Strategic Human Resource Management - Essay Example

STRATEGIC HUMAN RESOURCE MANAGEMENT FREMAP Carretera de Pozuelo 61 Majadahonda E-28220 Spain Telephone: 34 (91) 626 55 00 Fax: 34 (91) 581 21 42 Human Resource Management (HRM) involves managing the activities of employees. It is required for staffing an organisation and sustaining high employee performance. HRM ensures that competent employees are identified and selected. It provides employees with up-to-date knowledge and skills and makes certain that the organisation retains competent and high- performing employees who are capable of maintaining high performance. With effective HRM, corporate culture and new forms of organising (NFO), Fremap is able to satisfy customers, compete successfully, grow the business, conduct operations, and achieve corporate goals. According to Joan Enric Ricart, a professor of Business Policy, Sandra Sieber and Silviya Svejenova, doctoral candidates of the IESE Business School at University Navarra in Spain, there are various forces that affect the acceleration of competitive change: increased globalisation, time-based competition, continuous short-cycle innovation, and technological change. Others include advances in manufacturing, information technologies, which speed up communication and lower costs, and greater political and social freedom. Manager, consultants and academics are initiators of NFO; however, through effective implementation, managers are facilitators (Ricart, Sieber, Svejenova 1999). Andrew M. Pettigrew, professor of Strategy and Organisation in the Business School at Warwick University and Silvia Massini, lecturer of Economics and Technology Management at the University of Manchester Institute of Science and Technology in the United Kingdom agree. However, both suggest that the explanations for organisation change are more in depth than that of the efficiency motives of managers and entrepreneurs. New forms of organising are due to the convergence of economic, technological, informational, industrial and political factors. There is increased international competition in the global economy; the need to reduce costs; pressures to concentrate manufacturing resources regionally; and to make the complex matrix structures simpler by de-emphasizing country organisations. To accelerate the transfer of skills and knowledge, international organisations are strengthening internal networks between functions, divisions, countries, and regions. Many are investing in alliances and other partnerships to compete through co-operation. There is a necessity for more flexibility in organisations since technological changes have shortened the product life in many industries. Furthermore, the advances in information and communication technologies enable network formation and utilisation, and allow quantity and quality of hierarchical control and lateral knowledge sharing. Deregulation has increased economic competition, and influenced cultural and people change. Even industries, previously protected from competition, have had to acquire new skills, knowledge, attitudes and standards (Pettigrew, Massini 2003). However, the results of the Organising for the 21st Century Research Project (OCRP) indicate that knowledge intensity and international exposure are the explanations for implementing NFO. Because of structural and organisational changes that have taken place since 1992, Javier Quintanilla and Carlos J. Sanchez-Runde, authors of New Forms of Organising through Human Resource Management: The Case of Fremap, suggest that Fremap is an excellent example of NFO. In addition, they indicate that corporate culture and human resource management played a significant role in the transformation of the company. Influenced by new forms of competition and internal pressures, companies such as Fremap implemented new ways of organising company activities. With the use of horizontal mechanisms such as the development of teams, decentralisation, and flexible work arrangements, decision-making power was delegated throughout the organisation. Established in 1933, Fremap is a leading mutual insurance company in Spain. The company is a non-profit organisation within the framework of the Spanish Social Security System. With the enactment of the Social Security Act in 1966, the company offers sickness benefits and health care. Fremap provides its associated firms' employees with insurance coverage for work-related accidents and occupational diseases. To treat work-related accidents and illnesses, the company manages health centres and hospitals. Affiliated companies insure their employees against accidents or diseases they may suffer while working. For instance, in cases where an employee suffers a work-related accidents or disease, Fremap provides medical care. In addition, the company has prevention programmes, which include regular medical check-ups, follow-ups for employee, accident prevention training and awareness activities. Fremap's success is due to its commitment to providing high quality service to customer. The company's basic principles of corporate culture are ethical and continuously improving. With the belief that the individual is the centre of social relations, all activities are to provide service to workers and to comply with their employee's professional and personal fulfilment. The organisation respects its employee's dignity and freedom. Quality is the objective in fully satisfying the workers who use their services. The insured workers use of their services is the only source of financing the company therefore employees must adequately respond to members need for coverage against occupational risks. Through the participation of channels such as the general meeting members, management board, business advisory board, and regional advisory board, Fremap encourages suggestions, and implements them. Since employees are directly responsible for providing service, it is in Fremap's interest to develop personal and professional skills while respecting human relationships. In recruiting new employees, the company uses objective selection criteria to verify that candidates are the right personnel with the professional qualities for a position. Promotions are based on an employee's abilities, desire to improve and the capacity to take on responsibilities. To make certain that there is equality of opportunity for promotion, employees are assisted in adapting to their job and training is provided. To administer the best possible service to insured workers, ongoing training is provides to all personnel. An annual training plan regarding professional and cultural aspects is submitted to each province. In making sure that the organisation is properly represented to the external environment, Fremap provides employees with monthly information on the company's progress. Balance sheets and income statements are given to external audits, to promote openness and to build trust. Furthermore, since decentralisation makes efficiency, supports creativity and creates initiative, the company promotes actions that enhance the autonomy of decisions. According to Pettigrew and Evelyn Fenton, a lecture in the Department of Management at the University of Reading School of Business, Fremap development began in 1970 with the introduction of the 'integral treatment of industrial accidents' to improve quality to affiliated companies. This 'coordinated application of all available preventive, therapeutic, reparative and restorative techniques in the fight against occupational hazards and their physical, mental, social, human and economic consequences'. With this new concept, branch medical centres and annual corporate goals were established. Because the new focus viewed the relationship with the client as a whole, the coordination of various departments and units was required (Pettigrew, Fenton 2003). In 1985, with the use of training, the company began to decentralise decision making to the branches. Corporate goals were to improve customer service thereby generating initiative and creativity throughout the organisation. By 1988, decentralisation resulted in organisational change due to the delegation of responsibilities to branches and territorial headquarters. Corporate goals and the organisational culture were officially defined and the entire workforce actively participated through seminars, surveys and workshops. Ethics and the individual became the centre of social relationships and the guiding principles of the organisation. By 1991, quality was the corporate strategy. A 'Total Quality Plan' was set forth with an action programme for each work centre and the involvement of personnel. This plan further improved and standardized the corporate feature of Fremap. Thereafter, the new forms of organising and Human Resource Management became the centre of attention. However, Carlos Sanchez-Runde, an associate professor in the IESE Business School at the University of Navarra, Richard Whittington, a professor of Said Business School at Oxford University, and Quintanilla, authors of Human Resource Management Implications of New Forms of Organising, report that new forms of organising is only useful when dealing with certain issues. It is practical for knowledge exploration in multinational environments and in complex, rapidly changing and turbulent environments where projects are unique, requiring input from various experts, and in need of creative solutions. New forms of organising is useful in circumstances where there is an extreme need for efficient and reliable information, where the value of the service or product being exchanged is not easily measured, and the organisation is continuously required to learn and transmit new knowledge and skills (Sanchez-Runde, Wittington, Quintanilla 2000). Since 1992, Fremap has undergone drastic change in organising its operations, particularly in the delivery of customer service. From headquarters to the territorial branches, decentralisation progressed as the company recognized that the distribution of tasks was a hindering their ability to provide maximum quality service. The administrative structure and the management systems had not changed since 1933. Determined by the legal requirements for mutual insurance companies, this structure prevented Fremap from operating in accordance with its objective and values. Because the structure did not support the integration of insurance claims, Fremap realised that interpersonal relationships and the integration of tasks were issues that had to be resolved. Due to the excessive time spent solving bureaucratic issue, the relationship between employees and customers suffered. Too many employees in the same branch handled customers. For example, eight employees were necessary to solve the problems of one customer. In implementing a new form of organising, the Fremap's headquarters (HQ) decided that each employee within the territorial branches had to perform all of the administrative tasks and commercial activities related to customer service. Under the direction of the General Manager and as a HQ mandate, integral agents were introduced. However, new employees who do not want to become integral agents and desire only to become specialist, work as agents. Significant organisational and cultural changes occurred as the structure transformed from a hierarchical to flat and horizontal. The managerial systems stress knowledge coordination, bureaucratic processes no longer exist, employees who are empowered to care for the needs of customers report to branch managers. Clerical employees within the territorial organisation, who demonstrate both knowledge and experience, are given the opportunity to become integral agents. As integral agents, they are responsible for resolving all problems related to customers, whether the customer is a company or a worker. All the duties previously performed by the branch team are now the responsibility of integral agents. Though integral agents do not supervise others, they are responsible for performing the full range of activities that satisfy the needs of customers assigned to them. Though intense training, agents master the art of teamwork. They become familiar with the management culture. Qualifying examinations ensure that agents are able to provide quick and effective solutions to clients. Pettigrew states that the "final result may also be described as being a team-based structure, somewhat in line with the Saab Training System experience". To facilitate teamwork, the layout of each branch office encourages interaction and contact between team members. All integral agents share the same management criteria, calendar of tasks and data-processing tools. This form of knowledge management allows them to work individually and a network. There are only two job categories in the branches: integral agent and branch director. With a flat and lean organizational structure, director's work as coordinator of branch activities, support the work of the integral agents and make commercial activities possible. The branch director is the link between the territorial level and HQ. In the territorial branches, the territorial director coordinates the territorial branches, defines commercial strategies and develops projects of common interest. Without directions from the HQ, territorial directors discuss shared problems and make decisions on some issues while leaving other decisions to HQ. In addition, they are required to attend meetings of the HQ's functional directors. At the company headquarter, changes were not as drastic as the changes implemented in the territorial branches. Since the functional organization via departments was preserved, HQ is more efficient in providing support to the branches' activities through specialized departments. Decision-making and responsibilities of branches and integral agents have increased therefore coordinators are no longer in need of their previous competencies and responsibilities. This allows coordinators to respond quickly to the needs of the branches. Figure 1 shows the former pyramidal system of control where HQ had to authorize all the territorial branches' activities and Figure 2 illustrates the current structure of support procedure and permanent assistance. Figure 1 Previous Organisational Chart (1992) Figure 2 Current Organisational Chart With appointment of a Personnel Director, further decentralisation and the centralisation of personnel policy, Fremap's established a workforce with a shared corporate culture. Now decentralised, management understands the importance of how a strong organisational culture simplified the coordination and integration between the head office and territorial units. Though common employee profiles and information systems have ensured that all new employees internalised Fremap's management style, the critical resource of the new forms of organising is that the corporate human resource strategy is based on mutual trust, and shared identity. For Fremap, selection, acculturation, management development, and permanent training are a primary focus. According to the Personnel Director, in selecting from a pool of candidates, especially those applying for integral agent positions, branch directors decide whom to select and they are looking for profiles that match the values of Fremap's corporate culture. The final selection decision of a new employee is the responsibility of territorial divisions and branches; they are involved in all personnel decisions. The company serves workers who have suffered an accident or occupational disease therefore social responsive candidates from non-profit organisations are highly viewed as an asset. And to help employees identify with the organisation, an induction programme with intensive training activities is held at the central HQ in Madrid. Fremap's new forms of organising, illustrates an organisation's ability to manage dualities: HRM centralising strategies and decentralising operations. Another example of the company's capacity to manage dualities is the two different types of workforce - those who accepted the new work system and those that preferred the previous one. In the case of Fremap, new forms of organising, demanded a new way of organising work. The company transformed from a centralised, bureaucratic organisation to a decentralised structure, consisting of semi-autonomous teams and a unique style of management. As integral agents, employees no longer perform specialised tasks. They are empowered to make judgements and with self-discipline. They control the resources required to satisfy the needs of workers. 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APPENDIX 1 Administrative Structure Legally Required For Mutual Insurance Companies APPENDIX 2 Financial Information 16 January 2006 31 December 2004 Euro'000 31 December 2003 Eur'000 Premium Income 1,945,672 1,766,100 Profit After Tax 162,827 108,209 Dividend 90,043 49,664 Shareholders Funds 54,587 30,460 Investment Income 15,499 19,856 Key Financial Data in Thousands (USD) 16 January 2006 Premium Income - EBIT - Net Income 205,925.65 Profit Margin 11.95% Sales Per Employee 396.35 Read More