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This is a case study on H&M, from a Strategic Human Resource Management perspective, based on publicly available details of H&M, which has been analyzed and presented within the context of the perspective. This case study was prepared to meet the requirements of an academic exercise.
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H&M was established in Vasteras, Sweden in 1947 by Erling Persson. H&M sell clothes and cosmetics in around 2,000 stores around the world operates in 37 countries and has 76,000 employees all working to the same philosophy: to bring you fashion and quality at the best price. H&M is a hugely successful multinational company. The success of H&M is primarily based on the business model of entire design being done internally and centrally, manufacturing totally outsourced, but quality ensured and local retailing with hired places, local staff and local shop managers empowered to take decisions. The success, business growth and expansion plans were possible because H&M have formatted their HR strategy in line with the corporate strategy. As evident from their Annual Report (2008), when they expand into new markets they do not lose sight of their core values. They have succeeded to manage all components of HRM effectively to ensure that core values are upheld in all parts, regardless of country and cultural differences. Their strategic and coherent approach in recognizing that the organization’s most valued assets are the people working there,
INTRODUCTION & COMPANY STRATEGY:
Hennes & Mauritz (H&M) was established in Vasteras, Sweden in 1947 by Erling Persson. H&M offers fashion and quality at the best price and offers fashion for women, men, teenagers and children. The collections are created centrally by around 100 in-house designers together with buyers and pattern makers. H&M also sells own-brand cosmetics, accessories and footwear. The stores are refreshed daily with new fashion items. In Sweden, Norway, Denmark, Finland, the Netherlands, Germany and Austria H&M offers fashion by Internet and catalogue sales. H&M does not own any factories, but instead buys its goods from around 700 independent suppliers, primarily in Asia and Europe. H&M has about 16 production offices around the world, mainly in Asia and Europe. The turnover in 2009 was SEK 118,697 million. H&M primarily operates in Europe, North America and Asia, and have around 2,000 stores spread over in 37 countries. The company is headquartered in Stockholm, Sweden. H&M has grown significantly since its beginnings in 1947 and at the end of the financial year had around 76,000 employees. The average number of employees in the Group, converted to fulltime positions, was 53,476 (53,430), of which 4,874 (4,924) are employed in Sweden. Around 79 percent of the employees were women and 21 percent were men. Women held 77 percent of the positions of responsibility within the company, such as store managers and country managers (AR2 2009).
H&M’s strategy is to offer fashion and quality at the best price. H&M’s annual report (AR1 2009) emphasizes that “quality” relates to both. H&M’s products exceeding customer expectations, and also customers being satisfied with the company itself. The report states “Taking responsibility for how our operations affect people and the environment is also an essential prerequisite for H&M’s continued profitability and growth.”
H&M is driven by strong values such as commercial mindset, simplicity, constant improvement, cost consciousness and entrepreneurship states in annual report (2009:13).
The World of H&M (H&M 2010)
Long-term strategic plan & goals of H&M
H&M which is in the fashion retail industry. H&M has stores in 37 different countries and employs over 76,000 people. The business concept of H&M is very clear. It is offering to clients qualitative fashion clothing for low price. The company has its own team of designers, its own interior designer team, its own production factories, production partners and team for purchasing other brands’ production. It usually stock up H&M cosmetics supply, making sure that those products will be cheaper than in other stores.
Long term objectives are strategic plans company make for future five years. These objectives are set in seven key areas- productivity, profitability, competition, employee development, employee relations, technological leadership and public responsibility and show were company wants to be when they are achieved. Long term objectives have to be motivating, flexible, measurable, suitable, understandable, realistic and acceptable by employees.
Three main strategic goals for H&M for the next five years would be linked with profitability, competition and technological leadership. H&M has reported a rise in sales and profits and sales for the three months to 31 August. Net profit for the third quarter of 2009 rose 4.1% to 3.46bn Swedish crowns from 3.33bn crowns last year. Sales, excluding sales tax, increased by 13% to 23.6bn crowns. So first LTO is to maintain financial stability H&M has achieved. H&M plans to increase sales revenues by 20% and earnings per share by 30% till 2015.
Secondly as main strategy of H&M is expansion, LTO in competition is to increase number of stores by 10% to 15% every year. Today H&M has as 1840 stores up from 1618 at the same time last year. New stores will be open in the cities H&M already has stores and also in completely new markets.
In the Annual Report (2008:7), H&M, CEO Rolf Ericsson states that the long term goal is to “Make fashion available to everyone, give the customer a fashion experience that strengthens H&M brand”. They also state the goal of a 10-15% increase in the number of stores every year, which would be funded internally (2009). The aim to increase sales in existing stores, while focusing on quality and continued high profitability.
How does H&M want to get there?
To execute its strategy H&M focuses on 3 main aspects of its business concept in the annual report of 2009.
- Price, which is controlled by limiting the number of middlemen, buying in large volumes, relying on its in-depth, extensive expertise within the design, fashion, and textile industries, buying the right merchandise from the right production markets, being cost-conscious at all levels and maintaining effective distribution procedures.
- Design: Products are designed in-house and production is completely outsourced.
- Quality: Central emphasis on quality with extensive testing and ensuring least environment damage.
- Merger and Acquisitions: Acquisitions (like FaBric Scandinavian, the Swedish design company), and Design Collaborations (collaboration with Mathew Williamson) are adopted.
(S)trengths – One of the main reasons for H&M’s popularity is because of its trendy items for such a low price. This store offers quality clothing at department store prices which is rare for many retailers today. Strength for this company is their overall delivery time. It only takes 12 weeks to get an item from the design to its retail state which is very impressive for a worldwide, low price retailer. The average for retailers is usually about 6 months which is double the time that H&M uses. They also manage to keep the stores brands fresh with guest designers coming in for different lines in the store. Some of these have been Madonna and Robert Cavalli. They also keep the prices affordable by using very few middlemen and buy large volumes cost consciously. But with these strengths come weaknesses as well.
(W)eaknesses – One of the strengths I mentioned above can also be a weakness for this company. Buying large volumes means that there is no real guarantee that all the items will be sold. This means that they’re already low prices may have to be lowered in order to make room for the next collection. This means that if these items are not sold in time, then the company will have to pay more for extra storage for the items not sold. Another weakness could be its wide range of customers this brand provides for. The range is for men between the ages of 18-45. This is not including the children’s clothing and maternity wear and the huge wide range of different styles they provide depending on what store you go into. This can be difficult to manage especially in a vertical company because there is no real focus on a target customer and gets more expensive to provide machinery for all these different groups of people. But with these huge leaps there are many opportunities for this company flourish.
(O)pportunities – One good opportunity would be for H&M is to have matching clothes for mothers and children. I think this would be a good opportunity because there are also maternity wear and children’s clothes and I think that it would appeal to a larger crowd. They would like to dress their children like them in the same styles.
(T)hreats – since H&M is a brand that is very unique it has very few threats as far as retail chains go. One of these stores would have to be the clothing chain called ZARA. This is a store that also has fairly reasonable prices but is most famous for its rapid delivery time. It only takes two weeks for the design to make it into retail stores. Even with H&M’s time which is 50% faster than most retailers, cannot even compete with that time. The second threat to H&M is Gap just because of their quality at reasonable prices and their wide range of people they reach as well with their vertical company as well. There is a market for babies as well as men and women
H&M’s corporate strategy is to expand on a continuing basis, and as a consequence, employee strength also increases continuously. The growth target is 10-15 percent new stores each year, which means that 6,000 -7,000 new jobs each year. Their staff is spread across approximately 37 countries and come from different cultural backgrounds. Their strategy is to recruit locally whenever a new store opens as stated in the annual report (2008).
The main area for which H&M may have clearly articulated policies are listed below. The policy areas are based on the categorization by Armstrong (2006).
Overall Policy and Values: H&M’s website indicates that their objective is to be a good employer, including in those countries whose laws and regulations fall short of their own requirements. To quote the Head of HR “In order to meet people’s expectations of H&M as an attractive employer, the company develops global guide lines on diversity, equal rights and against discrimination” (AR1 2008).At H&M, HR activities are guided by a fundamental respect for the individual. This applies to every aspect from fair wages, working hours and freedom of association to the opportunity for growth and development within the company. This also indicates that the company has specific policies for areas such as Equal opportunity, Managing diversity, and Employee development, Health and Safety, among others.
Employee Relations and Voice:
H&M has an open door policy granting all employees the right and the opportunity to discuss any work-related issue directly with management (AR1 2008). They also support their employees’ right and ability to organize and to decide who should represent them in the workplace (AR1 2008). H&M has positive experience of open and constructive dialogue with the trade unions and they welcome such relations wherever they operate. They consider such cooperation to be essential if they are to become even better. Examples of collaboration on staffing issues include their agreement with UNI (Union Network International) and the work they do with the EWC (European Works Council).
- Promotion: In the annual report of H&M (2008:34) the Head of HR quoted “Internal recruitment and job rotation enable the company to grow quickly”. This statement indicates that H&M has policies related to promotion.
- Employee Development: To quote Mr. Par Darj, Head of HR at H&M “I tell employees, if you do not grow neither will H&M” (AR1 2008:34). This indicates that policies exist for this area.
- Rewards: According to the annual report (2008) H&M focuses on rewarding people by providing more opportunities and responsibilities, and not through a promotions and job titles. This indicates that H&M has policies for this area.
Other areas with clearly defined policies might exist, but these are not evident from available sources.
Organization Behaviour and Structure
Structure: Corporate management is based at H&M’s head office in Stockholm. Stockholm is also where the main departments for design and buying, finance, accounts, expansion, interior design and display, advertising, communications, IR, HR, logistics, security, IT and CSR and environment are located.
H&M has around 16 country offices that are responsible for the various departments in each sales country. H&M also has around 16 production offices which take care of contacts with the approximately 700 independent suppliers that H&M works with. There are nine production offices in Europe, eleven in Asia and one in Africa.
Behaviour: H&M operates in 37 countries and has a work force belonging to these 37 countries because they recruit locally. H&M’s espoused values are stated to be the foundation for a multinational company in a multi cultural market where great respect is paid to the individual.
Interviews with the CEO and Head of HR in the annual report indicate a participative culture where “everyone is made to feel like a part of the company’s success” (AR1 2008:34). Par Darj (Head of HR) stated in the annual report the key word for continual growth is responsibility and commitment. We have committed employees and we are prepared to delegate responsibility at every level. The company encourages what it calls the “The H&M spirit” employees committed to their work and prepared to take on new challenges, common sense, hard work and team spirit are encouraged. All their operations are typified by an essential respect for the individual; including reasonable wages, reasonable hours, and opportunity to grow, and develop within the company (AR1 2008). Quotes from employees about the organizational climate indicate that the values above are “values in use”. These quotes can be found on the career section and in the annual report of H&M.
Based on this information; the prevalent culture appears to be primarily “task oriented” (Schein 1985). Such a culture can support H&M HR related strategies and policies (like Open door, job rotation, freedom of association etc.). They also have a significant impact on HR aspects; Recruitment needs to focus on finding candidates with the right fit to the organizational culture irrespective of local culture, facilitating expatriation of experienced staff when new stores are opened, facilitating rewards schemes aligned with organizational culture, enabling HRD that can empower employees to take on new challenges and work in new teams.
At H&M, a lot of importance is given to personality development and for opportunity for the employees to grow within the organization. Various practices empowering the employees; like a Shop Manger being allowed to take independent decisions, and managing the business like an entrepreneur etc. are designed to increase employee loyalty and commitment to the organization and are great motivators (AR1 2008). The HR strategy for employee motivation; total reward with emphasis on Intrinsic Motivation (Armstrong 2006), has been proven, to be directly related to forming the success of the organization. All their operations are typified by an essential respect for the individual; including reasonable wages, reasonable hours, opportunity to grow and develop within the company (AR1 2008) The prevailing organizational culture at H&M encourages team work, supports effective leadership and provides adequate growth opportunity for employees. These HR strategic initiatives in turn make significant contributions to the organizational goals of continuing growth and profitability.
H&M’s strong corporate culture – the spirit of H&M – has existed ever since the days of H&M’s founder, Erling Persson. This strong culture is of great value and is a contributory factor to H&M’s successes over the years.
The spirit of H&M: The spirit of H&M is based on a number of values that describe in simple terms how we want to work. These are in turn based on our business concept, fashion and quality at the best price. The fundamental values behind the spirit of H&M are among other things common sense and own initiative. H&M provide room for people to make their own decisions and take responsibility, and co-workers get regular feedback on their performance. An important part of H&M’s culture is to delegate responsibilities to the stores. Strong commitment and involvement are important, and co-workers are encouraged to take their own initiatives within a defined framework. Creativity and job satisfaction increase when there is a good working environment. Co-workers’ commitment makes a major contribution to H&M’s successes. H&M believe in the abilities of the individual and encourage co-workers to develop further. Respect for the individual is a fundamental value at H&M. This applies to everything from fair pay, reasonable working hours and freedom of association to the opportunity to grow and develop with the company. Job rotation is common at H&M. In the stores, for example, duties may vary between the cash desk, fitting rooms, unpacking, display and follow-up of advertising and campaigns. Working in the store provides very important experience and is a way of getting to know H&M from its very foundation. Attracting and retaining skilled staff is important for H&M’s success therefore H&M work constantly on skills development and all training is carried out within H&M. However, the biggest knowledge gain is made through active learning on the job.
H&M has employee-scheduling system to improve its use of staff resources and maximise time spent by staff on the shop floor.
The Swedish clothing company implemented. 30,000 employees swipe in and out with smartcards at the beginning and end of their shifts. The system reduced administration by recording shifts electronically and helped improve sales by scheduling shifts to coincide with the busiest times in stores.
The scheduling application is linked to H&M’s human resources and payroll systems, which lets the retailer control staff costs more accurately.
The Workforce Management application from software supplier Work Place Systems will be hosted at a data centre in Stockholm.
Motivation at H&M
H&M is a flat organization, which might give the impression that it’s hard to move up within H&M, the organization is constantly evolving and is growing fast, thus providing more opportunities to its employees. Employees are motivated by providing new challenges; in another department, another role or, another country. H&M encourages employees to try many different roles within their organization stated in annual report part 1 and 2 (2008).
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H&M recruitment advertisements indicate possibilities like: working abroad, furthering education and learning new things. Their websites promotes that many in management today, actually started on the shop floor. H&M also provides a comprehensive benefits package. H&M fulfils employee aspirations by providing opportunities to take more responsibilities.
Individual development versus organisational development.
H&M’s annual report (AR1 2008) and website (Careers website), emphasize that working at H&M is about commitment, both from the individual and the organization. H&M’s Head of HR emphasizes that organization can grow only if the individuals grow. H&M won’t make a career plans for their employees, but will provide them with tools to go as far as they possibly can on their own.
This indicates that at H&M, individuals are expected to drive their own development, within the framework that the organization provides. The organization appears to facilitate and promote cross-functional and cross-boundary development opportunities for individuals, which is aligned with their own development and growth strategies.
To quote Pär Darj, (Head of HR), “We have committed employees and we are prepared to delegate responsibility at every level. I tell employees, if you do not grow neither will H&M”, (AR1 2008:34). This indicates that H&M treats individual development and organizational development as tightly linked areas.
Selection & Recruitment
The HR strategy, which is closely aligned with the organizational strategy to achieve continuing growth and profitability, envisages recruitment of people every year to run the new stores scheduled to be opened. For example, as per their Annual report (AR1 2008), about 6000 – 7000 employees are to be recruited during this financial year, to meet the requirements of the 225 new stores being opened worldwide. The planning and recruitment is based on the HR policy to recruit locally when a new store is opened. Future employees are evaluated and chosen according to certain criteria practiced by H&M and based on the company’s culture.
They look for people with personality who can perform well within the culture, growth and motivational framework provided at H&M. Par Darj, Head of HR stated, At H&M, great grades and all the university credits in the world are no guarantee of a job or a fast-track career. Of course, we do welcome those things, but what we are really looking for, more than anything, is people with the right personality. This is based on the belief that one can always gather skills as you go along, but personality and attitude can’t be taught. Either you’ve got it or you don’t. One of the most important things we look for is drive (AR1 2008). H&M values personal qualities much more than formal qualifications. Since H&M is a fast company and the tempo is always high, they need employees who are self-driven and capable of well direct communication. Hence H&M recruits people who like responsibility and decision-making also it indicates that a love of fashion combined with a focus on sales is perceived as an advantage. These appear to form the basis for H&Ms recruitment requirements (and person specifications), programmes and drive its selection processes.
At H&M selection interview approach is usually face to face and mostly “structured situational based” According to Armstrong (2006) In a situational based interview the focus in on a number of situation or incidents in which behaviour can be regarded as being particularly suggestive of succeeding performance. This is followed by panel interviews and aptitude/work sample tests. It appears that candidates are filtered at each stage of the process in H&M.
Sources of candidates:
Internal Recruitment: This is their first choice for a new job opening. External recruitment is considered only if no internal options are available.
External recruitment: Potential recruits (minimum age is 16 years) are encouraged to apply directly to the local store, from the careers website. H&M does not offer summer jobs or work experience placements. Buying is centralized in Stockholm, and so is the recruitment for the same.
H&M recruits locally to its new stores (AR1 2008).
Organisational learning and management development in H&M.
The average numbers of training days per employee in 2008 are, 10 for new sales staff, 1 for existing sales staff and 5 for existing management positions. H&M usually conducts all training in-house (classroom, stores and one to one), written and produced by H&M staff. External training has been considered for some areas like buying. E-learning has also been initiated for a few subjects (AR 2008).
However, indications are that H&M today focuses more on on-the-job, just- in time, hands on learning. For example, when they opened their first H&M store in Japan, locally recruited employees were sent to Norway and Germany for gaining experience in existing operations. Also, during the sales intensive opening phase of a new store, colleagues from other countries are brought in temporarily (AR 2008). The head of HR quoted in annual report (2008:34) “As an employee of H&M, you can be an entrepreneur and you will be given responsibility early on”. H&M claims to provide structured opportunities for on-the-job, hands on and work place based training.
To summarize, it appears that H&M focuses on experiential Self-directed learning today as defined by Armstrong (2006), however, they are moving towards incorporating a blended approach with including simulation and e-learning.
Ensuring Learning and Development opportunities for its employees is an integral part of the HR strategy at H&M (AR1 2008), and these essential ingredients contribute significantly to the success of the organization. Human Resource Development is a continuing process at H&M, the new recruits being sent to already existing shops for gaining valuable experience, experienced employees being brought to new shops to support the new local recruits during the intensive opening period activity etc. This is critical to the process of organizational learning and helps them climb the learning curve faster. Keeping employees highly motivated is essential to the success of H&M, due to the nature of its business of dealing in high fashion consumer goods. The various concepts that can be adopted to increase performance (like job satisfaction as a reward management tool) are very effectively employed and as the employees themselves state, they are happy to be there and every day is a challenge (AR1 2009). Expectancy Theory, which states that if individuals feel that the outcome of learning is likely to benefit them, they will be more inclined to prove it (Armstrong 2006) has been proven on the shop floors of H&M.
The HR practice of giving responsibility to the employees early on in their career, treating them as entrepreneurs rather than just employees is a definite and positive step towards their development. Considering the employees as capable of shaping its results and improving it in big and small ways and is key to H&M’s approach to learning and development.
The reward management process of H&M and its potential influence on human resource management.
H&M’s careers website indicates that the company offers a comprehensive benefits package, which includes staff discounts, incentive bonuses, company sick pay, private health care & a pension scheme. Share options are not provided. The head of HR, indicates that they do not consider titles and pay structures as motivational tools. Opportunities to fulfil an employee’s aspirations by wanting more responsibility, as a means of getting on with in the organization quickly, are provided. Apart from these, as stated by different categories of employees on the careers site and the annual report, the main reward is the job satisfaction they derive.
Thus, H&M appears to provide a total reward framework, with greater emphasis on relational rewards even though transactional rewards are provided (Armstrong 2006). H&Ms reward management is consistent with other HR areas, including organizational culture, recruitment/selection etc. and is also in sync with the overall HR strategy of “open doors”, “job rotation” etc. which is essential to fulfil H&Ms strategy of fast growth.
H&M has implemented the concept of Total Reward Management very successfully. Apart from the financial compensation, job satisfaction as a reward has motivated the employees to perform and contribute their maximum to ensure customer satisfaction and business success through increased sales. This is evident in the statements by the employees from various levels on the H&M website. As a stated policy, there is more emphasis on personality development through delegated authority in the decision making process and greater autonomy to local elements of the organizational structure. Being a multinational company with employees of different cultures, this decentralized decision making process and empowerment of employees have proven direct impact on the success of H&M (AR1 2008) Various techniques associated with basic motivation have been given more importance and priority than the extrinsic aspects. Work environment related parameters like leadership, employee voice, recognition, achievement etc. have been built in to the HR policy and practiced to leverage the critical business goals of continuing growth and increased profitability.
H&M has adopted a strategic and integrated approach to achieve organizational success through improved performance of its employees. H&M employees have been told that the growth of the employees and the organization are closely linked (AR1 2008). The practice of Shop Managers going through a process of reviewing that day’s business with their subordinates on a daily basis is part of the performance management activity. This underlines the fact that H&M has recognized the importance of such a practice, and built in that process by which managers and their subordinates work together, agree on what needs to be done and how it is done. They are able to plan, prioritize and develop their sales team in a customer-focused environment (AR1 2008). At H&M a shop manager is in charge of the daily running of the store like running their own business. The HR strategy of delegating authority for managing the shop’s activities is a key factor contributing to the success of the organization.
Managing Diversity in teams and groups
H&M is expanding its business to open new shops in countries where they are currently not present. By their HR policy and procedures, when a new shop is opened the staff recruited locally. They also have the practice of job rotation and movement of employees from one location to another based on internal recruitment (promotions). This brings together people of different cultural back grounds together in the same team, and successfully managing such a team is crucial to the success of the organization. The HR strategy is, not to have very rigid procedures, and the corporate culture of respect to the individual. As stated in their Annual Report (AR1 2008), the HR strategy ensure the following:
1. In order to meet people’s expectations of H&M as an attractive employer, company develops global guide lines on diversity, equal rights and against discrimination.
2. H&M’s objective is to be a good employer, including in those countries whose laws and regulations fall short of their own requirements. The whole of their activity is shaped by a fundamental respect for the individual. This applies to every aspect from fair wages, working hours and freedom of association to the opportunity for growth and development within the company (AR1, 2008).
3. H&M has positive experience of open and constructive dialogue with the trade unions and they welcome such relations wherever they operate. They consider that cooperation is essential if they are to become even better. Examples of collaboration on staffing issues include their agreement with UNI (Union Network International) and the work they do with the EWC (European Works Council). (AR 2008)
H&Ms success in executing their strategy of continuous international growth and expansion, while maintaining its Swedish organizational culture, indicates that its HR practices have contributed to the successful management of diversity in teams and groups.
Recommendations & Conclusion
Issue and challenge at H&M could be: nurturing and maintaining a balanced relationship with employees. Line managers may need good awareness of their reporters’ aspirations, to enable motivation by providing responsibilities and opportunities al
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