Appropriate Business Structure, Benefits and Risks - Assignment Example

Heading: Human Resource Management Your name: Course name: Professors’ name: Date Introduction Effective management and success of business firms, today, rely on the use of appropriate model. An appropriate business type is the one that has greater benefits than risks. The company should employ suitable people management theories and practices in order to ensure high performance levels, employee and customer satisfaction. Development of HR specialists is vital in every organization that seeks continuous success by proper human resource management. Therefore, this paper attempts to examine appropriate business structure, benefits and risks involved, appropriate management theories and practices, as well as considerations for senior management and HR specialists. Background I have been employed in a medium sized manufacturing company as an operation manager. The company currently has a gross turnover of more than £5 million, 5 directors, 300 workers, and 25 managers. This company employs outsourced support for information technology systems, payroll, finance, and human resource specialists for recruitment. Our company has won contracts that are sufficient to take it to the next level with a projected increased turnover of £20 million in 2 years. Therefore, the company needs to recruit extra employees and as per our philosophy, we employ locally. Nonetheless, we are situated in a developing locality where most of the people have basic academic qualification; hence, unable to quickly develop extra skills and learning so as to ensure the firm’s consistent success. To address this issue, our directors have scheduled a meeting in which the firm’s action plan is developed. Every manager is assigned a specific task to manage, and mine concerns human resource management, particularly on how the company can employ a highly committed and engaged personnel. Our company is a corporation that has adopted a functional structure, which entails the differentiation of jobs around specialty areas (Daft 2009, pp. 104-107). For instance, in the company, there are human resources and accounting specialists that are employed to address these specialized roles. Here, the functional line managers are expected to report to the CEO, but commonly have independence in the day-to-day decision making, such as firing and hiring employees. Literature Company’s functional structure There are numerous organizational structures that include functional, simple, product, matrix, and multidivisional structures. In this case, the company adopts a functional structure that involves differentiation of jobs or tasks around employees’ specialty areas (Daft 2009, pp. 104-107). For example, a company can have various specialists that include human resources and accounting specialists that are employed to address these specialized roles. Advantages in relation to HRM This structure gives the firm an opportunity of having specialists that are competent in appropriate decision making. It also bestows the CEO can manage all firm’s interests without worrying about ordinary problems. It also allows solving of problems and exploitation of opportunities even in the absence of the CEO (Daft 2009, pp. 104-107). Disadvantages in relation to HRM Here, Daft (2009, pp. 104-107) says that functional-area managers seem to emphasize on domestic versus whole firm’s strategic matters. There is also a weakness of failure to inform CEO of the possible difficulties or problems; hence being caught by surprise and delay in solving them. In this structure, the company’s vertical communication can get difficult; thus, rivalry or duplication among departments. There is also poor accountability caused by weak connection between functional and product units. Management theories Motivation behind evolution of management practices and theories is the constant search for better ways of employing organizational resources. The history of people management practices and theories can be traced back to the F.W. Taylor’s scientific management theory. Taylor says that scientific management theory involved the study of association between tasks and people with an aim of redesigning work process so as to enhance efficiency (Adetule 2011, pp. 20-38). This scholar believes that the time and effort applied by every worker in order to produce an output can be minimized by division of labor and specialization; hence the production process will get more effective. Although this theory got popular, it had more negatives than positives. This is because it made employees feel that the increased performance led their managers to add work with the same wages. Thenmozhi (pp. 1-22) says that it also meant that improved performance led to fewer jobs and bigger threat layoffs. Workers also felt that division of labor and specialization led to repetitiveness, monotony and dissatisfaction. The second management theory that was adopted was the Fayol’s administrative management theory. This was concerned with the study of how to develop an organization structure that would rise to high effectiveness and efficiency. At the same time, Max Weber developed the theory of bureaucracy between 1864 and 1920, so as to ensure effectiveness and efficiency of organizations (Sheldrake 2003, pp. 1-100). Impliedly, a bureaucratic system must have evaluation and selection system, which rewards workers equitably and fairly; explicitly specified system of role relationships and tasks; clearly outlined hierarchy of authority; and system of standard operating procedures (SOPs) and written rules that guide employees’ behavior. Fayol put forth certain principles that guide effective organizational management that include division of labor, responsibility and authority, unity of command, centralization, unity of direction and equity (Moore & Gardner 2004, pp. 274-300). He introduces other management principles, which are order, initiative, discipline, personnel remuneration, stability of personnel tenure, subordination of individual interests to common interests, and esprit de corps (Adetule 2011, pp. 20-38). By division of labor, Fayol means that managers should promote division of labor so as to enhance performance through specialization (Glynn 2009, pp. 1-20). Concerning authority, the scholar advocates for managers to possess the right and power to give orders and press subordinates for obedience. He argues that workers should take orders from their seniors, and he emphasizes that command chain from top to bottom in a firm should be reduced. Glynn (2009, pp. 1-20) notes that Fayol insists on concentration of authority at the top of the command chain. He also advocates for operations in a firm must have similar objectives controlled by one manager who should use a plan. He also stresses on managers’ friendliness and fairness to the juniors; and workers being in the appropriate place at the right time (Hill & Jones 2010, pp. 11-33). Fayol focused on giving freedom to subordinates to conceive and conduct plans regardless of mistakes. He also values respect and agreement of the organization, as well as fair remuneration of workers. He campaigns for enhancing employees’ tenure, and prioritizing employees’ interests instead of the firm’s interests. Fayol focuses on the promotion of team’s spirit so as to enhance firm’s unity. For instance, he advised on employing verbal communication, rather than written communication. The next management theory to be developed is the behavioral management theory by Mary P. Follet, Elton Mayo of Hawthorne studies; and McGregor of theory X and Y. According to Hill and Jones (2010, pp. 11-33), this theory entailed how managers ought to behave in order to stimulate workers and encourage them to enhance performance as well committing towards the attainment of organizational goals. Follet asserts that authority and knowledge go hand-in-hand; advocated for workers’ involvement job development and analysis processes; communication among departmental managers; and cross functioning. Elton Mayo argues that leadership approach or manager’s behavior in an organization greatly affects the employees’ performance level (Adetule 2011, pp. 20-38). Human relations movement theory assert that managers should attain satisfactory behavioral training to supervise subordinates appropriately so as to draw enhanced productivity and cooperation. This also advocates for informal organization that entails system of conduct norms and rules that arise from a group. There is organization behavior that involves factors that influence groups’ or individuals’ responses and activities within their organizations. According to Sheldrake (2003, pp. 1-100), theory X assumes that average employee is lazy, hates work, does as little as possible, and has low ambition as well as avoids responsibility. Managers who adopt theory X should keep high performance by closely supervising their employees, and controlling their conduct through rewards and punishments; “carrot and stick” technique. On the contrary, theory Y assumes that employees are not inherently lazy; do not naturally hate work; and if give a chance, employees will do well for the firm. This implies that features of work environment influence if employees view work as a source of punishment or satisfaction. Davenport (2006, pp. 13-20) argues that that supervisors should not closely control employees’ behavior, but exercise self-control. It says that managers’ role is to offer support and guidance, as well as to assess employees’ basing on their ability. Theory Y also campaigns for decentralized authority and increased employees’ control on their jobs, and employees are liable for their tasks. The latest management theory entails the management science theory, which is an approach that employs painstaking quantitative methods to enable managers make maximum utilization of firm resources. This theory focuses on operations management, quantitative techniques, management information systems and total quality management (Radcliffe 2005, pp. 51-66). Organization environment theory also sets conditions and forces that function beyond firm’s limits, affect supervisors’ ability to obtain and use resources (Sheldrake 2003, pp. 1-100). Harvard HRM models There are a number of invented models essential in the management of a firm’s employees. One of these models is Harvard HRM strategy, which is one of the most effective management strategies of human resources in an organization. This is considered as one of the soft HRM models that are fundamental in the enhancement of a business’s efficiency (Collings & Wood 2009, pp. 42-44). This model it views employees as human assets instead of variable costs, and it is related to the human relations management theory by McGregor and Herzberg. It also focuses on the development of collaborative, trustworthy, innovative, proactive employees who can propel the company towards success. It also emphasizes on the alignment of HR policies with business objectives in order to ensure firm’s prosperity (Collings & Wood 2009, pp. 42-44). Reward strategy development Human resource managers are also advised on the use of reward strategy in order to sufficiently motivate their employees. These include the use of both monetary and non-monetary strategies such as, pay, bonuses, incentives, recognition, self-fulfillment, improved working conditions, equity, organizational culture, work balance, and alignment of personal and firm values. Motivational strategies Some of the significant strategies used in motivating employees include acquire, bond, challenge and defend. These are instrumental in the improvement of the company’s success through employees’ elevated motivational levels. Key performance indictors Parmenter (2011, pp. 1-10) asserts that human resource managers can also use key performance indicators in order to measure the success of the firm and attainment of its objectives. Some of the indicators include customer satisfaction, retention, customer base, and revenue turnover. However, managers must ensure that their selected key performance indicators clearly reflect their firms’ goals and objectives, and should be quantifiable. Discussion/analysis Harvard HRM Model As an operational manager in our company, I will convince other senior officials to adopt the Harvard HRM model. This is considered as a soft human resource model that improves an organization’s efficiency; it views employees as human assets instead of variable costs. This model will be influential in focusing on the human element of the employees since it is related to human relations school of McGregor and Herzberg. Through the model, we will emphasize on treating workers as valuable assets and a source of competitive advantage by commitment, high quality performance, skill, and adaptability (Collings & Wood 2009, pp. 42-44). Collings and Wood (2009, pp. 42-44), maintain that workers are proactive, and not passive inputs of production processes, able of development, worthy of collaboration and trust that is attained by participation. The model will help us in the company release unused human resourcefulness reserves by enhancing participation, commitment, and involvement. Employee commitment is a prerequisite of their effectiveness in work. This model will also enable us to focus on the significance of incorporating HR policies with the firm’s objectives; hence, there is a need for efficient motivation, communication and leadership. Reward strategy development process In order to make our employees productive and efficient, I will ensure that the business goals and objectives are aligned with the reward strategy. We will apply Locke’s and Latham’s goal theory, and the equity theory so as to motivate our workers. Here, we will ensure that our employees feel that they are treated equally in relation to skills and effort; that they are self-fulfilled by giving them opportunities to learn and develop their knowledge and skills; and that they have clear roles that are aligned to personal and firm’s values so as to make them enjoy working our company (Armstrong 2012, pp. 258-260). We will also ensure that our employees are recognized through appreciating, allowed to give their opinions, and taken seriously. We will also give them an opportunity to balance their lives and work, and help them develop an organizational culture through engaging and fitting them with the firm’s values and way of doing things. We will also create a favorable working environment in relation to equipment, physical layout, security, safety and health. Apart from the non-financial rewards, we will motivate our employees by giving them bonuses, sufficient basic pay, and extra monetary advantages. Therefore, this total reward system will make workers do the right thing at the right time; thus enhancing our company’s performance (Armstrong 2011, pp. 31-35). 4 motivational steps I will ensure that our employees are effectively motivated by using the four motivation steps; acquire, bond, challenge and defend. In the first step, we will employ the acquire strategy in which workers are stimulated by enhancing the way their reward system give feedback on poor and good performance, making them understand their reward opportunities, improving recognition programs, and introducing variable pay alternatives that are related to their performance. This is because employees are driven by need to acquire rare goods that boost their sense of well-being (French 2011, pp. 180-184). We will also drive them by use of the bond strategy that creates personal connections among between our employees and the firm; hence developing a sense of comradeship, unity and belonging. We will achieve this through creating many opportunities for them to form friendships and improve camaraderie; forming culture that motivate friendships; and providing chances of bonding like sponsored sports team, social gatherings and community work; and enforcing different teambuilding programs. In terms of challenge drive, we will ensure that individual job are designed to include challenge, variety, and learning; consistent training, education, professional advancement opportunities, and enlisting worker input in operational and strategic decisions (French 2011, pp. 180-184). Finally, as the HR manager, I will create a defend culture among employees that will enable them develop flight or fight reaction when they are threatened. This will be achieved through employees have a positive relationship or image with the company. We will also develop a culture that is designed to satisfy their individuals’ needs; that focus on their energy, time and resources on competition rather than inside turf wars (French 2011, pp. 180-184). Key Performance Indicators (KPI) As a HR manager, I will be keen to notice some of the key performance indicators of our company. Therefore, it will vital to set appropriate indictors that are aligned with our firm’s business goals and objectives, and are quantifiable. Some of the key indicators that will be looking for are customer satisfaction, firm’s turnover, customer retention, outstanding balances, customer profitability, and collection of bad debts (Smith 2008, pp. 102-104). For instance, we will determine whether our firm has an increased turnover of £20 million in two years. Application of the theories and management practices With reference to the aforementioned theories and management practices, I will work towards the expansion of the company. I will employ the scientific management theory, and administrative management theory, which focus on division of labor and specialization so as to improve company’s performance and employee satisfaction (Hill & Jones 2010, pp. 11-33). A theory of bureaucratic system is also valuable in my management plan because it ensures respect, order, unity and equity and fairness in the company. The company requires rules and regulations, SOPs and norms in order to ensure smooth running, appropriate employee behavior, and efficiency. Besides, I will adopt Fayol’s principles of management so as to boost the firm’s performance, through division of labor and specialization (Sheldrake 2003, pp. 1-100). Most significantly, I intend to integrate both theories Y and behavioral management in order to achieve effective management in the firm. In this case the use of theory X is inappropriate in that I want to change the way managers view employees and how they are viewed by employees. This implies that, as a manager, I will advocate for managers concentration on supporting workers perform highly, instead of closely controlling them (Davenport 2006, pp. 13-20). What is more, I will promote workers’ involvement job development and analysis processes; communication among departmental managers; and cross functioning. Furthermore, I will encourage other managers to employ appropriate supervisory techniques so as to enhance workers’ productivity and efficiency, as per Mayo’s principles. More so, I will employ the management science theory that comprises of operations management, quantitative techniques, management information systems and total quality management. Additionally, I will adopt the organization environment theory that sets conditions and forces that function beyond firm’s limits, affect supervisors’ ability to obtain and use resources. Lastly, I will employ a flexible management style in which the firm cares about the employees social, professional and family issues so as to enhance their productivity. Therefore, my management plan in the firm will ensure that all the developed management practices and theories are integrated so as to achieve the set goals and objectives effectively (Sheldrake 2003, pp. 1-100). Risks of outsourcing Since we are situated in a developing locality where most of the people have basic academic qualification, we are unable to quickly develop extra skills and learning so as to ensure the firm’s consistent success. Therefore, our company has decided to outsource employees, an initiative that might bring certain risks in the business. It is possible that we will get the right staff through outsourcing and meet our set goals and objectives. However, outsourcing will endanger our corporate social responsibility that requires that we should employ local personnel, and thus poor image. Besides, outsourcing will be costly to us since we will be forced to pay about double the local employees’ salary for every outsourced member of staff. In addition, our company’s information systems may get insecure through outsourcing. Authors’ opinion I agree with the literature findings in the literature review because of appropriate information that the authors have presented. This implies that their ideas and theories are appropriate, accurate and applicable in real life. Conclusion Our company in this case is categorized as a corporation with a functional business structure. The success of our company is based on the kind of business structure used, and effective management practices. It requires integration of management theories and practices including scientific management, human relations, bureaucratic, administrative management, theory Y, management science theory, and organization environment theories. Moreover, I will ensure that the company adopts a flexible management theory so as to meet both the clients’ and employees; and thus improved performance. Additionally, the new, local employees that might our company face in their employment will be trained so as to develop the right skills suitable for the company. As a HR manager, I will employ rewards strategy, identify key performance indicators, motivational strategies like acquire, bond, challenge, and defend techniques, and the Harvard HRM model, in order to motivate employees and ensure continuous success of the firm. Recommendations The company should provide sufficient resources that will help propel it towards the achievement of its goals. It should also provide us, the line managers, with total support so as to facilitate our success in the management of respective projects. The company should also consider changing its philosophy so as to allow it adjust to environmental changes, and to facilitate effective motivation of employees. It should also consider employing and training the local employees so as to fit enable the company achieve its goals and objectives. Additionally, it is crucial for the company to adopt a social corporate responsibility of campaigning for education of local residents in the area so as to develop skills for its future recruitment activities. References Davenport, T 2006, Strategic management in the innovation economy strategy approaches and tools for dynamic innovation capabilities, Publicis Wiley, Erlangen. PP. 13-20. Adetule, PJ 2011, Handbook on management theories, Author House, Bloomington. Pp. 20-38. Armstrong, M 2012, Armstrong's Handbook of Strategic Human Resource Management, Kogan Page, London. Pp. 258-260. Armstrong, M 2011, The reward management toolkit: a step-by-step guide to designing and delivering pay and benefits, Kogan Page, London Philadelphia. Pp. 31-35. Collings, D & Wood, G 2009, Human Resource Management, Routledge, New York. Pp. 42-44. Daft, R 2009, Organization Theory and Design, South-Western College Pub, Cincinnati. Pp. 104-107. French, R 2011, Organizational Behavior, John Wiley & Sons Inc, Hoboken. Pp. 180-184. Glynn, MS 2009, Business-to-business brand management: theory, research and executive case study exercises, JAI Press, Bingley. Pp. 1-20. Hill, C & Jones, G 2010, Strategic management theory: an integrated approach, South-Western/Cengage Learning, Mason, OH. Pp. 11-33. Parmenter, D 2011, Key Performance Indicators: Developing, Implementing, and Using Winning KPIs, John Wiley & Sons, Hoboken. Pp. 1-10. Radcliffe, D 2005, ‘Critique of Human Resources Theory ‘, Otago Management Graduate Review, vol. 3, no. 5, pp. 51-66. Sheldrake, J 2003, Management theory, Thomson, Australia United States. Pp. 1-100. Smith, R 2008, Rules of Thumb for Maintenance and Reliability Engineers, Elsevier/Butterworth-Heinemann, Amsterdam. Pp. 102-104. Thenmozhi, M Evolution of Management Theory, Indian institute of Technology Madras, pp.1-22. .http://nptel.iitm.ac.in/courses/IIT-MADRAS/Management_Science_I/Pdfs/1_2.pdf Appendices What type of Company is this? In this case, the medium sized manufacturing company is a corporation. A corporation is often referred to as a limited company or a ‘company’. It is a separate legal entity that is formed by following certain procedures put forth in the applicable law. Upon creating a corporation, it gains a long-term existence separated from its owners, officers and directors. In some countries like British Columbia, a corporation possesses equal powers as a natural human being. For instance, it can enter into contracts by using the corporation’s name; it can sue or be sued by the corporation’s name; it can sell and buy property; and create associations with other individuals or corporations, and even possess another corporation. As a corporation, this manufacturing company should have at least one director, shareholder, and an officer. Here, the shareholders refer to the corporation’s owners, while the directors involve the people who are in charge of the company’s administrative and management activities, and other affairs of the company. On the other, the officers of the corporation entail the president, secretary, and other officials that the directors find essential. In case where the corporation has one shareholder, this individual will become the company’s sole director and officer. Here, the corporation will not necessarily appoint a secretary and a president. Therefore, the medium sized manufacturing company, in this case, is a corporation with five directors, 25 managers, and 300 employees. Benefits of the model This company is beneficial in a number of ways. First, it has a limited liability in which shareholders or owners are not responsible for the obligations and debts of the company. Impliedly, a common rule, creditors of the company cannot hold owners or shareholders liable for the company debts. In cases the corporation cannot settle its debts, the creditors are not entitled to claim any payment form the corporation owners. Nevertheless, there are exceptions to the general rule either because of a certain statute or act created by owners to make them responsible for the debts. Secondly, the corporation has an advantage of an easily transferrable ownership. This implies that the company ownership can easily be transferred through the transfer of shares. This can be as simple as endorsing back share certificate to belong to the new shareholder. This transfer of ownership is recorded in the company’s document. Nonetheless, if the company is actively conducting business, the new shareholders will need various warranties and representations both form the corporation and share seller. Besides, the seller will desire to exclude responsibility in some areas and restrict the warranties and representations provided. Moreover, particular requirements of ruling legislation must be satisfied. Thirdly, this company is beneficial in that it enjoys a perpetual existence. Because the company is a totally separate entity from the shareholders, it has a long-term existence. Even if the company’s ownership is altered; the company continues to exist in law. This allows for the continuous existence of the corporation’s business. The fourth benefit of this company type lies on its tax issues. As a corporation, the company has an advantage of being taxed as at a considerably minimized rate if it qualifies as a medium business. There can be a considerable tax saving in comparison to conducting business outside the corporation. Fourthly, the model has an advantage in terms of raising capital. For many reasons, it may be easier to get capital for starting a corporation than it is for a sole proprietorship or a partnership. This is because of the fact that many lenders are ready and willing to give capital to corporation businessmen than other types of companies. In a nutshell, as a corporation, the company had many sources of capital for its establishment. Disadvantages of a corporation Corporations are faced with a challenge of greater regulations than other business types. As a corporation, the company may be subjected to heavier regulations regarding its operations; this increased costs in conducting business. Some of these regulations relate to collecting of capital and selling of shares. It also has a disadvantage of higher costs than in a sole proprietorship or a partnership because of a lot of government and legal fees. A corporation is disadvantageous in that it requires record keeping, in terms of the shareholders, officers and directors, and the debts. It is required that some other changes and transactions that happen in the corporation are kept. What is more, various records are kept open for public inspection, for instance, everybody can access the corporation’s list of owners, even though the modern Business Corporation Act has certain restrictions. A corporation has a limitation of double taxation as compared to other types of companies. This is largely dependent on what special restrictions and rights associated with shares, and how corporation profits are distributed to the shareholders. The corporation ought to pay tax on its profits, and the owner can be subjected to taxation on the dividends received. Consequently, this taxation is more than if the business was in another form. A corporation has a drawback concerning its shareholder and director liability. Although the common rule is that such a business has a limited liability, there are cases in which shareholders and directors are held personally responsible for the company failures or acts. There are several statutes that formed personal responsibility on directors and owners of the corporation. Moreover, this personal liability can be caused by certain owners’ or directors’ acts or failure to follow procedures or steps. Therefore, there is a need for appropriate legal advice on the corporation activities so as to avoid losses, and instead gains its full benefits. HR considerations I intend to engage myself in developing strategies that will ensure that the company improves its efficiency and performance; hence achieving its objectives. My responsibilities will include designing and redesigning of business operations; overseeing every activity in the company that concerns the production of goods and services. Besides, I will be charged with the responsibility of deciding facility location, its design and layout, and quality assurance in the company. I will also be expected to handle maintenance planning and schedule issues in relation to the company operations. I will have a great liability of ensuring that firm’s operations are effective as regards the use of as little resources as required, and efficient satisfaction of customer needs. Additionally, I will be required to be competent in handling processes that change inputs in terms of energy, labor or materials, into outputs in terms of service and goods. I and other senior members of staff in the company will be expected to totally commit ourselves into managing company’s operations effectively so as to ensure that it attains its highest productivity levels. Moreover, we are required to engage our employees in training and seminars that will help advance their skills and improve their productivity. Diagram; organizational structure Read More