Business Issues Handling From An HR Angle To Deal With Change In Strategy

Posted in Human Resources Articles, Total Reads: 3073 , Published on 26 October 2013
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This article is the 2nd Prize Winner of the Article Writing Contest October 2013


Many organisations of today in the post global financial crisis of 2008 seeks to redefine their strategy to retain their profitability and adapt to the changing needs and wants of the customers . With increasing competition, organizations are feeling the need to protect their customer base from the invading competition. This is possible only through better customer service, knowing customer preferences and providing customers with what is their need. In the recent past technology has been the enabler for companies achieve this objective by tracking every aspect of customer and catering their need. With the dropping demand of new software’s many software manufacturing forms are now trying to enter the software servicing segment of the software industry. This has opened up a new challenge for human resource professionals so to adapt and change the company strategy to effectively meet this challenge.




Image Courtesy: freedigitalphotos.net


The possible ways to deal with the change are as follows:

1. Study the Change in Business model and financial impact on the organisation

2. Identify key challenges

3. Organisational Restructuring to cater to new business processes

4. Change in systems and processes

5. Change in performance appraisal structure

6. Change in compensation system

7. Adapting to the culture transition



Change in Business Model



Key Challenges



Organisational Restructuring

If the organisation seeks to be a services company, the structure should be as proposed below:



Change in Systems and Processes




Change in Performance appraisal


Metric to be included

Inputs to be provided by

Recommendation for Performance Appraisal

Number of issues successfully solved of the number of issues assigned along with the rating provided by customer

Customer , Line Manager

It will reflect the Quality of service provided and will be part of the performance index .

Number of instances of being late and their criticality

Line Manager

performance index should be including this parameter

Amount of time taken to solve the issue in comparison to the amount of time that should be ideally taken

Line Manager

Timely service is an essential criterion for building customer satisfaction .

Number of instances of misconduct or rude behaviour with customer

Customer , Line Manager

Good behaviour with customers is of paramount importance.

Years of experience with the organisation

HR

In services industry years of experience is of utmost importance both as an indicator for employee expertise in handling a particular operation and also as ready source of knowledge which can be imparted to other employees. Employee loyalty to the organisation will also be enhanced by including this parameter in performance appraisal


Raw Performance Index =Grade * ((Number of issues handled *Criticality*Customer rating*(time taken/time ideally should be taken)/ (Number of issues assigned)+ years of service – (Number of instances of misconduct *criticality ))


*** Bonus should be provided on the basis of performance index obtained above and not on the basis of a separate potential index which it is currently following . Because the number of years of service is reflected in the performance index calculation itself .


Change in senior management Compensation structure

Problem with stock options as compensation

1. If stock prices decline, the stocks go underwater and company loses talent

2. In case of underwater stocks, repricing or reissue could lead to serious complications.

3. The CEO could take short-term measures just before his vesting period to boost up the stock prices

4. The CEO might not have the incentive to invest in long-term proposals like R&D which bears fruits long after his tenure.

5. Giving too many stock options would result in dilution.


Total Compensation Plan

 


Introduction of EVA for Executive Bonus calculation

EVA, shorthand for Economic Value Added, is a periodic measure calculated as after-tax operating profits less a charge for capital employed, where the charge is based on the cost of capital (or WACC) times the level of capital employed. The underlying premise of EVA is that if managers focus their efforts on maximizing earnings, subsequent earnings growth may come at the expense of the balance sheet. That is, managers may overinvest in costly capital if they are only concerned with the profit and loss statement. To counter such asset inefficiencies it should replace earnings as the objective in their managerial compensation schemes with EVA.

 



Culture transition


Based on Hofstede’s model , we can classify the transition as follows:

Characteristics

Culture before change

Culture after change

Individualism

High

Low

Power distance

Low

High

Uncertainty avoidance

Low

High

Long term/short term orientation

High

Low


As a software manufacturer , the culture of the organisation was based on joint decision making in teams and status based on achievement with high level of egalitarianism ( ideal culture for research and development).The uncertainty avoidance was low as unexpected was seen as challenging and expecting . Most operations took place with a long term orientation . However , as a service company , it would need to have a belief in group control and team accomplishment . The communication would be top down and authoritarianism would be demonstrated . Uncertainty avoidance would be high and short term orientation would be preferred since it would be essential for a reliable ,error free ,timely service delivery which will be driven by the rigid guidelines of service document issued by the organisation in response to the request filed by the client.


This article is authored by Uddalak Banerjee And Arijit Das from XLRI



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