Workforce Management Issues & Recommendations for ModSat - Case Study Example

Workforce Management Issues & Recommendations for ModSat Workforce & Staffing Issues at ModSat The current situation at ModSat as it relates to the workforce and the need to develop an effective management team can be best described as stagnant; the management of the company reflects its previous position as a monopoly in that it is bureaucratic, strictly hierarchical, conservative, and risk averse. Times have changed, but ModSat has not, and this is reflected in the growing discontent of the workforce and especially among the important talent pool represented by the middle management, as well as a lack of customer service focus. ModSat’s declining market share reflects the significant challenge the company faces from its competition. As a market leader, the “way ModSat does things” serves as a kind of a template for its competitors; to draw customers away from ModSat, its competitors only need look at its makeup and methods and test different approaches until better ones are found. As long as ModSat continues to ‘do things the way they’ve always been done,’ it is just a matter of time before its competitors catch up and surpass it. This report focuses on the workforce and staffing issues that must be addressed in relation to the changes for ModSat proposed by its new CEO. These issues are addressed by six recommendations: Improving management credibility with the workforce, building a more diverse management team, identifying key talent to be retained and optimising organisational changes by building a “change agent” team, promoting a service culture within ModSat and its business units, restructuring management compensation, and shifting staff compensation to more incentive-based individual contracts. The Proposed Changes as They Relate to the Workforce The changes proposed for ModSat include changing the compensation structure for the management team, outsourcing many of the organisation’s activities and reducing the permanent staff to a “high development” core group of employees, and shifting compensation for the workforce to individual contracts. In terms of overall strategy for ModSat, the objectives relating to staffing and workforce development represent “corporate strategy” rather than “competitive strategy,” in that they are “top-down” organisational change initiatives, whereas competitive strategy develops from the bottom up, starting from the perspective of that part of the enterprise that interfaces with its market. (Porter, 1987: 43) This is an important consideration because these proposed changes do not actually represent a strategy, but rather a form of “resource deployment.” (Rumelt, 2003) “Strategy” is a statement of an organisation’s plan to reach some desired future state where the company’s strengths and opportunities are maximised, weaknesses corrected or compensated for, and the threats from the environment deflected. Resource deployment, in this case, specifically, making the most efficient use of the most capable human resources available to ModSat supports an overall strategy. Therefore, while these changes are necessary, they must be aligned with the similar initiatives developed for customer service, marketing, finance, and operations in order to provide ModSat with an effective overall strategy. All the changes needed by ModSat will in some way affect every part of its organisational culture, which has eight key dimensions. (Martins & Terblanche, 2003: 66) Mission and vision describes how the company’s values and mission are understood by its people, and how they can be translated into measurable goals. External environment describes the market and competitive forces that affect the company’s activities. Means to achieve objectives are the structural and organisation tools and processes by which changes must be implemented. Image of the organisation describes the perceptions of others of the company. Management processes are the ways in which the means to achieve objectives are directed. Employee needs and objectives look at employee goals and “psychological investment” (Neumann, et al., 1999: 217) of the employees. Interpersonal relationships focus on the interaction between management and workforce, and between different groups within the company. And finally, Leadership is just what it sounds like; does the organisational culture, or changes to it, strengthen or detract from the perceptions of leadership that the entire organisation has of its management? (Martins & Terblanche, 2003: 66) The changes related to ModSat’s workforce and staffing primarily address management processes, employee needs and objectives, interpersonal relationships, and leadership, and success in these areas will contribute to the success in other areas. One key to ModSat’s success in implementing any of the recommended changes described below is to provide a high degree of employee motivation, not only to counteract the atmosphere of mistrust that exists currently among the workforce, but to improve the performance of the organisation. Much of the success of ModSat’s proposed changes is dependent on maintaining motivation through change processes that are presumably negative – additional reductions in staff and significant changes to the compensation scheme. This makes the task more challenging, particularly more so because intrinsic employee motivations – job satisfaction, a sense of organisational loyalty, trust in management, and the like – have clear operational effects. (Cruz, et al., 2009; Reychav & Sharkie, 2010) In order to manage employee motivation, however, ModSat has to maintain a realistic view of its organisational maturity. At present, ModSat can be described as being at Level 1 or 2 (out of four), which is characterised by a strong, near complete reliance on extrinsic motivation – i.e., payday every Wednesday – and rigid, well-defined job descriptions and processes. (Flynn, 2011: 13-14) This is of course not ideal, and for ModSat to fully-realise its objectives it must move beyond the levels of compliance or process management into the maturity levels of capability and strategic management. This relates to the manner in which the objectives are defined, communicated, and accepted by the entire organisation. The approaches can vary from a strict “top-down” or systematic manner which breaks down planning and tasks into clearly-defined components and follows a clear set of rules, and quite normally mirrors the physical organisation of the company itself, with areas of responsibility divided amongst the relevant departments. At the other end of the spectrum is a, decentralised, fully-participatory approach, with all parts of the organisation contributing to the strategic decisions and the setting of specific objectives. (Storey, 1992) ModSat is at this point closer to the left end of the spectrum; specific initiatives to move the organisation towards the right end and a more integrated form can be introduced, but the movement has to be progressive or the motivation of the workforce will not match the organisation’s management needs. (Flynn, 2011: 14-15) That means the changes must begin with more direction from the top management, starting with improving their trust and credibility with the workforce, which is a good place to also start introducing a greater degree of employee-management collaboration. Recommendations: How to get from the “As-Is” to the “To-Be” State Recommendation One: Improve Management Credibility with the Workforce One way in which “credibility” or “trust” between the management and the workforce can be measured is in the willingness of the staff to take on “extra-role” tasks. This is particularly relevant to the aims of ModSat, because of the need to pare down the workforce to a smaller core of permanent workers, a move that will almost certainly require the expansion of some of those workers’ job roles. Trust can be measured by four factors, but only one is an extrinsic factor that can be easily quantified, which is the employees’ expectations towards pay and other direct rewards. Other factors that are important are an atmosphere that encourages job autonomy, management values, in the context of how clearly they are communicated to the organisation and reflected in management decisions, and psychological support, or the sense that the management ‘cares’ about the people in the organisation. When these four factors are high, ‘trust’ in management is high, and the commitment of employees is reflected in higher levels of extra-role activity. (Reychav & Sharkie, 2010: 235; 237-238) The obvious first step then is to learn the sentiments of the workforce, something which the case study does not indicate has been done yet. Even before that step is taken, clearly defining and explaining the specific objectives for ModSat will not only help to encourage familiarity with the ‘management values’ noted above, but will also increase the prospects for meeting those targets. In a McKinsey Company survey among companies undergoing a significant organisational change conducted in 2008, three-fourths of those who said their company’s change was either “very” or “extremely” successful also said that success targets were well-defined in financial or operational terms. By contrast, about nine out of ten companies whose workers did not feel the success targets were well defined also characterised their change programs as “only somewhat” or “not at all” successful. (The McKinsey Quarterly, 2008: 4) How successfully ModSat communicates its objectives can be determined by a simple test in the course of gather employee feedback by simply asking employees to interpret the goals from their own points of view. One way in which the employee mistrust of management’s motives – described in the case study as a belief among the staff that they are expendable despite management’s assertions to the contrary – can be counteracted while at the same time a clear communication of ModSat’s direction and objectives made to the organisation is through the development of an effective mission statement, ideally after the feedback process above has taken place. By considering and including some of the employees’ own interpretations into a mission statement, the message can not only be made more effective because any degree of miscommunication – i.e. the difference between what management thinks they are saying and what the employees think they are hearing (Denton, 2001) – will be immediately identified, and the workforce will have a clear demonstration that their voices are being heard. Another key ingredient for success in organisational changes is an “involved and visible” CEO; two-thirds of companies surveyed who characterised their own organisational change projects as “extremely successful” also characterised their CEO’s as “very visible” in the process. (The McKinsey Quarterly, 2008: 6) This should be a significant warning to ModSat’s new CEO, but the mistrust of management extends beyond him, and the entire senior management team should consider their “visibility.” As indicated by the case study, the management can be described as an entrenched bureaucracy, and it is very likely that changes in the management team need to be made. One of the areas mentioned in the case study where there is a disconnect between management, the staff, and the customer base is in terms of diversity, a concept which has met with resistance from the current management team. Recommendation Two: Apply Diversity Management in Selecting a Management Team The current senior management team is described as being ‘promoted technicians’ with three having a background in accounting and four being engineers. As a consequence, ModSat’s management has been developed with due consideration to functional competence, but in limited areas, and without regard to differences in work preferences, attitudes towards risk, or personalities. Recruitment and retention for management as well as staff should be linked to organisational performance; in ModSat’s case, the CEO has laid out a number of critical objectives, which can serve both as a guideline to skills that need to be brought into the management team as well as a basis for a ‘career map’ for developing and promoting people within the company as ModSat has typically done. (Reichenberg, 2001: 3) The best way to achieve diversity in the management team without compromising the need for functional competence is to seek people with different areas of expertise, who naturally have different perceptions of success. For example, ModSat’s current accountant-engineer management mix has just two measures of success; the accountants will see things in financial terms, while the engineers judge quality in terms of function. But these perspectives are different from people who, for example, have backgrounds in marketing, design, or production. While the diversity of expertise certainly can lead to conflicts, and while people with similar perspectives can establish mutual trust much more easily, a team perspective which is too uniform can lead to ‘blind spots’. (Bassett-Jones, 2005: 173) After all, ModSat’s workforce and customer base are not all either accountants or engineers, but instead have a variety of perspectives and judgments about success or satisfaction. Either cross-training some of the existing management team in other disciplines, or more likely, substituting some of them with people who have different competencies, will bring a much-needed diversity of approaches to ModSat’s direction. Recommendation Three: Recruit a “Change Agent” Team from within the Company One of the most effective ways ModSat can develop a diversified leadership as well as successfully integrate the proposed organisational changes across the entire enterprise is to form a “change agent” team to manage and monitor the change process. It can be formed in different ways, and operate separately from the rest of the organisation or in complete integration depending on what the needs and characteristics of the company are, but always includes the roles of executers who give direction to implement solutions, experts to assess and solve technical or operational problems, coaches to train line staff and gather feedback, custodians to ensure that information and organisational knowledge is shared among different units, and controllers to monitor progress and what remains to be accomplished. (Arrata, et al., 2007:1-2) By forming a change agent team, ModSat can also address the discontent of the skilled middle-managers who feel their ideas and initiative are being stymied by the senior management. Of course, the caveats about the potential for conflicting perspectives in diversity management also apply to a change agent team. Just as management objectives are regarded in the context of different individuals’ expertise, those responsible for implementing changes focus on those that fall within their ordinary areas of responsibility and tend to attach a priority to them. (Neumann, Miller, & Holti, 1999: 218) The change agent team’s make-up must be balanced across the organisational boundaries within ModSat so that the full value of different perspectives can be realised without overlooking any important areas, but in such a way that the focus is not imbalanced towards any particular perspectives – such as is represented to a certain extent in the relatively homogenous make-up of ModSat’s senior management team. Recommendation Four: Build a Service Management Culture within the Business Units The concept of a service management culture has a much broader application than human resource management, but there are several key components of service management that are relevant to the objectives for ModSat, particularly given the intention of the company to outsource many of its functions and, presumably, give the individual business units greater autonomy. Service orientation within an organisation is associated with the idea of “learning organisations,” in that the primary focus of the organisation’s strategy is to respond to changing customer needs. (Grönroos, 1994) Learning organisations have six value-creating characteristics: Flexibility, Commitment, Communication, Empowerment, Teams, and Trust. (Jamali, et al., 2006: 339-341) The recommendations given here address these six characteristics to varying degrees, particularly in the areas of Communication, Teams, and Trust, and are critical for the success of the proposed structure of ModSat which will rely on a smaller, more skilled core workforce. One relatively simple and effective way a customer-oriented and service-oriented culture can be encouraged is to provide a degree of sales and marketing familiarisation for all employees. (Grönroos, 1994: 13)This has a practical benefit of spreading customer contact resources throughout the organisation; even in departments that are not directly related to sales or marketing, there are at least occasional opportunities for employees to interface with customers. The cross-training also has the effect of reinforcing the customer service priority for everyone in the organisation, and provides an opportunity for production and other non-front-line staff to collaborate with the sales and marketing departments to smooth out the inevitable conflicts in expectations between areas of the organisation with very different abilities and responsibilities. Recommendation Five: Restructure Management Compensation Management compensation must precede any change in the compensation structure of the general staff, as one of the best ways to make compensation changes more acceptable is to clearly demonstrate that management is subject to the same changes as everyone else. (Buhayar, 2009) Since another priority change sought by ModSat is a move towards individual rather than collective contracts for the general workforce, which will represent a considerable challenge, properly restructuring management compensation will perhaps give the workforce a little more confidence in what they may expect from the proposed changes. In terms of management preferences towards compensation, it appears that intrinsic rewards such as “opportunity for personal development” and “responsibility” are about as equally important as clearly extrinsic motivators such as “cash bonus” and “executive stock options.” (Kominis & Emmanuel, 2005: 64) Although managers in that particular study – which was conducted amongst mid-level managers, and is relevant to ModSat’s situation because of the talent pool that part of its organisation represents – expressed higher opinions of the value of intrinsic rewards than those of financial compensation, motivation and performance were highest when the balance between the two was fairly equal in compensation packages. (Kominis & Emmanuel, 2005: 68-69) What this suggests is that a combination of base salary, a significant incentive-based pay component, and personal and professional development incentives such as continuing education support would be the most effective option. This must, of course, be combined with a substantial and reliable performance evaluation program that communicates clear goals to individual managers and connects them directly to organisational performance. (Medlin & Green, 2009; Whittington & Galpin, 2010) Recommendation Six: Promote the Advantages of Individual Contracts for the Workforce The usual rationale for individualism in contracts is that employees benefit by having their individual contributions recognised directly, and the organisation benefits by employee motivation and productive effort not waxing and waning according to a schedule for renegotiating CBAs. (Waring, 1999: 295) Moving to individual contracts, however, raises problems of what role, if any, ModSat’s evidently strong union representation would play in the future. Fully de-recognising the unions in favour of individual contracts may have unintended negative effects and increase the already-high level of employee apprehension towards management’s motives with regards to the workforce. (Bacon & Storey, 2000: 413-414) This was confirmed in a comparative study of a greenfield and a brownfield site in Australia, where in the latter employee suspicion of management increased significantly throughout the necessary two-step process of management’s first ‘imposing’ a new, individualised HRM scheme, and then working on building relationships between management and workforce. (Baird, 2002: 367-368) On the other hand, working with the unions to give the collective an important role in areas not quite as directly related to performance as individual compensation might allay some of these suspicions. Areas where this might be effective are in management of health and safety standards and in quality control oversight. (Bacon & Storey, 2000: 421) The unions can also serve as a trustworthy liaison between management and staff in terms of explaining the new compensation packages, in effect vouching for management’s sincerity in adopting a similar scheme for themselves as they are promoting to the workforce. Conclusion The primary objective of the recommendations presented in this report is to support the planned organisational change initiatives for ModSat by addressing key communication and employee motivation issues. Beginning with greater ‘visible’ involvement of the senior management – which can be demonstrated by eliciting the insights of the general staff towards the proposed objectives – and communicating a clear vision and “road map” to achieve the objectives is the essential first step. 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