You are on page 1of 15

(HR) is more then maintaining personal functions.

Corporate and economic developments since the 1950s have dictated that businesses, to remain competitive, need to view HRM as an evolutionary process which combines the HR functions with the HR policies and strategies, with the business strategies and management teams, with all stakeholders (Unions and Governments) and with the organisation and understanding of the actual employees themselves. Strategic HRM is about aligning the abilities and desires of the employee with the needs of the business so that the corporate objectives can be met. HRM can no longer afford to be viewed as simply an administrative task. Corporations need to have proactive policies to attract and retain the right type of people to their business and in this ever changing and uncertain economic climate the management of employees takes on an even greater role.

Using the VIRO (value, rareness, imitability, and organisation) human resources can be proven to be strategic and therefore, provide firms with a competitive advantage through its people. The article by Barney and Wright (On becoming a strategic partner: The role of human resource management in gaining competitive advantage V page 32) states that companies can achieve this competitive advantage on three levels, those being through the use of physical capital resources, the organisational structure and the human capital resources. The article by Schuler and Jackson titled Linking Competitive Strategies with Human Resource Management Practices states on page 208 that competitive advantage can be achieved through innovation, quality enhancement and cost reduction strategies all of which require certain specific employee behaviors to be achieved. The consistent theme with the articles is that the actions and conduct of the employees directly affects whether these forms of competitive advantage can be achieved. Strategic HRM focuses on influencing the behaviors of the employee so that their activities are aligned to achieving the corporate goals. The key is to identify the policies needed to influence and guide employees so that this, working towards a similar goal, can be achieved.

Value, first area covered by the VIRO model, focuses on minimising costs and differentiating products offered. If your product is a service then you can differentiate it by having well trained, competent and qualified staff that the clientele will like dealing with. To achieve this you may need to implement HR policies such as certified training programs. If your corporate strategy is to create value then the role of HR is to implement strategies that will achieve adding value. These may be to cut costs and improve production efficiency. HR may also add value to a firm by increasing revenues through increased employee satisfaction and responsibility V linking an employees remuneration to their individual and over all company performance is one method to building an incentive for employees to generate revenues. The Barney and Wright article provided an example of where a strategic HR choice (paying aircraft on-time bonuses to employees) leads to both increased revenue (better service lead to more passengers deciding to use that airline) and decreased costs (passenger accommodation expenses due to late aircraft was reduced). If HR policies can add value to a corporation it clearly has a need to be included in the corporate strategies.

Rareness, the fact that a resource is limited, can also provide firms with a competitive advantage. The role of HR is to ensure that the characteristics of their human capital can not be found elsewhere (such as with a competitor). In other words HR needs to exploit the rare characteristics of its workforce. For example, William M Mercer Pty Limited emphasises the fact that it is one of the greatest employers of qualifies Actuaries in the world meaning that if the rare mathematical skills of an Actuary are required then the client would contact Mercer and not a competitor who would not have the required skills. HR policies to achieve rareness include graduate recruitment programs and ensuring that the skill of these sort of people (those with the rare skills) are being used appropriately and not in a role that could be completed by some one less qualified and less rare.

Strategic HR should also focus on ensuring that the characteristics of a firm are not easily imitated or copied by others (imitability in the VIRO model). Creating a niche market for your firm can be achieved by ensuring your product or service can not be provided by another firm. The HR policies must be adapted so that the company is seen as unique, these policies may be to provide greater decision making power and work place flexibility to employees or to prosper initiative and communication between all stakeholders such as the executive, the line-managers and the clients.

Finally in the VIRO framework, how the Organisation is structured can impact upon achieving competitive advantage. The HRM team of a firm must work with senior and middle management to that they have the right number of skilled people in the right place at the correct time to meet the needs of the consumers. To achieve this, HR must recruit the correct type of people (by providing career paths, competitive remuneration and training) so that the specific jobs needed to achieve the corporate objectives, are being done. HR also needs to establish what sort of internal management structure would best suit the corporation, whether it be a flat system or a hierarchical arrangement. The chain of command and organisational profile are critical to how employees are managed and to how employees believe they fit into the company. Employee reporting lines, maintenance and performance and appraisal should also be identified as requirements by the HR departments.

Organisation also focuses on how the internal systems are structured V for example does the company have computer systems in place. The role for HR is to ensure, that if the company does have electronic systems, the employees have the necessary competencies to use the systems effectively.

After reading about the VIRO framework, strategic human resource management could be understood to mean; achieving a sustainable competitive advantage through the use of a firms people by setting appropriate human resource strategy, inline with corporate strategy, and then setting specific functional plans to implement the strategy. VIRO can be considered a reasonable framework for the assessment of strategic HRM because it incorporates the role HR has within the corporate level, the specific business unit and the functions required to implement the strategies required by management. However, for HRM to be strategic there needs to be long term planning where the business context is

defined, the future needs to achieve the requirements are outlined and plans to achieve future objectives are set and continually monitored.

VIRO has a strong corporate philosophy and strategic human resources must also focus on the needs of the individual employee, whether those needs be the understanding of personal culture, personal development or other. However, the Barney and Wright article does state that the growing importance and influence of HR policies and achievements on organisational performance proves that HRM can be strategic. By improving the performance and efficiency of your staff you can improve the operation and financial performance of a business. This can also have the adverse affect V in that, poor HR policies can lead to poor corporate results.

There are also a number of factors that impact upon the strategic HR policies set by companies. These include the following:

Economic climate: during periods of recession companies may adopt policies of internal recruitment and redundancy packages. Economic conditions can also dictate and influence revenues and expenses meaning companies may have to limit their costs and budgets.

Government legislation: Laws covering topics such as equal employment opportunity, sexual harassment, awards and pay scales all have an impact upon the type of strategic human resource policies that can be set. For example a firm can not adopt a policy of only recruiting male employees because they believe they are harder workers, as it would be a breach of the law.

Trade Unions: The union influence on policy decision making is heavily reliant upon which industry a corporation falls. However, the level of union influence should not be under estimated, as union activity could prove devastating to a businesses activities.

Competitors and Clients: The HR policies should be set to ensure that the needs of the clients are being met. Some clients are more demanding then others and policies should reflect the companies desire to satisfy all clients to the best of their ability. HR policies should also be inline if not above those of the companies competitors so that the firm remains an employer of choice and maintains its competitive advantage.

However, the biggest challenges facing contemporary firms when trying to adopt strategic HRM policies come from internal sources. Firms must be willing to change and be progressive in their HR policies. Functions must be adopted by all the employees and then measures taken by management. HR policies must be continually developed to meet the needs of the staff and satisfy the external environment on a frequent basis. The key for contemporary firms is to first set the HR strategy so that it is in line with the business strategy.

The goals for contemporary firms to aim for so that strategic HRM is achieved include the following:

h Recruit and retain a quality work force (HR functions)

h Develop leaders (management and senior staff to set examples)

h Manage performance systematically

h Establish a culture (both corporate and personal)

The HR functions, of all firms (including contemporary ones), are increasingly expected to deliver results as a strategic business partner, supporting the organisation's achievement of its business goals through effective people processes. Whether they are financial achievement or an increased market share and recognition. However, to do so the very HR function itself needs to transform and adopt business strategy so that the corporation as a whole is acting strategically in its environment. The simple fact that the performance of a firms employees affects the performance of the firm highlights the fact that human resource management needs to be strategic.

Question 2: Case study analysis of FedEx Inc

What are the core strategic issues faced by the organisation in its environment (both internal and external)?

1) The first core strategic issue to be examined is the question of whether to further expand FedEx overseas via the purchase of the Asian based international freight company, Flying Tiger. Previous international development experiences of FedEx had been poor, with many international operations regarded as cash and capital drains on the United States (US) based FedEx Corporation. The acquisition of Flying Tiger would turn FedEx into the worlds biggest international cargo company (Unit 13 Managing People in the Global Company, page 489) V a long way from the company that stared with the delivery of just 6 parcels in 1973 and an extremely attractive incentive for management to purchase the fledgling company. Other issues management needed to consider on a corporate, business and functional level before the purchase of Flying Tiger included the ability to service the increased market as per the 100% quality policy, the employment of the additional 6,500 employees, most of whom were unionised, and the administration of the supplementary employees by a centralised system. Previous international expansion problems were caused by a failure of management to adapt quickly to the specific cultural differences and labor practice disparities meaning FedEx America had to subsidise financial losses at the expense of US service standards (service standards being the FedEx measurement of performance and customer satisfaction).

2) The second strategic issue for FedEx was the emergence and threat of direct competitors to the market that the company had targeted since Fred Smith first identified there was a niche in overnight package delivery. A number of competitors, including the United Parcel Service (UPS) and the United States Postal Service (USPS), began to challenge the dominance of FedEx and have continued to do so in recent years. The key for FedEx to remain competitive and maintain their market share was to establish ways to differentiate their service from the other courier and delivery companies. FedEx gained a competitive advantage by differentiated their product through computerised and electronic tracking systems and time guarantees leading to customer confidence. A broad delivery network also provided customers with the knowledge that their wide range of needs could be met no matter where they were or when it was.

3) A major internal strategic issue was to maintain an employee focus through the use of HR policy when setting corporate objectives and policy, all while trying to expand on a mass international basis. Smith, known as a hard decision-maker, chose to pursue both aggressive and progressive human resource (HR) and corporate policies during this period of development and fight for market share. However, he emphasised that the company must link the goals of the individual with the goals of the company (the essence of strategic HRM). With the acquisition of Flying Tiger the question faced by FedEx was how do you integrate two completely different work forces under one corporate policy? And most importantly, do it successfully. Management identified that the unionised Asian employment market may impact upon its adaptable yet controlled work practices. Continued strong communication between management and employees was seen as the crucial element in keeping staff informed about the external FedEx developments, two way communication also provided a forum for employees and management to express their views on the policies and direction of the company.

4) The final strategic issue faced by FedEx was how to establish a single corporate culture across boarders where the actual cultures of the countries are so very different. FedEx had not done this well. Establishing a single worldwide brand, corporate profile and centralised procedures while incorporating the different beliefs, economic and government systems, and work practices would ensure FedEx success in the global market.

What external strategies should the organisation pursue in its environment?

1) The basic nature of the industry that FedEx is in dictates that the company should continue to pursue a strategy of international expansion so that the delivery needs of both its corporate and individual clients are met. The greater the international coverage that FedEx can obtain, the greater client base that the company can attract and retain. FedEx clients depend upon reliability and flexibility. To service the client to the best of the companys ability, FedEx needs to offer the facility to deliver parcels to all sections of the globe quickly and cost effectively. To do this, the company has to have a presence in all 7 continents and the majority of large countries north, south, east and west. Therefore, the strategy of international expansion should be continued. However, history has proven that international expansion

has not been a smooth process for FedEx and to inflate the companies global operations it would be best for the company to enlist the expertise of local experts who know the processes of the adopted nation.

FedEx senior management (Directors) should set specific plans and timetables when the decision is made to expand overseas. FedEx should evaluate which nations would be both practical and viable financial options in which to launch a presence and adapt corporate strategy so that the company is seen and focuses as a global business in the global market place. The key is to create a boarderless environment where the constraints of time need not be considered an issue. This can be done by expansion while not compromising current service standards. FedEx should also work with governments to increase their air space, plane space and landing rights in all nations so that operations can take place 24 hours per day V every day. The purchase of aircraft, ships, trucks and other aircraft will also guarantee that the company can operate across seas and boarders.

2) To minimise the growing threat of increased competition, FedEx needs to increase its brand and corporate image in the external environment. The corporation needs to ensure that the client considers FedEx before any of the competition. Increased advertising and an aggressive marketing strategy is one method to lift the impression that the firm makes, as does continued high service through the continual improvement of processes. FedEx also needs understand what its competitors are doing and which direction that they are heading in so that they can counter their movements and gain the competitive advantage against them. FedEx should also be attempting to sign corporate clients up on long-term, multi-service contracts to provide their goods and services so that the competition does not become a player. Contract negotiation between parties will also allow FedEx to set fixed prices and therefore, make accurate estimates of staffing requirements and future revenues and expenses. Contract negotiations should be targeted at multinational firms and e-business based companies that need stocks delivered from the warehouses to the consumer. Technology should also be used to differentiate FedEx from its competitors V continued use of Internet should be encouraged and the physical network of FedEx should be closely aligned to the electronic network (i.e. they should work together to achieve the same objectives). Forming alliances with e-business and logistic specialists will improve service and have positive effects on efficiency and long-term profits. Technology should also be used for communication between employees and to the consumers, it can also be used to administer justin-time management methods as all deliveries have set deadlines.

3) For FedEx to continue with its focus on aligning the employees objectives with the business strategy the company can adopt a number of external strategies. The line of attack that FedEx could take may perhaps include the following; continually monitor the HR policies of its competitors and the industries which the company operates within including the airline industry, courier and technology industry to ensure that the FedEx remains an employer of choice. FedEx should also work with the Governments, employer organisations and trade unions of its host nations where it operates. Lobbying the government for certain policy changes (such as enterprise agreements) and negotiating collective

agreements with any applicable unions will ensure that the best needs of the employee and employer are met. Working with education centres (such as universities, adult education programs and open learning colleges) to provide employees with training and qualifications will lead to greater commitment from staff.

4) The cultures of the US, Europe and Asia are all different, as is the culture of the individual employees and in fact, all nations. To gain internal consistencies FedEx will need to work with the local people and governments, those who have knowledge of how business is done in the different countries, to understand where they have gone wrong previously and where they should head. FedEx has documented that their familiarity with trucking in Asia is poor so they should contract travel / trucking consultants to help set policy in regards to on the ground delivery. The lack of understanding the complexity of the cultural differences between nations and their associated attitudes was regarded as the reason for the companys first ever share price decline. FedEx needs to really analyse new markets before they are attacked so that these losses are minimised. Although FedEx uses centralised processes the delivery and travel policies need to be individualised for each nation because of their differences.

What internal changes are required to implement these external strategies?

1) The strategic international expansion plan and process should first be set to highlight the fact that FedEx will now be a truly global competitor and it will also give specific directions as to how the growth will take place. The executive committee should draft this policy with all employees to be made aware of the outcomes. This will give all involved in the company a direction to head and objectives to achieve. This policy should be set inline with the overall corporate objective of people V service V profit. Internal global strategies such as overseas placement of employees should be adopted. An international development management committee should be set up and meet regularly to establish any potential overseas opportunities and flesh out any potential problems that could arise in doing business in new markets. This international development management committee should contain people from a number of countries, backgrounds and departments and should report directly to the FedEx executive.

2) To establish competitive advantage, internal strategies would be to develop new services such as grocery delivery or contracted company mailroom functions so that the responsibility is on FedEx to minimise costs and not the clients. Staff would need to be made aware of any new technologies through training and development. Training programs will lead to improved skills of the employee and provide FedEx with a more qualified workforce. Training programs should not only be restricted to those using the computer systems but for all staff and should cover a wide range of topics such as, sales techniques, marketing, customer service (especially for those with the continual contact with clients) and accounting procedures and handling cultural differences. Official recognition if of training programs should be adopted by FedEx

The information technology, marketing and delivery departments should be required to meet on a regular basis to brainstorm and discuss their ideas, issues and problems that have arisen. This would see them working together as one with the same goals and not in different directions. Meeting should be formalised and documented with performance standards and measures set for each department. Once performance indicators are set and signed off, actual performance can be compared and recorded. This will assist in management decision making and goal setting for each department separately and for the company as a whole. These steps will ensure FedExs internal procedures remain competitive and efficient meaning they can compete in a number of levels such as personal or corporate, domestic or internationally.

3) The internal HR policies of FedEx will need to change so that the external strategies can be met. FedEx can not remain economically competitive if the no lay-off policy is maintained. Simply because in an ever uncertain economic environment the policy could prove so costly that it could end up sending the business bankrupt. Instead FedEx should negotiate with employees a change of policy where if lay-offs are required then there is a certain order that they take place (i.e. perhaps first on V fist off basis) and those laid off are financially compensated depending on seniority and service. This new lay-off policy will align part the HR policy with the corporate objective of profits. Employees should also be aware of corporate policy and objectives so in addition to the corporate television network information should be distributed to employees via an intranet web-site and quarterly corporate news letters. The HR changes will be examined further in the next section. Staff should be informed of WHY the policy changes are required which would lead to a change in staff attitude and will encourage the concept of change.

Further internal strategies that should be adopted include greater levels of performance linked remuneration where stock options are available, service recognition, well defined career paths where potential leaders are identified and employee assistance programs such as child care and personal counseling, not only employment grievance processes.

4) The internal change required to ensure that a international corporate culture is established includes the training of employees and communicating to employees what the business objectives are. Employees should also be provided with job-description / outline which links the requirements of the job to achieving the corporate goals. This will have every one heading in the same direction. Other methods to achieve a corporate culture include introduction of a dress code (for all employees not only courier staff however, not specifically uniforms), introducing standard procedures to computer systems and increased branding.

What are the Human Resource implications of the external and internal changes?

The key for FedEx is to link the Human Resource (HR) processes and strategies in all nations to the strategic goals of the actual business, that being People V service - profits. Recently, the

goal of the business was to expand to Asia, via the purchase of Flying Tiger, whilst adopting policy which tried to eliminate the need for the American base to subsidies the Asian operations. The major HR objective during this period would have been to lift the staff moral and commitment of the Asia based employees, without neglecting the importance or needs of the other international employees, during the period of acquisition. The aim being to ensure that the Asian based business would actually remain operating and eventually turn in a profit, which did begin to happen. HR would have also had to deal with the fear of unionisation of its workforce and revolt amongst employees by ensuring that they were all portrayed as valuable to the enterprise.

There are a huge number of implications for HR as a result of the internal and external changes. Firstly the HR team of FedEx would need to be developed and formalised new international human resource policies that take cultural differences into account. This would need to include an Asian based head of HR and his / her staff. The Asian based HR team would need to be provided with a budget and the power to implement its strategic procedures. An HR plan would need to be developed in line with the strategic plan of the business.

One of the first tasks would be to bring staff up to scratch on the new international and competition policies, training programs will need to be developed. As mentioned, all staff should also be provided with job descriptions and informed of performance measures. HR would need to define the job descriptions and performance indicators for each role. Performance plans for Asian based employees would also need to be set for each individual so that the performance objectives of the business will be met. Each staff member and his or her manager should meet to formalise the performance plan, at which time an informal discussion should also be encouraged for the staff member to express his or her concerns about the changes occurring throughout the FedEx acquisition. These discussions should then provide feed back to management.

Other HR policies that will need to be implemented due to the internal and external strategic changes at FedEx include the development and documentation of an Equal Employment Opportunity policy, Occupational Health and Safety policy and Sexual Harassment policy. To implement some of the internal changes, such as service recognition, a HR database incorporating all employees will need to be established. This will include general staff details and extra information concerning annual and sick leave, training requests, time sheets and salary and superannuation information.

HR should also continue with the internal recruitment policy however, it should be documented that the best candidate should be offered the job first whether they be from an internal or external source. A staff introduction scheme should be introduced internationally. This will create international career paths for current employees and encourage staff to stay at FedEx where they know that they will have a secure employment.

HR should also keep staff informed of the changes and about general company information. At FedEx, as it is so big and spread, there is the issue that not all are informed or told why changes are necessary or even, what the changes are.

The key for FedEx HR function will be to educate staff about the strategic changes so that they understand why they are required and how to implement them. This will see employee attitudes welcome the change and international developments and see them embrace the concepts so that the over all goals of FedEx are met, including to increase profit, better client service and become maintain market leadership.

Appendix:

Levels of FedEx strategy:

Corporate: The FedEx Corporation V provides over-riding strategy to all other active companies. The FedEx web-site states Our corporate strategy will continue to shape the unique FedEx model: operate independently yet compete collectively.

Business: FedEx has 5 Major operating companies, all of which operate and compete individually and report separately with the FedEx Corporation providing the strategic direction. The 5 companies, which implement a business level strategy, are:

1. FedEx Express

2. FedEx Ground

3. FedEx Freight

4. FedEx Custom Critical

5. FedEx Trade Networks

Functional: HR functions. Department level and line, managers encouraged to take responsibility.

My SWOT analysis of FedEx:

Strengths:

h Moderate, followed by rapid expansion

h Hard decision maker in Smith

h Fighting quality and culture (early set backs and legal fights)

h High growth in late 1970s and early 1980s

h Especially aggressive

h Progressive HR Policies

h Technology adoption (planes & computers)

h Computer tracking systems

h Large logistics: nation wide base

h Extremely strong brand name

h Strong reputation within the overall society and recognition

h Customer satisfaction and security

h 100% quality commitment

h Controlled image and performance

h Efficient and reliable delivery systems (i.e. in transit sorting)

h Majority of the national market share

h Continual evaluation of business processes

h Employee autonomy with decision making processes

h Highly structured and centralised

h Employee commitment

h Employer of choice V competitive remuneration, career paths and training

h Strong emphasis on employees

h All corporate policies had a people focus

h Training focus for employees

h No lay off policy (strength for employees?)

h Strong earnings

Weaknesses:

h Poor record of overseas expansion V no overseas acquisition had proved profitable

h Having to subsidise foreign operations proved a cash drain

h Lack of understanding of overseas cultures and business practices

h Lack of exposure to Asian market

h Rank and file system V differentiate all employees

h Especially aggressive

h Zapmail V lead to large capital loss

h International Hubs and couriers lead to a decline in service standards

h International date / holiday differences

h Different attitudes and cultures were not adapted for by executive when setting policy

h Failure to adjust for transportation differences V such as trucking and courier differences

h Highly structured and centralised

h Army management culture?

h No lay off policy (weakness for company?)

Opportunities:

h The original opportunity seen by Smith V specalised, efficient, reliable and affordable aircraft package delivery

h Tiger International take over bid

h Become worlds largest overnight international courier company

h Internet usage for customers (has since been adopted) V other further technology

h Ownership of aircraft (larger, faster with improved turn around)

h New markets (aircraft routes and landing rights) V overseas markets

h New products

h Lobby the governments (increased airspace, taxes, policies and new laws)

h Advertising campaigns

h Structural change (Hub and spoke system?)

h Ensure safety of packages for all stakeholders (anthrax and terrorism) V differentiation from competitors

h Market leader V operations, HR policy choices

h Create global market place for itself and its customers

h Develop business alliances V tech companies

h Bulk and large parcel delivery - shipping Threats:

h Emergence of direct competitors (UPS, USPS, Emery and

h Decreased market share

h Tighter controls on mailed packages (what can / can not be sent now)

h Decreased employee safety

h Uncontrollable economic fluctuations

h Unionised workforce V limiting flexibility of employees and management controls

h Take over by another organisation

h Declining service standards due to overseas operations

h Technology rejection for personalised service

h Failure of overseas operations (failure of overseas markets adopting the FedEx philosophy)

h Down turns of economic activity V no lay off policy could prove costly

h Undercutting by opposition

h Increased use of technology eliminating the use for document delivery

Bibliography:

Question 1:

The following journal articles from the Strategic HRM book of readings, Spring 2001, sourced and quoted.

1. Linking Competitive Strategies with Human Resource Management Practices.

By Randal S Schler and Susan e. Jackson, New York University

2. Gaining Competitive advantage through strategic management development.

By Sam McClelland

3. Competitive Human Resource Advantage through the Strategic Management of Performance

By Richard W. Beatty, Rutgers University

Question 2: FedEx case study analysis

http://www.fedex.com