Peoples’ Bank: Linking Business Strategy and Human Resource Management

Peoples’ Bank: Linking Business Strategy and Human Resource Management

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The role of human resource management is one of strategic partner, administrative expert, and consultant (managing all of the organization’s people related processes strategically). It is the job of hr management in to recognize that decreased turnover, higher employee morale, and involved employees in the decision making process are all optimal in providing key leverage in an organization’s strategic plan. Management integrate strategic hr management with the organization’s strategy formulation. This means that management has searched the organization and its environment for opportunities and initiated projects and decisions to bring about changes that are both advantageous and competitive for the organization. Through this integration, HR policies must “cohere and be accepted across all company policy areas and across all hierarchies in the company”. These same HR policies had to be turned into practices that were used by both managers and employees as part of their everyday work. The hr management role has changed tremendously from being a mostly personnel function, consisting primarily of a lot of paper pushing, hiring and firing, to being totally responsible for the maximization of “human capital effectiveness”. Which primarily creates a better-trained, more flexible workforce that will add more to the bottom line. Peoples’ Bank went through some organizational restructuring in order to stay competitive in the market. As a result of the changes that were made in the Bank’s System, HR Management had to do research and analysis in order to scan the banks new environment to see what types of employees would be needed with the “new strategy’s skill and organizational requirements. This was a use of HR’s information management skills, which was followed by HR’s integration and change skills to manage the organizational interfaces, assess the organizations skills (or the current values of the banks human resource investment), set priorities, anticipate the future, and facilitate the changes. This is an excellent example of HR Management’s role being at every level of the strategic planning process.

At Peoples’ Bank, “massive changes began to take place in the business environment of banking with deregulation and the relaxation of ceilings on interest”. This affected what people actually did with their money and where they actually put their money; and these two factors affected the whole money market system of banking. This especially affected the competition between the different levels of banks (regional, district, and local) for various (but the same) sources of funds.

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In the US Navy, their environmental issue was mostly cost containment. “In the Navy’s case the HR planners analyzed the labor cost savings of a strategy involving its civilian employees, which would substitute local wage policies for national wage policies” which are higher. The Navy basically began operating HR as a profit center to minimize incremental costs. At Ingersoll-Rand, the company was faced with the opportunity for improved productivity through changes in technology. Then at Maid Bess, the company had the environmental influence of intense foreign competition.

The sum of the environmental factors that facilitated the actions and changes in each of the organizations was as follows:

The rapid rate of business change; high uncertainty; rising costs; increasing competitive pressures on the bottom line; the legal environment; increasing demands for new skills through education and retraining; increasing multinational competition and collaborations; and all the rapid technological changes (which is a huge factor). All the new technology causes increased competition by providing vast amounts of market data. This data allows companies to quickly collect, analyze, and interpret changing and emerging customer needs. This affects the rate of business change. Technology also changes the way the work is done; this increases demands for new skills through education and retraining. As a result the ability to access and share information creates a growing need for less hierarchy and more employee empowerment. A common theme running through all these environmental factors is a cost control orientation, which means that organizations (as it relates to remaining profitable and competitive) have a concentrated focus on containing costs. This can most often be done through planning and planning can be done through (first) environmental scanning. Another environmental factor is reengineering, which is also called process innovation, core process redesign, or business process reengineering. Reengineering is directed at achieving large cost savings by eliminating unneeded activities and consolidating work. This was done in the Navy, as they eliminated several middle management jobs/positions, and replaced those jobs with better-qualified civilians on a local wage policy. The type of service desired by customers is also a major environmental factor (as demonstrated in the Peoples’ Bank example). In the Peoples’ Bank example, the environment changed from a product orientation, to a market orientation where the market (or what people wanted, demanded, and were buying and using) demands where determined first and then the products were “developed to serve the market”.

There are several managerial trends. One well-known managerial trend is Total Quality Management, also known as TQM. In a strategic context, TQM is probably most accurately categorized as a tactic for carrying out strategies requiring high levels of product or service quality. “TQM principles emphasize the following:
a) articulation of a strategic vision, b) objective and accurate measurements, c) benchmarking (evaluating the quality of human resource programs, activities, and impact as well as a means of identifying areas in which resources should be concentrated) d) widespread employee empowerment and team building, e) striving for continuous improvement, f) emphasis on a systems view of quality which conceptualizes quality-related activities as being highly interdependent, g)leadership committed to quality, and h) great emphasis on customer satisfaction.
Another trend is the increased use of work teams, which is defined as a cohesive group assembled to address a problem, manage a process, or work to improve productivity. Teams can be formed from individuals doing the same work (a functional team) or from different work (a cross-functional team). Also, (as in the Ingersoll-Rand example) there is trend towards product development teams, which is a kind of cross-functional team. They bring together all functional areas involved with creating new products: engineering, production, research and development, marketing, purchasing, and so on. A key advantage with teams is that they help organizations and individuals depart from traditional, and bureaucratic, notions about how work is organized, and who is responsible for what. Teams exert a powerful influence on individuals by setting norms regarding appropriate work quantity and quality. Positive results from group influences are more likely when there are rewards for group efforts, and the group has autonomy and control over the work environment. Another trend is managing through employee participation and empowerment. This encourages the decentralization of decision-making and gives broader worker participation and empowerment in controlling their own work process. Research has shown that participation increases both employee satisfaction and productivity. Then there is strategic salary planning, which includes incentive pay and pay for performance, and having wages that are higher than that required by the market. This salary related trends allow employees who are responsible for enhanced levels of performance and profitability to share in the benefits. If properly implemented, they can align the interests of employees with those of other shareholders. Such employees will likely take a long-term view of the organization, its strategy, and its investment policies.

Employee empowerment can provide a valuable source of competitive advantage to be considered in strategic decision-making. Empowerment can improve productivity in two ways. First, it can strengthen motivation by providing employees with the opportunity to attain intrinsic rewards from their work, such as a greater sense of accomplishment and a feeling of importance. Workers then become self-motivated. Second, employee empowerment can improve productivity because the process leads to better decision. Decisions are better because they are made by employees, (as in the case at Ingersoll-Rand, when the employees were included in the purchase of the new technology system for the company) and employees have a more complete knowledge of their work than do their managers. Furthermore, employees are more likely to accept (and thus implement) decisions when they have participated in the decision-making process. An organization’s competitive advantage rests with managing and developing its “knowledge capital”. Knowledge capital refers to the collective economic value of the organization’s workforce. It encompasses the organization’s ability to stimulate employees to develop new approaches to cutting costs and increasing revenues, and to discover new products and services. Examples of this include information sharing which provides an informed basis for employees to appreciate how their own interests and those of the company are related, and thus provides them with the information they need in order to do what is required for success in various business related situations. There is also employee ownership with things such as shares of company stock and profit-sharing programs; and informal participative decision –making programs, where managers decide just how much decision-making authority employees should have and managers and subordinates make joint decisions on a day-to-day basis.

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