Human Resource Management at Coles Supermarkets Australia Pty Ltd - Case Study Example

Running Head: HRM REPORT – COLES SUPERMARKETS AUSTRALIA PTY LTD Human Resource Management Report – Coles Supermarkets Australia Pty Ltd Table of Contents 1.Introduction 4 2.Reducing Employee Related Costs for Coles Supermarkets 4 2.1.Overview of Coles Supermarkets and the environment it operates in 4 2.2.Critical discussion of ER and compensation and benefits at Coles 5 2.3.Identification of how ER and compensation and benefits could be applied to achieve the CEO’s directive 6 2.4.Critical evaluation of application of ER and compensation and benefits to ‘reduce employee related costs without cutting staff numbers’. 9 3.Conclusion 10 4.Recommendations 11 Executive Summary This report exploresthe human resource management (HRM) initiatives that Coles Supermarkets Australia Pty Ltd would use in order to meet a CEO directive that requires the organisation to cut employee-related costs without incurring any job cuts. The report begins with a brief description of Coles Supermarkets and then it explores the critical factors in Coles’ environment that are relevant to HRM and which would affect the strategies that the organisation uses to accomplish the directive. The report then identifies and discusses the two approaches that Coles can use to meet the directive. The approaches are identified as employee relations (ER) and compensation and benefits. A critical evaluation of the two approaches underscores their basis in theory and argues that they are the most ideal to use at Coles as employees can be treated as stakeholders whose relationship with their employer is one of mutual dependence. Compensation and benefits has also been identified as a viable source of cost cutting since Coles can reduce the discounts offered to its employees as well as reduce the bonuses offered for meeting specific work-related targets. In the end, the report recommends that Coles should ensure that its HRM initiatives are within the acceptable legal requirements, particularly with regard to the provisions of the Fair Work Act 2009 (Cth). 1. Introduction Coles Supermarkets Australia Pty Limited (Coles) is a supermarket chain in Australia that has been in operation for more than 100 years. The supermarket has more than 100,000 employees working in more than 2000 outlets across Australia (Hadler, 2011). Coles is owned by Wesfarmers, which also acquired the BI-LO Supermarkets brand, under whose name Coles trades in Western Australia (Prophets, 2014). With Coles having more than 100,000 employees, a CEO directive requiring the HRM department to ‘reduce employee related costs without cutting staff numbers’ would require some creativity to implement successfully. This report will identify two HRM strategies that Coles can use in achieving the CEO’s directive. The two strategies are identified as employee relations (ER) and compensation and benefits. The report has a discussion section, which identifies how employee-related costs can be reduced; offers a critical discussion of the two strategies; and identifies how they can be implemented at Coles. The report also has a conclusion section and a recommendation section, which will highlight the considerations that Coles will need to make. 2. Reducing Employee Related Costs for Coles Supermarkets 2.1. Overview of Coles Supermarkets and the environment it operates in There are several environmental factors that influence HRM. Such include the economic conditions in a country; government regulation; technological changes; labour unions; competition by similar firms; workplace demographics; and industry sector demographics (Genc, 2014; Punia & Sharma, 2015). A look at Coles’ recent history reveals that government regulations and labour union environmental factors have affected the company more than the other above-mentioned factors particularly in relation to HRM. The legal environment in Australia is for instance, relatively strict for employers since they have to work within the confines of the Fair Work Act (FWA) 2009 (Cth). The representation of workers by labour unions at Coles complicates the legal environment in which the supermarket works. A majority of Coles’ employees are represented by the “Shop, Distributive and Allied Employees’ Association” (SDA) (Le Mare & Forsyth, 2016). Technological changes have also affected HRM practices at Coles significantly. In 2008 for instance, Coles reportedly laid off some of its management-level employees with the intention of creating a flatter organisational structure (Coles, 2014). Just as Drucker (1988, cited by Kettley, 1995) had predicted, technology appears to have taken up middle-management roles by linking low-level workers with the high-level managers. Notably, routine information is now communicated faster and more reliably to high-level managers without having to pass through middle-level managers. 2.2. Critical discussion of ER and compensation and benefits at Coles As has been established above, ER at Coles is regulated by enterprise agreements and must occur within the accepted legal framework. ER is a “normative and unitary concept” that describes the interactions and activities that happen within HRM (Abbot, 2006, p. 188). Employment relations can be characterised by employee-management interactions, loyalty, flexibility and employees’ skills, as well as the absence of conflict in the workplace. ER can be internally managed in an organisation without the intervention of external stakeholders such as government representatives or labour unions. According to Gupta and Show (2014), the compensation and benefits that employees receive affect their motivation, commitment, and even feelings of self-reliance. Gupta, Conry and Delery (2012) further argue that while people associate compensation and benefits with increased costs, this is not always the case. As Trevor (2008) notes, compensation is a primary element for employees and employers, and it also counts among the largest sources of operating costs in most organisations. However, good compensation practices and the issuance of benefits can become a source of enhanced organisational performance and could lead to enhanced and sustained competitiveness for firms. Benefits could also be a source of motivation for employees, especially if they are inspired by what workers consider to be a caring attitude about the employees’ welfare by the employer (Jiang, Xiao, Qi & Xiao, 2009).. Overall, the successful use of compensation and benefits to reduce employee-related costs while avoiding a reduced headcount at Coles will, according to this report, largely depend on whether the expectations of the employees will be met. As Jiang et al. (2009) note, employees need to feel that they are getting value for their efforts at the workplace. If the rewards they get (from both compensation and benefits) satisfy their concept of value, they are likely to stay loyal to an organisation and may even have less regard for monetary compensation, which is what has a direct impact on the cost of operations in any organisation. 2.3. Identification of how ER and compensation and benefits could be applied to achieve the CEO’s directive Since the CEO’s directive is to minimise employee-related costs without job cuts, ER can be used in a manner that makes it possible for Coles to cut its HR-related expenses without compromising employees’ morale. One of the critical aspects of ER is communication. As Dahl (2012) indicates, it is always important for an organisation to communicate its financial struggles with its employees because it makes them understand why cost cutting initiatives are necessary. Notably, most employees understand business and they would not expect their employer to operate at a loss. Once they are made to understand the rationale for cost cuts, it becomes easier for them to support the organisation in its different initiatives. Additionally, Coles can ask and consider the employees’ suggestions on how best to cut costs. As noted by Grensing-Pophal (2003), employees are best placed to point out such areas because they experience them every day at work. A report conducted by the Daily Mail Australia for news reporting services in 2015 revealed that most of the sampled employees complained about lack of training and the absence of teams (Tran, 2015). Coles can remedy such situations first by enhancing training and development for its employees. Based on the information provided by Tran (2015), it is evident that Coles has an in-house team that reportedly does not do its work as efficiently as it should. As a result, some new hires give up on the job after several weeks of training, and by so doing, the money invested in hiring and training them is lost. Coles can remedy the foregoing situation through putting together a team of trainers who are highly committed to training and guiding other employees. It has been argued that for such teams to be effective in cost-cutting and creating the right HR dynamics, they must have a goal they are working towards; they must be trained by a model trainer on how to handle employees; and they need to assess their performance regularly as well as strategise on how to meet identified organisational goals in future (Harrington, 2010). In 2012, Coles made a decision to employ more people on permanent basis as opposed to casual as one way of encouraging more employees to stay with the company (HC Magazine, 2012). While such a decision is relatively effective in cutting training-related costs by curbing employee turnover, Coles can go a step further and identify ways of hiring and retaining ‘A’ players. According to Khan (2016), one of the best ways to hire the best staff is by being deliberate on the qualities, qualification, experience, personal traits and the physical requirements of the new hires. Once the company has selected and employed such people, it should develop a retention strategy, because as PricewaterhouseCoopers (2008) indicates, replacing one employee has become more expensive over the years. A retention strategy at Coles should therefore consider providing the company’s employees with career and development opportunities within the firm; the provision of regular feedback; and the creation of trust so that employees freely communicate their opinions and concerns to the management. In the retail sector, it has been proven that employees leave not only for higher salaries, but also because of better opportunities elsewhere (Khan, 2016). Coles could also consider replacing permanent workers who resign or retire with existing part-time workers since the latter have a rough idea about what the company is about and would not therefore be expensive to train and familiarise as new hires. Coles also provides its employees with deals in several areas including leisure, telecommunications, finance and health. Currently, the supermarket offers a five percent flat discount on all purchases made by its employees in all Coles, Wesfarmers, and other selected stores and a 10 percent discount during the major holidays (Coles Careers, 2016). Since the nature and value of the deals offered to employees is at the discretion of the organisation, Coles can lower the discounts to match its economic situation. For example, the supermarket can reduce the discount rate during the major holidays to eight percent to enhance its cost cutting objectives. Additionally, the supermarket can limit the number of products which the employees can access at a discount as long as this is well explained and agreeable to the employees through their representatives. In literature, reducing or eliminating monetary and non-monetary benefits are considered viable ER cost cutting strategies (Dias, Marques & Martins, 2012). Coles also offers incentives for good performance to its employees (Coles Careers, 2015). The incentives are another area that the supermarket can re-evaluate with the intention of cost-cutting. Some of the interventions that the supermarket could use include increasing the performance benchmarks for which employees earn incentives. Moreover, the incentives can be pegged to the larger departmental performance to ensure that effective practices are pursued by different employees at a department level. 2.4. Critical evaluation of application of ER and compensation and benefits to ‘reduce employee related costs without cutting staff numbers’. The ER and compensation and benefits approaches suggested above for use at Coles are regarded viable because of several reasons. To start with, when employees are involved in the cost cutting processes, they are more likely to support the initiative as opposed to if it was imposed on them. According to Jiang et al. (2009), giving employees a voice in an organisation makes them feel engaged and is a critical aspect of total reward strategy that is advocated for in most modern companies. A total reward strategy involves compensating employees not only through monetary rewards, but also through an inclusive company culture, providing them access to training and development initiatives, and other offers by an organisation that improve the employees’ wellbeing. In return, employees feel committed and are able to dedicate more skills and competencies to the organisation (Jiang et al., 2009). The ER approach suggested above is theoretically supported by the pluralism ideology, which proposes that although Coles and its employees may have different goals, they also have a mutual dependency as suggested in the stakeholder theory (Rasmussen, 2002). Moreover, the pluralism ideology assumes that the different players learn how to attain a balance with the different agendas and demands that they encounter in their relationship. As a result, both parties learn to achieve consensus on different issues and also enlarge their commonality (Rasmussen, 2002). Pluralism is criticised for assuming that a power balance exists between employees and employers, but as Rasmussen (2002) notes, power is not a static concept and there are times when employees will have high bargaining powers although most times the power balance is tipped against them. The compensation and benefits approach suggested above for use by Coles is anchored in the agency theory, which argues that remuneration represents the agency costs paid to the employees (Gerhart, Minkoff & Olsen, 1995). However, since agency theory perceives both the employees and their employers as stakeholders in an organisation, it indicates that the employer’s interest is to cut cost, while the employees’ interest is to increase their agency cost. The interest of both parties must therefore be considered when settling for the remuneration package, which is what this report has advocated for in the use of compensation and benefits to cut costs. 3. Conclusion The complexity of cutting costs without reducing the company’s headcount cannot be refuted. If Coles has to implement the CEO directive, it has to be strategic in its actions, and as argued in this report, ER and compensation and benefits are two ways through which cost cuts can be attained. Still, the two aforementioned approaches are arguably the most difficult for any HRM department since the activities involved have been referred as being among the largest cost sources in any organisation. Getting ideas on cost-cutting from the employees is arguably the most ideal way to identify areas that could do while avoiding increases in expenditure. Moreover, the firm can use training and development, hiring and retaining exemplary talent, as well as replacing retirees and those who resign with existing part-time workers as ER strategies to reduce costs without reducing employee numbers. Compensation and benefits can also be another source of cost cuts. With the help of employees, Coles can determine the benefits that employees value least and scrap them. Also, the organisation lower the percentage discounts given to employees and restructuring the incentives systems that exist in the firm thus effectively lowering the associated costs. 4. Recommendations To effectively use ER and costs and benefits to cut costs, it is advisable for Coles to observe several things. First, the company should comprehensively engage employees to make sure that they understand why cost cuts are necessary. Secondly, the supermarket should seek employees’ input and suggestions on the subject because as indicated elsewhere in this report, employees know where the most wastage occurs in an organisation and are therefore better placed to identify such areas. Third, Coles will need to identify areas where the discounts available to its employees can be lowered or scrapped altogether. As argued in the report, however, such interventions have to be agreeable between the HR managers and the employees’ representatives. The HR department may also need to rethink the short-term incentives availed to its employees, and may need to enhance the performance benchmarks needed to earn such bonuses. The payment of bonuses should ideally be pegged on an individual’s performance as well as the performance of the division where such a person works as that would ensure that an employee is not just considering what they can do for purposes of earning benefits, but also that they would think about the department’s welfare too. References Abbot, K. (2006). A review of employment relations theories and their applications. Problems and Perspectives in Management, 1, 187-199. Coles Careers. (2015). Pay & benefits. Retrieved from https://www.colescareers.com.au/~/media/files/colescareers/join%20us%20down%20under/pay--benefits.pdf Coles Careers. (2016). Rewards & benefits. Retrieved from https://www.colescareers.com.au/why-work-with-us/rewards-and-benefits Coles. (2014). Chapter nine: Challenges and opportunities 2000-2008. Retrieved from https://www.coles.com.au/~/media/files/coles/pdfs/coles%20centenary/chapter%209.pdf Coyne, K., Coyne, S.T., & Coyne, E.J. (2010, May). 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Retrieved from: http://www.dailymail.co.uk/news/article-3313134/Employees-reveal-problems-faced-Coles-Woolworths-Aldi-staff.html Trevor, J. (2008). Can compensation be strategic? A review of compensation management practice in leading multinational firms. Cambridge Working Paper Series 03/2008. Retrieved from https://www.jbs.cam.ac.uk/fileadmin/user_upload/research/workingpapers/wp0803.pdf Read More