Tescos Human Resource Strategy and Its Implementation in a Joint Venture in India - Case Study Example

Evaluating an international human resources strategy A report on Tesco’s HR strategy and its implementation in a joint venture in India Course: Date: Word count: 4052 Words Table of Contents Executive summary…………………………………………………………… 4 1. Introduction................................................................................................... 5 2. Company profile…………………………………………………………… 5 2.1 Tesco Plc…………………………………………………………. 5 2.2. PESTLE Analysis of Tesco……………………………………… 6 2.3. Tesco’s vision……………………………………………………. 6 2.4. Tesco’s mission…………………………………………………... 7 2.5. Tesco’s values…………………………………………………..... 7 2.6 Tesco’s Growth strategy………………………………………….. 8 2.7. Global Corporate Strategy……………………………………….. 8 2.8. Glocalization of Tesco…………………………………………… 10 2.9. Joint venture with Tata Group in India…………………………... 10 3. Analyzing Tesco’s HRM……………………………………………… 11 3.1 Best practice approach……………………………………………… 11 3.2.Cultural analysis of UK and India…………………………………. 13 4. Human Resource Functions at Tesco…………………………………… 14 4.1. Recruitment and selection………………………………………….. 14 4.1.1 External recruitment ……………………………………… 14 4.1.2 Internal recruitment……………………………………….. 15 4.1.3 Selection process………………………………………….. 15 4.1.4.Recruitment & selection at joint venture………………….. 15 4.2. Training and development………………………………………….. 16 4.2.1 Apprenticeship programme……………………………….... 17 4.2.2 Options……………………………………………………… 17 4.2.3 TWIST………………………………………………………. 17 4.2.4. Training and development at joint venture…………………. 17 4.3. Performance management………………………………………….. 18 4.3.1 Managing by objectives at Tesco……………………………18 4.3.2 Managing by objectives at the joint venture…………………..19 4.4. Reward management………………………………………………...20 4.4.1 Extrinsic rewards……………………………………………....21 4.4.2 Intrinsic rewards……………………………………………….21 4.4.3. Rewards and benefits at joint venture……………………….. ..22 4.5. Employee involvement……………………………………………….23 4.5.1 Internal involvement……………………………………………23 4.5.2. External involvement…………………………………………...23 4.5.3. Employee involvement at joint venture………………………...24 5. Recommendation and Conclusions……………………………………………25 Executive summary: The current report presents an evaluation of human resource management practices adopted at a multinational corporation that wishes to expand its business to unexplored territories. For this reason, UK-based supermarket giant, Tesco, has been chosen. Tesco has been studied in detail in terms of its growth, performance in business, and the strategies adopted at Tesco in UK. However, this report focuses on understanding Tesco’s core human resource practices such as recruitment and selection, training and development, performance management, rewards management and employee involvement. In order to enter international markets, successful entry and establishment of businesses depend upon various factors related to political, environmental, legal, social, technological, economic and cultural aspects. The impact of these factors has been analysed using appropriate and proven frameworks such as the PESTLE analysis and Hofstede’s cultural dimensions. Based on our findings from all analyses pertaining to external factors (PESTLE and cultural dimensions), and internal factors (HR perspectives), applicability of the native HR practices in the joint venture has been assessed individually, which also include some suitable suggestions specific to the HR function. Finally, general recommendations have been made that would enable successful establishment of Tesco in India by forming a joint venture with another well-known Indian company. 1. Introduction: International human resources management is the area of focus for organisations that wish to set up their business in the international markets. India presents a huge business potential in the retail sector, which Tesco wishes to utilize. Hence, Tesco’s business strategy and the extent of its applicability and effectiveness in Indian markets will be studied and presented in the current report. An analysis of external factors will be performed using appropriate models. Strategy pertaining to human resources function will be studied in detail and recommendations will be made keeping in mind various factors before concluding with key points. 2. Company profile: 2.1. Tesco.Plc : Tesco is a world-renown and largest grocery store and general merchandise in the world. Founded by Sir John Cohen in East London in 1919 as a small stall, has now expanded to more than 10 countries and operates more than 5000 stores by employing more than 500,000 employees worldwide as reported in one of its annual factsheets. Tesco boasts of its strategies and grand vision that have created a strong foundation for its success and expansion. Currently, TESCO operates in various streams of business other than grocery and general merchandise, some of which include finance, technology, education etc. TESCO’s values are focused towards uplifting their customers and employees. Tesco’s core strategies are aligned towards growth and market capitalization along with building a great team. According to Fox and Vorley (2004), Tesco has the capability to match its competitor Wal-Mart in terms of business and spread (cited by Matusitz & Leanza, 2011). 2.2. PESTLE Analysis of Tesco 2.3. Tesco’s vision: Tesco’s vision is “To be the most highly valued business by: the customers we serve, the communities in which we operate, our loyal and committed colleagues and of course, our shareholders.” To achieve this Vision, Tesco focuses on five core elements, as shown below: Source: Vision and strategy, n.d. Tesco Plc. 2.4. Tesco’s mission: Tesco aims to achieve its vision by working towards one core purpose, which is to create value for their customers, to earn their lifetime loyalty. Their statement is: ‘We make what matters better, together’. 2.5. Tesco’s values: Tesco guides its stakeholders through a strong value system that reinforce commitment of all its stakeholders. Its values are: Source: Values, N.d. Tesco Plc. These values are supported by actions that lead to responsible trading; reduce impact on the environment; being a great employer; and by supporting the local communities. 2.6 Tesco’s Growth strategy: Tesco’s growth strategy is a seven-part structure, as shown below: Source: Vision and strategy, n.d. Tesco Plc. 2.7. Global Corporate Strategy: This growth strategy is managed and measured on the basis of their Corporate Steering Wheel. This comprehensive blueprint defines its overall business strategy and provides common guidelines to all its stakeholders at the global level. This, they termed as the ‘ Corporate Steering Wheel (Marr, 2009). In fact, the corporate steering wheel is their balanced scorecard that is used to manage their business performance across five core segments, namely, Community, Customer, People, Finance and Operations. This model helps Tesco in creating shared thinking across all its business functions and also links all functions with each other. As seen in the Steering Wheel, Tesco’s strategies towards quality, efficiency, customer satisfaction, job satisfaction effective leadership, career progression, maximising profits and sales are included. However, these aspects do not guarantee an effective human resources management. It is important that the company’s policies and practices related to job satisfaction, evaluation, continuous learning and growth, effective recruitment, work environment, etc need to be analysed. Source: Marr, 2009, p.4. 2.8. Glocalization of Tesco: Tesco has expanded its various businesses across the world, and is present in China, India, Malaysia, Thailand, Czech Republic, Hungary, Ireland, Poland, Slovakia, Turkey etc. Tesco has adopted different practices in each of the countries with respect to business, philanthropy, corporate social responsibility, and environment depending upon the region’s need. Glocalization to such extent is guided by Tesco’s Corporate Steering Wheel, which identifies its main strategy but allows customization to suit the needs of the region and situation. In India, Tesco has set up its global services arm for Tesco global operations, Hindustan Services Centre (HSC), which undertakes creation and execution of strategic initiatives that include IT, financial, commercial, property etc. Tesco also sources numerous products from Indian suppliers. It is already tied up with the Indian retailer Star Bazaar, an establishment of Tata, providing more than 80% of its products through centralized distribution centre that liaises with numerous suppliers from all over the country. While supporting the Indian Government’s move towards FDI, Tesco wishes to enter the Indian market in a full-fledged manner. 2.9. Joint venture with Tata Group in India: India is the second largest consumer market in the world, after China. Therefore, Indian markets provide a great business potential for Tesco in retail sector. Moreover, Tesco’s competitor, Wal-Mart had ventured with Bharti Enterprises and set up its store in Jan 2014, according to a PTI report (2014); this joint venture is already on its way to split due to various reasons. Ignoring the split, Wal-Mart continues to do business in Indian markets due to the business potential. Tesco’s joint venture with the esteemed brand and Indian Conglomerate, Tata Group can be highly beneficial considering the brand image, credibility and value systems of the Tata Group. In fact, Tata’s joint venture with European automobile industry has proven very successful in recent times (Sahu, 2014). Besides other business and management functions that require strategic alignment with Indian retail market, HRM is not exempted. Human resource functions that need attention for this joint venture to succeed and sustain have been evaluated in following sections. 3. Analyzing Tesco’s HRM: While Tesco’s business strategies emphasize expansion, profits, stakeholder value creation, customer loyalty, etc, Tesco achieves these strategies with the help if its employees at all levels and locations. Effectiveness of human resource management (HRM) function decides the effectiveness of its business outcomes, growth and profits. Tesco has successfully integrated its human resource strategy with business strategy, which is evident through its expansion and success. However, this effectiveness and integration largely depends upon the kind of HR practices, policies and procedures adopted by Tesco in various HR-related activities. Tesco has certainly developed a comprehensive HRM to manage its more than 500,000 employees spread across various countries. In all, main functions of HRM at Tesco include recruitment and selection, deciding compensation and benefits, training, communication, employee relations, reward and performance management. 3.1 Best practice approach: Clearly, Tesco adopts the best practice approach to manage their human resources, as evident from Tesco’s CEO, Clarke’s statement associated with Tesco’s 2012-Annual Report. This point has a scientific evidence from Hutchison and Purcell’s (2003) study on Tesco which highlighted the fact that store performances depended upon the extent of liberty given to its staff by the managers (cited by Robinson, 2006). Pfeffer (1994) identifies seven elements in best practice approach, Source: Armstrong, 2011, p.55. This best practice model adopted at Tesco has been analysed considering fundamental HR practices such as recruitment and selection, training and development, reward management, performance management, and employee involvement. Along with analysis of best practice approach, the extent of its replication in the Indian market scenario has been evaluated after performing a cultural analysis based on Hofstede’s cultural dimensions for UK and India. 3.2. Cultural analysis of UK and India: Cultural analysis based on Hofstede’s (2001) dimensions is presented below 4. Human Resource Functions at Tesco 4.1. Recruitment and selection: The fact that Tesco has been extremely successful in the European markets indicates their efforts towards acquiring and retaining the best talent in the industry. Tesco’s recruitment and selection procedures are systematized and also strategically aligned to Tesco’s business strategies, and hence focus on recruit and train staff that can deliver the service and quality according to the company standards. Source: Recruitment and selection at Tesco. 4.1.1 External recruitment: Tesco uses different methods of recruitment for various levels. For entry level, it uses online recruitment and also walk-ins with CV to collect as many applicants as possible to fill their vast number of openings at various levels in their retail stores. This approach not only saves costs and time by avoiding middle men’s interference, it also saves administrative costs for HR department (Gopalia, 2011). For harder-to-fill jobs, Tesco uses other media such as offline media, television and radio, advertising in Google or recruitment magazines. 4.1.2 Internal recruitment: Tesco also emphasizes use of company’s internal website, intranet, to fill vacant positions for staff interested in moving to other roles or eligible for promotions. 4.1.3 Selection process: Tesco selects candidates based on comprehensive job description for the particular role, which ensures the candidate selected is the best fit for the role. The recruited candidates are assessed for their team-working, problem-solving and decision-making abilities at the assessment centre before conducting a face-to-face interview with reporting managers, which will conclude the selection process. Selection candidates are intimated through offer letters and employment contracts. 4.1.4. Recruitment & selection at joint venture: While selection process can be adopted in the Indian joint venture, recruitment methods will require modifications. Both internal and external recruitment would be required in the beginning, and from both internal and external sources. Internal recruitment through intranet can be adopted by utilizing Tata’s existing job portal as the base, and advertising vacant positions for existing Tata employees. However, as a start-up, it would be difficult for Tesco to acquire and fill larger numbers of entry-level staff as these applicants usually are better sourced from external vendors rather than online applications. To note, if Tesco wishes to recruit undergraduate people, then taking assistance from external recruitment agency would save time and also costs to some extent barring the agency-related costs. These agencies can also provide contractual staff that will be less expensive compared to permanent employees. Seeking applications for lower and middle level management positions will be difficult as this joint venture would be a start-up and hence viewed by the Indian workforce as risky and unstable. Fraser’s five-fold grading (cited in Weightman,2004) system that assesses five main attributes in various ways would be most suitable for selection process of employees recruited from external agents as gives comprehensive information about candidate’s suitability for the selected role. Source: Weightman, 2004, p.106. For overseeing all recruitment and selection procedures in a manner that meets Tesco’s quality standards, an expatriate recruitment manager from UK will be required in India for every region, which can be done through Tesco’s intranet and selected based on job description to their usual assessment centre followed by interview by Indian and UK recruitment managers. Most importantly, cultural awareness of this expatriate manager needs to be assessed apart from other managerial capabilities. 4.2. Training and development: Human resources function owns the responsibility of training and development of its employees in order to achieve the desired outcomes. Tesco lays much emphasis on training activities and supporting their staff by sharing knowledge and expertise. Tesco believes in instilling their slogan, “Every little counts,” into every employee’s actions and thoughts through training and every action associated with the business that will help in serving customers better. Tesco invests huge efforts and money to train their staffs worldwide, which have impacted Tesco’s business outcomes. It offers three kinds of training and development programmes: 4.2.1 Apprenticeship programme: This is a 12-month programme that equips the staff with qualifications required for store management. The next level is National Vocational Qualification (NVQ), which is offered by the managers and helps candidates with practical skills and knowledge about retailing. The next part of apprenticeship is the Technical Certificate programme, which tests the candidate’s theoretical knowledge learned during the entire course. Tesco has seen remarkable responses to its Apprenticeship and Options schemes that prepare and provide the staff necessary skills and platform to perform better and grow (News release, 2011). 4.2.2 Options: Tesco offers tailor-made training for staff willing to move laterally or vertically to roles other than their current role, termed Options. Tesco ensures it is preparing at least 80% of its staff for various vertical and lateral roles at all times (Tesco Careers, n.d). 4.2.3 TWIST: For the managers, Tesco has designed the TWIST programme, Tesco Week in Store Together, which allows managers to spend one week per year in the store to learn various store activities; this is a form of on-job-training for managers that assists in learning all activities such as customer assistance, receiving deliveries, warehouse management, filling, checkout management, customer service desk etc. 4.2.4. Training and development at joint venture: Firstly, Tesco places immense value on its employees’ capabilities and commitment. Training the staff to help them serve customers better is relatively new concept in Indian retail stores because the frontline staff, with minimal qualifications, is not aware of the need for customer satisfaction. Indian staff seems to be more concerned about the business or buying factor rather than customer satisfaction; this could be partly due to the power and control exercised by supervisors by way of targets and goals. Hence, training the staff to treat their glocal customers better becomes necessary. Therefore, training and development programmes implemented by Tesco, which focus on developing attitude, skills and knowledge, can be replicated at the joint venture in India because these programmes will not only help staff learn and provide better customer service; these activities also increase commitment towards the company, considering that India is a growing market with huge competition for experienced talent. However, what needs to be given thought is the content of training programmes because the knowledge, understanding, and accessibility to technological resources are minimal in India, both for customers and employees. 4.3 Performance management: Tesco strongly believes that performance of the overall business strongly depends upon the performance of its employees. Performance of every business function is vital and is a part of corporate strategy. Tesco focuses on doing the right thing, with minimum cost and effort and ensuring highest customer satisfaction, both internal and external. Lewis and Trevitt (2000) explain that performance management at Tesco is a top-down process in which the corporate strategies are divided into achievable objectives for each function. These objectives are cascaded down to departmental heads who further design departmental objectives and key performance indicators (KPI) for these objectives. These KPIs are further divided into individual targets by the managers for their teams working in different units of store operations. 4.3.1 Managing by objectives at Tesco: Performance management for employees has two parts: Objective setting: Each employee is asked to set individual objectives based on his/her job role and skills for a specific period of time and a time period for evaluation of these objectives. Personal development plan: Each employee has to design a plan towards self development, which includes identifying the skills and knowledge he/she wishes to acquire by utilising various training and development programmes in order to improve the performance and also to grow to the next level or job as per the employee’s choice. Performance is appraised periodically based on outcomes such as customer appreciations, customer complaints, total sales at the store etc. However, the most important part in performance management is constant support and supervision from managers in order to ensure employees are not deviating from their objectives. In addition, employee performance also has a major role in their succession planning besides their personal development plan. 4.3.2 Managing by objectives at the joint venture: Aligning individual objectives to organisations goals is the correct approach to manage employee performance. However, managing by objectives in the Indian contexts would require many modifications (Anand, Sahay & Saha, 2005). Considering that Indians levy more significance on hierarchy and control, they would expect their supervisors to provide targets that they need to achieve. Asking the employees to set objectives would be unsuccessful in such contexts. Moreover, Indians prefer less risky propositions and are inclined to blame others for their failures. They are comfortable taking blame collectively rather than individually. They prefer to conform to rules set by superiors rather than taking risks. For these reasons, objectives need to be set by the regional manager, which can be divided into quantifiable performance indicators or targets. Development in Indian contexts refers to growth and promotion, which Indians relate to performance, experience and tenure rather than personal development plans through learning and skill enhancement. 4.4. Reward management: Tesco has some unique rewards systems that provide share options, retirement pension, health and life insurance as well as discount schemes. Tesco encourages and supports its employees for maintaining work-life balance. Overall, Tesco’s reward systems can be related to Armstrong and Brown’s (2006) Total Reward Strategy with a futuristic approach, as shown below: Source: Armstrong, M, 2007, p.79. 4.4.1 Extrinsic rewards: Savings and Shares: Tesco offers free shares to its employees after one year, which can be redeemed after 5 years exempted from tax. Tesco allows its employees to save some amount of their earnings every month for either 3 or 5 years, which can be withdrawn or can be used to buy shares with discount of 20%. The Buy As You Earn (BAYE) scheme allows the employees to buy Tesco shares and save tax and National Insurance from their salaries and can be redeemed after specific time with tax exemption. Colleague privilege card: This card is given to employees after six months, which allows a 10% discount on most Tesco products besides earning Clubcard points. Pension scheme: Tesco offers a pension scheme to its employees, which has the dual benefit of employees’ secured future and also employee retention. Holiday programme: Tesco encourages and supports its employees that wish to take time off work by providing discounts on theme parks, holidays etc throughout the year. Healthcare: Tesco is tied up with some healthcare companies that offers discounted rates for Tesco employees apart from special dental care plans, private medical insurance and health cash cards. 4.4.2 Intrinsic rewards: Tesco stresses upon intrinsic reward systems that employees value, which is seen in Tesco’s values, as mentioned in earlier section on values. Employees are constantly recognized for demonstrating these values through behaviour and actions by giving away badges. Moreover, employees’ efforts are constantly recognized and rewarded by profit-sharing methods such as share options and competitive pay packages. This way, Tesco has aligned its reward strategy with business strategy also (Armstrong, 2007). Tesco believes in lesser hierarchies, which will not only improve empowerment but also facilitate competitive pay packages for all its employees across all levels. 4.4.3. Rewards and benefits at joint venture: Extrinsic and intrinsic reward systems in Indian context would require enormous thought as these rewarding factors differ largely. For instance, Indian workforce is more materialistic and ambitious, therefore, expects better pay package and growth than share options that would lock their money for longer time periods. Moreover, Indian workforce is less inclined towards holidaying though they like to spend time with family and friends. Much importance is given to relationships rather than performance and objectives; this indicates the need for effective leadership that understands the emotions and behaviour of Indian employees. Learning and development can be highly motivating provided these are linked to their professional growth. Being rewarded for values with badges can be highly motivating only if the employees are able to relate to the values and understand how their behaviour impacts the business. In Indian companies, information sharing and understanding is limited to the managers and sparingly cascaded to subordinates. 4.5. Employee involvement Tesco has been immensely appreciated for its employee engagement efforts through empowerment, involvement, partnership with trade unions, participation through employee voice etc. 4.5.1 Internal involvement: In the internal environment, i.e., within the organisation, employee involvement can be seen through participative work and decision-making processes. For instance, employee empowerment is exercised throughout the organisation. Line managers are empowered to use reward systems in a manner that enhances performance; this empowerment includes flexibility to allocate pay of their teams as well as manage career development in less-hierarchical structure (Armstrong, 2007). Secondly, employees are encouraged to take appropriate decisions within the realm of their jobs at the store to enhance customer satisfaction. The International HR Director at Tesco mentions about their “Listen and Fix” programme that intensifies employee engagement across various business lines and also provides greater understanding of all underlying issues that affected the business and its employees. As one of the outcomes of this programme, Tesco identified the basic things that its employees needed, such as coffee machines and dish washers (Kearns, 2013). Such engagement although does not seek employees’ direct decisions or actions, they do provide the employees a platform to voice their concerns, which is a very important factor for employee commitment. 4.5.2. External involvement: Tesco in the UK advocates strong human rights principles, and is appreciated for its efforts towards supporting all its employees to partner with trade union and has an agreement with Union of Shop, Distributive and Allied Workers (USDAW), which is a model for other private entities in the UK. Contrary to such support in their native country, Tesco is known to have opposed partnership with trade unions in its Thailand centres, which has been condemned (Wilton, 2013). 4.5.3. Employee involvement at joint venture: Employee involvement and engagement would be required to intensify employee commitment at this joint venture; however, the same approaches might not be effective. Firstly, empowering employees to take decisions to satisfy customers would require clear guidelines and boundaries explained so that the staff is well aware of what kind of decisions can be taken. Moreover, it is unlikely that the frontline staff will try to take any decisions considering the risk that their decisions might pose to their jobs, business or performance. Hence, such decision making powers would be better accepted and exercised at the supervisory and managerial levels. However, practices that will enrich their job experience and reduce monotony will certainly improve employee commitment. Staff empowerment can be exercised with clear guidelines and reassurance of job security in case of unexpected outcomes. Ethical principles and guidelines will control employees from any wrong doing while critical decisions are being taken. Employee surveys will be greatly appreciated provided they are kept confidential. Trade union relationships in India are more prominent and have a strong say in the participative bodies though the number of employees associated with trade unions could be low. Dominance of trade unions is usually linked to external leadership in the unions that are political representatives with political objectives (Sen, 2012). Hence, employee partnership with trade unions is highly risky in India, which would necessitate a strong labour union policy in employment and business contract to prevent any untoward politically-motivated mishaps or events involving employees. A few reasons that make union participation in India difficult are shown below: Source: Sen, 2012. p. 3. 5. Recommendation and Conclusions: It is evident from this brief study that extent of applicability of HR practices in different contexts varies. Firstly, a ‘best-fit’ approach to HRM would be ideal for any new start-up in international region; secondly, HR strategies that are best fit with the life-cycle of the organisation would be recommended which will facilitate necessary changes to HR strategies based situation. Hence changes to HR practices become inevitable. Modifications in policies and procedures would be required, as analysed in earlier sections, while aligning them to national legislation; practices should match local preferences and cultural aspects in order to be effective. Leadership and management needs to be local to drive and implement the management strategies. However, the initial implementation would require expatriate managers that are highly motivated and possess cultural awareness to work in foreign locations and face numerous challenges. Finally, an exploration into Tesco has revealed that human resources are most critical aspect of its business worldwide. 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