Evaluating the Nature and Presence of the Human Resource Strategy in Cadbury Schweppes - Case Study Example

The Human Resource Function Case Study of Cadbury Schweppes Introduction. Cadbury Schweppes is the world's largest soft drinks company. It is oneof the FTSE companies. It has its headquarters in the United Kingdom and has manufacturing operations in more than 35 countries. The company has more that 50,000 employees with 7000 in its UK headquarters. Its brands include Cadbury, Schweppes, Trebor, Bassett's, Trident, Dr. Pepper, Halls, Dentyne, Snapple, Orangina, Bubblicious and 7UP. Its main competitors include Masterfood, and Nestle. It is the market leader in the United Kingdom with a market share of 29.5% as opposed to 19.7% and 14% for Masterfoods and Nestl respectively. Cadbury Schweppes has as its main objective the delivery of superior shareholder value. To achieve this objective, the company stresses the need for all employees to understand the different goals of the company so that they can tailor their efforts towards achieving these goals which will in turn lead the company toward its overall objective of delivering superior shareholder performance. This paper aims at looking at critically evaluating the nature and presence of the human resource strategy that appears to be in operation at Cadbury Schweppes in the light of the wider business strategy. The paper also presents a discussion of how the Human Resource Function can position itself toward delivering the people strategy based on evidence gathered from the case study as well as the understanding of the development of Human resource functions. Having said this, the paper will begin by critically evaluating the nature and presence of the human resource strategy in section 1.1 below and later a discussion how the Human resource function can position itself will be presented in section 1.2. 1.1 Critical Evaluation of the Nature and Presence of the Human Resource Strategy at Cadbury Schweppes. The human resource strategy that appears to be in operation at Cadbury Schweppes seems to be in conflict with the company's business strategy. The overall objective of the company is to deliver superior shareholder value as measured by turnover rates and return on investment (return on equity). As stated in the case study "Cadbury Schweppes may be a leader in the confectionery market but it isn't all sugar, spice and all things nice. Its number one goal for 2004-07 is not excellence, innovation or developing its people. It is simply to deliver superior shareholder performance". The latter quotation clearly shows that Cadbury Schweppes does not care about developing its people, all it cares about is delivering superior shareholder value. According to Lengnick-Hall and Lengnick-Hall (1988: p. 451) citing Porter (1985) and Huselid (1995: p. 636) citing Begin (1991); Butler, Feris, & Napier (1991); Cappelli & Singh (1992); Jackson and Schuler (1995); Porter (1985); Schuler (1992); Wright and McMahan (1992), human resource management can help a firm obtain sustained competitive advantage by lowering costs, increasing sources of products and service differentiation, or by both. Lengnick-Hall and Lengnick-Hall (1988: p. 451) define competitive advantage as "those capabilities, resources, relationships, and decisions that permit a firm to capitalise on opportunities and avoid threats within its industry". Lengnick-Hall and Lengnick-Hall (1988: p. 451) further states that in order for a firm to achieve competitive advantage through human resources, the activities must be managed from a strategic perspective. Cadbury Schweppes seems to have missed out in this domain. It has focused most of its attention on delivering shareholder value but fails to understand that it is only after integrating strategic human resource management into its business strategy that superior shareholder value may be delivered. Another interesting point is that even if Cadbury Schweppes has got some competitive advantage as demonstrated through its current levels of profitability, this competitive advantage may not be sustainable if it does not properly integrate a human resource strategy into its business strategy. As reiterated by Huselid (1995: p. 636) "a firm's current and potential human resources remain important considerations in the development and execution of its strategic business plan. This implies that Cadbury needs to reconsider its business plan and see if human resources have been carefully considered in executing the plan. Despite the fact that Cadbury Schweppes represents one of the few FTSE companies that have an HR director on the main board, implying that its main objective is not only profiteering per say, the case study states that "this is not human resource as usual". Andrew Gibson the newly promoted HR director who has served the company for 13 years is described in the case as an aggressive leader although his physical appearance does not reflect this. In other words Andrew Gibson is considered not appropriate for the post of Human Resource Director given his aggressiveness. The field of human resource management (HRM) consists of the various practices used to manage people in organisations, and these practices have been grouped into subdisciplines of selection, training, appraisal, and rewards. (Wright and McMahan, 1992: p. 297) citing Fombrum, Tichy, & Devanna (1984). This generally reflects the Human Resource Function in an organisation. (Wright and McMahan, 1992: p. 297). There are considerable doubts as to whether Andrew Gibson can carry out the aforementioned functions successfully given his aggressiveness. Is he going to select and recruit the right people Will he develop appropriate on-the-job training schemes for employees Will he provide the right incentives and rewards necessary to fuel employees to devote enough energy toward delivering superior shareholder value There is also further evidence from the case that most of the leaders of Cadbury Schweppes are aggressive, implying an autocratic form of leadership. Under such circumstances, developing a successful human resource strategy and integrating it with the business strategy can be a bit difficult given the tension that may exists between managers and employees. Its managing for value programme launched in 1997 by John Sunderland (current chairman) stressed employees' understanding of how the company could be more profitable. This programme also did not focus on how employees could develop themselves, it again focused only on the shareholder. This programme could not be successful in my point of view in the sense that it still appeared to place shareholders in conflict with shareholders. The case study also points out that the company only realised lately that it could get more from its staff reason why it introduced another programme, "Growing our people". this case points out that Cadbury Schweppes is only realising the importance of human resources at this stage as it is also stated in the case that "some pretty tough managers, who would usually talk only about hard nosed financial results said the focus on behaviours and unlocking the potential of people at different levels of the business had really paid dividends". The company also places the enhancement of its reputation with staff as a fifth priority with its first priority being shareholder performance. This again clearly shows how the focus is only on the shareholder and not on the staff. 1.2 How the Human Resource Function Can Position itself toward Delivering The People Strategy. The human resource function is very important in an organisation in that it helps in selecting, recruiting, training, promoting, motivating and rewarding competent employees who in turn apply their knowledge and skills toward executing the business strategy to ensure that the firm makes maintains sustainable competitive advantage and that the firm also generates sustainable earnings which in turn lead to superior shareholder value. Michael (1999) defines strategic human resource management as those decisions and actions which concern the management of employees at all levels of the business and which are directed toward creating sustainable competitive advantage. Another definition by Walker (1992) cited in Michael (1999) asserts that strategic human resource management refers to "the means of aligning the management of human resources with the strategic content of the business". The critical concerns of human resource management are therefore integral to strategic management in any business. (Michael, 1999) quoting Boxell (1994). The human resource function must therefore be positioned in such that it will carry out its duties in a way that is integrated with the overall business strategy. in Cadbury Schweppes, the human resource function is not well-positioned to deliver the people strategy. For example, although the company has an HR director at the main board, who is represented at every regional business unit, his autonomy to take appropriate actions to tailor the problems of employees to the board is in question. This is because the HR director reports to the managing director of Cadbury Schweppes who in turn reports to the board. His independence to report all the necessary problems might be impaired considering the fact that some of his actions may be influenced by the managing director who might not care so much about the human resources. Consequently, the first thing I will recommend here is that the HR director should be given more power and should report directly to the main board. By so doing he will have more autonomy, independence and thus objectivity in reporting matters concerning human resources. To effectively develop a human resource strategy, Cadbury Schweppes must ensure that members of the human resource function have appropriate capabilities (or competencies). (Huselid et al, 1997) quoting Lawyer (1992); Ulrich & Lake (1990). Huselid et al (1997) identify two types of capabilities that human resource staff must possess. These include business-related capabilities and professional HRM capabilities. In the past in was believed that professional human resource management capabilities related to the delivery of traditional technical human resource management practices were both necessary and sufficient for assuring the development and effective implementation of HRM practices. (Huselid et al, 1997). However, following the emergence of the strategic HRM paradigm, this belief has been questionable. Today, it is obvious that although professional human management capabilities may be requisite to ensure technical HRM effectiveness, business related capabilities are also required since they enable members of a human resources staff to understand how business considerations unique to a firm can create specific HRM needs. Consequently, Cadbury Schweppes must employ human resources staffs who are endowed with both HRM and business related capabilities so as to make sure that they better understand how HRM needs that are specific to Cadbury Schweppes can be created. Baird and Messhoulam (1988) identify five different stages through which an organisation must pass through as well as the different developments the human resource function undergoes in the different stages. The first stage is the initiation stage at which stage the organisation is still at the start-up level, it may have just an entrepreneur or a founder, it is usually informal with little products and markets. At this stage, management's attention is focused on a limited range of human resource management concerns such as salary administration, hiring, and firings. (Baird and Messhoulam, 1988). Most of the decisions at this stage are made by the owner/founder. (Baird and Messoulam, 1988). The human resource support necessary at this stage is help in maintaining and updating individual files, keeping record of vacations, absences, and etc. (Baird and Messhoulam, 1988). Most human resource functions at this stage are therefore handled by line managers who have administrative and support staff and who focus on establishing basic recruiting and compensation programs. (Baird and Messoulam, 1988) The second stage is the functional growth stage which is characterised by technical specialisation, dynamic growth, expanded product lines and markets as well as added formality in structure. (Baird and Messhoulam, 1988). At this stage the human resource function becomes more sophisticated as line managers need help to find, train and recruit the right people in order for the company to sustain growth. A formal personnel department is established with capabilities in the basic sub-functions of human resource management. (Baird and Messhoulam, 1988) The third stage otherwise referred to as the Controlled Growth stage is characterised by professional management, scarce resources, new acquisitions, and diversified product lines. (Baird and Messhoulam, 1988). At this level, the need for measurement and control, growing diversity of employees, and the growing complexity of communication encourage investments in automation and use of advanced analytical tools for human resource management. (Baird and Messhoulam, 1988) At the fourth stage Functional Integration, which is characterised by diversification, product groups or divisions, project management, and integration within functions, the focus is on decentralization and coordination. (Baird and Messhoulam, 1988). Management focus at this stage is on the interdependencies among specialised activities. (Baird and Messhoulam, 1988). There is growing pressure on staff both to decentralise and focus on strategic issues. The Human resource function at this stage is focused on coordinating and integrating sub-functions, such as training, compensation, and recruiting. (Baird and Messhoulam, 1988) The fifth and last stage is referred to as Strategic Integration. (Baird and Messhoulam, 1988). At this stage of the organisation, human resource management is regarded as everyone's job. (Baird and Messhoulam, 1988). Managers also recognise the importance of human resources in positioning the organisation for the future. (Baird and Messhoulam, 1988). This stage also sees the integration of human resource programmes among themselves as well as with other functions such as accounting, marketing, and operations. (Baird and Messhoulam, 1988). Before making a major business decision at this stage, the human resource implications must be considered. This include decisions such as introducing a new product, entering a new market, or taking over another business. (Baird and Messhoulam, 1988). Sophisticated analytical techniques must be used at this stage to ask "what if questions". (Baird and Messhoulam, 1988) The human resource management activities of a firm therefore pass through five stages of development: initiation, functional growth, controlled growth, functional integration and strategic integration. (Baird and Messhoulam, 1988). Human resource management activities move through the stages in a sequence in response to increasing complexity in the parent organisation with each stage incorporating and building on the previous stage. Human resource management activities are therefore effective when their stage of development matches the stage of development of the parent organisation. Even if a given stage is short, it must exist and the human resource management must go through the stages sequentially. If a stage is skipped performance in the later stages will be ineffective and the organisation must return to the previous stage to fix things so that the pieces fit properly into the puzzles. (Baird and Messhoulam, 1988). The management of human resources at the different stages has been described by Baird and Messhoulam (1988) as the "Human Resource Strategic Matrix". According to this model, there are five stages of human resource management each of which is appropriate or inappropriate depending on the organisational needs and characteristics. (Baird and Messhoulam, 1988). The first stage in human resource management is therefore understanding the parent organisation's current stage of development so as to better understand its human resource needs. (Baird and Messhoulam, 1988). The human resource department of Cadbury Schweppes must begin by identifying the stage its current stage of development so as to better understand its human resource needs. By so doing it can better integrate human resource management into its strategic business plan. "If human resource management is to be proactive, human resource professionals must develop the ability to recognise the organisation's stage of development. The case study demonstrates that, Cadbury Schweppes has not been developing its human resource strategy along with the different stages of growth. Consequently, it is finding things difficult to properly develop a strategic human resource management strategy. It must therefore look back to see where it mis-fired so that it can fix things before moving ahead. Cadbury Schweppes being an old company is certainly in its last stage of development implying that the human resource function is also very complex at this stage. At the fourth and fifth stages of development in which the focus is on integration, flexibility and adaptability, the human resource function should be structured around core points of integration. (Baird and Messhoulam, 1988). It should not be based on the sub-functions. (Baird and Messhoulam, 1988). Cadbury Schweppes should therefore organise its human resource function around the client groups that are served. (Baird and Messhoulam, 1988). Another option that it may consider would be to organise the human resource function around integrative activities, such as planning, research, and information systems. Traditional sub functions should be organised under each subunit Also the human resource staff at Cadbury Schweppes must undergo appropriate training. Baird and Messhoulam outlines five different skills that human resource professional must possess. These include (a) Introduction management skills which include statistics, analysis, and research; (b) planning skills which include the knowledge of planning methodologies plus statistics techniques; (c) management skills which include skills in the various business functions and environmental analysis; (d) integration skills including competency at managing organisational interfaces, and skills in assessing the organisation plus setting priorities; and (e) Change management skills. By carefully understanding the above and putting them in practice, Cadbury Schweppes can position its Human Resource Function in a way that will deliver the people strategy and at the same time achieve the overall objective of the business in delivering superior shareholder value. BIBLIOGRAPHY Baird L., Meshoulam I. (1988). Managing Two Fits of Strategic Human Resource Management. Academy of Management Review, vol. 13, No. 1, pp. 116-128. Huselid M. (1995). The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance. Academy of Management Review, vol. 38, No. 3, pp. 635-672. Huselid M. A., Jackson S.E., Schuler R. S. (1997). Technical and Stratetic Human Resource Management Effectiveness as Determinants of Firm Performance. Academy of Management Review, vol. 40, No. 1, pp. 171-188. Lengnick-Hall C., Lengnick-Hall M. (1988). Strategic Human Resource Management: A Review of the Literature and a Proposed Typology. Academy of Management Review, vol. 13, No. 3, pp. 454-470. Michael A. (1999). A Handbook of Human Resource Management Practice London ; Dover, N.H. Kogan Page. Wright P. M., McMahan G. C. (1992). Theoretical Perspectives for Strategic Human Resource Management. Journal of Management, vol. 18, No. 2, pp. 295-320. Read More