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AN INTRODUCTION TO DIFFERENTIATED LEARNING TOOLS
Participants in flexible learning programs have limitations on the nature of the
time they can spend on learning. Typically they are employed fully or partially,
pursuing higher studies or have other social and familial responsibilities.
Availability of time is a great constraint to these students.
To aidthe participants,we have developedfour unique learningtools as below:
 Bullet Notes : Helps in introducing the important concepts in each unit
of curriculum, equip the
student during preparation of
examinations and
 Case Studies : Illustrate the concepts through real life experiences
 Workbook : Helps absorption of learning through questions based on reallife nuggets
 PEP Notes :Sharing notes of practices and experiences in the Industry will help the student to
rightly perceive and get inspired to learn concepts at the cutting edge
application level.placementinterviews
Why are these needed?
 Adults learn differently from B. School or college going
students who spend long hours at campus.
 Enhancing analytical skills through application related learning
kits trigger experiential learning
 Availability of time is a challenge.
 Career success increasingly depends on continuous learning
and success
What makes it relevant?

How is it useful?


Where does this lead to?
As and when you get 5 to 10 minutes you can read one of these and absorb and comprehend.
Spending more time is your choice.
You can use the time in travel, waiting for meetings, lunch time, small breaks or at home
usefully.
Through these tools, the learning bytes are right sized for ease of learning for time challenged
participants.
The content starts from practice and connect to precept making it easy to connect to industry
and retain.
They can be connectedto continuous assessment process of the academic program.
Practitioners can use their real life knowledge and skill to enhance learning skills.
Immediate visualization of the practical dimension of the concept will offer a rich learning
experience.

 Easier to move ahead in the learning process.

 Will facilitate the student to complete the program earlier than
otherwise.Helpsstay motivated and connected.
When is it useful?


PEP Notes
Human Resourc
e Management

© The ICFAI Foundationfor Higher Education (IFHE),
Hyderabad,March, 2015. All rights reserved
No part of this publication may be reproduced, stored in a retrieval system, used in a
spreadsheet, or transmitted in any form or by any means – electronic, mechanical,
photocopying or otherwise – without prior permission in writing from The ICFAI
Foundation for Higher Education (IFHE), Hyderabad.
Ref. No. HRM-PN-IFHE – 032015
For any clarification regarding this book, the students may please write to The ICFAI
Foundation for Higher Education (IFHE), Hyderabad giving the above reference
number of this book specifying chapter and page number.
While every possible care has been taken in type-setting and printing this book, The
ICFAI Foundation for Higher Education (IFHE), Hyderabad welcomes suggestions
from students for improvement in future editions.
Our E-mail ID: cwfeedback@icfaiuniversity.in
II

INTRODUCTION
Participants in ICFAI University Programs are eager to apply theory to practice. They realize that
application orientation can enhance their learning and subsequent usage of management precepts and
practices. Picking out the principle behind real world events is critical to this learning. Towards this end
the institution has introduced the PEP Notes.
The PEP Notes (Practice, Experience and Perspective Notes) is a collection of annotative notes on
practices, experiences and perspectives from industry as appearing in articles fromreputed sources such
as Harvard Business Review, Economist, Mckinsey Quarterly, Accenture, Bain Consulting etc.
Practice : Organizations follow practices based on their past learning
Experience: Based on changing context, they face fresh experiences
Perspective: Organization learns from the experience and the practice to gain fresh perspective
These notes connect the three dimensions of the real world to key concepts in the subject. Each note is
brief – about one to two pages and is adapted from the article referred to in the note. The concept
underlying the note is highlighted in a box. The concept is also connected to the article through an
introductory abstract in a boxat the beginning.
The learning outcomes expected are:
1. Real world Application based approach significantly enhances absorption and retention.
2. Exposure to the current trends, practices with illustrations connect back to theory.
3. Thoughts from leading sources.
The PEP Notes may be used for Assessment.
iii

CONTENTS
Block I: OverviewofHuman Resource Management 6
1. Innovative and Unconventional HR Policies and Practices 7
2. Great Place to Work 8
3. Employee Engagement – The Case of Rackspace 9
4. Multigenerational Workforce- A HR Challenge 10
5. Culture of Continuous Improvement 12
6. The Talent Challenge - A Time for Extraordinary Leadership 13
7. HR- Target Operating Model 14
8. Formal and Informal Organizations 15
9. Networking and Organizational Change 17
10. Lattice Organizations 19
11. Giving in Numbers and Employee Engagement 21
12. Requirements for Delivering both Business and Social Value 24
13. Leadership Accountability 26
14. Lego’s Fall and Rise 28
15. Focused Company 30
16. Ferguson’s Style of Team Building 32
17. How Goldman Sachs Drifted 34
18. Performance Reviews- Doing away of Stack Ranking by Microsoft 35
19. High Performance Culture 37
20. Indispensable Managers and their Practices 39
Block II: Employment ofHuman Resources 41
21. Scaling Up for Success-The case of BuildDirect 42
22. Meeting Future Demands 43
23. The innovation Value Chain 44
24. Headhunters 46
25. IDEO’s Culture 47
26. Women in Leadership Roles- Hurdles 48
27. Unique Employee Onboarding 50
iv

Block III: Management and Development ofHuman Resources 52
28. Long-term Perspectives for Professional Advancement 53
29. Enhancing Workplace Productivity through MQ 54
30. Career Path for Top Executives 56
31. The Focused Leader 58
32. Performance Measurement in Hospitals 60
33. Strategic Planning at Thomas Nationwide Transport (TNT) 62
34. How to Manage Someone You Don’t Like 63
35. Challenges of Performance Management 65
36. Creating Spaces for Scalable learning 66
37. Measuring Learning Proficiency can aid Learning Organizations 68
38. Minimum Wage 70
39. Discussing with Employees on Pay Raise 72
40. Leadership Lessons from the Chilean Mine Rescue 73
41. Health and Safety for Knowledge Workers 75
42. Multinational Workforce Health 77
43. Leading during Extreme Times: Lessons from Abraham Lincoln 79
44. Health and Productivity 80
Block IV: Employee Relations 82
45. Agreement Reached in CWU-Royal Mail Dispute 83
46. Irking Issues at Workplace 84
47. FedEx –Ensuring Discipline through Surveys 86
48. The Culture of Overwork 87
49. Keys to Building Flexible Work Schedules 88
50. Optimizing Care in Osteoporosis: The Canadian Quality Circle Project 89
V

Block I:
Overview of Human Resource Management
1. Innovative and Unconventional HR Policies and Practices
2. Great Place to Work
3. Employee Engagement – The Case of Rackspace
4. Multigenerational Workforce- A HR Challenge
5. Culture of Continuous Improvement
6. The Talent Challenge - A Time for Extraordinary Leadership
7. HR- Target Operating Model
8. Formal and Informal Organizations
9. Networking and Organizational Change
10. Lattice Organizations
11. Giving in Numbers and Employee Engagement
12. Requirements for Delivering both Business and Social Value
13. Leadership Accountability
14. Lego’s Fall and Rise
15. Focused Company
16. Ferguson’s Style of Team Building
17. How Goldman Sachs Drifted
18. Performance Reviews- Doing away of Stack Ranking by Microsoft
19. High Performance Culture
20. Indispensable Managers and their Practices
6

Block I: Overview of Human Resource Management
1. Innovative and Unconventional HR Policies and Practices
Innovative and unconventional HR policies,procedures and practices,
many a time bring huge profits to organizations.
Netflix, an American provider of on-demand Internet streaming, moving from traditional to innovative
and unconventional and common sense based HR policies, procedures and practices could emerge
successful. In 2013, its stocks tripled, won three Emmy awards and its subscribers’ base grew to 29
million. The success story of Netflix speaks volumes about the company’s HR policies and practices.
• Relying on logic and
commonsense rather than on formal policies of hiring people who put company’s interests on top
• Instead of writing and enforcing HR policies, adopting adult like behavior, where open
discussions take place between bosses, colleagues and subordinates
• where employees show responsible behavior by saving money for the company- for instance,
employees themselves book their own travel tickets instead of relying on travel agents;
responsible spending on restaurants and buying gadgets required for the company
• Telling truth on performance reviews- and adopting face to face informal 360 degree reviews, and
having honest conversations by telling employees where they fit in
• Hiring people with right skills- for instance for storing massive volumes of files in DVDs, people
with experience in cloud technology are required
• Instead of offering annual bonuses,paying market-based compensation •
Offering equity compensation rather than stock options
• Making no special retention strategies as holding people who is not interested in the company is
no good HR policy
• Maintaining punctuality and never delaying meetings
• Managing expenses logically
• Opening bank accounts forhourly workers also
• Building great teams as great teams accomplish great work and making every employee
understand high performance work culture.
By adopting good HR policies Netflix could emerge successful.
HR policies and practices are guidelines for management on how to treat and motivate employees
for high performance. Good HR policies keep the workforce satisfied and enhance employee morale
and organizational productivity.
Discussion Questions
1. Discuss the importance of HR policies and Practices in achieving organizational productivity
(Hints- Guidelines for motivating employees- enhance employee morale- leading to organizational
productivity)
2. Explain how Netflix could get huge profits through its innovative HR policies
(Hints- Relying on logic and commonsense- Responsible behavior from employees- Informal
Performance Reviews- Paying Market based compensation)
Source: McCord, P. 2014, “How Netflix reinvented HR”, Harvard Business Review, January/February, pp 70-76.
Unit/Section Topic Course
1.6 HR Policies and Procedures HRM
7
Innovative HRPolicies and Practices adopted by Netflix

PEP Notes: Human Resource Management
2. Great Place to Work
The List of Fortune 100 Best companies to work can indicate effective HR Policies and
Procedures and suggest the importance of aligning HR to strategy.
What makes employees to consider workplace as a great place to work? Organizations are realizing the
importance of aligning HR policies and procedures with organizational strategies for building their
image. Every organization probably aspires to enter into the list of Fortune 100 Best Companies to Work.
A great place to work is one where management and employees are happy and feel that they are mutually
benefitting with each other’s contribution and where employees are proud to work.
Fortune Partners with the Great Place to Work Institute annually conduct a Survey in Corporate America
to pick 100 best companies to work.
The Top 10 Best Companies for 2013 are:
Rank Name of the Company
1 Google. Inc
2 SAS
3 CHG Healthcare Services
4 The Boston Consulting Group, Inc.
5 Wegmans Food Markets, Inc.
6 NetApp
7 Hilcorp Energy Company
8 Edward Jones
9 Ultimate Software
10 Camden Property Trust
Methodology used for selecting Best Companies:
More than 277,000 employees from 259 firms participated in the survey this year. The eligibility criteria
for participating in the survey are: 1) the company should be 5 years old, and 2) the company should
have more than 1000 US employees. Data was collected through two questionnaires, one called Trust
Index Survey and the other Culture Audit Survey. The Trust Index Survey questions related to
management’s credibility, job satisfaction and camaraderie. Two thirds of the score is based on this
survey. Questions on Culture Audit Survey included on Pay and Benefit programs, Hiring practices,
Methods of internal communication, Training programs, Recognition programs and Diversity efforts.
One thirds of the score is based on this survey. Ranking of companies is done on the basis of overall
score obtained by each company.
HR policies and procedures refer to the set of guidelines, which determine the way in which
employees should be treated in an organization. They are based on the objectives and culture of the
organization and the external environment. Good HR policies enhance the image of the company.
1. What are the criteria for determining workplace as a great place to work?
(Hints-Aligning HR policies and procedures-Organizational image- employee satisfaction)
2. Explain the methodology used for selecting best Companies by Fortune Partners
(Hints- 5 year old companies with more than 1000 employees- Index survey-Culture Audit Survey-
Ranking of companies on the basis of scores obtained from the surveys)
Source: Christopher Tkaczyk .2014, “ 10 Great Workplaces for Millennials”, Fortune, 15 May 2014
1.6 HR Policies and Procedures HRM
8

3. Employee Engagement – The Case of Rackspace
Employee engagement is one of the important challenges faced by HR
professionals worldwide.
Employee engagement is crucial for the growth of organizations, but for many companies and HR
professionals worldwide, it remains a challenge as observed from the startling findings of Bain &
Company in association with Netsurvey.
Their findings show:
1. Employee engagement scores are low for experienced employees.
2. Employee engagement scores are low for front line employees.
3. Employee engagement scores are the lowest for sales and service employees, who have the most
interactions with customers.
The experience of Rackspace Company, which is listed in Fortune's list of 100 Best Companies to Work
For, speaks a totally different version. Rackspace, the global leader in hybrid cloud and founder of
OpenStack, based in Texas, has highly engaged and motivated employees with abundant customer loyalty
and support. This is mainly because Rackspace invests heavily in creating a culture of employee
engagement.
The reasons for the success ofRackspace are:
• Line Supervisors involve directly with employees in engaging themand employee engagement is top
priority for them.
• Supervisors are trained to handle sensitive issues and win the confidence of employees by
highlighting the importance of their contributions.
• Supervisors try to understand the pulse and views of employees through regular, frequent and short
surveys that help in improving customer satisfaction.
• They get insights from the employees on improving business and building the ranks of customer
promoters.
The only way to have high employee engagement is to encourage constant dialogue and close interaction
between the employees and supervisors with support fromtop executives. Highly energized, enthusiastic
and creative employees can do wonders to organizations as is seen in Rackspace.
Acquisition, developing and retaining employees has become a big challenge to HR professionals.
Employee engagement is another important challenge faced by HR professionals in the present
scenario. Globalization and liberalization have changed the business activities and in the process HR
professionals have to cope up with the market demands and challenges in order to remain competitive
in the knowledge society.
1. Discuss employee engagement as a challenge for HR professionals
(Hints- Employee engagement essentialfor organizational growth- low engagement of employees-
impact of globalization and liberalization)
2. Explain how Rackspace could engage its employees successfully
(Hints- Direct involvement with line supervisors-Training to handle sensitive issues—constant
dialogue and interaction between employees and supervisors)
Source: Rob Markey. 2014, “The Four S ecrets to Employee Engagement”, Harvard Business Review,
January/February.
Unit/ Section Topic Course
1.9 Challenges to HR Professionals HRM
9

4. MultigenerationalWorkforce-A HR Challenge
Managing a multigenerational workforce is a challenge for
HR professionals in India.
Workplace diversity has become an increasingly important part of organizations, consisting of diverse
socio-economic and cultural groups. Pooling the diverse knowledge and skills of culturally distinct
workers together strengthens companies. More than half of the population in India is less than 25 years
and by 2020 the average Indian will be of 29 years age. These changing demographic trends pose unique
challenges to companies also. It became a necessity for organizations to have multigenerational
workforce and managing them and bringing unity in this type of diversity is the biggest challenge.
Having multigenerational work groups means companies have to adopt techniques to understand the
needs of the current generation people in twenties and accommodate them with higher age group people.
Needs of20-30 group people:
• Freedom and empowerment are the top most priority for youth-issues emerging out of this
priority are vocabulary, dress-code,flex-time, work-life balance, use of social media and the like.
• Curious to know what and why they are doing and the outcomes.
• Want to derive excitement from work with high aspirations and growth expectations.
• They come from affluent background and are independent and aware of global opportunities,
because of which they may have decreasing loyalty towards the companies and increasing focus
on short termgoals and the traditional type of leadership control is unacceptable to them
A mismatch between the people who take decisions in a traditional way and those who have to
implement the decisions is widening. Deloitte and the Confederation of Indian Industries Report titled
‘Gen Next Workforce 2013’ says if these needs are not met ‘attracting, engaging and retaining’ th e
youth would be the biggest challenge.
Management of workforce diversity:
• Constant dialogue and involving youth in decision-making
• Emphasizing commonalities and deemphasizing differences in age and experience
• Senior employees to be more open and make adjustments
• Providing high clarity, sharp direction, in-depth job knowledge and abundant skills to younger
employees
• Keeping the youth informed of latest developments
• Make them get excited and involved in work, giving variety in roles and functional areas
• Building a ‘salsa’ culture- where everyone without losing one’s identity, work for common goals.
IBM allows its workforce to use their personal devices and developed internal social networking
platform through which employees can interact with each other freely and the new generation identify
so much with this network.
At HCL, training is provided outside of work, which is preferred by youth.
Asia Pacific region firm Caterpillar encourages supervisors and managers to get to know and
understand the aspirations of employees better.
Diversity at workplace has become a part of corporate culture and companies have to make necessary
adjustments to meet the challenges without losing its core values.
10

HR professionals face constant challenges as their responsibilities have gradually become broader
and more strategic. Workforce diversity is one of the most important challenges to HR professionals.
The HR managers have to adopt proactive strategies which help them to take appropriate actions to
face the emerging challenges.
1. What do you understand by multigenerational workforce diversity?
(Hints- Demographic trends- understanding and meeting the needs of the needs of 20-30 group-
Managing workforce diversity)
2. Write some corporate workforce diversity initiatives taking examples from IBM, HCL and
Caterpillar
(Hints- personal devices- internal networking- training outside of work)
Source: Amit K. Nandkeolyar. “India’s New HR Challenge, Managing a Multigenerational Workforce”,
Knowledge@wharton, February 2014.
1.9 Challenges to HR Professionals HRM
11

5. Culture of Continuous Improvement
Better HR Policiesand Procedures can lead to quality improvement through a
culture of continuousimprovement.
HR policies and procedures are derived from the strategic business objectives and reflect the culture of
the organization. Though important, neither advanced technology nor best practices alone help in
attaining quality improvement in organizations. The most important thing for an organization for
enhancing its credibility is to adopt culture of continuous improvement. What then is this culture of
continuous improvement? George Halvorson, the CEO and Chairman of Kaiser Permanente, a large non -
profit hospital in U.S.A. discusses in this article, how by instilling a culture of continuous improvement it
could receive 5-star ratings in seven out of eight regions.
A culture of continuous improvement is wherein individuals grow, learn and contribute to the overall
goals of the organization. Through ongoing communication, information sharing, and adopting
appropriate assessments and rewards, individual employees and groups can achieve personal and
organizational goals.
Some of the measures adopted by Halvorson in his hospitalare:
1. If his employees know a way to do something better, they would take the initiative to point it out.
When a nurse in the North West region insisted for replacing the old obsolete method with an
automated, error-free insulin drip calculator, it was implemented by taking her suggestions.
2. They work on a strong sense of ‘us’, staying unified culture.
3. They know that small improvements compound
Kaiser Permanente, by adopting a culture of continuous improvement, had the lowest number of pressure
ulcers (less than 1%) and received top quality scores in 29 categories.
Quality improvement focuses on the improvement of a company’s quality of products and services
to survive in highly competitive markets. In order to achieve excellence in quality, all the employees
and top management of a company should be committed to the concept of quality. A culture of
continuous improvement helps organizations to improve their quality to a great extent.
1. What do you understand by culture of continuous improvement?
(Hints- ongoing communication-information sharing- adopting appropriate assessments and records)
2. How could Halvorson achieve quality improvement in the hospital through continuous
improvement?
(Hints- taking inputs from employees- sense of we-feeling- concentrating on small improvements)
Source: George Halvorson, “The Culture to Cu ltivate”, Harvard Busi ness Review, July 2013
1.9.2 Quality Improvement HRM
12

6. The Talent Challenge - A Time for Extraordinary Leadership
Talent Management is an important function of Strategic Human Resource
Management.It can pose challenges to strategy execution for leadership.
The focus of talent management is on the four functions of HR, that is, to acquire, develop, motivate and
retain talented employees in the organization. A talent management strategy needs to be linked to the
business strategy lest it poses challenges to strategy execution for leadership.
The PWC 16th Annual Global CEO Survey on ‘The Talent Challenge’ conducted 1330 interviews with
CEOs in 68 countries during 2012. It also solicited detailed views from 33 CEOs. It was felt that the trust
between the companies and stakeholders is eroded over the past few years and something needs to be
done to rebuild the trust. It was also felt that it is essential to refocus on the fundamentals of talent
management-attracting and retaining the best people, organizing them in the most effective way, creating
a culture that encourages the best from them and motivating them to give their best. It requires
extraordinary leadership to tackle these issues.
• Most CEOs are concentrating their operations in the locations where they already have
operations.Only 8% plan to grow new operations in foreign markets.
• 70% of CEOs are planning cost-cutting measures in the coming year. However, only 23% of
them plan to cut headcount as CEOs are aware that there is great talent shortage.
• Skill shortage is the greatest concern for CEOs.
• CEOs are aware of the importance of employee engagement and how talent development
programs help to support and improve engagement, but 66% CEOs admitted that their staff
weren’t actively engaged in decision- making.
• CEOs recognize that employees want to work for an organization that makes themproud as 56%
employees consider leaving an employer whose values no longer met their expectations.
• 77% CEOs are ready to change their strategies for managing talent in 2013.
• CEOs know that the trust between organizations and customers, stakeholders and employees is
very important-57% CEOs plan to focus on CSR related activities.•69% CEOsadmit tedthatpayisani mportantpart ofmotivatingandr etai ningemployees.TheKeyFi ndingsoft heSurveyare:
The survey highlights that a strong and exceptional leadership is required for the growth of
Strategic HRM refers to the optimum utilization of human resources to achieve the set goals and
objectives of the organization in the business environment.These can be achieved, only when they are
properly aligned with the organizational strategy and with the strategies of other functional areas like
finance and marketing.
1. Explain talent management as a function of Strategic Human Resource Management
(Hints- acquisition, development, motivation and retention of talented employees - linking with
business strategy)
2. Analyze the importance of leadership for the growth of organizations as found in the PWC survey
(Hints- growing new operations-cost cutting measures- employee engagement- CSR activities –
managing talent
Source: Raul Baltar Estevez, “TheTalent Challenge, A Time for Extraordinary Leadership, The PWC Annual
Global CEO Survey”, PWC.COM, 2013.
1.10 Strategic Human Resource Management HRM
13

7. HR- Target Operating Model
To survive and sustain in competitive market conditions,
structure of the organization is very crucial.
Organic organizational structures, characterized by flexibility, decentralization and low formalization are
more suitable for operating in the present day dynamic environment. HR functions need to be
reorganized from time to time to meet changing market demands and fluctuating global governance
models.
E.ON, one of the largest power and gas companies in Germany with more than 72000 employees
reorganizes its HR functions into a new target operating model (HRTOM) to meet the high cost pressures
and changing market conditions and to increase its efficiency levels across all units.
HRTOM introduced three distinct roles for all global and regional units:
• HR Centers Of Competence (COCs)-responsible for governance and HR policies
• HR Business Service Center (BSC)-provides clearly defined global HR services
• HR Business Partners (BPs) coordinate between COCs and BSC and provide coaching and
guidance.
The new model HRTOM supports employees in several ways:
• Training the Trainers by conducting workshops
• Collocation of COCs to promote interaction among HR experts
• Focus on value creation in the BSC in recruitment and other HR activities
• Careful selection of BPs
• Clearly defined governance model for defining the roles and responsibilities of all the
components of HRTOM
E.ON by implementing this new model HRTOM has significantly reduced costs and created
prerequisites for qualitative delivery of global services.
For increasing the efficiency levels of organizations, they need good structures which can deliver good
HR services.
The organizational structure is primarily concerned with the allocation of activities or tasks and
delegation of authority. An organization can be structured in many different ways, depending on their
objectives- formal and informal; tall and flat; mechanistic and organic. New models are emerging and
HR managers have to work effectively and efficiently to cope up with the demands.
1. What are the characteristics and advantages oforganic structures?
(Hints- flexibility-decentralization- informality- meet changing market demands and global
governance needs)
2. Explain the new target operating model (HRTOM) initiated by E.ON
(Hints-Three distinct roles- COC, BSC BP- Training the trainers- Collocation of COCs- value
creation in BSC- Careful selection of BPs- clearly defined governance model)
Source: Rainer Strack, “Crea ting People Advantage 2013”, The Boston Consulting Group,
2.3 Organizational Structure and HRM HRM
14

8. Formaland Informal Organizations
Formal and Informal Organizations are complementary and interdependent and
success lies in finding the balance between the two.
Formal and informal organizations are complementary and interdependent.Harnessing the power of both
isn't about choosing one over the other, but finding an effective balance between the two.
This article highlights three important aspects offormal and informal organizations:
1. Ignoring the Informal Is a Frequent, and Frequently Fatal, Mistake- The importance of
informal organizations is poorly understood, poorly managed and often disregarded as
inconsequential in many corporate settings. Sometimes they prove to be so powerful that any formal
structure could accomplish. The presence of informal organizations is seen in all high performing
organizations. The challenges faced by 21st century organizations could well be handled by
leveraging both the structure of the formal and the power of the informal and bridge the gap between
the vision and performance of the company. For instance, in redesigning an organization, the plans,
communication processes and new policies framed by formal structures are as important as the
informal aspects like the fears, concerns, motivators and networks. Successful transformation in
companies takes place if both are addressed equally.
2. Knowing Both Sides of the Coin- One has to know the strengths and weaknesses ofboth the
systems for bridging the gap.
Weaknesses of formal Structures Weaknesses of Informal Structures
Fails if informal elements are not incorporated Can be intractable
Risk of human error Difficult to manage
Inconsistencies often occur No certainty that it will work
Small deviations lead to costly errors Sometimes feel uncomfortable and intimidating
Strengths of Formal structures Strengths of Informal structures
Illustrate the official structures of power and Complex web of relationships, influences ,
paths of decision-making interactions and judgments
Creating Efficiency Motivating employees
Clarifying authority Making changes stick
Communicating priorities Communicating information quickly
Aligning employee behavior with company’s Engaging employees in collaborative work
common objectives
They can get things done They help in getting things done in a better way
1. Examples of the Formal and Informal in Action: Companies of all sizes and shapes need to know
when to take advantage of both. The examples cited in the article show that formal and informal
organizations are complementary and also work independently and balancing both will lead to
success of the organizations.
1. Starbucks: Empowering Employees to Improvise Within Structure-Starbucks Corporation is
an American global coffee company and coffeehouse chain based in Seattle, Washington.
Starbucks is the largest coffeehouse company in the world, with 20,891 stores in 62 countries,
including 13,279 in the United States.
Howard Schultz, the company's former CEO and current Chairman, has done an excellent job of
building and fostering the informal organization, but he also recognizes that the formal element
plays a key role. He said “You can't grow if you're driven only by process, or only by the creative
spirit. You've got to achieve a fragile balance between the two sides of the corporate brain.”
15

2. eBay: Recognizing the Right Time to Reinforce What's Right- eBay Inc. is an American
multinational Internet consumer-to-consumer corporation, headquartered in San Jose,California.
eBay's business is built on its own enormous informal community of over 200 million buyers and
sellers who exchange goods and money to the tune of close to $50 billion a year. eBay maintains
a light touch in monitoring and enforcing ethical behaviors in its customers. But CEO Meg
Whitman recognized that some formal mechanisms were needed to protect both the vast majority
of eBay-ers who were good-willed as well as the health of the company.
3. Bell Canada: Accelerating Change by Building Pride- Bell Canada
(commonly referred to as Bell) is a Canadian telecommunications and media
company headquartered in Montreal, Quebec.
Michael Sabia, the CEO of Bell Canada, made the decision to harness the power of the informal
organization when he needed to help his employees embrace vital changes in strategy and
structure. The combination of the two sides of the coin - the formal and the informal - has created
a vibrant community of people who care about the organization and has made a fundamental
change in the way people work.
Most effective and sustainable solutions arise by understanding what the formal and informal structures
are good at and what their limitations are. One cannot choose one over the other, but balancing both will
harness progress.
Formal and informal organizations co-exist in every organization. They define the path of
communication and method of sharing information and are part of the whole organization. While a
formal organization is a fixed set of rules of intra-organization procedures and
structures, an informal organization is formed by the ad-hoc and random collection
of employees who come together in an informal environment and share common
interests.
1. What are the strengths and weaknesses of formal and informal structures?
(Hints- formal strengths- efficiency, prioritized communication, clarity in authority, weaknesses-
risk, inconsistencies, costly errors; Informal Strengths- employee motivation, quick communication,
collaborative work, weaknesses- intractable, difficult to manage, no certainty, uncomfortable and
intimidating)
2. Show that formal and informal organizations are complementary, taking examples from Starbucks
and e Bay
(Hints- balancing both lead to success-Starbucks-formal structure with informal processes; e Bay-
informal community- ethical behavior- formal mechanisms)
Source: Jon Katzenbach. 2010, “Informal organization”, The Katzenbach Center, 2010.
2.4 Formal and Informal Organizations HRM
16

9. Networking and OrganizationalChange
Informal networks can help transform public healthcare.
While transforming organizations, resistance to change is common. Kurt Lewin describes how difficult it
is to bring in change in the desired direction. He explains several ways to overcome resistance to change.
Julie Battilana and Casciaro, associate professors at Harvard Business School say that networking is
crucial in transforming workplaces.
UK’s National Health Service (NHS), a large government run institution could easily bring more than
100 changes through the efforts of just a clinical manager. The secrets behind the success story are:
• Informal networks of the change agents
• Disconnected groups bridged by people
• Change agentsbeing close to ‘fence-sitters’
This is true for many otherorganizationstoo.
It is clear that the role of change-agents is very important in bringing change. It is essential to know the
techniques they use.
Informal connections: In every organization along with formal authority co-exists informal connections,
which plays a vital role. Research shows that it is not necessary to be on top positions, more than that it is
necessary to have good networking relations with influential people.
John, a change agent in NHS encountered a lot of resistance when he wanted to set up a nurse-led pre
operative assessment service. But, Carol, a well-respected nurse, and on whom many colleagues
relied, could assist John in bringing the change.
Similarly, Gustaf, a senior equity partner at a U.S. Law firm, was trying to create client-file partner
system, but he could not get support from the lawyers in the firm. But his associate Penny could
quickly succeed because of her influential informal networks. Many colleagues respected her and
sought her advice on many occasions.
In both the cases,Carol and Penny could initiate changes because ofthe networks they had.
• Types of networks: Cohesive networks are those in which people are connected to the change agent
and also interconnected with one another. In bridging networks people are not connected to each
other except to the change agent. A cohesive network works well when the changes are not
divergent, where dramatic changes are not required. Because of the trust and mutual support the
members accept the changes. But a bridging network works well in non divergent changes, where
dramatic changes are required and the existing norms are replaced. So, the types of networks
influence the types of changes.
• Types of people: We find three types of people- endorsers (who are positive about the change),
resisters (who oppose the change) and fence-sitters (who think about the pros as well cons of
change). Being close to endorsers does not make any impact in divergent and non-divergent changes
because, for them issue is important than the closeness of the change agent. But closeness is
important with fence-sitters because they can go either way. Change agents must closely watch
resisters and infer their attitudes. Keeping resisters away works well if the change agent is
determined and confident about the result of change. Influencing fence-sitters, help in bringing
change. They are like ‘cats on the wall’ , who may jump any side, any time.
Networking, no doubt plays an important role in transforming organizations. More than formal authority,
though important, informal networks are significant. Change agents need to consider types of networks,
types of people and types of changes while bringing change.
17

Informal organizations exist within the organization. An informal organization is a network of
personal and social relationships, which is formed by the ad-hoc and randomcollection of employees
who come together in an informal environment and share common interests, ideas and opinions. They
perpetuate the cultural and social values that the group holds dear.
1. Discuss the role of informal networks in transforming organizations
(Hints-Types of networks- Types of people)
2. What is the secret behind the success story ofUK’s National Health Service?
(Hints- informal networks- disconnected groups bridged by people- closeness to fence-sitters)
Source: Battilana, Julie, and Tiziana Casciaro, “Th e Network Secrets of Great Change Agents”, Harvard Business
Review, July–August 2013, pp 62–68
2.4.2 Informal Organizations HRM
18

10. Lattice Organizations
Many organizationsare changing their structures and new
organization structures are emerging in modern days.
Valve Corporation, a videogame maker in Bellevue, founded in 1996, is one of the many Lattice
organizations in USA. It is a flat organization with no hierarchies in positions. It has an open system of
organizational structure where management functions are performed through self-directed and self-
managed work teams. New projects are taken up depending on the demand.
Application
• In Valve Corporation, hiring, firing, pay and working day are all determined by peers. The pay
which is confidential is calculated by the average rankings given by peers. Hiring and firing are done
by teams.
• There are no promotions in Valve Corporation but the new projects determine the hikes or lesser
economic gains.
• Someone or the other in the team leads the projects and emerges as de-facto manager and if it is not
led by anyone,it implies that the project is not worth taking.
• Similarly, marketplace determines the continuing or scrapping of the products,especially when there
is disagreement among employees.
With so much of autonomy, Valve Corporation is able to work effectively and all the employees feel
empowered.
Benefits of Lattice Organizations
• The employees of lattice organizations are highly motivated and bent upon bringing results.
• They are committed to their work and are less stressed and have a feeling of ownership to their
companies.
• They have obviously a very flexible work structure with great autonomy and independence to work.
• They tend to support each other and collectively perform with team spirit.
• They collaborate in their work with otherteams of the organization.
• Somebody or the other takes the leading role and others follow without any difference in status.
• Everybody’s performance is equally valued. Since performance is evaluated by all peers, there are
no difficulties in fixing rewards.
Bottlenecks in Lattice Organizations
• Some scholars,no doubt are skeptical about the working of lattice organizations.
• They say chaotic conditions prevail as there are no bosses.
• There is no delegation of authority, no commands and no controls.
• It is also difficult to identify poor performers and offers no career paths to good performers.
• Decision-making and hiring takes longer time resulting in low productivity.
• Since the hiring and firing are done by peers, getting right people may become difficult.
• Group effectiveness possibly may shrink.
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Concept
• Organization structure in Lattice organizations is open and flat.
• There are no bosses in lattice organizations.
• The traditional superior-subordinate hierarchical organizations are criticized for many reasons and
are replaced by innovative and collaborative organizations.
• Everyone is equal and no one is in charge, a place where employees vote on who gets a promotion
and how much people should be paid.
• It may be concluded looking at these organizations, that this approach may be applied generally to
smaller organizations within low volume factories with a relatively small number of employees.
• Anotherimportant dimension is that the employees should be well-trained and should be able to
perform multiple tasks as there are no middle management employees.
• Mostly,this approach works well with self-managing teams.
Discussion
With changing times, new and innovative practices are emerging and lattice organization structure is one
of them, without bosses. Workplace customization and workplace flexibility create productive
workplaces. Autonomy with checks and balances leads to empowerment and effectiveness.
Let chaos reign, then rein in the chaos-Former Intel CEO- Andy Grove
Organization structure refers to the defined relationships among the elements of an organization.
While a tall organization is characterized by a number of hierarchical levels but a narrow span of
control, a flat organization is characterized by fewer hierarchical levels with a wide span of control.
New organizational structures are emerging like that of the lattice organizations.
1. Looking at Valve Corporation, can you explain the performance evaluation systemin Lattice
Organizations?
(Hints-Hiring, firing, pay and working day determined by peers-no promotions, new projects
determine the hikes-no fixed leader)
2. Evaluate the working of lattice organizations
(Hints-workers highly motivated- committed- flexible work structures-collaborative work; chaotic
conditions-no delegation of authority, performance evaluation difficult- shrinking group effecti
Source: Rachel Emma Silverman, “Who’s the Boss? There Isn’t One”, Wall Street Journal, June 2012.
2.5 Tall and Flat Organization Structures HRM
20

11. Giving in Numbers and Employee Engagement
Corporate social responsibility can reinforce organizational values critical
for long term organizational development.
Giving in Numbers-2013 features the research findings of Committee Encouraging Corporate
Philanthropy (CECP) in association with the Conference Board. A total of 240 leading companies,
including 60 of the largest 100 companies in the Fortune 500 participated in this year’s survey. The main
purpose of this study was to know how companies are meeting societal challenges and corporate social
responsibilities and the patterns of giving. It speaks volumes about the way in which corporates maintain
business values. The annual Giving in Numbers report is based on data drawn from the Corporate
Giving Standard (CGS) benchmarking tool. In this article, an attempt is made to highlight how
companies are engaging their employees.
The 2008 and 2009 recession affected business communities worldwide. Slowly from 2012,
improvement is seen and the 2012 trends show that majority of companies (59%) are giving more than
they were before the recession. The value of contributions across 240 companies was more than $ 20.3
billion in cash and kind in total giving.
Corporate Giving Trends:
1. Giving between 2007 and 2012- increased for 59% companies, decreased for 38% and remained
static for 3%- That means giving increased despite slow economic recovery.
2. Non-cash contributions accounted for more than 95% of the aggregate giving increase between 2007
and 2012. Non-cash giving include product donations, pro bono services and others. This means that
companies tightened cash donations due to the effect of recession.
3. While 42% of companies expect giving to remain static in 2013, 40% expect increase and 18%
decline in giving in 2013.
Employee Engagement: Companies engage their employees not only in their specified roles but also in
• Matching-gift Programs- Under this program, companies match employee donations of money or volunteer time to
eligible non-profit organizations. The median level of matchinggift rose from $3.7 million in 2007 to $ 4 million in
2012. Matchinggifts comprised a median of 12% of a company’s total givingin 2012, of them energy companies
provided the highest level (17%), followed by IT companies(16%).variousgivinginprograms. The following list
includes various employee engagement programs:
Matching-gift programs include:
• Year Round Policy (giving that occurs year-round and not as part of a specific campaign)
• Workplace Giving Campaign (fundraising drives that occur for a defined time period)
• Dollars for Doers (contributions in recognition of a certain level of employee volunteer service)
• Disaster Relief Matching (Benefiting disaster related crisis relief, recovery, building and/or
preparedness. Disaster Relief Matching-gifts are typically focused on earthquakes in Japan in 2011
and Hurricane Sandy in 2012.
Matching-gift programs’ Allocation in Caps in Matching-gift programs:
2012,Average Percentages:
• Year Round Policy (41%) • Year Round Policy-Ranged from $300-to $50000
• Workplace Giving Campaign (39%)
•
per employee
• Dollars for Doers (9%) Workplace Giving Campaign-$5000-$15000 per
•
employee
Disaster Relief Matching (6%)
• Dollars for Doers--$500-$750 per employee
• Others (5%) • Disaster Relief Matching- $5000-$6000 is
•
common
Others (5%)
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• Employee volunteerism- Employees are engaged as volunteers and employee volunteerism
programs are planned and managed efforts that seek to motivate employees to volunteer under their
employer’s sponsorship and leadership. In 2012, 188 companies participated of which 60% offered
both domestic and international programs and 40% offered only domestic programs. 70% of
companies in the matched set offer paid release time programs.
Manufacturing companies provided the majority of non-cash contributions through product
contributions (82%).
The most successful programs are:
• Paid Release Time- This program allows employees to volunteer with a 501 (c) (3) organization (a
charity or public service entity that qualifies for tax exemption) during a normal paid work schedule.
Employer incurs costs for the time they spend away from the office.
• Dollars for Doers - Contributions in recognition of a certain level of employee volunteer service
• Company-wide Day of Service- Company sponsored community activities
• Employee-Volunteer Awards- Designed to improve employee morale, increase retention and assist
recruitment for high performing job candidates
• Flexible Scheduling- Working schedules are not fixed
• Team Grants- Grants given to successfulteams
Domestic (171 companies) International (93 companies)
Paid Release Time ( 75 companies) Paid Release Time (41)
Dollars for Doers (72) Company-wide Day of Service (37)
Company-wide Day of Service (71) Employee-Volunteer Awards (31)
Employee-Volunteer Awards (50) Flexible Scheduling (26)
Flexible Scheduling (39) Team Grants (24)
• Pro Bono service- Pro Bono service is a type of employee engagement that helps marginalized
communities and under privileged population with the unique skills and resources of the employees.
It is recorded in the CGS Survey as a non-cash or in-kind contribution.
Trends in Pro Bono Service
• Pro Bono programs grew from 32% in 2008 to 50% in 2012.
• Companies aim to support communities with unique skills and resources of workforce.
• Non-cash giving is defining the new corporate societal engagement.
• Philanthropic Leverage- Philanthropic Leverage is fundraising by companies. Philanthropic effort
involves raising funds from employees, customers, suppliers and/or vendors which are reported
separately in total giving.
Philanthropic Leverage
• Fundraising from employees amounted $ 747, 725 in 2012
• Fundraising from non-employees amounted $2.33 million
• Non-employees include customers, vendors,suppliers
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In spite of recession, many companies have undertaken philanthropic activities and fulfilled their social
responsibilities, as is shown in the data, 59% companies increased their giving in from2007 to 2012. The
predominance of non-cash (products and skills) contributions shows their desire for helping the
communities and also engaging their employees in efficient manner. Employee engagement activities
clearly demonstrate the commitment of the corporate to meet societal challenges and fulfill their social
responsibilities. The main purpose of business is not only making profits but also serve the society in a
productive manner by engaging their employees in various activities. The utilization of their employees
in a useful way speaks a lot about business values.
According to Edward B Flippo, responsibility refers to one’s obligation to perform the function
assigned to the best of one’s ability in accordance with the directions received. Responsibility,
authority and accountability are the three inter related concepts that have a bearing on corporate social
responsibility.
1. Describe various employee engagement programs as researched in ‘Giving in Numbers -
2013’ (Hints- Matching-gift programs- Employee voluntarism)
2. Analyze Corporate Giving Trends as per ‘Giving in Numbers-2013’
(Hints- Increased for 59%, decreased for 38%; non-cash contributions accounted for 95%)
Source: Michael Stroik, “G iving in Numbers 2013”, The Conference Board and CECP, 2013
2.6.1 Responsibility HRM
23

12. Requirements for Delivering both Business and SocialValue
Corporate social responsibility is no more a philanthropic activity,but a business
development need which contributes positively to the organization.
The important objectives of business are: maximization of profits, sales and revenue; increasing market
share and growth rate; avoiding risk for long time survival; and image building. But companies have
realized that they will be successful in realizing these objectives only when they meet to societal needs.
They consider this as their corporate social responsibility. Existing social problems hinder business
operations and opportunities for growth. Most of the companies have switched to ‘shared value concept’.
Michael Porter and Mark Kramer in their article ‘creating shared value’ point out that business is at its
best when companies innovate to meet society’s needs while building profitable enterprises.
Marc Pfitzer and others in their recent article in HBR ‘Innovating for Shared Value’ give several
examples of companies (from their research of the respective companies) that derived business value by
embedding social values.
Company Social value Business value
Dow Chemical Removed 600 million tons of trans fats Nexera sunflower and canola
and saturated fats from US diet. seeds-best selling products.
Nestle Helped millions of malnourished Turned to be a profitable business.
families by providing inexpensive
spices.
Novartis Provided essential medicines to 42 Became profitable after 31 months.
million people in 33000 rural villages.
Mars Transformed farms and Avoided cocoa shortages.
communities to Ivory coast.
Intel Trained 10 million teachers in the use of Became profitable business in
technology. education.
Becton Dickinson Protected millions of health workers by Resulted in $2 billion business,
creating needleless injections. accounting for 25% of company
revenue.
Vodafone Extended mobile banking services to 14 Company’s one of the best
million people in East Africa. offerings
According to them, companies rely on five reinforcing elements in creating shared value:
• Embedding a social purpose: Many companies are building large scale businesses on social issues.
While companies like Nestle, Unilever, Danone have made profitable business on health and
nutrition aspects, technology and telecommunication firms like IBM, Intel, Verizon have made
education and healthcare as their mission. Many companies are making profitable business on issues
related to Millennium Development Goals.
• Defining the social need: Many firms conduct extensive research on the existing social problems
like malnutrition, anemia, poverty and the like to understand the underlying social conditions and
how best to improve them along with good business.
• Measuring social value: To derive social and business benefits, they need to be monitored closely
through standard procedures. For instance, Coca-cola measures its initiatives for increasing
employability of low-income youths and young adults and increasing sales through company’s
distribution channels and brand awareness.
• Creating the optimal innovation structure: Avoiding risk is an important business objective. Care
needs to be taken for initiating business of social value in issues of financing, governance, managing
systems and location.
24

• Co-creating with external stake holders: Co-creation is involving all the stakeholders in all the
dimensions of the problem and designing and implementing solutions. Companies involve
stakeholders to understand the social needs and execute strategies for implementation.
Many companies are making profitable business by incorporating social values in their business,
combining their corporate social responsibility with business expansion.
Responsibility is a duty or obligation to satisfactorily perform or complete a given task.
Responsibility, authority and accountability are the three inter related concepts that have a bearing on
corporate social responsibility. When a responsibility is delegated, it should be accompanied with the
authority necessary to carry it out. Accountability refers to the employees’ answerability for the
performance of a task.
1. On what elements, companies rely in creating shared value?
(Hints- social purpose-socialneed- social value- innovation- stakeholder involvement)
2. Do corporate social responsibility and business expansion go hand in hand? Is so, illustrate with two
examples from the given case
(Hints-CSR, no more philanthropy- business value increases through social value- Dow Chemical-
Nestle- Novartis or any other)
Source: Pfitzer, M., V. Bockstette and M. Stamp,”Innovating for shared value”, Harvard Business Review,
September: pp 100-107, 2013
2.6.1 Responsibility HRM
25

13. Leadership Accountability
Organizationsbecome effective when leaders show accountability to
their actswhich turn like a snowball.
Transforming an ineffective leader to an effective leader is not an easy job. Peter Fuda and Richard
Badham in their Doctoral Research Project interviewed mainly seven CEOs to find the success stories
behind transforming themselves and their organizations as effective. They found seven important factors,
used as metaphors, of which they applied four metaphors to more than 10000 managers on four countries
to transform them into effective leaders.
The four metaphors are: fire, snowball, mask and movie.
Fire:
Fire represents ambition. To achieve something, motivation is required. Fire creates fear and this fear
initiates achievement. But the real motivator is aspiration. The authors find that sustainable change
requires the fire of a ‘burning ambition’.
One of the CEOs of the Research Project, Tim was desperate in 2004 to turn around his advertising
company. The fear in him was due to: Low profits, Employees turning around, Competitors gaining
ground, Insecurity about his leadership and deterioration in his health.
But the real fear-the ambition burning inside Tim was to ‘lead a big and authentic life’ and to push his
organization toward worthy social cause.
By 2011 with the burning ambition Tim could transform his company into an effective company by
winning a prestigious advertising award in the world.
Snowball:
Snowball represents accountability. When leader shows accountability by involving his subordinates,
they too get inspired and become accountable for their acts. The momentumof accountability turns like a
snowball to become effective.
Clyton, Managing Director of a German Company could transform his company by exposing himself
to the snowball technique. By encouraging his subordinates to step-up and take initiatives for
achieving his individual and organizational goals, Clyton could become successful as he
acknowledged his failings and motivated his subordinates to that end. If the teammembers along with
the leader take more initiatives and work in collaboration with accountability, success follows in
snowball technique.
Mask:
Mask represents authenticity. When leaders uncover themselves with true identity of themselves by
dropping their inner conflicts, they could emerge as successful leaders and enhance their relationships
and business outcomes.
Mike, the CEO of multinational IT Company was initially inconsistent with his behavior and used to
mask himself from his subordinates. Realizing his failings, he adopted more authenticity at work and
focused on core business values with empathy and connection towards his team members. Then he
could see his company’s profits rising and his effectiveness as leader enhancing.
Movie:
Movie represents evaluating one’s behavior and performance and making required amendments. Leaders
have to view and edit their performance to realize their vision.
Alan, the CEO of a German pharmaceutical company found that employee engagement was low and
financial performance in the company stalled. Initially all members were competing with each other.
After reviewing, he found that collaboration would lead to success, his company exceeded financial
targets and culture of the company changed to better and could win a prestigious Hewitt Best
Employers award.
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The authors experimented with these metaphors on all types of organizations and at all levels of
managers and could emerge successful in transforming them into effective organizations and effective
leaders. They conclude that to be an effective leader, one has to identify his burning ambitions, become
accountable to his actions, uncover the masks he possesses to represent his real picture and constantly
review and edit his performance like a movie director.
Accountability refers to the employees’ answerability to his/her superior for the performance of a
task when the responsibility and the authority to perform have been delegated to him/her.
Accountability is from the employee toward the manager, whereas responsibility and authority are
delegated by the manager to the employee.
1. What do you understand by accountability?
(Hints- employee answerability for the tasks performed)
2. What according to the authors of the case, are the essentialrequirements for transforming as
effective leaders?
(Hints- identifying burning ambitions- accountable to actions- depicting real picture- reviewing and
editing performance continuously)
Source: Fuda, P. and R. Badham, “Fire, snowball, ma sk, movie: How leaders spark and sustain change”, Harvard
Business Review, November 2011: pp 145-148.
2.6.2 Accountability HRM
27

14. Lego’s Fall and Rise
A firm’s position in the market is determined not only by the quality of its products and
services but also on its focus and control over its business.
Lego’s fall and rise story speaks about how the global toy industry with its ‘out of the boxthinking’ and
‘innovation binge’ became almost bankrupt and co uld once again rise to supremacy with ‘in box
thinking’ and turning to ‘innovation inside the brick’. The success behind the st ory is Lego’s creativity
and innovation coupled with focus and control in business.
Out of the Box Strategy Vs. In the Box strategy
• An expression that describes non- • An expression that describes conformal
•
conformal creative thinking
•
thinking
New Innovative strategies Traditional strategies
. . . This means that managers go beyond the normal
borders to get solutions or to solve problems. In the
case of Lego they shifted from excessive innovative
. . . methods and out of the box strategy and went back to
their traditional brick assembling toys.
. . .
Out of the Box expression is derived from the famous nine dot puzzle which asks for joining the dots in
four straight lines without lifting the pen when once started joining
David Robertson, the author of the book ‘Brick by Brick: How Lego rewrote the Rules of Innovation and
Conquered the Global Toy Industry’ writes about the transformation of Lego from a small company that
made wooden toys to a worldwide giant and a recovery from near bankruptcy to supremacy in global
market. Here goes the story.
The Lego Company: The Lego Group is a family-owned company based in Billund, Denmark, and best
known for the manufacture of Lego brand toys. The company was founded in 1932 by Ole Kirk
Christiansen. The golden period for Lego was from 1978-1993 where the company grew at 14% per year,
every year for 15 years.
Fall of Lego: It went through a decline when sales did not grow and costs rose during 1993-98 even
though it tried to triple its number of new toys. One reason for the decline it reached could be attributed
to the end of a natural growth cycle and the other is rise in the cost without changing sales. Company laid
off 1000 people. That time it was managed by Kjeld Kirk Christiansen, grandson of the founder Ole Kirk
Christiansen.
Importance and perils of Innovation: Looking at the losses he felt that he was not the right person to
lead the company and passed it on to a turnaround expert, Poul Plougmann. He embarked innovation and
experimented by introducing a lot of products, including Star Wars, Harry Potter and Bionicle. The
company tried to create whole set of complementary innovations that would reinforce each other. For
instance, Galidor toy had video games, TV show, telling the story behind the toy. Unfortunately, the TV
shows were so bad that Lego did not know how to make them. Harry Potter and Star Wars were
successes only for a short time as people lost liking for those toys when these movies were outdated. The
company tried to innovate in lots of ways and lost control of the innovation. Lego started losing money in
2003.
28

Rise of Lego: While other firms abandoned innovation, Lego continued in a different way. They shifted
from the ‘out of the box strategy’ to be back ‘in the box’ strategy. They went back to th eir old brick and
focused on police stations and trucks which their fans liked very much and they also profited from that
business. The importance and the dangers of innovation illustrate the story of Lego. Excessive innovation
bankrupted Lego. It could come back by adopting new strategies. The success of Lego lies in small
innovations and small ideas integrated well by focusing on what the customers wanted and needed. For
the past five years, Lego has sales growing at 24% per year every year and profits growing at 40% per
every year.
A firm’s position in the market is determined by the quality of its products and /or services. These
products and services are developed and delivered by the human resources. Employees and their
knowledge give the firm an edge over its competitors. Acquisition, dissemination and retention of
knowledge and managing knowledge workers have become the focus of Human Resource
departments. Many companies are taking up knowledge management initiatives so as to capture and
initiate changes the customer wanted in the products.
1. Explain the need for initiating changes in products to suit customer needs
(Hints-Focus on customers’ needs and wants-lead to growth-sales growth-image building)
2. Explain how Lego rose from its decline
(Hints-Small innovations-out of the box thinking-concentrating on customer needs)
Source: David Robertson, “How Lego clawed its way out of near Bankruptcy”, Knowledge @Wharton, 01 July
2013
2.8.1 Products and Human Resources HRM
29

15. Focused Company
The Focused Company by Mark Gottfredson illustrates how increased complexity of HR
activities is a big challenge to International Human Resource Management.
For an organization to develop, it needs to imbibe simplification and focus. Mark Gottfredson (2012)
says complexity in business is the biggest challenge faced by CEOs. To meet this challenge, companies
need to focus on their strategies, customers, products, organizations and processes and IT. Gottfredson
talks of ways to create a focused company by giving several examples of companies and their CEOs who
rose from losses to gains.
Focused Strategy
Alan Mulally, Ford’s chief executive transformed the company drowning in complexity into a focused
company. Ford which lost more than $2 billion in 2007 earned more than $20 billion in 2011.This is
mainly because Mulally adopted strategies of simplification and focus. Focused strategy implies
simplification in business and understanding the needs of its core customers and knowing which
products will most appeal and which are unnecessary. Ford could do this. Similarly, Jorgen Vig
Knudstrop, the CEO of LEGO, a famous Danish Toy Company believed in focused strategy and
simplification of business. As a result LEGO’s sales rose to 22% in 2009 and 37% in 2011.
Focused Customers
The second strategy for a company to be a focused company is to focus on its customers. Companies
need to know their core customers and their needs and eliminate those products which customers no
longer need. They need to simplify processes to make customer interactions easier and fas ter. An
Insurance Company in Asia Pacific region could identify the segments that were most important to
business through customer based approach. By applying simplification and knowing the customer
needs the company could realize 30% gain in efficiency.
Focused Products
The third strategy is to focus on its products by giving customers exactly what matters most to them
and trimming what customers no longer value because customers confronted with too many choices
walk away. Market demand pulls innovation. Companies have to add regularly new products, options,
features and line extensions. A computer manufacturer by moving fromgiving customized products to
preconfigured machines could help the company in reducing its product line and also made its
consumers happy.
Focused Organization
Focused organization designs its organizational structure to support critical decisions. The
organizational structure of an aerospace company requires 125 individuals and 709 interactions to
process for approving a contract change request. This complexity led to delay in taking decisions. By
simplifying its processes it could improve.
Focused Processes and IT
Focused company redesigns to maximize integrated process efficiency and aligns IT system with
business objectives. A chemical company by applying Lean SixSigma effort could become successful
and improve utilization by about 20%.
30

Complexity needs to be rooted out for building a focused company which requires commitment of time
and resources. If it is done the pay-offs would be significant and costs decline. Sales rise because
customers find it easier to buy. That is how organization development takes place and success follows.
The HRD of an organization operating in international markets has increased complexity of HR
activities like employee relocation and orientation, administrative and other support services for
expatriates, adherence to social and legal rules in the host nations, maintenance of relationships across
borders. Complexity in business is the biggest challenge faced by companies. To meet this challenge,
companies need to focus on their strategies, customers, products, organizations and processes and IT.
1. How can companies overcome the challenge of ‘complexity of businesses?
(Hints- Simplification- Focus on strategies,customers, products,organizations, processes and IT)
2. Discuss Alan Mulally’s strategies in transforming Ford into a focused company
(Hints- Focused strategy-customers-products-organizations-processes and IT)
Source: Mark Gottfredson, “TheFocused Company”,Bain and Company Publications, 28 June 2012.
3.5.1 Complexity of HR activities HRM
31

16. Ferguson’s Style of Team Building
Team building improvesand promotes stronger interpersonal relationships.
Team Building improves organizational problem solving and decision making abilities of team members.
It promotes effective interpersonal relationships and develops communications among members. Team
leaders have crucial role in developing teams. The important characteristics for team building are:
• Problem sensing
• Giving and receiving feedback
• Developing interactive skills and constructive behavior
• Follow-up actions
Sir Alex Ferguson, one of the greatest football coaches, retired in May 2013, after spending 26 seasons as
manager at Manchester United. He won more than double the number of titles as the most successful
English club manager. He was more than a coach as he played a crucial role in managing the entire club.
Anita Elberse, Harvard Business School Professor, with her student TomDye, who conducted a series of
in-depth interviews with Ferguson and observed him on many occasions, examines Sir Ferguson’s
management approaches. She particularly analyses his leadership qualities and teambuilding capabilities
in eight perspectives. What follows now are those eight approaches, demonstrating Ferguson’s
exceptional capabilities in developing work teams and team-building.
1. Developing young players- He felt that great clubs should have young players who need to be
trained to develop into successful players. He established ‘two centers of excellence’ for this purpose
and tried to give the young talent technical skills so as to make themwinners and better people. His
conviction was ‘building a club brings stability and consistency’. The famous football players, Ryan
Giggs, Beckham, Paul Scholes and Gary Neville were all the products of centers of excellence.
2. Rebuilding teams- Ferguson was well aware that in sports, age matters the most. Rebuilding the
teams is a continuous process as the cycle of a successful teamlasts at the most for four years. So he
concentrated on developing young players. He believed in moving out older players, though they
were great players and bringing in younger ones.
3. Setting high standards and holding everyone to them- Spreading work ethics and energy
throughout the club is his ambition. He felt that working hard is a talent and talented people must
work harder for showing others that they are star players and winners. His training sessions were full
of quality, intensity, concentration, speed and a high level of performance.
4. Not to lose control over the team- To maintain high standards, he always maintained control over
his team. He never hesitated to respond forcefully when players violated the standards set. For
instance, when Captain Roy Keane publicly criticized his teammates, his contract was terminated.
He believed that to maintain control responding forcefully and quickly is essential. Otherwise
situations go out of hand.
5. Match the message to the moment- Ferguson is known for his reputation in communication. He
had his own style of communication. He was tough and demanding in his communication. He was
insisting that players should act according to the need of the moment. Andy Cole used to say with
players ‘even if you lose, there is no problem with Ferguson if you gave in the best’. Some of his
communication types depict his talents and conviction in winning the game.
a. Post game messages-pointing the mistakes right after the game in the dressing room.
b. Pre game messages-telling about his expectations from players, mutual trust of the players, not
letting the mates down.
c. Half time messages- when winning, asking the players to concentrate on the game and not
getting complacent; and when losing correct them why they are losing and focus on their
strengths.
d. Training session messages-he felt that as a manager he must play different roles in different
times. He must act like a doctor, teacher or father depending upon the situation.
32

6. Prepare to Win- He always prepared his team to win and win every time, even at the advent of
adversaries. He encouraged the players with inspirational half time talks, and made players ready
when they entered the pitch, with confidence to play. When they were losing, the message was not to
panic but to concentrate and if necessary to take the risks and play aggressively as it makes no
difference to lose with 1-2 or 1-3 goals. When they were winning, the message was inspirational and
encouraging them to attack and asking them to be aggressive and systematic. Practice sessions are
always important for winning.
7. Rely on power of observation-He felt that there is lot to learn through observation. The world’s
best coach delegated training sessions to assistant coaches and he watched. By observing the
training, he was able to pick up much more in detail, change in habits, energy, mood, etc.
Observation is a best technique to gauge information. In his words ‘the ability to see things is the
key--- the ability to see things you don’t expect to see’.
8. Never stop adapting- Willingness to change is his important attitude. He used to take care of
minute things also and adapt to changes.When players were not exposed to sunlight, he used to give
them Vitamin D tablets, conduct Yoga classes for their fitness, hiring optometrist for players,
medical facility etc. He had a lot of confidence on his team members and that is how he used to
manage change by accepting it.
From these eight approaches, we notice important team building characteristics: Promoting young
players, continuous process of rebuilding teams, setting high standards, inculcating team spirit,
responding to the situational needs, achievement of organizational goals, learning through observation
and willingness to change. These eight approaches illustrate the importance of team building in modern
organizations. An effective team is one that contributes to the achievement of organizational goals by
performing the tasks under an effective teamleader. Ferguson proved to be an effective coach who could
see that his teamhad won several matches.
The HR manager should develop stronger relationships for realizing organizational goals and
inculcating them among employees. It is essential for HR managers of a global organization to have
awareness, tolerance and respect towards various cultures.
1. What is Team Building? How does it help in promoting interpersonal relationships?
(Hints- Problem sensing-feedback- developing interactive skills- follow-up-promotes interactive
relationships)
2. How did Sir Alex Ferguson demonstrate exceptional capabilities as team leader in team building?
(Hints- developing young players- rebuilding teams- holding everyone- control over the team- good
communication-prepare to win- good observation-willingness to change)
Source: Elberse, A. and A. Ferguson, “Ferguson's formula”, Harvard Business Review, October, 2013, pp 116-126
3.5.3 Stronger relationships HRM
33

17. How Goldman Sachs Drifted
Several IHRM factors contribute for the success/ failure of international organizations.
Excerpts from the talk between Justin Fox, editor of HBR and Steven G. Mandis, author of the book
‘What Happened to Goldman Sachs–An Insider’s St ory of Organizational Drift and Its Unintended
Consequences’.
Steven writes in his Ph.D dissertation on how organizations drift when they deviate fromprinciples with
special reference to Goldman Sachs where he worked for 12 years and later left the industry.
Goldman Sachs once was an organization with strong identity and its employees were like a family. They
were receiving a percentage of profits with good compensation structure. But such a tight band company
drifted due to several pressures-regulatory, organizational, technological and competitive economic
pressures. The regulatory pressure was high when commercial banking was separated from investment
banking. There was pressure for Goldman Sachs to do inves tment banking in large scale par with
competing banks like J. P. Morgan and Citibank. Competitors, who initially could go public with three
years profits, changed their IPO policies and practices and started going public even without having
profits also. When Goldman was a small private partnership, it had the freedom to select its clients. But
when it started growing, it had to take many risks in selection of clients and IPO policies. All these
pressures combined together forced Goldman Sachs to change its policies and procedures resulting in
diluting its basic principles.
When any organization dilutes its principles and brings forward changes to grow, though it may have
good market share, organizational failures do happen. The drift in the organization is difficult to
overcome, though not impossible. Management of drift without disturbing its core values and principles
is essential for organizational change.
IHRM has gained importance as a unique concept in recent times. The factors affecting IHRM are
national culture, political forces, economic forces, market forces, technology forces, legal forces and
corporate culture. In the case of Goldman Sachs, several IHRM pressures like regulatory,
organizational, technological and competitive economic pressures forced Goldman Sachs to dilute its
core principles resulting in organizational failures.
1. Explain the factors affecting IHRM
(Hints- national culture- political forces- economic forces- market forces- technology forces- corporate
culture)
2. What made Goldman Sachs to drift from its core principles?
(Hints- Regulatory, organizational, technological, competitive economic pressures)Source: Mandis, “How
Goldman Sachs Drifted”, HBR Blog Network, October 2013
3.7 Factors affecting IHRM HRM
34

18. Performance Reviews-Doing awayofStack Ranking by
Microsoft
While changing performance appraisal methods and procedures,
organizationshave to take extra caution.
Stack ranking, otherwise known as vitality curve, is a performance appraisal method which forces
companies to declare a certain percentage of employees as top, good,average and as low performers. A
vitality curve is a leadership construct whereby a workforce is graded in accordance with the individual
productivity of its members (http://en.wikipedia.org/ wiki/Stack_ranking). The “Law of the Vital Few”,
popularly known as Pareto Principle or “80-20 Rul e” explains the vitality curve clearly. While 80% of
work in the organizations is done by 20% of high performers, how to reward these 20% people, has
• By rewarding the 20% people, the rest of the 80% are displeased and they may either leave the
company or further lower their performance. Those who leave may try to undermine the image of
the company to the maximum extent.
• By not rewarding these 20%, there is a threat that companies may lose their exceptionally talented
employees.becomeabigissue. But there are many issues and implications in rewarding the high performers.
Samuel Culbert, a professor in the Anderson School of Management at UCLA, is an outspoken critic of
performance reviews. He says “They destroy the trust between the boss and the employee, and co st the
company enormous amounts of money in terms of time and wasted effort”. In an article on ‘Should
Performance Reviews be Fired’ in Wharton Magazine, it was stated that ‘Performance reviews typically
are not done often enough and all too often are done poorly’. David Insler, a Senior Vice President at
New York-based Sibson Consulting, estimates that only about 35% to 40% of companies do performance
reviews well. It is also pointed out that performance reviews have a bad reputation even though 97.2% of
U.S. companies have performance appraisals, as do 91% of companies worldwide.
SAS had no performance reviews till recently but consistently occupied a strong place in ‘100 Best
Companies to Work For’. SAS is the world’s larges t privately held software company, with 12,854
employees and worldwide revenues last year of $2.73 billion. Headquartered in Cary, N.C. Fortune
Partners with the Great Place to Work Institute annually conduct a Survey in Corporate America to
pick 100 best companies to work. In The Top 10 Best Companies for 2013, SAS occupies second
position.
Stack Ranking has been withdrawn by Microsoft recently, which aroused a lot of criticism against
Microsoft. Though The Four Horse Men: Facebook, Amazon, Google and Apple also have some sort of
stack ranking which allows them to weed out low performing employees, only Microsoft and its CEO
• Doing away Stack Ranking is a destructive process.
• Drove away several employees.
• Ranking employees on a vitality curve is the root cause of the problem.
• It is criticized as a political move.
• Critics say that it is not based on valid metrics that define performance.
• It has faulty measurement system.
• Reviews come for every six months- the threat being that employees focus on short-term goals rather than on long-term efforts to
innovate.SteveBallmerhavebeencriticizedvehemently for their lapses:
In defense of these criticisms Microsoft says:
• Team work and collaboration are going to be given more priority.
• Emphasis in the new approach will be on performance, development and growth.
• There will be no more ratings and curves and no pre-determined target distribution.
• Flexibility to managers to allocate rewards to individuals and teams.
35

Remedies suggestedby scholars:
• If CEOs force stack ranking on the leadership team, they would do critical thinking and inquiry to
improve performance.
• It may be useful to adopt 360 degree performance review also.
• For evaluating people thrust to be on clear criteria [???] . In the absence of clear, acceptable and
visible criteria, problems do arise.
• Performance reviews are mostly for giving promotions, bonuses and incentives.Instead,reviews
also should concentrate on performance improvement methods.
Despite criticisms from several angles, one has to remember that performance reviews and performance
management are indispensable. Elkiem says if the range between the lowest and highest performers is
reduced, performance improves. Leaders have to build high performance environment and effective
leaders in business to improve the performance of their people.
The performance appraisal system of an organization has to be designed and implemented with
utmost care because the goals and the metrics differ from organization to organization, especially
when a company has international operations.
1. What is stack ranking? Discuss its merits and demerits.
(Hints- categorizing employees as top, good, average and low-Pareto principle 80-20-Rewarding
meritorious employees- Low performers will be disappointed)
2. What are the criticisms leveled against Microsoft for doing away with stackranking?
(Hints- process-employee turnover-problem of vitality curve- political move-no valid merits)
Sources: Mary Jo Foley, “Microso ft does away with stack ranking”, Zdnet.com, Nov 2013
Robert Sher, “Thecase for stack ranking of employees”, Forbes.com, Jul 2012
Unit/Section Title Course
3.8.4 Performance Appraisal Management HRM
36

19. High Performance Culture
While collaborating culture is important for high performance to some
organizations,employee empowerment and cost containment is important to some
others. Managing cross- cultural issues is important.
What is culture? How do we understand the important attributes of organizational culture? When does an
organization change its culture? Why do different organizations have different cultural patterns?
Studying them will make us understand how organizations are becoming successful or breaking. The
people, the structure and the processes of organization- all speak volumes about organizations’ culture.
Julie Morath of a Children’s Hospital in Minnesota wanted to implement safety measures in the
Hospital, but her efforts materialized only when she made the staff express their experiences the
previous week on what went wrong in the hospital. This made the staff realize the need for changing
the organization culture. Morath’s display of curiosity, passion and empathy changed dramatically the
organization climate and culture. Source: Amy C.Edmondson (HBR Dec 2013)
Edmondson (HBR Dec 2013) says collaborating with team spirit is an important aspect of culture
which relies on curiosity, passion and empathy-curiosity to know what other’s know, to be passionate for
working and empathy to understand other’s perspectives, and with this type of culture organizations can
get things done quicker, better and with more impact.
Michael C. Mankins (HBR Dec 2013) says culture plays a vital role in the performance of a company.
High performing organizations adopt a culture that depicts honesty, focused performance, owner-like
accountability, collaboration, agility and adaptation, innovation and winning orientation. These are
the attributes of winning culture that foster an environment that is conducive to generating the best
possible results.
Adopting any of these three or four attributes also brings progress in the company as seen in Ford
Motor, which adopted a leadership model based on collaboration, innovation and a desire to win. Alan
Mulally created a culture of ‘working together’ and w ith this culture Ford went from losing money
and share to gaining both money and share.
Source: Michael C. Mankins (HBR Dec 2013)
How to instill performance culture among employees? The experience of ANZ bank employees
adopting ‘openness and honesty’ and ‘can-do-culture’ proved that right culture can transform the
performance of employees.
Source: Carolyn Dewar and Scott Keller (HBR Jan 2012)
For Carolyn Dewar and Scott Keller (HBR Jan 2012) the important three steps for high performance
culture are: establishing a common understanding of culture and metrics, focusing on few vital
changes and integrating changes with business improvement initiatives.
Traditionally, Tylor’s definition of culture is exhaustive which says ‘culture ... is that complex whole
which includes knowledge, belief, art, morals, law, custom, and any other capabilities and habits
acquired by man as a member of society.’ Now, we understand organizational culture plays several
important roles. Each organization has its own recipe for success. While Steve Jobs of Apple could
become successful with his ‘anything is possible’ culture, Southwest Airlines is successful with its
‘employee empowerment and cost containment’ cu lture. Culture, therefore is contextual. Healthy
organizations by adopting right culture get things done quicker, better and with more impact than
unhealthy ones.
Managing cross-cultural issues is challenging. As the world economy is globalized, companies are
expanding their businesses in international markets for business profitability. The teams are recruited
by these companies in the international market for the business tasks to be performed. These teams
belong to different cultural background and have different values.
37

1. What according to Edmondson and Mankins the characteristics of high performance culture?
(Hints- collaboration- empathy- honesty-focused performance- accountability agility- adaptation-
innovation- winning orientation)
2. ‘Culture is Contextual’ explain with examples
(Hints- Different organizations have different cultural practices- Apple- anything is possible culture-
Southwest Airlines- employee empowerment and cost containment)
Source: Carolyn Dewar and Scott Keller. 2012, “Th ree Steps to a High performance Culture”, Harvard Business
Review, Jan 2012. Available online at: https://hbr.org/2012/01/three-steps-to-a-high-performa.html
Michael C. Mankis, “TheDefining Elements of a Winning Culture”, Harvard Business Review, Dec 2013.
Amy C. Edmondson, “The Three Pillars of a teaming Culture”, Harvard Business Review, Dec 2013.
Unit/section Topic Course
3.8.8 Managing cross-cultural issues HRM
38

20. Indispensable Managers and their Practices
The role of HR Executivesis vital to Strategic Human Resource Management.
The Google Experience
Google experimented and proved that the value of HR managers in all departments of all companies,
including engineering is immense. Earlier before 2006, there was skepticism on managerial functions for
engineers and it was felt by many engineers that management was a distraction in highly technocratic
culture. Google launched “Project Oxygen’ to find the validity of the statement and the value of
managers. Applying research tools and statistical methods, Google proved that the skepticismwas wrong
and this finding was based on the following points:
• The attrition rates for employees working under high scoring managers were low.
• The exit interviews showed that people were leaving the organizations for some otherreasons rather
than management issues.
• By applying multivariate statisticaltechniques,they found that an incremental increase in manager
quality showed positive results.
• Retention was related to manager quality than to seniority, performance, tenure or promotions.
• Employees showed greater satisfaction in innovation, work-life balance and career development
working under high scoring managers.
Project Oxygen could identify eight key behaviors of managers through survey responses,management
feedback and training programs that transform good managers to great managers.
Benefits/ Bottlenecks
Managers and management are essentialand indispensable for the success oforganizations because of
the benefits they accord. Management is essentialfor
• Communicating strategy
• Helping employees prioritize projects
• Facilitating collaboration
• Supporting career development
• Aligning processes and systems with company goals
• Eliminating roadblocks and for giving advices in the right direction
• Developing and motivating direct reports
Concept
It is now clear that the value of managers and their practices are manifold and it is not an exaggeration to
say that companies find difficult to run manager-free organizations. But we need to know the key
behaviors of an effective manager. He
• Is a good coach
• Empowers the team and does not micromanage
• Is concerned about team members’ success and personalwell-being
• Is productive and result-oriented
• Is a Good communicator
• Listens and shares information
39

• Has a clear vision and strategy for the team
• Helps the employees in career development
• Has key technical skills to help and advice the team
Discussion:
The case of Google, as illustrated by Harvard Business School Professor, David A, Garvin, illustrates
that HR Executives contribute in many ways for the growth of organizations and for attracting young
ambitious self-starters and original thinkers. The Oxygen Project of Google accomplished not only the
worth of managers but also identified and institutionalized the key behaviors of managers. Strategic
IHRM practices help global organizations in several ways.
Strategic IHRM is the process of planning how best to develop and implement policies and practices
for managing people across international boundaries by multinational companies. Strategic HRM
addresses broad organizational issues relating to changes in structure and culture, organizational
effectiveness and performance, matching resources to future requirements, the development of
distinctive capabilities, knowledge management, and the management of change. It is concerned with
both human capital requirements and the development of process capabilities, that is, the ability to get
things done effectively.
1. Explain the salient features of Project Oxygen.
(Hints-low attrition rates working under high scoring managers- importance of manager quality-
causes for retention-innovation)
2. Discuss the role and importance of management in the running of organizations.
(Hints- communicating strategy-prioritizing projects- collaboration- career development- aligning
with company goals- eliminating roadblocks)
3. Which are the key behaviors of managers that turn into best practices of the organizations?
(Hints- coach-empowering the team-concern for team members- result-orientation- communication
skills- technical skills)
Source: Garvin, D. 2013, “How Google sold its engineers on management”, Harvard Business Review, December
2013, pp 74-82.
Unit/ Section Topic Course
3.9 Strategic IHRM HRM
40

Block II:
Employment of Human Resources
21. Scaling Up for Success-The case of BuildDirect
22. Meeting Future Demands
23. The innovation Value Chain
24. Headhunters
25. IDEO’s Culture
26. Women in Leadership Roles- Hurdles
27. Unique Employee Onboarding
41

21. Scaling Up for Success-The case of BuildDirect
HR Planning is an important component for scaling up for success in organizations.
To grow in an organization, it is necessary to learn the art of scaling- some organizations may have
plenty of people with no right skills and some organizations with few people to do everything. When an
organization grows in size, the operations that looked simple previously become complex.
Communication, decision-making- all become difficult to manage. But if the organization does not grow,
the problem is still worse. Quantitative growth has to match qualitative expansion. BuildDirect could
emerge successful by understanding the scaling problems with good HR planning.
BuildDirect is a Canadian e-commerce company headquartered in Vancouver, BC Canada. It is one of
the fastest growing online building materials and home improvement products retailer. BuildDirect.com
was founded in 1999 by Jeff Booth and Rob Banks with an investment of $20000. BuildDirect had
earlier setbacks but now able to scale up and effectively grow over the past four years. Its sales doubled
in 2013 and employees from 40 in 2008 rose to 175 in 2014 and its financial position improved. The
reasons for its growth are:
• Dynamic five rock approach for setting priorities
• Focusing on key areas and changing them regularly
• Strategic thinking by employees
• Encouraging imaginative, off the wall proposals from people
• Removing old ideas which are not useful like removing the old order fulfillment process with
automated process procedure.
Five Rock Approach
If one has to fit in five large rocks, sand and some pebbles in a fish bowl, the intelligent way of doing
it is to put the five large rocks in the fishbowl first and put other things later. In case a new rock is to
be added, the useless old rock is to be removed.
As BuildDirect started growing, it recognized its new priorities, and deleted redundant old practices with
innovative ideas. The secret of its success is scaling up its activities in right way with good HR Planning
of having right resources for meeting the requirements.
Human Resource planning is a process that identifies current and future human resource needs for
an organization to achieve its goals. The objective of Human Resource (HR) planning is to ensure the
best fit between employees and jobs, while avoiding manpower shortages or surpluses.
1. What are the objectives of Human Resource Planning?
(Hints- identifying current and future HR needs-ensuring best fit between employees and jobs-
manpower planning)
2. Explain the reasons for Build Direct’s growth and scaling up in efficiency?
(Hints- Five rock approach- focus on key areas-Strategic thinking- Discarding old ideas)
Source: Robert I. Sutton, “Scaling Up is a Problem of Both More and Less”, Harvard Business Review,
January/February, 2014.
4.5 Human Resource planning HRM
42

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