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MALAYSIA'S HERBALINE FACIAL SPA: HBP No. NTU070
A HUMAN RESOURCE STRATEGY FOR Publication No: ABCC-2015-001(TN)
Print copy version: 23 Jul 2015
GROWING A STARTUP
TEACHING NOTE
Wee Beng Geok and Lim Beng Chong
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Dr Wee Beng Geok and Associate Professor Lim Beng Chong prepared this teaching note as an aid to instructors in the
classroom use of the case Malaysia's HerbaLine Facial Spa: A Human Resource Strategy For Growing A Startup, No.
ABCC-2015-001. This teaching note should not be used in any way that would prejudice the future use of the case.
COPYRIGHT © 2015 Nanyang Technological University, Singapore. All rights reserved. No part of this publication may be
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copied, stored, transmitted, altered, reproduced or distributed in any form or medium whatsoever without written consent
of the Nanyang Technological University.
For copies, please write to The Asian Business Case Centre, Nanyang Business School, Nanyang Technological University,
Nanyang Avenue, Singapore 639798
Phone: +65-6790-4864/5706, Fax: +65-6791-6207, E-mail: asiacasecentre@ntu.edu.sg
This Teaching Note is authorized for use only by Dr.S.Anjali Daisy, Bharathidasan University until Aug 2024. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860.
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SYNOPSIS
HerbaLine, a facial spa beauty chain in Malaysia, grew from one outlet in 2000 to 55 outlets (23 owner-operated
and 32 franchised) in 2014. The two co-founders, Mr. Low Chee-Kwong (CK) and Ms. Liu Kim-Hwa (Kim),
created a niche for themselves in a highly crowded and competitive beauty industry with a business model
based on a ‘Ꮎ˟ ᭅԌҦ’ (Beauty, Stress-free) philosophy. This philosophy underlined three major elements
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of the beauty spa operations: services and products, environment and ambience, and pricing.
To the founders, a major contributing factor in the rapid growth of the company-owned outlets was the service
staff that they recruited and trained to deliver the service excellence that underlined one of HerbaLine’s core
strengths. As the number of stores grew, the founders felt that more effective management over the delivery
of HerbaLine service and products was needed and that this required staff to continue to buy into Herbaline’s
mantra of providing excellent customer service.
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In late 2011, CK was mulling over the feasibility of an ‘Internal Franchisee’ scheme whereby promising and
capable employees could be offered prot sharing in the company-owned retail outlets. The selected employees
would be those who shared the company service philosophy and corporate values, well trained and experienced
in delivering the service standards essential to uphold the HerbaLine brand reputation. Furthermore, for
employees, the scheme should not only reect the company’s recognition and reward for the hard work and
service excellence, it should also provide an attractive long-term career path for HerbaLine beauty consultants.
CK and Kim felt that they might have just found an important key to unlock HerbaLine’s growth potential. The
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challenge was in the implementation. CK and Kim had over the years built an organisational culture anchored on
HR policies and practices that had bolstered support among staff for HerbaLine’s service excellence practices.
Going forward, they had to think through the implications of this new scheme on the organisational culture as
well as on the HerbaLine brand. They also needed to consider the implications for HerbaLine’s human resource
management policies as well as the additional leadership roles that they had to assume as they nurtured a new
group of internal Herbaline retail outlet managers-cum-shareholders.
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TEACHING OBJECTIVES
To understand the crucial linkages between human resource management and service strategy;
To assess the role of leadership and the emerging organisational culture in the growth of HerbaLine Facial
Beauty Spa;
Evaluation of ‘internal franchisee’ scheme as a motivational tool for staff; impact on growth of outlets and
future sustainability. Identication of potential issues and concerns.
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APPROPRIATE USE OF CASE
1. The case provided undergraduate students an opportunity to examine human resource management practices
up close in a real life context as practised by two entrepreneurs. It also provided insights on how small and
medium-sized rms could align human resource practices with the growth of their businesses.
2. For executive training programmes:

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a. The case could be used to examine the link between customer excellence and effective human resource
policies and practices.
b For new start-ups, small and medium-sized enterprises, the case underlined the key role of entrepreneurs
in the alignment of human resource practices, management leadership and organisational values.
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GENERAL DISCUSSION ON CASE STUDY
A. Link Between Service Strategy and Human Resource Management
HerbaLine’s Service Strategy
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The competitive environment in many service industries were often characterised by low entry barriers, product
substitution and limited opportunities for economies of scale. (Herbaline’s experience with scale through external
franchising demonstrated that the sale of products to third-party operators could in the long run affect customer
perception of its service quality and brand). The beauty business was no exception and it was in such a context
that Herbaline’s service strategy is a good point to begin the case discussion.
HerbaLine’s emergent service strategy was the outcome of the founders’ decisions regarding its target market
(who); service concept (what); Operating strategy (how) and delivery system (how).
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HerbaLine targeted the middle-income segment of the population (pricing) but with a service concept –
Beauty, Stress-free - that inferred luxury. This concept underlined the three major elements of the beauty spa
operations: services and products, environment and ambience, and pricing. In designing and marketing the
service concept, the entrepreneurs were conscious of price sensitivity in this market segment and sought to
differentiate themselves from the competition by concentrating on the physical surroundings where the service
was delivered, and the role of the service personnel in regard to their competencies as well as the consistency
and quality of their service delivery.
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B. Managing People for Service Advantage
Frontline work were among the most demanding jobs in operating a service business. Such employees were
expected to be efcient in execution while being courteous and helpful with customers/clients, and to do so
every day and every time they had a customer encounter.
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The beauty spa business in particular, was heavily dependent on cost effective but excellent customer service.
In Malaysia, where the industry was populated by one-shop owners who provided the service themselves,
motivating frontline service staff was not a problem as they. were eager to provide efcient and courteous
service. However, HerbaLine Beauty Spa founders’ intention was to move beyond being a one-shop operator;
to grow and ll every Malaysian large town with at least one HerbaLine beauty spa outlet. Hence it was critically
important for the rm to have a committed and effective service corps that would ensure that every HerbaLine
spa would offer the customer service excellence standards that were central to the company’s business strategy.
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To address this challenge, the two founders through a distinctive philosophy, style of service leadership and
role modelling, committed themselves to the effective management of human resource. CK and Kim’s personal
values were evident in how policies and work processes were designed. Their management philosophy, to a
great extent, was shaped by their application of Buddhist teachings and in particular, the concepts of compassion
and gratitude, which they incorporated into their work values. Being very ‘hands-on’ bosses, they were able to
inculcate the same set of work values in their staff. The outcome: HerbaLine Beauty Spa service personnel
became a source of customer loyalty and competitive advantage for the company.
C. Strategic Human Resource Practices

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HerbaLine founders needed to have a source of sustainable competitive advantage on which to grow their
business. In the beauty spa business, the focus was on service delivery and for the founders, this meant
developing an innovative service concept backed by good HR practices and systems that would mobilise and
focus human effort and energy in the delivery of the service concept effectively, efciently and continuously.
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To operationalise the service concept, specic HR practices were successfully deployed that aligned the service
delivery system to the operating strategy and ultimately the service concept. These practices facilitated the
following elements that were important in the successful implementation of the rm’s operating strategy:
Superior quality standards

Differentiating service delivery from that of competing rms through better trained and motivated staff
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Customer perceptions of superior service provided some barriers of entry by competitors
The major HRM levers deployed by Herbaline were:
(i) Selection and Recruitment
a. Hiring the right people. To CK and Kim, this meant that selecting employees based on their work and
interpersonal attitudes was more important than skills, as skills could be acquired with the right attitude.
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b. Identifying the ‘best’ candidates. To ensure a good match in expectations between company and
prospective employee, every new recruit was required to attend a one-month orientation program
conducted at HerbaLine’s corporate headquarters in Kuala Lumpur. During this period, they were expected
to stay in the corporate dormitory together with other staff and recruits. The founders discovered that
this was a good method to help screen recruits who were not prepared to be hands-on and work with
other staff. Very often, those unable to adapt to the life in the dormitory would choose to quit during the
training.
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c. Providing applicants with a realistic preview of the job. The one-month orientation programme not only
provided skills training, it was also designed to inculcate HerbaLine’s corporate values and for trainees to
learn more about themselves and to assess if the job would suit them.
(ii) Training and Socialization

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Besides skills development, HerbaLine also placed emphasis on teamwork requirements; product and service
knowledge; and organisational values as part of its socialization programme. While many of its competitors
practised on-the-job training for new staff in their salons, CK felt that such training was not very effective as
staff would always be interrupted by customers or suppliers. Hence the month-long orientation programme
was conducted away from the retail shop sites. To know their staff better and to induct into the rm’s values
and philosophy, every newly recruited employee would have at least one dinner at the entrepreneur’s home
before the end of the one-month training. They also made it a point to celebrate with employees occasions
such as birthdays and baby showers. As the ‘heads’ of the HerbaLine family, CK and Kim led by example
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and they expected managers at different levels to do the same for their staff.
The two entrepreneurs also emphasised on t between company and employees: and in order to enhance
the person-organisation t, additional training in corporate values was conducted. This training, based
on the concept of ‘her, you, me’, was aimed at developing and rening the staff’s, especially the beauty
consultants, thought processes with regard to service delivery. This was to:
rst think from the perspective of customers

then from the perspective of their colleagues
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before taking their own perspective into consideration
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(iii) Staff Motivation and Job Performance
The two founders continuously ne-tuned the organisational setting and context to t service staff’s life
situations as well as their life needs . For example, as a service business, the peak loads were during the
weekends, which meant that most beauty salons operated at full force during the weekends. However, at
HerbaLine, the operating hours for weekends were actually two hours shorter than on weekdays. HerbaLine
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outlets closed at 6 pm on weekends so that the staff could go home and have dinner with their loved ones.
This was an important concession to service staff as many of them were from homes located some distance
from town centres where the salons were located. Recently, CK and Kim established a ‘co-pay’ scholarship
scheme for senior employees’ children to enable them to pursue their tertiary education overseas when
they realised that their staff were having some difculties sending their children for overseas education.
(iv) Career Development
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Apart from the extensive training provided and the opportunities for socialization within the company,
HerbaLine had a clear career progression policy for their staff – beautician, assistant supervisor, supervisor,
manager and partner. To further reward well-deserving staff and deepen the corporate culture, all managers
were promoted from within the company.
The HRM measures implemented suggested the following underlying strategies:
Improving social mobility of employees. Prospective employees were generally from less well-off families,
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and usually with little formal education. Hence, the extensive training provided and the attractive career
scheme offered by HerbaLine were often perceived as opportunities to help them learn a new skill and
to acquire a stable livelihood.
Professional recognition through effective training and enhanced self-image
Attractive career ladder
Financial support for family members (life needs)
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D. Leadership and (Service) Culture
CK and Kim were well known among the staff to be very ‘hands-on’ bosses. Prior to asking the staff to do a
task, they would likely be the rst to try out the task.
The management philosophy and actions by CK and Kim had a profound impact on the service culture of
HerbaLine. Their service strategy of ‘Beauty, stress free’ was well supported by many of their policies and
processes.
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a. HerbaLine chose not to follow the common local industry practice of requiring customers to commit to
up-front payments for pre-signed packages of facial beauty treatments. This meant that customers just
paid for services delivered on demand. There was no hard selling by beauty consultants.
b. Sales targets of beauty consultants were based on the number of returning and new customers served
rather than the absolute sales gures. Hence staff needed to make sure that every customer was well
served.
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c. The company had a strict ‘no tipping’ policy.
d. One-month centralised training at the company headquarters to inculcate service and organisational
values.
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e. As both CK and Kim practised Buddhist meditation and felt that this had helped them considerably in
the way they conducted their business and lives, they encouraged their staff to take up such meditation
practices to enhance their own well-being. They felt that the effects of such practices enabled a person
to be at ease, relaxed and achieve clarity of mind. Staff members were given the opportunity to attend
a fully paid one-week meditation course every year. This initiative had resulted in fewer conicts among
colleagues and had made the workplace more pleasant. This in turn had a positive effect on the customers
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as well.
From the perspective of service culture as referring to shared perceptions on what was important in an
organisation and shared values and beliefs about why these were important, the founders’ leadership style
and approach were focused on developing perceptions, values and beliefs that would align employees with the
rm’s service strategies and the founders’ beliefs and philosophy.
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E. The ‘Internal Franchising’ Scheme as Performance Management
The scheme was an attempt to achieve two key goals:
a. To provide leadership at store level as HerbaLine continued to grow more outlets; and
b. To reward effective and committed staff for their performance and add another level in the career progression
ladder.
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The founders’ business strategy was to move away from external franchise operations and to focus on building
their own network of beauty spas. To do this, they needed outlet leadership to share the same values, beliefs
and service quality practices that would continue to enhance HerbaLine motto and tagline of ‘Beauty, stress
free’. By selecting beauty consultants-managers from their current network, they could be reasonably condent
of continuing the service standards that they had set.
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Although the scheme seemed no different from other employee prot-sharing incentives implemented by other
rms, it attempted to take the employer-employee relationship to another level. An employee was regarded a
business partner of HerbaLine for a specic outlet, through her ‘purchase’ of up to certain percentage of the prot
entitlement of a specic outlet. This meant that employees, who took up the rm’s offer to ‘buy’ a percentage
of future prots of an outlet, were shareholders in regard to specic outlets’ operating prots.
In terms of driving behavior, the scheme could be very powerful, especially if employees perceived that the
business was in the uptrend of a high-growth trajectory.
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It could be effective as an employee motivation tool as the scheme provided an opportunity for beauty consultants,
without capital of their own, to buy a ‘share’ and participate in the growth of the company.
Additional Issues for Class Discussion
1. Promoting and sustaining service excellence – what are the challenges of leading and building a sustainable
service culture in new start-ups ?
2. Human Resource Development – would HerbaLine’s approach to training and development of front line staff
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be effective in all contexts?
3. Company’s Growth plans – what are potential impact on HRM policies and practices if HerbaLine expanded
its network beyond Malaysia?
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Readings
Fitzsimmons, James A. & Fitzsimmons Mona J. Service Management: Operations, Strategy, Information
Technology. 7th edition. MacGraw Hill, International edition.
Lovelock, Christopher & Wirtz, Jochen. Services Marketing: people, technology, Strategy. Pearson Education
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International.
Normann, Richard. Service management: Strategy and leadership in Service Business. 3rd Edition. John Wiley
and Sons. 2002.
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AsiaCase.

Wee Beng Geok and Lim Beng Chong

APPROPRIATE USE OF CASE

2. For executive training programmes:

A. Link Between Service Strategy and Human Resource Management

HerbaLine’s Service Strategy

C. Strategic Human Resource Practices

Superior quality standards

The major HRM levers deployed by Herbaline were:

(i) Selection and Recruitment

(ii) Training and Socialization

rst think from the perspective of customers

before taking their own perspective into consideration

(iv) Career Development

The HRM measures implemented suggested the following underlying strategies:

D. Leadership and (Service) Culture

c. The company had a strict ‘no tipping’ policy.

The scheme was an attempt to achieve two key goals:

Additional Issues for Class Discussion

be effective in all contexts?

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