Employee Relations Management

Unit 2

Unit 2

Strategic Employee Relations Management

Structure: 2.1 Introduction Objectives 2.2 Different Strategy Levels in an Organisation Corporate Level Strategy Business-unit Level Strategy Functional Level Strategy People Strategy 2.3 Strategy and Employment Policies 2.4 Future Challenges 2.5 Performance Management Services 2.6 Quality, Involvement and Commitment as Competitive Advantages 2.7 The Psychological Contract: Interest and Expectations 2.8 HR Infrastructure 2.9 Employee Surveys 2.10 Summary 2.11 Glossary 2.12 Terminal Questions 2.13 Answers 2.14 Case Study

2.1 Introduction
The previous unit explained the concepts of Employee Relations Management (ERM). This unit familiarises you with the concepts of strategic relations management. You will learn about the strategies and employment policies adopted for effective employee relations. You will be introduced to performance management, quality management, and employee commitment, expectations and interests. Johnson and Scholes define strategy as The direction and scope of an organisation over the long-term; which achieves advantages for the organisation through its configuration of resources within a changing

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environment, to meet the needs of markets and to fulfil stakeholders expectations.1 The main levels of strategy of an organisation are: Corporate level strategy: It frames the overall business direction and goals. Business-unit level strategy: It specifies the methods the organisation uses to compete in particular markets. Functional level strategy: It outlines the strategy of individual departments and divisions like finance, marketing, etc. People strategy: It matches an organisations activities with its resources. Objectives: This unit familiarises you with the concepts of strategic relations management. After studying this unit, you will be able to: list the different levels of strategy in an organisation. explain why strategic people management is essential for the success of an organisation. explain how the strategy of an organisation influences its employee policies. recognise the role of quality, involvement and commitment as competitive advantages. assess the role of HR infrastructure and employee surveys in strategic relations.

2.2 Different Strategy Levels in an Organisation

Organisations have different levels of strategic decision making. Although these levels are inter-related, each one of them has its own scope and reach. The different levels of strategy in an organisation are at the corporate level, business-unit level, functional level and people level. Let us now examine each level of strategy that exists in an organisation in detail. 2.2.1 Corporate level strategy Corporate level strategy is usually devised at the board level. It defines the following for an organisation:
1

http://www.oppapers.com/essays/Johnson-And-Scholes/269474

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The overall mission The game plan The management of the business portfolio The priorities of each business unit regarding resource allocation The structuring of the business The methods of financing the business The alliances to be made The acquisitions/mergers to be performed.

Figure 2.1 depicts the factors which influence corporate strategy.

Figure 2.1: Factors Influencing Corporate Strategy

From Figure 2.1 you can see that corporate strategy is influenced by the external environment, the people and systems within the organisation, the organisation structure, and resources within the organisation, the current values of the organisation and the expectations and objectives of the organisation. Corporate strategy examines internal (within the company) and external factors (competitors, clients, customers), frames a new vision for the organisation and aligns policies, practices and resources to achieve that vision. It provides an overall direction to the organisation. The corporate visions of some organisations are listed below: GE (General Electric): We bring good things to life. Microsoft: To enable people and businesses throughout the world to realise their full potential.
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The corporate vision influences the business mission. A good business mission should be: Clear: It should be stated in a language that is easily understood by most of the employees. Achievable: The employees must feel that the organisation can achieve the specified objectives. Challenging: Each employee should exert as much effort as possible to contribute to the overall success of the mission. According to Johnson and Scholes, corporate strategy can be evaluated by the following criteria: Suitability: Is the strategy economically viable? Is it suitable to the current corporate capabilities and environment? Feasibility: Are the resources (finance, people, time, knowledge, etc.) available to implement the strategy? Acceptability: Will the stakeholders (shareholders, employees, customers) react favourably to the strategy? For example, Dell Computers is a leading PC supplier. The corporate strategy adopted by it is to deliver innovative and cost-effective solutions, which address customer needs. Dell Computers tries to deliver this through its in-house research and development (R&D) division and by forming strategic partnerships with top industry suppliers and original development manufacturers. We have so far discussed corporate strategy. Let us now discuss the business-unit level strategy of an organisation. 2.2.2 Business-unit level strategy Business-unit level strategy is mainly concerned with how the organisation gains advantage over its competitors. It deals with the following: The methods the organisation uses to compete in particular markets The new opportunities that the organisation identifies or creates The products or services to develop The customers that the organisation targets. For example, the business-unit strategy of a furniture manufacturer is decided by the following factors:

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The type of furniture the furniture manufacturer wants to market (home furniture, office furniture, etc.) The competitors who market similar furniture The quality of furniture the furniture manufacturer wants to market (solid wood, plywood) The customers the furniture manufacturer targets (individual customer, corporate, educational institutions).

According to Porter (1985), the three basic factors that influence the decision-making process are: Cost leadership: It aims to offer lower costs than the competitors without lowering quality. Product differentiation: It tries to achieve industry-wide recognition that the different products and services of the company are superior in quality when compared to that of the competitors. Specialisation by focus: It tries to establish a niche market. Having understood the business-unit level strategy, let us now discuss the functional level strategy of an organisation. 2.2.3 Functional level strategy Functional level strategy is concerned with how different units of the business (marketing, finance, manufacturing, personnel) transform corporate and business level strategies into operational goals. According to Johnson and Scholes, functional strategy describes how the component parts of an organisation in terms of resources, processes, people and their skills are pulled together to form a strategic architecture, which will effectively define the avenue. 2 Functional units help in framing the business and corporate strategies by providing input on resources and capabilities. Once the higher level strategies are framed, action plans are framed for each department, in order to accomplish the higher level strategies. For example, when the corporate strategy of a business is to become the lead player in a specific market, the functional strategies of each division would be as follows:
2

People and Organisations - Employee Relations, Third edition by John Gennard and Graham Judge

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Manufacturing division: To produce good quality goods. Human resource division: To train staff in order to have a highly skilled workforce. Marketing division: To increase sales by increasing advertising.

The different kinds of functional strategies are Marketing strategy: It deals with pricing, selling and distributing a product. Production strategy: It deals with what products to produce (issues like new products for existing markets or products for new markets), the production chain, etc. Finance strategy: It aims to align the financial management of an organisation with its mission and goals. The decisions to be made are regarding budgets, liquidity issues, credits, cash flows, loans, capital investments, etc. Human Resource Management (HRM) strategy: It deals with managing an important asset of the organisation its work force. R & D strategy: It deals with issues like innovation and development of new products, and the addition of new features in existing products. It is essential that various functional units organise themselves with care in order to achieve their aims and synergise with the rest of the business. Let us now analyse the concepts of people strategy. 2.2.4 People strategy People strategy aims to match the activities of an organisation with its human resources. An effective strategy for people management is vital to the success of an organisation. Research carried out by the Institute of Work Psychology and the Centre for Economic Performance shows a clear link between the adoption of good human resource business practices and improved performance. The research proves that focussing on key people management issues will improve productivity and profitability. People strategy aims to: Ensure that the employees are satisfied with their jobs, working environment, rewards and career prospects. Develop employee commitment by motivating them to move beyond contractual obligations to emotional commitment. This develops a strong sense of loyalty to the organisation and its customers.
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Manage organisation culture by concentrating on the important cultural aspects of the organisation.

The culture of an organisation is defined by: The artefacts and symbols of the organisation The stories and myths within the organisation about its various successes or failures The rites and rituals that define employee behaviour The rules and procedures that set parameters for employee behaviour and action The role models within the organisation The beliefs, values and attitude reflected in the daily activities The ethical standards which set the boundaries of acceptable behaviour. The five main features of people management are: Developing a strategic view of managing employees Involving employees in the business Investing in communication Managing employee performance Viewing employees as individuals. Developing a strategic view of managing people An organisation must ensure that its people are at the centre of any strategic business planning. The key issues that an organisation must address while planning its business strategy are: Are the right knowledge, skills and competencies available within the organisation? Should people be recruited from outside? Can the knowledge, skills and competencies of the people be developed to explore new business opportunities? Involving people in the business Emphasis on team work will involve employees in the business. Teams need: More autonomy and freedom for self-management. Clear objectives and targets. The freedom to plan and undertake work, acquire resources and improve the processes, products and services.
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Investing in communication To be successful, an organisation must invest heavily in communications. Businesses that show a high growth have implemented the following in enhancing communication within the organisation: Communicate their business strategy to all employees Give feedback on performance to all employees regularly Use a wide range of communication methods. Managing employee performance Employees perform well if they: Know what they have to do Get feedback on their performance Know the areas in which they have to improve Know how they can improve themselves. If employee expectations are not well defined, it can lead to low morale, dissatisfaction, absenteeism and high turnover. Viewing employees as individuals High performing organisations view people as individuals and use techniques of involvement which encourage satisfaction and commitment. This section explained the various levels of strategy in an organisation. We will next discuss how organisational strategy influences employee policies. Self Assessment Questions 1. The main levels of strategy of an organisation are __________, __________, __________, and _________. 2. __________ strategy is usually devised at the board level. 3. __________ strategy is concerned with the methods the organisation uses to compete in specific markets. 4. According to Porter, the three basic factors that influence the businessunit level strategies are ________________, ______________, and _____________. 5. People strategy is concerned with matching the activities of an organisation with its _____________. 6. Improvement in productivity and profitability can be achieved by focussing on key _______________ issues.

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7. Employees can be involved in the business by emphasising on _______________. 8. To be successful, an organisation must invest heavily in _______________. Activity 1: An organisation wants to introduce a new product, for example a new shampoo. Note the factors that determine the business strategy of the organisation. List the people strategy which will help in realising this goal.

2.3 Strategy and Employment Policies

Figure 2.2 shows how employee relations are formulated.

Figure 2.2: Strategy and Employee Relations

The business strategy defines the Human Resource Management (HRM) strategy, which in turn defines the employee relations strategy. The employee relations strategy defines the employment policies and practices. Having understood how to differentiate between the different levels of strategy in an organisation, let us now see how the strategy of the organisation links with the different aspects of employee relationship namely, employee resourcing, employee development and employee reward. It is very important that the strategy of an organisation maximises its competitive advantage. An organisation must constantly evaluate and
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re-evaluate itself and make necessary improvements. Organisations should design and manage employment policies, which will improve their business. The process of change and its impact on the formulation of strategy poses many challenges. For example, if there are trade unions in an organisation and there is a trend towards individualism, then the organisation must decide whether the trade unions have to be encouraged or marginalised. The workforce of Southwest Airlines (a U.S. airline company) is organised into nine unions for pilots, technicians, transportation workers, customer service personnel, mechanics, cleaners, reservation agents and flight attendants. The company has welcomed these unions and maintains cordial relations with them. The company has also ensured that these unions have the same objectives as the company. The strategies and policies on employee relations must be in synergy with the business strategy and also be innovative, clear and action oriented. The employee relations strategy must respond to the needs of the organisation. It must assist the employee in understanding their goals and the methods used to achieve their goals. The employee relations specialist formulates the employee relations strategy based on the philosophy of the organisation. The needs of an organisation in terms of its employee relations policy are defined by the following areas: The change management procedure: It deals with issues ranging from increasing productivity, improving employee involvement, or introducing team work. Attitude towards trade unions: It decides whether to encourage trade unions or not. Practical employee relations strategies include: Regulation of workplace agreements Protection of employee issues Human Resource (HR) infrastructure support Growth performance management. Now you know how employee policies are influenced by organisational strategies. Let us next analyse the future challenges of an organisation.

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Self Assessment Questions 9. The strategies and policies on employee relations must be in synergy with the __________ strategy. 10. The ________________ formulates the employee relations strategy based on the organisations philosophy. 11. The _____________ procedure deals with issues as diverse as increasing productivity, improving employee involvement, or introducing team work.

2.4 Future Challenges

Future challenges in the area of employee resourcing are developing appropriate recruitment and selection policies. Regarding employee rewards, the HR personnel face constant challenges in: Stimulating employee commitment Motivating employees Enhancing performance Balancing monetary and non-monetary rewards. As far as employee development is concerned, the challenges facing the HR personnel are in deciding whether: New staff has to be recruited or if in-house staff has to be trained People with special skills or general skills have to be recruited Staff have to be trained only to execute their current project or for enhancing their knowledge or skills. The directors of the organisation have to consider challenges the organisation might face in the future and their impact on the employees. The external political, economical (rate of inflation, interest rates, etc) and societal influences (demographic trends) also have to be considered before strategies of the organisations are decided. Changes in technology also impact the strategy of the organisation. You now know the future challenges which an organisation has to consider while planning employee relations. Let us next analyse performance management in an organisation.

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2.5 Performance Management Services

Armstrong and Baron (1998) define performance management as, a strategic and integrated approach to increase the effectiveness of an organisation by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors.3 The features of a good performance management programme are: Key performance indicators: These are critical measures that identify that the employee is doing what needs to be done and at the level that it should be done. These then provide the basis for reward and recognition. Organisational competencies: These identify the organisational traits that are very important for its success, the framework for employee recruitment, employee duties and employee contributions. Performance reviews: These provide feedback to the employees on how they are performing. They can be paper based or web based. Training programmes and explanatory materials: These include handbooks that are provided to both appraisers and appraisees. The appraisal process is explained along with examples of completed appraisal forms. Having understood the performance management of an organisation, let us next discuss how an organisation can achieve excellence by adopting the concepts of quality, involvement and commitment. Activity 2: Imagine you are the HR manager of an organisation. How will you assess the performances of new employees who have completed their training and have not been assigned to a project? Self Assessment Questions 12. Future challenges in the area of employee resourcing are developing appropriate ___________and ______ policies. 13. _________________ can provide feedback to the employees on how they are performing. 14. A good employment contract clearly states the basic ______ and ___________ of both the employer and the employee.
3

http://en.wikipedia.org/wiki/Performance_management

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2.6 Quality, Involvement and Commitment as Competitive Advantages

The three critical factors that help achieve organisational excellence are: Commitment to quality customer service Commitment to high quality work life Employee involvement. Employee involvement implies that employees at all levels are involved in the successful operation of the business. Employee involvement is present only when employees have the following facilities: Authority to make decisions Good understanding of business operations Training and personal development opportunities Good and open channels for communication Good performance management programmes A good reward programme. Quality customer service should be the core priority of any business. The top management should be totally committed to quality and this commitment should be communicated to employees at all levels. Customer feedback should be constantly used to improve business practices. Organisations display a commitment to a high-quality work life if they follow the practices listed: Help employees balance their personal and work life. Give its employees challenging jobs without overworking them. Do not discriminate amongst employees. Equip its employees with the correct tools, materials and equipment. Ensure job security. Organisations can gain competitive advantage if they incorporate employee involvement, quality assurance and a high commitment to good quality work life in their culture. Employees, too, become committed to the organisation. The morale of the employees improves and productivity increases. The next section explains the concept of the psychological contract.

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2.7 The Psychological Contract: Interest and Expectations

Psychological contracts are the foundation of employer-employee relationships. According to Rousseau (1989), psychological contracts are defined as the beliefs individuals hold regarding the terms and conditions of the exchange agreement between themselves and their organisations. The written contract of the employees cannot include every aspect of the employment relationship. Psychological contract bridges the gap by defining the mutual beliefs, views and duties of the employer and the employee. It reduces employee insecurity and helps shape employee behaviour. Psychological contracts are based on promises made by both the employers and the employees. Every employee expects a fair deal and clear communication. Every employer expects employees to perform well and protect confidential information. The general promises made by the employers are of the following types: Career development: A good career growth and timely promotions. Job nature: A challenging and interesting job. Social environment: A pleasant working environment. Financial compensation: A fair compensation. Work-life balance: A good understanding of the personal situation of the employee. The promises made by the employees are of the following types: Good performance: Willingness to work hard and do the job well. Loyalty: Willingness to work in the best interests of the company. Flexibility: Willingness to work flexible hours (like overtime) in order to complete the work allotted. Ethical conduct: Assurance of good ethical behaviour like protecting confidential information and dealing honestly with the resources of the organisation. Employees form their expectations on the basis of their interactions with the people in the organisation and the culture of the organisation. Newcomers have great expectations from the organisation. When newcomers gain experience, their expectations weaken. The psychological contracts of newcomers develop as their socialisation within the organisation increases.

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Violations of the psychological contract occur when either the employer or the employee fails to fulfil one or more obligations of the contract. Employees respond to the breaches of the psychological contract by: Quitting the organisation. Asking their superiors for better work conditions Having less loyalty to the organisation Neglecting their work Being absent or late more often. This section discussed the importance of the psychological contract. Let us next analyse the HR Infrastructure needed for organisational success. Self Assessment Questions 15. _______________ implies that employees at all levels are involved in the successful operation of the business. 16. ____________ are the foundation of employer-employee relationships. 17. ______________ of the psychological contract occur when either the employer or the employee fails to fulfil one or more obligations of the contract.

2.8 HR Infrastructure
Figure 2.3 illustrates how managers and employees interact in a good HR infrastructure. A good HR infrastructure should: Support the mission, vision and values of the company Be simple, flexible and reliable Support and enable the flow of work Connect the employees to the overall system. The five strategies to strengthen the HR infrastructure of an organisation are: Attaining HR expertise Implementing performance management Implementing HR policies and procedures Understanding and complying with labour laws Developing training programmes.

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Figure 2.3: HR Infrastructure

The essential HR building blocks that build a productive workplace are: Employment contracts: A good employment contract clearly states the basic rights and obligations of both the employer and the employee. Staff handbooks: These provide information about what is expected of the employees and what the employees can expect from the organisation. Policies and procedures: These specify the working of the organisation. Good job descriptions: These describe the manner in which each job fits into the overall organisation. Proper performance evaluation systems: These improve employee productivity. Compensation system: It rewards and reinforces right behaviour.

Now that you know the HR Infrastructure essential for a productive organisation, let us next discuss the importance of employee surveys.

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2.9 Employee Surveys

Employee satisfaction is very essential for the success of an organisation. Employee surveys help in finding out the opinions of the employee regarding the organisation and the co-workers. These surveys also indicate to the employees that their opinion is very important. The feedback from the employee helps the organisation in understanding what it is doing well, and in what areas it should improve. Employee survey results provide guidelines for the business. Employee surveys also act as an effective communication tool. Employee surveys can be conducted online or on paper. The different kinds of employee surveys are: Employee satisfaction survey: Sometimes employees find it difficult to communicate their feelings and expectations. These surveys help to bridge the gap between the employer and the employee. They give an opportunity for employees to voice their opinions. Culture survey: This enables in identifying the current corporate culture. We can determine if the culture of the organisation is in sync with the corporate vision. Certain negative cultural elements like disrespectful treatment of employees, poor planning and lack of team work will affect the success of the organisation. These have to be identified and corrected. Ethics survey: Corporate ethics are essential for an organisation. Ethics survey enables the employee to understand the ethics and values of the company. The company can also determine the feelings of the employee regarding the ethical standards of the company. Productivity surveys: Employee productivity is in direct proportion to employee satisfaction. Productivity can be improved if the organisation understands employee expectations and attitude. As organisations grow, they have to reassess and correct their policies and procedures. They have to use better employee recognition programmes. Organisations have to ensure the career development of the employees. Favouritism and bias have to be removed. Health and safety surveys: These surveys help to identify health and safety lapses. They provide statistics on time lost from work due to accidents. They also determine if the safety policies are being adhered to.
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Exhibit 2.1: A sample survey A large insurance company in the UK uses administration of surveys to determine the specifics of the work climate. This is done to ascertain the positives and the negatives regarding the work climate. Areas that need work are identified. Suitable measures to be taken are suggested by the respective managers or HR personnel. Sometimes external consultants are appointed for finding solutions to very tricky problems. Work-life balance and amount of stress that the employees undergo is judged by using these surveys. A sample is provided below: Survey No. 22 Target: All the personnel in executive/supervisor levels in Zonal Office, Reading. (125 members) Note: Read the following questions carefully and answer only Yes or No.
Yes 1. The environment in this organisation supports a balance between work and personal life. 2. My manager/supervisor understands the importance of maintaining a balance between work and personal life. 3. I am able to satisfy both my job and family responsibilities. 4. I am not forced to choose between job and family obligations. 5. The pace of the work in this organisation enables me to do a good job. 6. The amount of work I am asked to do is reasonable. 7. The organisation has reasonable expectations of its employees. 8. My job does not cause unreasonable amounts of stress in my life. No

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Activity 3: ABC is a manufacturing organisation. Since the past eight months, it is being observed that there is a decline in the employee productivity and an increase in absenteeism and attrition. The management wants to conduct an employee survey to look into the problem. Suggest a survey and also suggest 5 to 10 questions for the survey. Self Assessment Questions 18. A good __________________ clearly states the basic rights and obligations of both the employer and the employee. 19. _____________ help in finding out what the employee thinks about the organisation and the co-workers. 20. _____________ is in direct proportion to employee satisfaction.

2.10 Summary
You have now learned that strategy defines the long-term plans and scope of an organisation. The different levels of strategy in an organisation are at the corporate level, business-unit level, functional level and people level. Corporate strategy defines the mission, vision, long-term objectives, policies and plans of the organisation. Business-unit strategy is concerned with how a business competes in a specific market. Functional strategy is concerned with how the different units of the business translate corporate and business level strategies into operational goals. People strategy matches the activities of an organisation with its human resources. The strategy of an organisation strongly influences its employee policies. Performance management is a strategic and integrated approach to improve the performance of the employees of an organisation. Organisations can gain competitive advantage if they incorporate employee involvement, quality assurance and a high commitment to good quality of work-life in their culture. The psychological contract defines the mutual beliefs, views and duties of the employer and the employee. It fills the gaps of the formal contract. It helps in shaping employee behaviour. Breaches in psychological contract lead to dissatisfaction.
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Organisations should strengthen their HR infrastructure to be successful. Employee surveys provide guidelines for the business and influence the direction the business takes. Organisations have to identify future challenges and frame appropriate strategies for them.

2.11 Glossary
Term Acquisitions Appraisals Artefacts Autonomy Competencies Description Taking control of a firm by purchasing more than half of its voting shares. Impartial analysis and evaluation done according to certain set criteria to determine merit or acceptability A hand-made object such as a tool or a work of art; an object reflecting contemporary society or popular culture. Independence or freedom as of the will or ones action; selfgoverning. Sufficiency of qualification; cluster of knowledge, abilities and skills that enable a person (or an organisation) to act effectively in a job or a situation. Layout and interconnections of different units; arrangement of different units The number and characteristics of the people who live in an area, in relation to their age, sex, marital status, ethnic group, etc. To make a product or a brand stand out as a provider of unique value to its customers in comparison with its competitors. A system of moral principles; the rules of conduct with respect to a particular group. Using new and creative methods or ideas The concept that freedom of thought and action for each person is the most important quality of a society, rather than shared effort and responsibility Measure of the extent to which a person or a firm has the ability to acquire cash to meet immediate and short-term obligations. Ancient story; false idea A focused targetable part of a market; a small area of trade within the economy, often involving specialised or unusual products Page No.: 45

Configuration Demography

Differentiation Ethics Innovative Individualism

Liquidity Myths Niche market

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Portfolios Stakeholders

Specialised collection of company shares and other investments that are owned by a particular person or organisation Person, group, or organisation that has direct or indirect stake (a share or financial involvement) in an organisation. They can affect or be affected by the organisation's actions, objectives, and policies. Key stakeholders in a business organisation include creditors, customers, directors, employees, government (and its agencies), owners (shareholders), suppliers, unions, and the community from which the business draws its resources. A state in which two or more agents, systems or processes work together in a fruitful way that produces an effect greater than the sum of their individual effects. Practical; an alternative that is beneficial at a reasonable cost

Synergy

Viable

2.12 Terminal Questions

1. Explain briefly the different levels of strategy in an organisation. 2. How are employment policies influenced by the strategies of the organisation? 3. What are the future challenges that an organisation may face? 4. Describe Performance Management Services. 5. How can organisations gain a competitive advantage? 6. Explain psychological contracts. 7. How are employee surveys helpful to an organisation?

2.13 Answers
Answers to Self Assessment Questions 1. Corporate level, business unit level, functional level, people level 2. Corporate level 3. Business-unit level 4. Cost leadership, product differentiation, specialisation by focus 5. Human resources 6. People management 7. Team-work 8. Communications 9. Business 10. Employee relations specialist 11. Change management
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12. 13. 14. 15. 16. 17. 18. 19. 20.

Recruitment, selection Performance appraisals Rights, obligations Employee involvement Psychological contract Violations Employment contract Employee surveys Employee productivity

Answers to Terminal Questions 1. Refer section 2.2 2. Refer section 2.3 3. Refer section 2.4 4. Refer section 2.5 5. Refer section 2.6 6. Refer section 2.7 7. Refer section 2.9

2.14 Case Study

RWE Power is one of the main energy companies in the UK. It has both private and business customers. Its corporate strategy is to deliver cleaner, affordable and secure energy while improving profitability. RWE Power has a culture of trust in its employees and it delegates decision making to all levels in the organisation. Employees are encouraged to use their talents and capabilities to deliver the desired performance with focus on the customer. An example of this is found in their Strategic Spare Parts project. This project was set up with the strategy of minimising the risk of supply failure. The main objective of the project was to improve the availability of important spare parts and reduce plant availability costs. The directors made the corporate decision to undertake the Strategic Spare Parts project in order to realise the companys objective of reliable power supply. The leaders of this project then formulated a strategy to manage spares by categorising them to critical parts and non critical parts. The actual implementation was delegated to a junior engineer,
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who gathered data from different levels of employees (managers, operators, etc) using different channels of communication (group discussions, one to one meetings). The junior engineer had to Look at the range of spare parts kept in stock Assess the costs of maintaining and re-ordering the stock Compare these costs to the costs of breakdown in supply. The junior engineer found that For 75% of the spare parts, time could be permitted for normal ordering, purchase and installation. These items could be sourced as and when needed. 25% of the spare parts were vital for efficient energy supply. The findings of the junior engineer were communicated to the directors who had to make the final decision on whether the project investment was worth the cost. Thus we see that due to the culture of trust in RWE Power, functional decisions like changes in the method the job is done are proposed by the staff. But there is a constraint that these functional decisions must be in line with the companys aims and objectives. Questions: 1. What are the differences in the strategic decisions and other decisions taken in RWE Power? 2. What are the advantages and disadvantages of delegating decision making to all levels in the organisation? References: Gennard J. and Judge, G. People and Organisations Employee Relations, (3rd ed) E- references: http://www.oppapers.com/essays/Johnson-And-Scholes/269474 http://en.wikipedia.org/wiki/Performance_management (retrieved on 7/06/12) http://www.engaging.com.au (retrieved on 7/06/12) http://www.erstrategies.com.au/services (retrieved on 7/06/12) http://www.employeesurveys.com/default.htm (retrieved on 7/06/12)
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