Expensive business
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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
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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
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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
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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
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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.
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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
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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
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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.
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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
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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.
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