Put formal HR function in place and strengthen it

Below is a fictionalized case study that presents dilemma faced in real organizations. And written by me is the recommended solution to the problem. This has been published in Business Manager Magazine April 2016 edition.

Akshay Sales Corporation is a partnership firm established in the year 1994 at Surat, Gujarat. The founder and the CEO of this firm is Mr Amar Patel. This firm is the distributor, wholesaler and supplier of all types of wood working, laminate pressing, shoes PU adhesive and SR rubber adhesive for foam and flooring and mattress. Akshay is one of the top five performers in this type of business out of about 50 Small and Medium Enterprises (SMEs) in its region of operations. Being an experienced firm it also enjoys good competitive edge over others in business. The average turnover of this partnership firm is Rs. 24 crores whereas the strength of its workforce is 348 employees including clerical supervisory and managerial categories.

Akshay is well known for achieving customer satisfaction, ensuring timely delivery, innovating new designs, and honoring commitment to buyers. However, the critical and thorny issue of this firm is the talent management and retention. The human resource management system of Akshay is very much traditional and similar to any typical Indian SME. This firm does not have a specific manager or officer with HR responsibility. Most basic HRM functions such as recruitment and salary fixation are done by the line managers either by themselves or in consultation with the CEO of the firm. In recruitment it seeks professional competencies among the potential candidates and also offers competitive pay packages. In most cases the promotion is given to the employees based on the assessment and recommendation of the line managers.

As regards the talent management, the major problem for Akshay is in retaining the talented people with the firm for longer duration. This problem persists despite the abundant availability of skilled people in labour market. Akshay offers financial incentives to employees at highly competitive rates as a retention device but without much success. The firm has no record of conducting any form of formal skill training for its employees. This is because the CEO of the firm Mr. Amar Patel strongly believes that employee training can only worsen the problem of talent retention as the well-trained employee is more likely to leave the firm-seeking greener pastures. Consequently, this firm ruled out training as a solution to the problem of high attrition. In Akshay, the attrition related issues remain untamed and continue to affect the plans and future growth prospects of the firm. During temporary recession, it was decided lay off the people to lessen the wages cost resulting in to draining out the talent people. Remained only were average performers. After recovering from recession, when managers reached out to sacked people offer them to rejoin, it came out as a shocking surprise to the management that most of them refused to rejoin on some pretext or the other. Now the problem before the managers and CEO is to employ not only the good people but also to retain them. The organisation suffered business as it started getting complaints about poor logistics and quality of products. In all likelihood, this issue may worsen in coming times as the competitors may adopt aggressive style with using their ex-workers knowledge about the important business information of Akshay Sales corporation. CEO has asked the managers to come forward with a blue print to address the problem.

Questions for discussions

1. What is your assessment of the whole situation in Akshay Sales Corporation from HR perspective?
   
2. According to you what specific steps are to be taken by Akshay to tackle the problem of rising attrition rate?
   
3. What should be long-term strategy of this firm in terms of HR policy, procedure, and practice?

Solutions

Established in 1994 in Surat Gujarat, Akshay Sales Corporation, a partnership firm headed by Amar Patel is a leading top 5 distributor, wholesaler and supplier of all types of wood working, laminate pressing, shoes PU adhesive and SR rubber adhesive for foam and flooring and mattress in the SME Segment. The company being well established & experienced in its line of business enjoyed a market competitive edge. It was well known for achieving customer satisfaction, ensuring timely delivery, innovating new designs and honoring commitment to buyers. The company clocked a turnover of 24 crores and had a workforce strength of 348 employees across all cadres.
 

Akshay Sales Corporation was doing very well as far as its business was concerned however like all traditionally ownership managed companies, it was facing the challenge of managing attrition. The company did not believe in having a full time professional HR team. The HR functions like recruitment, salary, promotion, etc…were managed by the functional manager’s themselves in consultation with the CEO. Hence there was never a full-time HR person looking into all HR functions and issues given that the company had 348 employees but the functional manager’s themselves managing it as additional responsibility whenever it came up. This was the first HR issue facing the company and probably the root cause.
 

Secondly promotion was based on assessment and recommendation by the managers to the CEO. Hence the company lacked a formal employee evaluation, feedback and promotion methodology. Chances of bias coming in as a consequence were very high and disgruntled employees leaving the company simply because of them being overlooked for promotion were there. This was another issue facing the company in talent management & retention.

Thirdly there was no formal training plan on upgrading the skills & competencies of the workforce in line with the changing dynamic business environment. The CEO believed that by training it’s employees, they would seek better prospects. Mr. Patel should have thought for himself and for his company as to what is suited to his buiness strategy better – having a well trained employee and performing or rather having an employee who is not performing and not trained and as a result is stuck in the same job in the same company. There is absence of an strategy or lack of direction as far as employee skills up gradation and training goes. 

Lastly when there was slowdown in business, the company decided to reduce its employee strength to lessen the cost of wages on its balance sheet. As a result, talented employees left the company and only average performers remained. When the recession tide was over, the company reached out those sacked employees and offered them to rejoin which they vehemently refused. As a result, the company’s business suffered and it started getting complaints about poor logistics and quality of it’s products and services. There were chances that the sacked employees would join other competing firms and that they would use their knowledge about the important business information of Akshay Sales corporation thereby threating it’s immediate business prospects and long term sustainability. Clearly this act states lack of long term HR vision of the company, about where it wants to be and where it wants to go as far as its employees are concerned. All these actions are short-term minded. There is no long term Focus on the Future.

In any industry, employees are to be treated as assets of an organization and not as costs. Also the HR function should be on par with the business functions of the company and not treated merely as side function doing only recruitment & salary.

The following few steps should be taken by Akshay Sales Corporation immediately to tackle the problem of rising attrition rate and other HR related issues plaguing it.
 

Firstly appoint an experienced, professional and full time HR Head who is preferably from the same industry background as Akshay Sales Corporation so that HR function is in tune with the business activities, it’s requirements and can fully support it.

Secondly the HR Head should be empowered to take decisions for betterment of the company. HR should be allowed to function independently reporting directly to the CEO. By allowing HR to function independently as if it were a business department itself there would be reduced chances of biasness in its activities and as a consequence there would be healthy work environment in the company.

Third introduce Compensation, Recognition, and Rewards / Incentives to retain it’s existing employees as well as to recruit and hire new talent. These should be influenced purely by performance measures and for generating business growth ideas and reinforcing them on the job. By introducing such Rewards & Recognition schemes, the employees will get a sense of belonging to the company and will feel valued. Thus they will get more engaged with the company which is not so in current scenario and an engaged employee will perform more and contribute more to the growth and development of the company. As an employee grows, the company also grows and the same hold true in reverse.

Lastly but the not least, Develop training plans based on employee and manager input. There should be clear linkages between the business strategic objectives of Akshay and education and training. Skills to be developed based on business demands and employee needs.

The long term strategy for Akshay Sales Corporation in terms of its HR Policy, Procedure and Practice should be to invest in their employees to ensure they have the skills for today and to do what is necessary to succeed in the future. The CEO should aim towards building a work climate that addresses the needs of its employees. Recruitment and training are tools to enhance the work climate. Employees should be incentivised such as bonuses or other rewards, for developing additional career-enhancing skills. Provide for employee support and benefits depending on their different needs like health care, education (both work and non-work related), maternity, paternity and family – illness leave, etc…Make available special activities and services for the employees.

Develop formal career plans for each employee. Evaluate progress against the plans and make adjustments where necessary to ensure that they remain relevant. Companies that provide career development opportunities are four times less likely to lose talent in the next year than companies that do not. 

Why People Leave?

Below is a fictionalized case study that presents dilemma faced in real organizations. And written by me is the recommended solution to the problem. This has been published in Business Manager Magazine March 2016 edition. 

Arvind Suiting’s a global textile company is based in India. The company has presence in more than 35 countries. It has succeeded in getting a decent share in an increasingly competitive global market. It has employed more than 5,800 employees. This company always views its employees as its strength and as the secret of its success. It has got several HR practices oriented towards employee satisfaction and motivation. The uniqueness of the HR practices of this company are (i) its accent on extensive training programme for its employees during their probationary period of two years and (ii) its compensation packages, which are excellent for the industry. The HR department of the company is managed by Mr Ravi Varma, a post graduate in Human Resource Management.

However, the company has been plagued by quite a few HR-related problems in the recent past. One of them is the high rate of attrition witnessed by the company, especially among the employees promoted to the higher position in the organization. Some other recently promoted employees were asking for reversals to their original position. Apparently, the company was perplexed by the developments as the employee leaving the organization were indeed performing activities critical to the organization. The company took the matter seriously and was determined to identify its reason. It appointed a team of HR experts to look into the issue and suggest necessary remedial measures.

The team approached all the employees who were leaving the organization and conducted an exit interview to ascertain the reason for their quitting the firm. It also interviewed the employees who applied for reversals to their previous positions. Similarly, it interviewed all the existing employees in that cadre as on that date. Finally, it went a step ahead and contacted the employees who had already left the company in the recent past and elicited their views on the different aspects of employment and the reason for leaving.

Shockingly, almost all the employees spoke negatively about their job. They also informed the team about the presence of an anomaly in authority, responsibility and accountability. A number of them perceived a lack of fit between the level of authority and responsibility. They opined that the job carried too huge a responsibility but provided little authority for the job holder. They also revealed that the lack of demarcation of job authority of different employees often led to misunderstanding and quarrels with their subordinates. Several employees felt that the compensation package was not commensurate with the difficulty and accountability of the job. Based on its interviews with the present and former employees, the team of HR experts prepared a report and presented it to the top management. The report squarely blamed the job analysis report (that had been made earlier) and the resultant HR practices as responsible for the present situation. It held the job analysis report as poorly investigated and drafted. The HR manager was asked to respond to the report and present his own report about the situation. In his report, the HR manager cited the lack of cooperation of the employees for job analysis exercise as the reason for inaccuracies in the job analysis report. However, he strongly defended the methods and techniques adopted in the job analysis process.

Finally, the company decided to undertake a fresh job analysis for all job titles and integrate the information with the HR practices by revising these practices thoroughly. An external HR consultancy agency with relevant expertise in job analysis was hired this time to prepare the job analysis report even though it charged a high fee.

Question for Discussions:

1. How do you view the developments in Aravind Suitings from your perspective?
2. Do you agree with the findings of the team of HR professionals regarding the recent spate in employee resignations and requests for reversal?
3. What is your response to the report of the HR manager Mr. Ravi Varma blaming employees for the defective job analysis report?
4. Do you have any alternate suggestions for controlling attrition in Aravind Suitings?

Solutions:

Arvind Suitings, an Indian textile company having 5800 employees & a global presence in more than 35 countries views its employees as its assets and key to business success. The objective of it’s HR practices are employee satisfaction & motivation resulting into the company having extensive training for it’s employees who are on probation and excellent compensation packages that are the best in the industry. Recently, the company is facing a challenge that of employees leaving the company especially those promoted to higher positions or employees asking for reversal to original position.  The company appointed a team of expert consultants to look into the matter and based on extensive interviews with different cadres of employees by they found ambiguity in job profile as one of the main reasons. Job responsibilities and authorities were not properly defined and the pay offered was perceived to be less as compared to the huge amount of responsibility it carried. The HR Manager Mr. Ravi Varma cited lack of co-operation of the employees when carrying out the job analysis exercise for the inaccuracies.

Employees and first-line supervisors who are closest to the work usually understand best what skills are required (and missing) to do the work effectively. Failure to obtain and use input from these employees may result in the development of inappropriate or ineffective training opportunities and it’s resultant application on the job. This is exactly what has happened at Arvind Suitings & has led to waste of its Human Resources. Although the HR Manager has cited lack of co-operation by the employees, it is HRD’s responsibility to get the work done properly and implement it effectively. Simply blaming the employees as an excuse cannot be tolerated as they have their own line functions also to look into.

Has the HR Manager Mr. Ravi Varma communicated to the employees the objective of the job analysis exercise? Has it been perceived rightly by all the employees? Incase of improper communication, employees may take it in wrong sense and start looking out for other options. If the HR Manager spoke about lack of co-operation from the employees, he must realise that it is almost impossible to get real and genuine data without the support of employees. if they are not ready to co-operate, it is a sheer wastage of time, money and human effort to conduct job analysis process. The solution is that of taking the workers in confidence and communicating to them that it is being done to solve their problems only.

Companies must look at recruiting, hiring, placing, and retaining employees who will meet skill requirements required to position it for future success. Obviously the right employee is a key factor in this. This has also not quite exactly happened at Arvind Suitings resulting into employees leaving the organization or requesting for reversal to their original function.

If the HRD had indeed a problem in carrying out this exercise effectively, has it proactively communicated it to the Management of Arvind Suitings for their support. That could have eased out matters somewhat as compared to the current situation that the company is currently facing in having it reviewed by a team of external HR consultants and then appointing an external HR consultancy agency with relevant expertise in job analysis to prepare the job analysis report.

Alternative suggestions for controlling attrition in Arvind Suiting’s, one of them could be to have self-directed or self-managed work teams throughout the organization. They should be having authority over their relevant matters because this was the current problem faced. Secondly the HRD should conduct systematic job needs analysis to ensure that skills required to perform work are routinely assessed, monitored, and maintained. Employee opinion should be regularly sought (and obtained) regarding job design and their work process management and improvement. This should be a part of yearly routine activity with frequency to be defined.
 

Since Arvind Suitings has oriented its HR practices towards employee satisfaction and motivation and views extensive trainings as one of the indicators, it could systematically evaluate training effectiveness on the job. Performance data to be collected on all employees at all levels to assess the impact of training. Prompt and regular feedback should be provided to teams and individuals regarding their performance. Employee satisfaction with the courses to be tracked and used to improve training content & training delivery.

Respond Effectively to Changed Circumstances

Below is a fictionalized case study that presents dilemma faced in real organizations. And written by me is the recommended solution to the problem. This has been published in Business Manager Magazine February 2016 edition.

Case Study - Is Metrics Panacea for all HR Problems in Century Software?

Century Software is one of the leading technology based companies engaged in management consulting, technology development, and outsourcing services. This company is well known for its innovative approach towards delivering business value and its commitment to sustainability. It aims at optimized utilization of natural resources, capital, and talent. It is engaged in activities like Big Data Analytics, Operational Analytics, and Supply Chain Analytics. It has 1 25,000 employees on its roll and offices in 110 cities around the world. The net revenue of this company is Rs. 13.0 billion for fiscal year 2014. In Century Software, people management cost constitutes nearly 59% of total expenses.

The HR department of this company is headed by Mr Easwaren, one of the senior leaders in the company. However, in recent times, the CEO of the company Mr Mahendra Singh has lot of worries about the functional efficiency of HR department especially in the context of serious erosion of manpower in Big Data Analytics - one of the core departments. The high attrition rate in this department has caused consternation among the top managers. The CEO and his team is wholly aware of the fact that the HR department has taken the issue seriously and conducting exit interviews to understand the root cause of the problem.  They also regularly collect information on absenteeism and turnover. However, the irony is that the top management is not informed of outcome of such exercise in desirable and actionable form for initiating necessary action. The absence of actionable report about the HR problems of Big Data Analytics department kept the top management always in tenterhooks. This is because the good and consistent performance of this department is essential for the execution of the strategic and operational plan of the whole organization.

Of late, the top managers began to believe that HR is not supporting the strategic agenda of the company. They are now toying with the idea of changing the leadership in the HR division and also effecting radical changes in the structure of the HR department.

Questions for discussions and solutions

1) Do you agree with the opinion of the top management that HR department is not effective in handling the attrition and absenteeism problems of Big Data Analytics department?

It is to be noted that that in Century Software, a management consulting, technology development & outsourcing services company having 1,25,000 employees on its payroll, offices in 110 cities globally, the people management cost constitutes nearly 59% of its total expenses. Hence it is but natural that Top Management would be concerned about the efficiency of the HR department since a sizeable portion of its revenue vis a vis expenses goes to people management. The Top Management would be looking at optimising its cost per employee of its various business departments vis a vis the revenues generated and their contribution to the overall revenue of the company. 

In the case of Century Software, one of its core departments Big Data Analytics is facing a serious erosion of manpower and has a high attrition rate. Although this issue has been identified, serious taken note of and actionable measures like Exit Interviews undertaken to get to the root cause of the problem, still there has been no significant improvement observed in stemming the flow of people leaving the organization. Hence the Top Management who would be monitoring the situation and evaluating the results of the actions taken, it’s effectiveness would naturally be concerned. If it is being reported to them by HR Head that action is being undertaken, Top Management would be looking at results, better changes and improvement in the scheme of things to come. However that was not to be seen or evident. Hence the Top Management is bound to be opined that HR department is not effective in handling the attrition and absenteeism problems of Big Data Analytics department. 

2) According to you, what needs to be done by the HR department from HR metric perspective to tackle the situation?

The HR department in order to tackle the situation from HR metric perspective should have regular reporting to the Top Management. A frequency to be defined. The HR metrics data should be collated, analysed and reported to Top Management with their comments and action plan for the future. Since the time of Top Management is valuable, the information being reported should be that which needs their urgent attention, be short, summarized and crisp. Top Management is not interested in going through volumes of reports and data. They are more interested in the outcomes and results and how it is helping the business. The information should speak the language of the Top Management.

It may help that before deciding on reporting structure, frequency, desired reporting method, etc…inputs from the Top Management to the HR Department be given as to what exact information is being desired and in what manner. Defining, in measurable, outcome-oriented terms. Clarity on this may make things easier and that may perhaps resolve the issue of reporting in desirable and actionable form for initiating necessary action. 

The HR department at Century Software may be using numerous metrics that may be providing information as to how the HR function is performing; however there may be some metrics that may be more important than others depending on the organization’s goals and strategy. At times, it is necessary to evaluate that as well i.e. effectiveness of the metrics being deployed. It may not be a bad idea to ask the Top Management for guidance as to whether this is the information which they desire or is there anything else that is required – what metrics are most important to the organization. Clarity of communication on it may help make the road ahead easier and perhaps keep the Top Management on less tenterhooks of the HR department.

3) If you were to be a HR consultant, what will be your specific suggestions and strategy to improve the efficacy of HR department?

If I were to be a HR consultant I would first of all look at the entire HR Metrics structure itself, look at the metrics being used and information being generated out of it. Four crucial considerations that need to consider when using HR metrics include:

•What metrics are most important to the organization?

•What data needs to be gathered or tracked to calculate these metrics?

•How will the data be analysed and benchmarked?

•How will the analysis be used for action planning, development/improvement, and problem-solving?

If the metrics do not satisfy any of these crucial considerations, then it needs to be looked at as to whether it makes sense to gather so much data and report when it is not really useful. Sometimes it is prudent to have only few metrics that are in line with the business requirements of the organization as compared to having many. Too much volume of data may lead to information overload and chances are that in it one may tend to miss out on crucial details that get hidden / over sighted in tonnes of data.

Have a Dashboard. A dashboard facilitates effective monitoring at all levels and makes management of implementation and related actions easier. A good dashboard that provides measures of leading indicators to help the Top Management understand what is important to the employees, how well it is delivering on those things that are important, the reaction of its employees, and the capacity of its work processes and delivery systems. With this advance knowledge, Top Management can make better decisions about the actions needed to be successful, bring more value to the workplace, and respond effectively to changing circumstances and new opportunities.