Corporate Strategy and

Role of HRM
Critical Cases in Oil and Chemicals

Presented By: Aditya Kumar

Presentation Plan
• What is HRM and its Role in Corporate Strategies?

• Research Studies – 2 cases.

• Discussion

• Conclusion
What is HRM?

• HRM is concerned with the "people" & keeping the fact in

mind that HRM helps in acquiring, developing, stimulating &
retaining the outstanding employees as it gives both
effectiveness & efficiency to the working of the organization.

• HRM is considered as 2nd or 3rd order strategy, though it has

been argued consistently that it is a prime issue in any strategy
formulation. It has been only considered important for cost
cutting initiatives at the level of unit level labour costs.
Continued…
• Strategy has been defined as “essentially market related”. This demands
control on directions, especially costs.

• Most of the literatures links HR policies to strategy as more of

downstream. It has been seen as a tool to downsizing, unbundling,
increased sub contracting and vertical de integration rather than extending
the skills and versatility of the work force i.e. reactive and not proactive.

• Further inconsistencies in literature over what constitute human resource

roles, outcomes and processes. “Personnel functions” should not be
confused with “personnel department”.

• Involvement on a particular issue is related to company structure and

strategy. This was called “Macho Management” i.e. labor is treated as a
commodity and a way to tackle unions.
The Research Study
• Study used oil and chemical industry which has well documented
history of proactive strategic HR interventions. Emphasis is
placed on the role of HR issues in manufacturing plants.

• A new semi structured interview technique was used. Data of two

entirely different companies with plants in different locations
were used for generalization.

• Triangulation of data after corroboration was designed and used.

Multiple interviews organized to rectify inconsistencies.
 CASE 1: “WARR-CO”
• Warr-Co, a supplier of bulk chemicals, had manufacturing as the
core competence. Due to severe competition wanted to adopt
“differentiation” strategy.
• Differentiation meant fast response, smaller batch processes, fast
switching, ability to handle more complex tasks.
• Implementation required huge skilled man force, capital
investment on massive scale, transfer of unskilled / semi-skilled
labor to contractors.
• Core activities were required to be reduced to be able to shift
quickly between products, reduce downtime – to maintain plant
availability for emergencies.
• Changes to contracts to reduce costs, and these became
performance based, targets on quality. Improve contractors skill
base and reduce number of contractors.
Continued…
• Capitalize on trade ownership and thus give up trade ownership. Teams
will be composed of different trades and increase problem solving and
preventive methodologies within maintenance.

• Initiated a kind of “placement” scheme. Improved technical skills,

attitudes and concepts of contractors.

• Thus all the major decisions taken gives a strong evidence that a strategy
of cutting labor costs was not part of corporate strategy issue. Strategic
evaluation depended on achieving more flexibility between employees
and thus better productivity.

• Thus HR turns out to be not a second or third factor, but a necessary

underlying requirement which then enables evaluation of corporate
strategy.
 Case 2: “Hutchings” 1260
• An oil producing company which also needed change due to competition
and deteriorating oil prices and the need for cost effectiveness.
• Required to assess evaluate its performance, measure value addition for
each plant, reinvest or cease production.
• Corporate strategy determined to increase managerial responsibility for
profit and product – asset based structure proposed to evaluate market
potential of each product separately by use of BCG matrix.
• Hutchings had to do implement strategy with existing man power and
not contractors, so required major rationalization of its maintenance
support.
• But “usual pattern of events” continued as maintenance priorities were
changed on daily basis and managers were not responsible to deal with
inherent HR problems.
• A broader strategy encompassing HR to involve all employees and
flexibility between units, more labor availability on demand.
Continued….
• Moved from bargaining on productivity each year to remove stigma
of being called “the bears” and involve in diagnostic, preventive and
problem solving techniques.
• Later a new agreement was established which allowed management
to chose between in house or contract workers. Use of in house
workers saved 66% of the maintenance budget.
• Though it did not impacted much on the overall costs but de
recognized the unions as collective workforce.
• Whatever the judgment, it is clear that the new asset based policy
could not have been implemented without flexibility of labor to
counteract scale of economies.
• Later, given the flexibility managers outsourced non-critical works.
This gave managers more time to concentrate on critical tasks,
streamline work, become more skilled with the help of maintenance
workshops.
Continued…
• These framework of employee relations changes enabled the
company to enact further new management changes.

• Hutchings extended the maintenance overhauls from 36 to 48

months and complete in record time and thus decrease the
downtime by huge margin. Improved cash flows, thus
increasing share price, and this new confidence led to new
investments.
 Discussion
• From the cases we can understand what a huge impact HR
creates with improved plant performance and ass to shareholder
value. So it can not be a “third order affair”.
• Most of the corporate strategies have been externally focused
therefore less able to evaluate the importance of internal factors.
• Only strategic implementation without HR involvement, even if
its step wise and with widely accepted models, it fails as same
strategic model may not work everywhere.
• This hypothesis is generic and not specific to the oil and
chemical industries. This approach has been adopted by many
companies. Outsourcing and subcontracting has been part of
strategic rather than cost effective methods.
 Conclusions
• HR issues of flexibility and competence are critical to the
evaluation of first order strategies.
• HR strategies informs and even precedes analysis of corporate
goals.
• Though HR strategies are still emergent and at times heuristic
trial and error and that HR factors can be changed whenever
required.
• The literature essential states that HR is at least a necessary pre
condition for action, and part of groundwork and this is where
employee relations remains vitally important, “ A First Order
Objective”.
THANK YOU