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MGT B347 Managing People and Organizations : Influence of Contractual

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East Bay is a coastal resort area which has struggled to attract visitors in recent years. Fifty years ago the area was a popular holiday destination which was also able to attract large numbers of day trippers on summer weekends and bank holidays from the nearby large city. Now fewer and fewer come each year. Things may soon improve thanks to East Bay council's success in attracting grants to build a new purpose-built, state-of-the art conference centre with its planned 3000 seat auditorium, but this announcement has come too late for Jack King and his hotel group, East Bay Nights Ltd. After years of declining sales and decreasing profits in all three of his hotels in the area, Jack has had to admit defeat and has put his company into receivership.  

You work as a management consultant for a company in the leisure industry that operates visitor attractions around the world. Your company is looking to expand and has cash available to buy East Bay Nights Ltd from the receiver. The aim would be to invest substantial sums in upgrading the three hotels that make up the group, closing each in turn for a programme of refurbishment and re-opening them before the new conference centre opens in two years' time.

You are asked by your managers to meet with the receiver's representatives and to visit each of the hotels to talk to their general managers. Your brief is to establish what HR practices are currently in use in the hotels with a view to recommending what, in your view, needs to change if the proposed acquisition goes ahead. You spend a week in East Bay during which time you establish the following:

  • The three hotels are run by different general managers who have each reported separately to Jack King. There are separate management teams and quite widely differing management systems and management styles in operation across the three hotels, as well as very different approaches to the management of employees. Staff only work in one hotel, although some have moved jobs from one to another over the years.
  • Each hotel employs around 30 permanent staff, many of whom work on a part-time basis. These teams are supplemented during the summer and at other busy holiday times by temporary staff recruited on a ‘casual’ basis.
  • Jack King has been managing the hotels on a very tight budget for the past five years spending no money at all on training or staff development, paying most of his staff at a fixed hourly rate which is around the local minimum level, with no other incentive, bonus or benefits schemes in place.  
  • Any vacancies are only advertised in the local newspaper, and much recruitment is done by ‘word of mouth’. It is not always easy to fill vacancies and the quality and number of applications are often very low.
  • Workers are not encouraged to speak up about any problems they are experiencing and there are high levels of dissatisfaction amongst employees. Staff turnover levels among permanent staff are running at around 50%, but would be far higher if seasonal workers and temporary staff were included in the analysis. There are some long-serving employees in each hotel, but the average length of service of current permanent staff is less than two years.
  • Most of the current staff, including all three general managers, got their jobs by knocking on Jack's door and asking directly if any vacancies were available. They did not have to compete with any others for the job, being appointed if Jack decided that they would fit in after a brief interview with him. None received any specific management training or development.
  • No formal induction programmes are run in the hotels. Staff learn their roles on the job from colleagues and their line managers, and are usually ‘thrown in at the deep end’ to sink or swim in their new roles with little preparation.
  • There is no formal appraisal or performance management in place with employees receiving only ‘ad hoc’ feedback, and usually only when something has gone wrong or there have been customer complaints.
  • Regular ‘sackings’ have occurred which have followed no formal process. East Bay Nights Ltd has been named as the respondent in 25 separate labour tribunal cases over the past two years for non-payment of wages on dismissal. The company does not have a good reputation locally as an employer.

Write a briefing paper (report) for your manager which meets the following objectives:


  1. Makes recommendations for what you consider to be the most important changes that would need to be made to the HR policies and operating practicesat the three East Bay Nights hotels were your organisation to take the company over.
  2. Justifies each of these changes with a good business case, and with reference to appropriate research and literature. This means presenting a strong and persuasive rationale
  3. Makes reference to both the internal and theexternalcontext of the company, including the way in which legislation should be taken into account in its future people management policy and practice.

Answer:

Introduction: 

In the present business scenario, human resource is one of the key aspects for determining the effectiveness of the contemporary business organizations. Human resource managements are being implemented by several business organizations to effectively utilize the existing human resource of the organization by increasing their output and productivity level (Armstrong and Taylor 2014). Human resource management is the concept of enhancing the performance of the employees with the help of implementing various organizational strategies and policies (Armstrong and Taylor 2014).

Hotel industry is one of the most human resource oriented industry, where the personal skills of the employees matters a most in determining the customer satisfaction (Torres and Kline 2013). East Bay hotel was one of the leading and prominent hotels few years ago attracting good numbers of visitors and having goodwill and reputation in the market. However, in the last few years, they are facing difficulties in maintaining their standards which caused reduction in the inflow of the customers. Due to their ineffective management of human resources, customer service has taken a hit which cause further degradation of their service (Mok, Sparks and Kadampully 2013).

Figure: 1. GE Mckinsey matrix

According to the GE Mckinsey matrix of East bay hotels, the strategic business unit strength is low due to the reason that, internal environment of the organization is not productive in nature. Implementation of ineffective human resource management policies further degraded the unit strengths. These all lead to the dissatisfaction of the employees, customers and financial crisis. Market attractiveness of them is also low due to unfavorable customer service provided. However, new initiatives such as, constructing a new conference centre may help to raise the market attractiveness of East bay hotel.

This report will discuss about the issues in the existing human resource policies of East Bay hotels. Recommendations will also be discussed based on the identified issues. External environments such as political, legal, social and economic environments will be taken in to consideration in discussing the recommendations.

Role of HRM in supporting the business strategy 

Human resource management is the concept of effectively using the existing human resource of the organizations in a way that it will increase the productivity, job satisfaction and motivation of the employees. Thus, organizational performance can be enhanced and increase the return on investment for the organizations. Strategic human resource management is an organizational activity to implement the human resource management aligned with the organizational goals and objectives. It helps the employees as well as the entire organization in effectively fulfilling the strategic goals. In the present business scenario, the prime job of the human resource executives is to identify the link between the organizational policies and the human resource management. Vertical and horizontal fit should be properly implemented in the strategic human resource management. Vertical fit refers to the alignment of the human resource management with the overall business strategy of the organization. It will enable the organization to involve all the internal stakeholders in human resource management. Horizontal fit refers to the coordination and linkage between the various aspects of the human resource management. It helps in implementing an unified approach in managing the employees.

Existing issues identified in East Bay hotels 

Identification of the key issues related to the management of human resource is being done by having interview with the employees of the organization. Majority of the issues are being generated due to the organizational failure and ineffective leadership roles.

  • Recruitment and selection:Recruitment policies are the worst part of the management of East Bay. Organizations like East Bay should have effective policies of recruitment to select the right talent for the right job (Breaugh 2017). However, they advertise the job vacancy only on the local newspaper which does not have broader reach. Most of the recruitment is done by reference and word of mouth. Thus, proper selection policy is not followed, which lead to the inflow of inefficient employees in the organization.
  • Contractual employee:Lack of permanent employees is another key issue for them. Contractual employees will not have the same level of responsibilities as permanent employees (Cabral, Quelin and Maia 2014). However, East Bay is now mainly operating with the help of contractual employees. Thus, they do not have any responsibilities regarding the customer satisfaction.
  • Employer branding:Employee turnover ratio is also high due to lack of proper policies of people management (AlBattat and Som 2013). It also incurs extra cost for the organization in recruiting new employees. With all these existing issues, East Bay has been identified as the worst employer and thus new talents are not being attracted towards them. Hence, lack of adequate new talents is also hindering their recruitment objectives.
  • Induction training program:There are no policies regarding the training and induction of the employees. Newly appointed employees are not being given any formal training and they are directly sent to their respective job roles (Dhar 2015). Thus, without having any proper knowledge of the particular job, they are working as the employees. Therefore, customer satisfaction will obviously not be in place with these under prepared employees.
  • Staff engagement:There are no employees welfare policies exist in the organization which further reducing the motivation level of the employees (Anitha 2014). Employees are not being appreciated for their good work and there is no policy of appraisal and performance review. Thus, employees do not feel engaged in their respective job roles.

Recommendations 

Recruitment and selection 

It is being already discussed that, they do not go for any extensive advertisements for their vacant jobs. Thus, it is being recommended that, a talent pool should be created to have the adequate flow of right talent in any point of time (Breaugh 2017). Moreover, advertising in various job portals about the vacant posts will enable the organization to reach out to larger section of job seekers. It will be communicated more effectively and will cover more area (Kapse, Patil and Patil 2012). Thus, inflow of more job seekers and increase in the options for single posts will help the organization in selecting the right talent.

There should be a separate department who will be responsible for the recruitment purpose. The department should constitute of experienced persons having knowledge of human resource management (Armstrong and Taylor 2014). Technology should be implemented in the recruitment process which will enable them to verify the data of the applied candidates and reduce the chance of nepotism.

Software should be introduced in the management of human resource also. The database of the potential candidates can be maintained and retrieved more efficiently (Furtmueller 2012). Assessment process of the recruitment should be ideal in order to select the right candidate. Creativity and innovation should be identified regarding the employees rather than just testing their mugging power. Recruitment process will be looked after by the responsible department but it should be well coordinated with the higher management. The criteria being expected from the candidates should be well adhered with the vision of the organization (Arthur 2012).

For instance, currently Samsung is the leading manufacturer of smartphone in the world. However, this was a distant dream for them a few years ago. It is due to the reason that Samsung operates in a sector where technologies get changed on a regular basis. At one point of time, they were trailing behind the competition due to the lack of updated knowledge among their employees. Thus, they had implemented two strategies such as, providing suitable training to their existing employees and recruiting new employees on the basis of the new criteria in the market (Arthur 2012). This helped them in getting adjusted with the updated organizational process, which helped them in regaining the market.

Employer branding 

As already discussed that east bay hotel is longer attracts talents for recruitment due to their poor management of the existing employees and low market attractiveness (AlBattat and Som 2013). Thus, various employee welfare schemes should be implemented in the organization. This will act on a chain basis. Implementation of the welfare schemes will enable the existing employees to increase their motivational and satisfaction levels. This will eventually raise the quality of the customer service. Positive word of mouth will be generated and number of customers will gradually increase which will lead to the increase in the market attractiveness. Hence, increase in the market attractiveness and engaged employees will help to attract more new talents in the organization.

For instance, Walmart is working on reducing the issue with their existing employees over gender inequality and payment issue. Employer branding of them got hampered due to the continuous protests hold by their existing employees. Hence, they are now trying to resolve the issues and regain their lost employer branding. Otherwise they will trail in the competition without having new and effective talents (Alternet 2017).

Training and development 

It is been seen that majority of the existing employees including the managers have not being given proper training. However, employees in the contemporary business organizations should be properly trained and equipped to face diversified challenges. Thus, it is important for them to provide proper training to the existing employees as well as the newly inducted employees. It will help the employees in enhancing their personal skills and will increase confidence among them (Sung and Choi 2014). They will feel more equipped in facing challenges which will act as a competitive advantage for the organization.

 For instance, Amazon introduced a training program for their underperforming employees known as Pivot. According to them, in this training program an individual subject matter expert will be provided to the employees to identify their shortcomings. It will enable them to overcome those and increase their productivity (Business Insider 2017).

Compensation and benefits 

Disparity in compensation of the employees is being identified in East Bay hotels. Monetary benefits provided by them to their employees are much less to what are being provided by their competitors. In addition, they are not being offered any kind of incentives for good work. Thus, employees do not have any kind of motivation in performing a better job for them. Hence, compensation of the employees should be at par with the industry standard. Incentive should be given to the performance oriented employees. It will motivate them to work better in the future (Yanadori 2015). New talents will also be attracted if provided standard compensation and other perquisites. Other perquisites should include yearly bonus and increment which will help to retain the employees.

For instance, Sports direct, leading sports retailer in United Kingdom faced issues related to the compensation of the employees. Employees went for strike demanding industrial standard wages. This caused decrease in the productivity level of the organization. However, higher management agreed to raise the compensation to the national standard and also providing more guarantee to the contractual employees (Gayle and Butler 2017).

Communication 

Communication is one of the most important aspects of contemporary business organizations. Communication helps in proper implementation of human resource management (Christensen and Cornelissen 2013). It will help the organization to have the access about the issue faced by the employees in their course of work. Employee grievance management is an important measure to check the issue related with the employees (Klingner, Nalbandian and Llorens 2015). On the other hand, employees can convey their opinions related to their workplace with the help of effective communication process. Generation of innovative ideas can be promoted from this (Aziz and Rizkallah 2015). Thus, effective communication will enable the organization to implement a free and flexible working environment in the organization which will help to increase the level of output of the employees.

For instance, Tata motors, one of the leading commercial vehicles manufacturers in the world faced issues at one point of time regarding their passenger vehicle department. One after another, their passenger vehicle models failed to gain market share. Afterwards they identified the issue or problems and taken required measures to check them. One of the measures is to implement effective communication channel in the organization. It enabled them to gain innovative ideas from the employees and also necessary inputs regarding the market trend. Accordingly they modified their existing product portfolio and introduced newer models in the market (The Economic Times 2017). Right now the result is, Tata is one of the prominent brands in the passenger car market.

Evaluation of current policies 

According peter McGraw, recruiting and selecting right employees is one of the key decision making aspects of human resource management. According to him, right employees for the right job will help to increase the productivity and output of the organization. Thus, success of the organizations is highly depended on the quality of the recruitment process (McGraw 2013). However, the current recruitment policy of East Bay hotels is quite ineffective compared to the theory. They mainly recruit employees on the basis of reference from the existing ones. Thus, chance is very less for selecting right employees for the right job.

According to Yoshio Yanadori, compensation and benefits refers to all forms of financial benefits and other tangible perquisites being provided to the employees by the organizations. He stated that, not only the basic salaries and wages, but also other benefits such as, insurances and retirement benefits are also being considered in compensation and benefits (Yanadori 2015). However, in the case of East Bay hotels, they even do not offer the standard compensation to their employees. Other benefits such as incentives are not being provided by them. Thus, engagement and the satisfaction level of the employees are also not to the expected level.

According to Sun Young Sung and Jin Nam Choi, organizational investment in the training and development of the employees will have positive impact on the output of the organization. According to them, with the help of training and development, employees will be more motivated in generating innovative ideas which can act as competitive advantages for the organizations (Sung and Choi 2014). However, East Bay hotels have no such training and development process to equip their employees in facing challenges. Thus, employees are not motivated to initiate new ideas rather than they are just doing their job for the sake of doing. 

Conclusion: 

Having analyzed the identified issues of East Bay hotels, it can be concluded that, there is a huge gap between the effective human resource management and their existing organizational practices. East Bay hotels had not followed any effective policy of human resource management. They have created a negative image from the perspective of both the employees and the customers which eventually lead them to the end. Based on the identified issues, certain recommendations are being provided in this report. It can be concluded that these recommendations will help the company who is going to buy East Bay hotels. The above discussed recommendations will enable them to regain the lost goodwill in the market by implementing effective and ideal human resource management. Implementation of effective human resource management will help to increase the motivational and satisfaction level of the employees which eventually help to serve the customers better.

Reference: 

AlBattat, A.R.S. and Som, A.P.M., 2013. Employee dissatisfaction and turnover crises in the Malaysian hospitality industry. International Journal of Business and Management, 8(5), p.62.

Alternet. (2017). Newest Strike Against Walmart Battles Years of Blatant Disregard for Workers. [online] Available at: https://www.alternet.org/corporate-accountability-and-workplace/walmart-strike-battles-disregard-workers-rights [Accessed 15 Jul. 2017].

Anitha, J., 2014. Determinants of employee engagement and their impact on employee performance. International journal of productivity and performance management.

Armstrong, M. and Taylor, S., 2014. Armstrong's handbook of human resource management practice. Kogan Page Publishers.

Arthur, D., 2012. Recruiting, interviewing, selecting & orienting new employees. AMACOM Div American Mgmt Assn.

Aziz, H.H.A. and Rizkallah, A., 2015. Effect of organizational factors on employees' generation of innovative ideas. EuroMed Journal of Business, 10(2), p.134.

Breaugh, J.A., 2017. to Recruitment. The Wiley Blackwell Handbook of the Psychology of Recruitment, Selection and Employee Retention, p.12.

Business Insider. (2017). Amazon just launched a new training program to help employees in danger of being fired. [online] Available at: https://www.businessinsider.in/Amazon-just-launched-a-new-training-program-to-help-employees-in-danger-of-being-fired/articleshow/56677278.cms [Accessed 16 Jul. 2017].

Cabral, S., Quelin, B. and Maia, W., 2014. Outsourcing failure and reintegration: the influence of contractual and external factors. Long Range Planning, 47(6), pp.365-378.

Christensen, L.T. and Cornelissen, J., 2013. Bridging corporate and organizational communication: Review, development and a look to the future. In Organisationskommunikation und Public Relations (pp. 43-72). Springer Fachmedien Wiesbaden.

Dhar, R.L., 2015. Service quality and the training of employees: The mediating role of organizational commitment. Tourism Management, 46, pp.419-430.

Furtmueller, E., 2012, January. Electronic human resource management: Four decades of empirical evidence. In Academy of Management Proceedings (Vol. 2012, No. 1, pp. 1-1). Academy of Management.

Gayle, D. and Butler, S. (2017). 'A potentially oppressive model': key points of Sports Direct review. [online] the Guardian. Available at: https://www.theguardian.com/business/2016/sep/06/sports-direct-inquiry-key-points-working-practices [Accessed 16 Jul. 2017].

Kapse, A.S., Patil, V.S. and Patil, N.V., 2012. E-recruitment. International Journal of Engineering and Advanced Technology, 1(4), pp.82-86.

Klingner, D., Nalbandian, J. and Llorens, J.J., 2015. Public personnel management. Routledge.

McGraw, P., 2013. Recruitment and selection. na, p.205.

Mok, C., Sparks, B. and Kadampully, J., 2013. Service quality management in hospitality, tourism, and leisure. Routledge.

  1. Torres, E. and Kline, S., 2013. From customer satisfaction to customer delight: Creating a new standard of service for the hotel industry. International Journal of Contemporary Hospitality Management, 25(5), pp.642-659.

Shontell, A. (2017). The Greatest Comeback Story Of All Time: How Apple Went From Near Bankruptcy To Billions In 13 Years. [online] Business Insider. Available at: https://www.businessinsider.com/apple-comeback-story-2010-10?IR=T [Accessed 14 Jul. 2017].

Sung, S.Y. and Choi, J.N., 2014. Do organizations spend wisely on employees? Effects of training and development investments on learning and innovation in organizations. Journal of organizational behavior, 35(3), pp.393-412.

The Economic Times. (2017). When 'humiliated' Ratan Tata did 'favour' to Ford with JLR buyout!. [online] Available at: https://economictimes.indiatimes.com/industry/auto/news/industry/when-humiliated-ratan-tata-did-favour-to-ford-with-jlr-buyout/articleshow/46572012.cms [Accessed 14 Jul. 2017].

Yanadori, Y., 2015. Compensation and benefits in the global organization. The Routledge companion to international human resource management, pp.190-209.

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