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This purpose of this business report is to reflect the concepts and techniques of operations management within Gerdau through the HR transformation initiative. The document will give us a clear picture of Gerdau's strategic objectives an its alignment with HR's business operations objectives and how it enables execution the transformation objectives.
The project seeks to create a multi-year Human Resources Transformation project that will improve HR operations, technologies and services. The multi-year journey will include streamlining of the existing HR processes, designing and implementing shared services, designing and implementing SAP ERP as the new global HR system, and preparing its workforce to effectively work in the future state operating environment.
Brief Description of Gerdau and the HR Business Operation
The History of the Gerdau began with the values cultivated by Joao and Hugo Gerdau, expanded by Curt Johannpeter, clearly shows how it is possible to build a successful business model that values employee autonomy and the pursuit of excellence. Established 110 ten years ago, the company has since developed and evolved to being the " leading company in the production of long steel in the Americas and one of the major suppliers of specialty long steel in the world" (Gerdau,2012).
The values the company relies on from the basis of its thoughts, determine actions and its decision. This same value explains the choices and strategies that the organization has employed throughout its 110 years of existence and within its HR business operations. With 10,000+ employees and contractors in 14 countries globally, Gerdau continually seek to implement the best organizational solutions to enable it to be forefront in the development of its people, improve and modernize its human resources management systems and business processes visible in the value statement" thinking globally and following models that encourage organizational development in order to be the best steel companies in the world" Gerdau Johannpeter Family (2010)
Strategic Objectives of Gerdau and HR Operation
Strategic objectives and alignment- Strategic alignment focuses energy, eliminates redundancy, eliminates conflicting work and defines the capabilities and competencies which provide competitive advantage to the organization (The knowledge Compass Inc, 2006, p.4). In light of this, there is the understanding that creating synergy requires more than a concept and a strategy. (Kaplan and Norton, 2006). The enterprise value proposition defines the strategy for value creation through alignment of business processes and organizational objectives.
With this focus, HR as a business operation within Gerdau seeks become a strategic partner that develops new service models based on Center of Excellence (COE's), shared services and consolidated Human Resource information systems that improves standardization of core HR processes across geographies and business units and ultimately boost the organizations performance and effectiveness.
HR Operation/Process Design
Since the design of HR business unit is derived from strategy, the process design activity is closely related to strategic activities. "To design is to conceive the looks, arrangement and workings of something before it is created" (Slack, Chambers & Johnston, 2010, p.87). Further more, the organizational strategy forms the basis for the entire operating model.
The strategy provides the guidance and framework on which all initiatives and operations within the business rest. With this HR transformation initiative, the HR strategy forms the next layer of the model, it is based on and aligned to the organisational strategy and provides specific guidance to the delivery of HR services to the organisation.
Group Strategic HR is the central structure that will house the HR Centre of Excellence (CoE) as well as the HR Technology and Services solution. This unit will be responsible for talent management and people related risks and regulations. The CoE's will be responsible for developing the specific practice strategies, policies and processes in collaboration with the divisional HR structures. They will provide the guidance to the divisions, but the responsibility for implementing and executing on these agreed approaches remains with the divisions.
In order to provide a stable systems landscape to the business unit, the centre retains primary accountability and responsibility for the management, operations and maintenance of the underlying HR technologies (SAP). As this is a shared system, the administration of the system will be managed centrally with the capturing of transactions taking place in the divisions. The final design of HR Operations - IT, though its description not in scope of this report will be is also an important piece of the overall HR process design.
The divisions will be are responsible for interacting with the CoE's and Group Strategic HR in order to develop strategies and processes as well as to provide feedback to the CoE in light of the current climate and trends in the divisions. This feedback will allow the CoE's to adjust and review the relevant HR practices to ensure that they remain in sync with the needs of the Group as a whole.
Delivering the HR services and implementing the customised solutions within their operations is the sole responsibility of the divisional HR structures.
Transacting with the shared solutions (SAP ERP), the capturing of all HR data and initiation of HR transactions are the responsibility of divisional HR. Ownership and accountability for HR data also resides in the divisions.
In order to maximize the effectiveness of the HR business unit, the physical layout is equally as important as the process design. The basic objective of layout is to ensure a smooth flow of work, material, and information through a system. The basic meaning of facility is the space in which a business's activities take place. The HR business unit will be located in the organization's head Office/Corporate office. The department will take up an entire floor of the corporate office building. Adil Dereli and Sabuncu (2006) describes operational factors that should be physical layout. Operational factors such as flow and movement of personnel, Flexibility, Safety and ease of communication will be considered in the establishment of the physical layout of the HR Business unit.
Utilization of Technology
Information systems and technologies play a crucial role in corporate strategy and strategic planning. Laudon and Laudon (2007). This realization propels Gerdau to take a holistic approach, combining HR strategy, process and technology; while fine-tuning the backbone of the HR division to increase the strategic value of HR. The technology of choice to support the HR transformation project is SAP ERP. This basis for choosing this technology is because of the previous analysis and RFI process that was initiated earlier on as part of the project. As Gerdau is a global organization, SAP provide the right match of technology platform as well as HR core functionalities like Personnel Administration & Organization Management in a global single SAP instance.
As a steel manufacturing company, Gerdau's Business process operations consists of a variety of business process types such as Batch processes, Job processes, continuous processes and mass processes. The different processes sometimes overlap (Slack, Chambers and Johnston, 2010, p.95) giving Gerdau the choice on what process it can apply for its different business units. Specifically the volume - variety characteristics of the HR business unit is categorized as a low volume- high variety continuum where the one type of technology (SAP ERP) supports various service processes such as payroll, compensation, benefits, organizational development, Talent management etc.
The HR transformation project will leverage the technology-leading hardware and software products from SAP. This helps to create the right horizontal and vertical scalability needed for HR business unit now and into the future.
The technical landscape to support a global business solution is usually comprised of many SAP components, which will also translate to architectural complexity. However, not only must it support complex business processes but also provide similar end-user experience across geographies and solutions.
Planning and Control of HR Operation
The ability to have the HR business unit react and respond to the many and various demands that will be placed on it is a key in the planning and control strategy of the HR business operation because several different aspects of performance such as cost, Speed of response, Quality of service, flexibility are impacted. This planning and control usually relates to "how the operation should react to fluctuations in demand". (Slack, Chambers and Johnston, 2010, p.299)
Part of the HR transformation initiative is to ensure that demand is balanced with capacity. To support the process such as payroll processing, benefits administration in a timely and efficient manner, the right system servers, and matching queuing jobs for the payroll processes to run will be considered in the capacity planning. Too few servers, or too many servers many impact level of service provided by the HR department and lead to dissatisfaction (Slack, Chambers and Johnston, 2010)
Failure and Improvement Management
A good transformation project adequately accounts for measures that will be used to either prevent failure from occurring, mitigate the impacts of failure or correct any form of failure if it does occur. Critical failures can result from a series of related and unrelated events that can be combined and totally disrupt a company's business (Slack, Chambers &Johnston, 2010, p.595). The failure analysis performed in the initial stages of the project 's business case development, revealed potential sources of failure as defined by Slack, Chambers and Johnston, (2010):
Human failure - seen in scenarios where key personnel within the organizations as a whole or within the HR business unit leave or are not able to fulfill their role as well as scenarios where personnel make mistakes while working on the job.
Organizational failure- reflected in failed processes within the organization's structure and culture
Technology failure - Seen in scenarios where the IT systems and infrastructure that is meant to support the HR operation fails or goes down.
Environmental disruptions- impact as a result of the economic downturn, political turmoil or major weather disruptions.
As such, two types of maintenance plans are considered within Transformation project:
Preventive maintenance - Is the maintenance prioritized to undertake intervention action to reduce failure of IT Systems and infrastructure before it wears out. Preventive maintenance will be planned on regular calendar intervals (weekly, monthly, quarterly, etc.)
Corrective/Reactive maintenance - Maintenance for varying failure types based on specific job requests received, planning this type of maintenance; will result in having any non-foreseeable failures planned for, and action plans already available.
Failure prevention is paramount in the strategic design of the HR transformation project for Gerdau. Particularly for the sources of failure that were identified above, prevention techniques such as building system redundancies, maintenance protocols described above.
The HR Transformation project is strategically positioned as business driver and enabler of HR operations, functionalities and processes within Gerdau. A successful HR transformation increases the value Human Resources adds to a business (Ulrich, Allen, Brockbank, Younger, & Nyman, 2009) by decreasing costs, increasing market share, positioning Gerdau as strong and strategic global leader and maintaining competitive edge. A targeted and well-defined organizational and operations management strategy helps move organizations in the right direction. This project that not only uplifts the operations management within Gerdau but also ensures that the HR strategic objectives fits and aligns with the organizations strategy that creates organizational effectives and growth and success.