The Performance of Medium-Sized Manufacturing Firms - Essay Example

Research Proposal How Human Resource Policies Influence the Performance of Medium Sized Manufacturing Firms Date: How Human Resource Policies Influence the Performance of Medium Sized Manufacturing Firms 1. Introduction Globalization has created a paradigm shift in the ways by which firms conduct their business. The convergence of world economies has minimized-and in some cases eliminated-both legislative and geographical barriers to international production and sale of goods and services. The flip-side of this process is the increased competition for world markets created especially by the threat of multinational firms to local firms (Garry & Litan, 1998). Local firms must find ways to compete and survive the threat of take-over and crowding out of the market by multinational producers who enjoy favorable economies of scale. This is effectively achieved by ways of in themselves creating this very economy of scale; expanding business operations helps them lower the marginal cost of production allowing them to therefore provide a favorable pricing policy within the market. In achieving the aforementioned, firms must build up capacity. The attention of managers-and researchers alike-has been commonly directed towards assets in the sense of physical (fixed and current) and monetary assets (optimal capital structure) of the firm in achieving this objective. Perhaps as an oversight or of limited interest is the aspect of human resource and its contribution towards this end. Human resource policies usually come into light when matters of corporate governance and ethics in business practice are highlighted; and rightly so. A need therefore presents itself to examine whether the scope of human resource policies extend beyond the limited precincts of governance and organizational culture into its influence on capacity building in medium size manufacturing firms aiming to move to the next level of operations. Organizational culture is created for through the organizations core values as stated within the company’s vision, mission and objectives (VMO) clause. The determination of this clause is restricted within the periphery of strategic decision makers involving the top level management (also referred to as C-level management since their usually have a prefix chief in their title for example chief executive officer, chief finance officer, chief marketing director and so on, so forth ). It is this organizational culture that provides identity to the firm within the public, thereby, distinguishing it from other organizations and by extension, their products in the market. Therefore, this research aims at exploring the efficacy of the human resource policies employed as far as the managerial effect contributes to the performance of local medium size manufacturing companies under the case study of ten such organizations. This is with the objective of identifying specific patterns of human resource policies influencing productivity and general competitive advantage that can be generalized to apply to all mid-sized firms within the same industry. 1.1. Specific Research Objectives To identify the extent to which the human resource policy have influenced the short term and long term vision and growth of the firms To identify factors within the human resource policy influencing overall productivity of the ten medium size manufacturing firms To identify common patterns within the human resource policies for the ten case study firms To examine whether an optimal human resource policy exists and how such a policy can be modified and/or applied to all medium size manufacturing firms within the same industry 1.2. Research Questions Do the various human resource policies influence the vision and growth of the firms? Which factors within these human resource policies directly influence the firm’s productivity How do the factors influence overall productivity of the firms? Is there a common pattern within theses firm’s human resource policies? Does an optimal human resource policy exist? How can such an optimal human resource policy be applicable to organizations within the same manufacturing industry? 2. Literature Review Globalization is the process of increasing connectivity between geographically distant places as well as the interdependence of both trade and the financial markets (Garry & Litan, 1998). Globalization can take ten forms: Globalization of markets - which is the elimination of barriers that limit cross border trade between countries or trading blocs, Globalization of production - the breakdown of the production process such that different components are produced in different countries where the comparative advantages in manufacturing said component are high Globalization of financial markets which is the integration of financial systems between countries so as to achieve unrestricted flow of capital-seen in the trade in financial securities-between the member states. The drive behind calls for globalization is that it encourages healthy competition as between producers, drives progress between all trading countries and increases consumer welfare through provision of a variety of products and services at affordable pricing (Held & McGrew, 2007). Globalization of financial markets can be therefore reflected through the firm’s ability and access to financial resources from the secondary market. An optimal capital structure, ideally, must have a component of both owners own capital as well as debt instruments. Globalization of production can be reflected through the firm’s innovation and new product developments. A study by Hornsby and colleagues of 458 different level managers found that in addition to the leadership style, support from top management (defined as the extent to which an organization’s top management encourages entrepreneurism as perceived by lower-level managers) is a crucial influencer of the number of entrepreneurial ideas and innovations that a firm implements especially by middle-level management. The quality of human resource employed by the firm is of importance in achieving product diversification; in terms of skills, competency, and exposure. Firms that are able to employ a mix of management teams with broad international exposure in addition to their educational and diversity in identifying emerging markets can create a truly global strategy (Carpenter & Sanders, 2006). This shed slight onto the firm’s human resource policy on recruiting and selection. Can the right mix of employee be determined during the selection process? Against what benchmark can candidates for positions within the organization be assessed? The growth of a firm can be associated with the individual growth of the employees within the organization. A continuance within the firm that is very vital for building the “right” strategy for long-term policy drafting (Noe et al., 2010). According to Noe and colleagues, the need for internal recruitment mechanisms is very crucial for achieving organizational growth. They argued that in driving a firm’s growth and expansion an informed policy on staff retention and growth must be exhibited since such employees were able to have directly overseen the firm’s development and therefore are more informed through experimentation and failures as to which approach is best suited for pushing the organization to the next level of operation (Wood, 2009). The human resource policy therefore appears that it be based on solid examinations of the job requirements within the organization and how the job context fits within the overall short term and long term vision of the firm (Kandula, 2006). This job analysis gives birth to an essential element of formal organizations-the organizational structure. The organizational structure is the spine of any formal organization. In addition to creating and listing the jobs within the organization, it helps to define relations between employees of the organization as well as relations with other external shareholders such as the suppliers, customers, and financiers (DuBrin, 2008). Researches on how conceptual elements can influence a firm’s international strategy (multi-domestic and global) have shown that a close relationship exists between aspects of management characteristics such as risk-tolerance, satisfaction, and group consensus in decision-making. Total pay and use of long-term incentives among top management teams have led to improved performance amongst multinational firms. Similarly, the impact of remuneration on performance was found to be greater at high levels of internationalization (Carpenter, 2011). Does this therefore imply that monetary compensations should be a focus for medium level firms seeking to expand their business across borders? Abraham Maslow’s hierarchy model for needs identified five levels of human needs/wants including monetary, social, and professional. At the helm of this hierarchy is the concept of self-actualization, which refers to a state of individual fulfillment over how the individual has lived the course of their life (Cary L. Cooper, 2011). The human resource policy must be sensitive to the pertinent remuneration needs as well as employee expectations on the company. Above and beyond the financial incentives, employees have an intrinsic need for career growth and development (Noe et al., 2010). Usually this is satisfied through training, task delegation, and appropriate promotional mechanisms within the organization. A firm that offers an employee both satisfaction and ability to actualize themselves provide the best environment for the individual to be creative and operate at very high optimal levels. The net effect to such a firm is the development of a strong work ethic at all levels within the organization leading to active product diversification and improved in both volume and quantity in production (Roberts, 2004). Cognitive processes especially within middle level management are also attributed to improved performance of multinational companies (Garry & Litan, 1998). Internationalization means that the organization exposes itself to more risks and uncertainties due to the challenge of information asymmetry. The managerial team’s ability to recognize and anticipate changes in the business operating environment-especially within the external environment- and subsequently, analyze the possible impacts of such changes to the organization is essential in adjusting the company’s mentality therefore enhancing the firm’s global strategy. However, this cognition is not in itself conclusive. The management team must additionally be able to communicate such information effectively to the other members within the organization for efficient implementation. It is evident that the role of human resource and especially in regard to managerial functions is an integral part in organizational expansion as much as it is to the performance of the organization. Consequently, there is an underlying importance in the human resource policy that a firm adopts (Roberts, 2004). This research therefore will analyze the human resource policies and practices within the firms under study. The research team shall review the functional areas of human resource management such as the recruitment, selection, remuneration, appraisal, training and development and motivation. In addition to the policy stipulations, the excision of governance within the select companies shall be evaluated as under the leadership style and power centers within the organizations. A comparison and contrast of the human resource policies of the ten firms under such aforesaid categories shall be done to identify commonalities and possibly develop an optimal human resource policy stance for the industry. 3. Research Plan `The literature will provide general direction as to which areas of the policy statements obtained from the firms under the study shall be considered for assessment. The researchers will also rely on published sources of the firm’s financial statements for the past three years. Through this, the researchers can save on time and resources that would otherwise be consumed in the extensive and perhaps non-essential information therein burdening the evaluation process. The audited and published reports of the firm’s financial performance will form the benchmark for comparing the productivity of the managerial team as against industry averages as well as obtaining a trend analysis in view of the firm’s growth trend and objectives. A questionnaire is also necessary for acquiring up-to-date information on the human capital employed by the organizations. 3.1. Data Collection As shown, the data to be compiled will be largely secondary and this will be obtained from the organization’s strategic plans as well as financial statements that are obtainable from either the Registrar of Companies’ office or the National Bureau of Statistics. Owing to the sensitive nature of such documents in form of strategic plans, a direct authorization will be sought by the research team beforehand from the senior most officers of each of the ten organizations; during which a brief but conclusive explanation as to the purpose of the research shall be explained to allay any fears of corporate espionage. Furthermore, a final copy of the findings of the research shall be forwarded to each of the involved companies. However, the quantitative elements of the research such as identifying the efficacy of the managerial team as well as their competency demand that primary data be compiled. For this purpose, a questionnaire shall be prepared by the team and administered to managers at both middle and top-level management of the firms. The questionnaire shall have sectional provisions for determining the educational background, professional training and experience and achievements or accolades. The sample size comprises ten local medium sized firms that are involved in cloth manufacturing industry. The questionnaire shall be administered to between and eight managers; of whom a finance manager, production manager and the senior most manager in the organization must be included. The purpose for the first two officers is due to the close connectivity between production and cost elements for any manufacturing organization. As such any production control mechanisms employed at the operational level by such firms must have a cost implication for the firm; similarly any financial control by the company will be reflect in the production department in terms of volume and/or quality. 3.2. Data Analysis For purposes of analyzing data obtained from the questionnaire, where the research team lacks necessary skills and training for evaluating collected data, the team shall seek the help of a qualified human resource consultant. The data shall then be incorporated within the other research findings before making overall findings and conclusions. The information on financial performance and position obtained from the National Bureau of Statistics is historical in nature and therefore both its validity and analysis is not called to question. However, a direct comparison is necessary since a natural comparison may not be automatically available. 4. Risks The research runs the risk of being invalid especially where researchers are denied access to the companies’ strategic plans by the management of the firms. The documents are usually safeguarded from public access for fear of replication by competitors. The researchers anticipate that this shall be the single most challenging element in the research process. Another risk is that the financial performance data may not be reflective of the overall position of the firms with respect to their growth position. There might have been significant prevailing conditions both intrinsic to the organizations and within the aggregate economy itself that might have lead to the gross differences as indicated by the audited financial reports. This may produced a biased and inaccurate position as derived at from the analysis. A final risk is that the research itself may provide both data and conclusions that cannot be generalized to the other firms within the same industry. This is because an optimal human resource policy itself cannot be obtained due to the fundamental differences in rationalization and skills as between individuals even where they have similar training and exposure. 5. Ethical Issues Ethical issues that may arise within the conduction of the research include issues of confidentiality. The research team must as a matter of requirement, maintain confidentiality with particular regard to the strategic plans that they acquire as part of the secondary data. The researchers must also demonstrate unbiasenes with regard to the interpretation of the quantitative data acquired by steering clear of any incline in light of the reported financial performance by the organizations under study. References Carpenter, M.A., 2011. The Handbook of Research on Top Management Teams. Edward Elgar Publishing. Carpenter, M.A. & Sanders, W.G., 2006. Strategic Management : A Dynamic Perspective, Concepts and Cases. Prentice Hall. Cary L. Cooper, R.J.B., 2011. Human Resource Management in Small Business: Achieving Peak Performance. Illustrated ed. Edward Elgar Publishing. DuBrin, A.J., 2008. Essentials of Management. Cengage Learning. Garry, T.B. & Litan, R., 1998. Globaphobia: Confronting Fears About Open Trade. New York: Brookings Institution Press. Graeme Salaman, J.S.J.B., 2005. Strategic human resource management: theory and practice. 2nd ed. Sage. Held, D. & McGrew, G.A., 2007. Globalization/anti-globalization: beyond the great divide. London: Polity. Kandula, S.R., 2004. Human Resource Management in Practice: With 300 Models, Techniques and Tools. New Delhi: PHI Learning Pvt. Ltd. Kandula, S.R., 2006. Human Resource Management in Practice: With 300 Models, Techniques and Tools. New Delhi: PHI Learning Pvt. Ltd. Noe, R., Hollenbeck, J., Gerhart, B. & Wright, P., 2010. Fundamentals of Human Resource Management. McGraw-Hill/Irwin. Roberts, G., 2004. A Literature Review on the Impact of Investment in Human Capital on Economic Success: How Do Human Resources Practices Affect Organisational Performance? Literature Review. Munich : GRIN Verlag. Secord, H., 2003. Implementing best practices in human resources management. Toronto: CCH Canadian Limited. Wood, G., 2009. Human resource management: a critical approach. Illustrated ed. London: Taylor & Francis. Read More