business and advisors who would perform the role of consultants in the internal organizational environment. The role of handmaidens which focuses on customer relationships is not applicable in this scenario. High performance management can be identified as a best fit solution for the present issues in Foxconn (Hartog and Verburg, 2004). High performance management including high performance work system is a strategic HRM approach that can be implemented to create and support a highly motivated, satisfied and participative work force, In this approach, work satisfaction based on non-monetary schemes are focused. This may include the introduction of suitable training and development processes, performance appraisal systems functional grievance redressed systems, and proper compensation and promotions systems (Peng, 2006). Foxconn can start with redesigning the job requirements and job roles. The current operational system of the company requires every labor to work with high responsible, work pressure and intensive work load. Foxconn should focus on reducing the work load on each employee so that they are not psychologically and physically affected by extensive work loads and work pressures (Warner, 2004). The company should focus on improving the communications of the labors with the line managers and supervisors. Almost 6 of the 14 suicide incidents of the labors of Foxconn have been caused by extreme work pressure and stress. Therefore, Foxconn should take measures to reduce the work load of the labors. This can be done by employing more number of labors and redesigning the operational processes as well as the job roles. Foxconn employs many security guards in the factories whose main job is to maintain strict rules in the factories and dormitories. These rules include that conversations are barred in the production lines; the labors take minimum duration breaks in their work and do not socialize in their dormitories. Also, the security guards do not have any responsibility to look after thefts which means that the wages and belongings of the labors living in the dormitories can be easily stolen. As per records, 1 of the 14 suicide cases of the labors of Foxconn was caused because of stolen wage. Therefore, the stealing of wages should be prevented to prevent any major repercussions. Foxconn has to find the best fitting human resource strategies that would be in alignment with the business strategies and the corporate strategies of the company and that would help the company to maintain its competitive advantage in the market. In the background of the suicide incidents and the public and media reactions to them, Foxconn should immediately take suitable measures to offset the negative publicity of the company. Firstly, the company should introduce revised leadership policies and work guidelines (Wang, 2005). Foxconn has already been forced to increase the labor wages due to the pressure from the external environment including pressure from the media, public as well as its client company, Apple Inc. Secondly, the company should also try to find other strategic ways to ensure that the human resource practices are improved so as to build motivation and satisfaction among the employees of the company. A decrease in the dissatisfaction among the workers regarding various work factor like working conditions, wages, facilities etc. would lead to lesser chances of extreme reactions from the employees like suicide. If the company is able to create better working conditions and guidelines for the workers in its factories, this would enable it to establish a satisfied base of labors without having to increase the wages further. An increase in the wages any further may directly impact the operations of the company and hinder the creation of continued competitive edge for the business. Therefore, the company has to focus on alternative strategic HRM concepts like improvement of labor relations, development of supportive leadership and creation of positive patterns in the worker relationships to control its operational cost while maintaining the operational efficiency (Armstrong, 2006). Conclusion From the detailed case analysis of Foxconn in strategic HRM perspective, it can be concluded that an immediate improvement in the work conditions of the factories of Foxconn is extremely necessary. The stock prices of Foxconn have fallen after the high degree of negative publicity caused by the suicide incidents of the workers. Also, Foxconn has been severely criticized for the sweatshop practices which are considered to be completely unethical in the modern business domain. To create an ethical image for itself and to re-establish its image in the industry, Foxconn has to focus on improving multiple aspects of its human resource management. Since, the increase in prices of the products may not be accepted by major clients of Foxconn like Apple Inc., therefore, it is advisable for Foxconn to ensure maintaining a low operational cost. The maintenance of controlled operation expenses would help the company to keep low prices of its products. The maintenance of low prices is directly linked to the labor wages. Therefore, Foxconn should employ other ways of strategic HRM to improve the labor relations and control the labor costs. This would help to build an ethical image for the company as well as add to the competitive advantage creation for the company. References Armstrong, M., 2006. Strategic Human Resource Management: A guide to Action. London: Kogan Page. Boselie, P., 2010. Strategic Human Resource Management: A Balanced Approach. New Jersey: Mcgraw Hill. Bratton, J., 2012. Human Resource Management: Theory and Practice. London: Palgrave Macmillan. Caplan, J., 2008. 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