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Human Resource Strategy and the Firm Ill (Measurement Issues)

Apex Inc. Case Study

Apex is a five-year-old company that is engaged in two types of related businesses: (1) it manufactures and sells document imaging equipment for commercial use; and (2) it serves clients by helping them build computer systems to read and analyze documents. For example, whenever a company wants to eliminate a warehouse of paper, it purchases one of Apex's scanners, a "juke box" of CD disk storage and other document imaging equipment. It then scans all the paper and converts the information into computerized form. Then Apex consultants from its service branch work with the buyer to program software to convert the computerized documents into databases for analysis.

Apex hardware and software are currently being used by the Navy to computerize all the records of the military, and by a wide variety of federal agencies. Private law firms use Apex to computerize all their documents for trials. Corporations use Apex to computerize all their records and create new computer applications.

Apex has 1 ,500 employees, generates $2 billion in sales, and has a pre-tax profit margin of 17 percent. It has one main office which includes a "lab" for the software engineers, and a "plant" that assembles all the computer components. The company has placed little emphasis on marketing because of the uniqueness of its product, especially its ability to service clients who generally have heard about it by word of mouth. However, larger companies such as Microsoft are getting into the document imaging business and threaten to crowd Apex out of the market. Competition from abroad is also fierce, and the computer equipment portion of Apex's business is subject to being undersold via "pirated" hardware and software. Apex's main competitive advantage is its ability to customize service for its clients and design systems for them on an individual basis. But this is also a constraint on its ability to grow, since it requires highly specialized labor intensity.

The CEO is young and very smart, but lacks the executive skills to run more than a small cottage-industry type of company. Fortunately, she recognizes this, which is why she recently hired a chief operating officer and subsequently you as the new VP of Human Resources. When the CEO was searching for an HRVP, she wanted someone who could help the Chief Operating Officer "transition" the organization and its workforce. In fact, she was seeking someone who would know wh~t the HR function could and should deliver and would deliver it.

Lately she has been focusing on cost cutting, but this has resulted in a drop in quality. With the cost-cutting pressures, significant problems have been developing between the engineering staff, who claim the equipment they send to the customer works fine, and the sales staff, who receive complaints that customers are not satisfied. When you and the Chief Operating Officer arrived, you found reams of data generated by the various divisions, but many of these data did not seem to be used by anybody (you suspect that they were generated more to test new software than to fulfill specific purposes).

A new customer-service database has just been added to help everyone keep track of new customer demands, customer complaints, etc., and as a tool to monitor all the jobs in this growing business.

It was the Chief Operating Officer's first decision to sell the manufacturing unit and to pursue a customer intimacy strategy in providing customers with solutions in document imaging and retrieval. He is also to coordinate the strategic direction and scorecard of the company and work with its various divisions, including:

• Systems design (designing a system to meet the client's needs);

• Systems engineering (procuring from vendors the components of the computer equipment needed);

• Systems delivery (installing the system and working with the client to implement it);

• Marketing (finding new customers);

• Compliance (OSHA and environmental concerns stemming from use of certain toxic materials in the computer lab related to special high-resolution equipment), and

• Human resources (training current workforce, and upgrading skills as necessary).

The main task before the Chief Operating Officer is to determine the strategic growth opportunity for Apex, and what might be the constraints to achieving this growth. The two of you must also put in place a strategic performance measurement system to track and enhance Apex's success and the measures for measuring the success of the HR function in delivering the work force to enable Apex to achieve its strategy.

Apex's current organizational structure and human resource management (HRM) system can be characterized as follows:

- The organizational structure can be described exhibiting strong organizational "silos," with little cross-functional communication or coordination.

- The HR function can also be described as highly "silo-based" as well. The recruiting, selection, performance management, compensation, and HR planning & strategy areas generally operate in an autonomous manner.

- HR managers can generally be counted on to properly administer compensation and benefit programs and hire people as requested, but are frequently described by line managers as overly focused on compliance and cost reduction at the expense of solving specific business problems.

-Jobs are designed in a traditional (i.e., narrow) fashion. Team-based work structures and decision processes are very limited.

- Recruiting and selection is generally focused on filling current openings. Little consideration is given to hiring for potential or "promotability." Hiring decisions are generally made on the basis of resume screening and interviews; no formal validated selection tests are employed.

- Considerable resources are devoted to skills development for new and continuing employees. Training systems tend to be aimed at general skills development and generally are provided to all employees.

- Performance appraisal and management development systems have been in existence for many years. However, many employees described the firm's performance management process as "routinized" and not particularly impactful on individual, team, or business-unit behavior. In addition, line managers frequently complain about the time required to complete these evaluations.

- Compensation is generally not contingent on individual, work group, or firm performance. When pay increases are granted, they are generally given proportionally to all workers. As a rule there is little differentiation in pay between the lowest and highest performing workers in any given job title.