Case Study the Australian Cladding Company

¶ … Australian Cladding Company

The objective of this study is to answer the question asking what are the immediate and underlying problems facing ACC? As well, this work will answer as to what sort of HR activities need to be put in place reasonably quickly and what HR approaches need to be taken in the longer term to ensure ongoing strategic competitive advantage? These theories will be addressed using the Evolution of HRM, SHRM, HRM Planning/Retention/Turnover, Job analysis and design, recruitment and selection.

The Australian Cladding Company (ACC) was started by Jim Hackett in 1998. Hackett has a background in engineering and created is the creator of a house cladding product that is lightweight and low cost. This product is reported to have found "a ready market in Australia." Hackett's company grew rapidly and the headquarters while being in Sydney supplied the cladding in various states and attracted customers internationally as well. The construction industry remained vibrant due to government initiatives. ACC was involved in the supply and installation of the product to various construction projects that were large in Western Australia. Hackett staffed the venture with a small group that included Hackett as managing director, Ben Harper, Engineering and design, Reg Grundy, Marketing and Sales, Arthur Seymour, Financial Controller, Clark, production manager and Jill Hackett, to head personnel including wages and salary and personnel administration. The company employed 20 individuals in the beginning and grew to a production staff totaling 150 and 25 additional staff working in the area of logistics, engineering, personnel, sales and accounting and finance. The company's profitability fell during 2007 and in the beginning of 2008 due to an increase in the cost of materials and labor costs. In addition, there were noted to be efficiency problems with production staff including too much down time and other times due to stress of constant work. The company was additionally having problems with retention of staff and especially skilled staff such as engineering and IT staff. Accidents in the workplace had risen and it was noted that workers were not following safety procedures around the machine areas. Additionally, there was a problem with alleged sexual harassment according to some of the female workers.

I. Consultant Makes Recommendations

Hackett hired a consultant in the middle of 2008 due to declining performance and staff problems. The consultant believed that the majority of the problems were linked to the company's very rapid growth and the fact that the company's approach to Human Resources had failed to keep pace with the company's expansion. The company had failed to plan its workforce around peak demand periods and the workforce was different than the workforce of five years earlier, which had been comprised primarily of men tradesmen. The skilled workforce had related that they were not receiving enough professional development and in addition, all the senior positions were filled by the existing management group and the result is that other employees were unable to see a clear career path for themselves with the company. Clearly, the company needed to address strategic management of its workforce.

II. Strategic HRM

The work of Akhtar, Ding, and Ge (2008) reports that it has been argued by researchers that human resources can be viewed "a sustained competitive advantage for organizations. The underlying assumption is that human resources are unique to the extent that competitors cannot imitate them. This research has led to the identification of a number of human resource management practices that contribute to company performance across different organizations." (p.15) Akhtar, Ding, and Ge (2008) relate that it has been reported that seven practices have been identified s being consistent with strategic HRM principles. HRM strategic practices are those, which are "theoretically or empirically related to overall organizational performance. The seven identified practices are reported to include those stated as follows:

(1) Internal career opportunities;

(2) Formal training systems;

(3) results-oriented appraisals;

(4) Employment security;

(5) Participation;

(6) Job descriptions; and (7) Profit sharing. (Akhtar, Ding, and Ge, 2008, p.16)

Thite and Kavanagh (nd ) reports that firms realize that "innovative and creative employees who hold the key to organizational knowledge provide a sustainable competitive advantage because unlike other resources, intellectual capital is difficult to imitate by competitors." (p.10) People management is a function that has become important to organizational strategy. Because of this the HR scorecard has been developed. (Becker, Huselid & Ulrich, 2001; Huselid, Becker & Beatty, 2005) In addition there is an emphasis on the return on investment of the HR function and HR programs. (Cascio, 2000; Fitz-Enz, 2000, 2002 in Thite and Kavanagh, nd) Typical HR programs are reported to include such as "…record keeping, recruiting, selection, training, employee relations, and compensation. However, all these programs involve multiple activities, and these HR activities can be classified into three broad categories: transactional, traditional, and transformational. (Wright, McMahan, Snell, & Gerhart, 1998 cited in Thite and Kavanagh, p. 11) It is reported that costs and cycle times can be reduced through IT-driven automation and work process redesign and that this also serve to improve quality. Management information systems assist in decision-making and strategic decision implementation. Information technology is a tool and is often mistaken as the message rather than as the messenger. (Thite, 2004) The critical success factors in information systems project implementation is stated to be "nontechnical and due more to social and managerial issues." (Martinsons & Chong, 1999) Roehling et al. (2005) reports that as information technologies are used increasingly in HR planning and delivery "…the way people in organizations look at the nature and role of HR itself may change." (Thite and Kavanagh, nd)

III. Best Practices

The approach just described is such that is reported to have become known as the "best practices or universalistic approach." (Akhtar, Ding, and Ge, 2008, p.16) Akhtar, Ding, and Ge report that within the best practices approach to strategic HRM "the first practice, internal career opportunities, refers to the organizational preference for hiring primarily from within." (Akhtar, Ding, and Ge, 2008, p.16) Training systems refers to "whether organizations provide extensive training opportunities for their employees or whether they depend on selection and socialization processes to obtain required skills." (Akhtar, Ding, and Ge, 2008, p.16) Akhtar, Ding, and Ge report that appraisals are "conceptualized in terms of outcome-based performance ratings and the extent to which subordinate views are taken into account in these ratings." (2008, p.16) Employment security is reported to be such that is reflective of the "degree to which employees feel secure about continued employment in their jobs. Although formalized employment security is generally on the decline, organizations may have either an implicit or an explicit policy." (Akhtar, Ding, and Ge, 2008, p.16) Employee participation is reported to be "in terms of taking part in decision making and having opportunities to communicate suggestions for improvement has "emerged as a strategic HRM practice." (Akhtar, Ding, and Ge, 2008, p.16) Job description is reported to refer to "the extent jobs are tightly and clearly defined so that employees know what is expected of them." (Akhtar, Ding, and Ge, 2008, p.16) Profit sharing is reported to be reflective of the "concern for overall organizational performance on a sustainable basis." (Akhtar, Ding, and Ge, 2008, p.16)

IV. Research on HRM

Research on HRM includes "contingency and configurational approaches. The contingency approach implies that organizational strategy (moderates the relationships between strategic HRM practices and company performance. In other words, a particular HRM practice may influence company performance positively in combination with one strategy and negatively in combination with another strategy." (Akhtar, Ding, and Ge, 2008, p.16) Akhtar, Ding, and Ge report that the configurational approach is such that "…builds on the two previous approaches and synthesizes them into a high order system in which researchers are interested in identifying the unique patterns of strategic HRM practices that are optimally effective." (Akhtar, Ding, and Ge, 2008, p.17) The work of Appleby and Mavin (2000) states that human resources are "the efforts, skills, and capabilities that people contribute to an employing organization, which enable it to continue in existence. Although difficult to define, SHRM is generally perceived as a distinctive approach to managing people which seeks to achieve competitive advantage through the strategic development of a highly committed and capable workforce." (p.555) SHRM is reported to be concerned with the management of human capital of an organization in such a way as to achieve some type of competitive edge. Having not only a committed workforce, but also having a workforce that is highly trained for the job that must be performed achieves the competitive edge. Moving in this direction is where human resources becomes SHRM." (Defining SHRM, 2006, p.3) This idea is built upon by Van Donk (2001) who explains where the human resource management role must fit in the planning process of a company in order for the planning to be strategic in nature. Van Donk states as follows:

"From the 80s onward there have been pleas for integrating human resource management and corporate strategy. A number of authors have been working on approaches to the achievement of what is called Strategic Human Resource Management. These approaches place the human resource management policy formulation at the strategic level. In these approaches to Strategic Human Resource Management it is claimed that: (1) human resource problems are problems solved by linking HRM and strategy formulation at an early stage; and (2) problems with strategy implementation are solved by early adjustment of the HRM to these strategies." (p.299)

Human resources must be included in the planning from the very earliest of stages and this enables human resources to understand what is needed and enables HR to adjust which means that the decisions made about company employees are geared toward the company's overall strategies. Mueller (1996) states that strategic use of human resources requires the following:

(1) Management is not reactive but instead is active;

(2) High policy integration exists;

(3) Senior management plans an orchestrational role; and (4) There is clear articulation of policies by senior management. (p.759)

Strategic theories of HRM include the Resource-based view of the firm. It is reported that the most recent entry into the theoretical discussion of strategic human resource management "comes from the organizational economics and strategic management literature and has been coined the resource-based view of the firm." (Wright and McMahan, 1993, p.10) The firm resources can only provide sustained competitive advantages if:

(1) The resource adds positive value to the firm;

(2) The resource must be unique among present and future competitors;

(3) The resource must be perfectly imitable; and (4) The resource cannot be substituted with another resource by competing firms. (Wright and McMahan, 1993, p.12)

Stated second is the 'behavioral perspective', which is a theory that focuses on the behaviors of employees as the mediator between strategy and performance for a firm. It is held by the principles of this theory that the "purpose of various employment practices is to eclict and control employee attitudes and behaviors." (Wright and McMahan, 1993, p.15) The particular attitudes and behaviors that are the most effective in organizations are differentiated by various organizational characteristics including the strategy of the organization. Schuler and Jackson (1987) propose a model that stresses the requirement for congruence across HRM practices.

V. HRM Practices -- Menu of Choices

HRM practices are such that can be viewed as menu of choices for HT executives from which they may make a choice of practices that:

(1) Promote the most effective role behaviors consistent with the organizational strategy; and (2) That are aligned in a way that each HR practice is congruent with other HR practices. (Wright and McMahan, 1993, p.16)

The third stated theoretical model of HRM is reported to be those of 'cybernetic systems' which is a popular theoretical model applied to SHRM. Cybernetic models are reported to vary in their treatment of the system in that "some models focus on closed systems that seek to set up mechanisms to buffer the technological core from the environment. Other models treat systems as being open to exchanges with their environment." (Wright and McMahan, 1993, p. 17) Open systems models are such that are based on general systems models, which hold that organizations "can be described as input, throughput, output systems involved in transactions with a surrounding environment." (Wright and McMahan, 1993, p.17) Reported as central to open systems models is the "idea of a negative feedback loop that informs the system that it is not functioning effectively, thereby allowing for changes to reduce any discrepancies." (Wright and McMahan, 1993, p.17) Competence management in HR practices is that which refers to the processes and methods used to cope with the findings and to make sure that the organization's employees "have the skills required to execute a given organizational strategy." (Wright and McMahan, 1993, p.18) This is reported to acknowledge the "negotiations with the external labor environment in order to attract, select, retain, and use employees with the necessary knowledge, skills, and abilities of re-executing the strategic business plan." (Wright and McMahan, 1993, p.18)

VI. Four Competence Management Strategies

Four competence management strategies are proposed as follows:

(1) Competence Acquisition -- refers to the training and selection activities that are geared toward ensuring that organizational employees have the necessary competencies;

(2) Competence utilization -- this deals with the activities that seek to utilize latent skills or skills that have been deemed unnecessary under a provision strategy;

(3) Competence retention -- this is a strategy aimed at retaining various competencies in the organization through reduction of turnover and constant training.

(4) Competence Development -- this is comprised by activities aimed at eliminating competencies that are no longer necessary for the organizational strategy. (Wright and McMahan, 1993, p.18)

VII. Analysis