Unit No: Unit 10 – Assignment Brief #3 – Reviewing Human Resource Management

Introduction

Human resource (HR) are the most important resources of an organization. Human

resource management (HRM) contributes to the performance of the company and it is

significantly affected by the organizational structure and culture. This paper will explain

how organizational structure and culture impact the performance of DaimlerChrysler

(DC) after its mergers and acquisition of different companies in other

regions/countries. This paper will also examine the how the effectiveness of HRM is

measured and will identify the key performance indicators (KPIs) and metrics as basis

of the measurement.

Learning outcome 4.1 – Analyse the impact of an organisational structure on the

management of human resource.

Organisational structure is important in order for a business to function well and grow.

Armstrong (2014) defined organizational structure as “frameworks for getting things

done”. It is a framework of roles, responsibilities, authority and communication

relationships that are deliberately designed to achieve goals and objectives (Agbim,

2013). Organisational structure provides a proper flow of leadership and authority

such that everyone in the organisation have a clear idea of their roles and

responsibilities, who are they reporting to, and who should be reporting to them, and

who should they supervise if needed.

On the other hand, Human Resource Management (HRM) is a set of management

practice that is aimed to develop the human resources for better performance at the
organisation. It regulates the organisational structure in an appropriate way so that

organisation is able to achieve its goals and objectives.

The organisational structure will influence the organisation’s HRM in terms of selection

of the correct people with right talent for every level of the organisation. According to

Bower (2003 cited in Avdelidou-Fischer 2007), organisational structure affects how

employees behave, their performance, satisfaction, motivation, passion for work, and

morale; which eventually influence their ability to achieve organisational objectives.

For the case of DaimlerChrysler (DC), after they bought and acquired various

companies, their structure has become disorganised which caused quality problems,

manufacturing inefficiency, and excess production capacity. This is because the

purchased companies did not fit their existing organisational structure which caused

confusions and delays in execution of works. Improper allocation of task and position

also caused redundancy in terms of position and duties that eventually translate into

inefficiency and higher general and administrative (G&A) costs.

To address this issue, the board decided to make some changes to the existing

organisational structure. One of the structural changes that was proposed is to

consolidate and integrate the G&A functions. Consolidation and integration of various

G&A functions will centralise the reporting process for each function that leads to a

more consistent processes and faster and efficient decision-making. This gives way

to a well defined or understood responsibilities and relationships that enable people to

work cooperatively together (Armstrong, 2014).

Learning outcome 4.2 – Analyse the impact of an organisational culture on the

management of human resource.

Strong organisational culture is the driving force behind successful businesses

(Hansen, 2018 cited in Cameron & Freeman 1991). It also cited as the primary reason

for the failure of organizational change (Hansen, 2018 cited in Linnenlueke & Griffiths,

2010). Organizational culture is defined by Armstrong (2014) as ‘the pattern of values,

norms, beliefs, attitudes assumptions that may not have been articulated but shape

the ways in which people in the organizations behave’. Culture according to Schein

(1990) is a pattern of basic assumptions developed by a given group to solve the

problems of external adaptation and internal integration which can be considered valid

as it has worked well enough that it should be taught to new members as the right way

to perceive, think and feel in relation to these problems. It is important that HR

managers understand the concept of organizational culture because it affects how

people behave, thus, should be considered in formulating HR policies and practices.

For the case DaimlerChrysler (DC), their acquisition of various companies from all

over the world has brought in cultures that are different and not align with their existing

culture, given that the companies they acquired are based and operates in different

countries and regions. It is evident that the difference in culture affected the

performance of DC negatively. According to Weber et al. (2014), culture differences

cause tension, pressure and negative attitudes among HR. This might be the case for

DC as the organization struggled after the acquisitions because the acquired

companies’ cultures are not aligned to the exiting culture. The HR practices of DC that

were formulated based on technology- and quality- focused culture has given the

company its share of success. However, these practices did not work out well after all

the acquisitions. As suggested by Isac and Rusu (2016), HR practices that have been
successful in an organization can fail in other culture, especially if the take over was

done without analysing the culture adequacy of the organization where it is supposed

to be applied. The inconsistencies in the DC’s organizational culture among the

existing and acquired companies had cause differences in management style that

eventually affected the performance of the organization. Having a considerable

difference in management culture can cause the merger to fail (Weber et al., 2014).

Learning outcome 4.3 – Examine how the effectiveness of human resource

management is monitored in an organization

The effectiveness of human resource management depends on its fit with the

organization’s stage of development (Armstrong, 2014 cited in Baird and Meshoulam

1998). According to Armstrong (2014), the measurement of human capital assesses

the impact of the HRM practices and HR’s contribution to organizational performance.

The indicators of human resource effectiveness can be divided into quantitative and

qualitative. Quantitative measures are those that are exactly quantifiable while

qualitative are those that can be measures by surveys, questionnaires and interviews

with employees such as skills, motivation, satisfaction, loyalty, creativity and

commitment (Majerova, 2008). Some of the qualitative indicators that management

may track are labor costs, the average length of the working day, efficient fond of

working time per employee, disease rates, labor productivity, HR ROI, fluctuation rate,

manager o employee ratio, rate of recruits leaving, and managerial post from internal

source which are in accordance with the vision, philosophy, culture, objectives and

strategies (Majerova, 2008). On the other hand, a study by Boudreau and Lawler III

(2017) suggested three types of HR measures which are measure of efficiency,

effectiveness, and impact. Their study had showed that HR metrics that drive

efficiency, effectiveness and impact are all significantly related to HR effectiveness.

A new tool HR Scorecard, which is based upon Balance Scorecard model introduced

by Kaplan and Norton (2007), was outlined by Becker, Huselid and Ulrich (2001) that

does two important things; manage HR as a strategic asset and demonstrate HR’s

contribution to firm’s financial success (Gabcanova, 2012). The elements in the HR

Scorecard are key performance indicators (KPI) for the success of workforce

(Gabcanova, 2012 cited in Huselid, Becker and Beatty, 2005). According to the study

of Eckerson (2007), good KPIs are sparse, drillable, simple, actionable, owned,

referenced, correlated, balanced, aligned, and validated. While Hursman (2010)

suggested that effective KPIs should be S-M-A-R-T (Specific, Measurable, Attainable,

Relevant, Time bound) (Gabcanova, 2012).

The KPIs as suggested by Gabcanova (2012) are summarised in the table below.

Objectives Lagging KPIs Leading KPIs

Sickness rate
Labor costs Labor cost per 1 Productivity
Employee
Financial

Decreasing of turnover
% of turnover Recruiting costs
rate
Effective using training Efficiency of investment
ROI of training
budget to human capital
% of employees who Number of successors
Succession planning
were promoted on key posts
Customer

% of multiskilled
Using human capital Qualification index
employees
% of employees who
Retention of the Participation in career
performed the
employees coaching program
Employee Dialogue
 Amount of investment
Savings (money and
to IT HR technologies
time) from HR IT
Corporate social Number of activities
technologies Number of
responsibility organized for
new hiring relates to
employees (sport,
good referral program
family day, etc.)
Posts filled by internal
Internal flexibility Job rotation
sources
Simplify of the sales Time for dealing with % of customer
process customer satisfaction
Result from employee Influence of the inflation
Increasing of motivation
motivation survey on salary
Internal

Returnability of Performed action

Employee survey
questionnaire measures
Acquisition for
Number of accepted
Idea management company according to
IM proposal
accepted IM proposal
Time for saving of Time for saving of
Online HR tools
routine HR paperwork routine HR paperwork
Consistently supporting % of training courses Average number of
of employee’s matching company training hours per
qualification requirements employee
Increasing of internal % of participants in Number of
customer orientation communication training customer’s complaint
Costs for training
Multiprofession relates to Qualification index
multiprofession

Rewarding system Average company

Learning and Growth

Compensation cost
improvement salary

Consistently develop of
leadership skills and
strengthen manager´s Leadership index Leadership index
role as a coach and a
mentor
Learning outcome 4.4 – Make justified recommendations to improve the

effectiveness of human resource management in an organization.

The mergers and acquisition that DC undertook has not been successful so far and

cost them to lose their competitive advantage and has caused their customer ranking

and loyalty to slip. Their competitor started to catch up in terms of technological

prowess, which is DC’s main advantage brought about by their technology- and

quality-focused culture. These are attributed to the misfit in the organizational structure

and culture of the acquired companies to the existing.

Organizing and staffing their operations is one of the fundamental challenges of every

companies and becomes even more complicated once the company decides to do

business internationally (Boundless.com, 2016). DC was not able to utilize its human

resource efficiently and the flow of authority is not clear, which is causes by its existing

organizational structure that is align with the company’s strategies. One way to tackle

it is by introducing changes to the organizational structure. There are many different

types of organizational structures. DC can update its existing organizational structure

by adding an international division which will take care of all the international business.

Further, the international division can also be structured and organized geographically.

Adding international division will make the existing domestic organizational structure

unchanged. Hence, its domestic success will be retained. And also, geographically

structuring the international division will allow each country managers to operate

independently and be able to formulate HR strategies that will meet the needs of local

stakeholders (Boundless.com, 2016). Allowing each country to work independently will

also facilitate in maintaining the organizational culture for each country. The

acquisitions of other companies had introduced new environment to DC which created

pressure and strain inside the organization, driving new understanding and adaptation.
Organizational culture offers a shared system of meanings which is the basis for

communications and mutual understanding (Armstrong, 2014). There are different

cultures of inside DC, thus, it is important that these cultures are align to the overall

goal of the company which is gain back its competitiveness and promote profitability.

Armstrong (2014) highlighted that if culture is inappropriate, it is necessary that to

determine what needs to be changed and implement plans for change. Hence, it is

important for DC to have culture that also promotes flexibility that will allow each

subculture to coexist and thrive.

Conclusion

Organizational structure and culture affect the human resource management in many

ways, and subsequently affect the overall performance of the organization. The

mergers and acquisitions that DC undertook had introduced new structure and culture

that did not match the existing. These has affected the company’s performance

negatively and lose its competitive advantage and profitability, highlighting that the

importance of structure and culture in the organization’s performance cannot be

ignored. It is also important that effectiveness of the HRM is measured to track the

achievement of the strategic objectives in human resource management and for

evaluating of work with human resources (Majerova, 2008).

Word Count = 1957

References

Agbim, K. C. (2013) The Impact of Organizational Structure and Leadership Styles

on Innovation, IOSR Journal of Business and Management (IOSR-JBM. Available at:
www.iosrjournals.org (Accessed: 16 December 2018).
Armstrong, M. (2014) Handbook Of Personel Human Resource Management
Practice.
Baird, L and Meshoulam, I (1988) Managing two fits of strategic human resource
management, Academy of Management Review, 13 (1), pp 116–28
Becker, B. E., Huselid, M. A. & Ulrich, D. (2001). The HR scorecard: linking people,
strategy and performance. Boston: Harvard Business School Press.
Boudreau, J.W., & Lawler III, E.E., (2017) How to Measure HR Effectiveness.
Available at: https://quarterly.talenteconomy.io/issue/fall-2017/how-to-measure-hr-
effectiveness/ (Accessed: 22 September 2019).
Boundless (2016) ‘Organizational structure and human resources management’.
Available at: https://www.boundless.com/users/235420/textbooks/business-
fundamentals/international-business-for-the-entrepreneur-14/organizational-
structure-and-human-resources-management-59/organizational-structure-and-
human-resources-management-261-15564/.
Cameron, K. S., & Freeman, S. J. (1991). Cultural congruence, strength, and type:
Relationships to effectiveness. In R. W. Woodman, & W. A. Pasmore, Research in
Organizational Change and Development (pp. 23-58). JAI Press Limited.
Gabcanova, I. (2012) ‘Human Resources Key Performance Indicators’, Journal of
Competitiveness, 4(1), pp. 117–128. doi: 10.7441/joc.2012.01.09.
Hansen, M. (2018) Cultivating Change: The Relationship Between Organizational
Culture, Leadership Style and Communication Style with Organizational Change.
Available at: http://epublications.marquette.edu/theses_open/450 (Accessed: 16
December 2018).
Hursman, A. (2010). Measure what matters. [online]. Information management.
Retrieved from:
http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=48&hid=11&sid=a294ed98
- abe3-4394-8cf0-ab8353d1d74c%40sessionmgr12
Huselid, M. A., Becker, B. E. & Beatty, R. (2005). The workforce scorecard. Boston:
Harvard Business School Press.
Isac, F. and Rusu, S. (2016) ‘The influence of culture on the human resources
management activities and practices’, Facultatea De Management Agricol, 18(2), pp.
77–80. doi: 10.1016/S0887-6177(99)00007-4.
Kaplan, S. R. & Norton, D. P. (2007). Balanced Scorecard: Strategický systém
měřění výkonnosti podniku. Praha: Management Press.
Linnenluecke, M. K., & Griffiths, A. (2010). Corporate sustainability and
organizational culture. Journal of World Business, 357-366.
Majerová, R. (2008) ‘Measuring of the Human Resource Effectiveness’, Journal of
Human Resource Management & Ergonomics, 2(1).
Schein, E H (1990) Organizational culture, American Psychologist, 45, pp 109–19
Weber, Y., Oberg, C., & Tarba, S. (2014) The M&A Paradox: Factors of Success and
Failure in Mergers and Acquisitions | InformIT (2014). Available at:
http://www.informit.com/articles/article.aspx?p=2164982&seqNum=3 (Accessed: 21
September 2019).