Strategic Organisational Issues at the IIC Ltd - Essay Example

Strategic Organisational Issues at the IIC Ltd. Q1 Outline and discuss the external influences on the IIC (International Instruments X-Ray business Case study) business unit, appropriate strategic responses and related HR factors that they need to address. (20 %). An organisation whether business or otherwise does not exist and operate in isolation but within an environment, which is dynamic and impacting upon its operations. Therefore, as an organisation interacts with and operates within its business environment, the impact of external influences needs to be considered and incorporated into the decision making process. In responding to these external pressures, an organisation must use a strategic architecture, which is the essential link between today and tomorrow in identifying what the company has to initiate today, to intercept the customer needs in the future (Hamel & Pralahad 1994). This essay aims to assess the external influences affecting the X-Ray Business Unit (XRBU) of International Instruments Company Ltd (IIC) and propose appropriate strategic responses, proceeded by an analysis of Human Resource Management (HRM) issues prevailing in the organisation with a focus on performance based remuneration systems as well as job analysis process. External Influence In assessing external influences impinging upon an organisation, environmental and industry analysis tools such PESTLE and Porter’s Five Force analysis can be applied. In the case of IIC, the key external factors impinging upon the company operations can be identified as follows: Political factors impinging upon IIC includes the current process of globalisation increasing competition; greater free trade minimising the protectionist tariffs, which allows foreign goods to compete in national markets with close price parities and the wide spread terrorism which has increased security precaution operations in unprecedented scale (Hall, Jones & Raffo 2004). Environmental influences impacting upon the company includes the heightened level of environmental regulations pertaining to industrial facility locations. Social factors, can be identified in the shifting trends in world demographics. The ageing population of the world will be more susceptible to illnesses, which requires X-Ray facilities in diagnosis expanding markets. Life style improvements in developing countries will also lead to better health care facilities. Technological factors influencing the business unit include the rapid developments of new technology driven by other competitors and the possible new applications of the X-Ray technology, which will widen the overall market. Trends in software development industry will also influence the IIC operations. Software developments are being outsourced to many cheaper locations such as India and China, which facilitates reduced cost structures. As almost half the cost of IIC products’ cost structures are associated with computing and software, these outsourcing trends will be significant for the company. Legislature on product quality and standardisation requirements should also be considered. The company should also consider the effects of copyright infringements by countries in developing world that are skilled in duplicating the technologies at far less costs (PESTLE Analysis d.n). Economic factors impacting upon the operations would include overall development of national incomes of developing nations, which leads to better standards of healthcare and investments in instruments such as X ray units. Economic impact of high costs associated with technology based product development coupled with lower price pressures by industry forces will affect the company’s profitability. Competitive forces exerting influences on the company includes the high level of rivalry among existing players. Here the other competitors who are more agile in introducing new products to the market is also with leaner cost structures, offering low prices. Threat of new entrants is not high with the high research & development cost associated with technology driven operations as X-Ray instruments. Issue of substitutes is constantly present threat in technology-based industries where a new technology can render the current industries completely obsolete within short period of time (Porter 1996). Strategic Business Responses Strategic responses of a company to its business environment should not only take in to account the current situation but also the probable long-term trends indicated by the external influences (Thomson & Strickland 2003). Following strategic responses are appropriate for IIC in view of the external influences as well as internal conditions. Organisational Restructuring from mechanistic to organic state which is essential for speedy and agile market responses required by technology based industries. (Lawrence & Lorsch 1967). Altering the functional work group arrangements and implementing high performance project teams to facilitate agility, performance and cost management (Weiss 2000). Creating a learning organisation, which will facilitate innovation and knowledge management required to stay ahead in technology based industries. Such a strategy will promote collaborations with customers, benchmarking and adopting best practices (Garvin 1993). Developing new markets – through new products, new applications, new technologies and geographic expansion in to developing countries. Customer focus through relationship marketing, customer collaborations in R&D. Strategic alliances with large-scale customers. (I.e. Health and Security ministries.) (Peters & Waterman 1982). Revamping the role of HRM by developing a strong HRM department with a HRM strategy aligned with the IIC’s global potential. Organisational Culture building through inculcating clearly defined organisational vision and values. Human Resource Management (HRM) Issues Organisations seeking competitive advantages are focusing more and more on their human capital as other sources of establishing a competitive edge has diminished over the years (Lawler 2000). Companies can increase productivity, efficiency and manage costs through numerous aspects of Human Resource management involving better selection and recruitment, development and training, fostering of learning environments, fostering innovation, performance management and implementing effective rewarding strategies to drive performance. In this light, IIC needs to address the following key HRM issues pertaining to its X-ray Unit. Lack of Job Analysis process which reduce effectiveness of recruiting, evaluations and career development as well as impact adversely on productivity due to lack of job descriptions and person specifications to provide guidelines to employees of what duties and roles are expected of them needs to be addressed (Cook 1998). Lack of Job Evaluation to establish worth of each job to the company, which will facilitate the establishment of internal equity in pay structures, also needs to be considered (Schwind, Das & Wager 2002). The company also needs to establish effective Remuneration policies and strategies which links performance with rewards. Current level of low staff moral resulting from lack of Career Development prospects and proper Performance Evaluation process is an immediate concern affecting workforce moral as well as productivity. Undefined leadership roles which will negatively impact upon strategic decision making as well as organisational culture and team dynamics also need to be rectified. The company needs to restructure the existing hierarchical structures with functional “stove pipe” segregation in to more dynamic and flexible project teams operate as high performance autonomous work groups (Weiss 2000). Q2 - Discuss the issues that General manager needs to consider in introducing performance –related pay. (40%). Implementing Performance Related Pay An organization’s remuneration system involves financial and non-financial benefits, which an organization is able to and willing to offer to its employees in exchange of for employee contribution (Cascio 1998). An effective remuneration strategy will aid the company in attaining not only the cost control objectives but also a host of other objectives, which has direct impact on achieving the Organization’s overall Strategic Goals and Corporate Vision. Some of the key objectives of a Remuneration system will include acquiring quality personnel who can add value to company operations, retaining present employees, ensuring equity, rewarding desired behavior in compliance with company culture and goal and also comply with the legal regulations (Schwind, Das & Wager 2002). Remuneration Strategies should be addressed with an integrated approach rather than treating in isolation and should be developed in a systematic manner than resorting to ad-hoc means. The lack of a strategic reward management system in any organizations takes away the opportunities to influence the behavior of employees in a way that could benefit the business. An effective remuneration strategy’s primary focus should be on deriving a high performance through its workforce by promoting and rewarding performance (Lawler 2000). Therefore, adopting remuneration strategies, which are directly linked to performance through Pay For Performance (PFP), methods are becoming widely popular among organisations (Armstrong & Murlis 1988). In a PFP system, remunerations & rewards are defined by individual behaviour combined with individual and organisational performance. “Performance standards are defined in alignment with organisation’s strategic objectives and employees are remunerated for meeting or exceeding these standards” (Dow 2004). For such a system to be effective, the top management team’s commitment and guidance is crucial, as PFP system’s measurements have to be developed in alignment with strategic objectives of the organisation. Such a system enables employees to be clear in their understanding of their role and contribution to the organisation’s achievement of overall vision. Considerations In Implementing A PFP System In implementing a Pay For Performance system at IIC, a number of critical issues need to be considered. It is necessary to decide on whether the PFP system will be individual or group based or whether a combination of both is to be incorporated. If team based PFP systems are being implemented, clearly defined team objectives and work targets such as number of new products, project lead-time for launching new products etc is applicable in the case of IIC. In a team based PFP system, teams are ranked as per their performance and team bonuses will be provided as per the ranking. In order to ensure that team members varying degree of contribution is taken in to account and “free rider” issue is identified if present, a peer rating system can be applied within the team to decide on the sharing of the incentive. Such measures improve workforce moral where higher rewards are for those team members who contribute more to the team performance to a greater degree (Cascio 1998). If individual PFP systems are to be implemented, considerations have to be made on which incentive methods are appropriate. Merit pay system, assess the individual performance and a salary adjustment is made as per the performance on annual basis. While this is the most common form of individual PFP methods, it’s weakness include the ineffectiveness in motivating performance as the principal of merit pay yields “annuity effects; lack of clear link to desired performance and lack of correlation between timing of incentive and timing of rewarded performance (Bratten & Gold 1999). Other forms of Individual performance rewarding needing consideration include discretionary bonus payments, piece rate wage or a commission based reward system. If purely incentive based pay systems are chosen, some scenarios where adverse external conditions beyond employee control affecting performances should also be considered. The most crucial issue in a PFP system involves the performance measures and standards, which should be in alignment with overall strategic objectives. Here, the measurements should be specific, measurable, achievable and time bound. A “Base line” for performance standards should also be established (Dow 2004). These measures should be clearly communicated to the employees and thus, proper communication systems should be in place. The measures should be coupled with an effective performance analysis system in order to assess employee performance. While Performance appraisal techniques are in abundance for companies to choose from, consideration has to be given as to what method suit best in terms of type of work being assessed as well as support the organisational background and its structure (Swan 1991). While methods such as Global Essay and Rating, Trait Rating, Peer Ranking, Critical Incident Assessment, Behaviorally Based Scales and Behaviorally Anchored rating Scales or Objectives and Goal setting procedures (as Management By Objective MBO) and 360 degree feedback can be used in performance appraisal, a combination of these methods can be developed to suit the organisational needs. In view of IIC’s predominantly knowledge worker base, a combined system using principles of MBO and 360 degree feed back system will complement the proposed high performance autonomous project team structures. Issues of how to effectively evaluate the performance of support department staff also needs addressing in order to ensure that both the PFP system and the performance appraisal system are perceived as fair by all employees. In certain environments, formal or informal group restrictions can be present in hindering effective implementation of PFP systems. Group pressure may prevent members from performing above a certain standard (Schwind, Haridas & Wager 2002). Trade unions too will oppose some of the PFP systems, arguing that they are exploitive. Collective bargaining agreements may also impinge upon designing decisions of a PFP system. In some countries such as Germany, PFP methods, such as piece rate wage is against the labour legislature (Hill 2003). IIC needs to consider whether such restrictions in terms of group pressures, trade union interventions or legislature is present, affecting the implementation of a PFP system. Another important consideration in implementing a PFP system includes financial aspects associated. As PFP systems are providing added incentives for employees to work harder while taking away the “safety net” effect of a general base pay, the lack of pay security is offset by above average remuneration for high performance brackets. Therefore such systems tend to be more costly than normal base pay systems although the associated increase in productivity will make it cost effective. In developing a remuneration system, it is important to consider the motivational aspects involved as remuneration is being used as reinforcement to ensure company goals are achieved. To maximise such reinforcement, fflexibility of the remuneration offer also have to be considered. This is an important aspect of implementing a PFP systems which aims to increase overall organisational performance. In line with motivational theories such as Expectancy theory or any other need based motivational theories such as Maslow’s Hierarchy of Needs, it is a recognised fact that different individuals’ value placed upon monetary and non-monetary components of remuneration and rewards differ. Some individuals will appreciate monetary rewards associated with high performance. Others may have non-monetary needs, which have to be addressed with flexible remuneration approach through a “Cafeteria Style” remuneration option. Such options may include family medical covers, fully paid annual holiday trips, schooling subsidies for children etc, so that employees can choose according to their needs (Lawler 2000). The complexity of the chosen system and administrative costs associated in implementation should also be considered. Most organisations get too caught up in the beneficial prospects of such a system and neglect to assess the vast amount of administerial effort, which needs to be put in to managing a PFP remuneration system effectively. In considering this aspect, its not only the remuneration system itself but the associated and interlinked activities such as performance management and evaluation programs as well as ensuing training and management development programs which needs to be taken in to account. Lastly, an essential aspect, which should not be overlooked, is the affect a PFP system will have on workforce moral. In initial stages of implementing a PFP system, it is most common to encounter resistance, and negative moral among some of the staff. It is therefore necessary to consider what measures needs to be taken in creating proper awareness of the system and assuring the employees of the equity of the system in terms of justification of the measures being applied to evaluate performance as well as the fair process involved. The success of the system will largely depend upon how well it is accepted by the employees. Q3- Take one other of your HR factors from question 1, and explore and discuss in detail Job Analysis at IIC Among the identified critical HRM issues at IIC, lack of a formal job analysis process was most evident. Most employees were not sure of their roles and functions in the organisation. Management in specific has problems of not being aware of some of their functional duties, which includes training and developing their staff. Senior management team also faced role confusion. None of the IIC staff had job descriptions. Marketing department’s role and functions were not defined, resulting in very low level of customer focus being brought in to the R&D process. Thus, it is worth analysing the issue of Job Analysis at IIC in greater depth. “Job Analysis is the process through which organisations identify the duties which job positions have to fulfill and the characteristics of people to be hired for these positions” (Job Analysis d.n.). It is a primary function of Human Resource Management (HRM), which produces a set of information that is essential for successful performance of many other HRM functions. Job Analysis is the basis for developing Job Descriptions and Person/Job Specifications. It involves collecting, evaluating, organising and recording information regarding jobs with in the organisation. The common types of information collected for the purpose of Job Analysis includes work activities, human behaviour, machine tools, equipment and work aid, performance standards, job context and human requirements associated with the job. Job Analysis can be viewed as a process that involves a series of steps to be performed. Figure 1 below depicts the process involved in Job Analysis. Figure 1- Process involved in Job Analysis Source :Adopted from Weiss, J.W. (2001) Organisational Behavior & Change. 2nd ed. Ohio:South-Western Collage Publishing. Information gathering can be carried out through various methods including interviews, filming & video recording, written records, maintaining diaries, through observations, by using structured or open ended questionnaires, or through participation in the job being analysed. Once the information is collected, they have to be analysed using subjective, rational or statistical analysis methods. While a host of techniques are available for job analysis, they fall in to three main categories of Job-oriented, Content- oriented and Attribute- based techniques. Job Oriented techniques focus on the work being done while Content Oriented techniques are concerned with what the employee has to do to accomplish the task. “Attribute based analysis techniques describe jobs in terms of trait or aptitude needed to perform them” ( Cook 1998). Most common methods of Job Analysis include Application of already existing descriptions available in Dictionary of Occupational Titles, Use of Critical Incident Techniques, Repertory Grid Technique, Physical Abilities Analysis, Job Component Inventory or Position Analysis Questionnaires. While the suitability of each of these technique will depend largely on the type of work being analysed, Position Analysis Questionnaire (PAQ) method is currently the most widely adopted job analysis technique. PAQ considers 6 key elements in carrying out the job analysis, which includes Information input, Mental Process, Work Output, Relationships with other people, Job context and Other Special Features. These elements are rated for importance to the job; time spent on each element in carrying out the job as well as amount of training required. Job Analysis information forms the basis for many of the key HRM functions, which should be integrated for optimum effective of the HRM operation. Job Analysis, through the job descriptions and person specification, facilitate effective recruitment and selection through guiding the selectors on what the job entails and what sort of skills and characteristics are needs in a person to perform such a job. The Job Analysis also aids the development of focused training & development programs as well as succession planning process. As this is an area which IIC employees feel is lacking, implementing a formal Job Analysis process will aid developing the company’s training and development function. It also provides the basic information needed for the job evaluation process for planning effective remuneration systems. In job evaluation, the information acquired through the job analysis process is utilised to establish the worth of each job to the organisation and linking remuneration to such ranking or grading. The Job Analysis process also facilitate effective performance appraisal as it provides the measures and standards against which the employee’s performance is to be evaluated. As IIC is planning in implementing a new performance based pay system, it is essential that a Job Analysis process is implemented in order to acquire the necessary information to set up the performance measures and standards as well as the supporting performance evaluation system. While Job Analysis process has its obvious advantages as discussed above, the importance of the Job Analysis process is being questioned by some critics in view of the modern paradigm shifts in organisational structures. In the quest for establishing a sustainable competitive advantage in facing the ever- increasing competitiveness in today’s business world, companies are increasingly opting for flexible employee arrangements. Organisations are becoming flatter in their structures through job designing, which enlarge and enrich the positions, taking away middle management and supervisory functions (Belcourt & McBey 2000). As proposed for the IIC, most companies choose to have high performing autonomous work teams and project clusters with team members multi tasking and playing different roles in different scenarios. Change programs such as Business Process Reengineering (BPR), which involves “the fundamental rethinking and radical redesigning of the business processes to achieve dramatic improvements in contemporary measures of performance such as cost, quality, service and speed” ( Hammer & Champy 1993) are being implemented in many organisations. Such BPR programs usually involve combining of several jobs to be performed by one person and minimising supervision and empowering employees with decision-making process. In this context, while Job Analysis as a process will still be valid and essential, the traditional techniques of assessment used as well as the scope of each position will have to be reassessed. What entails currently as Job Analysis may have to be dramatically modified to create compatibility with modern day organisational structures and new HRM paradigms. For example, with the High performance autonomous work teams, comes the need for flexible and multitasking team members who possess multiple skills and competencies. Thus, modern Job Analysis process may have to re-look into designing systems, which will produce job, based skill inventories such as the “Skill Matrix” being implemented by one of the British Petroleum companies. Such innovative adaptations of Job Analysis process identify the basic bundle of skills needed to perform certain roles and the minimum skills levels required (Job Analysis d.n).Therefore, with the proposal to implement autonomous project teams at IIC, it would be necessary to ensure that the Job Analysis process being implemented would be compatible with and be able to provide validity to the scope of jobs performed by team members. In conclusion, it can be noted that companies need to be well tuned to the external pressures from the business environment which include both positive opportunities which needs to be capitalised upon as well as negative impacts which has to be guarded against. The competitive pressures from the business environment also need to be considered in forming strategic responses as it is likely to illicit reactions from competitors. Companies need to respond to the dynamic nature of the business environment with strategic responses, which are crafted with a long-term orientation but deployed with agility and speed. Most of the companies that have tumbled from its successful positions attribute their failure to the lack of agility and speed in responding to market influences. Thus, IIC too needs to craft and implement strategic responses, which include restructuring the current organisation and process, implementing a host of HRM strategies and bringing in customer focus in to its operations. In implementing its Pay For Performance system, IIC needs to take in to consideration a host of key considerations such as type of PFP systems, measurements and standards, financial constraints, administrative issues, as well as motivational issues of the workforce. In addressing the key HRM issues identified at IIC, implementing a Job Analysis process is also a necessity. By doing so, the company will facilitate all other key HRM functions including effective selection and recruitment, training & development, remuneration planning as well as performance evaluation. 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