Value Addition Through HRM - Essay Example

HRM and Organisational Turn Around: Value Addition Through HRM Case Study: Selfridges and Co This paper seeks to discuss the new role of the Human Resource element that has emerged in Trafford Park Store of Selfridges and Co that has in turn led to an organisational turnaround in terms of performance and value added service. Selfridges This company became one of the most successful names in retail towards the 1990s. This was basically attributed to the role that the human resources played in the company. (Hutchison et al, 2003) The human resource or human capital element in Selfridges has emerged as one that perpetuates this role at every level of the organisation through an effective integration of personal and organisational goals. Having segregated itself from the Sears group in, 1998, the Selfridges group started out with an investment of 100 million pounds. This was diverted towards the opening of its second store in Trafford Park. This mall houses 280 stores and enjoys a wide clientele from various parts of Europe and the rest of the world. (Hutchison et al, 2003) The human resource role and organisational turnaround have been discussed in this paper from the point of view of the premise of competitive advantage as follows: Competitive Advantage for Effective HRM The world of commerce in this era is one where there is an amalgamation of a global market place as well as the theories of competitive advantage with the strong backing of innovation. (Green, 2002) Any marketer or producer in this modern market place needs to adhere to these practices and theories in order to gain any measure of success, whether small or big. In this regard, the role of the HR element in Selfridges plays on its overall brand equity and effective goal achievement program. (Park, 1994) Before delving any deeper into the paper, let us fist consider the elements of the modern world of commerce. The world has shrunk to accommodate the limitations of the geographical demarcations and expanded to transgress the same by reaching out to people from all corners of the world. (Tirole, 1990) This has triggered a phenomenon called the global village concept, which is basically depend on the information technology, communication and a unified mode of business and commerce. Thriving in this global scheme of things indicates an affiliation with keeping abreast of what is going on in every corner of the world and adapting oneself to make profits accordingly. (Hutchison et al, 2003) This is owing to the fact that a manufacturer can now see his name in the most unexpected of places and in order to get there, he needs to be able to keep with the latest and improvise on the same to create his own unique brand and unique selling point or USP. (Fieg, 1993) What has been described in the above lines revolves around the theories of competitive advantage. This theory goes beyond the traditional theories of demand and supply. Competitive advantage relies on the creation of production and marketing strategies in tandem with consumer and competitor touch points. (Hamel et al, 1996) These touch points have been studied in order to find the nuances where the producer in question has any scope of profitability. This, in turn, relies on the assumption that there are no two exact manufacturers in today’s market place and that there is ample space for all kinds of marketers and producers. (Johnson, 1996) In this regard, the HRM policies in Selfridges are dictated by such events in its external environment so as to project the brand as a cohesive whole. (Kash, 2002) Competitive Advantage and Sustainable Entrepreneurial Growth: HR Policies Before laying down the formal plan of action, it is necessary to understand the elements that have been involved in the HR strategy that has dominated Selfridges. This will help us understand the exact application of the theories through the length and breadth of the paper. (Johnson, 1996) A major part of Selfridges’ plan of action included following a strategy based on gaining competitive advantage as well as achieving sustainable entrepreneurial growth for wholesome HR practices. Let us first examine competitive advantage to see how and where it will fit in with the overall growth of HR at Selfridges. Michael E Porter has paved the way for revolutionary strategising trends and a whole new perspective on competition through his competitive advantage theory. In the corporate world, Porters first book Competitive Strategy (1980), which he wrote in his thirties, became an international best seller, and is considered to be an authoritative piece of work on corporate strategy. The book, which has been published in nineteen languages and re-printed approaching sixty times, changed the way business leaders’ minds worked. Further, it remains a guide of choice for strategic managers on a global scale. Apart from being rich in lessons about why and how industries, regions, and nations succeed or fail, this book is of great value as the first serious attempt to develop a really original grand theory of national economic development processes since the early years of Postwar development economics, and one of the most original ways of thinking about development policy in years. (Porter, 1998) Source: Michael E Porter, 1998 This brings us to a discussion on the technicalities of the model proposed by Porter. Porters Five Forces model provides suggested points under each main heading. When taken into consideration individually, each of these gives rise to the development of a broad and sophisticated analysis of competitive position. This may further be used during the creation of a strategy, plans, or even where making investment decisions about a business or organization is concerned. (Hutchison et al, 2003) These five competitive forces determine industry profitability and attractiveness apart from being responsible for shaping the prices that firms can charge, the costs they have to bear, and the required investments to engage in industry level competition. (Hamel et al, 1996) We are concerned with the fact that Porter’s essentially ahistorical approach cannot provide a full account of either a nation’s competitive advantage and corporate strategies or the growth and development of industrial clusters. For this, let us first understand competitive advantage. This has special relevance for Selfridges, owing to the following reasons: The company has launched a full fledged expansion policy. It needs to zero in on Human resources which can be procured on easy and regular terms. There needs to a study of the marketing options in order to gain competitive advantage as there are many players involved here. (Hamel et al, 1996) Operational Context of HRM Policies Competitive advantage is the response of a firm to the pressing need to organize and perform discrete activities. This has been imbibed in Selfridges in the following way: Business Partner Role: Informal and formal Communication; Change Manager Role: Tapping resources and new markets; Innovator: Knowledge Management and Resource Allocation; Monitor: Motivation as well as training and development activities. (Hutchison et al, 2003) While these needs may not be perpetually spelt out, it is the responsibility of the planners and executers of policies to foresee such situations when catering for growth and development of the firm at various levels. So this implies that Selfridges has employed an individual perspective with an affiliation towards the basic industry type as far as the market in and around UK is concerned. (Hutchison et al, 2003) The basic explanation for this comes from the fact that any change on an individual level is effected by changes on a national level. Yet, Porter’s theory cannot accommodate strategies and competitiveness at such levels due to various constraints. (Tirole, 1990) The first of these emerges from the fact that people run businesses and economies – and everyone has his or her own unique style. These cannot be covered at length when talking which factors and resources will be utilized in which combination. Thus Porter’s theory does not provide an accurate account of the diversity and dynamism in the corporate and commercial environment that businesses and firms thrive in. (Hutchison et al, 2003) Secondly, there are various HR activities to take into consideration in the case of Selfridges. The activities performed when competing in a particular industry can be grouped into categories, as these activities can be divided broadly into primary activities and support activities. (Hutchison et al, 2003) It has been noted that primary activities are those involved in the ongoing production, marketing, delivery, and servicing of the product. (Kash, 2002) Whereas support activities are those that provide purchased inputs, technology, human resources or the overall infrastructure functions supporting the other activities. Every activity employs purchased inputs, human resources, some combination of technologies, and draws on firm infrastructure such as general management and finance. Activities vary in their importance in regard of competitive advantages from industry to industry. (Porter M E, 1998). While this is a good theory to reckon with, cynics are of the opinion that in today’s world there are ‘n’ number of influences on a firm’s activities and not just a set number of the same. In a nutshell, Selfridges was faced with the challenge of breaking even and garnering profits if the buyer value manages to exceed the collective cost of performing the required activities. (Green, 2002) Thus, in order to gain competitive advantage over its rivals, Selfridges provided comparable buyer value, and performed HR based activities in all its departments more efficiently than its competitors at a lower cost, or perform activities in a unique way that created greater buyer value and commands a premium price through differentiation. If we are to take recent facts into consideration regarding the state of the economy, we will find that this is not necessarily an accurate measure at the national level. Thus, for a more competitive strategy, the theory that the firm adopts has to be more forward looking. (Tirole, 1990) Ethics and Equality on Entrepreneurial Control This brings us to the issue of equality in HR practices within Selfridges, which is a major requirement for the development of an organization. (Hutchison et al, 2003) The more consistent and widespread the development, the more advanced its overall economy can be called. Unless there is mass involvement in various policies and acts, an industry or a sector of the economy, cannot be called developed by itself. Therefore, there is a need to redefine the theory in order to make sure it accommodates such yardsticks for the measurement of competitive advantage in the case of Selfridges. (Kash, 2002) This is due to the fact that more people need to be aware of such measures for development to be actually felt and enjoyed. (Hutchison et al, 2003) In the context of Selfridges, does Porter’s theory ask the relevant questions? What must the company do to ensure that the industry evolves in a way that is maximally advantageous for the organization in particular? What skills and capabilities must the company begin building now if it is to occupy the industry high ground in the future? How should the company organize for opportunities that may not fit neatly within the boundaries of current business units and divisions? (Tirole, 1990) The answers are to be found in not in this theory but in the theories propounded by Gary Hamel, C.K. Prahalad titled Competing for the Future. The authors are of the firm belief that when armed with the information in their findings and subsequent theories, a company can create a pro-active agenda for organizational transformation and can control its own destiny by controlling the destiny of its own industry. Few companies that began the 1980s as industry leaders ended the decade with their leadership in tact and undiminished. Many household name companies saw their success eroded or destroyed by tides of technological, demographic and regulatory change and order-of-magnitude productivity gains made by nontraditional competitors. "Do you really have a global strategy", the first article by Hamel and Prahalad, developed the theme that small companies could prevail against larger, richer companies by inventing new ways of doing more with less. Differences in resource effectiveness could not be explained by efficiency, labor or capital, but by amazingly ambitious goals that stretched beyond typical strategic plans, raising the question how such incredible goals could get past the credibility test and be made tangible and real to employees? (Green, 2002) As if in answer to this question, managers of late, have created new competitive space while sick units have protected the past rather than creating the future. Being incrementally better is not enough because a company that cannot imagine the future wont be around to enjoy it. (Hamel et al, 1996) Also, a large chunk of the standard HR management practice has been discarded, while the conventional models of strategy and growth have been declared obsolete. These have been replaced by the powerful ideas and methodologies of Gary Hamel and C.K. Prahalad, whose much-revered thinking has already given birth to a new language of strategy. (Hamel et al, 1996) While it is true that their work paves the way for the development of a coherent model for how todays executives can identify and accomplish no less than heroic goals in tomorrows marketplace, one can also determine ways for executives to ease the tension between competing today and clearing a path toward leadership in the future on a more global level through the basic framework of the theory laid down by the authors. This will hold testament to the importance and relevance of competitive advantage that forms the backbone of so much of todays accepted wisdom. (Hamel et al, 1996) Each argument put forward by the authors is clear and is seen to be progressing through the reasons behind competitive strategy being believed to be less mechanical that the claims of Porter in his theory of competitive advantage. (Johnson, 1996) Therefore, Porter’s approach lacks the underlying belief that winning in business today is not about being number one - its about who "gets to the future first", thus making the "core competencies" approach the right one to strategic planning when it comes to providing a full account of either a nation’s competitive advantage and corporate strategies or the growth and development of industrial clusters. (Green, 2002) Conclusion In conclusion, it is imperative to say that the role of the modern day HR has evolved to fit a variety of roles, such as the ones discussed above. This helps the organization define its goals and find a sense of identity through the effective motivation of its HR to play these roles in the operational sphere of the organization. (Barrie, 2005) In this regard, the organizational turnaround at Selfridges has been a matter of successfully integrating the organizational goals with the personal. (Hutchison et al, 2003) The Trafford Park Store has paid specific importance and attention towards developing the store in a manner that will help imbibe the brand identity elements with that of the HRM. In doing so, it has conducted HRM in tandem with the four roles that have been discussed above. (Barrie, 2005. P 1 to 10) It may be seen that the basic vision of the company was to focus on maximum consumer satisfaction which helped it downplay the prices that were on the higher side. With a focus on “mental gymnastics” the store has kept the employee base motivated and in a state where there is constant renewal. (Hutchison et al, 2003) This has led to a high score as far as overall organizational health is concerned. This in turn has been recognized by chains the world over and especially within Europe. In the true sense, this has led to the emergence of a trend where the performance of an organization earns value through its HRM practices. (Tirole, 1990) References: Hutchinson, Sue; Kinnie, Nick; Purcell, John (2005). “HRM and Organizational Turnaround at Selfridges and Co.” They’re Free. People Management Magazine. Johnson, John (1996). Time to rebulid HR. Business Quarterly; Vol61. Pp 13 to 18 Green, Marnie (2002). Internal HR. Plublic Mangement Personal; Vol 31. P 111 Latre-Rufat, Jorge (2005) Beyond Raining Employee Benefit. Plan Review; Volume 59 Park, C. S., & Srinivasan, V. ( 1994 ). A survey-based method for measuring and understanding brand equity and its extendibility. Journal of Marketing Research, 21, 271-288. Swait, Joffre (1998). 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