Expensive business

12
1 (word count: 3539) CASE STUDY EXPENSIVE BUSINESS ESSAY NAME: HFHSKFHDSKFHDSHKDHS

description

Impact of human resources management and restructuring in real business world

Transcript of Expensive business

Page 1: Expensive business

1

(word count: 3539)

C A S E S T U D Y

E X P E N S I V E B U S I N E S S

E S S A Y

N A M E : H F H S K F H D S K F H D S H K D H S

Page 2: Expensive business

2

The essay is based on a case study named “Expensive business” regarding the issues

related to the impact of human resources management and restructuring in real

business world. In the case, Utilities Co. has set a deadline for slashing 120 jobs. The

initial target of the CEO was the middle managers and some senior administrative staff.

The CEO considered these staff as “ underperformer” or “dead wood” as they were

expensive, long serving but without significant potential for development. The

redundancy was planned to increase the efficiency and competence of the company

under challenging economic environment. The first stage started from voluntary

redundancies across the organization. As a HR manager, Maree had been facing

significant job stress arisen from the change since the first stage of redundancy strategy.

Maree felt that the plan was unwise as only expert staff responded to voluntary

redundancies; meanwhile, understaffing had pulled down customer service quality and

caused psychiatric illnesses widespread among the staff. The redundancies were not

stopped at the voluntary stage. The conflict between Maree and the CEO was upgraded

to an unacceptable level for Maree when the redundancies moved into its secondary

stage. The targeted redundancy list from the CEO revealed that he was trying to lay off a

significant amount of staff older than 50 years old. Maree felt that the company was

taking the risk of violating Human Rights Commission, though the CEO claimed that he

was not aimed to target these staff’s age. The intervention of the Union lodged with the

Fair Work Australia for a collective negotiation made the case more complicated,

especially when the media and state politicians supported the campaign. Finally, Maree

could not stand anymore and handed in her resignation after the CEO could not control

his anger for her and left their meeting room. According to Bal (Holman et al.) , the

function of today’s HRM should be involved in strategic planning and decision making

processes in order to gain competitive advantage. Seemingly, the CEO may defend his

plan of redundancies as one of costing control strategies; but in fact, his announcement

to lay off 120 staff has critical HR implications in terms of equity issues. This essay is

purposed to have literature review for the roles of HR managing and restructuring, and

the HRM issues in respect of ethical, Occupational Health and safety and employment

legislative. The main arguments include that, Utilities Co. ignored the role of HRM a for

strategic decision making, the top management did not provide open communication to

support HRM’s job, and the redundancy list from the top management had equity and

OHS issues. The management oversight and related ethical issue stimulated the union to

Page 3: Expensive business

3

call on industry action and it might lead to worse consequence, such as strike and lower

productivity. In addition, the essay will argue against Maree’s resignation as well.

The function of HRM should go beyond taking the role of record keeping and

relationship maintaining into being evolved into a strategic partner of a company. It is

surprised that Maree, as the HR manager, did not take a part of top management team

for lying off 120 staff. She was not informed with the decision until one week before the

decision was disclosed to the whole company. All HRM implications emphasize on

managing human resources in a “strategic” way (Dainty, 2011). The HR of the company

had patchy involvement in strategy formulation for the redundancies as HR was only

granted with the duties of implementation rather than aiding decision-making. Actually,

Maree had found that some critical sections of the company had been understaffed

already. Under this situation, HR department’s power was reduced and it affected the

effectiveness of their job. Maree wished she could have been given more notice about

such huge amount of redundant jobs. Her team could prepare sufficient analysis of the

company’s cost structure and skills profile. At first stage, HR department prepared a list

of staff who were not working in core business units and some managerial staff who

had not fared well in annual performance appraisals in the part two rounds; however,

their jobs were totally ineffective as the CEO had his own mind. He only considered HR

as an operational function. Maree did not know the list of targeted redundancies from

the CEO until the second stage of the strategy. The CEO’s mantra was to develop an

efficient organization stronger and more competitive than it had ever been. HR practice

is referred to involving people (Buller & McEvoy, 2012). He ignored the contribution

from HRM for strategic decision making, which suggests that he did not realize that

company value could only be created through people. Absence of the important linkages

between the company’s strategy and its HRM is dominant to the failure of the CEO’s

redundancies strategy and led to a series of consequent unfavorable outcomes, such as

service delivery of inferior quality, flooding customer complaints, inability to acquire

new customers, continuous negative press and abusive e-mails sent from the employees

to HR department.

Utilities Co. failed to align organizational strategy effectively with organizational, group

and individual factors via effective HRM practices. No doubt, HRM practices should

Page 4: Expensive business

4

positively influence firm performance (Boselie et al., 2005; Buller & McEvoy, 2012),

however, to the most extent, the appropriate HRM practices depend on contextual

factors such as business strategy and top management tone (Chandler & McEvoy, 2000).

HRM should be the central for generating, sustaining and reinforcing organizational

competencies, culture, motivation and growth opportunity. The CEO focused on the cost

side of the company’s HR investment and simply wanted to remove the obstacles of his

vision to improve the company’s efficiency and competencies. Unfortunately, this had

been his own mantra but was not communicated with Maree and her team. Maree could

not have comprehensive analysis for the company’s cost structure and skills profile as

she could not follow the mantra of the CEO. She totally had no ideas how to identify 120

redundant jobs and the uncertainty put every employee on line with the fear of job

security. Maree and her team did not know whether any work for redundancies was

being done or not. Untrusted climate was spread throughout the company. Employees

were talking and whispering on the phone, in the tearoom or on closed offices. HR

professionals are supposed to offer an independent perspective on the organizations’

policies and strategies (Kochan, 2004). Maree is actually a competent HR professional.

She had some important competencies that were supposed to be HR professionals’

qualifications. She is credible activist as she offered the CEO her point of view about age

discrimination hidden in his targeted redundancies list. It reflects that she was taking

her active and credible HR role. She was capable of assisting shaping the company’s

strategy to deliver its vision. She noticed that the first 52 voluntary redundancies were

“workhorse” and current “stars” of the company. She argued against the CEO by skills

profile point of view that letting these staff go was “unwise”. But obviously, Maree and

her HR team were not able to challenge the CEO and take the role of balancing employee

and business interests. It gave the employees a feeling that the HR professionals were

turning inward to deal with them. The pressures on the workforce grew and the

employees could not trust HR professionals. Some of them sent abuse email to the HR

department because they thought HR department was standing on opposite side of their

interests. The depression was spread widely among the employees. Those capable

employees chose to leave the company voluntarily as nobody wanted to retain in a

company full of complaints, disorders and depression. It resulted insufficient front line

staff and additional work redistributed to remaining staff. When they were not able to

or willing to adjust their job, Maree and her team were exhausted for troubleshoot

Page 5: Expensive business

5

across the company. All these increased the pressures working in the company. The

increasing workplace pressures call for leadership from the HRM to aid better balancing

employee and company needs and interests, rebuilding trust, and shaping a cooperative

organizational culture at work (Kochan, 2004). Without any acceptance and supports

from top management, the overall breakdown in trust in the company is unavoidable.

Without effective help from HRM, the organizational performance in terms of job

efficiency could not be managed to meet the requirement of the CEO by any way.

The management of Utilities Co. did not treat its employees with equity and respect.

When Maree found that disproportionate number of women and younger staff took

voluntary redundancies, her investigation suggested her that Utilities Co. had sex and

age discrimination. Staff complained that they were treated with little respect.

According to justice approach, different treatment of people should not be based on

arbitrary characteristics (Shaw, Barry & Sansbury, 2009). Age discrimination was

proofed by the redundancy list from the CEO, in which the majority of the redundant

staff was 50 or older, though the CEO defended for his decision as that their age was not

“targeted”. That was because he knew that dismissing an employee for discriminating

his/her age was unlawful under Fair Work Act 2009 (Fair Work Australia, 2009). But

his obstructive attitude suggests that the top management built a wall to protect the

company’s own interest. Although the company is working for the economic interest of

its shareholders, it should take account of the interest of other stakeholders as well,

such as the employees’ working climate. They should be respected under the ground of

equity. The sudden change in job security would be a shock not only for themselves but

also for their families. The company has the responsibility to provide open information

under equity theory. Individual employees judge if they are treated with equity by the

principle of balance and correctness (Van Gramberg, 2006). The comparison helps them

to determine if a decision is fair or unfair for them as workplace justice is reflected in

neutrality and impartiality (Van Gramberg, 2006). Hiding information had the action of

the company failed to meet procedural justice and distributive justice. The employees

have the right to know and understand the reasons for the decision-making and speak

out their opinions and needs for adjudication and facilitation by a neutral and impartial

party (Van Gramberg, 2006; Shaw et al., 2009). If these rights are not respected, it may

imply that other rights of the employees are not perceived and respected.

Page 6: Expensive business

6

Business owners have the responsibilities regarding health and safety in their

workplace. It is also one of the best means to retain employees and maximize

productivity. Utilities Co. had neglected OHS issues related to redundancy. Safe Work

Australia (2008) states that the knowledge and understanding for OHS laws are

important to avoid unnecessary costs and damage to the business, even if it may be

costly in a short term but it is worthwhile with a long term effect. Utilities Co. did not

take action for stress related claims and onslaught of distressed staff. The consequence

can be severe. One of important parts of OHS consulting duties is to share relevant

information with workers about the matters that may affect their health and safety.

However, the OHS consultants in the company were not able to communicate the

information regarding the staff ‘s concern about potential redundancies. The shock

from the announcement hurt the psychiatric health. According to Landsbergis (2003),

more and more epidemiological evidence indicates that job stress remains the greatest

cause of work-related disease and injury. The case in which a staff became physically

violent towards his/her colleagues was only a severe signal for further worsening

situation in job stress-related adverse health outcomes. Maree could not sleep overnight

due to the stress related to redundancy processing. It suggests that stress response and

health injury had been escalated from psychological distress and anxiety to physical

health symptoms and behavioral outcomes. The job stressors in this case were arisen

from various perspectives, including lack of support when the employees were

experiencing the difficult situation caused by threatened job security and not being

informed about what was happening in the parts of organizational strategy and other

colleagues (Noblet, 2003). It is easy to cause disagreements and conflict with other staff.

They might feel that their work was closely monitored but no more training offered to

do the job properly. In addition, remaining staff might have to take over extra jobs due

to more reassignment and unfair treatment due to overloaded work duties as well as

the stress from unsatisfied customers. The objective of OHS consultation is to make sure

every stakeholder associated with work stress has a shared understanding about the

potential risks, the harm for psychiatric health of the workers, and available control

over the risks (Steven & Shanahan, 2002). Obviously, OSH consulting team in Utilities

Co. could not take the role appropriately as the top management, as one of the key

stakeholders did not make the exchange of information available for planning and

Page 7: Expensive business

7

managing health and safety in the company. They did not disclose any information

about redundancy pay, layoff timeline and any reassignment available.

Utilities Co. did not provide enough support for Maree so that Maree felt over stressful

for her responsibility. Maree’s job position and HR role had her placed in the core of

identifying job demand, applying job control and providing work-based support. She

had to support her won HR staff as well as the troubleshot across the company. Her job

load was increased for dealing with the shock, fear and untrusted feeling from

employees. She needed to bargain with the union for protected industrial action as it

had lodged its application with the Fair Work Australia (FWA) and renew the current

enterprise bargaining agreement (EBA). The CEO had constant conversation with the

company’s lawyers towards industrial action. She worried about the impact of inferior

working environment and motivation on customer service quality and satisfaction.

When the demands of a working situation exceed the levels of job control and the

support available to the individual, job strain, which is defined the risk of psychological

and physical illness, will increase significantly (Noblet, 2003). Although Maree was not

the target redundancy, her physical health symptom was hurt for the consequence that

she could not have good sleep at nights. Her wellbeing related to being an employee of

the company is closely linked to the change of “job control’ and “support” (Noblet, 2003,

p. 256). Lack of either or both of them would increase job strain and reduce employee

wellbeing.

Utilities Co. should take serious concern about these OHS issues as they started affecting

the company’s development of high-performance work systems. Downsizing may be the

tough and calculative side of HRM to meet the business requirements for crucial

integration between working productivity and HRM strategies and systems on one

hand; on the other hand, strategic HRM needs soft approach to retaining employee

commitment and involvement within the company in order to increase effectiveness

(Beardwell, Holden & Claydon, 2004). The soft side is defined as to encompass

communications, teamwork, and individual contributions and awareness of the needs of

a wider range of stakeholders (Noblet, 2003). Utilities Co. is recommended to collect

information on the relationship between job redundancies and employee health. Open

communication may work effectively to reduce unnecessary fear and depression among

Page 8: Expensive business

8

the employees. The company should seek social support for the redundant staff to find

new jobs. If more and more skilled employees chose to leave the company, Utilities Co.

may face skill shortage sooner or later. The company may have to hire and train new

staff if it gained more market share and increased revenue for higher proficiency. It

should take account the training cost and hiring cost as a part of the cost for today’s

redundancy policy. Retraining existing staff for higher skills and efficiency may save

cost in a longer term, compared to just removing incapable employees. Utilities Co.

should build confidence or knowledge to identify and address organizational-level

issues related to work efficiency. It should work with HRM and Maree to find a new job

design for higher productivity rather than simply going for redundancy. Maree is a

reliable and capable HRM leader. She has valuable observation and opinion for the

critical people issues. She has developed an operational team to work for meeting

organizational objective. The top management should provide more support and trust

for Maree and build partnership with HRM for strategic decision-making, particularly,

for improving OHS during layoffs.

Industrial action may lead to bed result for either side of employment (employees and

employers) if it did not lead to a collective agreement. The union, acted as bargaining

representatives of employees applied for protected industrial action to support their

claims as the current EBA was nearly expired. The preferred resolution for the dispute

between the top management and employees is supposed to be negotiation. Negotiation

may result a win-win situation. Negotiation is a process in which two parties, the CEO

and employees, try to solve productivity problem, resolve their difference in

redundancy issue, and attain an agreement (Dwyer, 2009). But the union had argued

that the redundancies were directly related to the impending negotiations of a new

agreement. The aggressive attitude of the union would make a win-lose situation rather

than a win-win situation and lead industrial action to result poor motivation and poor

communication. It may forward industrial action to strikes and lock-outs – both would

hurt the productivity of the company, affect the quality of customer service and

increased the amount of customer complaint. More employees might be laid off if the

company lost market share due to industry action that may last longer time to reach an

agreement.

Page 9: Expensive business

9

Fair, equitable and lawful working condition should be the first of all for job protection.

The recommendation for the union is that, it may ask the company to provide work-

based learning opportunities for current employees before making redundancy

announcement. It may increase their employability to retain current jobs or find new

jobs. According to Orlitzky and Frenkel (2005) and Holman et al. (2011), the employer

should measure employee performance not only by efficiency but also by innovation,

including idea generation, idea promotion and idea implementation. The royalty,

knowledge and experience of those employees who have been working for many years

are valuable assets for the company. The company should start from job design to

develop competitive strength via “job design–learning mechanism” (Holman et al., 2011,

p. 190), instead of going for redundancy as its first step for the change.

As a HR manager, Maree takes the responsibility to resolve workplace disputes and

deliver workplace justice (Van Gramberg, 2006). She should not quit when all the

employees needed her to stand out on their interest. The position of HRM professional

grants her “employee champion” role(Van Gramberg, 2006). Workplace dispute

resolution procedure usually calls for an independent third person to help resolving the

conflict in order to obtain ethical decision-making for problem solving. From this point

of view, Maree should not leave her current job.

The CEO of Utilities Co. was liable for the bad result. Open communication is necessary

for layoff plan as employees rely on the information disclosed to measure the fairness of

the company’s decisions. Once the comparison among the employees passed their test

for fairness, it is more likely for them to accept the company’s decision (Van Gramberg,

2006). The company missed the good timing to get smoother way for announcement. To

communicate the layoff decision to the employees or managers, the top management

must understand the employee’s perspective. Shock and depression are unavoidable

reaction from the employees. It is wise to talk to the HRM professionals about any

assistance that HR may offer before starting any actions. The HRM professionals must

be knowledgeable about the layoff process and available resources. Any communication

plan should not downplay or discredit the employee's concern. The employees should

be allowed to express their feelings. Secondly, any appointment should be arranged in a

private place. During the meeting, the employee's contribution to the company should

Page 10: Expensive business

10

always be recognized before explain the reasons for the layoff clearly. The officers

should always be prepared to listen without being defensive. These communication

steps may be helpful to reduce the harm of shock and depression for employees and

make the redundancy process less costly if it is not avoidable by any way.

Utilities Co. did not have HR professionals involved in strategic decision-making. HR

was not informed with the decision of lay off until one week before the decision was

disclosed to the whole company. Absence of the important linkages between the

company’s strategy and its HRM is dominant to the failure of the CEO’s redundancies

strategy and led to a series of disputes. The ethical issues were resulted from possible

sex and age discrimination. The aggressive attitude of the union would make the

situation worse than negotiation to gain an agreement. Maree should not quit her

position when all the employees needed her to stand out on their interest. She should

take the role as an independent third person to help resolving the conflict in order to

obtain ethical decision-making for problem solving. Open communication is necessary

for layoff plan as employees rely on the information disclosed to measure the fairness of

the company’s decisions.

Page 11: Expensive business

11

Reference Bal, Y 2011, ‘The New Human Resources Management in the 21st Century: A Strategic

View’, International Journal of Finance and Management, Vol. 1, Issue 1, pp. 5967. Beardwell, I, Holden, L & Claydon, T 2004, Human Resource Management: A

Contemporary Approach, FT Prentice-Hall, Harlow. Boselie, P, Dietz, G & Boon, C 2005, ‘Commonalities and contradictions in HRM and

performance’. Human Resource Management Journal, Vol. 15, Issue 1, pp. 67–94. Buller, PF & McEvoy, GM 2012, ‘Strategy, human resource management and

performance: Sharpening line of sight’. Human Resource Management Review, Vol. 22, Issue 2012, pp. 43–56

Chandler, GN & McEvoy, GM 2000, ‘Human resource management, TQM, and firm

performance in small and medium-size enterprises’, Entrepreneurship Theory and Practice, Vol. 25, Issue 1, pp. 43–57.

Dainty, P 2011. ‘The strategic HR role: Do Australian HR professionals have the required

skills? ‘, Asia Pacific Journal of Human Resources, No.49, pp. 55-70. Dwyer, J 2009, The business communication handbook, Frenchs Forest, Australia:

Pearson Australia. Fair Work Australia, Unlawful workplace discrimination fact sheet, viewed 26 May 2013

http://www.fairwork.gov.au/resources/fact-sheets/workplace-rights/pages/unlawful-workplace-discrimination-fact-sheet.aspx

Kochan, TA 2004, ‘Restoring Trust in the Human Resource Management Profession’,

Asia Pacific Journal of Human Resources, No.42, pp. 132-146. Holman, D, Totterdell, P, Axtell, C, Stride, C, Port, R., Svensson, R & Zibarras, L 2011, ‘Job

Design and the Employee Innovation Process: The Mediating Role of Learning Strategies’, Journal of Business and Psychology, 27, 177-191.

Hurth, E 2006, Advantages and disadvantages of different forms of industrial action,

GRIN Publishing GmbH, Munich, viewed 26 May 2013 http://www.grin.com/en/e-book/61034/advantages-and-disadvantages-of-different-forms-of-industrial-action

Landsbergis, P 2003, 'Work organization and CVD', New Solutions, Vol. 13, pp.149-152 Noblet, A 2003, ‘Building health promoting work settings: identifying the relationship

between work characteristics and occupational stress in Australia’, Health Promotion International, No. 18, pp. 351-359.

Page 12: Expensive business

12

Poole, M & Mansfield, R 1994, “Managers’ attitudes to human resource management:

rhetoric and reality”, in Blyton, P and Turnbull, P (Eds), Reassessing Human Resource Management, Sage Publications, London, pp. 200-14.

Safe Work Australia. Work Health and Safety Consultation, Co-Operation and Co-

Ordination, Code of Practice, viewed 26 May 2013, http://www.safeworkaustralia.gov.au/sites/swa/about/publications/pages/consultation-cooperation-coordination-cop

Steven, ID & Shanahan, EM 2002 , ‘Work-related stress: care and compensation’, The

Medical Journal of Australia, Vol. 176, pp. 363-364. Shaw, WH, Barry, V & Sansbury, G 2009, Moral issues in business. Cengage Learning

Australia Pty Australia ,Victoria. Van Gramberg, B 2006, 'Managing neutrality and impartiality in workplace conflict

resolution: The dilemma of the HR manager', Asia Pacific Journal of Human Resources, No. 44, pp. 197-210.