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Ark Nurseries is a specialist wholesaler of fresh and freeze-dried herbs and vegetables. These are grown within the country or brought in from other parts of the world and packaged in a small, chaotic factory. Most of the sales are to small retailers and restaurants in middle class areas. The company was formed ten years ago and has prospered as its products have become familiar and customers have been increasingly interested in a more varied range of food.
The managing director founded the company with her late husband and has taken complete control since his death three years ago. She was always accustomed to working hard and now spends virtually all her waking hours on company business. Her main interest is selecting and marketing new products and she is happy to spend a lot of her time travelling to meet growers and attending trade fairs and exhibitions. She is frequently away from the office for weeks at a time.
Management style and HR practices
Employee numbers have gradually increased and most of the more senior managers have been with her for several years. She deals directly with her managers, usually on a one-to-one basis as problems come up, and dislikes committee type meetings. An outgoing and energetic person, she takes decisions quickly, based on intuition and her experience of the market. She takes advice from her staff but does not feel obliged to follow it. Generally, she is a talker rather than a listener and is accustomed to having her way. She insists on vetting all staff recruitment, promotion and pay increases and takes all equipment purchasing decisions herself. There is no one specifically in charge of human resources, each functional manager being responsible for their own staff. Pay is good for the area and employees are generally pleased to work for the company. The factory has a five day week and is open for ten hours a day. There is no appraisal or performance management system, with senior staff being paid salaries and factory workers receiving wages based on a piece-rate system.
The sales manager has just clinched a deal with a major supermarket group which has agreed to take Ark produce for its 60 stores. The managing director was surprised by his success but is delighted that it has finally been achieved. The contract was announced last week but reactions within the company have been mixed. The managing director has spent years trying to break into this market and is astonished by the attitude of most of her senior staff. They have been accustomed to steady but undramatic growth and are now faced with tripling sales over the next three years. They argue that their regular growers could not meet the demand at the right level of quality, especially as the supermarket group will expect stringent standards and exact financial penalties for late delivery.
Over the last few days, fierce arguments have broken out between the managing director and her staff and there have been threats of resignation. However, she is convinced that the contract is feasible and that resignations will not happen because of the unemployment situation.
The managing director has begun to get concerned about the strength of resistance against the new contract. She is determined that the company should accept the contract but is aware that it would be impossible to expand the workforce, and implement new procedures without the support of existing staff. She is also beginning to realise that, if the company expands, she will have to delegate more responsibility to her line managers. The company currently has 88 employees, these are a mix of administrative staff, packers, delivery drivers, and line managers and she anticipates that this number will increase to around 200 over the next three years.
The managing director is keen to ensure that this expansion is handled in a professional manner with the support of key employees. She has approached you, an HR consultant to ask for advice regarding how she should change attitudes towards the contract now and how she should manage employees in the future to ensure that the terms of the contract are met.
Your task is to write a 3000 word assignment outlining the HR strategy, policies and practices that you believe should be introduced to enable Ark Nurseries to expand, gain the support of all employees and deliver the contract. It is very important that when you write your report you identify how you will gain commitment for your strategy from all stakeholders and that you justify your proposals by reference to the underlying research literature.
You should structure your assignment around the four steps in analysing a case outlined by Newell and Scarborough which you read for Tutorial One, and which is printed in the tutorial study guide, namely: 1) Understanding the Situation; 2) Defining the Problem; 3) Generating and Evaluating Solutions; 4) Implementing Solutions.
You must make sure that your assignment builds on the material that you have covered in Semester One of the programme. "Top-of-the-head" recommendations or ideas gleaned from the "University of Life" will not achieve high marks. For this assignment, the material from the lectures on strategy, reward management, performance appraisal, training and development and motivation are particularly apposite, as are the tutorials on analysing case studies, management training and team-pay (tutorials 1, 3 and 4), but remember that policy recommendations in HRM rarely flow from just a small part of the subject-area. You must also ensure that the proposals that you come up with are properly costed and presented as part of a business case that will convince 'gatekeepers' in the financial and operations management areas to buy in to your position.
It is also very important that you adopt a critical approach that does not accept HR fads and fashions (of which there are many) as the truth, the whole truth and nothing but the truth. Recommendations must make reference to the research literature that often suggests that many HR practices do not work as well as their supporters (usually in the management consultancy industry) suggest, or at least work better in some contexts rather than others, eg small versus large firms, public sector versus private sector.
Understanding the Situation.
Ark Nurseries is a privately owned organisation that deals in the distribution of wholesale of fresh and freeze-dried herbs and vegetable to small retailers and restaurants in the middle class area. It has been in operations for about ten years and started as a family business. The organisation has grown over the years and has earned the trust of the local communities in terms of the supplies to the retailers and demands from the farmers. The type management style practised is that of an autocratic style, whereby the managing director makes all the decisions without giving much regard to the senior managers (who have been with the organisation for years). The organisation offers a fair pay to its employees and the employees are generally pleased to work there, the senior staff are paid salaries and junior workers are paid based on piece rate system. With the introduction of the contract to supply a major supermarket group with over sixty stores, this means more business for Ark and the organisation is on the verge of change.
Defining the Problem.
The problems facing Ark Nurseries are numerous, namely: the resistance to change by the senior managers as the managing director has been trying to break into the market and finally has the opportunity and is surprised by how her managers are very comfortable with the slow growth of the company. Another plausible reason is that they (senior managers) believe that their growers will not be able to meet up with the demands of the new market (as the demand for products will increase and the supply has not), creating disappointments with the previous customers and new customers, pushing the customers to seek for other suppliers and in return losing their business. The company clearly lacks an objective, vision and mission, and this is the reason why the organisation lacks a direction, also the management style practices doesn't bring out the best out of the employees as the style, structures the organisation to the managing directors' opinions and personality and there is no two way communication which leads to demotivation of employees and in return turnover among the best employees. Another problem facing the company is that the CEO lacks trust in her staff members in regards to listening to their opinions and in delegations of duties in regards to the equipment, promotion and pay increases. Other problems include there is no organisation structure in terms of the reporting lines and delegations of duties. There is also a lack of Human resource processes and policies to help the organisation with structure and design in terms of employment contracts (terms and conditions), job descriptions, recruitment and selection etc.
Generating and Evaluating Solutions.
There are two options to take in regards the organisation and they include: to do nothing, this entails for Ark to keep running as it has always been run even with the new contract. This will be an issue as the demands for the products will not be able to reach the customers, according to the demand and supply theory in economics (which is the backbone of the market): it states that as demand increases, so should supply in order to satisfy the needs and if this doesn't happen it leads to scarcity and inflation.
Another option is management of the new change
Management of change within organisations needs to be a core part of the role of HR professionals, as many of the issues concern the 'people aspects' of change. Two-way communication with employees and their active involvement in implementation has also been identified as a key enabler of change and an effective way of managing change. Active participation is one suggested means of overcoming resistance to change (CIPD). As the Ark will require the buying into the contract by all the senior management so as to make the execution of the contract successful, the resistance to change will need to be handled. Kurt Lewin (1947) proposed 3 stages of change:
Unfreezing: this stage refers to getting to the point to realize that change is necessary and prepare to move away from the current comfort zone. This is a mental stage by getting everyone emotionally and mentally ready to change (motivation) and weighing the positives and negatives of change.
Change: has been said not to be an event but rather a process of transition. This is not an easy process (as all the plans are implemented) even if the minds of the employees are geared towards change, time and support is most crucial at this stage and this involves training, coaching, expecting and correcting mistakes. Also communication helps keep a clear picture of the desired change, so as not to lose sight of the benefits to come along.
Freeze or Refreezing: this stage establishes stability after the change has been implemented, this makes the change become a norm and culture as its imbibed in all employees. With time the employees get familiar with their new roles and functions.
This process of change is beneficial to Ark, as it's still a small business enterprise with no previous structure or culture; this will enable the unfreezing and change implementation swift. With the success of the change management, other processes of solving the type of organisation Ark is will be sought out in order to make it in the new market.
According to Pferrer (1998), he introduced the seven practices of successful organisations which include employment security, selective hiring of personnel, extensive training, extensive sharing of financial and performance throughout the organisation (feedback), self-managed teams and decentralisation of decision making in terms of career management, comparatively high compensation contingent on organisation performance and reduced status distinction and barriers.
From the above listed practices, some of them will be adopted as to getting a successful structured organisation out of Ark.
Duties of a Managing Director/C.E.O
The duties of a managing director or the chief executive officer of an organisation is to ensure the smooth running of the business (reference). The managing director should endeavour to be more focused on meeting more growers for the business by getting more connections and building stronger business relationships. This can be done by attending more fairs and seminars related to their business and from the case study; it shows the managing director enjoys attending trade fairs and exhibitions. As Ark nurseries is a small enterprise, there hasn't been a great deal on the marketing plan to grow the business, this will have to be taken up by the managing director, so as to get the word out there in the market that Ark is going national. If the expansion is successful, then the need of a marketing department or corporate services will be required in terms of handling branding and image setting.
Strategy and Type of Hrm.
A strategy is a pattern or plan that integrates an organisation's major goals, policies and action sequences into a cohesive whole for either short or long terms. The strategy that will be beneficial for Ark will be to adopt a combination of the classical and evolutionary approach. This is because both approaches have their emphasis laid on profit maximization. The classical approach also lays emphasis on the internal and external environment that then enables the organisation to evaluate and choose from a range of strategic choices that in turn allows for plans to be made to implement the strategy while the evolutionary suggests that strategy is made through a process in which managers rely less upon top managers to plan and act rationally and more upon the markets to secure profits (Redman and Wilkinson, 2009).
The type of Human Resources that should be practised should be the Soft Hrm. According to Heery and Noon (2010), they described the term to be the developmental aspects of managing people. This approach emphasises the need to treat employees as an asset which must be looked after, trained, and developed in order to get the best out of them. It is a strategic intervention designed to elicit commitment to the organisation and to develop resourceful humans. The reason for this type of Hrm is that the company is still a growing company and there can be a "family culture" developed, where everyone feels that the progress of the organisation is their personal progress and that organisation does have their best interests at heart.
Recruitment/Selection and Location
In expanding a company, the work force will be needed to be increased to meet up with the work load and not to over work the current employees. Hereby, there will be a recruitment and selection in the different levels of the company. The hiring will be done at 2 levels in the organisation namely: the junior level (drivers, packers and administrative staff) and senior level (line managers). In return expanding means more work load for the line managers which shows more delegation and trust from the managing director, as the reason for hiring line managers is to ensure the smooth operations of the business while the CEO can concentrate on other aspects. Also in regards to the expansion, a new location will be required as their present location is in a small, chaotic factory. A warehouse location which will be close to the growers and markets will be sought out, so as to make the deliveries and supplies easy and reducing the costs. In securing a new branch for the business, the cost of renting a warehouse or buying a warehouse will be considered in regards to finances of the business.
In hiring of new staff, the organisation has to be in line with the labour laws in regards to employment contracts, minimum wage, terms and conditions etc. Expanding an organisation does not mean having less satisfied workers as larger organisations tend to have more distinct policies and practices (reference).
According to Heery and Noon (2010) defined performance management as the process of linking the overall business objectives of the organisation with the departmental objectives, team objectives and individual objectives. It generally involves target setting, evaluation of actions and taking of remedial actions. Furthermore they defined appraisal as the process of evaluating the performance and assessing the development or training needs of an employee. Ark currently doesn't have any form of appraisal and as a small organisation with staff strength of eighty eight employees; there are a couple of appraisal methods that will fit the organisation. The junior employees will be appraised from two different aspects using the customer appraisals which includes customer's surveys like questionnaires and surveillance, and team based appraisals which focuses on the employees working as a team and not as an individual as the business is a process linked where each department is as important as the other department in meeting the end target. The team based appraisal will be a collation of all the line managers' score on each department and if the company makes a profit, it is shared across all departments as a reward. The line managers will be appraised with a combination of upward appraisal, competency based appraisal and team based appraisal, this involves appraisals from their junior colleagues that they manage, evaluated on their departmental performance and appraised on the way the job is done rather than what is achieved( Sparrow, 1994).
For the new hires, they will be required to be trained on the business processes and what the values, aims and objectives of the organisation are, in order to be part of the organisation's culture. The training for new employees will be internal and on the job training which reduces the cost of paying for facilitators. The older employees especially line managers will be trained externally, courses on managing people, increasing productivity, how to be effective and efficient at work, leadership courses and in return could train the junior employees. This training in return assist in planning a career management in the organisation, whereby if anyone leaves the organisation, the work still carries on. Return on Investments for training will be the transfer of skills, knowledge and ability which in returns increases productivity, quality of work, staff retention and morale, efficiency at work. This is beneficial to both the organisation and the employees because the employees that act as facilitators have an autonomy feel and sense of responsibility. The trainees are brought up to speed as they learn on the job which is the practical aspect and errors are corrected quickly.
Implementation of Solutions.
With the buying into the acceptance of the new contract (change management), the suggested solutions can now be implemented. A good HR strategy and policy making is not all about the design but how the strategies and policies are implemented in the organisation. Ark will need to set a vision and mission statement to enable employees know the directions and aims of the company, in order to match the HR practises with the business strategy to get the best fit and develop an organisational culture.
CIPD research with Said Business School has identified seven areas of activity that make successful change happen - 'the seven c's of change':
choosing a team
crafting the vision and the path
connecting organisation-wide change
consulting stakeholders(Customers and farmers)
coping with change
This will help in handling the change management in the organisation.
The managing director seals more deals with farmers at the fairs and exhibitions that she attends. This will help Ark to meet up with the supplies for the new contract so as not to disappoint them.
In getting the type of soft HRM in place will not be difficult as employees are already happy to work with Ark as stated in the case study and it's still a small growing business, so things like open door policies will be in place whereby any issue with an employee can be discussed with their managers and solutions can be sorted out as this will help the employees feel satisfied with their jobs and according to (reference) stated that engaged and satisfied employees are productive workers. This policy is a non-financial policy as this is an intrinsic motivator to employees.
The recruitment will be done by via mouth, publication in the local newspapers and online for senior levels. Since the organisation is cost driven getting candidates online will be the cheapest source of recruitment by using platforms like LinkedIn, Twitter, and Facebook etc. The junior staff selections will be on contract basis (which can be renewed every year depending on the need of the company) while the senior level will be permanent basis especially looking out for someone with the experience and education in the relevant field of Ark's business, this will help in bringing in new methods, techniques and introducing new knowledge (reference).The terms of employment will still remain that the line mangers earn salaries while the junior works earn piece rate. The managing director will still be involved in the selection of candidates but for the junior levels, meeting the managing director can be the final phase after getting only the shortlisted candidates (maximum of 2 candidates), where the managing director can make the final decision if necessary, while for the senior positions the managing director will conduct interviews with other line managers and selection will be done after. Each new recruit at the junior level will earn the minimum wage. The advertisement of the vacancy will be a quarter-page in the local newspaper which will cost between the ranges of £50-£100/day; a website can be created which can be done through Google and an email to receive the CVs.
Chief Financial Officer
Chief Operations Officer
Human Resources Officer
Positions to be filled internally.
Positions to be filled externally
Positions already occupied
Fig 1: Organogram of Ark Nurseries
From the above organogram emphasis has been put on the forecasted vacancies in the company. Some vacancies can be filled internally through promotion. The junior employees will start off on a minimum wage salary and performance will be rewarded if target and profit is made.
Internal training and on the job training helps in reducing costs of an organisation, whereby employees that have the necessary experience will be facilitators to the new employees in terms of transferring of their skills and knowledge. For the external training, the skill gaps will be identified and facilitators that can be bridge the gap will be sought out. Training ranges from £60/week to £1000/month depending on the courses. (www.cavc.ac.uk/training)
As factual figures for profit margin are not provided in the contract, the following cost analysis were based on considerations of Ark being run as a small scale company and thus having limitations. However, their economic relevance is however stated to justify the choice.
New location and equipment-1000
Recruitment and selection- 250
Internal training and on the job- 50
External training- 100
Salary for new hires-
Performance and rewards- dependent on profits.