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LVMH is French origin world leader in the luxury brand has 60 prestigious luxury brands. Each one of these has unique history and culture. Some of the famous brands among them are Chateau d'Yquem, Moet &Chandon, Hennessy, Guerlain, and Louis Vitton. LVMH is a group who has conserve genuineness of all brands. The Group is active in five different sectors: Wines &Spirits, Fashion &leather goods, Perfumes &cosmetics, Watches &jewellery and selective retailing.
The formation of Moet Hennessy in 1971 was in the direction of larger group in 1987 beneath LVMH. In 1989, Group Arnault becomes majority shareholder. In 1999 entered in watches & jewellery and selective retailing. Year of 2009 LVMH reached on total revenue of 17.1 billion euros, 77,300 employees worldwide, a retail network of more than 2,400 stores. LVMH organizes its HRM around the world in five zones are France, Europe, the Americas, Pacific and Asia and Japan.
Task 1 HRM Theory:
"The element of managerial work which is concerned with acquiring, developing and dispensing with the efforts, skills and capabilities of an organisation's workforce and maintaining organizational relationships within which these human resources can be utilized to enable the organization to continue into the future within the socil, political and economic context in which it exists" (Watson, 2003, p.1)
Best fit model:
It emphasizes that HR strategies should be congruent with the context and circumstances of the organisation. It is see the sights the close link between strategic management and Human resource management, 'Best-fit' can be perceived in terms of vertical integration or alignment between the organization's business and HR strategies. Vertical integration can be clearly confirmed through the linking of a business goal to individual objective setting, to the measurement and rewarding of that businesses goal. For achievement of organisation goal, individual, team and organisation behaviour and performance must be match with business strategy or the objectives of the business goal.
The resource based model focusing on internal resource of organisation, rather than external resources. By this model human resource management specialist easy to identify which human resource become a scare, valuable, organisation-specific and difficult to imitate resource. The Human capital pool comprised of the stock of employee knowledge, skills, motivation and behaviours. The flow of human capital through the firm- the movement of people and of knowledge. The dynamic processes through which organizations change and or renew themselves.
Best practice model:
"The notion of best-practice or 'high-commitment' HRM was identified initially in the early US models of HRM, many of which mooted the idea that the adoption of certain 'best' human resource practices would result in enhanced organisation performance, manifested in improved employee attitudes and behaviours, lower levels of absenteeism and turnover, higher levels of skills and therefore higher productivity, enhanced quality and efficiency. This can be identified as a key theme in the development of the SHRM debate, that of best-practice SHRM or universalism" (Ian Beardwell at el 2004, P.56)
LVMH is running around five main world zones. So HR structure is very important for LVMH. When organisation spread worldwide, Matrix Organisation structure is very useful for firm to achieving their goal & smooth running. LVMH HRM policies are in surplus of vital and imposed on the business groups and companies. Through the adjustable rule, it also given management support to the business. The task of corporate HR is to standardize sure measures, to describe plan and to give momentum to companies' HR teams. Concerning strategy, HR proposes other than hardly ever impose.
An employee interacts with the companies. This companies report to business group which report to corporate headquarters. Approximately 50 to 60 % of progresses are handled by companies, the else managed by the business groups or corporate.
There are four types of HR managers at LVMH. Following the group's structure, they operate on four levels: corporate, regional, business group and company level. The subsidiary HR Director or the person acting as such, reports to the subsidiary's President. The subsidiary's HR Director gets recommendation and shore up from his company. HR Director of the business group managing his companies through monthly meetings. The principle of these meetings is to identify vacant positions throughout the world and to study the list of possible candidates for these positions, between which are the Ready to Move. Being a Ready to Move does not mean anyone move, but that the management has recognise them as having the competence to progress by new task within the year. The major objective of corporate HR managements is to make sure in sequence stream and rationally applied in zone., while meeting concluding decisions to the company.
International mobility is essential part of every prospective career path. It is evolve skills & abilities which are hidden inner side of employees. It targets to create global managers many of them have far above the ground fundamental practical move. As an example the head of HR development recall the case of a French insurance specialist in the fashion business unit who was sent to Romania to head a shoe factory. By this global manager as a person with the training or the experience needed to manage a global business. LVMH's maximum staffs belong from French, whereas the French account for 37 per cent of the group's global workforce. HR needs to develop more global business managers so they can be a part of globalized top management. LVMH mobility process works on the network of HR teams who mostly staffed with locals.
LVMH did not send out experts because not have local talent. Mainly its expatriates fit two profiles: those sent out by the corporate HQ to control its subsidiaries and protect its interests and sent out to develop their skills. To support the international business growth transfers is increasing. Though, it not means that increasing number of French expatriates will force this tendency. In global scenario organisation face adverse consequences due to scare of global manager.
LVMH did not attract experts by giving them economics incentives in terms of levels. The group is motivated for cost efficiency. They know that a good package is necessary, but that it not the main inducement to go abroad. By research it's prove that all people are not working for money, but some people like competitive task and they like to utilise their skill & abilities.
Specific country based salary is obvious for international assignment. Salary will rise during the period of assignment. That is used as a basic for work out of social security and pension payments. The mobility wages are average compare to local labour market. LVMH distinct two types of high potentials, HP1 and HP2 is an individual likely to achieve a top management position such as member of Board committees, Regional president or Subsidiary president. An HP2 is an employee likely to go up one or two steps in the hierarchy. For corporate HR this characterization of high potential is too broad and is more relevant for flat structures. It is now considering narrowing it. It would retain the definition of HP1 and include those who are considered to be experts in their domain.
LVMH is giving specific task or assignment to the global manager in their working content for specific period and give him or her full authority to take decision for the company, also they want to learn from this kind of freedom to do new or dare things.
"A relatively permanent change of behaviour as a past experience. Training is taken to mean more than acquiring knowledge, it encompasses the way in which outmoded values and techniques are shed in favour of new ones. At an organizational level this requires a collective process of change in its shared worldviews, including perceptions of the company and its market" (Alan price 2007, P. 513)
Key approaches towards managing training and development in HRM:
Participants are charged with addressing an organisational problem or challenge by using new skills and methodologies. They work independently with periodic reviews to discover how they are applying and working with discrete skills and methodologies.
The competitive of business in globalized world is strongly depending on highly skilled workforce which is do flexible works. It's possible through training & development.
training and development activities make a major contribution to the successful attainment of the organization
Personal development processes provide the framework for individual and self-directed learning
Showing a clear understanding of the business drivers in their organisation
Helping their organisation add value and move up the value chain
Establishing a clear vision and strategy for people development
Involving others and engaging shareholders in a transparent and open way
Having both a good overview of what is needed to advance in the long-term and also of the short-term priorities
Using process and techniques appropriately - without being overcommitted to any one method of delivery
Applying metrics to demonstrate value, and above all
Understanding the legacy that learners bring with them and adjusting their interventions accordingly
Companies that function globally comprise international and multinational firms. International firms are those where operations take place in subsidiaries overseas that rely on the business expertise or manufacturing capacity of the parent company; they may be highly centralized with tight controls. Multinational firms are ones in which a number of businesses in different countries are managed as a whole from the centre; the degree of autonomy they have will vary.
As a consultant recommendation to LVMH Board:
Globalization is the process of remove barrier between worldwide markets. It involves the development of single international markets for good or services accompanied by an accelerated growth in world trade.
To match the global requirement of business working pattern LVMH has to deploy local people rather than experts from the French, because they do not have know the local culture or local market how they react in new or old segment for their products or what is the trend among them for LVMH's products. Globalization also driven by issue of marketing, cost and competition. If they select local manager with relevant expertise for their desire project or aim to achieve. In this condition they can get manager with skill which they want and also get improvement from his knowledge about their product matching the local public views and if possible implement them for getting better results.
All factors which exist outside the business enterprise, but which interact with it. Human resource managers have been closely involved with employment legislation, industrial tribunals and trade unions at a functional level. HRM also focus on other environmental variables like government economics, social security, education & training policies affect the supply, cost & quality of available employees.
For LVMH operates in all over world so, they have to think globally and act locally for their operations. For example they have decided same rules and regulations for the all employee worldwide like their wages and benefits. In France they have decided to give 6500 â‚¬ per month salary to the global manager for giving his or her services to the company as per same pay may not be pay in other continent like Asian countries Singapore and Korea. Living standard in all continents is different so, their policies should be different than headquarter and subsidiary in terms of wages.
Comparing one country with another we find component of people management are accorded different degrees of importance and are carried out differently. The Economic & political differences, Language differences, Differences in legal system, differences in religious and moral attitude and trade practice differences. Human resource practicing has to consider all these issues also numbers of fundamental question arise. How is HRM structured in individual countries? What are the main differences & similarities? What is put into practice?
LVMH has to take care for the different culture base for their strategy in HRM for example in Japan they cannot deploy younger manager on the employee who is senior in terms of age then him or her, because Japanese have cultural custom that they respect elder person and do not cross their words ever so, in that way LVMH has to be specific about cultural differences. Like in South East Asia India is a populated country and have more knowledge base potential candidates are available to match their criteria but they have to keep in mind that Indian culture is a versatile and full of festivals. If they want to launch the new product there they have to look forward for the appropriate festive season for their products and the manager who familiar with the custom of this festival and achieve company's goal. Before sending the global manger on his or her assignment they has to be given training about language which is locally spoken over there and have good command over at least 3 languages other than French.
Convergence and divergence:
According to Brewster et al (2002) the effectiveness of global HRH depends on 'the ability to judge the extent to which an organization should implement similar practices across the world (convergence) or adapt them to suit local conditions (divergence)'. The dilemma facing all multinational corporations is that of achieving a balance between international consistency and local autonomy. They have to decide on the extent to which their HR policies should either 'coverage' worldwide to be basically the same in each location, or 'diverge' to be differentiated in response to local requirements.
Looking forward the HRM policies of LVMH is to adopt divergence in terms of local environment like in UK people like to drink Beer while in USA and France prefer to drink Wine. Such things keep in mind and develop their plan for act in a global market through their global managers who actually implement their policies to their business.
Balanced Scorecard means 'A strategic planning and management system used to align business activities to the vision statement of an organization'. More resentfully, and in some cases practically, a Balanced Scorecard attempts to interpret the sometimes indistinct, moral hopes of a company's vision/mission statement into the practicalities of managing the business better at every level. A Balanced Scorecard approach is to take a holistic viewÂ of an organization and manage MDIs so that efficiencies are experienced by all departments and in a joined-up fashion.
To go on board on the Balanced Scorecard path an organization first must know (and understand) the following:
The company's mission statement
The company's strategic plan/vision
The financial grade of the organization
How the organization is at present structured and operating
The level of knowledge of their employees
Customer happiness level
In HRM 4 main perspective play important role in balance scorecard. The following table indicates what areas may be looked at for improvement (the areas are not full and are often company-specific):
If we succeed, how will we look to our shareholder?
Return On InvestmentÂ
Return on Capital EmployedÂ
Financial Results (Quarterly/Yearly)
Internal Business ProcessesÂ
How to smoothly handled performance drivers and with outcomes measures?
Number of activities per functionÂ
Duplicate activities crossways functionsÂ
Process alignment (is the right process in the right department?)Â
Operations Management process.
Customer management process.
Regulatory and Social process.
To achieve our vision, how must our organization learn and improve?
Is there the correct level of expertise for the job?Â
To achieve our vision, how must we look to our customer?
Delivery performance to customerÂ
Quality performance for customer
Customer satisfaction rate
Customer percentage of market
Customer retention rateÂ
Each of the four perspectives is inter-dependent - enhancement in just one area is not necessarily a recipe for success in the other areas. Balance scorecard is interred linked with Strategy. In strategy process first management decide Mission - Why we exist, Vision- what we want to be, Value- what's important to us and then make a game plan for strategic outcomes. In strategic outcomes management specialize translate the strategy and measure and focus by BSC. It consequences are came by satisfied shareholder, happy customers, excellent processes and motivated workforce.
The Learning & Growth Perspective
In balance scorecard learning and growth outlook is important part and this is depending upon HR performance. "Kaplan and Norton emphasize that 'learning' is more than 'training';"This perspective reflects the competence that a company should have Human capital, Organization Capital and information capital. In this outlook good human resource development system, organizational system and information system forms a hard basis for improving company performance. This outlook includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people -- the only storeroom of knowledge -- are the main resource. In the modern climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode.
Learning & growth base on these three outlooks Human capital, Organization capital and information capital. In Human capital HR performed improve skill, knowledge and attitude of manpower of organisation. Organization capital in which HR performed improved culture, leadership and organization development and last one information capital in which HR performed improved system, database and networks.
Learning & growth metrics address the question of how the firm must learn, improve and innovate in order to meet its objective. Much of this perspective is employee-centred. In this perspective HR specialist have to decide objective and then measure to it. i.e. objective of manufacturing, in this hr specialist have to measure time to new process development. Objective of product focus, in this hr specialist have to measure percentage of products representing eighty present of sale. And objective of time to market, in which HR have to measure time compared to that of competitors.
Making of the Balance Scorecard.
The ladder involved in development of Balance scorecard is explained in the figure on next page. The process is broken into four phases:
This phase starts by a chain of brain-storming sessions at higher level to bring everyone at balance as far as organization's Vision and Core values are concerned. This basically prepares the organization to develop its current strategy and goals in line with its Vision and middle values.
Build up Strategy
In this phase, the organization develops its strategy map to achieve its vision. Strategic maps extend to develop key strategic objectives and allocate accountability to achieve these objectives on specific employees.
Build Balance Scorecard
Having certain the strategic objectives, it is now necessary to work-out key strategic initiatives and the key performance indicators which would mirror the results of these initiatives. Specific targets and goals along with the stretch targets are agreed during this stage and various employees of the company are assigned SMART Goals (Specific, Measurable, Achievable, Realistic and Time-bound).
Put into operation Scorecard
In this phase, the organization's Balance Scorecard is further bust into departmental level scorecard, so that each department can focus on the elements of the complete organization's scorecard. This helps in micromanaging the activities and their monitoring at lower level at intervals best suited to specific goals. The overall scorecard of the organization reports data from departmental scorecard and is reviewed by higher management.
Benefits of Balance scorecard:
Change of strategy into measurable parameters.
Message of the strategy to everybody in the firm.
Arrangement of individual goals with the firm's strategic objectives - the BSC recognizes that the certain measures influence the behaviour of employees.
Comment of operation result to the strategic planning process.
Process focus to achieve strategic goals.
Timely reporting of status of strategic goals.
It's helpful for making budget decision & drives investment.
Employees recognize themselves with goals.
As per the case study there is a lot of improvement in the companies' policy regarding international mobility, Expatriation and learning English language that gives strength to the LVMH's goal to sustain in global competition and achieve company's goal through knowledge base HRM.
As student I cannot give the exact idea about reading just few papers for the company which is running successfully since 1593. Company has history of 416 years they have created their name and fame through their working pattern and workforce who works for them. I am little bit small to evaluated and give the recommendation to the company's board of directors they are the genius in their planning and implementation of their HR policies.