HR Planning Research Project
Executive Summary
The following report will examine strategic human resource planning of Maxtech Metals with Michael Porter's competitive strategy model. Following areas of human resources will be examined:
* Recruitment and Selection
* Orientation
* Training and Development
* Career Planning
* Compensation Management
* Health and Safety
Head Office of Maxtech Metals is in Waterloo, Ontario Canada. The company executes the main sales, marketing and distribution operations of Maxtech from here while their brother company in Shanghai, China allows them to leverage their relationships with external vendors in order to maximize margins while maintaining a consistent level of innovative products.
Maxtech, which operates three plants including two in Waterloo's north end, makes numerous components for big-name suppliers like Mahle, Siemens and Arvin Meritor. In turn, they add other parts or value like machining for delivery to Chrysler, General Motors and Ford assembly plants.
The company also designs hand and power tool accessories that are made in China, and then distributed to retailers such as Home Hardware. It is also seeking new work in the environmental sector.
Through the course of this report, Maxtech's low cost provider strategy and the practices they integrate in HR strategic planning would be examined.
Porter's Model
Named after Michael E. Porter, this model identifies and analyzes 5 competitive forces that shape every industry, and helps determine an industry's weaknesses and strengths.
1. Competition in the industry
2. Potential of new entrants into industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products1
These five forces with respect to strategic management planning were broken down to identify five competitive strategies that a business can incorporate as:
* Low-cost provider
* Broad differentiation
* Best-cost provider
* Focused or market niche based on low-cost
* Focused or market niche based on differentiation
In his 1980 classic Competitive Strategy: Techniques for Analyzing Industries and Competitors, Porter simplifies the scheme by reducing it down to the three best strategies. They are cost leadership, differentiation, and market segmentation (or focus). Market segmentation is narrow in scope while both cost leadership and differentiation are relatively broad in market scope2
1 http://www.investopedia.com/terms/p/porter.asp
2 http://en.wikipedia.org/wiki/Porter_generic_strategies
Maxtech Metals have adopted Focused Low cost strategy; the company provides low cost products to a narrow range of customers. Maxtech Manufacturing focused low cost corporate strategy is best fit with their classical managerial strategy. Because of manufacturing environment the jobs have been designed with few basic elements so they can be supervised closely and so that employees can be replaced easily if they quit or are dismissed. The environment at Maxtech Mfg. is stable and simple and the skills/ education required by entry level employees are low. The Strategic Human Resource Planning of Maxtech in light of Porters low cost strategy is discussed below:
Human Resources Planning
In Porter's low cost strategy the company will have to keep wages low and job scopes limited. The position requires highly repetitive and predictable behaviours. At the entry level, HR planning focuses on low-skilled workers while monitoring the labour market for fringe type workers such as students, seniors and unemployed. Succession planning at the executive level holds the same importance of other organizations. 3
At Maxtech Manufacturing specific duties and work methods for each job are planned and defined in detail by management, since employees cannot be trusted to perform effectively without doing it. Jobs are arranged in strict, pyramidal fashion because of the overriding need for accountability.
Employees at Maxtech are organized by function; production staff into one department, marketing staff into one department. They par competitive wages to production staff and job scope is limited in Maxtech.
ORGANIZATION STRUCTURE
CEO
¯
President
¯
General Manager
¯
Plant Manager HR Manager Sales Manager
¯ ¯
HR Generalist Sales Representative
Quality Manager
Maintenance Manager
Production Manager
¯ ¯ ¯
Quality Supervisor Maintenance Supervisor Production Supervisor
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Quality Inspector Maintenance Technician Production Foreman
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Machine Operator
Maxtech Consumer Products - Mission Statement
Exceed consumer expectations with innovative, well designed, high quality products in partnership with leading-edge retailers, hard-line distributors and vendors, worldwide.4
4 http://www.maxtechconsumers.com/main2.cfm?id=A59EFACF-B6A7-8AA0-694B559FD79AE86F
Recruitment and Selection
In organizations that are low cost providers recruitment and selection begins at the entry level into the company. The primary focus for advertising into the organization is through word of mouth and application forms for employment on site. This benefits that organization by saving money on advertising. Promotions through levels are common in the organization; however, the career path taken by employees is narrow in scope and will take a long time to achieve growth and promotion within the organization.4
In Maxtech the recruitment and selection of employees at entry level is done from surrounded labor pool. The employees generally refer someone they know for position available. At production level there are approx. 200 employees and their pay is tied directly to hours of work. The employees are not paid higher than absolute necessary to attract a sufficient flow of job applicants at higher positions.
Orientation
The orientation into a company that is a low cost provider is least. The employees are introduced to the corporate values and mission of the organization. There is little control of the employee in the company.
This is because organizations are structured to minimize the cost of turnover; and with narrow job categorizations workers are easy to replace, train and supervise.
At Maxtech the scenario is same as discussed, most of the times a supervisor would show new employee the machine on which he would be working. The control at Maxtech is external i.e. through supervisors, rules, punishments and some rewards.
Training and Development
According to Porters Low-cost strategy most training takes place on the job and can be accomplished in a few short hours. The skills are minimal and thus the training mirrors the job skill level. Training is based on increasing efficiency in the current position and there is little or no investment in neither long-term development nor the acquisition of new skills for promotion.5
The training provided to employee at Maxtech is on the job training. The supervisor shows the new employee how to run the machine the machine, the new employee work is strictly supervised for 1-2 weeks to make sure that he is performing his job well. The training is in the form of instruction as the job are likely be narrow in scope and require repetitive tasks. At Maxtech metals HR has open door policy for employees to come and talk with on any matter, be it business or personal which helps lead to higher job satisfaction and hence higher overall productivity. Employees are encouraged to get help and support to accomplish desired outcome theough training hen needed.
Career Planning
In this kind of model most organizations does not have an expectation of promoting or planning career moves for employees. At Maxtech decisions are made at a relatively high level in the organization.
The main leadership role is autocratic, with a high emphasis on tasks. Communication in some situation is formal with an emphasis on a downward vertical flow. Career Planning has not been fully incorporated in the organization.
There are few employees at organization who have hit plateau and some of the employee's skills are underutilized. With Career planning the staff can lead to increased job satisfaction, involvement, commitment and productivity at Maxtech.
Performance Evaluation
Porter's Model focused low cost strategy involves short term results based on specific and standardized criteria used to evaluate an employee's performance. Feedback is immediate and specific geared towards the individual results. Feedback tends to be one way with little opportunity to receive developmental feedback.6
The performance management system that Maxtech has incorporated at the plant represents a very simple form of evaluation for employees. Individual employees are held accountable for their behavior and performance. This is a one-way process with very little opportunity for the employee to get feedback on the results. This is usually done by supervisor and then information is sent to manager. The employee is promoted and receives appraisals based on the evaluation. The rewards and recognition are distributed according to employee performance, seniority and job status. The employees at Maxtech are in highly routine kind of jobs that require supportive leadership to help them cope with the tedious nature of work in fast paced production environment, which is seen at some levels.
Compensation Management
The Low-cost strategy firms attempt to pay wages slightly below industry norms tending to a lag strategy. They also save costs on compensation by hiring pert time employees that do not qualify for any benefits. Pay for performance is used where compensation is linked to productivity and is rewarded individually.7
A low cost provider strategy provider such as Maxtech Metals will have lower wages and fringe benefits. The organization will carefully monitor their competitions wages in their local market. The pay offered to employees may actually be slightly below the industry norms but will comply with minimum legal pay requirements. At floor level pay is tied directly to hours of work. Little indirect pay is used at Maxtech, because it is not tied to individual performance, and management does not see much value in incurring large benefits cost in order to promote loyalty and reduce turnover. Because that how the Maxtech is structured to minimize cost of turnover, and workers are easy to replace, train and supervise.
Labor Relations
The poor compensation practices, low consideration for workers needs and their adversarial management - labor relations make Maxtech a unionized firm, as employees attempted to protect their interests. The relationship between management and union is not so good. Employees feel bitterer when management's cost cutting solutions does not seem appropriate to employees.
Health and Safety
The health and safety practices for a low cost provider will meet minimal standards. Maxtech being manufacturing company has a health and safety teams at its various plants. The team members are trained in emergency response systems like providing first aid, ensuring safety compliance all across the plant, WHIMS information availability etc.
The HR department plays a vital role in achieving its objective of ensuring that all industrial safety compliance rules are met and followed. Team meetings are held regularly to ensure all objectives are met and addressed.
CONCLUSION
In this report importance of Porter's model in success of organization is explained. The company analyzed is following one strategy focused low cost, thus by not being struck into middle, the company is successful in today's competitive world. Human Resources department is aligning well with the classical managerial strategy of Maxtech and low cost competitive strategy.
Maxtech is seeking healthier sectors for their expertise and technology (because of Ontario's auto sector shrinkage) such as , Alberta's oil patch. Like its peers, Maxtech has had a rough few years — its workforce is down to about 300 from 500, and revenue has dropped by half, to $50 million — as high commodity prices, a soaring loonies and now dwindling demand for its brake rotors and other parts cut into its business. In response, the company is leading an ambitious push into the oil sands.8
8 http://network.nationalpost.com/NP/blogs/fpmagazinedaily/archive/2009/06/01/playing-forward-companies-that-are-making-gusty-innovations-and-possibly-shaping-the-futures-of-their-industries.aspx
With this planning Maxtech is in need to change its classical managerial approach, which were best fit many years ago but now with new competition and changing technologies the company is in need of changing their managerial strategy into high involvement approach, this issue is the primary strain within the company.
When company is analyzed with Porter's model, importance of this model in today's competitive world has been realized. Porter's model would have been more effective impression if supply chain strategy is incorporated.
Supply chain strategy is an interactive process that evaluates the cost benefit trade-offs of operational components. Business strategy involves leveraging the core competencies of the organization to achieve a defined high-level goal or objective. It also includes the analytic and decision-making process surrounding what to offer (e.g., products and services), when to offer (timing, business cycles, etc), and where to offer (e.g., markets and segments) as a competitive plan.
Supply chain strategy is not simply a linear derivative of the business strategy. At best, supply chain strategy can be the enabler of the business strategy. If the business strategy is to be the low cost provider, the supply chain strategy should support this.
As supply chains have moved from a cost focus to a customer focus and now currently to a strategic focus, the need to think strategically about the supply chain has never been more important. The success of a strategy is only as good as the company's ability to fully and properly execute it. A great supply chain strategy, linked with operational excellence, can provide success for not only the company in question but also its partners and customers.9
9 http://www.ups-scs.com/solutions/white_papers/wp_supply_chain.pdf
REFRENCES:
Belcourt, M. and McBey, K. (2004). Strategic Human Resources Planning (Second Edition). Scarborough: Nelson.
www.investopedia.com
www.wikipedia.com
www.ccohs.ca
www.maxtechmanufacturing.ca
www.nationalpost
http://www.ups-scs.com/solutions/white_papers/wp_supply_chain.pdf
