Human Resource Management Assignment 2

profilematador
Week1Case2Strategy_DrivenHumanResourceManagement.pdf

7

2 Strategy-Driven Human Resource Management

Case 2.1. The External Environment: When State Government Offers Early Retirement The external environment consists of a series of influences that originate outside the organization and that the company cannot control. These external factors, which must be considered when forming a strategy, include customers, competition, suppliers, shareholders, society, technology, the economy, the labor force, and our government.

In regard to the external force of the government, we have come to expect our government agencies to be complex, formalized, and centralized in terms of organi- zational structure.

Government agencies are very large organizations that are normally very com- plex. Complexity involves the way in which we divide the organization into differ- ent segments. Government agencies are often organized into many different layers of employees, which makes communication more difficult between the different parts of the agency. Government agencies are often known to be very slow at making decisions.

Government jobs are often standardized (formalization) within an agency, since they have to make decisions based upon many policies, procedures, and rules. Although these rules help employees to make routine decisions, they also stifle cre- ativity since employees must also follow these rules.

Overall, government agency decision making needs to be made by top govern- ment officials (centralization) to ensure the same decision is given to each citizen. Centralization helps to maintain control and should also result in lower costs.

National, state, and local governments all set laws and regulations that businesses must obey. Federal and state governments create opportunities and obstacles for busi- nesses. Safety standards set by government agencies, such as the Occupational Safety and Health Administration (OSHA), are meant to increase employee safety while in a working environment. The Environmental Protection Agency (EPA) set standards to reduce pollution. Although it can be expensive for a company to meet the standards

C o p y r i g h t 2 0 1 6 . S A G E P u b l i c a t i o n s , I n c .

A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

EBSCO Publishing : eBook Collection (EBSCOhost) - printed on 11/20/2021 9:10 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS AN: 1945902 ; David Kimball.; Cases in Human Resource Management Account: s4264928.main.eds

Part I • 21st-Century Human Resource Management Strategic Planning and Legal Issues8

of these types of agencies, the laws are designed to improve our quality of life at work and at home.

However, just like a for-profit company, the government has to be careful about hiring people to work in its agencies. At times, the government can experience a defi- cit and has to entice its employees to accept an early retirement program.

In Massachusetts, the state government had a primary goal of achieving budget savings of $172 million by offering an early retirement incentive package. Governor Charlie Baker and his people estimated that 4,500 state workers would take the incen- tive. The actual number of people who applied for retirement was about 2,870.1 The reduced number of employees who accepted the reduced early retirement program might result in layoffs in state employees. However, the governor has promised to look for other solutions besides layoffs.

The state wanted to use 20 percent of the savings to refill positions that were now open. As an extra incentive, the state offered a $10,000 buyout to employees who were eligible to retire. It appears that 100 fully ready to retire employees accepted the extra $10,000 offer.2

The state of Massachusetts’s forecast for how many employees would take the early retirement package should have considered multiple issues. For example, Massachusetts had a record snowfall of 100 inches in the winter of 2015. The increased amount of snowfall should have enticed more government employees to retire early so they could move to a warmer climate. However, the people of Massachusetts are used to snowy winters—fewer left the state, or their position with the government, than expected.

Employees also are more likely to accept an early retirement program if they have been preparing for their own retirement. If employees have saved money in prepara- tion for their retirement, then they would be able to retire early since they will have enough money in retirement. But employees who have not saved enough for their retirement will need to continue to work to receive their salary.

Last, employees can have social reasons for working toward their proper retirement age of approximately 66 years old. Many employees enjoy the job they do at work. The job gives them motivation to wake up in the morning, to achieve something at work that is meaningful and can help other people, they enjoy their salary level and bene- fits package, and they enjoy the friendships of the fellow workers.

Enticing your employees to retire early from the company (or government) is lined with many potential problems. Here are a few examples:

• A “brain drain” situation can occur if your best and most important employ- ees take the early retirement package. Key knowledge toward running the operation will be lost if your experienced employees decide to leave the orga- nization early.

• A serious lack of talent can also happen if the number of people taking the early retirement package is more than expected.

• There would be fewer employees left to deal with the face-to-face interactions with customers if the middle-to-lower level state employees decided to take the early retirement package.

• It will cost more money up front to entice people to want to retire early.

EBSCOhost - printed on 11/20/2021 9:10 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Chapter 2 • Strategy-Driven Human Resource Management 9

Case Questions

1. Which force of the external environment has the greatest impact on the state of Massachusetts?

2. Which force would you select as the second greatest impact on the state?

3. Should the state be concerned if more than 4,500 employees elected to retire?

4. In regard to structure, how would you consider the state with respect

to complexity, formalization, and centralization?

5. If you were an employee of Zappos or the state of Massachusetts, would you take early retirement? Assume you qualify for the extra $10,000 incentive. You are currently 58 years old.

Case 2.2. HR Strategy: Employees Matter at Costco Costco is a wholesaler and a retailer—customers love to shop at Costco and buy con- sumer goods in bulk packages. At the same time, the employees who work at Costco are equally happy with their jobs at Costco. No wonder the company is ranked in the 2015 top 100 workforces.3

Organizational culture consists of the values, beliefs, and assumptions about appro- priate behavior that members of an organization share. The former CEO at Costco, Jim Sinegal, said, “When employees are happy, they are your very best ambassadors.”4 Although many companies say employees are their most important asset, there is a special emphasis on employees at Costco. Sinegal is considered a hero at Costco because he started out his career a bag boy, worked his way up to VP of merchandising and operations, and eventually co-founded Costco in 1983.

There are plenty of stories of people buying a Costco rotisserie chicken for $4.99 and having no idea why Costco keeps the price so low. The price of a hot dog and soda for $1.50 hasn’t changed since the mid-1980s. However, the $1.50 price is a symbol of how much Costco cares about its customers; it keeps its price low so that customers, who often drive quite far to reach a Costco store, have very affordable options to eat while shopping at the store.5

Employees at Costco are also treated extremely well. Costco pays its employees much higher than the minimum wage. The company also pays about 90 percent of health-care benefits for full and part-time workers. There is a clear path provided for employees to grow and develop with the company.

Competitive advantage (CA) is a key strategic topic often associated with Professor Michael Porter from Harvard.6 Competitive advantage is the area of an organization that is unique and keeps an organization ahead of its competitors. Determining the competitive advantage for an organization is the job of management leaders. In the case of Costco, competitive advantage lies in the ability to sell bulk packages of food

EBSCOhost - printed on 11/20/2021 9:10 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Part I • 21st-Century Human Resource Management Strategic Planning and Legal Issues10

items at a lower cost per unit than traditional supermarkets. Of course, these food items (along with nonfood items such as clothes, books, and videos) are stocked and sold by extremely pleasant and helpful employees. The key to a competitive advan- tage is to make sure it is a sustainable competitive advantage (SCA). An SCA would mean the advantage the company has is not easily copied, outdated due to new inno- vations or technology, or in general no longer having a valid competitive advantage.

With the goal of a SCA in mind, Porter also developed his Five-Force Model of Competition.7 Porter’s five forces are Supplier Power, Buyer Power, Threat of New Entry, Threat of Substitution, and Competitive Rivalry. In Costco’s case, Costco is such a large retailer that it can buy large amounts of products, such as Coca-Cola and Oreo cookies, that it can get items at the lowest possible cost. Plus, Costco has its own brand name, Kirkland, which also increases its control over suppliers. In regard to substitutions, there is really no replacement for food. However, the force of a Threat of New Entrants is quite possible. For example, Amazon is the largest retailer online and recently surpassed Walmart as the largest company in market value. Costco has to be concerned that its customers will increasingly buy their food items online at Amazon instead of going out to shop at a Costco store.

As one can see, in many industries, the competitive rivalry within an industry is as great as at any time in the history of business. Thus, Costco will have to emphasize its great face-to-face customer service offered at all of its stores. It certainly helps to have pleasant people at their doors checking customers into and out of the store. Of course, that is also a security check to make sure customers have their membership on the way into the store and that they have a receipt for buying the products on the way out of the store.

Based on personal experiences since 1991, the author’s family has bought grocery and nongrocery items at Costco. We are loyal customers, and the employees are always sincerely helpful 100 percent of the time. The level of service, including returning any product that has ever been bought at Costco, is not found at any other retailer. Costco’s focus on employee happiness translates to customer satisfaction. Happy employees make happy customers.

Case Questions

1. Costco has impacted the retail shopping industry. Use the Five-Force model to outline how Costco impacted the grocery and nongrocery marketplace.

2. How does Costco’s approach to human resources provide it with a competitive advantage?

3. How do Costco’s HR policies help the company be successful?

4. Discuss how Costco creates a link between employees and customers.

5. Does the mission of Costco impact HR?

EBSCOhost - printed on 11/20/2021 9:10 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Chapter 2 • Strategy-Driven Human Resource Management 11

Notes

1. Associated Press, “Early Retirement Signups for Massachusetts State Workers Below Proje- ctions as Deadline Nears,” FoxBusiness.com, June 12, 2015.

2. Schoenberg, Shira, “2,870 Sign Up for Early Retirement,” The Republican, June 13, 2015, 1. 3. “2015 Workforce 100: Ranking the World’s Top Companies for HR,” Workforce, May 22, 2015,

http://www.workforce.com/articles/21293–2015-Workforce-100-List.

4. “Employee Relations Best Practices: Costco’s Approach to HR,” i-Sight, http://i-sight.com/ resources/employee-relations-best-practices-costco/.

5. Tuttle, Brad, “Why Costco May Never Raise Prices on $4.99 Chickens, $1.50 Hot Dogs,” Time .com, May 29, 2015.

6. Porter, Michael, “Competitive Advantage,” Free Press, 1998. 7. Airline, Katherine, “Porter’s Five Forces: Analyzing the Competition,” Businessnewsdaily

.com, February 18, 2015, http://www.businessnewsdaily.com/5446-porters-five-forces.html.

EBSCOhost - printed on 11/20/2021 9:10 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use