1. ? 116. 2 million in 2009 with
1. Discuss to What extent does Richers offer useful lessons for other organisations in terms of its approach to HRM and to what extent is their approach replicable? 2.
Critically evaluate whether the Richer’s Way of managing people would be effective in the Barbados Submitted on January 04, 2011 Word Count 2475 No. Z0923915 1 Table of Contents Page 1. 0 Introduction ………………………………………………… 2 2. 0 Preview ……………………………………………………… 2 3.
0 High commitment Management …………………………….. 2 3. 1 Resource Based Value ……………………………………… 5 4. 0 Discussion ……………………………………………………
6 5. 0 Conclusion ………………………………………………….. 11 6. Bibliography ……………………………………………….
.. 12 List of Figures Figure 1: Some key areas considered in HCM modeling…. …….. 4 2 1.
0 Introduction With the Guinness Book of records highest sales per employee and sales value per square foot, a five-star rating and #1 High Street shop survey ranking from Which? Magazine; Richer Sounds Plc (RS) is the largest high fidelity (hi-fi) and home theatre equipment company in the UK. Richer Sounds is an unlisted public limited company, wholly owned by Julian Richer, and there are currently fifty-two branches nation wide, each approximately 200sqft in floor area and located off the main high streets.The company had an annual sales turnover of ? 116. 2 million in 2009 with pre-tax profits of ? 3. 4million. Bloomberg (2010), Redman (2010), Richer Sounds (2010) 2. 0 Preview This essay will analyse the Resource Based View (RBV) and High Commitment Management (HCM) Human Resource (HR) models and apply them to the practices at Richer Sounds, then discuss any useful lessons for other organisations, and how replicable their approach is.
Secondly, this essay will give various points of view about whether the Richer’s Way of managing people could be effective in Barbados. 3. 0 High Commitment ManagementAccording to Redman (2001) the Best fit model of Human Resource Management (HRM) is dependent on how HR practices align with corporate strategy to gain competitive advantage also known as vertical integration.
Huselid (1997) showed that there was a positive impact between the effective use of high performance work systems and alignment with strategy, and this produces positive performance, with employees increasing market share. Delaney et al (1996) suggests that the progressive use of HRM practices such as selective staffing, training and incentive compensation produces the perception of positive performance results.Redman (2001) writes that different HR services are required for different groups of employees due to varying requirements. 3 According to Redman (2010) properly structured HRM creates perceived organizational support (POS) from the employees where they feel they are valuable assets to the organization demonstrating affective commitment and therefore positive organizational citizenship behaviour which leads to positive performance, this is also supported by Mitchie et al (2005) using statistical methods.Becker et al (1996) Suggested that key to strategic HRM, flexibility must also be factored in light of continuously changing operating and business environments. Figure 1 shows some areas that are considered in HCM. Figure 1 Some key areas considered in HCM modeling Corporate Strategy and Philosophy Schuler R (2002) suggests that effective HRM is key in any organisation and should be integrated with the business strategy, and by satisfying employee needs through various HR practices gains their cooperation.
Gratton et al Recruitment & Training Communication RewardsEmployee Involvement Corporate Strategy & Philosophy Culture High Commitment Management 4 (2003) carried out studies of companies with different levels of horizontal and vertical integration, and implementation levels. They showed that alignment of the HR objectives with; company strategy; management values and behaviour; and work processes; were all necessary for a successful people strategy which leads to positive performance. According to Redman (2001) a business strategy based on cost leadership as opposed to risk taking requires different HR services.He further states that the complexity of company structure and size are also important, since large companies typically have formal HR policies as well as funds for implementation. Rewards According to Redman (2001) Strategic Reward Management is used to promote positive employee behaviors and centers on the alignment of the business strategy and core reward values, the reward structure and the reward process features. Monks K. et al (2006) states that what is important it is not the quantity of HR practices but how these practices reinforce and support the core company strategy and philosophy.
According to Redman (2001) some HR practices can add to employee work stress and exploitation. Communication According to Kaman V. et al (2001) by management encouraging open communication this shows trust and can motivate employees to provide competitive advantage; this notion is also supported by Redman (2010) who also states that employee involvement in decision making can contribute to increased affective commitment.
Network Relationships According to Redman (2001) HR practices play a significant role in mployee-employee (team work), and employee-customer relationships especially in service oriented or knowledge based companies. 5 Recruitment, Retention & Training Delaney et al (1996) showed that an important part of any organisation starts with the recruitment of the right personnel. who align with the company strategy and philosophy.
According to Anvari R (2010) once employees are given reasonable information about training and they can see a benefit to them, there is increased desire to learn and they are more committed. Redman (2001) also factors in competition for labour according to geographic location.Goddard (2004) suggests that several problems can arise with implementing High Performance models – distrust from staff and the union can result from management making decisions that are perceived as undermining the role of the union, or not in the interest of the worker. Due to the high costs of using the involvement approach, many companies use an intensive approach where workers are pressured to participate, some companies only implement moderate levels as add-ons to existing HR services. Management’s interest also varies due to company size and structure (layers), and the market. 3. 1 Resource Based TheoryCiting Barney (1991), he states that RBV is based on attaining, then sustaining competitive advantage through the continuous development of HR in alignment with the business strategy.
To sustain competitive advantage the human resources have to be valuable where they contribute to continuous improvement and therefore increased efficiency and effectiveness of company performance. Resources also need to be rare, Redman (2001) further states that those processes that are strongly influenced by organizational culture, and those HRM practices that are aligned with the culture, are hardest to imitate by others.Barney (1991) further states that sustained competitive advantage is obtained when resources cannot be copied easily – those that are condition based such as dependent on historical conditions, social interactions and corporate culture. Furthermore, if the link between resources and competitive advantage is unknown by the competition and by the company with the advantage, then it is also difficult to imitate.
Lastly social 6 complexities such as culture, reputation, and inter-personal relationships among management and staff are difficult to copy.This is supported by Holtom (2006) who states that social capital formed through social networks is an increasingly important resource. Truss (2001) states that several researchers argue that the management of the human resource is what maintains the competitive advantage as opposed to humans being regarded as the resource. She further states that under changing conditions because RBV relies so much on alignment between processes, it has difficulty with flexibility. 4. 0 Discussion Richer Sounds is a very successful company with annual sales turnover exceeding 100 million annually.
The company has been able to create a culture of fun for the customer and employees, that is aligned with the company strategy of volume sales of discounted or end-of-the-line hi-fi equipment, whilst keeping overheads to a minimum; and company philosophy which follows three main principles- quality products, value for money and great customer service Redman (2010) To be successful RS must sustain competitive advantage. If we apply the principles of Best fit and RBV to RS we can see the following -The company has a clearly defined company strategy and philosophy to which all the staff are aligned. This is substantiated by results from staff surveys. The company chart is inverted with customers heading the chart followed by sales staff then management. Copying the company strategy goes beyond just the statement – the implementation is difficult to copy. The company promotes a fun culture which aligns with the corporate strategy and philosophy, around which they have created several HR services. According to RBV, culture and the services derived from it are very difficult to imitate.
With customers as the #1 priority, RS is a customer oriented company and has not only tried to keep costs low but also created several HR services for customers which align with company culture which is difficult to imitate. o The gimmicky giveaways, store decor, and informal dress all align with the culture and gives customers a unique experience which adds value to their products o The 24 hr customer problem line operated by upper management o Customer survey and suggestion schemes o Item refund if found legitimately cheaper elsewhereThe bundling of the HR rewards is tailored to align with the culture and corporate strategy to produce affective commitment from staff which supports the Best fit model. Applying the RBV model, the combination effectiveness can not be easily copied and the affectively committed employees are rare continually producing new ideas. The staff is highly paid and salary is directly linked to performance, with deductions for poor performance (even this negative procedure works positively in combination with the other rewards). o Management earns basic salary plus commission o Profit sharing o Customer service bonuses. Reward pins for work above and beyond the call of duty (ABCD) as well as for poor performance.
o Life insurance and subsidized medical insurance o Staff name badges o Gimmicky word-of-mouth as one of means of recruitment o Interest free emergency loans o Subsidized outings thrice yearly o Drink allowance o Team incentives o Very successful staff suggestion scheme with very nice prizes o Group incentives – encourages 8 Regular and relevant training creates affectively committed staff – which is difficult to copy. However if not managed correctly can promote normative and continuative behavior. Some recruitment methods are unorthodox but aligns with the fun culture o Intensive induction training – this is a critical stage where culture, history and company standards are taught o High initial employee turnover – due to non-compatibility o Regular training twice yearly at vacation homes in St.
Tropez and Venice o Regular seminars o Promotion from within There are open channels of communication which align with the culture and strategy and are difficult to copy. Using the Best fit model this practice can serve to reinforce affective commitment once properly managed. Bi-weekly branch videos on company performance shown o Regular seminars. o Staff dinners o Annual staff attitude surveys.
o Staff access to chairman’s home phone o Teamwork is encouraged All of these services produce affective commitment and social capital and therefore a positive effect on organisational performance Crossman A (2006) Regarding the ‘Richer’s Way’ and whether it could work in Barbados, there are several factors to consider – 9 1. The Business Climate Trade union presence – In Barbados the workforce is approximately 120,000 out of a population of approximately 270,000, of which between 25% – 30% are unionized.The UN Refugee Agency (2009). According to Chukwunonso (unknown) the presence of the union influences HRM in the form of discipline, salaries, work time and conditions. The Social Partnership – this a tripartite consultation group of Government, the trade unions and private sector representatives; that discuss nationwide policy. Barbados Ministry of Labour (2009) Applicable Barbados Labour Laws Citing ICFTU (2002) Pg 2 Item 1, Barbados has ratified the International Labour Organisation (ILO) conventions No. 87 and 98 allowing freedom of association and the right to collective bargaining respectively.
According to Redman (2010) often the union sees HCM as a threat to their usefulness and may oppose. Barbados has also ratified ILO conventions No. 100 and 111, for equal remuneration and prohibiting discrimination on the grounds of religion or gender. It s public knowledge that there are few females at Richer Sounds, quoting Julian Richer through Beenstock (1998) Pg 3 “It’s wonderful, I’m very short of women.
” This is a direct contravention to ILO No. 111 and thus the Labour Laws of Barbados. Currently in Barbados little attention is placed on gender bias in Barbados, however for those that see RS as a threat, will refer to this law. 0 Wage Deductions Citing from the Database of Labour Legislation, Chapter 351, Item 8.
“Deductions or payment in respect of fines restricted. Except where otherwise expressly permitted by this Act or any other Act, no employer shall make any deduction or make any agreement or contract with a worker for any deduction from the wages to be paid by the employer to the worker, or for any payment to the employer by the worker, for or in respect of any fine or for bad or negligent work or for injury to the materials or other property of the employer save when such injury is occasioned by the wilful misconduct or neglect of the worker. At Richer Sounds when employees under perform on their monthly customer survey index their wages are reduced, however according to Labour Laws- Section 8 Chapter 351 no deductions from wages can be made for bad or negligent work. Tax laws regarding allowances and income tax deductions vary in different countries and some of the monetary allowances and perks given to RS staff may be subject to income tax reducing their effectiveness. Stable democratically elected government 2. Local market,According to Chukwunonso (unknown) companies introduce some HR services in response to social and political demands.
According to Holtom (2006) peoples’ needs vary according to geographic location, income, literacy and other demographics. This will affect both the type of customers and the staff pool. 11 Business structure and culture – as discussed earlier, culture is not easily copied, and will be influenced by Barbados’ history and the wider Caribbean island culture e.
g. calypso, reggae and carnival are a part of Caribbean heritage.The new market will produce different SWOT analysis results, which will affect company strategy and the entire alignment process.
The size of the market must also be factored, small economies are fragile to global events and HR practices and business strategy and structure will need to be flexible. 5. 0 Conclusion The useful lessons that can be learned for other organisations from RS are that there must be a clearly defined business strategy and working philosophy that the staff are aligned to.
RS has created a unique culture to promote these along with carefully developed HR services. Customers are considered #1 and treated as such, followed by the staff who are rewarded well for good performance. The suite of HR bundles along with open communication, relevant training and team work all support affective commitment. RS has been able to create a unique culture with rare resources, that cannot be copied, and therefore sustain competitive advantage, thus the Richers approach is not replicable.
Regarding the Richer’s Way being effective in Barbados – when consideration s given to the different factors such as – labour legislation and enforcement of the law, the presence of the union, political influence and stability, market size and demographics, island culture, the SWOT analysis results, The Richer’s Way is not replicable in its entirety, however several general aspects of the approach can be used as described in the previous paragraph; to create a unique business culture that complements the new market culture and is wholly supported by an effective strategic HRM system. 12 6. 0 Bibliography Journals Anvari R. 010 ‘The Customer Relationship Management Strategies: Personal Needs Assessment of Training and customer Turnover,’ European Journal of Social Sciences Vol.
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