I. Examine Hayco’s employee compensation and benefits program. Why did Hayco invest money and effort in building Hayco Home?
Fringe benefits costs are known to be little but it could yield potential benefits for both the employee and the employee as well. Mr. , president and CEO of Hayco Manufacturing Limited, notes that getting skilled labor has been one of the biggest problems that the company faces. Accordingly, they could not make products to the SIX Sigma quality levels without them. Hayco adopted a quality-oriented strategy as to decrease defects at the same time lower its manufacturing costs. This strategy can be carried out if the company has employees that are dedicated, well-trained and focused on quality. The production process involves the assembly of multi-component products that require a demanding and detailed work. As a result to this need, the company built the Hayco Home for their employees - an accommodation facility designed as state-of-the-art “home-away-from-home” for the company’s workers.
The Hayco Home was built because according to the president of Hayco Manufacturing Limited, , the company has realized that human resource is one of the most essential factors that contribute to successful manufacturing. As China’s industrial sophistication increases, its manufacturing environment gets even more competitive. To address this matter, Hayco Manufacturing is committed to the provision of a clean, well-equipped and safe work place for its employees of all levels, at the same time adhering to equally high standards in accommodation, food and other benefits.
Benefits also include the safety and security of the plant and the dormitory with preventive maintenance program of electricity circuit, fire precaution system and production equipment as well as safety training classes for all employees. In terms of security, all employees of Hayco must show their employee identification pass to enter the premises. Welfare benefits also include free medical services for its employees with clinics that are complete with first aid equipment and qualified doctors and nurses to provide medical consulting services to all its employees, in addition to the free life and injury insurance provided by the company.
Hayco also has a welfare committee to monitor the quality of welfare that the company provides to their employees and at the same time, acts as mediator between management and workers in association to the company’s welfare polices. Hayco Home also offers a wide variety of facilities such as a grocery store at prices lower than the market. It also has a hair salon which provides cheap and convenient hair care services, as well as telephone booths available for use and various interest or hobby classes like sewing, knitting, dancing, make-up and English classes which is free of charge. Aside from the aforementioned benefits, the company also provides recreational services for its employees such as a football ground, a basketball court, a badminton court, table tennis, an American pool, a karaoke room, library and reading room, a dancing room, a chess room, a recreational park, a bowling alley and an internet café as well.
II. Assess management philosophy as reflected in Hayco’s benefits policy. What were the long term effects from the benefits offered?
According to , president of Hayco Manufacturing Limited), “No matter how advanced and highly developed a company’s technology is, it is only as effective as the people operating it. Taking the best possible care of our employees is the basis to improve productivity, retain staff and improve efficiency.” The management team of Hayco Manufacturing Limited claim that hardware and pieces of machinery can easily by replicated by competitors, whereas employees are unique individuals who need to be treated as assets; employees need to be taken care and respected. As reflected in Hayco’s benefits policy, the company’s management philosophy implies that the employees of Hayco Manufacturing Limited are valued and that they considered their employees as a factor that differentiated the company from its competitors which further lead to the success and the gaining of competitive advantage by the firm.
As the company gives a clear message to their employees that they are very much valued through their benefits policy (i.e. Hayco home, in particular) will lead to many advantages for the firm. In one study wherein employees were asked on their expectations from the company, typical responses of these employees included: (1) salary that is competitive with the rest of the industry, (2) trustworthy co-workers, supervisors and upper management, (3) understanding the organization mission and vision, (4) an incentive program that has an impact on the employee, (5) a safe work environment, (6) an appropriate recognition for work which is done, (7) job security, and finally (8) dignified treatment of all employees. The management philosophy of Hayco Manufacturing Limited can be assessed as one that values their employees as an important factor in the success of the company.
Any company’s success relies increasingly on the knowledge, abilities and skills, innovative creativity and motivation of their employees. The valuing of employees means that the company is committed to the satisfaction, development and well-being of their employees. There are major challenges and obstacles that companies can face upon this kind of management philosophy (the valuing of employees). They include: (1) indicating the commitment of the top management to their employees, (2) offering acknowledgment opportunities which extend or go beyond the normal compensation system, (3) offering opportunities for the development and growth of their employees within the company, (4) sharing the company’s knowledge so employees can better serve and contribute to the attainment of the strategic objectives of the firm, and lastly, (5) creating an environment that fosters risk taking.
If one thinks more about it actually, there can be several advantages of this kind of management philosophy such as Hayco Manufacturing Limited’s. In lined with the statement made by the president of Hayco Manufacturing Limited, the first advantage is reducing the cost of doing business. Valuing employees will reduce net costs that are associated to hiring, training and development, legal services and health insurance premiums as well.
Another advantage is that the company will to attract at the same time hold talent. The retention of employees means that as employees feel that they are valued by their company, there is a high potential that employees will not easily go out looking for other jobs as their needs are substantially satisfied by their employers. This actually reduces turnover and the high cost of replacing lost workers. The management philosophy of Hayco Manufacturing Limited will also attract people to want to work for the firm because of its benefits policy which means that employees will be looking out for them, not the other way around. Plus, it should be noted that since it is the people going after the company, there is a very high possibility that they will make good employees and would want to offer their skills and talents to the company which will consequently bring about quality products for the firm
Third, as companies give a clear message to their employees that they are valued, productivity can increase. This kind of management philosophy can improve the quality of work of the employees. Valuing the company’s employees will foster motivation and employees will be encouraged to a better or improved work performance. It lessens absenteeism, stress and distractions that may weaken productivity. In addition, the Hayco Home will give their employees the flexibility, choices and opportunities that they need to balance the competing demands which allow them to be more productive. Products of the company will be of higher quality due to an improved work performance by its employees. Not to mention that there will also be an improved efficiency in the operations or the activities the firm especially in the manufacturing processes as the company has satisfied and motivated workers.
Fourth advantage is that this kind of management philosophy may lead to the strengthening of employee loyalty and commitment to the organization which can contribute to the success of the organization.
Fifth, valuing employees may also result to building a positive image in the marketplace. This type of management philosophy can enhance a company’s reputation and image in the market with its customers, suppliers, investors and communities.
Finally, this brings us to the last advantage that is considerably related to the aforementioned advantages and effects of this particular type of management philosophy advantage which is the gaining of competitive advantage for the firm against its competitors. All the advantages mentioned earlier contribute to the gaining of competitive advantage of the firm.
III. To what extent could the implementation of Hayco’s compensation and benefits program increase the company’s competitiveness? Why?
As for performance-based companies, valuing employees or employee recognition is an essential part in any organization which continuously communicates and reinforces constantly changing goals. An employee recognition program, along with its compensation and benefits program must be rooted on true and meaningful corporate values; otherwise, it will be unsuccessful. These programs necessitate that firms examine and take a gook look at its core values and beliefs and whether they emphasize the importance of hard work and commitment of the firm’s employees in order to create an image of quality, trust and consistency which makes the company above and gives them an edge against other companies.
The implementation of the company’s compensation program could increase the company’s competitiveness to the extent that this program will satisfy their employees. A successful people management can actually improve morale, increase the company’s productivity and enhance a brand as well. In fact, it is believed that companies with a committed staff are more productive. In addition, companies with contented employees are said to be more profitable.
One study has suggested that enhanced performance could be down to the costs saved by employee retention as the companies surveyed showed a lower rate of employee turnover with 12.6 percent from 26 percent. This factor resulted in longer occupancy or tenure, retention of more of the investment in human skill and capital which consequently significantly decreased the costs for recruitment. Aside from that, the study also revealed that the surveyed companies also received 1.9 times more applications per post than average which offers a broader choice of candidates for each role. Another factor could also be that as the levels of employee job satisfaction are high, employees are reported to make more strenuous efforts to cooperate with those of other departments in the firm which leads to greater organizational effectiveness and efficiency.
Another study has supported that there is strong positive correlation between improved productivity and employee job satisfaction. The study concluded that “the more satisfied workers are with their jobs, the better the company is likely to perform in terms of profitability and particularly productivity.”
IV. Exhibit 3 in the case (p. 8) sets out the “Hay Model of Work Culture”. Which of the four types of work culture would you find in Hayco? How best is the work value found in Hayco aligned with the organizational structure, career focus and the basis of competition of the company?
Hay Management Consultants have developed a framework for defining work culture. According to the research done by , work culture arises as a direct consequence of the strategic pressures that are driving the business and the balance between these pressures. There are actually four pressures (customers, reliability, flexibility and capability or technology) and they key in determining work culture. There are four models of work culture namely: (1) functional work culture, (2) process work culture, (3) time based work culture and (4) network culture.
As for Hayco Manufacturing Limited, the company has adopted the functional work culture. This assessment has been made based upon the statement of the company’s goal which is to “ensure its products are manufactured to the highest standard using the latest designs and technology while also meeting strict production deadlines to allow customers to get their products market quickly.” Functional work culture stresses that the predominant pulls or pressures are about the reliable delivery of the company’s internal capability or technology. From Exhibit 3, in the functional work culture: (1) job is the focus for valuing work; (2) the basis for external competitiveness is relevant labor markets; (3) organizational focus is hierarchy or deep structure; (4) career focus is narrow; and (5) there is also a narrow work value range.
In a functional work culture, the company gains its competitive advantage from finding and applying core specialized knowledge and technology. For the case of Hayco, it is their employees. When one examines closely the case of Hayco Manufacturing Limited’s, the recognition of the employees as an important factor in the company’s success is basically a strategic move aiming towards a reliable delivery of the internal capabilities and technologies of the company. The benefits reaped from the company’s benefits policy and reward and compensation programs lead to productivity.
The researcher has assessed that this type of work culture is Hayco is best even though that there has been arguments that functional work culture is considered as “the old” model with an obvious implication that old is bad. However, this model will actually remain a feasible model for such an organization as Hayco Manufacturing Limited and that applying a newer work culture model may actually be harmful to the company.
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