Audit of HRM Practices in Company X - Case Study Example

An Audit of HRM Practices in Company X Name Course Instructor Date Table of Contents Table of Contents 2 References 15 An Audit of HRM Practices in Company X a) Introduction Human Resource Management (HRM) is one of the most important strategic functions in any organization. This function is concerned with the management of employees, who collectively and individually contribute to the achievement of business goals and objectives. At its core, the HRM functions plays a tactical and strategic role in maximizing returns on an organization’s investment in human capital, and in minimizing employee-related operational and regulatory risks. Although the HRM function is expected to operate as an independent unit, its activities and influence touch on all aspects of operations in an organization. For this reason, most organizations recognize the significance of HRM and structure their operations to fit into the strategic HR plan (Pfeffer 2005, p. 95). The paper that follows presents an audit report on HRM practices in a major British organization. The name of the company has been disguised in accordance with the company’s confidentiality policy. b) Company Background and History Company X is a medium-sized retailer and grocery firm in the United Kingdom. The company has been operating in the UK for several decades, and has expanded over the years to become a notable player in the British retail industry. The company’s stores carry a wide range of products including apparels, groceries, electronics and home décor. The stores and retail outlets are strategically spread across major British cities and towns. The company endeavors to offer high quality products at low prices. To this end, Company X seeks to develop and maintain strong competitive advantages over its rivals in the industry. c) Description of the HR Department’s Role in Company X The HR department is one of the several functional units that were established as soon as the company was formed. Since the company’s mission is to offer goods and services in a manner that is convenient and efficient to customers, its human resources directly influence the company’s business performance. Therefore, the HR department is responsible for maximizing employees’ performance to increase sales and brand equity. Human resource planning, job design and analysis are the main components of the HRM function at Company X. Human resource planning helps the HR department in attracting and developing talented and motivated employees. Through job design and analysis, the HR department develops proper job specifications and descriptions for its employees. Because of its wide branch network and a large number of employees, Company X has adopted a hybrid system of HR management. This system combines decentralized and centralized HR activities and responsibilities (Youndt & Snell 2004, p. 337-343). Under this system, each store employs its own staff but the HR department at the head office retains centralized overall responsibilities. Essentially, each store under Company X brand is headed by an HR manager who is appointed at the head office. The main responsibility of these HR managers is to translate and implement the company’s general human resources plan as developed at the corporate head office. Store managers may implement different interpretations of the HR plan. The variations are as a result of the unique circumstances surrounding each store’s human resources and also the nature of each store’s interactions with the target market. This means that the company’s HR policies in Wales may be different from those in Scotland. Structurally, Company X HR department is divided into three major functions (subdivisions): HR services and support; employee relations and administration and employee benefits. The HR services and support subdivision is responsible for supporting the company’s branches in areas of selection and recruitment, labor relations, compensation, and conflict resolution. This function has a compliance team which monitors HR performance in each of the company’s branches. The employee administration and relations division supports the HR department in coordinating issues related to labor negotiations, development of overall HR standards and policies, and is responsible for overseeing the company’s administrative needs. The employee benefits division is responsible for coordinating the workforce’s benefit needs. Key activities of the employee benefit division include developing countrywide benefit administration strategies and monitoring current and former employees’ benefit programs. In order to balance demand and supply of talented workforce, the company uses sophisticated management information and decision support systems to track and analyze changes in the market and the workforce. The automated ‘system captures data from the company stores, which is entered into the company’s central database and organized to reveal various trends in HR operations. Through this elaborate HR forecasting system, the company is able to predict possible future movements in its workforce such as turnover rate or changes per region. Generally, the company maintains a continuous process of recruiting new employees and offering them the necessary training. This proactive process ensures that vacancies are filled within the shortest time possible and that critical operations are not disrupted due to employee turnover. As an established retailer, Company X has a wide range of job description and performance expectations for its employees. The company’s human resource department uses different variables such as job factors, position, duties, responsibilities and performance standards as criteria to develop job descriptions. For junior and entry level positions, the HR department emphasizes product knowledge, communication skills and presentability as core attributes. For managerial and supervisory positions, the company emphasizes problem solving, critical decision-making and analytical skills and abilities. The HR considers interpersonal skills essential for a successful career at the company. Performance management and employee training are important functions of Company HR department. As the company seeks opportunities for expansion across the UK and beyond, its need for specific abilities, knowledge and skills also expand. The HR department has implemented a robust employee training and development program designed to ensure efficiency in routine operations, and increased capacity to handle unexpected conditions in the industry. The HR department envisions the goal of cost-effective training to maximize productivity. The HR department uses both process-oriented and results-oriented approaches to support its training programs. The results oriented approach helps in satisfying the company’s need for specific skills, knowledge and abilities for different positions. The process-oriented approach addresses the need to maintain the right performance standards. The company uses performance management to address critical aspects of its HR performance. These include problem solving, decision-making orientation and development of customer service skills. Overall, the HR department emphasizes high levels of customer service in its performance management programs to ensure that customers get the best services. d) Technical Description of the HR Department i. Critical Analysis of the Strategic Importance of HR Department at Company X The HR department does play a major strategic role at Company X. According to Monks and McMackin (2001, p. 57-72), the primary objective of establishing the HR department within an organization is to reduce risks of business failure and to drive operational success through people. At Company X, the HR department is the bridge that links all of the company’s tactics and strategies to ensure achievement of business goals. The HR department’s operational philosophy states that overriding goals can only be achieved by aligning business strategies with the best practices in human resource management. As such, the HR department strives to ensure that the company’s human capital plays a critical role in fostering the highest levels of success in the fiercely competitive retail industry. It can be noted that HR department plays a strategic at Company X by mobilizing employees to work towards achieving business success. In this regard, the HR focuses on enabling top leadership and employees to access opportunities for continuous learning, empowerment and improvement with the aim of creating synergy in the workplace. Generally, Company X’s work teams are productive although staffing levels have been designed to remain lean. Another way through which the HR department plays a critical role at Company X is by fostering a culture of commitment to organizational growth and excellence. The X culture, which has been carefully cultivated by the company for many years, is a diverse collection of highly skilled people all of whom have a stake in the company’s success. Employees are considered the most important assets in the company and have been empowered to act as business owners through problem solving and decision-making (Pfeffer 2005, p. 97-98). Another strategic role of the HR department at Company X entails connecting people to the products. At Company X, employees are expected to act like merchants in a retail business. The HR department offers a supportive work environment and appropriate conditions to ensure that everyone, no matter their positions, focus on helping the stores improve service to customers. To realize this vision, decision-making powers have been pushed down to local store managers. This way, important customer service decisions are made as quickly as possible (Youndt & Snell 2004, p. 337-341). Reduction of business risks is another way through which the HR department plays a critical success role at the company. According to Monks and McMackin (2001, p. 57-72), successful organizations minimize business risks by aligning their HR practices with business strategies. The management of risks at Company X is reliant upon the collective skills and knowledge possessed by the company’s employees. The company’s leadership credits their employees who contribute to risk reduction by achieving performance goals, controlling the company’s expenses and serving customers diligently. The last aspect of the HR department’s strategic role is the sourcing of talented employees who drive results at the company. The HR department recognizes that having the right talent in place to support business growth objectives is a critical success factor. Accordingly, the company recruits aggressively from different educational institutions in the UK and abroad. The HR department has set a primary talent acquisition goal of recruiting the best talents, providing the most useful training opportunities and creating the best workplace. ii. SWOT Analysis of the HR Department and its Subdivisions Strengths The HR department’s strengths are the internal factors that facilitate successful execution of HR functionality and strategies (Becker & Huselid 2006, p. 899). Basically, the company’s HR strategy encompasses the long-term vision of building a top performing workforce and becoming the best employer in the retail industry. In this regard, the HR department’s strengths include a dedicated executive leadership to promote and support the strategic HR agenda. Another strength is the knowledgeable staff with diverse skills that enable them to execute tactical duties effectively. The human resources are enthusiastic about pushing the company’s agenda forward for the long-term growth and survival of the company in the industry. Weaknesses Weaknesses are the factors that may pose challenges to the successful execution of the HR department’s strategies (Storey 2004, p. 92). The most important of these factors is budget constraints. Company X’s HR department suffers from severe budget cuts because it is not a revenue-generating centre like other departments. The HR department has to justify its expenditure and budget needs to get funding for investments in its programs. High employee turnover, long working hours and low employee morale are other major weaknesses that can disrupt operations at the HR department. Opportunities In accordance with X’s ambitious expansion program, there are opportunities for workforce growth. Expansion into regional centers means more business, which will translate into better wages for the company’s employees. There are also opportunities for the HR department to turn the company into the most reputable industry player capable of dictating trends in the industry. There are also opportunities in terms of the increasing pool of volunteers ready to offer their expertise services to the company. The HR department can tap into these volunteers as a cost saving strategy. Threats Threats refer to any of the external factors that may adversely affect the HR department and ultimately the ability of the company to function and maintain its competitive advantages in the industry. The greatest threat is increased competition from rival retailers. As these competitors gain a commanding edge in terms of market share, they can affect X’s profitability. This may result in X laying-off its talented staff (Monks & McMackin 2001, p. 63). Another threat is the existence of companies that offer better wages and working conditions than company X. Such companies are likely to target X’s staff. The HR staff at X can insulate the company from aggressive competitor moves by reviewing its compensation structure, surveying market rates and by strengthening employee commitment. Other threats include costly litigations from employees and increased demand by employees for more focused opportunities. iii. Analysis of the HR Function Based on Ulrich’s Model Ulrich’s model provides guidelines for transforming the human resources department in an organization by separating administration, HR policy making and business partnering roles. The primary aim of his model is to shift the vital HR role from merely administrative to strategy (Ulrich & Brockbank 2005, p. 19-22). Based on Ulrich’s model, Company X has defined four critical roles as primary components of its HR department. The first role is HR business partnering, which involves communicating with employees, customers, suppliers and other stakeholders. The main benefit of the HR business-partnering role is that it helps in giving feedback to customers about the quality of their experience, identifies the best talents in the organization, and helps in sharing goals with employee. The second role is change agency, which helps in communicating important changes internally. These changes could be related to expansion, altering of business goals or evolution of business processes (Ulrich & Brockbank 2005, p. 35). As a change agent, the HR department at X organizes various training opportunities for management and employees to learn new skills for embracing change. The third role is administration expert. This role is responsible for implementing changes in policies, legislation, labor laws and occupational health and safety guidelines. It is also responsible for organizing employee’s information and updating it. The last role is employee championship and advocacy. This involves protecting employee’s interests, gauging employee’s satisfaction and creating a favorable working environment. iv. Soft HR versus Hard HR and the Reporting Structure Soft and hard HR are the two main ways of approaching the management of human resource function in an organization. Hard HR considers employees merely as a resource of the company and maintains strong links with business planning. The key focus of hard HR is to identify workforce needs of the company and recruit accordingly. On the contrary, soft HR treats employees as an important strategic resource in an organization and as a source of competitive advantages in the industry. The key focus of soft HR is to satisfy the individual needs of employees through proper planning of rewards, roles and motivational incentives (Judge & Ronald 2004, p. 761). Company X’s HR department uses soft HR more than hard HR. The guiding principle behind the company’s adoption of soft HR is that employees who show high levels of job satisfaction, productivity and skills promote a healthy environment for organizational growth. The key benefit of using soft HR is that this approach appeals to the feelings and desires of the company’s employees. The HR department uses such tools as management reports, personal interviews and customer surveys to gather data for use in implementing soft HR metrics. Employee satisfaction remains by far the most important soft HR metric (Youndt & Snell 2004, p. 337-341). The HR department frequently assesses employees to determine whether they are comfortable with their roles. In terms of reporting structure, Company X has adopted vertical reporting structure. In this stricture, the head of HR department (corporate HR director) reports directly to the company’s chief executive officer but has powers to implement policies. Employees report to regional HR managers who in turn report directly to the corporate HR director. The advantage of this reporting structure is that policies are not necessarily dictated from the head office. The arrangement gives line HR managers and employees an opportunity to participate in important steps of the HR management process and to communicate deliverables (Becker & Huselid 2006, p. 898). v. Transactional versus Transformational HR HR activities can be described as transactional or transformational. Transactional HR is the traditional approach to the management of human resources. It focuses on routine processes for keeping an organization running. It involves specific administrative tasks, which are similar to the duties handled by the traditional personnel departments. These tasks include recruitment, review of workplace policies and benefit administration. In contrast, transformational HR focuses on the strategic role of employees within an organization. This approach aims to expand the transactional role of HR by developing strategies for aligning human resources and organizational goals (Judge & Ronald, 2004, p. 755-761). Company X has adopted the transformational HR approach with the aim of turning the HR department into a key driving force that can help the organization achieve its key business objectives. The company recognizes that business needs have changed significantly due to factors like globalization, technological advances and more informed customers who need better services and a wider range of product choices. In this rapidly changing environment, the traditional HR approach (transactional) is not capable of helping an organization to remain competitive. Rather, the transformational approach is required for successful running of organizations. This approach enables the HR leaders to review the strategic direction of the company and to share what has been conceptualized as the HR strategy. This way, the HR department enhances value by making employees strategic partners in pursuance of the company’s long-term vision. e) Recommendations for Improving Effectiveness of the HR Function at Company X The following recommendations can help in improving effectiveness and efficiency of the Hr function at company x: i. Consider implementing work-life balance programs to enable employees deal with personal development issues. The company can implement work-life balance through condensed week works, job sharing and telecommuting (Lepak & Snell 2002, p. 517-519). ii. Implement strategies for career support and advice, with the objective of developing an accepted system for progression at the company. iii. Have plans for succession planning to avert costly crises during periods of transition. f) Conclusion The HR department plays an important strategic function at Company X. The department is responsible for sourcing the company’s talent and developing policies to meet the company’s business objectives. The department is divided into several functional areas to improve efficiency in the performance of its roles. Management of the HR function is based on the principle of efficiency to provide the organization with necessary abilities and structures to gain its competitive advantages. Although the HR function is high performing, it suffers from high turnover and low employee morale due to long working hours. References Becker, A & Huselid, M 2006, ‘Strategic Human Resources Management: Where Do We Go From Here?’, Journal of Management, vol.32, no.6, pp. 898-925. Judge, T & Ronald, F 2004, ‘Transformational and Transactional Leadership: A Meta-Analytic Test of Their Relative Validity’, Journal of Applied Psychology, vol. 89, no. 5, pp. 755-768. Lepak, D & Snell, S 2002, ‘Examining the human resources architecture: The relationships among human capital, employment and resource configurations’, Journal of Management, vol. 28, no. 4, pp. 517-543. Monks, K & McMackin, J 2001, ‘Designing and aligning an HR system’, Human Resource Management Journal, vol. 11, no. 2, pp. 57–72. Pfeffer, J 2005, ‘Producing sustainable competitive advantage through the effective management of people’, Academy of Management Executive, vol. 19, no. 4, pp. 95-106. Storey, J 2004, Leadership in Organizations: Current Issues and Key Trends, London: Routledge. Ulrich, D & Brockbank, W. 2005. The HR value proposition. Boston: Harvard Business School Press. Youndt, M & Snell, S 2004, ‘Human resource configurations, intellectual capital, and organizational performance’, Journal of Managerial Issues, vol. 16, no. 3, pp. 337-360. Read More