Strategic HR- Case study

University Degree Business and Administrative studies

TASK ONE - Strategic HRM- organization performance

Introduction

Number of growing organizations believes that Human Resource (HR) provides them competitive advantage. It was understood by many organizations that competitive advantage can be obtained by quality work force/employees and culture. Approach of linking Human Resource Management to Strategic objectives of an organization is called as Strategic Human Resource Management (SHRM) (Bratton and Gold, 2001). It was cited by Bratton and Gold (2001, p39) strategic management is defined as ‘that set of managerial decisions and actions that determines the long-run performance of a corporation’. Strategic HR ensures that employees/human capital of an organization contributes to its achievements with their skills and performance. Traditional HR is concerned with implementation of policies and techniques like recruitment, staffing, remuneration, assessment etc (Klabbers, University of Bergen). But linking the general HRM and the organization’s strategy gives HR department more scope to enhance the abilities of their workforce and concentrate on the vision and mission. This connection is made to improve the organization performance and develop organizational culture which in turn facilitates innovation and flexibility. Overall the key principle of Strategic HRM is to achieve organization’s vision and mission.

Bratton (2001) describes SHRM as a continuous process that requires constant adjustment in three major areas namely Value of Senior management, the environment and the resources available.

Fig 1: Three major poles in strategic planning (Adapted from Bratton and Gold, 2001)

Some authors believe that Strategic HRM is an Outcome and some believe that it’s a process. It was cited by Bratton and Gold (2004) that authors like Ulrich (1997) and Snell et al had different opinion on Strategic HRM. Snell et al believed that it’s an outcome designed to achieve sustained competitive edge through quality workforce. Ulrich (1997) also stated SHRM as an outcome of mission, vision and priorities of HR department. HR strategies are more concerned about matching the Five Ps that stimulates the employee roles for competitive strategy (Bratton and Gold, 2004, p46 and Cerdin and Ashok Som, 2003). It was cited by Cerdin and Ashok Som (2003) that Strategic HRM is identified in three levels namely Strategic, Managerial and operational level. Strategic level looks to the long term future, Managerial level looks at the mid term and the operation level looks at the short term focus. Different models and approaches were discussed in this assignment to understand the functionality of strategic HRM and how far the organization able to implement it.

Models and Approaches

There are several approaches and models by which Strategic HRM can be applied but basic strategic HRM model is widely accepted by many authors, researchers and even critics as well (Kane and Palmer, 1995). This basic model is based on the external and internal environment and basic organization strategies.

Fig 2 Basic Model of Strategic Human resource Management (Adapted from Kane and Palmer, 1995)

Strategic HRM models demonstrate how an organization links its business strategies and HR function to achieve it goals. Though SHRM adopts resource based philosophy, there are three different models defined by authors (Bratton and Gold, 2004, p49). These models are Control based, Resource based and Integrative model.

Control based approach generally deals with control of work place and direct monitoring of employee performance. According to this approach, HR strategies and management structure are used as instruments and techniques to enhance labour productivity and there by increasing profitability.

Resource based approach satisfies the human capital requirements of the organization (Armstrong, 2006, p117).It was observed by Bratton and Gold (2004) that sustained competitive advantage is not achieved by external market position but careful assessment of their own skills and capabilities that competitors cannot copy. Main objective of this approach is improving resource capability and effective utilization of resources to achieve the goals set by the organization. Within this model there are three different approaches by which organization can implement strategic HRM practices (Armstrong, 2006, p117)

High Performance management approach
High commitment management model and
High involvement management model

High Performance model helps in developing several processes by which employee performance is improved and impacted. This in turn directly effects the organization growth. This model believes enhancing the employee skills and encouraging them to learn continuously. This model involves rigorous recruitment and selection procedures, learning & development activities and performance management system.

Kemin nutritional technologies in India adopted similar model in implementing their strategies human resource. Kemin is a manufacturer of animal feed ingredients and human food ingredients. Their head quarter is located in Des Moines, US and having operations in over eight countries. Kemin have more than 4000 employees’ world wide. Kemin’s vision is to improve quality of Life by touching half the people of the world every day with its products and services. In order to achieve this vision Kemin strategically aligned all its divisions to contribute to the vision. HR division developed strategies to improve workforce capabilities and bring quality workforce into the organization. They have made certain changes in their recruiting process that will indirectly lead them to the vision of the organization. Now their selection process is complex and specifically looks for individuals who are matching to their core values. The recruiting process involves three stages with the initial screening is made to identify the ability of the individual to adapt to the situations and show high levels of resilience. Individual’s integrity is also tested during this process. This process is fallowed by the technical assessment of an individual by the concerned department and finally personal interview is done by the HR to speak about his growth in this organization, performance analysis, incentives and learning prospective.

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Once the strategic planning is done for the year, senior management roles out the goals and responsibilities to the concerned departments. They constantly monitor the proceedings of their departments and analyse how far they have come. For example, Customer Lab Services (CLS) come under the marketing department. This department is evolved to support the marketing department technically. All the employees in the CLS have clear job responsibilities which will contribute the organization’s strategic goals. If the organization’s (Kemin’s) strategic plan is to improve one particular product group in this year, all the employees in CLS will have their SMART (Specific, Measurable, Attainable, Realistic and Time bound) goals related to that product category. This SMART goals system is implemented by Kemin to align organizational strategy to the HR practices so that they have a competitive edge to their competitors. These goals are set during the beginning of the year and monitored regularly by the senior management/supervisors. These goals are agreed mutually with the concerned supervisor regularly and employees are committed to deliver them. Kemin in 2005 introduced 360 degree appraisal system to analyse the employee performance in the place of regular one to one appraisal system. In 360 degree feedback system, employees are asked to select colleagues, peers or supervisors to rate them in the aspects of adoptability, development, learning, team work and technical etc. Again selection of the ratters should be discussed with the employee and his/her supervisor.

All the employees are encouraged to participate in team meetings, ask questions regarding the approach of the organization to achieve certain task. Employees are also encouraged to submit ideas which will lead to a new product or a new business opportunity. Employees are provided with career ladders to understand about the hierarchies and their future growth. This will enable employee to focus more and contribute to the organizational growth and there by obtaining personal benefit. Kemin also identified few employees interested in taking new job roles and provided them with horizontal promotions (Lima and Pereira, 2003). For example an employee who was found efficient in serving customers was identified and offered to serve in marketing department where the employee originally belongs to CLS (Technical).

Kemin’s HR department also incorporated developmental goals in their regular SMART goals so that employees make an effort to develop some personal capabilities which in turn help organization or help the individual to perform the job better. Kemin regularly conduct strategic meetings with the HR personals to understand their core capabilities and competencies. Some of the key points are listed below. Finally all the employees who are leaving Kemin are interviewed in process called Exit interview (Arnold, 1995) to find out their experience with Kemin and know possible areas of improvement.

A clear vision and mission
Clear job description and SMART Goals
Rigorous recruitment/interview process
360 degree appraisal system
Developmental trainings
Horizontal promotions
Encouraged to learn and develop continuously
Exit interviews

One of the main strategic plans of Kemin is to maximise utilization of resources without increasing the cost structure. Kemin HR had built a strategy to cope up with this task. HR hired few internship students to conduct market surveys and research in different locations so that they avoid cost bared by regular employees and their time and travel expenses. These small things contributed in a big way to company’s performance. All the departments worked parallel to each other to achieve the same objective saving time and money. Overall by implementing these strategies Kemin’s Strategic HRM function aligns with the company’s objectives, vision and mission. These strategies deliver high performance environment for the employees and for the management. Kemin also provided opportunities for its employees to work globally and allowed them to participate in seminars, conferences etc where ever they were held. Kemin also made a strategy to retain employees by giving them benefits for staying long years. Once the employee of Kemin stays longer than 15 years he/she will join the president’s elite committee which plays a major role in taking key business decisions.

The High commitment approach is defines as a focused approach which concentrates on development of career goals and trainability and commitment of employees (Armstrong, 2006, p119). Key points of this strategic approach are developing ownership where employees are given opportunity to speak and involved in decision making. The second aspect is providing clear communication to the employees about the goal they are committed to achieve (Armstrong, 2006, p279). And the initiative of this approach is to develop leadership skills. Commitment can be increased or enhanced by making leaders inside the organization. From this theory it is understood that Kemin also practiced such type of strategies to improve the commitment of the employees. Kemin provide employees with useful trainings like SALT (Strategic accounts and leadership Program) and Project Management (e.g. Stage Gate process).So it seems Kemin strategic HRM is a mix of the two approaches discussed above.

The High involvement approach involves treating employees as partners in the organization. In this approach employees are given opportunity to communicate with the managers continuously about the organization’s mission, vision, values and objectives.

Integrative model characterized by two dimensions namely acquisition and development and the locus of control (Bratton and Gold, 2004, p53). Bratton and Gold explained that Bamberger and Meshoulam (2000) integrate two main models of SHRM. Whatever strategy or approach fallowed by organization it is the aim of the SHRM to obtain competitive advantage and achieve organization objectives.

TASK TWO - HRM Practices , horizontal and vertical integration

Introduction

Organization now concerned about their human capital and their competitive advantage. Human resource management (HRM) largely replaced the term Personnel management. Personnel management deals with managing people in the organization who contributes to the organization’s performance. Human resource management can be defined as a strategic and coherent approach to the management of people. HRM operates in a coherent way to help organization perform better and achieve target.

HR philosophies, strategies, policies, processes, practices and programs are the processes by which Human resource function works. Values and guidelines of principles of people management (Armstrong, 2006, p4) are described in the HR philosophies. HR strategies define the path of the HR function in achieving organization’s vision.

Key functions of HR department are

Improve organization’s effectiveness
Human capital management
Knowledge management
Rewarding and employee relationship management

All the goals and policies are made by the HR department are finally helps to improve stakeholder value by putting the customer in the first place. HR function will play a major role in creation of an environment for the employees that enable them to utilize their capabilities maximum and benefit the organization (Armstrong, 2006, p54). HR function also supports the management to achieve its vision through the people. HR function also aligns with organization’s strategies to achieve vision and it can also be described as vertical integration. Concept of coherence can be described as Horizontal integration which defines developing HR employment and development policies and practices. Different theorists defined several models Human resource management. Some of the models include Matching model, Harvard frame work model and conceptual model. Matching model include four generic processes namely selection, appraisal, rewarding and development. The Harvard frame work model was developed by Beer et al of Harvard University, hence called as Harvard model. s

Kemin’s HR function employed effective policies to serve employees and the organization with benefits. By providing benefits to the employees it is eminent that organization’s performance is improved. HR function in Kemin operated in organized way by both horizontal and vertical integration. To integrate HRM successfully its is observed that people in that department should have a good idea about how HRM is different from personnel management (Cathy, 2005). Kemin’s vision states that ‘Improve the quality of life and touching people’, and their mission states that ‘they provide nutritional solution to the customers by continuous improvement in their people, process and products’. Every department in the company has been provided with a ‘quality policy’ for which the department is committed to achieve certain tasks. Kemin HR quality policy is to provide best man power, improve organizational culture, reduce cost to the company, provide healthy and safe environment to the employees and provide competitive edge to the company. Some of the key HR policies and practices adopted by Kemin are listed below.

Code of Conduct
Appraisal and promotions
Internet and email policies
Selection of employee and referral program
Dress code and corporate clothing
Salary increase, increments and incentives
Leave and transfer policies
Equal opportunities

These policies make sure that HR function deliver best value to the employees. Horizontal integration of HR policies in Kemin was done with precision so that employees feel satisfied about the efforts of organization in treating them. Selection of employee was done with great importance. The interview process includes analysing the person’s ability to adjust to the culture, capability to deliver job and respect the vision of the company. Salary negotiations were done in the HR interview to meet the organizations requirements. Important HR policies regarding transfer, promotions, transfers, relocation were circulated to the employees to make them aware of the organization policies and avoid any kind of confusion. It is important for the HR function in Kemin to protect and preserve company’s valuable information within. The code of conduct and internet & email policies serves as the protective strategies for Kemin. All the Kemin employees were asked to maintain professional relationship with internal and external customers and maintain the organization culture.

One more basic function which was employed by Kemin was providing trainings to the employees for defined hours in a year. All the employees are eligible for the trainings and the trainings were selected based on the department and job roles. These training are provided to employees for their personal development and to make employee take care of his own career instead of looking for promotions (Ben, 1998) Employee referral system was found to be effective in Kemin. Every employee can refer a friend, past colleague or any he knows for any available position in Kemin and when the referred persons is successful and joins the company, employee will get a monitory benefit. This will encourage employees to bring new talent to the organization. Kemin’s HR department takes good care of the new employee in a way that he/she will get familiar with the organizations flow, roles and responsibilities of the job. An induction program will be provided for the new employee and mentor for the new employee also assigned to monitor the progress. All the employees were provided with career ladder so that employee knows where he stands and understand the organization’s hierarchies. Employee’s performance was measured twice in a year. Performance was measured in terms of SMART goals. Every goal set was given with some weightage and employees bound to achieve those goals. Performance will be measured in ratings/marks gained on the scale of 5. For example if an employee’s performance was analysed as meets the requirement, it means he/she achieved 3 on the scale. If the employee exceeds expectation it is measured as 5 on the scale. If the employee attains 5 on the scale, he/she will be eligible to climb up the career ladder. Increment and incentive schemes were rolled out to all the departments to reward the employees according to their performance.

Vertical integration of HRM deals with the alignment of HR strategies with business strategies. This kind of integration encourages everyone in the organization to take responsibility of HRM, not just the HR department (Cathy, 2005). It was cited by Cathy (2005) that HR role also requires a business partner role along with the HR manager. Kemin’s HR manager was effective in delivering tasks related to people and controlling business process as well. Kemin’s HR manager was involved in many operation meetings and board meetings and developed ideas to achieve the strategic goals. This can be explained by an example by which HR manager made a difference in reducing cost to company and helping the strategic goal achievement. Kemin wanted increase the customer retention and satisfaction by 5 percent, increase the product sales by 25 percent during the year 2005. To achieve the task all the product managers had to work collectively in mobilizing the sales force. But achieving 25 sales growth was something difficult without the help of HR manager or department. It was difficult for the sales people to travel all over India as it consumes lot of time money. HR manger then employed internship students from different backgrounds to serve different departments in different location. This saved enormous amount of time and money for the company. The other concept of HRM vertical integration is to provide organizational learning/work based learning. Every employee has been provided with 40 hours training. It was cited by Bratton and Gold (2001) that formal and informal trainings can act as lever for the organization in terms of sustained core competencies. Trainings such as SALT (strategic account and leadership trainings) and Project management trainings make the difference in the employees in terms of competency and leadership which are most important for the organization.

Kemin’s strategy is to produce innovative products with best processes. One of the Kemin’s HR policies includes Idea generation by which employees can submit an idea to improve, develop a product or a process. Each Idea will be considered after a careful investigation and analysing the feasibility. If the idea is unsuccessful initially, it is recorded for future use or reference. Once any idea is successful, idea generator is recognized and rewarded so that it motivates the other employees to contribute in the same way.

Retaining the quality staff always been a difficult task for organizations. Reducing employee attrition rate/ worker turnover ( Ing-chung Haung et al, 2006) was one of the important goals for Kemin. Kemin’s HR employed a new strategy to retain the skilled employees. Kemin offered overseas assignments to the employments where they can work for sometime out side the country of origin. This lead to belief and trust of the employees on Kemin and lot of employees anticipated and shown positive approach to it. To improve the performance analysis of employees Kemin incorporated 360 degree feed back mechanism by which employees are rated based on their performance and behaviour. One of the main functions of the HR is to manage change in the organization. Change management is the process of continuous renewal of organization structure, direction and capabilities (Moran and Brightman, 2001). To improve the working condition Kemin even changed its office location to Chennai (India) city from a rural area. HR played a major role in facilitating the change. He handled the people resistance (Waddel and Amrik, 1998) to the change in way that it had a very little impact on the organization performance. This change was anticipated by Kemin to achieve corporate goals and improve working conditions for the employees. Kemin seemed to effectively integrating its HR strategies to its business strategies.

Recommendation

Although Kemin appeared to be functioning well in the area of HR management, there are some areas of concern for the Kemin. Its is suggested that Kemin could use best fit model or the mix of culture fit and best fit models to manage the strategic HR function. Kemin’s employees had a dissatisfaction regarding the company salary policy and employee welfare. Though Kemin appear to be well function strategically, its bit neglected the Horizontal integration part. Kemin’s employees were unsure about the increment and incentive packages. In their policies it was mention that how and who are eligible for incentive and increments but it was not clearly mentioned that what is the percentage of raise they will get if their performance is above expectation. Few of the recommendations are listed below.

It is suggested to document and communicate the reward and incentive policies accurately.
Conduct regular audits to improve HR function and performance.
It is suggested to Kemin that it employs strategies to improve employee satisfaction in terms of salary and compensation policies.
Kemin should continue its practices in analysing the performance of employee and look for continuous improvement of the process.
Kemin’s recognition system also needs improvements as they does not involve lower level employees. Often people from those levels hesitate to come forward and submit an idea. Kemin is suggested to have some strategies to motivate the lower level employees and come forward to participate in developmental programs.
Kemin also should engage employees in some cultural activities that enhance team building and group working culture.
Kemin also should employ job rotation (Huang, 1999) policy to enhance the learning capabilities and change to routine job responsibilities.

These recommendation might help Kemin in ‘improving the quality of life’ of their employees and help organization to perform better. Overall Kemin seem to be in good condition in employing HR policies and practices both in horizontal and in vertical integration.

REFERENCES

Armstrong Michael (2006), ‘A hand book of Human resource management practices’, 10th edition, Cambridge University Press, London.

Arnold Kransdorff (1995) ‘Exit interviews as an induction tool’, Management Development Review, Volume 8 · Number 2 · pp. 37-40, © MCB University Press

Ben Ball (1998), ‘Career management competences – the individual perspective’ Librarian Career Development, Vol. 6 No. 7, pp. 3-11, © MCB University Press

Bob Kane and Ian Palmer (1995), ‘Strategic HRM or managing the employment relationship’, International Journal of Manpower 16,5/6, pp. 6-21,© MCB University Press.

Bratton J, Gold J, (2001), ‘Human Resource Management: Theory and Practice’, Routledge, Publications. 2nd edition.

Cathy Sheehan (2005), ‘A model for HRM strategic Integration’, Personnel Review Vol. 34 No. 2, pp. 192-209 q Emerald Group Publishing Limited

Cerdin Jean-Luc & Ashok SOM (2003),’Strategic Human Resource Management Practices: An Exploratory Survey of French Organisations’, Strategic human resource management practices: exploratory surveys on French organization, Groupe ESSEC CERNTRE DE RECHERCHE / RESEARCH CENTER, ESSEC Working Papers DR 03024

Huang, H. J. (1999). ‘Job Rotation from the Employees’ Point of View, Research and Practice in Human Resource Management, 7(1), 75-85. see at , accessed electronically on 14th May 2008.

Ing-chung Haung, Hao-chien Lin, Chih-Hsun Chuang, (2006) ‘Constructing factors related to worker retention’, International Journal of Manpower, Vol. 27 No. 5, pp. 491-508 q Emerald Group Publishing Limited

Klabber Jan H.G, ‘Enhancing corporate change: The case of strategic human resource management’, University of Bergen, Norway, KMPC Netherlands, See at , accessed electronically on 8th May 2008.

Lima F and Pereira P T (2003), ‘Careers and wages within large firms: evidence from a matched employer-employee data set’ International Journal of Manpower, Vol. 24 No. 7, pp. 812-835 q MCB UP Limited

Moran J.W and Brightman B.K (2001), ‘Leading organizational change’, career development international, vol.6 No.2, pp 111-118, MCB University press.

Ulrich, D. (1997), Human Resource Champions: The Next Agenda for Adding Value and Delivering Results, Harvard Business School Press, Boston, MA, .

Waddell Dianne and Amrik S. Sohal (1998), ‘Resistance: a constructive tool for change management Decision’, Management decision, 36/8, MCB University Press, pp 543–548

Bibliography

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