Biggest problem lack of a proper HR department


Introduction to the case

This case study basically revolves around the Australian biomedical/pharmaceutical industry. Bill Mason, a biomedical researcher, after working for many years in North America returns to Australia and starts his own firm. The firm, Medtech, starts with 3 employees including Bill and within a few years the workforce expands to 120 people. Medtech specializes in 'Red Biotechnology' and the company has acquired patents for its products. Due to a lack of information, we assume that the company only has two departments, research & development and production. A high percentage of the workforce is highly skilled, but the R&D department is considerably smaller than the production department in terms of number of employees but the employees are highly qualified. As with any other industry, new competition within the industry has brought some challenges for Medtech. Furthermore Bill has decided to take a leave of absence from the firm, due to health problems and has left John Short in charge of the company. John has an engineering background and seeing as he was in the production department which involves working with high tech machinery, we assume he is a mechanical engineer. However shortly after John's tenure started problems began to arise. The methods adopted by him regarding how the company should be run and how to manage employees didn't go down all that well with the workforce especially the employees in the R&D department. Consequently this prompted a few of the company's longest serving employees to look for work elsewhere. Bill has now returned and seeks to bring about whole sale changes to solve the relevant issues within his firm.


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Before discussing the problems and issues that the company is suffering from it would be appropriate to first talk a little bit about the biotech industry. Biotech is an extremely dynamic industry. It undergoes constant changes, with new products coming out in a shorter period of time than before and this trend is increasing (Theyel, 2000). Secondly, at the core of this industry is research and development i-e it is a research intensive industry. Thirdly patents and copyrights hold a lot of importance in this industry due to the ever increasing competition. Companies need to work harder than ever to make sure that their research and products remain their property and are not copied. The last characteristic of this industry relates to the legal issues. Biotech companies are constantly at a risk of facing legal problems for example if their drugs prove to be hazardous in some way or if companies sue each other for violation of copyrights etc.

Now, coming straight to the problems being faced by Medtech. The biggest problem that can be deduced is the lack of a proper HR department, which is critical for a company of this size. The absence of human resource management caused the company problems in various areas. At the forefront of these problems is an effective performance management strategy. After Bill's leave of absence John introduced his own method of performance management which to say the least proved ineffective. Here Bill also exhibited his inexperience as an administrator by leaving the firm at a crucial time and also showed a lack of judgment by leaving the company in the hands of a person who might well be a good employee but proved to be an ineffective leader. His view on how to bring about positive change in the company consequently proved to be incorrect. While his performance management strategies might work in the production department, they backfired in case of the R&D department. The approach he adopted was more quantitative rather than being qualitative which is inappropriate for a firm dependent upon research and development. The problem with the R&D department wasn't inefficiency but rather an issue of innovation. A lack of competition meant that the company became complacent and were satisfied with their existing products; therefore innovation took a back seat. Their approach became reactive instead of being proactive. They only got into action after the emergence of new competitors. The above discussion points to two problems. Firstly it seems there was a lack of succession planning in the company. The company was not prepared to handle the absence of it's CEO. Secondly it also indicates that there were no training and development programs in the firm. Effective HR management might have forecasted such situations and could have avoided these problems.

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As indicated the company now also faces potential litigation, after one employee who was sacked for unfair reasons is thinking about suing the company. This can also point to problems related to employee satisfaction. The success of a firm depends on employee satisfaction. Employees require an adequate amount of encouragement and support. They need a certain level of freedom and flexibility to exhibit the productivity that a firm expects. This is more relevant than anything to research based firms. Furthermore there was no concept of work-life balance initiatives in the firm which is extremely important especially for today's working mothers which consequently leads to employee dissatisfaction.

Employee dissatisfaction is also then directly related to retention. An unhappy employee is hard to retain especially if he is highly skilled because that employee is aware of the fact that finding a new job would not be that difficult for him/her. Skilled biotech employees have considerable opportunity to move from one company to another, making loyalty a key concern of employers and a critical factor in organisational and management practices (Eaton, 2001). In this case as well, we know that the Medtech employees especially those working in the R&D department are highly skilled and qualified and quite a few of them want to leave the company. Therefore employee retention is another major issue.

Another problem is based on the assumption that Medtech doesn't have any alliances or partnerships within the industry. This could lead to problems such as bad industrial relations as well as issues related to the sharing and management of knowledge.

As can be understood from the above arguments all the issues are inter related with each problem giving rise to another problem, a chain of problems, if you will with a lack of HRM at it's core. All the above problems fall under the jurisdiction of the HR department which in the case of Medtech does not exist. Therefore there is a need to rectify these issues to maintain the competitive advantage that Medtech holds.


Strategic HRM is an approach to the strategic management of human resources in accordance with the intentions of the organization on the future direction it wants to take. What emerges from this process is a stream of decisions over time that form the pattern adopted by the organization for managing its human resources and which define the areas in which specific HR strategies need to be developed. (Armstron, 2006). These focus on the decisions of the organization on what needs to be done and what needs to be changed. It is evident therefore that all the issues discussed in the previous question are related to a lack of strategic HRM. Below I have given my suggestions on how to deal with those issues and how to prevent their occurrence in the future. It is worth noting that science-based firms, i.e. those whose success depends on scientific research - i.e. aerospace, biotechnology and medical engineering - rely mainly on intellectual and social capital to attain their goals (Finegold & Frenkel, 2006).

Performance Management

In a perfect world a performance measurement system would:

provide an early warning detection system indicating what has happened;

diagnose reasons for the current situation

indicate what remedial action should be undertaken.

However designing a performance management system related to research intensive firms is a difficult task and considering the fact that Medtech did not have a performance management system (PMS), the firm has to start from scratch. For the development of a PM system first demands the individuals, preferably those involved in the management, of the organization to create the system. They have to agree on measures, ways of data collection, responsibilities and schedules. This can be seen as an innovation process, which includes many kinds of interaction and co-operation of participants. The participants articulate their own conceptions of the company's objectives, goals and customers. These ideas are to be shared and a common meaning to be developed in the innovation process of the PM system development. The designing of a PMS has to be thought of as a learning process with changes being brought about with time according to what works and what doesn't and not rigidly following the protocol, as John tried to do. Furthermore a distinct PMS should be incorporated for each department, as pointed out before what works for the production department might not work for the research & development department. For example should the PMS be follow an individual based approach, a team based approach or even a task based approach? The answer is adopting the approach according to the department. The employees in the R&D sector like working in teams so the PMS for that department should be based on a team performance measurement approach. Furthermore these employees deserve a little flexibility in terms of time. Research does not happen in a fixed amount of time. Time should not be an issue in R&D but the issues to focus on are proper management of ideas, quality of goals, practicality and innovation (Rantanen & Oikarinen, 2004). Sometimes even a single good idea can result in success for a firm for many years.

Leadership and Succession Planning

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Succession planning is the process of assessing and auditing the talent in the organization in order to answer three fundamental questions:

Are there enough potential successors available - a supply of people coming through who can take key roles in the longer term?

Are they good enough?

Do they have the right skills and attributes for the future?

In the case of Medtech, it would be safe to assume that there is no good enough successor considering the fact that the best person for the job, in Bill's opinion, actually created a lot of problems. Instead of identifying successors the firm needs to work towards the development of a talent pool from which to pick out the best man for the job (Hirsh, 2000). This is because it is difficult in the changeable environment in which most organizations exist, to predict succession requirements. Each individual possesses different characteristics; therefore a talent pool will allow the firm to pick out a candidate according to the environment and situation at that time.

Recruitment, Retention and Innovation

The biomedical innovation cycle is a long and complex process. Managing it requires a new and complex array of approaches and management skills to ensure a smooth evolution from idea to market as both business development and research outcomes are pursued. Innovation performance requires planning that is more strategic, proactive, long-term oriented, and development-focused (Terziovski & Morgan, 2006). Medtech will need to adopt a more strategic and disciplined approach to managing the innovation cycle. Their cycle has become relatively long whereas with the emergence of new competition there is a need to accelerate this cycle as much as possible. There are two ways to achieve that objective. First is to vastly expand the R&D department. Assuming that the firm is still running successfully, expanding the R&D department is not going to be a problem financially. Expansion does not only mean buying more advanced equipment but also means hiring new people. The recruitment process needs to be overhauled so that the right people are hired, meaning employees who have abundant experience in research and are highly motivated and passionate about research. The organization should use behavioral interviewing techniques to identify individuals with the required experience, expertise and problem solving behaviours to fit the organization (Jorgensen, Becker, & Mathews, 2009). In addition, there is an expectation by the employees that an organisation will play a part in not only securing employment but in upgrading employees' knowledge, skills and ability, so that these workers remain in demand in the wider employment market. Whilst the concept of job-hopping may become the norm, paradoxically it may be a factor in at least reducing the turnover (through on-going skill acquisition) and making the organisation an 'employer of choice' to return to or recommend to other highly skilled workers as organisations that provide on-going development opportunities for these increasingly discerning workers (Turnley & Feldman, 2000). From a resource-based perspective, the way organisations attract, develop and retain these human resources will have to change. Research indicates that organisations that are prepared to focus on developing talent will be in a stronger position to retain key employees as the so-called 'war for talent' intensifies (Boxall & Purcell, 2003). The need to develop talent and become an 'employer of choice' therefore places the HR professional and their policies and practices at the centre of organisational systems to achieve these outcomes and promoting the organisation as an 'employer of choice'.

Second way is to outsource the innovation process. The outsourcing of innovation has significant implications for the commercialisation of research. Quinn (2000) cites an example in the area of combinatory chemistry where experimental cycle times have been reduced by more than 800 times and costs and risks lowered by more than 600 times. He also refers to large pharmaceutical companies (such as Hoffman La Roche) that have successfully outsourced innovation to universities, institutes and government laboratories that have long provided fundamental research knowledge for new product stream. The firm also needs to follow a similar path.


Most biotech firms are networked through partnerships, alliances, formal and informal collaborations, and agreements (Powell, 1998). We assume that Medtech has no prior industry alliances or partnerships. This network increases labour market information, and thus helps in recruiting a better workforce. Firms are intensely competitive for skilled knowledge workers. Firm-specific skills involve advanced scientific work on projects that are highly specialised and take significant time to learn. Medtech needs to improve its industrial relations and the best way to do that would be through strategic alliances with other firms in the industry.

Reward Management and Employee satisfaction

Within the resource-based view of the firm there are three types of resources that act as sources of competitive advantage: physical capital, organisational capital and human capital (Barney & Wright, 1998). In this case the major issue is with the human capital. Companies that actively promote a positive work environment, and who also value employee contributions while achieving a true work-life balance have been found to be more successful at communicating the idea that their employees are one of their most valuable resources( (Mcgrath, 2006). The firm needs to look at its workforce as a core competency. In line with the resource based view of the firm, the approach developed by Hamel and Prahalad (1993) argues that long-term investment in core competencies provides sustained advantage over time as contemporary competencies become baseline capabilities. To do this the HR department needs to come up with a reward management strategy. A performance-by-result (PBR) scheme might work in the production department but the R&D department requires something different. As pointed out that the R&D employees preferred working in teams, this characteristic should be exploited by introducing a team bonus strategy. This would result in better communication as well as cooperation between the employees as they would all be working towards the same goal thereby limiting complacency within the team. Furthermore the most effective organizational responses to work/family conflict and to employee propensity to quit are those that combine multiple elements, including family-supportive benefits, human resource incentives, and work design. None of these elements alone is enough to produce positive outcomes for both employees and employers (Batt & Valcour, 2001). Therefore the introduction of all these factors is vital.


Recent trends in science-based firms reinforce the need to manage HR strategically. These include more intense competition resulting in strategies to move more quickly from discovery to having a product on the market; greater reliance on alliances and partnerships with other specialist firms in order to take advantage of specialist scientific or technological expertise in a cost-effective manner; more weight being given to protection of intellectual property (IP); keeping abreast of advancing computer technology that impacts on scientific productivity; and increasing workforce diversity, which has led to new issues such as devising part-time working opportunities for employees and achieving work/life balance (Farris & Cordero, 2002)

The workforce must be categorized and managed differently in line with the organization's business strategy. This suggests that HR professionals play a key role in analysing, categorizing and developing differentiated HR practices and ensuring their integration and alignment with the organization's overall strategy. (Holland, Sheehan, & De Cieri, 2007) In the case of Medtech, whose success depends on innovation, it would appear vital that the creative individuals responsible for the innovation be attracted, nurtured and retained by the firm. Innovation also implies organizational flexibility, which in turn requires that employees broaden their knowledge in order to work closely with other specialists. Satisfying these needs for effective selection, motivation and development requires a specialist set of skills that HR personnel hold (Boxall and Purcell, 2003). In conclusion the advent of an HR department would go a long way in solving these issues.