Managing Human Capital - of Woolworths Limited - Case Study Example

MANAGING HUMAN CAPITAL Name: Course: Professor’s Name: University: State: Date: Abstract This report aims at assessing the human capital management challenges within Woolworths limited to identify suitable solutions. It is a consultancy report for the organization including information about the organization and its relation to the human resources. It details human resource issues faced by management and assesses the effects of these problems on the organization’s performance. The report then suggests various solutions for the identified problems based on major management theories. It also offers a detailed list of recommendations for the human resource management issues within the organization. Table of contents Introduction………………………………………………………………………………..5 Company overview………………………………………………………………………...5 Human resource issues: Gender imbalance…………………………………………………………………………..6 High labor turnover………………………………………………………………………...7 Job insecurity……………………………………………………………………………….8 Motivational issues…………………………………………………………………………9 Effects of HR issues on organizational performance High operational costs……………………………………………………………………..9 Corporate image…………………………………………………………………………..10 Customer dissatisfaction………………………………………………………………….11 Low skilled labor………………………………………………………………………….12 Solutions to motivational issues Training and development………………………………………………………………..13 Job security…………………………………………………………………………….....14 Growth opportunities……………………………………………………………………15 Recognition………………………………………………………………………………16 Maslow’s hierarchy of needs theory………………………………………………….…17 The Johari window………………………………………………………………………18 Conclusion………………………………………………………………………………20 References………………………………………………………………………………21 Introduction Human capital is the most valuable asset of an organization and has a strong bearing on its level of success. Human capital management therefore becomes a crucial function of a firm’s management to ensure the motivation and efficiency of employees in handling their tasks (Dessler 2000 p.33). The process begins with recruitment of the right persons for various jobs, placement, and appraisal of performance. Proper management of human resources reflects on the quality of services rendered by employees as well as their level of motivation. However, this practice is prone to several challenges since it involves handling people with a wide range of personalities. A high level of flexibility is important in management of human resources. Woolworths’ management has a large number of employees and often faces challenges in their management hence the need to assess these issues and identify solutions. Company Overview Woolworths is a grocery store chain/supermarket operating in Australia since 1924 with outlets in various cities. It is the largest supermarket chain in Australia with over 961 stores in the country. It prides itself in offering its customers the best produce sourced from the farms of farmers and growers. It operates under the slogan, ‘fresh food people’ that helps in maintaining its brand as a fresh food provider. The retail business provides general merchandise, fuel, electronics, and home improvement items among other products available in its outlets. The company recorded an income of $61149400000 in 2015 making it one of the highest earners in Australia. Woolworths ranks among the largest employers in Australian private sector with approximately 191000 employees working in its stores, distribution centers, and support offices. These employees include those employed in the company’s subsidiaries that operate under the names ‘Woolworths’ and ‘Safeway’. The company operates various subsidiaries outside Australia placed under regional management that reports to the parent company. The company therefore has a very strong competitive position in the Australian retail industry offering a wide range of services to customers. It operates in a very competitive industry with ease of entry and exit hence a large number of competitors. The retail industry is highly competitive in the modern world of technology with small retailers inventing ways to get ahead of dominant players. Woolworths commands a market share of over 40% making it a dominant player in the market for almost a century. It attributes its success to its branding strategies and attractive incentives that attract customers throughout the year. However, in the recent past, its reputation has gradually declined due to poor customer service. This has resulted into a decrease in its market share as some customers move to other retailers within their areas of residence. Recently, the company has been undergoing restructuring which has affected 7000 employees working in its Masters Stores. It operates a number of 63 Masters Stores in Victoria, Queensland, NSW, Western Australia, South Australia, and the ACT. The stores have recorded huge losses for the organization following the need to sell off its hardware business. Woolworths had to find a willing buyer who would absorb its existing workforce to secure the future of its employees. Human Resource Issues Gender Imbalances The retailer faces major challenges in maintenance of a gender balance across various ranks within the organization, which has caused resistance from the employees. Over the last decade, the business has grown substantially so has its human resource requirement. Lack of timely planning for these growth requirements deny management ample time to assess dynamics of the workforce. The issue of gender balance therefore becomes an afterthought in the recruitment process. Women already working within the organization also lack the opportunity to move through the employment ladder into positions of higher responsibilities. Drastic organizational changes have also contributed largely to the gender imbalance due to lack of enough time for planning of human resource requirements at a particular time. The nature of the job requires a high level of flexibility due to the several working hours that discourage women interested in taking up roles of more responsibilities. Gender imbalance is an issue that the management must address since it affects the corporate image of the company as well as the morale of employees (Finkin, Catcher & Araki 2013 p.64). High Labor Turnover The organization experiences a challenge in attracting and retaining talent required in running its operations. It mainly employs students interested in a part time job while undergoing their studies in various schools. Most of employees are on a part time basis hence having the mandate to leave at any time and the company then hires another employee. The company therefore employs a large number of employees in a year due to the high level of turnover. Employees leave the organization in search for career building opportunities in other organizations. After attaining their academic goals while working for the company on a part time basis, they present them to organizations that offer them better paying jobs. Low retention level means that management has to continuously train new employees from the basics and lose them after equipping them with relevant skills. This eventually costs the company a lot of time and resources with fewer benefits reaped from the recruitment process. The workforce therefore comprises of individuals with low skill and experience level. This poses a major challenge to the management who find it very difficult to train and retain highly skilled employees (John 2000 p.162). They train individuals who move to other organizations to offer their skills to these organizations that benefit from the efforts of Woolworths management. Job Insecurity The Masters stores of the organization have been undergoing losses due to operational problems leaving over 7000 employees uncertain about their future. The nature of jobs within the company involves many changes with the high level of labor turnover and job rotation. Employees therefore lack the sense of security in their jobs and feel the need to find other jobs within organizations that can guarantee job security. They have a perception that the company’s jobs are only part time rather than an opportunity to grow their careers. This affects the level of motivation of employees working within the organization due to their unwillingness to invest in a job that they may not keep. Restructuring only amplifies the job security issues with employees seeking to exit the organization due to the uncertain future of their jobs. The change in management creates skeptic perceptions among employees who have to adapt to changes in management style (Bloom 2010 p.110). The management therefore faces a major challenge in dealing with employees who are uncertain about their future in the organization. The high level of job insecurity affects their quality of work since they consistently wonder about their fate. Motivational Issues The human resources in the organization lack the morale to perform their jobs to the best of their ability (Finkin, Catcher & Araki 2013 p.42). Their jobs require long working hours with little free time hence very exhausting to the workers. Despite being part time jobs, they are very demanding due to the nature of the jobs that require frequent and direct interactions with customers. The management has been facing problems handling the motivational aspect of the employees due to the high rate of labor turnover. It takes time for a supervisor to familiarize themselves with employees and equip them with relevant skills only for them to leave. It becomes hard for the supervisors to develop healthy relationships with workers hence employees often feel left out and view themselves as outsiders to the organization. Customer relationships also suffer heavily with many customers complaining about poor services. The online platform that encourages customers to give feedback concerning the service experience at the supermarket gives evidence of the high level of customer dissatisfaction with the service offered. This emerges from the low level of motivation of employees who make no effort to attend to the needs of customers and only focus on doing what gets them paid. This creates the need for the management to find ways to motivate their workforce in the course of their duties to make them feel as important members of the organization. Effects of HR Issues on Organizational Performance High Operational Costs The organization incurs heavy costs in training employees who do not end up staying in the organization. It therefore incurs costs that it does not reap any benefits from since the employees leave with all the knowledge and skills instilled on them. It becomes uneconomical for the organization to train its workforce each time new employees join the organization. The high labor turnover also has cost implications on the organization where it loses sales in the course of transition (Smith 2000 p.99). A new employee takes time to adjust and may cause the loss of customers if they fail to trust his judgment. Employing a high number of employees also has serious cost implications on the organization resulting in heavy losses. The management therefore needs to reevaluate its human resource needs through the cost-benefit analysis to determine the optimum number of employees is should obtain. Currently, the organization has several employees who add less value to the organization. This has become uneconomical for the organization with certain segments starting to feel the effects of this problem. The Masters stores have consistently reported heavy losses necessitating its sale to another organization that can revive its vibrancy. Corporate Image The company’s corporate image has suffered tremendously due to the evident human resource issues within the organization. Human resources are an important component of the organization and act like the glue that keeps everything else together. Problems with the human resources reflect throughout the organization and affect every aspect of operation. In Woolworths, most operations require the actual presence of an employee hence the outcome directly depends on his or her input. High rate of labor turnover has negative implications on its corporate image with the public wondering about the cause of the exit. The management appears unable to manage the human capital hence the great exodus. The high turnover may also imply poor working conditions to the public making the company undesirable to potential employees. People may fear applying for jobs with the organization due to the high job insecurity involved. Most employees seek a healthy working environment that enables them to concentrate on their jobs. The history of the company indicates that employees are constantly worrying about their future in the organization hence requiring an exit plan by looking for jobs elsewhere. The inability to retain its workforce has raised questions about the competence of the management and if unaddressed may permanently damage the organization’s image (Williams 2001 p.133). Customer Dissatisfaction Customers are the most important stakeholders in any business organization since it exists to make profit. Customers translate into high sales volumes that guarantee high profits for the organization. It is of the company’s best interest to attract and maintain a healthy relationship with customers. The saying that the customer is always right means that the customer’s words are important since they know their needs and preferences better than anyone else does. The organization should therefore not ignore the feedback of customers since it helps in rating the quality of services offered. In Woolworths, customers have been expressing dissatisfaction with the level of services offered by the organization. The lowly motivated employees do not commit themselves to attending to unique needs of the customers. Poor quality of interaction between employees and customers renders customers dissatisfied with the quality of services offered (Williams 2001 p.129). This has led to loss of several customers over the years with most of them citing dissatisfaction with services rendered. Operating in a highly competitive industry requires the company to ensure consistent customer satisfaction by maintaining a healthy relationship. Lack of addressing this issue seeks to threaten the market base of the organization in future due to loss of customers. This will have negative implications on the sales volume hence the amount of revenue earned by the organization. This threatens the profitability of the company in the end as well as its continuity in terms of survival. Low Skilled Labor Woolworths struggles with the creation and retention of a pool of skilled labor due to the high labor turnover. Most of its employees are students seeking part time employment while they continue with their studies in nearby institutions. They therefore lack specialized training in the retailing business and only operate using the instructions provided by management. The nature of jobs within the company makes it more difficult for management to train and develop skills of employees. Employees work part time basis hence do not dedicate most of their time to working for the organization. This slows down the process of acquiring new skills and developing their experience in working within the company. They therefore learn about the company and its operations at a very slow rate contributing to the deficiency of skilled labor within the organization. This has negative implications on quality of services owing to the low level of expertise and experience of employees. Association with poor service threatens the reputation of the company and affects the position of the company in the highly competitive industry (Truss, Mankin & Kelliher 2012 p.41). Solutions to the Motivation Issues Training and Development Training and development is the key to improving the skills of employees working for the organization (Harbison & Myers 2000 p.302). During training, employees learn about the company; its history, goals, organizational structure, and general operations. Learning about these aspects of the organization motivates them since they have a desired outcome in mind. Equipping employees with relevant skills gives them confidence in performing their tasks since they can improve the quality of their work. Knowledge of expected quality standards motivates them to improve their services to match these standards hence improving their output. Educating employees on their job requirements and specifications enables them to understand various expectations in performance of their job. This opens up their knowledge as to their role in the performance of the overall organization. Continuous training and development of their skills enables them develop their expertise in performance of their jobs. They also understand the changing dynamics of their jobs and gain relevant knowledge to help in the adjustment. Woolworths allocates over $30 million to the training and development of its employees annually but these resources go down the drain due to the high labor turnover. Focusing on training and development will involve the use of low cost methods such as peer education to manage the amount of costs going into the process. This means that the organization does not need to allocate additional resources to the training and development process. It will also involve frequent updates on market changes that require a certain level of adjustment on services offered. The company should use memos and updates on its website to communicate with employees consistently to make training a continuous process. This will require a month for the employees to adjust to the constant information dissemination. New employees should join the learning process immediately and should retain participation regardless of their level of experience. Engagement of supervisors in the learning process ensures that they continuously assess training needs of employees and the progress initiated by adopting the training program. Job Security Job insecurity affects the motivation of employees to perform their jobs as expected by the management. Employees fear losing their jobs hence constantly look for alternative sources of income instead of focusing their full attention to performing their current jobs. They lack the motivation to invest in a job that they may lose anyways hence the need to assure them of the security. Management should address this issue by employing workers on contractual basis with a promise of permanent jobs after working with the organization for certain duration of time. Employees should have the freedom to choose contracts that suit them hence those interested in working for long durations can choose contracts covering durations of six months. This means that in the course of employment, the employees focus on working rather than seeking other forms of employment. The human resource department would incur minimal costs in the design of contracts and monitoring their expiry dates. The contracts should include a condition that employees would receive their wages in full regardless of the organization’s financial position. The organization should improve their management styles in various departments especially in relation to financial management. The financial situation in the organization determines the future of employees within the organization. This involves frequent audits of financial records and employment of competent individuals to handle finances of the company. The human resource department should have a representative of all workers who represents the employees’ interests in terms of their security while working for the organization. This protects employees from unpredictable predicaments in case of changes within the organization. Management should adopt these changes immediately to begin creating the desired level of confidence among employees especially due to the low cost implication of the process (Kantola 2016 p.203). Growth Opportunities Employees have the need to grow their skills and expertise by taking up challenging tasks that expose them to different challenges. Offering growth opportunities should therefore be a main function of the management. This is mainly because most employees leave the organization in search for growth opportunities unavailable in Woolworths. The process should begin with assignment of ranks and titles to various jobs to avoid making all employees feel as if they operate on the same level. Management should create distinction among various jobs to introduce a certain level of identification for workers in these positions. Having titles instills the motivation to work towards attaining certain titles hence encouraging improvement in performance (Duncan 2001 p.331). Working in an environment without job titles makes all jobs seem equal failing to instill a sense of direction for the employees. Management should therefore create a distinct starting point for workers and a hierarchy of titles that one can acquire over time. Employees will then strive to climb up the ladder and instill the need for them to show commitment to their jobs. The job ranks should possess varying levels of responsibilities and roles to make the transition realistic. There should be opportunities for promotion to higher positions within the organization rather than outsourcing managers. Management should also introduce certain privileges for employees holding certain ranks such as holidays and allowances for the positions to become more desirable. The organization will incur costs in this process due to the need to create physical offices for employees holding certain titles. This will introduce a certain level of sophistication for employees working in high positions, which motivates others to rise to these levels. Another cost implication involves holding meetings for the heads of various departments to continuously monitor their progress and improve their expertise in handling challenging tasks. Recognition Recognition motivates employees to improve their performance since they know that someone is watching. It makes employees feel appreciated and valued by recognizing their contribution to the success of the company. Developing a system of recognition begins with setting objectives for the employees to observe in the course of performing their tasks. Performance is therefore measurable against these standards to determine highly performing individuals (Eigen & Dijk 2008 p.76). Management should then create a reward system to rewards employees showing a high level of performance on their work. The system should ensure the highest performer gets the best reward to encourage others to work towards attaining these standards of performance. The organization will also need to change the organizational culture by instilling the spirit of competition. This will eliminate redundancy and inefficiencies caused by the sluggish attitude towards work. The management will incur substantial costs in introducing a reward system since they need to allocate money for holidays, gifts, allowances, and other reward packages. These are additional costs since they do not form part of the usual pay given to employees. However, recognition does not have to involve financial gains since it is the feeling of appreciation that counts. Recognizing an employee’s efforts in public works as well as awarding the individual a certificate of high performance. The company will also require time for management to assess employees’ performance and rate them in order to identify the greatest achievers. Another cost involves the introduction and management of change within the organization through change agents. The overall effect of these changes will emerge in the long term when the company acquires a new and healthy organizational culture. Maslow’s Hierarchy of Needs Theory Maslow’s theory recognizes that humans have several theories that they rank in order of priority. The theory suggests five categories of needs in order of priority such that one has to satisfy needs in one class before moving to the next. After satisfying one need, it ceases to be a motivating factor and one seeks the satisfaction of another need. The first level of needs is the physiological needs that include food, water, breathing, shelter, and clothing among other basic needs. An individual cannot survive in the absence of these items hence dedicates his or her life to satisfying this basic need for the sake of survival. The next class of needs include safety needs since humans have the need to feel safe and secure. They also seek to secure their families, property, resources, and even employment. The need for belonging association follows with individuals seeking to form part of a society and gaining association with certain people. After gaining a sense of belonging, the individual seeks to satisfy esteem needs that massage his or her ego and nurtures the feeling of importance in the society. Self-actualization is the highest class in the hierarchy where the individual seeks to grow and realize his full potential. This theory offers a useful guide to human resource managers since it provides a guideline on how to motivate employees. The first stage involves satisfying their basic needs by paying them enough money to cater for their food, clothing, and shelter (Yung 2007 p.122). Since this ceases to be a motivational factor, the management then moves to providing safety needs through assuring job security. Employees need the assurance of job security for them to gain enough confidence to contribute in issues concerning the organization. They should also have the freedom of association within the organization through informal and formal groups to offer them a sense of belonging. The next step involves focusing on esteem needs through recognition of employees’ input. Recognition of efforts gives employees a sense of appreciation, which motivates their efforts to improve performance for the benefit of the organization. Offering growth opportunities is the ultimate motivational factor that instills the spirit of competition on the workforce and challenges employees to realize their full potential through taking up challenging tasks. The needs theory therefore offers a clear guideline to the management team at Woolworths to handle the motivational problem affecting the performance of employees. The Johari Window This is a concept that offers guidance to individuals in understanding the relationship with themselves and others. This process involves identifying adjectives that describe a subject’s own personality from a list of provided adjectives. Peers then pick adjectives that describe the subject’s personality and they then feed the adjectives in a grid. The grid has four parts; the open, hidden, blind spot, and the unknown compartments. The open quadrant includes adjectives picked by both the subject and the peers, the hidden quadrant has adjectives only picked by the subject, the blind spot has adjectives only picked by peers and not the subject while the unknown quadrant includes adjective not picked by the subject or the peers. The grid demonstrates information of an individual available to the person and to other people that he relates. This exercise enables employees learn about their personalities and relationship with others within the organization. This technique is useful to the management of Woolworths in demonstrating the workers’ relationship with customers who shop at various outlets. Customer service is very crucial to the success of the organization, which affects the level of customer satisfaction (Martin 2010 p.75). Employees need to understand their current relationship with others for them to identify their weaknesses. After identifying areas that need improvement, they can then improve their handling of employees and customers for the sake of performance improvement. The first step is understanding one’s personality to understand strengths and weaknesses. Capitalizing on the strengths can help one improve their relationship with others and fostering positive relationships. The management therefore needs to encourage employees to learn about themselves hence understand others’ perception of their personalities. Fostering healthy relationships among employees in the organization also begins with learning and understanding each other’s personalities. Learning about another person’s personality triggers interest in the individual. This leads to emergence of strong relationships between employees within the organization, which creates a healthy working environment. Coincidentally, this leads to an improved corporate image since employees demonstrate solidarity and satisfaction with their jobs. This also motivates employees to improve their performance to attain certain standards set by the organization. Motivated employees offer high quality services to customers hence ensuring customer satisfaction in services rendered (Pinnington, Macklin & Campbell 2007 p.63). Once customers are satisfied, sales volumes increase as well as the profitability level hence a successful organization. Conclusion Human capital management is an important function of the human resource department in both small and large companies (Gilmore & Williams 2009 p.11). Woolworths faces the challenge of retaining its employees and reducing the high rate of labor turnover. This affects its corporate image and quality of services offered to its customers hence the declining level of customer satisfaction. Failure to address the human resource issues threatens the survival of the company through reduced profitability. The company should therefore consider various motivational incentives to improve the morale of employees and improve the quality of their services. This promises to improve customer satisfaction and increase the level of retention of employees. References Bloom N 2010, Human resource management and productivity, Cambridge: National Bureau of Economic Research. Dessler G 2000, Human resource management, Upper Saddle River: Prentice Hall. Duncan M 2001, ‘The current state of performance appraisal research and practice: Concerns, directions, and implications, Journal of Management, Vol. 18 No.2 Pp.321-352. Eigen A, Dijk R V 2008, HR strategy for the high performing business: Inspiring success through effective human resource management, London: Kogan Page. 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