University Press. • Dhar, Rajib Lochan. (2008). Strategic Human Resource Management (1st ed.). New Delhi: Excel Books. 101 CU IDOL SELF LEARNING MATERIAL (SLM)
UNIT - 7: HUMAN RESOURCE ENVIRONMENT Structure 7.0 Learning Objectives 7.1 Introduction 7.2 Reward and Compensation Strategies 7.3 Retrenchment strategies “Thompson Technology: a case study in Controlling labour cost”, 7.4 Thompson Technology: A Case Study In Controlling Labor Costs 7.5 Summary 7.6 Keywords 7.7 Learning Activity 7.8 Unit End Questions 7.9 References 7.0 LEARNING OBJECTIVES After studying this unit, you will be able to: • Describe HR Strategies • Identify scope of Functional HR Strategies • Define Reward strategies • Define Compensation strategies 7.1 INTRODUCTION The Human resource environment is a subset of the social environment that encompasses the philosophy, perspectives, work culture, attitudes, performance, abilities, productivity, existence and behaviour of HR, employee demand and supply, motivational aspects, compensation processes, and industrial relations related to HR activities. For the past two decades, a transition phase has emerged as a result of the increasing and interconnected function and understanding of social and Human resource environmental factors. Many transformations have occurred as a result of the transition from manual to machine processes, from unskilled to professional workers, from manufacturing to service economies, and from the machine era to the autocratic age. 102 CU IDOL SELF LEARNING MATERIAL (SLM)
Human resource environment – Need to Study HR Environment Within the globalised economy, HR managers and workers face a number of significant environmental developments and improvements that pose significant challenges. There is a need to research the HR environment in order to raise HR awareness, improve skills and performance, increase HR productivity, and solve problems and challenges. The aspects as well as factors to be responsible to study the Human resource environment are as given here: 1. It is essential to improve learning and knowledge attitudes among employees in order to build and develop intellectual capabilities. 2. To define and plan social standards, ethical principles, and a variety of codes of conduct applicable to employees; 3. To analyse and enforce market and labour laws and provisions in an efficient and perceptive manner; 4. To improve and refine the work plan so that workers can engage in effective and constructive activities; 5. In order to create a pleasant and harmonious work environment, it is essential to examine all applicable issues emerging from environmental studies. 6. It is essential to analyse the social climate in order to address and resolve various societal problems, evils, and conflicts. 7. To handle and coordinate the workplace's mechanical and technological advances, as well as modern and creative methods; 8. In order to make sound, fair, and systematic decisions about HR activities invariably; 9. To establish HR efficacies as well as evaluate long-term strategies for various internal and external aspects of HRM; and 10. The HR environment must be studied, analysed, and developed in order to learn, analyse, and improve personal skills and performance. 7.2 REWARD AND COMPENSATION STRATEGIES Organizations must have a well-defined strategic plan as well as a compensation policy in place. These two choices should be made in tandem. In the pursuit of a competitive advantage for the organisation, it is the workers who, in the end, assist in the delivery of that advantage. As a consequence, compensation mechanisms should be in line with the company's objectives. 103 CU IDOL SELF LEARNING MATERIAL (SLM)
This alignment principle is based on the contingency approach, which states that as an organization's strategy changes, so should its human resource strategies, including compensation strategies, in order to influence and shape results. The company's strategic strategy and the value propositions it can provide as an employer are tied together when determining whether to pay talent ahead of the curve or behind the curve. In order to cope with turbulent business conditions, organisations seek to decipher issues such as shifting customer preferences, competitor behaviour, changing labour market dynamics, changing laws, and globalisation. Their compensation elements and plans will assist the company in handling the business conditions and dealing with the issues listed, as well as preparing for the future. After discovering that low manager commitment and a lack of transparency could lead to undervaluing the programmes' benefits, Schneider Electric India Pvt. Ltd realised the value of raising awareness about incentive programmes. SPICE, an online collaborative network, was developed to connect employees with the rewards team and help them overcome problems. In order to make decisions about employee compensation, managers were given training to emphasise the connection between performance management, incentives, and development. This relationship exercise was broken down into three phases. As part of the Know Your Rewards Initiative, the first step raised awareness of the organization's key advantages and differentiating factors. Allow was the second phase, which centred on knowledge sharing, while Motivate was the third phase, which looked at how employees used data to make informed decisions about their pay. Several factors and key issues are considered while aligning the compensation system with the business strategy in order to reward talent: 1. When the manager is determining what factors will be considered during the appraisal process, culture and common beliefs are naturally included. Ethical behaviour, creativity, collaborative behaviour, direct communication, openness to change, learning orientation, and dedication are only a few examples of these principles. When reviewing efforts and results during the performance assessment process, aligning performance patterns with community and common values is advantageous. Furthermore, the culture of the company influences how the compensation policy should be developed. An organisation with a strong employee orientation culture can offer a welcoming work environment as well as opportunities for work-life balance. 2. When designing a performance assessment scheme, keep the organization's approach in mind. Organizational goals that are clear and widely shared enable the talent pool to coordinate their efforts in the direction of the desired results, allowing for synergistic collaboration. When the evaluation process is related to the business plan and results, it is possible to determine how effective the executive has been in implementing the year's business strategy. 104 CU IDOL SELF LEARNING MATERIAL (SLM)
Midyear evaluations allow the organisation to reassess the talent pool's performance behaviours and make adjustments as needed. 3. Executive compensation has been increasingly tied to company results and outcomes as the focus on contribution to the bottom line, increase in profit, return on capital, growth in profits, and market share has shifted over time. The use of incentive programmes as part of variable pay will provide the flexibility to pay more to talent who meets goals. 4. Observable and criterion-valid goals allow for the development of an efficient and progressive performance assessment system. Comprehensive performance assessment mechanisms are created by setting targets that represent both financial and non-financial measures. The use of a combination of quantitative and qualitative indicators should represent the desired behaviour’s emphasis. Clear quantitative measures can be used to endorse incentive programmes tied to particular goals, while qualitative measures, while subjective, may provide useful information about the nature of results. 5. Compensation and incentive plans should be consistent with the company's priorities while still adhering to the regulatory environment under which it works. In terms of equity, fairness, and accountability, these methods should be a good match for the organization's culture and internal climate. 6. The compensation strategy should also be competitive in comparison to the external world in which the competitors operate. Benchmarking practises and compensation surveys help a business to determine its core talent compensation policy in relation to its rivals. Organizations pay attention to factors that give them a competitive edge and make them the employer of choice when compensating workers. 7. Compensation and incentive systems are affected by how work is designed internally, as well as whether compensation and benefit programmes should be based on employee and/or team achievement, competence and/or continuous learning, improved abilities, changes in cost of living, personal needs (housing, transportation, health care), and/or business unit results. A major challenge in rewarding talent is designing next-generation incentive programmes that better fulfil individual needs and desires. This can be done by providing more options to employees. Younger employees would choose to have more cash on hand to construct assets or help finance their education, while older workers may seek health and pension benefits. Similarly, families with dual-career spouses can select from a variety of options for caring for their ageing parents, including flexible work schedules, child care services, and insurance and health benefits. Businesses believe that allowing employees to select their own incentive or profit components adds value and is also a good way to retain employees because competitors can find it difficult to replicate such flexible schemes. Organizations must, however, advise and communicate the benefits and drawbacks of each benefit so that employees can make informed decisions that improve the system's efficiency. 105 CU IDOL SELF LEARNING MATERIAL (SLM)
8. A team that is widely representative of the organization's culture designs the compensation and reward programme, which should include all relevant stakeholders as well as external experts. Feedback from a variety of stakeholders is essential for managing talent production and adequately compensating talent. This decision, however, may be influenced by the organization's culture and management style. These factors aid in the development of compensating and rewarding behaviours and policies in an organisation. Although one organisation may have a well-defined talent acquisition strategy and policy, another may use a more haphazard approach. On the other hand, a well- articulated incentive package is successful in attracting, engaging, and retaining talent. Compensation and Reward Management – Different Levels for Payments Based on Work Performance by Employees Under the pay and benefit situation, there are a few phases that reflect the rank and status of workers. Human resource ability, expertise, skills, and credentials are used to assess these levels. The basic level of remuneration is dictated by the essence of the work, the skills required, and the capability required. The most common wage levels used in companies are merit-based pay, skill-based pay, variable pay, and competency pay. Different Levels for Payments Based on Work Performance by Employees: Within dynamic phenomenon of compensation scenario, there are four major levels to be followed by employers that are based on different levels of employees’ work performance. Level # 1. Merit Based Pay: i. Focused on employee assessments ii. In the compensation process, merit is a determining factor. iii. The highest merit pay is given to the best-performing employee. Level # 2. Skill Based Pay: i. Workers with more experience and expertise are more important to the company and should be compensated accordingly. ii. Employee pay is focused on work skills, ability, and knowledge. Employees can earn more money as they develop more abilities, as well as learn and gain new ones. iv. It is important for companies to have opportunities and tools for career growth. v. It devises methods for motivating workers. Level # 3. Variable Pay: i. It is used to keep a tight grip on labour costs while maintaining a high level of efficiency. 106 CU IDOL SELF LEARNING MATERIAL (SLM)
ii. It should be remembered that bonuses received during a previous employment period are not added to the base salary or starting pay at the current job. iii. Employees and high performers may earn a range of perks and benefits. iv. A minimum pay rate is created. Variable incentives lead to more salary raises if an employee's performance reaches the norm. However, if an employee's performance falls short of expectations, his or her pay is reduced. It creates financial insecurity among employees and has a negative effect on employee morale. v. It should be used in conjunction with merit and competency-based compensation systems. Level # 4. Competency Based Pay: i. Workers are rewarded based on their talents, skills, motivations, and attitudes, among other factors. ii. The work quality and results are given more weight. iii. The proficiency level should be assessed in order to provide an overall competency foundation. 3 Major Approaches to Compensation and Reward Management: Bargaining Approach, Traditional Approach, and Contemporary Compensation Approach Perspectives and methods have changed dramatically over the years. There are three major approaches as given here: 1. Bargaining Approach: For a long time, whatever the workers wanted in terms of consideration or salaries was the reciprocal rate against the pay system in the HR scenario. The capitalists and employees have agreed on a large sum of money to share. As a result, the long-back method was used to assess compensation based on workers' bargaining power with their co-workers. 2. Traditional Approach: Employees are compensated using a job-based compensation structure under this approach. It is based on an empirical analysis as well as a work assessment and design of a specific job. It is used to calculate the relative value of employment or a specific work, as well as technical factors. 3. Contemporary Compensation Approach: This method places a greater focus on talent, performance, and competencies, both of which are important factors in determining compensation and incentives. Today's HR environment necessitates promoting and accommodating the most qualified and experienced workers. Employees have the ability to control their salaries by performing well. 107 CU IDOL SELF LEARNING MATERIAL (SLM)
7.3 RETRENCHMENT STRATEGY Simply put, a retrenchment policy implies the discontinuation of goods or services that are no longer viable for the company. It also means taking the company out of markets where even survival is difficult. A corporate hospital, for example, might decide to concentrate solely on specialty treatments in order to increase revenue. In addition, a retrenchment plan results in fewer staff and the disposal of properties associated with a discontinued product or service line. BANNER ADVERTISEMENTS: At other occasions, it entails debt restructuring via bankruptcy proceedings, and in the most serious situations, the firm's liquidation. Some of the types of retrenchment strategies are: - 1. Turnaround 2. Divestiture Strategy 3. Liquidation Strategy 4. Captive Company Strategy 5. Harvest Strategy 6. Transformation Strategy 7. Leadership Strategy 8. Niche Strategy 9. Bankruptcy Strategy 10. End-Game Strategies. Types and Classification of Retrenchment Strategies Types of Retrenchment Strategy – 8 Types Retrenchment is a strategic strategy for reducing an organization's size or variety of operations. It can also be used to maintain a company's financial stability. This is accomplished by lowering costs. A retrenchment strategy is a proposal for a company's core competencies to be improved. Simply put, a retrenchment strategy involves the business discontinuing products or services that are no longer profitable. It also entails removing the business from markets where even survival is a challenge. To maximise revenue, a corporate hospital, for example, might decide to focus solely on specialty treatments. 108 CU IDOL SELF LEARNING MATERIAL (SLM)
A retrenchment strategy often results in fewer employees and the disposal of assets related to a discontinued product or service line. Most times, it involves debt restructuring via bankruptcy proceedings, and in the most severe cases, the company's liquidation. Retrenchment is a strategy for reducing an organization's operations in order to improve productivity. It is used to determine where the issues are and how to address them. When a business has been losing money for a long time, this method is used. Businesses use retrenchment for a number of reasons. These include divesting a corporation or a strategic misalignment between a particular sector and an organization's core business. When a single entity is so small that it does not contribute significantly to the organization's total profits, retrenchment is often used. 1. Turnaround: The word \"turnaround\" refers to steps taken to reverse downward trends in a company's performance metrics. It refers to management actions that turn a sick business into a safe one, or actions that reverse declining patterns in performance metrics such as falling market share, falling revenue, decreasing profitability, rising costs, weakening debt equity ratio, negative cash flow, serious working capital issues, and so on. The tactics used to recover from a crisis differ from one situation to the next and from one organisation to the next. In general, a turnaround plan focuses on enhancing internal performance, and a struggling organisation can be nursed back to health using either or a combination of the following methods: (a) Reducing costs may involve: i. Personnel layoffs or downsizing ii. Strict oversight of general and administrative overhead iii. Elimination of non-value-added roles and activities iv. Equipment modernization to minimise production costs v. Lower funding costs by using low-cost debt, for example. (b) Increasing revenue through: i. Improved inventory control ii. Increase the productivity of debtor collection and shorten the collection cycle iii. Profitable expenditure of surplus cash and cash equivalents iv. Lowering the purchase price in order to maximise sales volume v. Use cutting-edge advertisement and sales promotion techniques. v. Boost customer service after the sale 109 CU IDOL SELF LEARNING MATERIAL (SLM)
vii. Improve customer loyalty, and so on. (c) Reducing investment in assets: i. Dispose of surplus assets that aren't contributing to the company's profitability. ii. Effective use of existing plant and equipment iii. Technological modernization and development to lower production costs iv. Invest in high-quality material-handling facilities. v. Invest in equipment to eliminate bottlenecks in output. v. Increase the asset turnover ratio (d) Revision of strategy which may involve: Changing to a new strategic strategy to reclaim market share • Identify and focus on tasks that are related to core competencies. • Exclude goods and segments that are no longer profitable. • Analyze the business landscape and competitors' tactics. • Restructure the marketing platforms. • Expand into new markets. • Establish your brand's reputation and equity. • Reduce inefficiencies and rigidities in different operations. • Develop strategic strategies in order to react to the fast-paced changes in the external world. • Improve your efficiency and take advantage of new opportunities • Take advantage of the opportunities of takeovers and mergers. • a change in the top management team • Building initial trustworthiness • External stresses are being neutralized. • regain control of the crisis situation • Identifying behaviours with a fast payoff • Controlled management from a central location • Improvements in information technology • Using the services of highly trained and seasoned staff 110 CU IDOL SELF LEARNING MATERIAL (SLM)
• Internal communication, for example, could be improved. • Accurate diagnoses of a distressed company's condition and immediate steps to fix the issue are needed before developing a turnaround strategy. Management, human resources, manufacturing, finance, product mix adjustment, marketing, and other factors all have an effect on turnaround strategies. 2. Divestiture: In divestitures, the organisation that has purchased assets and divisions will examine the assets and divisions to see how they fit into the overall corporate plan for value maximisation. Such properties or divisions are hived off if they don't serve the function. The term \"divestiture\" refers to the sale of a division or a portion of an entity. It's often used to collect funds for more strategic purchases or investments. It's also used to get rid of unprofitable business units. F.R. David has suggested six guidelines for when divestiture maybe used as an effective strategy to pursue: (a) Where a company has followed a retrenchment plan but failed to achieve the desired results. (b) Where a division needs more capital than the organisation can provide to remain competitive. (c) When a division is held responsible for a company's poor overall performance. (d) When a division does not fit in with the rest of the business, for example, because of radically different markets, customers, managers, workers, views, or needs. (e) When a large amount of money is needed quickly and cannot be accessed in a timely manner from other sources. (f) When a corporation is threatened with antitrust action by the government. The act of withdrawing from a market is known as divestment. This technique is used while an operation is still in progress but on a smaller scale. Selling before the industry enters a steep downturn will maximise a company's net investment recovery from a market. Divestment refers to the sale of a portion of a company's activities or the discontinuation of such commodity – market segments. This strategic option can be used by a corporation when it needs to release liquid capital. Divestment could be appealing if the present value of potential income is less than the present value of the investment. The ability of the company to predict a market downturn before it becomes substantial and sell out when its assets are still valued by others is vital to the strategy's success. 111 CU IDOL SELF LEARNING MATERIAL (SLM)
When a company lacks competitive advantages, it can be better to exit the business. This strategy is used in weakening industries where a company exits before other companies realise it is in a long-term decline. The three fundamental types of divestment are as follows: i. Sell-off or Hive-off: During the strategic planning process, a company can decide to concentrate on core business operations by selling off non-core business divisions. When a portion of a business is sold to a third party under the following terms, it is called a sell-off. (a) To address cash shortages and liquidity problems. (b) To concentrate on the company's main activities (c) Sell the attractive division to the highest bidder to protect the business from takeover attempts. (d) To boost the profitability of the business by selling off losing divisions. (e) To improve personnel, system efficiency, and resource productivity (f) Sell non-performing assets to provide sufficient funds for promising operations. (g) Reducing business risk by delegating high-risk tasks ii. Spin-off: A spin-off is a business practise that separates businesses that are incompatible with one another. Even if two businesses are both related, their strategies, organisational structures, and regulatory requirements can be incompatible. They may also be competitors in the business world. A spin-off is a type of re - organization in which a particular company's business activities are split into several organisations. By demerging business activities, a corporate entity splits into two or more corporate bodies with control and accountability separation. The key reason may be to turn each division into a profit-driven business, requiring division heads to account for their divisions' profitability. iii. Split-off: A split-off, on the other hand, is the separation of two roughly equal-sized corporate units or divisions. After the shareholding is shuffled, the two divisions work separately. 3. Liquidation: A company will go out of business if it loses money for an extended period of time. The losses are offset by past earnings (reserves) held in the company, but the situation clearly cannot last much longer. Liquidation may be appropriate in this case. 112 CU IDOL SELF LEARNING MATERIAL (SLM)
To avoid more losses due to technological obsolescence, a lack of demand for the company's products, financial losses, cash shortages, or a lack of managerial skills, the owners may decide to liquidate the business. For strategic purposes, a business unit can be liquidated. When a company's business is unattractive and the company needs to be revived, this strategic option is used. The selling of the whole business is referred to as liquidation. Liquidation is the process of selling all or part of a company's assets for their current market value. In liquidation, the owner's rights are better secured than in bankruptcy, which is inevitable. F.R. David has suggested three guidelines for when liquidation may be an especially effective strategy to pursue are: (a) Where a company has attempted and failed to implement both a retrenchment and a divestiture plan. (b) When a company's only option is to file for bankruptcy. Liquidation is a method of getting the most money for an organization's properties in an organised and prepared manner. To raise required money, a corporation will declare bankruptcy first and then liquidate various divisions. (c) when a company's stockholders may reduce their losses by selling the company's assets. 4. Captive Company: A captive corporation is a company that retrenches via backward vertical integration. A business becomes a captive of another company when it submits to the decisions of the other company in exchange for a promise that the other company will buy a certain amount of the captive's commodity. A captive company strategy is used when: (a) a company sells more than 75 percent of its goods or services to a single client; and (b) a company sells more than 75 percent of its products or services to a single customer. (c) The consumer performs many of the roles that an independent company would usually perform. This strategy may be chosen for the following reasons: (a) A failure or inability to enhance marketing or other functions. (b) The recommendation that this approach is the most successful way to achieve financial stability. 5. Harvest: This strategy enables the company to maximise the value of its existing assets without having to make any new investments. It's a strategy for reducing or removing an organization's investment in a market in order to gain as much profit as possible. When a company has made all of the profits it can, it will leave the industry. 113 CU IDOL SELF LEARNING MATERIAL (SLM)
To maximise short- to medium-term cash flow from the unit before it is liquidated, the company suspends all new capital equipment, advertising, R&D, and other investments. This approach would be used if the company's product/market segments show weak, decreasing but still positive profitability. The company's aim is to acquire a smaller market share, which would offer the best short-term return while also allowing it to exit the market in the long run. This strategy can be used to raise funds that can be used to finance more lucrative ventures. 6. Transformation: A transformation occurs when a company's outlook and practises change significantly, such as when it switches from one form of business to another. Changes in strategy are necessary in general. These methods are difficult to implement because they require a high level of flexibility from the entire organisation. According to Joe G. Thomas, firms may undertake a transformation when: (a) Returns on current operations are lower than desired. (b) Opportunities in other areas are especially attractive. (c) Investments needed in the current operations exceed what the firm is willing or able to spend. (d) A strong, flexible management team exists. (e) The firm has a strong financial base to support its transformation. 7. Leadership: The aim of this strategy is to put a company in a dominant position so that it can effectively own the shrinking market. Firms in weakening industries use this strategy, which entails outlasting all other competitors and becoming the industry's dominant player. This strategy necessitates lowering the so-called \"exit barriers\" that prevent rivals from entering the market. The firm seeking the leadership role will often assist its rivals in overcoming their exit obstacles, ensuring its position as the last survivor. By implementing aggressive pricing and marketing policies, the market leader sends a message to its rivals that it will not give up the industry without a battle, increasing the prices for anyone involved. The company stresses its desire to stay in the business. The company's goal under this strategy is to be a market leader in a shrinking market, resulting in above-average industry returns. 8. Niche: The word \"niche\" refers to an emphasis on a particular product or industry. It is a low-risk approach that illustrates the usual actions of small businesses. Such businesses are generally wary of expanding because it may expose them to legal, labour, and management issues. As a 114 CU IDOL SELF LEARNING MATERIAL (SLM)
result, they are satisfied with their current position and would like to take advantage of their superior knowledge of local conditions by focusing on a very specific market segment. Niche marketing is the method of identifying, financing, and servicing lucrative consumer segments, as well as developing custom goods and services for them. Owing to a lack of economies of scale, these business segments are too small for large corporations to represent. A niche market can be characterised as a specific category of potential customers who are not served by mainstream providers. To sustain a profitable volume of sales, a niche marketer often uses the loyalty business model. The niche strategy entails finding lucrative niches within a declining market and maintaining a dominant role within those niches. Niches that are appealing are those that are either unaffected by the downturn or have rather inelastic demand. Since the low levels of demand found in these residual markets are typically insufficient to sustain several businesses, it cannot be considered a solution for all competitors. Types of Retrenchment Strategy – Turnaround Strategy, Divestment Strategy, Harvest Strategy and Liquidation Strategy In the face of internal and external crises, a company can protect its survival and life, as well as better represent the interests of its shareholders, in a variety of ways. These retrenchment sub- strategies can be divided into four categories: turn around, divestment, harvest, and liquidation. Let us know each one in brief: 1. Turnaround Strategy: In turnaround cases, a turnaround or cutback plan refers to the strategic steps that a company takes to compete in the same market. A turnaround situation may be an increase in lower organisational performance triggered by a downward trend that is uncontrollable by current management behaviour. Environmental and internal factors such as lower production price realisation, lower profit margins, raw-material supply problems in terms of efficiency, quantity, tune, and other cost rises, strikes and lockouts, increased competition, and recession managerial laxity are all contributing to the downward trend. All of these factors lead to lower levels of organisational efficiency, regardless of the metrics used, and the company is unable to reach its set goals. This necessitates a turnaround plan. This turnaround plan aims to bring the current downward trend in results to a halt while also improving the long-term quality of operations. That is, it focuses on I cost reductions—cutting back on unnecessary discretionary spending, personnel layoffs and retrenchment, and so on. (ii) revenue increases—improving sales marketing without raising expenses, improved receivables collection, inventory management, 115 CU IDOL SELF LEARNING MATERIAL (SLM)
and the like; and (iii) asset reductions in combination with product or service reductions—sale of redundant and excess plant facilities and other properties. Take, for example, Mafatlal Industries. The Arvind Mafatlal Group's holding company, Mafatlal Industries Ltd. (MIL), has merged with the Mafatlal Fine Spinning and Manufacturing Company (MFSMC) with retrospective effect from April 1, 1993. MFSMC's poor performance was due to the following factors: (i) Textile industry has had a tough time, owing to sluggish fabric demand in both the domestic and international markets. (ii) The Indian economy's liquidity crunch. (iii) An increase in the amount of money owed in interest. The organisation decided to restructure in order to minimise interest costs and raise performance by- (i) Reducing debt and reducing idle power in the shipping division. (ii) Strict managerial control improves efficiency in key areas. When and why to go in for turnaround strategy? To have streamlined growth, a turnaround plan speaks against growth. When a company is in the throes of a recession, a turnaround plan is almost a must. Also, the best-managed businesses embraced restructuring strategies to break out of a rut. Voltas, Batas, Birla's Tata's, Goenkas, Chands, and Lais were all affected by the economic downturn. They then proceeded to reverse the downsizing in order to address certain basic internal and external issues. Both internal and external factors contribute to the downward trend in organisational efficiency. External factors are uncontrollable, whereas internal factors are. To ascertain what turnaround strategy an organisation is to follow will depend on answers to the following two questions: The first question is whether or not the company is worth saving. Would it make sense to liquidate it right now? If the response is yes, the organisation can step on with deciding what restructuring plan it should employ. The point of this analysis is that the firm's going concern value is greater than its liquidated value. If the liquidated value is higher, it is easier to use a divestment or liquidation strategy rather than spend the considerable funds and energies needed for a turnaround for just a marginal return. 116 CU IDOL SELF LEARNING MATERIAL (SLM)
Question two is: If the answer to the first question is yes, what is the current state of operational and strategic health? This question of \"current operational health\" and \"strategic health\" necessitates a detailed review of the firm's strengths and weaknesses. After the company has completed its review of strengths and weaknesses, it must determine which form of turnaround plan to use. The type of tactic to be used must then be determined between two choices, with the one that best fits the situation being selected. “Strategic” versus “Operating” Strategies: The change in the firm's approach to succeed in the current market is referred to as a \"strategic\" turnaround. It may require deciding the firm's share. Turnarounds in operational or functional areas tend to do with marketing and manufacturing engineering skills. These prioritise rising sales by regaining lost market share over increasing market penetration, lowering prices, lowering properties, or a combination of all three. It's important to remember that in a strategic transformation, the focus is on achieving strategic improvements, and success is a result of those changes. In other words, in an operational turnaround, the primary focus is on meeting performance goals, while in a strategic turnaround, the primary focus is on improving the firm's operating approach. Approach to Turnaround Strategy: The company must then form the more precise aspects of its chosen turnaround strategy until it has decided on one of the broad turnaround strategies. These action plans are based on the organization's current strategic and operational health, as well as the dynamics of the market in which it competes, as well as the firm's strengths and weaknesses in comparison to its rivals in the same industry. This strategy specifically calls for three steps: top-level management reform, strategic turnaround design, and operational turnaround design. 1. Change in the Top Management: Until planning and executing turnarounds, it is necessary to determine if the current top management is capable of taking the bold steps required for turnarounds or whether a change in top management is required. This complete or partial changeover, or no change at all, will be determined by the management qualities. Different general managers, of course, have highly specialised skills for managing various forms of administrative activities. If the current management lacks these attributes, it is necessary to change management. 117 CU IDOL SELF LEARNING MATERIAL (SLM)
A strategist or entrepreneur is needed if a high-growth strategic turnaround is feasible. Similarly, if an operational turnaround is to be pursued, a manager who is an accomplished, meticulous, and ruthless cost cutter is required. 2. Designing Strategic Turnarounds: Strategic turnarounds are needed when a business firm's current operational health has deteriorated and the firm has lost its strategic role. The majority of recovery scenarios include a substantial decrease in revenue and market share or market share status. As a result, the basic method of distinguishing among turnarounds is calculated based on the anticipated magnitude of sales and market share revival. There are three options available. One – sustaining or even decreasing market share, then concentrating on one or more defensible goods, market segments, or niches. Second, an improvement of one level in market share ranking. Moving from a dropout position to a follower position, a challenger position to a leader position, or a challenger position to a challenger position. Third, a market share position is increased by two levels. That is, changing from a dropout to a challenger or from a follower to a leader. However, a two-level or even one-level increase or change involving attempts to secure a leadership role is usually not feasible unless the company has significant financial and non- financial capital that it has failed to capture. When the current leader struggles to retain leadership, when the stage of business or product transformation shifts significantly, or when the firm is the former leader that has been overtaken by challengers, a shift of this magnitude is likely. A one-level change in market share or a segmentation or niche strategy are also typical turnaround actions. Segmentation or niche strategy is favoured if the company does not have unusual capital or if the sector in which it operates is not in the growth or shake-out stage of product or business evolution. This technique, on the other hand, does not provide the resources for many of the people involved to gain leadership positions. If the segments chosen for the new situation increase significantly, it usually results in lower revenues in monetary terms than a good one-level share shifting turnaround strategy. As a result, most businesses attempt a strategic reversal, which entails the monetary revenues through a one-level shift in market share in order to reclaim leadership in the event that rivals or other external factors adjust. Another consideration is the region in which the company will compete. Ideally, the firm will compete in a sector that allows for increased revenue and market share while keeping rivals at bay. If there is a newly emerging consumer segment, this is an uncommon possibility. All of this necessitates the company designing and developing superior goods for that market, as well as updating its functional areas critical to serving that segment. Furthermore, the 118 CU IDOL SELF LEARNING MATERIAL (SLM)
company should be able to distinguish its products from those of its rivals. It will undoubtedly be a challenging challenge, since rivals might have more strategic capital. 3. Designing Operating Turnarounds: The operating turnarounds concentrate on the firm’s internal efficiency. Therefore, any strategy wants to follow is to improve its internal efficiency. Experts have suggested four such strategies: i. Generating of revenue, ii. Cutting of cost, iii. Reducing assets and iv. Combining these. i. Revenue Generating Strategy: To begin, the company focuses on its current product line; however, if this effort is successful, it can be supplemented by products that are currently being phased out if done in a timely and profitable manner. The other goods can also be used on a temporary basis. That is, they will not be repeated in the future. The overall goal of this strategy is to increase the number of resource-generating products. The main features of this approach are price reductions, increased ads, and increased direct sales activities to boost existing sales levels. In contrast, in the short term, research and development spending and staffing will be minimal. What matters is that the company determines the resources and expertise required to execute its long-term plan and protect its short- and long-term interests. ii. Cost Cutting Strategy: Specific experience determines whether the costs are high or low. Will it be possible to say if costs are higher or lower in the industry if inter-firm comparisons are made? What is the nature of the problem? Labour costs may be cut by their productivity or asking them to leave the company through a mutually agreed-upon \"golden handshake.\" Excessive advertising costs can be reduced by shifting the focus of the campaign—for example, from general to individual demand, or from institutional to product advertising. Even though research and development costs can be cut, there is no point in doing so, at least in India. The key explanation is that businesses spend 20 percent less than they used to, so there is no need to cut back. Personnel production costs can be cut by a small amount. Sound inventory control allows for better inventory moments. iii. Asset Reduction Strategy: 119 CU IDOL SELF LEARNING MATERIAL (SLM)
Asset reduction strategy entails selling or reducing properties that are no longer required now or in the near future. This asset-diminishing strategy is highly risky. What assets will be sold, is the issue. What is to be kept, and what is to be discarded? It is contingent on current and future strategy. In general, such assets should be kept because they are beneficial in both the short and long term. The timing of an asset's sale is also critical. If the company sells the assets at an inopportune moment, the price paid is well below what was anticipated. The long-term prospects of the company after the turnaround are complete, as well as the criticality of its financial position, determine if the firm can benefit from an asset-reduction strategy. If the firm's current capacity can be used for one or two years without financial difficulties, the firm can pursue a revenue-generating strategy rather than asset reduction. If the company is facing financial difficulties but its current capacity can be used in the immediate future, it can follow a mixed revenue-generating and asset-reduction strategy. If, on the other hand, the long-term revenue potential is significantly lower than current availability, an asset reduction plan is acceptable so that assets can be sold in the short term to meet long-term needs. iv. Combination Strategy: A convergence approach entails implementing all three revenue-generating, cost-cutting, and asset-reduction methods at the same time. By using a balanced combination strategy, the cash flow produced by balanced effort would be higher than if only one strategy is used at a time. This hybrid approach is better suited when the company is on the verge of breaking even. The use of a hybrid approach, on the other hand, adds to the difficulty of managerial employment. As a result, this hybrid technique is only used when the payoff outweighs the managerial complexity. For anyone who uses operational turnaround, a word of warning is in order. The strategists should concentrate their efforts on decisions that have a significant short-term cash flow effect on the company in question. These activities include collecting receivables, reducing inventories, concentrating on high-margin goods, reducing waste, selling excess assets, and retrenchment of surplus manpower. 2. Divestment Strategy: The ‘Divestment' or ‘Diverstiture' strategy is the polar opposite of the expansion strategy in that it entails the corporate office selling off or liquidating a portion of SBlTs. It is a technique for shedding business units, product divisions, or parts of business operations in order to redeploy the money freed for more productive endeavours. 120 CU IDOL SELF LEARNING MATERIAL (SLM)
The most popular types of divestment are I selling a business segment or product division to another corporation, and (ii) handing over ownership of a business unit or companies to a holding or subsidiary company. Though a company's divestment of a business unit or subsidiary may be compared to a company's acquisition of a unit that has been divested by another company, it is not rational or right to lump divestment and acquisition together. Why Divestment Strategy? The events in a company's life that cause it to profit from a divestment strategy. And when the company is still alive and kicking, it is sometimes an inevitable step. The reasoning behind a divestment strategy is to avoid allowing any unit or segment to be a drag on the organization's overall profitability, particularly when alternative investment opportunities exist. That is, divestment is a reasonable and constructive decision, not one taken in a desperate and powerless situation. Strategists accept divestment strategy as deliberate one for the reasons given below: i. To Better Utilise the Resources Available: In a product market, an organisation can have a strong competitive position and good profits. However, there is a need for deployment services, which can be financial, technological, or managerial, and which is lacking. This condition necessitates the introduction of an effective strategy to divest or withdraw from a vulnerable segment in order to better allocate available capital to a more promising product sector. ii. To Write Off the Acquisition Hidden Losses: When a company buys another company or assets in part, it must consider the good assets as well as any unwanted or poor assets that are concealed in the box. These unwanted properties or activities of the acquired company would be sold at a fair price in order to recoup the acquisition expense. This is a very normal procedure that must be acknowledged. The company is forced to sell this due to a technical void, wear and tear, high operational costs, high maintenance costs, and so on. Finally, it is worthwhile to sell them in order to obtain hard cash that can be put to better use in future operations. iii. To Turn Promises into Performance: It's conceivable that a firm's or subsidiary's actual output falls short of its commitments or prospects due to the sudden arrival of very strong rivals, increasing operating costs and declining demand for goods as competitors take market share. In this case, it makes sense to pursue a divestment plan in order to save face. 121 CU IDOL SELF LEARNING MATERIAL (SLM)
Take the case of Tata's and HLL, for example. For many Indian companies, the decade 1991- 2000 was a period of intense rivalry. Because of globalisation, the competition in the cosmetics industry was fierce. In the case of cosmetics, foreign goods could only be imported with a special import licence, and foreign brands had already established themselves in Indian markets through joint ventures between MNCs and Indian firms. 7.4 THOMPSON TECHNOLOGY: A CASE STUDY IN CONTROLLING LABOR COSTS Thompson Technology is a made-up corporation in this situation. Thompson Technology is a software company that specialises in financial software. The company achieved considerable financial success from its inception in 1988 through the 1990s, quickly expanding from a tiny start-up to a publicly traded company with approximately 800 employees. Thompson, however, has experienced substantial sales declines for the first time as a result of the ongoing economic crisis and increased financial sector regulation. The emphasis of this case is on the company's efforts to reduce labour costs by cutting costs. The case is divided into five situations and starts with a description of the company. It is suitable for students majoring in human resource or business administration at the undergraduate and graduate levels. CASE ABSTRACT Thompson Technology is a software company that specializes in financial software. The company achieved considerable financial success from its inception in 1988 through the 1990s, quickly expanding from a tiny startup to a publicly traded company with approximately 800 employees. Thompson, however, has experienced substantial sales declines for the first time as a result of the ongoing economic crisis and increased financial sector regulation. The emphasis of this case is on the company's efforts to reduce labour costs by cutting costs. The case is divided into five situations and starts with a description of the company. Undergraduate and graduate students are given different questions (and debriefs) to respond to in each case. Scenario A: Restructuring After a Hiring Freeze is the only scenario covered in this paper. The following are the scenarios: ■ Scenario A: Restructuring After a Hiring Freeze ■ Scenario B: Flexible Scheduling ■ Scenario C: Hot-Desking ■ Scenario D: Moving Employees to a PEO ■ Scenario E: Downsizing and the HR Department 122 CU IDOL SELF LEARNING MATERIAL (SLM)
ABOUT THOMPSON TECHNOLOGY Alan Thompson, founder of Thompson Technology, was always an idea man. Whenever something new came down the road, he jumped on it, took it apart, transformed what was there and created something different. He also embraced technology. Thompson was fascinated by its constant evolution, and he understood its creative possibilities well before the rest of us caught on. Thompson didn’t start his career in technology. As a teenager, Thompson worked at the local bank where his father was the branch manager. Banking helped pay his way through college, and although he never liked working there, Thompson admitted that it was the beginning of his career success. Technology captured Thompson’s imagination. He said his real career path started in the cluttered techno cave he carved out of a cramped space in his parent’s garage. He set up his first computer on a makeshift table squeezed between the lawn mower and the garden tools. It was there where he tinkered with programming and computer code. He designed simple accounting software at first, but he didn’t stop there. Each new innovation made his software better and faster. When he realized his systems were far better than anything available in the banking industry at the time, he knew he was onto something. In 1988, he left banking and launched Thompson Technology. By the mid-1990s Thompson Technology was a major player in the design and maintenance of specialty software for the financial industry; Thompson products were at work behind the scenes at most major financial institutions across the U.S. and Canada. The early years of Thompson Technology were characterized by innovation and growth, and it was soon known as a great place to work. When the company grew and prospered, employees did too, with generous compensation and benefits that rewarded creativity and employee engagement. When 1999 turned to 2000, Thompson Technology greeted the new century with enthusiasm; it seemed that there wasn’t a dark cloud on the horizon. Thompson Technology made its first public stock offering in 2006. By then, the company had 800 employees and new headquarters in Denver, Colo. As majority shareholder, Alan Thompson maintained control of the company, but he turned the day-to-day management of the organization over to Howard Kessler, Thompson’s new CEO. Kessler came to the company with a strong background in international finance, and Thompson believed Kessler was the ideal choice to expand the company beyond North America. Thompson Technology began to change with Kessler at the helm. He hired Jack Albright as the new chief operations officer (COO), and Elizabeth Schiff became the new chief financial officer (CFO). Scott Montgomery remained as Thompson’s chief human resource officer (CHRO). Besides new management, other things were different as well; now there were 123 CU IDOL SELF LEARNING MATERIAL (SLM)
shareholders to satisfy. In addition, the company underwent a major reorganization in 2008 that realigned departments and reassigned a number of employees. Some employees saw the reorganization as an opportunity for growth and new energy, but not everyone was happy. It wasn’t just Thompson Technology that was changing. In 2008, the U.S. economy went into a severe recession, and the U.S. Congress responded with increased regulation and stricter scrutiny of the nation’s banks. As the financial industry adapted to the new banking practices, demand for Thompson Technology software dropped precipitously. Sales plummeted, and Thompson Technology’s culture of easy profits and sky-is-the-limit employee perks morphed into a new era of cost containment and belt tightening. Every department was affected, but employees were hardest hit when a financial analysis showed that labor costs were not sustainable. The year ended with the implementation of a companywide hiring freeze to curtail labor costs and, it was hoped, squelch the need for more drastic measures. The hiring freeze was successful in reducing the number of employees. By late 2010, business in the finance industry had evened out, but Thompson was still not on easy street; increased competition in the marketplace caused sales to remain flat. Thompson’s stock price was falling. To address those issues, upper management held an intensive three-day strategic planning retreat off-site. The retreat included Kessler, Schiff, Albright, Montgomery and all the functional area directors. Before the retreat, the management teams spent many hours cloistered behind closed doors analyzing the various departments’ strengths and weaknesses and assessing budgetary and revenue forecasts. Kessler mandated that everyone come to the retreat prepared to make some difficult decisions regarding Thompson’s long-term future. Managers armed themselves with statistical data to defend the viability of their departments. Employees were on edge, and rumors were rampant because of the uncertainty about the future and the changes that might occur as a result of the retreat. The biggest worry was that the organization would downsize U.S. operations and move jobs offshore, even though Thompson took pride that its products were built and serviced entirely in the U.S. When managers returned from the retreat and remained tight-lipped about the results, employee tension increased as everyone waited for an announcement. Finally, on a Wednesday afternoon, Kessler sent the following e-mail to the staff: The rumor mill was instantly at full speed as heads popped up from cubicles and employees clumped together in speculation. Staff meetings were common at Thompson, but there had never been anything like this before. “What does it mean?” 124 CU IDOL SELF LEARNING MATERIAL (SLM)
“This must be a major announcement. Why else would all departments meet at the exact same time?” “Have we been bought out?” “Are we shutting down?” “I didn’t think things were this bad!” Productivity plummeted. Except for a lot of talk, the employees accomplished nothing from the time they received Kessler’s e-mail to 9:00 Friday morning. 9:00 Friday Morning Employees met with their area directors as scheduled. Some arrived early, but in contrast to the usual staff meetings, nobody arrived late. Coffee service at staff meetings had been discontinued months ago as a cost-cutting effort, so when coffee and pastries were set out for the morning meetings, it only raised anxiety levels. Speculation continued as employees filled coffee cups and forked pastries onto paper plates. At exactly 9 a.m., everyone dispersed to their designated meeting areas. In conference rooms across the company, chairs were full, speculation ceased and employees waited. Of course, things are never as bad as rumors suggest. In most areas, relief could be seen in employees’ faces as directors reiterated the organization’s commitment to employees, but the directors left no doubt that the future would be different. Managers had agreed that further cost-cutting measures would have to be taken. Employees were told to expect changes in working conditions as the company tried to cut labor costs by 10 percent. In addition, efforts would be made to increase sales revenue by exploring new markets. But for now, at least, the company was ready to move forward with no plans to lay off employees. SCENARIO A: RESTRUCTURING AFTER A HIRING FREEZE Players: Scott Montgomery, CHRO Sally Werner, technical support supervisor Maria Gonzales, payroll specialist Betsy Reynolds, customer service employee David Adams, accounting employee The hiring freeze was successful; the overall staff numbers were down by about 5 percent. As Scott Montgomery had expected, however, simply reducing staff by attrition wouldn’t ensure that reduction goals would be met or that reductions would occur in needed areas. Some departments had suffered serious talent loss when key personnel resigned, but other departments still had excess staff and duplication of effort. Reorganization was needed. After the strategic planning retreat, Montgomery scheduled a series of meetings with COO 125 CU IDOL SELF LEARNING MATERIAL (SLM)
Jack Albright and several department managers whose areas suffered most from the labor imbalances. Montgomery had a reorganization plan in mind, but he wanted input and agreement from those who would be affected before he implemented it. He knew it wouldn’t be easy getting agreement. From discussions during the retreat, it was clear that everyone recognized the need to realign and further cut costs, but some managers seemed more interested in protecting their turf than designing a feasible plan. It took a lot of negotiation, but a plan was finally agreed to and approved by Kessler. Montgomery’s HR staff was ready to move ahead with implementation. Like the previous reorganization, work groups were again realigned, teams were re-formed and job assignments changed. Even the facility changed. Partitions were removed and cubicles disappeared to reconfigure the office into an open floor plan. It was expected that the open plan would foster a sense of unity and ease communication among co-workers and managers. The managers would no longer be isolated in private offices; they would sit side by side with those they supervised. A number of managers objected to the open floor plan. They didn’t like giving up their personal work space or the status inferred by a private office. “How can I talk privately with a staff member when I’m out in the middle of the floor and everybody’s hanging around listening?” Sally Werner, a technical support supervisor, grumbled to her friend Maria Gonzalez, a payroll specialist. “You’re the only one left with a private office, Maria, and that’s just because you do payroll!” “Well, there are private conference rooms on each floor,” Maria replied. “You can always use those.” “They’ve all got windows that look right out onto the floor. Everyone knows who you’re in there with. As soon as I call someone in for a private conference, everybody will assume they’re getting reprimanded.” “I hadn’t thought of that. If that’s the assumption, Sally, maybe you have an image problem,” teased Maria. “It’s not funny,” Sally said. “I just think this whole thing is a lousy idea. And what are those people in marketing going to do? They bring their dogs to work. Before this, they had to keep their dogs in their cubicles. How’s that going to work now?” “I don’t know,” said Maria. “Maybe there won’t be any more dogs around.” “I suppose, they’re cutting back dogs, too,” Sally grumbled cynically. “Just like everything else—even our benefits are going away. No more tuition reimbursement, no more free coffee. This place is just not what it used to be. There is less of everything around here except the workload. That gets bigger all the time.” 126 CU IDOL SELF LEARNING MATERIAL (SLM)
“Well, I’m swamped too,” said Maria. “HR’s really scrambling with so many people reassigned. Scott’s desk is piled high with requests from employees for compensation reviews. Everyone thinks a little change in job assignment means more money. The only ones not complaining are the dogs!” “Well, what did they expect?” said Sally. “I’ve never seen such a dispirited, burned- out bunch of people. You know, Maria, it’s never a little change—it’s a lot! Most of us are working longer days, and no one even says thank you anymore. You know David Adams in accounting? He told me he hasn’t had a performance review in nearly two years.” “Wow! How can that be?” asked Maria. “We’re supposed to have one every year.” “I know, but managers aren’t doing them. David said every time he asks his boss about it, his boss just shakes his head and says he has so many people to supervise now he just doesn’t have time to do performance reviews anymore. David thinks they’re really just trying to delay everyone’s raise so they can save a little money.” “Maybe so, but that’s terrible!” said Maria, “I’m surprised Scott lets them get away with that.” “Well, maybe he doesn’t even know. I think he’s pretty out of touch with what’s going on around here. What about that ridiculous policy telling us not to talk about compensation? How do they think they can enforce a policy like that? Everybody’s talking, and some people are just plain angry. Betsy Reynolds in customer service has already had three different job assignments in the past year. Each time someone leaves, she moves into a new position, reports to a new boss and just gets more work piled on. She’s working longer and longer days just to keep up, but there’s never any more money! She told me she’s had it. She’s looking for a new job!” “Betsy?” asked Maria. “She’s been here for years. She knows everything about the company. She’s the best customer service person we have.” “I know, but management doesn’t even notice what’s going on. If she leaves, it’s just one less body on the payroll, and that seems to be what they want. Frankly, I don’t think we can take any more reorganization!” SCENARIO A: QUESTIONS FOR UNDERGRADUATE STUDENT TEAMS Montgomery is not as out of touch as Sally thinks. He knows employees are worn down from so many changes and that morale has plummeted. It has him worried. He knows that when morale is low, employees disengage, productivity falls and innovation ceases. Thompson’s strategic advantage of product innovation and exemplary customer service is at risk. Montgomery is meeting with Kessler and Albright tomorrow morning to formulate a plan to assess and improve employee engagement. He asked your team to help prepare the plan. You will meet with him later this afternoon to give him answers to the following questions he asked 127 CU IDOL SELF LEARNING MATERIAL (SLM)
you to research: 1. How can HR assess the level of employee disengagement at Thompson Technology? 2. What can HR do to improve employee engagement and maintain productivity? SCENARIO A: QUESTIONS FOR GRADUATE STUDENT TEAMS The objectives of the strategic planning retreat were twofold. The first objective was to formulate plans to move the organization into new markets to increase revenue. The second objective was to find ways to reduce expenses. Compensation was a key component of those discussions, because labor costs are Thompson Technology’s largest expenditure. A number of ideas were generated to control costs, although no agreement was reached on exactly what should be done. As the discussions concluded, however, everyone agreed that compensation equity was a top priority and that it must reinforce the organization’s strategic advantage of product innovation and exemplary customer service. Montgomery was well aware that some employees believed their workloads had increased as a result of the reorganizations and staff reductions, so it came as no surprise to him when he returned from the retreat to find his desk piled with employee requests for compensation reviews. The strategic planning team will meet again later this week. Montgomery wants to be ready with a plan to refocus Thompson’s compensation system. He has scheduled a meeting with your team this afternoon and has asked you to provide him with the following information: 1. What should be done about the numerous employee requests for compensation review, and how can Thompson Technology ensure equity in the compensation system? 2. How can compensation at Thompson Technology reinforce the organization’s strategic advantage of product innovation and exemplary customer service? DEBRIEF SCENARIO A: QUESTIONS FOR UNDERGRADUATE STUDENT TEAMS 1. How can HR assess the level of employee disengagement at Thompson Technology? Employees often have difficulties adapting when an organization goes through a major change initiative. Montgomery is justifiably worried about the negative effect of disengaged employees on Thompson’s strategic advantage. Low employee engagement not only affects performance, it increases employee turnover, lowers customer service satisfaction and increases absenteeism (Cataldo, 2011). There are a number of ways Thompson can gather information on employee engagement. 128 CU IDOL SELF LEARNING MATERIAL (SLM)
Focus groups, employee surveys and town hall meetings can be used to get needed information from employees. Surveys must be done in a way that ensures employee confidentiality. Thompson may want to consider using detailed gap analyses separated by division, location, department, etc. Engagement surveys often assess dimensions such as the intent to stay, employee trust and organizational commitment. Surveys can provide useful information regarding the relationships among job satisfaction, employee engagement, retention and the overall financial performance of the organization (Lockwood, 2007). High employee engagement is also linked to effective management practices, and because HR often serves as the link between senior management and employees, it plays a key role in maintaining employee engagement and productivity. HR must ensure that open, effective communication is practiced in the organization and that all supervisors are trained in the skills necessary for good management of employees. 2. What can HR do to improve employee engagement and maintain productivity? Thompson has changed since the hiring freeze. The company must recognize that with any staff reduction—even one as seemingly benign as a hiring freeze— employees experience stress and anxiety. As employees absorb the extra work left by departing co-workers, fatigue and burnout become major concerns to employee engagement. Senior managers should expect and plan for a decrease in engagement and productivity that typically results from staff reductions. There are a number of ways to improve employee engagement: ■ Communication. It is important to clearly and consistently communicate the organization’s goals and objectives. Employees should receive frequent, honest information. Everyone—from top management on down—should be apprised of how the company is doing and be aware of future plans. Information-sharing meetings should be scheduled with all employees to bring everyone up to date on changes at Thompson. Effective communication also involves good listening. HR staff members should work with managers to ensure that the company’s culture encourages employees to raise their concerns. An ombudsperson or someone in HR should be designated to hear and respond to employees’ concerns. ■ Feedback. Montgomery may want to conduct a survey to obtain feedback on employee issues. The survey must be designed and implemented in such a way that employees will be comfortable enough to give honest feedback. If employees fear retaliation or are not assured of confidentiality, information derived from the survey will be meaningless. Thompson must be prepared to address the issues identified by the employees in the survey. If no action is taken, the company risks a further decline in employee morale. ■ Restructure and reassign work. Workload issues arising from the hiring freeze and the 129 CU IDOL SELF LEARNING MATERIAL (SLM)
reorganization should be addressed. Don’t expect that work left by a departing staff member can easily be absorbed by the remaining staff. ■ Collaborate. Employees should be included in the planning for reassignment of workloads. Montgomery should schedule meetings with employees and them supervisors to assess the employees’ workloads and prioritize tasks. Montgomery should also ensure that management is realistic in its expectations and that employees know how they can contribute to the process. ■ Organizational structure. A new organizational chart that addresses the changes in structure and workload should be distributed to employees. Employees should understand their positions and workload issues in the new structure. Senior managers should reassure employees about the viability of their positions and provide a sense of equity in workload assignments. ■ Training. Employees should receive the resources and training needed to be successful in their new job assignments. ■ Metrics and rewards. New metrics that assess employee performance should be established. Montgomery should ensure that there are appropriate rewards in place to recognize employees’ work. Although financial rewards may not be possible in a cost-cutting environment, psychological rewards from supervisors or HR can be enormously effective in maintaining employee morale. It is important that employees know their work is appreciated. Managers whose behavior fosters employee engagement should also be rewarded. ■ Supervisors. HR should work with supervisors to help them adjust to managing departments with fewer employees and increased workloads. Supervisors may need to learn new ways to mentor and collaborate with employees. ■ Work/life balance. Montgomery and his team should make sure that there is appropriate work/life balance for employees. Occasional overtime may be necessary, but demanding long-term overtime by hourly employees or expecting nonstop 10- and 12-hour days from salaried exempt employees will lead to burnout and further loss of productivity. ■ Career planning and development. Montgomery and his teams should ensure that employees understand the company is still interested in their long-term success. When organizations engage in cost-cutting strategies, absenteeism often increases because employees are stressed and anxious about the security of their jobs. HR should give employees a reason to stay by supporting career growth in the company. ■ Visibility. HR must remember that supporting staff is just as important for organizational success as providing support for management. HR staff members must be out and about, meeting with employees and listening to their issues. Montgomery must ensure that the HR 130 CU IDOL SELF LEARNING MATERIAL (SLM)
department is visible and perceived as a support resource for employees. REFERENCES Cataldo, P. (2011). Focusing on employee engagement: How to measure and improve it. Retrieved from UNC Kenan-Flagler Business School www.kenan-flagler. unc.edu/execdev/focusing-on-employee-engagement.pdf Krell, E. (2009). Spreading the workload. HR Magazine, 54 (7). Retrieved www.shrm.org/Publications/hrmagazine/EditorialContent/ Pages/0709employeerelations.aspx Lockwood, N. (2007, March). Leveraging employee engagement for competitive advantage: HR’s strategic role. Retrieved from SHRM Online www.shrm.org/ Research/Articles/Articles/Documents/07MarResearchQuarterly.pdf SHRM Online Staff. (2009, April). Engagement, productivity at risk for employees averse to workplace change. Retrieved from SHRM Online www.shrm.org/ hrdisciplines/orgempdev/articles/Pages/ChangeAverse.aspx Wells, S. (2008). Layoff aftermath. HR Magazine, 53 (11). Retrieved from www. shrm.org/Publications/hrmagazine/EditorialContent/Pages/1108wells2.aspx DEBRIEF SCENARIO A: QUESTIONS FOR GRADUATE STUDENT TEAMS 1. What should be done about the numerous employee requests for compensation review, and how can Thompson Technology ensure equity in the compensation system? Montgomery cannot ignore the requests. The fact that his desk is piled with employee requests for compensation review indicates a widespread belief among employees that the reward system is inequitable and not appropriately correlated to the level of work being done. Reward systems are expected to attract, retain and motivate employees. It is imperative, then, that employees perceive the system as equitable to avoid decreased morale, decreased productivity and employee turnover that results from employee dissatisfaction. There are a number of actions that Montgomery can take to address employee dissatisfaction and to ensure compensation equity: ■ Realign workloads to ensure equity and reasonableness. The employee loss from the long- term hiring freeze caused an imbalance across the organization and significantly changed the workloads for the remaining employees. HR must work with managers and employees to conduct an audit of the workload changes that occurred. There may be employees who are significantly overburdened because they assumed the workload of a co-worker who left the organization. Montgomery may need to conduct a job analysis to get a better understanding of the work being done by employees. At the very least, the job analysis should include 131 CU IDOL SELF LEARNING MATERIAL (SLM)
employees who were affected by workload re-alignment. Based on information derived from the analysis, workloads should be redistributed, and managers must be reasonable in their expectations of employees. ■ Audit the compensation of all employees to determine where workloads are out of balance with compensation. If compensation has become significantly distorted by changing work assignments, Thompson may need a complete overhaul of the compensation system. Thompson should adjust the compensation of those employees who are most affected by workload reassignment. ■ Conduct a job evaluation. A job evaluation is the process of determining the relative value of one job in relation to another in an organization. Its primary function is to ensure internal equity across the organization (Monday, 2012). In addition, Montgomery should assess the organization’s compensation strategy to ensure it is appropriate for the current circumstances. ■ Conduct a salary survey. Thompson should ensure external compensation equity if it wants to be competitive in the marketplace. If Thompson’s compensation has sunk below the market price for comparable jobs in the community, they will experience unintended employee turnover. A salary survey can determine if Thompson’s compensation is still at competitive levels. ■ Realign the salary structure as needed. Thompson should realign its compensation structure where needed based on the information derived from the job analysis, job evaluation and market survey. Pay grades and pay ranges must be updated to ensure competitiveness in the marketplace and equity across the organization. 2. How can compensation at Thompson Technology reinforce the organization’s strategic advantage of product innovation and exemplary customer service? If they haven’t done so already, Thompson may want to include performance- based pay as part of its total rewards package. According to a 2010 survey from outsourcing firm Kelly Services, there is a high degree of interest from employees in having a portion of their compensation tied to the financial performance of their organizations. The survey also found that nearly a third of U.S. workers whose pay was not tied to performance believed they would be more productive if they had a greater stake in the companies that employ them through benefits such as profit sharing. Linking compensation to performance may also help Thompson increase sales revenue (Miller, 2010). Incentive plans must be well designed if they are to contribute to the organization’s success. Effective plans meet the following requirements (Noe, Hollenbeck, Gerhart & Wright, 2011): ■ Performance measures are linked to the organization’s goals. ■ Employees believe they can meet performance standards. 132 CU IDOL SELF LEARNING MATERIAL (SLM)
■ The organization gives employees the resources they need to meet their goals. ■ Employees value the rewards given. ■ Employees believe the reward system is fair. ■ The plan takes into account that employees may ignore any goals that are not rewarded. For Thompson, exemplary customer service is a strategic advantage. Thompson may want to consider linking performance bonuses directly to accomplishment of customer service goals. Performance bonuses maintain flexibility in compensation because they do not add to the employee’s base pay and have the advantage of being re-earned during each performance period. Bonuses can be used as a one-time reward, or they can be part of an ongoing system. Thompson employees would probably like to see the company institute a performance plan; research indicates strong support from employees for performance bonuses that are linked to productivity (Miller, 2010). Thompson may also want to consider adding a profit-sharing plan to its existing rewards system. Profit sharing encourages employees to think like owners and increases understanding of how their individual performance is linked to company profitability. Profit sharing also has the practical advantage of costing less when the organization experiences financial difficulties. REFERENCES Miller, S. (2010, August). Pay-for-performance plans would increase productivity, employees say. Retrieved from SHRM Online www.shrm.org/hrdisciplines/ compensation/Articles/Pages/Productivity.aspx Monday, R. W., Monday, J. B. (2012). Human Resource Management (p. 246). Upper Saddle River, NJ: Pearson/Prentice Hall. Noe, R., Hollenbeck, J., Gerhart, B., & Wright, P. (2011). Fundamentals of human resource management (4th ed.). New York, NY: McGraw-Hill/Irwin. SCENARIO B: FLEXIBLE SCHEDULING Players: Scott Montgomery, CHRO Walt Derringer, department supervisor Alex Harper, department supervisor Paul Paolilli, employee Montgomery analyzed Thompson’s absentee levels in preparation for the strategic planning retreat. He knew that because of the hiring freeze, some employees’ workloads had increased as they absorbed additional work left by departing staff, and he worried that employees were responding by calling in sick. Not only did his analysis support his assumption, but it indicated that Thompson had an absenteeism problem far greater than he had expected. 133 CU IDOL SELF LEARNING MATERIAL (SLM)
Although it is difficult to quantify the cost of unhappy employees, Montgomery was certain absenteeism was adding to overall labor costs. There were the obvious costs of hiring temporary labor and paying the nonworking employees. Absenteeism caused additional expenses in productivity losses because employees try to cover for the absent employee, or the work simply goes undone. Montgomery believed that if absenteeism could be controlled, Thompson could save significant labor costs. After the retreat, Montgomery met with some area managers to discuss the possibility of implementing flexible work schedules and telecommuting. His proposal met with some skepticism, but he reminded managers that productivity could actually increase and absenteeism could decrease if employees had the flexibility to manage their family needs. His plan would change the standard 8 a.m. to 5 p.m. workday to a 12-hour flex schedule from 6 a.m. to 6 p.m. Employees would still work a regular eight-hour day, but they would have flexible start and stop times, with start times between 6 a.m. and 10 a.m. and stop times between 2 p.m. and 6 p.m. All employees would be on- site between the core hours of 10 a.m. to 2 p.m. In addition, some employees could occasionally telecommute when it was appropriate for their job assignments. Some managers were hesitant because most had never supervised employees who worked off- site or had varying schedules, but with Montgomery’s promise of HR’s support, most managers agreed to give it a try. It was decided that the program would be launched in 60 days. Montgomery told managers that he would get back to them the following week with guidelines and a training plan for managing flexible employees. In the interim, he asked managers to send him recommendations for employees and jobs suitable for telecommuting. “What d’ya think, Alex?” asked Walt Derringer the next morning as he folded himself into the chair next to fellow supervisor Alex Harper’s desk. “Now it looks like you and I have a 12- hour day supervising staff, while they can come and go whenever they please. What kind of a crazy idea is that, anyway?” Walt grumbled. “Well, I think we have to give it a try,” Alex said as he leaned back in his chair and pushed away from his computer. “My staff has been through a lot lately, and they work pretty hard. Maybe this will bring back the spark we need to get things going around here again.” “Yeah, well, I’ve got some deadbeats that can hardly get anything done now. I don’t see how this is going to be any better. Telecommuting! That’s just an excuse to sit home in your pajamas and do nothing all day! How are we going to keep track of those hours?” “That’s just the point, Walt.” Alex replied. “We don’t have to keep track of hours. Staff will be responsible for results. They’re not going to get paid for chair time anymore. I think it’s a great idea. We can finally be managers now and not just babysitters.” “I think it’s just another management gimmick. Remember quality circles? That was supposed to be the greatest thing that ever came down the road for employees. And that just turned into a 134 CU IDOL SELF LEARNING MATERIAL (SLM)
bunch of gripe sessions, and nobody ever did anything to solve the problems.” “Maybe, but we learned a lot from that. And we have new management now. I think Scott Montgomery and his team really listen to employees, and they’ve got some good ideas. I was just working on a list of jobs and people I think would be suitable for telecommuting. What about your department, Walt? Do you have people you can recommend for telecommuting?” “Yeah,” he chuckled. “I’ve got Paul Paolillo. I’ve wanted to get him out of my hair for a long time now. He never gets any work done, and he files a workers’ compensation claim every time someone bumps his chair or he gets a paper cut. What are they going to do when he’s telecommuting and files a claim for a little hot coffee, he dribbled on himself at home?” “Maybe he’s not a good candidate for telecommuting,” replied Alex. “Oh, I think he’s the perfect candidate. I’m putting him at the top of my list!” said Walt as he got up and headed back to his desk. “See ya later, Alex.” “Yeah,” Alex said as he rolled his chair back up to his computer. “Maybe some of our managers need a reorganization,” he muttered to himself as he went back to work on his list. SCENARIO B: QUESTIONS FOR UNDERGRADUATE STUDENT TEAMS Montgomery believes flexible scheduling can be a win-win for Thompson and its employees. He has asked your team to help plan for the implementation of the flexible scheduling and telecommuting programs. He has scheduled a meeting with your team this afternoon and has asked you to provide him with the following information: 1. What HR policies will be affected by the change to flexible scheduling, and how should those policies be changed? 2. What criteria should Thompson Technology use to determine the jobs appropriate for telecommuting, and what criteria should be used to select employees who are appropriate for telecommuting? SCENARIO B: QUESTIONS FOR GRADUATE STUDENT TEAMS Montgomery believes flexible scheduling can support Thompson’s mission and be a win-win for the company and its employees. He is also certain that it can save on labor costs and improve productivity. He is meeting next week with the strategic planning team and wants to present them with some information on potential policy changes and cost savings. He has asked your team to research the information for him. You will be meeting with his management team later today. Your report should address the following: 1. How can flexible scheduling support Thompson Technology’s mission and enhance the organization’s strategic advantage? 135 CU IDOL SELF LEARNING MATERIAL (SLM)
2. How will flexible scheduling affect Thompson Technology’s bottom line? What cost savings can be expected, and how will it affect revenue? Will flexible scheduling enhance the company’s revenue stream? DEBRIEF SCENARIO B: QUESTIONS FOR UNDERGRADUATE STUDENT TEAMS 1. What HR policies will be affected by the change to flexible scheduling, and how should those policies be changed? There are a number of policy changes that must occur for the successful implementation of flexible scheduling: ■ Staffing. Career structures may need to be redesigned to replace the single career ladder that has been traditional in organizations. Employees will need new structures that allow them to move in all directions with a variety of timelines and platforms that support different career stages. The result should be increased employee control over their careers with improved productivity in the organization. ■ Compensation. New compensation structures must be designed for flextime employees. The emphasis must change from hours worked to a focus on results, where employees have more control over their time and how their work is done. Measuring results allows employees to concentrate on what is really important without the distraction of time. For hourly employees who telecommute, legal requirements for minimum wage, the Fair Labor Standards Act (FLSA) and so forth remain in effect regardless of a worker’s location. If Thompson allows telecommuting for both nonexempt and exempt employees, the company must continue to maintain time records for nonexempt employees as required under the FLSA. This can be accomplished by requiring employees to clock in and out electronically or by maintaining employee time logs. It may be more difficult for employers to control off-the-clock work of telecommuting workers than on-site workers, but Thompson’s HR department needs to ensure that telecommuting employees and their supervisors understand that the FLSA standards that prohibit off-the-clock work are the same whether the employee is off-site or on-site. ■ Performance management. Managers must be trained on how to manage off- site employees. Flexibility requires employers to trust employees. HR should help managers move away from the mindset of eyes-on employee control to performance assessment based on results. New communication structures must be established with clear expectations about how communication will take place between staff and supervisors. New performance metrics should be established and made available to employees so they can assess their performance from anywhere and at any time. ■ Safety. Occupational Safety and Health Administration (OSHA) and workers’ 136 CU IDOL SELF LEARNING MATERIAL (SLM)
compensation regulations remain the same regardless of work location. Telecommuting employees should be reminded that safety regulations are the same for off-site employees. HR must be aware of location-specific regulations, because some areas require inspections or certifications of off-site work areas. ■ Equal employment. Equal employment regulations apply to employees who take advantage of flexible scheduling and to telecommuting employees, just as they do to on-site employees. HR must ensure nondiscrimination in management of off-site employees and in all policies covering off-site work. In some circumstances, flexible scheduling or telecommuting may be a reasonable accommodation for a worker with a disability. HR will have to manage the specifics of each situation. ■ Technology. Thompson should establish policies about the use of off-site technology for teleworking employees. The policy should address issues such as communication protocols, use of company property and security of confidential information. 2. What criteria should Thompson Technology use to determine the jobs appropriate for telecommuting, and what criteria should be used to select employees who are appropriate for telecommuting? Not every job is appropriate for telecommuting. If the job must be conducted in the workplace, or if it requires in-person interaction among employees or among employees and customers, it is not suitable for telecommuting. Work that is tied to a specific location or to people or information that is located on-site only is not suitable for telecommuting. Computer-based or telephone-intensive jobs are likely candidates for off-site work. Specific job information should be available to the organization from job analysis data found in the HR information system. If it has been some time since Thompson conducted a job analysis, or if the information is no longer valid, it may be necessary to conduct a new job analysis to ensure that decisions are made based on current job information. Telecommuting employees (and where appropriate, their managers) must have the following characteristics (Leonard, 2011): ■ Be able to work independently and without a lot of supervision. ■ Have demonstrated self-reliance and the ability to meet deadlines and performance standards. ■ Be comfortable with the technology required for successful telecommuting. ■ Have strong communication skills and be able to communicate well electronically with team members and managers. ■ Be able to collaborate well with others and can be depended on to adhere to teamwork requirements. ■ Be comfortable with ambiguity. 137 CU IDOL SELF LEARNING MATERIAL (SLM)
■ Be capable of independent thinking and be willing to take initiative. ■ Have suitable space at home for working and a family that is supportive of telecommuting. REFERENCES Leonard, B. (2011). Managing virtual teams. HR Magazine, 56(6), 39-42. Meinert, D. (2011). Make telecommuting pay off. HR Magazine, 56(6), 33-37. Miller, S. (2011, February). Thought leaders call flexible workplaces “strategic imperative.” Retrieved from www.shrm.org/about/news/Pages/ ThoughtLeadersFlexibleWorkplaces.aspx Tarken, W. (2007, November). Supervising the virtual workplace. Retrieved from www.shrm.org/hrdisciplines/technology/Articles/Pages/CMS_006497.aspx DEBRIEF SCENARIO B: QUESTIONS FOR GRADUATE STUDENT TEAMS 1. How can flexible scheduling support Thompson Technology’s mission and enhance the organization’s strategic advantage? Thompson has a three-part mission that equally emphasizes customers, products and employees. To maintain competitiveness and to lead the marketplace, Thompson must change the workplace to meet the needs of its employees. Montgomery must convince the remaining doubters that workplace flexibility is not an employee perk; it is a business imperative. Flexibility defines new ways of how work gets done and how employees’ careers are organized. Advances in technology alone require that organizations rethink how employees interact with one another and how customer service is provided. Thompson’s culture must move away from an emphasis on hours worked and refocus on results. The first step is to ensure that flexible scheduling is supported by top management. Montgomery should be prepared to supply the strategic planning team with some hard facts that demonstrate how flexibility in the workplace can increase morale, engagement, productivity and, ultimately, return on investment (Miller, 2011). As the process is implemented, new structures may need to be formed that allow for a redesign of employee career ladders and new methods of managing and compensating employees. Flexibility will become a part of the organization’s culture when flexibility goals are part of the strategic plan and when achievement is incorporated into performance management and reward systems. 2. How will flexible scheduling affect Thompson Technology’s bottom line? What cost savings can be expected, and how will it impact revenue? Will flexible scheduling enhance the company’s revenue stream? Employers who have adjusted their work schedules to meet employees’ needs report significant 138 CU IDOL SELF LEARNING MATERIAL (SLM)
benefits to the organization and the employees. In 2007, more than one- half of employers that responded to a survey reported allowing at least some workers to periodically change their starting and ending times, and many agreed that the benefits far outweighed the costs. Organizations with a work/life balance focus report that flexible scheduling can save money by reducing the following (Rouse, 2010): ■ Turnover. ■ Recruitment expenses. ■ Absenteeism. ■ Real estate costs. ■ Health care costs. In organizations with high turnover rates, the estimated cost of replacing a salaried worker may be as high as 150 percent of the employee’s annual salary. For hourly workers, the replacement cost is estimated at 50 to 75 percent of annual pay (Custom-Fit Workplace Initiative, 2011). Employees who work flexible schedules report significant reductions in stress associated with conflicts that arise between work and personal responsibilities. For employees with children, flexible scheduling alleviates the tension created when work and school activities conflict. It is estimated that one-third of the workforce experiences such stress, with associated productivity losses amounting to $466 to $1,984 per employee per year (Custom-Fit Workplace Initiative, 2011). Applying the estimated figures to Thompson’s 800 employees would equate to a cost savings between $372,800 and $1,587,200 per year. Assuming a 15 percent reduction in workforce to 680 employees, the company would still see an annual cost savings between $316,880 and $1,349,120. Thompson may also save on health care costs. It is reported that workers with lower stress levels incur nearly 50 percent less in health care expenditures than those with high stress levels (Custom-Fit Workplace Initiative, 2011). Organizations that allow flexible scheduling are also expected to save in real estate and other overhead costs. In 1996, Bell Atlantic reported that telecommuting saved between $1,500 and $5,000 per telecommuter per year. A 1999 study by the International Telework Association and Council estimated a savings of $10,000 per telecommuting employee (Custom-Fit Workplace Initiative, 2011). Besides saving money, research shows that organizations can reap significant gains through flexible scheduling policies. A study of 550 employees in 100 organizations found a direct correlation between worker satisfaction and firm profitability. One study showed that organizations with highly committed employees had a 112 percent return to shareholders over three years. Research finds that the strongest improvement in market performance came from organizations that regard their employees as strategic assets rather than as costs to be 139 CU IDOL SELF LEARNING MATERIAL (SLM)
minimized (Custom-Fit Workplace Initiative, 2011). REFERENCES Custom-Fit Workplace Initiative. (2011). CustomFitWorkplace.org. Retrieved from www.customfitworkplace.org Miller, S. (2011, February). Thought leaders call flexible workplaces “strategic imperative.” Retrieved from www.shrm.org/about/news/Pages/ ThoughtLeadersFlexibleWorkplaces.aspx Rouse, C. (2010, March). The economics of workplace flexibility. Retrieved from www.whitehouse.gov/blog/2010/03/31/economics-workplace-flexibility SCENARIO C: HOT-DESKING Players: Scott Montgomery, CHRO Jack Albright, COO Rick Stephens, facility manager Vickie Carothers, employee Dianne Sturgis, employee Thompson Technology has changed since the hiring freeze was implemented in 2008. The sales numbers are up slightly, and costs have been saved because staff levels are down about 5 percent overall. It has been difficult for some departments; reduction by attrition doesn’t ensure that it will occur in the appropriate areas. Some departments lost a significant number of employees, and others experienced little to no employee attrition. Montgomery has worked with the managers to reconfigure departments and reassign staff to balance the workload. The most significant change occurred when the company moved to flexible scheduling and telecommuting. For nonexempt employees, the standard 8 a.m. to 5 p.m. shift was scrapped in favor of a 12-hour flex time day from 6 a.m. to 6 p.m., with core business hours between 10 a.m. and 2 p.m. when all employees should be on-site. In addition, a number of exempt employees shifted their work off-site and began telecommuting two or three days each week. That resolved most of the persistent absentee problems because flexible scheduling allowed employees the flexibility needed to manage work and family responsibilities. Now, several months into the new schedule, it is clear that employees love flexible scheduling, but the managers don’t. Most of Thompson’s managers had never supervised off-site employees or employees with time flexibility, and many were resistant to the change. Montgomery had anticipated that it would be a difficult change for some, but he hadn’t expected all the grumbling about the difficulty of managing “invisible” employees. He has been working one-on-one with supervisors who can’t seem to let go of the time clock mentality, and he hopes that with time most managers will realize the value of the new schedule. 140 CU IDOL SELF LEARNING MATERIAL (SLM)
At least absenteeism is no longer an issue, and morale and productivity are finally improving. “After all,” thought Montgomery as he reached to answer his phone, “our employees have been through a lot in the past few years with the hiring freeze and reorganization. It’s about time something made them feel better.” The call was from the COO Jack Albright. “Good morning, Jack,” said Montgomery. “Scott,” said Albright, “we need to sit down and figure out where we’re going from here. I’m looking at maximizing facility use for cost savings, and it’s going to affect people. Let’s talk about how we can do this to benefit both our areas.” “Fine, Jack,” said Montgomery. “I’ll stop by your office tomorrow morning.” The next morning, Albright got right to what was on his mind. “Scott, I think flextime and telecommuting is a huge success. It really changed the nature of work around here. Have you walked through the customer service area or the marketing department lately? There are empty desks everywhere, especially early morning and late afternoon.” “Yes, I’m very pleased with the results,” said Montgomery. “Our productivity numbers are up, absenteeism is down, and employees seem to be more content. It’s taken a bit for supervisors to get used to the idea, but I think most of them are coming around. I’ve still got a few old-style managers who think they have to police an employee’s time. But if I can get them to let that go, it’s a lot easier for everyone when an employee can take their child to the orthodontist or go to a ballgame without a lot of hassle over scheduling.” “Well, that may be,” said Albright, “but I’m looking at all those empty desks. Have you tracked employees’ new work patterns? Do we have any solid information on which hours employees are here and how many employees are actually here at the same time?” “We’ve been tracking work hours and productivity levels since the beginning. Most employees are here during the core hours of 10 a.m. and 2 p.m.,” said Montgomery. “And some people work off-site two or three days a week. We don’t have long-term data yet because this is a new process, but we’ve got good numbers so far, and there are definitely patterns and trends emerging that we should consider.” “Great,” said Albright. “Let’s meet again. I’d like to have a look at your numbers. I’m interested in a better use of our space. I see a lot of empty desks throughout this building, and it seems to me that if we consolidate some of that space, we could save costs and even generate revenue by leasing out what we’re not using.” “I’ve been thinking the same thing,” said Montgomery. “I’ve already talked with some colleagues in other companies where they use hot-desking for mobile employees.” “What’s that?” asked Albright. “I’ve never heard of it.” “It’s a process where mobile employees have no assigned work space. They don’t need a designated space in the office because they do most of their work off-site. On days they work 141 CU IDOL SELF LEARNING MATERIAL (SLM)
in the office, they use whatever desk is available. They simply find an empty desk, sit down, turn on the computer and go to work. It’s working well in other companies, and I don’t see any reason it wouldn’t work for us,” replied Montgomery. “I like it,” said Albright. “Let’s go over those numbers and get it going right away.” Montgomery sent the attendance and productivity data to Albright later that afternoon. He also scheduled a meeting with the facility manager, Rick Stephens, for the next morning. From there, things moved quickly. They identified two floors that could be consolidated into one floor of hot-desk areas. It was decided to proceed with the plan. A project team was formed and an implementation schedule was devised. Stephens’ staff would work with the IT department to make the physical changes during the final weekend of the conversion to reduce business disruption. Approximately 30 days before the change, Montgomery sent the following e-mail to employees: Later That Day Vickie Carothers stomped into the cluttered fourth-floor cubicle occupied by her friend Dianne Sturgis. “Did you see the e-mail from HR?” she asked. “No, I’m really rushed today,” said Dianne. “I’ve got to get this project to marketing by 3:00 this afternoon, and I’m way behind. I haven’t had time to look at anything. What is it?” “Well, it’s another announcement from HR,” replied Vickie. “What are you talking about?” asked Dianne. “What do they want now?” As Vickie read the e-mail aloud, Dianne stopped working and turned toward her. “Are you kidding me?” she asked incredulously. “No, it’s for real. You’ve got to haul all this stuff out of here by the end of the month,” Vickie replied, punctuating her comment with a wave toward the artwork by Dianne’s six-year-old twins adorning the cubicle wall. “And then what?” Dianne asked. “I’ve been in this cubicle for five years. How does anyone work at a shared hot-desk?” “I don’t know, but it looks like we’re going to find out.” SCENARIO C: QUESTIONS FOR UNDERGRADUATE STUDENT TEAMS Montgomery realizes that hot-desking will affect not only the physical work space in the company, but also how managers supervise employees. Many of these managers have no experience in managing mobile employees, and he has promised them support in making the transition. He has asked your team to design a plan to help the supervisors transition from traditional management to managing mobile employees. He is meeting with your team this afternoon. Please provide him with answers to the following 142 CU IDOL SELF LEARNING MATERIAL (SLM)
questions: 1. What challenges should Montgomery anticipate in the transition to hot-desking, and what can be done to ensure success of the project? 2. What support should HR provide to help transition supervisors from managing traditional employees to managing mobile ones? SCENARIO C: QUESTIONS FOR GRADUATE STUDENT TEAMS Montgomery is meeting with the strategic planning team next week to further discuss the move to hot-desking. He knows it will take time to complete the transition, but he wants a transition plan in place right away so it can be approved at the meeting. He has asked your team to work with him on the project. He will meet with you later today and has asked you to prepare written responses to the following questions: 1. Devise a project plan and timeline to move from a traditional work environment to a hot- desk environment. Who should be included on the project team, and who should lead it? 2. Data security is a significant concern to employers with mobile employees. What steps should be taken to protect the company from a data security breach? DEBRIEF SCENARIO C: QUESTIONS FOR UNDERGRADUATE STUDENT TEAMS 1. What challenges should Montgomery anticipate in the transition to hot- desking, and what can be done to ensure success of the project? Albright may view hot-desking as a way to free up space and generate revenue, but Thompson Technology should go slowly when implementing the new system. Hot-desking is a major change in the way people work, and it will take time to plan the transition and to train employees affected by the change. It may be helpful to pilot the project in one area of the company before moving ahead with a broader implementation. This would allow time to address employee issues and to work out problems before involving the entire organization. Either way, Thompson should expect resistance; there will be employees who do not want to give up their personal space. Inadequate Technology HR should work closely with the IT department to plan and implement the change; IT support is a significant factor in the success of such a program. To make the process work, Thompson must provide employees with the latest mobile technology. Desktop computers and telephone land lines must be replaced with laptops and cell phones that can be used from any location. Mobile communication must be available to employees regardless of their location. Working with IT staff and area managers, HR must establish appropriate parameters for the use of company equipment and communication devices. 143 CU IDOL SELF LEARNING MATERIAL (SLM)
Communication Challenges: Less Face-to-Face Interaction If teams normally work a standard eight-hour day and get work done through face- to-face meetings, hot-desking will be a major change in how they will accomplish their tasks in the future. Schedule time for team meetings before the process is implemented so teams can plan how they will interact and communicate with one another to get work done. Communication lines should remain open to enable employees to give feedback and to allow the company to respond appropriately to the feedback. This will not be a quick process; expect ongoing tweaking until employees are comfortable with the new system. Resistance For most employees, working in a hot-desk area will be a major change from working in an assigned personal space. There will be resistance to the new work style. Montgomery, his staff and the managers must be prepared to listen to concerns and address issues as appropriate. They must also assure employees that they will have support from the IT department to make a successful transition. Some permanent space in the hot-desk area should be reserved for administrative assistants and other support staff, so that mobile staff members can be assured of having access to support when needed. Although open space can generate a more collaborative environment, it will take time for employees to adjust to the change, particularly for those who are reluctant to give up their personal work spaces. Include quiet zones in hot-desk areas to accommodate small impromptu meetings or confidential phone calls. The Need for New Policies and Procedures HR must help managers make the transition from supervising visible employees to managing virtual ones, and this will require training. Time keeping and performance appraisals, for example, must transition to systems that are more appropriate for mobile employees. Many organizations now use online 360-degree feedback to appraise off-site employees instead of a traditional supervisor-managed appraisal process. The transition to a hot-desk environment will be difficult for some. It is important to remember that, just like there will be employees who don’t want to work at a hot- desk, there will be managers who don’t want to manage nontraditional employees. Montgomery should expect to have a few managers insist that they cannot manage employees unless they can see them. He should ensure that he listens to and addresses their concerns. Montgomery must remind them that there will be plenty of training on how to manage mobile employees and they will have HR’s support as they adapt to the change. Managers and employees must learn to trust one another because the success of the program depends on mutual trust. The HR department should ensure that open communication is maintained with employees working in hot-desk areas and expect to adapt policies and modify procedures as time goes on. HR and senior managers must understand that it will take time to implement the hot-desk 144 CU IDOL SELF LEARNING MATERIAL (SLM)
approach. 2. What support should HR provide to help transition supervisors from managing traditional employees to managing mobile ones? Organizations recognize the benefits derived from a mobile workforce, but a mobile workforce is not without concerns. In one study, executives said their biggest concern was the effective management and supervision of mobile employees (Zielinski, 2011). A recent Booz Allen Hamilton/Partnership for Public Service study showed that within the federal government, managers were the top reason why telework wasn’t a widely accepted business practice. HR must conduct training for supervisors to address concerns and to ensure the success of managers and mobile employees. Thompson must expect that some managers will be uncomfortable with supervising off-site employees because it is a significant change from supervising on-site employees. Managers must understand the differences between managing traditional employees and managing in virtual environments. The key drivers of successful telework programs are training for managers on what telework is and how to use it, helping managers decide which employees are eligible and getting senior managers to accept it. It is important to acknowledge the discomfort level some managers may experience and to provide support as they make the transition. HR must ensure that managers and their employees are suitable for the virtual environment. Training will be necessary for all involved so they can effectively use the technology required for successful communication. Employees are moving into a new world of work in which colleagues may not be available on-site for a quick chat or update on a project. Expect the transition to take time. It is especially important that supervising managers acquire new skills in performance management. Managers must learn to appraise employees based on results, and they need to suspend speculation about how off-site employees spend their time. Performance management will rely on goal setting and outcomes rather than less measurable criteria or hours worked. Thompson may want to tie the acceptance of telework directly to a manager’s performance evaluation and compensation. Also, it may be helpful to have managers telecommute at least part of the time. HR must provide ongoing support for supervisors as they move away from the traditional model of control management to one of manager as coach and coordinator. Employees who work remotely often report communication challenges, so it is vital that open lines of communication are maintained. HR may need to be a sounding board for managers and employees as they work through the change process. HR must plan to regularly review how the new processes are working and make adjustments as necessary. Achieving successful flexibility is a shared responsibility of the organization, managers and employees. Only then can flexibility positively impact workplace effectiveness and the bottom line (Friedman, n.d.). 145 CU IDOL SELF LEARNING MATERIAL (SLM)
REFERENCES Friedman, D. (n.d.). Workplace flexibility: A guide for companies. Retrieved from www. whenworkworks.org/tips/downloads/companies.pdf Gurchiek, K. (2011, June). Speaker shares keys to managing virtual workers. Retrieved from www.shrm.org/Publications/HRNews/Pages/ManagingVirtualWorkers.aspx Leonard, B. (2011, July). Make virtual teams a productive reality. Retrieved from www. shrm.org/Publications/ManagingSmart/Pages/MakeVirtualTeamsaProductiveReality. aspx Miller, S. (2010, December). Effective management is top mobile workforce concern. Retrieved from www.shrm.org/hrdisciplines/benefits/Articles/Pages/ MobileWorkforce.aspx The Partnership for Public Service and Booz Allen Hamilton. (2010). On Demand Government: Deploying Flexibilities to Ensure Service Continuity. Retrieved from www. boozallen.com/media/file/FWA_10.pdf. Wright, A. (2011, November). Experts: Telework still a hard sell for managers. Retrieved from www.shrm.org/hrdisciplines/technology/Articles/Pages/ManagingTelework.aspx Zielinski, D. (2011, April). Ready for ‘bring your own’ computers? Retrieved from www. shrm.org/hrdisciplines/safetysecurity/articles/Pages/BringYourOwnComputers.aspx DEBRIEF SCENARIO C: QUESTIONS FOR GRADUATE STUDENT TEAMS 1. Devise a project plan and timeline to move from a traditional work environment to a hot- desk environment. Who should be included on the project team, and who should lead it? Montgomery should advise the strategic planning team to go slowly with implementation of hot-desking. There is certainly an opportunity to improve the use of physical space and to generate revenue, but senior managers should be reminded that this is a culture change for Thompson, and it will significantly alter the way employees work. It is important to anticipate and plan for some resistance to the project. It is important to ensure top management support for the project before moving forward. After ensuring that there is support, Montgomery should select members for a project team. Project teams usually consist of employees from different backgrounds who can contribute knowledge and skills in their areas of expertise. Montgomery should include individuals who can implement the project plan and representatives from all areas that will be affected by the change. After the team is assembled, a project generally follows a five-step sequence (MindTools, 2012): 1. Define. Identify what will be covered by this project. 2. Plan. Identify who, what, when and with what resources the project will be completed. 146 CU IDOL SELF LEARNING MATERIAL (SLM)
3. Execute. Organize people, allocate resources and schedule tasks for completion. 4. Monitor and control. Track progress and take corrective actions as necessary. 5. Close. Complete and evaluate the project. Successful projects are linked to the strategic and operational goals of the organization. Montgomery may want to lead the team, but he should include managers who will be affected by the plan, including COO Jack Albright and CFO Elizabeth Schiff, on the project team. A planning grid or matrix should be developed and distributed to all team members. This matrix should indicate who is responsible for completing specific tasks (and when) and a timeline for completing the project. Team members must understand the importance of the project because they are probably fully engaged in other work and may be tempted to put the project on a back burner. It is the team leader’s responsibility to keep everyone on task and accountable for results. In addition to managing the team, it is the team leader’s job to manage communication. The team leader must ensure that there is open communication and cooperation in the group. This can sometimes be facilitated by the use of project management software or an electronic bulletin board to post information and timelines. Montgomery should expect that even when the project plan is completed, there will be an adjustment period for employees and managers who are affected by the new structure. He should plan to evaluate the process and make adjustments as needed. He must also keep the lines of communication open through employee focus groups or coffee meetings and respond to employee concerns. 2. Data security is a significant concern to employers with mobile employees. What steps should be taken to protect the company from a data security breach? Senior management must understand that the technology required for the success of mobile employees may make the company more vulnerable to security breaches, including the risk of revealing private information and company data. The plan must include requirements about who the equipment is assigned to and how the equipment should be used. Data can be protected by a variety of security tools, such as firewalls, antivirus software and proprietary security solutions. The use of smartphones must be given particular consideration because they are often used to transmit sensitive company data. They are far more vulnerable to security breaches because they lack the safeguards found in an organization’s IT network. Employees must be educated about how to use smartphones to connect to networks, run programs or store sensitive information. Another concern is the use of an employee’s personal computer. Procedures and guidelines 147 CU IDOL SELF LEARNING MATERIAL (SLM)
must be developed to ensure that personal computers don’t infect corporate networks with viruses or expose corporate data through unsecured e-mails. It is important for HR to work closely with the IT department to ensure that security safeguards are in place and that mobile employees understand and practice appropriate protocols to safeguard company information. REFERENCES Bliss, W., & Thornton, G. (2010, September). Managing flexible work arrangements. Retrieved from www.shrm.org/TemplatesTools/Toolkits/Pages/ ManagingFlexibleWorkArrangements.aspx Gurchiek, K. (2011, June). Speaker shares keys to managing virtual workers. Retrieved from www.shrm.org/Publications/HRNews/Pages/ManagingVirtualWorkers.aspx MindTools. (2012). Project management tools. Retrieved from www.mindtools.com Pomeroy, A. (2007). The future is now. HR Magazine, 52(9). Retrieved from www. shrm.org/Publications/hrmagazine/EditorialContent/Pages/0907pomeroy.aspx Zielinski, D. (2011, April). Ready for ‘bring your own’ computers? Retrieved from www.shrm.org/hrdisciplines/safetysecurity/articles/Pages/BringYourOwnComputers. aspx SCENARIO D: MOVING EMPLOYEES TO A PEO Players: Scott Montgomery, CHRO Jack Albright, COO Pete Zumwalt, engineering staff Niles Jorgensen, engineering staff Shortly After the Strategic Planning Retreat CHRO Scott Montgomery grabbed his smartphone and scanned his e-mail as he headed out the door for his appointment with Mayfield, a professional employer organization (PEO). As part of the plan to save on labor costs, the strategic planning team decided to move some of Thompson’s regular employees to contingent worker status. The change would enable the company to save on taxes and administrative costs while retaining the knowledge and skills the workers bring to the organization. The transfer would start with the engineering and design department and then be implemented gradually across other areas of the organization where flexible staffing is appropriate. Unknown to anyone outside the strategic planning team, Montgomery had already met with representatives from Mayfield several times. Today’s meeting would determine the terms of their agreement. The transition would mean terminating Thompson’s entire engineering and 148 CU IDOL SELF LEARNING MATERIAL (SLM)
design department. The terminated employees would be removed from Thompson’s payroll and then be re-employed by Mayfield and leased back to Thompson. Thompson would pay Mayfield a set fee per employee, and Mayfield would manage all the administrative costs associated with their employment, including taxes, benefits and compensation. Thompson would realize significant savings. Montgomery knew that many companies had successfully transferred employees to PEOs, but the idea made him uncomfortable. On paper, it looked great, but there were risks involved, and he was unsure how the employees would accept the change. He shared his concerns at the retreat and argued strongly against the plan. “After all,” he reminded everyone, “Alan Thompson based this company on innovation and creativity. That’s who we are! How can we be cutting-edge with no engineering or design team of our own? Do you really think you’ll get that kind of innovation out of contract workers?” “Come on, Scott, you’re being overdramatic,” replied Jack Albright. “We’ll have the same team as before. Nothing will change. Someone else will write their paychecks, and we’ll save money. The engineering staff should be independent contractors anyway. As independents, they would have the opportunity to work on outside projects whenever they want. It’s a win- win for everyone.” Several Months After the Conversion of the Engineering and Design Department Montgomery’s concerns may have been unfounded; there was little outward change in the engineering department. The staff was the same, with the exception of two employees who said they were independent enough that they weren’t going to hang around for any more of Thompson’s cost cutting. The rest stayed. There was grumbling at first, but then everyone went back to work and things now look much the same as before. The only visible change is the new ID badge the engineers have to wear. The badges now have the Mayfield and Thompson designations on them, but they work exactly the same as the old ones. The engineering staff still has admission to the front door, just as before. They sit at the same desks, have the same e-mail addresses and phone numbers, and work the same hours. The department is functioning like it always had. Montgomery was relieved that things were going well, and senior managers were impressed with the cost savings. Unfortunately, Montgomery wasn’t always privy to the conversations taking place among the engineers. If he could hear them, he would have overheard the following discussion between two engineers as they ate Thompson-provided cake to celebrate the birthday of one of the other PEO engineers. “How ya doing, Niles?” Pete Zumwalt asked, his mouth full of chocolate fudge. “I’m doing okay, I guess. You know how it is,” answered Niles Jorgensen. “At least we’ve still got jobs.” 149 CU IDOL SELF LEARNING MATERIAL (SLM)
“Yeah,” said Pete, “but it’s sure not what they told us.” “Not even close!” said Niles. “Sure, my paycheck is the same as before and I do the same work, but I feel like a second-class citizen now, and our benefits package isn’t the same at all!” “I know what you mean. I don’t think we’ll ever see a stock option again,” said Pete. “And all that stuff they told us about opportunities for other projects we could do as independents. Who has time for that? We have to be here every single day, the same hours as before!” “I really don’t care about stock options or independent work. I’ve got health insurance problems,” replied Niles. “Oh, I’m sorry Niles, I haven’t asked. How’s your wife doing?” “Not good, Pete,” said Niles. “You know she was diagnosed with breast cancer just before we were converted to Mayfield. We had just started a treatment plan through Thompson’s insurance, and then we had to shift over to that lousy HMO we get from Mayfield. She had to change doctors and go to a different clinic farther away. It’s not the same at all, Pete, and she’s not doing well. I don’t think she can handle all this change. “I’m so sorry, Niles. I thought she was doing better than that,” said Pete. “Well, things are pretty tough right now. I try not to take the stress home, but you know how that goes. I’ve got to leave early again today to take her in for another treatment. I really feel let down by Thompson, but I don’t think there is anything we can do about it. I’ve got to have a job, and I guess some insurance is better than none,” said Niles. “Yeah, me too,” said Pete. “But I’m not sure there isn’t something we can do. I talked to my wife’s cousin last week. We were at another family wedding. You know, my wives got a zillion relative. Anyway, this cousin of hers is a lawyer, and I was telling him about all this independent contractor stuff. He said it didn’t sound like independent contractor status to him.” “Well, they’ve been telling us we’re independents. If we’re not independents, then what are we?” asked Niles. “I don’t know,” said Pete, tossing his paper plate into the wastebasket. “But I’ve got to run. I have a committee meeting this afternoon. Can you believe it? They’ve got me on a hiring committee. I’m supposed to help hire staff, but they tell me I’m not really an employee. That doesn’t make sense to me. I just don’t trust Thompson anymore, and I think we need to find out where we stand. Say, if I make an appointment with this lawyer/cousin guy, do you want to come along?” “Yes,” said Niles. “I really need to talk to somebody. This just doesn’t feel right to me at all.” “I’ll give him a call and set it up,” said Pete. SCENARIO D: QUESTIONS FOR UNDERGRADUATE STUDENT TEAMS Montgomery was never convinced that transferring the engineering and design employees to a 150 CU IDOL SELF LEARNING MATERIAL (SLM)
Search
Read the Text Version
- 1
- 2
- 3
- 4
- 5
- 6
- 7
- 8
- 9
- 10
- 11
- 12
- 13
- 14
- 15
- 16
- 17
- 18
- 19
- 20
- 21
- 22
- 23
- 24
- 25
- 26
- 27
- 28
- 29
- 30
- 31
- 32
- 33
- 34
- 35
- 36
- 37
- 38
- 39
- 40
- 41
- 42
- 43
- 44
- 45
- 46
- 47
- 48
- 49
- 50
- 51
- 52
- 53
- 54
- 55
- 56
- 57
- 58
- 59
- 60
- 61
- 62
- 63
- 64
- 65
- 66
- 67
- 68
- 69
- 70
- 71
- 72
- 73
- 74
- 75
- 76
- 77
- 78
- 79
- 80
- 81
- 82
- 83
- 84
- 85
- 86
- 87
- 88
- 89
- 90
- 91
- 92
- 93
- 94
- 95
- 96
- 97
- 98
- 99
- 100
- 101
- 102
- 103
- 104
- 105
- 106
- 107
- 108
- 109
- 110
- 111
- 112
- 113
- 114
- 115
- 116
- 117
- 118
- 119
- 120
- 121
- 122
- 123
- 124
- 125
- 126
- 127
- 128
- 129
- 130
- 131
- 132
- 133
- 134
- 135
- 136
- 137
- 138
- 139
- 140
- 141
- 142
- 143
- 144
- 145
- 146
- 147
- 148
- 149
- 150
- 151
- 152
- 153
- 154
- 155
- 156
- 157
- 158
- 159
- 160
- 161
- 162
- 163
- 164
- 165
- 166
- 167
- 168
- 169
- 170
- 171
- 172
- 173
- 174
- 175
- 176
- 177
- 178
- 179
- 180
- 181
- 182
- 183
- 184
- 185
- 186
- 187
- 188
- 189
- 190
- 191
- 192
- 193
- 194
- 195
- 196
- 197
- 198
- 199
- 200
- 201
- 202
- 203
- 204
- 205
- 206
- 207
- 208
- 209
- 210
- 211
- 212
- 213
- 214
- 215
- 216
- 217
- 218
- 219
- 220
- 221
- 222
- 223
- 224
- 225
- 226
- 227
- 228
- 229
- 230
- 231
- 232
- 233
- 234
- 235
- 236
- 237
- 238
- 239
- 240
- 241
- 242
- 243
- 244
- 245
- 246
- 247
- 248
- 249
- 250
- 251
- 252
- 253
- 254
- 255
- 256
- 257
- 258
- 259
- 260
- 261
- 262
- 263
- 264
- 265
- 266
- 267
- 268
- 269
- 270
- 271
- 272
- 273
- 274
