Introduction
The purpose of this report is to analyse case study based on Relayer Coach Tours and Bus Services Limited and provide recommendations for improvements within people function at the Company. The structure of the report will be divided into six main sections. The first section will deal with external context in which the Company operates; PESTEL and stakeholder analysis will be carried out. Section Two will cover strategy development and sources of competitive advantage; section three will then explain the changes within the Company’s culture and structure. Section Four is the final section of the Company’s analysis; it will aim at examining people’s issues within the Company. The final two sections relate to making recommendations for improvement, explaining role of HR as well as applications of best fit and best practice within the organisations. All of the above sections will contain overview of what the literature reveals with regards to the topics discussed. The report will be followed by action plan for the organisation going forward.
SECTION ONE – CONTEXT
1.1. PESTLE framework
According to Badenhorst-Weiss et al (2008) external business environment relates to factors from outside of the organisation which have an effect on its functioning, existence and future opportunities. This divides further into market (competition factors) and macro-environment factors (economy, politics, society or geographical location). One of the tools designed to analyse those external factors is PESTEL framework analysis. The analysis is performed to understand the impact of those external factors on organisational performance, enables to find threats and opportunities and incorporate strategic planning to act upon them (Yeates & Wakefield, 2004). PESTEL focuses on political, economic, social, technological, environmental and legal factors (Murray-Webster, 2010). Although the framework is widely and easily used the biggest critique is that none of the factors work in isolation and should be understood and analysed collectively to give accurate results as most of the factors overlap (e.g. legal and political) (Needle, 2010).
1.2. Stakeholder analysis
It is difficult to compile one uniform definition of a stakeholder. Freeman and Reed (1983) refer to a narrow definition which encompasses the theory that stakeholder is a group ‘on which an organisation is dependent for its continued survival’. This is backed up by Bowie (1988) who states that an organisation would stop existing without stakeholders. A broader definition suggests that stakeholder is defined as ‘any person, group or organisation that can place a claim on an organisation’s attention, resources, or output or that is affected by that output’ (Bryson, 2004). Both internal and external stakeholders can be identified; their levels of interest in an organisation will however vary, and different organisational strategies are to be adapted to evaluate their contributions and maintain obdurate satisfaction (McEwan, 2001).
Mendelow (1991) suggested that the power/interest matrix can be used to describe correlation between the levels of power stakeholders have with the interest they hold in that organisation. The matrix can be a useful tool in establishing internal and external influences and develop organisational strategies (Johnson, Scholes & Whittington, 2008). The authors argue that it can be used for two reasons: to track changes in interest or power within stakeholders and analyse trends or to establish the impact a certain change may have on stakeholders within that organisation.
2.1. Strategy development
Strategy development starts with choosing direction for the organisation to move towards which would align with the end goal. Two main but opposite approaches emerge: top-down and bottom-up (Betz, 2002). Kontes (2010) explains that top-down control method is the most commonly executed in organisations with CEO of a Company devising strategy and setting future objectives (usually financial targets). It does not however, allow space for creativity and disable employees from taking part in strategic planning (Toulmin et al,1996). Bottom-up approach is a requirement of any innovative thinking organisation as it empowers employees to provide strategic ideas and creative solutions.
Different approaches of methodology planning emerge-deliberate (follows pre-planned and intended path) and emergent (implies that decisions are made as a reaction to an opportunity or issue and are not planned beforehand) (Harrison & St John, 2008).
Whittington (2001) devised a model which distinguishes four components of strategy: systemic, classic, processual and evolutionary. The model encompasses complexity of strategy and its various dimensions, differentiates types of strategy as well as processes of how the strategy can be achieved. The vertical axis presents the outcomes of strategy use – whether it enables maximising profit or allows diversity in its approach. The horizontal axis, on the other hand, defines the way in which processes occur, as discussed above they may be deliberate or emergent.
Key Findings
Mike’s father era held signs of evolutionary approach aiming at provision of creativity-enhancing workplace where all stakeholders were involved in decision making processes. Even though the structure was tall, all parts of that structure felt equally privileged to share and contribute to organisational strategy. In current era however, the Company’s main focus is on ensuring profitability, power is centralised at senior executive level and decisions are not derived from discussions with stakeholders. Not all decisions were however unjustified, in the era of increased competitiveness more strict and lean approach was needed – this suggests that a mixture of both approaches could be a solution.
2.2 Sources of competitive advantage
Competitive advantage is defined as ‘the specific, unique value that the firm produces to the benefit of different groups of consumers’ (Huggins & Isushi, 2011). Porter (1980) distinguishes three strategies that can be applied: cost leadership (managing costs), differentiation (introduction of unique product or service) and focus (product or service aiming at particular group of customers applying either low cost or product differentiation). The argument is that only one can be applied at the time as they exclude each other (McLeish, 2011). If the company does not adapt one of the three strategies it will be ‘stuck in the middle’ which guarantees very low performance –this can result in spreading resources too thinly if they are not allocated to any strategy in the first place (Genus, 2000). Although Porter’s model is influential, it is often considered as flawed –it does not reflect the influence of other stakeholders (such as employees) and lacks commentary on needs to determine an organisation’s market strategy (Cole, 2004). Furthermore, Miller (1992) is in opposition to Porter’s theory that the three strategies cannot be used at the same time; in his mind this may narrow an organisation’s opportunities and reduces its market flexibility. Miller suggests therefore that mixed strategy should be used, the one that would combine cost leadership and product differentiation.
3.1. Culture
Definitions of culture vary; from Deal and Kennedy (1982) who define culture as ‘the way we do things around here’ to more explicit definitions such as ‘organisational values and norms, with the focus on assumption and beliefs’ (McKenna, 2000) or that of Moorhead and Griffin (2012) expanding that those values are often seen as a foundation to understand which actions are deemed acceptable or unacceptable within that organisation, this can be represented by use of symbols and rituals.
Schein (2010) observes that culture can be investigated at various levels; three levels of analysis are presented in Schein’s model: artifacts (visible aspects of culture: architecture, language, rituals or objects), beliefs and values (attitudes and behaviours, mission statements) as well as assumptions (beliefs or values which are shared and followed unconsciously). Johnson’s (1988) cultural web model presents six different overlapping components embracing central concept of paradigm. Paradigm is regarded as common beliefs or assumptions shared within an organisation which are taken for granted, other components (symbols, stories, routines, organisational structure, power structure and control systems) are all different but at the same time work together to uphold the paradigm. It is argued that more than one component would have to be changed or broken in order to amend the paradigm (McIntosh & Beech, 2012).
Charles Handy distinguishes four types of organisational culture (Pugh & Hickson, 2007). McGrath (2014) explains the components of Handy’s model -club (power) culture identifies an individual or a small group of people who hold the power within an organisation with others acting in a way that would be approved by the power holder. Role (bureaucratic) type of culture is when all individuals within an organisation are expected to follow specific rules and procedures and fulfil expectations. In third type of culture, task (team), team working is highly valued, and organisation’s success is dependant upon creativity of all within the group. The last one, existential (individual) is based on utilising expertise of individuals. 3.2. Structure
Organisational structure is defined as system of tasks and relationships which controls how individuals work within an organisation to achieve a mutual business goal (Aquinas, 2008). Armstrong (2006) confirms by adding that structure is ‘a network of roles and relationships and are there to help in the process of ensuring that collective effort is explicitly organized to achieve specified ends’. Burns and Stalker (1961) explain that different types of environments require different systems of management. The mechanistic structure is best for stable organisations, it is identified by strict rules, tight job descriptions and top down communication flow. Organic however, can work well in organisations constantly adapting to change where flexibility is needed; decision making is not centralised, communication flows in different directions and tasks can be interdependent (Jackson, 2002). Organisations have to choose carefully which type of organisational structure to adopt; the most common type is hierarchical (pyramid) used in bureaucratic organisations. Executive management (CEO, Director, Owner) is at the top of the pyramid holding control over decision making within that organisation. Communication within this type of structure is vertical and comes from the top (Murphy & Murphy, 2004).
SECTION FOUR – PEOPLE ISSUES
It is widely recognised that human capital is associated with the value that people add to an organisation (Baron & Armstrong, 2007). Chatzkel (2004) strengthens the above statement by highlighting that human capital act as a differentiator and forms foundations for competitive advantage in organisations. Social capital relates to the system that allows employees to work effectively in order to achieve a common goal (Gittell and Vidal,1998). Grootaert and Van Bastealer (2002) expand on the definition by summarising the concept as ‘institutions, relationships, attitudes, and values that govern interactions amongst people and contribute to economic and social development’. Many authors embrace the theory that development of human and social capital is vital to survival and performance of any organisation (Kogut and Zander, 1996; Pfeffer, 1994). Developing human capital leads to understanding the key skills and knowledge sets needed for employees to perform within an organisation; developing social capital however enables HR to recognise the reasons behind good performance within teams, communication flow or career progression motivators.
There are other important people factors that should not be disregarded for the purpose of developing people strategy. The status of psychological contract should not be undermined; it is broadly defined as set of mutual expectations, needs and obligations arising from relationship between employee and employer (George, 2009). Other, simpler concepts such as recruitment and selection –recruitment referring to the process of sourcing best employee candidates for the organisation and selection being choosing the best out of the pool of those candidates (Khanka, 2007). Another issue, employee wellbeing, although there is no universal definition, it generally relates to mental and physical health and the feeling of happiness, security and comfort (Mitchell, 2018).
The role of HR differs between organisations and is subject to many continuous changes. This difference is usually dependant on the company’s culture and strategy as HR efforts need to be aligned well in order to work effectively. In literature we can find various models outlining HR function within a business. An early one, Legge’s innovator model, concentrates on the role of HR within change influencing, it distinguishes three levels of involvement –‘conformist innovator’ (improving organisation’s performance by suggesting changes in existing beliefs and assumptions), ‘deviant innovator’ (seeking radical changes within the fundamental methods of management) as well as ‘problem solver’ (utilising specialist expertise to tackle existing business issues) (Bailey et al, 2018). 1986’s Tyson and Fell’s model builds upon Legge’s by providing three roles of HR; ‘clerk of works’ which is mainly concerned with administrative work within HR, ‘contracts manager’ role focuses on providing expertise in systems and practices and finally ‘architect’ which encapsulates taking the lead in providing ideas and solutions whilst playing strategic role within that organisation (Saha & Rowley, 2015). A very influential model of HR role is presented by Storey (1992) where strategic versus tactical orientation exposing either high or low degree of discretion (Blyton and Turnbull, 2004). Storey’s model (graph 5.1.) is based on four roles of HR: changemakers (strategic role with high influence), advisors (strategic role with low influence), handmaidens (tactical role with low influence) and lastly, regulators (tactical with high influence). Kossek and Block (2000) argue that there are four roles HR can be grouped into: transactional, translational, transitional and transformational. The first two roles are focused on people and are short-term; transaction involves recruitment, dismissal or grievance processes, ensuring employees are paid and could be compared to Legge’s clerk of works. Translation encompasses communication as well as implementation of policies and procedures.
On the other hand, we have transitional and transformational roles which are concentrated on process improvements and are much more long-term in nature. Finally, similar to Storey’s, Ulrich’s model also presents four roles of HR, he advises however that all four should be used at the same time to boost organisational performance (Maringe & Prew, 2014). At the same time, it is stipulated that not all of those roles have to be performed by HR directly, the role of HR is to ensure those are actioned and implemented within a business (Truss et al, 2012). Again, four roles are defined; administrative expert (day to day tactical HR duties), employee champion (listening to staff and their concerns or needs), change agent (being change advocate ensuring change is perceived as positive) and strategic partner (ensuring there is an alignment between HR policies and procedures and company’s strategy) (Yusoff, 2012).
SECTION SIX – RECOMMENDATIONS – BEST PRACTICE AND BEST FIT
As stated by Dooley et all (2002) practice is defined as a successful method of carrying out a particular task or fulfilling set objectives According to Rowley & Jackson (2011) best practice has continued to raise an interest of Human Resources Management since 1990s.
Best practices are sometimes referred to as ‘better practices’, recommended practices’ or ‘promising practices’ (Austin & Hopkins,2004). Pfeffer (1994) introduced as set of HR practices which, if implemented and followed, result in higher organisational performance. Pfeffer recommends a bundle of sixteen best practices (revised and condensed into seven practices in 1998) and suggests that the greater extend to use of those practices, the higher organisational performance can be observed. The list of those practices includes: employment security, selection criteria for new hires, teams which are able to self-manage themselves, high salaries, high standards of training, no limitations with regards to appearance (or dress code) with fairness maintained across all groups and lastly, good information flow (Darwish, 2013). Guest (1987) argues that there is no best practice, at the same time however, in 1989 sketches four policies which are aimed at fulfilling anticipated goals. Those policy goals involve: ‘strategic integration’ (HR at strategic level within organisation, involved in planning), ‘commitment’ (employees are ‘bound’ to their organisation which ensures high performance and high levels of commitment), ‘flexibility’ (structure of an organisation has to be flexible and base on multi-skilled workforce) and ‘quality focus’ (the aim is achievement of high-quality product) (Torrington et al, 2008). Those policies have to however be seen as one bundle and applied together in order to achieve the desired goals.
The notion of best fit emphasises that people management policies have to be aligned with overall business strategy as well as its external environment (‘external fit’). Simultaneously, it needs to support the organisational structure and its culture (‘internal fit’) (Shields, 2007). Schuler and Jackson developed a model in 1987 that provides types of behaviours needed to enable alignment of HR practices and competitive strategy (Nickson, 2007). Innovation strategy can be distinguished amongst these; it relates to developing products which are different and set them apart from competitors; this requires willingness to take risks and creativity. Another one, quality enhancement, focuses on improvements in product quality so that competitive advantage can be maintained; this strategy encourages flexibility within job roles, teamwork and decision-making processes. The last one, cost reduction, relates to strategies of lowering costs in order to gain competitive advantage within a specific sector; behaviours of employees required to achieve this strategy would be based on stability, low risk taking or predictability. The Michigan model, often known as ‘matching model’ enforces very tight fit between four HRM policies/procedures (selection, appraisals, rewards and development) and business strategy and structure (Sharma, 2009).
27.3.2019
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