Home Depot's Strategic HRM - Case Study Example

Improving Business Performance through Strategic HRM Home improvement industry is one of dynamic and fast growing industries around the world. Home Deport is a US based company and a leader in home improvement market. Home Depot, Inc. is “the second largest retailer operating over 1,700 stores in North America. The company operates Home Depot stores, Expo Design Centers, Home Depot Supply Stores, Home Depot Landscape Supply Stores, and Home Depot Floor Stores” (Speight, 2004). Today, Home Deport relies chiefly on an efficient technology innovation system and supply chain. This company needs strategic HRM because environments generally change much faster than organizational structure and service quality. Directional and Business Competitive Strategies Home improvement market has a two-way reciprocal relationship. On the one hand, it is open to, and dependent upon, the social and physical environment that surrounds them. On the other hand, it needs financial resources and political legitimacy (a set of laws by which to operate) pro­vided by outside institutions and governments. Customers are significant members of the environment determining strategic choice of the organization. And knowledge and technology are also a part of the environ­ment: they are produced by other actors in the environment and purchased by the or­ganization as educated labor or as pure knowledge assets (Johnson and Scholes, 1998). Directional strategies (Ph. Kotler) help the company to expend internationally and reach diverse target audience (Johnson and Scholes, 1998). Recent years, Home Deport has implemented and developed a companies have already used this service, but still it is one of the most beneficial area for attracting a new customers). Home Deport acquires new knowledge and technology, and employ these assets in produc­tion quickly. From a management standpoint, technology is a major environmental factor that continually threatens existing arrangements. Fast-changing technologies, such as information technology, pose a particular threat to organizations (Johnson and Scholes, 1998). Without qualitative service the enterprise is not capable to achieve the overall objectives. Home Deport is marked by increasing capital markets activity over the past 5 years. It is estimated that average annual returns for full-service are anticipated to exceed 13 percent over the next 10 years, with retail industry investment alternatives performing at single digit growth rates (approximately 7 percent to 9 percent). (‘Home Depot in the know when’ … 2002). Competitive strategies (Michael Porter 1985) allow identify and analyze current market position of the company and its success factors. Generic strategies aiming at the achievement of competitive advantage or supe­rior marketing strategy demand that the firm make choices. The four strategies are cost leadership, cost focus, differentiation and focused differentiation. Home Deport follows cost leadership advantage based on the firms position as the industrys low-cost producer across a wide mix of products. This strategy has become increasingly popular in recent years as a result of the popularization of the experience curve concept. In general, Home Deport bases its competitive strategy on overall cost leadership and constructs the most efficient facilities (in terms of scale or technology) and obtain the largest share of market so that it’s cost per unit is the low­est in the industry. These advantages, in turn, give the producer a substantial lead in terms of experience with building the product. Experience then leads to more refine­ments of the entire process of production, delivery, and service, which leads to fur­ther cost reductions (Porter 1985). As H. Mintzberg suggested, the various approaches to strategic management can be regarded as "complementary, representing two different forms of analysis both of which must be brought to bear for improv­ing the quality of strategic thinking and analysis" (Mintzberg, 1987). In relation to minor competitors, Home Deport provides comparable buyer value but perform the activities more efficiently so as to perform the activities in a unique way which raises the value to the con­sumer and thus allows them to command a premium price. The use of dynamic lead-time policies allows Home Deport to capture some of the cost reductions (when service values decrease rapidly over time).. The customer satisfaction is achieved by changing operations model concerning flexible level of prices and time. SWOT Strengths The Strength of Home Depot is that its goods obtained a very competitive position on the US market. The brand has a hard core of loyal supporters. It develops lines of services to satisfy the needs of wide audience, low-cost of the services. For instance, Home Deport creates “online design center aimed to provides a customers with “a visual platform on which they can experiment and develop their design preferences” (The Home Depot: Helping Customers Dreams, n.d.). Web services, call centers and separate messenger service are used in order to provide support for those activities outside the company. Messengers are employed to carry mail, important and urgent messages, and other forms of communication the regional and head agencies. Due to constant programs of modernization, regular investments into the hi-tech equipment and constant training of the staff, gives Home Deport opportunity to satisfy the most specific inquiries which can arise at during business trip. Strengths of the company include knowledge, relationship selling and history. Because information systems potentially change an organizations structure, culture, politics, and work, there is often considerable resistance to them when they are introduced (Schuler, 1998). Weaknesses The main weakness of the company is that its agencies located abroad are unable to adapt to a rapidly changing environment and lack resources—particularly among young firms— to sustain even short periods of troubled times. The company has to invest in human resources and technological improvements in order to remain competitive and profitable (Home Deport, Inc., 2005). Opportunities Managing diversity is an opportunity for Home deport. “The Home Depot is committed to creating an inclusive work environment where all associates are included, respected and supported to do their best work. We continually strive for excellence in both business and community by upholding our core values” (Home Deport, Inc., 2005). It comprises ideas through which managers perceive and interpret the world, symbols they use to communicate these ideas, and institutions which enable individuals to become socialized and satisfy their needs. Managing diversity, by effective leadership in Home Deport ensures human resources policy is adhered to and department activi­ties are successfully carried out. Threats Competition is the major threat for Home Deport. The market is very fragmented in terms of supply, with a large number of smaller operators being characteristic. The majority of businesses offer products to a relatively small geographical area, particularly in the retail segment. The main competitors are Menards, Sherwin Williams, Tractor Supply and Lowe’s. Lowe is in direct competition with Home Depot. To resist competition, Home Deport must adopt new approaches to HR management and quality, customer service and technological changes (Home Deport, Inc., 2005). Effectiveness of HR Strategies Home Deport sees HRM as a source to obtain added value and allows to treat employees as value assets. This approach helps Home Deport to pay more attention to commitment and high quality than to quantitative and calculative strategies. For instance, Home Deport sees the effect in coaching to insist upon 360-degree feedback, preferably, through one-to-one interview. In presenting such feedback to the executive it is possible to see clear themes in terms of performance and, equally important, in terms of perception (Senior, 2001). Planning helps the company to use its resources effectively and efficiently. Also, planning allows management to understand the direction in which the organization is going, even if this is not expressed in a formal strategic plan. The ideal of achieving a link in rigorous terms may be difficult to attain. Compared to more traditional financing arrangements for retailers that require equity investments between 30 percent and 40 percent (or more) of project cost. To achieve this objective horizontal fit is used. Achieving ‘fit’ managers remember that business and HR issues influence each other and in turn influence corporate and business unit strategies. It is also necessary to note that in establishing these links, account must be taken of the fact that strategies for change have also to be integrated with changes in the external and internal environments which is unstable in retail segment (Senior, 2001). The ability to motivate and inspire workers is now the main com­petency for the management. In Home Deport, management embraces coaching as a main tool which allows to retain top talent, because professionals will stay where they feel they are growing and learning. HR managers take each member of staff to their full potential, not merely to the managers potential. The use of competency-based HR processes has a great impact on impact on recruitment, training, performance management and reward, and performance management which affects personal development and reward. Payment-by-results methods and flexible working is another feature of HRM. In the USA, many organizations have instituted quality man­agement processes to receive accreditation under the Standards. They lay down the requirements for a cost-effective quality system and how to estab­lish and maintain it, with the aim of demonstrating to customers that their organization is committed to quality. However, this does not necessarily mean that they have a total quality philosophy in their organization. Effective JIT systems include training each employee to do a variety of dif­ferent tasks, which eliminates the need for specialists. The theory held is that by training employees to do a variety of tasks it gives them the ability to view problems from many perspectives and problem solving can then be trans­ferred from staff specialists to line employees, giving much greater staff flexi­bility (At Home Deport “the Model Has Changed, 2004). Home Deport maximizes each employees potential as an individual and as a team member providing training and reward strategies. These and other programs improve and bring advantages in recruiting and retaining employees. Strengths of Home Deport include knowledge, relationships, selling and history. Home Depot “has inverted its organizational pyramid, putting customers and sales associates at the top, followed by store managers, regional managers and top management. This is complemented by a 360-degree appraisal system” (Five secrets from the world’s best retailers, 2003). Corporate culture helps Home Deport performance. It pro­vides a consistency in outlook and values, and makes possible the processes of decision making, co-ordination and control (Reed 2001). Home Deport makes some use of separate training needs assessments, although this is usually a periodic rather than a regular activity. There are many different ways of conducting such assessments, but they usually involve some form of survey, either by discussion or questionnaire, with managers and/or the people to whom they report. This does not automatically remove the problem of a failure to perceive the real needs, which occurs with annual appraisals. According to Armstrong (2001): “training needs analysis is partly concerned with defining the gap between what is happening and what should happen. However, it is necessary to avoid falling into the trap of adopting the “deficiency model” approach, which implies that training is only about putting things rights that have gone wrong” (Armstrong, 2001, p. 551-552). The same people are involved, and unless they are pro­voked by the approach into a different way of thinking, the probabil­ity is that their response will be the same as in the appraisal. This approach in­volves a consideration of the skills required against what they feel exists within the company. This can help managers to perceive needs which may otherwise be hidden to them, such as the many capabilities needed to manage strategic alliances, and the degree to which the managers who report to them have experience or know­ledge that is relevant. Home Deport adds training and development activities which are important to the organization, but which may not arise as a development need because the organization has been attending to it rather well. An example is induction training for new em­ployees. The need for it might only show up in the assessments if the organization stopped doing it. Following Reed (2001) effectiveness is explained by planning and employees selection techniques, needs assessment and strategic planning. For the middle category of management development, the indi­rect, longer-term business needs, Home Deport decides the extent to which initiatives should lead to formal academic qualifications. If the acquisition of a diploma in management studies or a masters degree in business studies is considered to be of im­portance to the organization, in terms of ensuring consistent quality and increasing employee motivation, a specific policy is needed to achieve this. Although management development initiatives are not restricted to one per person, there are trade-offs. For example, put­ting a person on a three-year internal management program which will lead to an MBA may make it impossible to give that person a temporary development posting overseas. There is also the very real point that there are various levels of management, all of which have development needs, and one aspect of the policy should be to determine how each level is to be pro­vided for, given that resources will always be limited. Senior (2001) underlines that direct business needs also require policies to support the detailed actions. This type of need is met by training that cascades down the organization. Home Deport meets some of the direct needs by inserting them into the second category of train­ing. For example, there might be a deliberate decision to ensure that all longer-term development training should also meet some shorter-term direct needs by chang­ing the content of programs, and by the nature of project work that could form part of the initiative. (Home Deport, Inc. 2007). An essential feature of management development is performance review (Armstrong 2001). The systematic review of work perfor­mance provides an opportunity to highlight positive contributions from the application of acquired knowledge, skills, qualifications and experience. An effective system of performance review helps identify individual strengths and weaknesses, potential for promotion, and training and development needs. The systematic review of work perfor­mance provides Home deport with an opportunity to highlight positive contributions from the application of acquired knowledge, skills, qualifications and experience. Armstrong: “the performance management approach to learning concentrates on the preparation of performance improvement programs and learning contracts or personal develop­ment plans, which are related to jointly determined action plans” (Armstrong, 2001, p. 555). An effective system of performance review will help identify individual strengths and weaknesses, potential for promotion, and training and development needs. According to Reed (2001) Management by Objectives attempts to relate organizational objectives to individual performance and development through the involvement of all levels of management. In Honm Deport, management development requires a combination of on-the-job-training, through, for example, delegation, project work, coaching and guided self-analysis, trial periods and simulation; and off-the-job-learning, through, for example, external short courses (Home Deport, Inc. 2007). In Home Deport responsibility for the media of internal com­munication lies with HRM. The offi­cial media, such as the company magazine or newspaper, may be important, but may not have as much impact as the day-to-day communication activities of managers. If the journal preaches the organization’s vision, but the immediate superior puts across a quite different message, it is probably what the superior says that will have the most impact. A major part of every managers job is internal communication, which means that we are once again in an area where HRM has to be both proactive and reactive (Armstrong, 2001) Resource-Based View The relevance of the resource-based view can be explained by increasing importance of strategic vision of the organization and increasing role of fast response to changes affected international environment. In general, the concept of resource-based view is founded on the belief expressed by Campbell (1997) that competitive advantage is obtained if a company can obtain and develop resources (and human resources) which enable it to learn faster and apply its learning more effectively than its rivals. The Resource-based strategy can develop strategic capability. The strategic goal will be to “create firms which are more intelligent and flexible than their competitors” (Grant p. 116 cited Campbell 1997, p. 67) by hiring and developing more talented staff and by extending their skills base. Using this approach to strategic management, it is possible to say that Home Deport gain competitive advantage by conceiving new ways of conducting activities, introducing new methods, technologies, inputs or channels of distribution. A convincing rationale for resource-based strategy has been produced by Grant: “When the external environment is in a state of flux, the firms own resources and capa­bilities may be a much more stable basis on which to define its identity” (Grant, p. 116 cited Campbell 1997, p. 67). Home Deport invests in people because investment in people adds to their value to the companies of any sector (Home Deport, Inc. 2007). Home Deport improves resource capability - achieving strategic fit between resources and opportunities available within international environment, and obtain added value from the effective use of resources. The resource-based view allows Home Deport to evaluate current situation and takes into account possible threats and challenges affected global business. Only in this case, Home Deport will be properly prepared to face the demands of a changing environment and response to change through people employed by it. In the light of these developments, it is not surprising to find many theories which attempt to outline and explain cultural similarities and differences among societies. The idea of the resource-based view incorporates all the functions applied on the national level but pays more attention to cultural differences and diversity. For Home Deport, the resource-based view becomes of even greater importance when entering e-business and when departments in different countries (such as research and development) have to work closely together. The resource-based view helps Home Deport to organise resources in accordance with the needs of the company and global environment. These technological advances are aimed to maximize security and fasten the process of production. Also, it allowed Home Deport to react faster delivering customer satisfaction. Technology replaced traditional methods of betting business, and caused growth of operations (Armstrong, 2001). The resource-based approach leads to a smooth task management process, helping Home Deport to manage complex tasks across multiple properties in a consistent, efficient manner. Home Deport faces two critical challenges in planning and executing tasks. First, planning and execution is a complex process that entails the coordination of a number of assets and internal teams as well as frequent scheduled interactions with the customer. Second, it is often difficult for Home Deport to provide a consistent set of services and products for tasks across multiple properties, a fact that often negatively impacts brand equity (At Home Deport “the Model Has Changed, 2004). According to Reed (2001) the “best practice” approach helps to achieve effectiveness of performance and specific goals including maintenance of high standards in order to deliver customer satisfaction. Unique talents among employees, including superior performance, productivity, flexibility, innovation, and the ability to deliver high levels of personal customer service are ways in which people provide a critical ingredient in developing an orga­nizations competitive position. In Hone Deport, people also provide the key to managing the pivotal interdependencies across functional activities and the important external relation­ships. It can be argued that one of the clear benefits arising from competitive advan­tage based on the effective management of people is that such an advantage is hard to imitate. An organizations HR strategies, policies and practices are a unique blend of processes, procedures, personalities, styles, capabilities and organizational culture. Job-to-be-done strategy also helps Home Deport to obtain strong market position and create an image of unique product lines in customers’ minds. In sum, Home Depot is well-positioned to take on this important leadership role in the USA. It has the resources and certainly has the technological capability. Clearly, some companies in the same industry are more successful than others, lending support to the view that competitive advantage is largely internally developed. Equally, however, there is a danger of ignoring the environment, as customers and their needs, competitors, changes in technology, etc., can play an important role in determining competitive success. Home Depot competes on both a price and a non-price basis. The strength of the company is that it is an expert and leader in the market. Its marketing challenge is to position service offerings as the high quality, high value-add alternative. With the help of Internet Home Deport, known for its patchy supply chain and bungling circulation processes, will have the possibility to improve efficiency, inventory, audit control and to diminish infrastructure and operation costs by web-enabling their business online. Internet will support the retail industry to be better equipped to handle business desires, paying attention to clients’ needs, competitors and prospective partners. It is especially important for retail business which includes more than one shop. The need is to find ways to manage the purchasing and brand requirements for both traditional and the Internet services. There are many reasons why Home Deport has different shapes or structures. Home Deport differs in its ultimate goals and the types of power used to achieve them.. The kinds of power and incentives differ accordingly, as does the overall shape of the Home Deport. In the infrastructure of service quality is the major question. Bibliography 1. Armstrong, M. 2001, Human Resource Management. 8th edn. Kogan Page. 2. Campbell, D.J. 1997, Organizations and the Business Environment. Oxford: Butterworth-Heinemann. 3. “Five secrets from the world’s best retailers”, Strategic Direction vol. 19, num 3, 2003, pp. 26-28. 4. Grant, R.M. 1991, The resourced-based theory of competitive advantage. California Management Review, vol. 33, num. 2, pp. 114-35. 5. At Home Deport “the Model Has Changed. 2004,  Retrieved 30 May 2007, from http://www.businessweek.com/magazine/content/04_43/b3905093_mz017.htm 6. “Home Depot in the know when it comes to IT investment”. Strategic Direction vol. 18, num 7, 2002, pp. 18-21. 7. Home Deport, Inc. 2007, Retrieved 20 May 2007, from http://www.homedepot.com 8. The Home Depot: Helping Customers Dream with Web-based Imaging Technology, n.d. www.kodak.com/eknec/documents/ 78/0900688a8011e478/IDC_Home_Depot.pdf 9. Johnson, G., Scholes, K. 1998, Exploring Corporate Strategy. Hemel Hempstead: Prentice Hall. 10. Mitzberg, H. 1987, Five Ps for strategy. California Management Review, Fall. 11. Porter M.E. 1985, Competitive Advantage. New York, Free Press. 12. Reed A. 2001. Innovation in Human Resource Management. Chartered Institute of Personnel and Development. 13. Schuler, R. 1998, Managing Human Resources. Cincinnati, Ohio: South-Western College Publishing. 14. Senior, Barbara. 2001, Organizational Change, Capstone Publishing. 15. Speight, Ch. Home Deport. (NYSE: HD). Krause Fund Research, 2004. Retrieved 30 May 2007, from www.biz.uiowa.edu/krause/HD_SP04.pdf Read More