THE NATURE OF MICROFINANCE PRODUCTS AND THEIR IMPACT ON CUSTOMER LOYALTY IN MICROFINANCE

THE NATURE OF MICROFINANCE PRODUCTS AND THEIR IMPACT ON CUSTOMER LOYALTY IN MICROFINANCE

Designing optimal incentives for credit agents has become a major concern for microfinance institutions (MFIs). The existing literature on microfinance has focused almost exclusively on incentive issues between borrowers and lenders. Yet, as credit agents play a critical role in ensuring the success of the MFIs they are working for, they must also be provided with adequate incentives. Without those, they may exert insufficient effort to learn about potential borrowers' characteristics, they may under-report repayments, and they may mis-represent the information they have obtained on potential borrowers. The issue is particularly acute in pro-poor MFIs.

Many pro-poor MFIs derive from non-governmental organizations and have non-profit status. Their objective is to give access to credit to very poor individuals with viable projects. There has, however, been a widely noted ‘mission drift’ among these MFIs as they increasingly tend to work with clients that are less poor, a drift that has accelerated with rising competition from for-profit MFIs (Weiss and Montgomery, 2005). This has led donors supporting these institutions in search for mechanisms that can induce MFIs to resist mission drift. This paper explores how to design credit agent incentives to achieve this result.

If less-poor borrowers reimburse more on average than very poor borrowers, a pro-poor MFI must strike a balance between financial viability and the selection of very poor borrowers. It wants to lend to an optimal mix of very poor and less-poor borrowers selected among individuals with high ability and most likely to repay. The higher expected repayment rate with less-poor borrowers is used to cross-subsidize loans to very poor individuals, while meeting the zero profit constraint. But incentives for credit agents to select high-ability individuals then tend to conflict with incentives to select very poor individuals, who repay less. For these MFIs, repayment is an incomplete measure of an agent's performance.

To induce search for information on simultaneously poverty levels and ability, one would need to use incentive schemes that are non-monotonous in repayment. But such schemes would give the agent incentives to hide, and possibly withhold, repayment. Observing another variable correlated with wealth is thus necessary. This requires costly audits. To meet their objectives, pro-poor MFIs thus have to bear the additional cost of an audit generating signals on the true type of borrowers; by contrast to for-profit MFIs that bear no cost in providing incentives to their credit agents. Audits are, however, not always feasible. In contexts where the cost of finding information on wealth is high, a pro-poor MFI will choose to offer incentives based only on repayment performance, as would a for-profit MFI.

An important assumption in our analysis is that wealth and repayment are positively correlated. If less poor borrowers were not more profitable to the lender than the very poor, there fundamentally would be no tension between the outreach objective of the MFI and the viability constraint. There would be no possibility for cross subsidization, and lending to the poor would have to be viable. This would lead to the particular case in which a pro-poor MFI would always lend only to very poor borrowers, and only to very poor borrowers of high ability if acquiring information on ability is not too costly.1 Yet a positive correlation is more plausible2, at least in areas where mission drift is a concern. A positive correlation arises when less poor borrowers have access to better education, better quality inputs and land, and better social capital that facilitate success in their activity. Empirically, Sharma and Zeller (1997) in Bangladesh, SEF (2003) in South Africa, and Zeller (1998) in Madagascar all find that repayment performance does increase with wealth — the very poor tend to invest in low-return activities and in poorly developed markets where environmental and economic shocks are frequent, while they have low ability to bear risk (Hulme, 2000). This positive correlation, and the conflict it creates between outreach and financial viability, is confirmed by a concern among practitioners that using repayment performance incentives for agents reinforces their drift towards less poor clients. Based on a global survey of microfinance institutions, McKim and Hugart (2005) report that 70% of the MFIs that implemented an incentive scheme acknowledged that it reduced focus on the target population.

Another assumption made is that the agent is risk neutral with unlimited liability. This (admittedly special) case is particularly useful as it offers a clear benchmark: a for-profit MFI would bear no incentive cost due to delegation in this setting. Any cost borne by a pro-poor MFI stems exclusively from the interaction of the particular objective of a non-profit organization with internal incentives. If the agent was protected by limited liability or was risk averse, additional incentive costs would obviously arise but our main insights would hold.

 

References

J. Weiss and H. Montgomery, Great expectations: microfinance and poverty reduction in Asia and Latin America, Oxford Development Studies 33 (3) (2005), pp. 391–416.

M. Sharma and M. Zeller, Repayment performance in group based credit programs in Bangladesh: an empirical analysis, World Development 25 (10) (1997), pp. 1731–1742.

SEF, Small Enterprise Fund, 2004 SEF, Small Enterprise Fund, Overview, 2003 (2004) www.sef.co.za/sef%20overview/more_about_sef.htm.

M. Zeller, Determinants of repayment performance in credit groups: the role of program design, intra-group risk pooling, and social cohesion, Economic Development and Cultural Change 46 (3) (1998), pp. 599–620.

D. Hulme, Is microdebt good for poor people? A note on the dark side of MicroFinance, Small Enterprise Development 11 (1) (2000), pp. 26–28.

A. McKim and M. Hugart, Staff incentive schemes in practice: findings from a global survey of microfinance institutions, MicroFinance Network (2005) http://www.mfnetwork.org/working_groups/staff_incentives.html.

MicroLINKS, 2008 MicroLINKS. 2008.

INFORMATION TECHNOLOGY MANAGEMENT

Contents

1.      Introduction

2.      Dell Computer Corporation Company Background

3.      IBM Company Background

4.      Reasons for choosing the two manufacturers

5.      Comparison of the products the two company has

6.      The best choice among the two

7.      Conclusion

8.      References

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Introduction

For businesses, information technology is only a means to an end which is the use of knowledge to make and implement commercial decisions. Efficient organizations require established systems to enable them to make the best possible decisions in the situations they are likely to meet. Thus an organizational information system should collect data, analyze and present this as useful information that can be retrieved as the basis of expert knowledge at the point of decision. Once decisions are made they must be passed on to those who implement them, carried out, and the success or failure of the operation monitored. Increasingly decisions can be automatically implemented using the technology, thus enabling organizational objectives to be achieved with maximum efficiency. Information is the major resource of modern businesses. In many cases businesses could even profit from having their physical plant destroyed, but could never recover from losing their information resources ( 2002).

 

 This was graphically illustrated in post-Second World War Germany/Japan when bombed industries recovered dramatically with new plant and inherited know-how. Hence some economists argue that information is a fourth major factor of production in addition to land, labor and capital, which is of increasing importance. However, an important point not so far stressed, is that the business information we have been describing is not just a series of isolated lists but is all interrelated. If one piece of information alters particularly the specification of a product then many other items will be affected such as how to produce it, suppliers required, potential customers, etc. In other words a business’s information is a system and should be organized accordingly ( 2002).

 

A related, but not identical, point is that it is misleading to think of business information as a static list of useful things to know; rather, it should be considered as a dynamic flow. Thus information will be acquired by one department and used. This then creates new information, which is vital for a second department. Computer people usually talk in terms of data input, processing and output, to describe what goes on within a department or part of the work process. In these terms what people are saying is that one man’s output is the next woman’s input. The quality of an information system will thus depend not only upon the excellence of the hardware and the subtlety of the software employed, but also on the accuracy and relevance of the data collected, plus the quality of the human professionals who use the system, This, in turn depends upon the extent to which the organization succeeds in coordinating and motivating employees to achieve corporate objectives (2002).

 

Over thirty-five years have passed since academics began speculating on the impact that information technology (IT) would have on organizational structure. The debate is still on-going, and both researchers and managers continue to explore the relationship between IT and organizational structure. This relationship is becoming increasingly complicated by both the rapidly changing nature of IT and the increasing environmental turbulence faced by many organizations. As organizations need to process more information under these uncertain conditions, IT is one possible way for organizations to increase their information processing capability. However, other, more organizational tools are also at their disposal for processing more information. These include task forces, lateral relationships, self-contained work groups, and slack resources. Thus, the relationship between IT and organizational structures is not a simple one ( 1998).

 

It is commonly acknowledged and understood that information technology (IT) is having a dramatic effect on both our personal and professional lives. IT is also changing the nature of our organizations by providing opportunities to make fundamental changes in the way they do business. Many of the opportunities are recognized and understood. Yet a tremendous number of issues and consequences are only vaguely perceived while other questions are just now being raised ( 1996). The technology is changing rapidly, with computing speeds and the number of transistor equivalents available in a given area of a microprocessor chips both doubling approximately every 18 months.

 

Organizations are acquiring more and more technology systems to assist in everything from manufacturing to the management of information to the provision and improvement of customer service. Harnessing and coordinating this computing power is the challenge. New tools and innovative perspectives with which to examine, interpret, and comprehend this rapidly evolving environment is always needed and sought ( 1996). The paper will select two manufacturers and compare products they have. The paper will also discuss the reason for choosing the two manufacturers. Moreover the paper will choose which among the two can create a computer system that works well with less cost. The information acquired will then be used to create proper conclusion regarding the paper.

 

Dell Computer Corporation Company Background

Dell Computer Corporation is a major manufacturer of personal computers, computer peripherals, and software. Among the leading producers of computers in the world, Dell sells its products directly to customers through the Internet and mail-order catalogs rather than through retail outlets. The company is based in Round Rock, Texas. At Dell Computers, customers are brought into the product planning and manufacturing processes, with all employees encouraged to have contact with customers. Through effective collaboration across boundaries, ideas can be shared about product designs and value propositions. The result is faster and more customer-focused product and service innovation. To produce the capacity for this, considerable attention must be placed on organizational structures, processes, skills and culture. Such elements that may need a radical overhaul in established companies ( 2002).

Dell was founded in 1984 by . In 1983, during his freshman year at the University of Texas, he bought excess inventory of RAM chips and disk drives for IBM personal computers from local dealers. He resold the components through newspaper advertisements at prices far below retail cost. By 1984 his sales totaled about $80,000 a month. In April 1984 Dell dropped out of school to launch his company (, 2003).The new company soon began manufacturing its own IBM-compatible computers under the name PCs Limited. Because Dell sold computers directly to users through advertisements in magazines and catalogs, the company could price its machines lower than those sold through retail stores. Sales reached nearly $6 million during the company’s first year, climbing to $34 million the following year. By 1987 Dell was the leading mail-order computer company in the United States. That year it created a sales force to target large corporations and began adding international offices to capture the direct-mail market outside the United States ( 2003).

 

While the company continued to grow rapidly; Dell experienced a series of setbacks that hurt profits. In 1990 the company began selling computers through retail stores, an effort it abandoned in 1994. In 1991 Dell launched a line of notebook computers, but quality problems and inadequate production planning forced the company to stop selling them for a year. In 1994 Dell launched a new line of notebook computers and expanded efforts to increase overseas sales. Dell also began focusing on the market for servers, which are computers used to run local area networks. By the late 1990s, Dell was firmly in place as the world’s number one direct seller of computers. More than 50 percent of the company’s computer sales transactions took place via its website, which generated worldwide sales in excess of $40 million a day (, 2003).

 

IBM company background

As late as 1960 IBM was still primarily a punched-card machine supplier. It was not until 1962 that computer sales equaled those of its traditional punched-card products. But by the end of the decade, its punched-card machine sales were essentially vestigial. While IBM was making this transformation in its product line in the 1960s, it was also growing at the rapid rate of 15 to 20 percent a year and soon achieved a domination of the computer market that was historically unparalleled in any other major industry. From annual sales of $1.8 billion and a head count of 104,000 in 1960, it had rocketed to sales of $7.2 billion and 259,000 employees by the end of the decade. Its market share was over 70 percent in 1960, a position it was able to sustain and even exceed throughout the decade. IBM's success was creating a difficult environment for its competitors. By 1960 the mainframe computer industry had already been whittled down to just IBM and seven others. Of all the mainframe suppliers,  had suffered the biggest reverse, consolidating a decline that had begun well before the launch of the 1401. Despite being the pioneer of the industry, it had never made a profit in computers and was gaining a reputation bordering on derision ( 1996).

 

For many years IBM's domination of the computer industry was attributed to a variety of factors: its managerial competence; its technological excellence; its formidable marketing organization; its monopolistic and antitrust business practices; and the leadership exerted by the Watsons. Yet when IBM fell into a decline, very little had changed. Its technology and marketing were as good in the 1990s as at any time in its past; and while it had only a 20 percent market share, it exceeded its nearest competitor in size by a factor of five; and even though the Watsons were no longer at the helm of the company, IBM's leaders were still among the most respected in the world. This suggests that there was something in the environment beyond IBM that was responsible for its rise and fall. IBM was blessed with a unique combination of organizational capabilities that equipped it perfectly for the mainframe computer market. While it fit this environmental niche, IBM prospered wonderfully; but once that niche changed, IBM's strategies were no longer appropriate ( 1996).

 

  A key difference between IBM and its competitors persisted right into the computer age. Thus, when a company used equipment from one of IBM's office machine competitors, it was all too likely to acquire a problem rather than a solution. Often the computer and its software were no more than a set of tools with which to fashion a solution, instead of the solution itself. Only IBM guaranteed a complete solution to business problems, and an IBM salesman was all too likely to remind a data processing manager that no one ever got fired by hiring from IBM. This was a patronizing attitude that came close to condescension, and often resulted in a love-hate relationship between IBM and its customers.

 

 In the mid-1970s a great change began to occur in the computer industry, which was fully realized in the 1980s; 1973 marked the first year that more than 100,000 computers were in use worldwide. But the growth slowed, and in 1978 there were only 7,000 more computers in use than there had been five years earlier. The mainframe had matured and become a commodity, while IBM's expertise in systems integration was increasingly taken over by software. As a result, computer users had far less need of IBM to hold their hand, and it was inevitable that they would begin to drift to other, less intimidating and less expensive suppliers ( 1996).

 

Diagram of a computer system

*taken from

The diagram showed the interconnection of computer systems. The diagram showed which part of the computer system is vital and related to another part.  The said diagram also showed how important each part is to the others. The two manufacturers tend to provide the different parts needed in the computer systems. One of the two manufacturers that can provide a system that is good internally at the same time provides satisfaction to its user.

                                                                                                                                                                                                                                          

Reasons for choosing the two manufacturers

It is perhaps not difficult to imagine that new products take markets from existing products, making redundant the services of the workers who are engaged in that production and rendering obsolete the capital which is similarly engaged. In the same way, new processes of production undercut existing technologies used by rival firms, causing them to make losses, to lay off workers and close down capital, and ultimately driving the marginal ones out of business. But because all of these effects are indirect, it is less easy to see the connection between the deployment of new technology in a particular plant, and the destruction of capital and of job opportunities elsewhere ( 1987). The more specific the capital, the more radical the nature of the new technology, and the more rapid the rate of change, then the greater will be the consequent dislocation. It will affect not only the producers of existing products and the users of existing processes. They will lose markets and find their costs of production undercut; it will also affect the unsuccessful competitors in the process of innovation. It has been estimated that it took 30 years from the start of the computer industry in the late 1940s for that industry to reach break-even point. Until the early 1980s the profits of the few successful computer manufacturers were more than offset by the enormous losses suffered by the rest, principally the large international electrical companies, such as GE, Westinghouse, RCA, GEC, Plessey, Ferranti, Siemens, AEG and Philips, all of whom ultimately failed in their attempt to remain major computer manufacturers ( 1987).

 

What happened in the growth of the computer industry differed only in detail from what happened earlier in the introduction of new technology in other industries in the western world. A similar pattern of competitive innovation can be discerned in the growth of railways in the early nineteenth century, and in the expansion of the electrical appliance industry in the 1920s. In each of these earlier waves of innovation there is a clear pattern of cause and effect from which we can learn. The present wave of innovation is however taking place in a very different social and political environment from that which has gone before, and therefore we should expect to find differences as well as similarities in the effects of the introduction of new technology today ( 1987).

 

There are other manufacturers that focus on computers and IT related functions but these two are chosen for different reasons that will be discussed accordingly. The two manufacturers are competitive and place well in the computer manufacturing industry. They can be considered the best in the industry and they do well against competitors.  These two manufacturers were chosen because they already have an established name and a good reputation it must protect. This gives an assurance that they offer the best kind of product and service. They cannot afford to have a negative image to their clients. The two also have been in the industry for so long.

 

Comparison of the products both companies have

One of the best products of Dell is its hard drive. The company makes use of excellent technologies in creating the different hard drives they offer to clients. These hard drives are easily adaptable and compatible to every clients needs. The hard drive determines how much space is still available for a client to use for his files. A manufacturer can easily create hard rives without considering a clients need. But Dell makes sure that the clients and their needs are given attention in creating a product. Another product that Dell creates well is its monitor. Its monitor gives the best graphics possible. It offers optimum satisfaction to the clients and removes any problems encountered when using the monitor.

 

On the other hand IBM’s best product is its processors. The company makes sure that its processors are of good value. It makes sure that the processors pass the standards they have and that the processors can give benefits to the clients. Another product that IBM creates well is also its monitors. Its monitors are not only high quality but price is reachable. The monitors produce exceptional performance and this gives it advantage over other monitors. A software that IBM creates well is the rational functional tester v 6.1 that gives simplification of product testing without sacrificing the versatility of project teams. Another software that IBM creates well is the Workplace services express v2.6. This software offers portal collaboration and solutions development platform that is best for a business enterprise. 

 

Cost and Licensing of the products of the manufacturers

Different things are needed in a business. These things include computers, office supplies, office equipment and other things needed in the office. To have this equipment a thing put into consideration is the cost the company has to make.  In any business the cost of the things they purchase and use are important. Companies don’t want to incur high cost. They tend to do everything they can so that the cost will be minimized. The hardware and software of the two companies can give a person major costs. Among the two companies the Dell’s products cost higher. This is due to the different expenses done by Dell to manufacture its products.  

 

License is a permit granting permission to engage in an activity that would otherwise be illegal. The main purpose of a license is to protect the public interest. A license issued by a government agency is required in order to pursue certain occupations, run certain businesses, and enjoy certain privileges. In the U.S., for example, a person must have a license to practice medicine and law; brokerage firms and restaurants are two types of businesses that require licenses; and one must have a driver's license to operate an automobile on public roads. Fees for licenses are a source of revenue for the government. The licensing of the manufacturers software and hardware was already done ( 1993). Licensing was done to make sure that the company will not be branded of doing something illegal. This also gives additional assurances that the manufacturers offer products that are within standards since license are acquired if the products pass the standard.

 

The best choice among the two manufacturers

In creating a computer system a thing given attention is the cost that will be incurred in creating a computer system. The cost that will be incurred is important because a high cost cannot be beneficial to a person or a company. On the other hand a very low cost can also cause problems to the individual or the company since the parts of the system may not be of good qualities thus additional costs will be made for repairs to the system.  Another thing that is given attention is the reputation of the manufacturer.  The manufacturer should not only be known well but has no bad track record. The reputation determines how the manufacturer is liked by the clients and how well the company treats its clients. Among the two the best choice is IBM.IBM has already had an established name and its products cost lesser than Dell. IBM also has been in industry for a longer time thus it already has different techniques in manufacturing products that is different against techniques used by dell. Lastly IBM offers products that cost lesser but of good quality. The products offered by IBM although lower in price are of good quality. These products are well made and its prices are adjusted according to the needs of the public.

 

Conclusion

Information technology is only a means to an end which is the use of knowledge to make and implement commercial decisions. Efficient organizations require established systems to enable them to make the best possible decisions in the situations they are likely to meet. These two manufacturers were chosen because they already have an established name and a good reputation it must protect. This gives an assurance that they offer the best kind of product and service. They cannot afford to have a negative image to their clients.  A key difference between IBM and its competitors persisted right into the computer age. Thus, when a company used equipment from one of IBM's office machine competitors, it was all too likely to acquire a problem rather than a solution. One of the best products of Dell is its hard drive. Another product that Dell creates well is its monitor.

 

On the other hand IBM’s best product is its processors. Another product that IBM creates well is also its monitors. The software that IBM creates well is the rational functional tester v6.1 that gives simplification of product testing without sacrificing the versatility of project teams. Software that IBM creates well is the Workplace services express v2.6. This software offers portal collaboration and solutions development platform that is best for a business enterprise.  In creating a computer system a thing given attention is the cost that will be incurred in creating a computer system. Among the two the best choice is IBM.IBM has already had an established name and its products cost lesser than Dell. IBM also has been in industry for a longer time thus it already has different techniques in manufacturing products that is different against techniques used by dell.

 

References

Marriott Hotels International - QSPM

QSPM

 

 

 

SO/WO

 

ST/WT

 

Strategic Alternatives

Weight

 

Rating

Score

 

Rating

Score

 

 

 

 

 

 

 

 

 

 

Market Share

0.11

 

3

0.33

 

3

0.42

 

Price

0.16

 

4

0.56

 

3

0.48

 

Financial Position

0.16

 

4

0.56

 

4

0.11

 

Product Quality

0.14

 

4

0.56

 

3

0.42

 

Consumer Loyalty

0.11

 

3

0.33

 

3

0.33

 

Brand and image

0.13

 

2

0.26

 

3

0.39

 

People Management

0.03

 

4

0.12

 

4

0.12

 

Global Expansion

0.05

 

3

0.15

 

4

0.20

 

Technology Advancement

0.08

 

4

0.32

 

4

0.32

 

Market Communication

0.07

 

2

0.14

 

4

0.28

 

 Advertising and Promotion

    0.12

 

         4

       0.36

 

         3

        0.11

 

Total

0.15

 

 

0.35

 

 

0.28

 

 

 

Marriott will be in ample business growth and effective competitive stature and continues to concentrate more on its core business goals and vision and with presence of excess resource, there can use such integration in keeping stable. Marriott need to evaluate strategic approach to the market and identify why several market based strategy is not effective and will adopt grand strategy options accordingly. The implementation of strategic base of Marriott of intensified focus and objectivity upon conveying a lot of information about marketing plan in simple ways, upon application to real life due to limited factors and some complications in the business world. In addition, Marriott’s relationship between market share and profitability differ in the industry Marriott operates and that QSPM tenets were concerned on strategic management issues and value recognition.

(i) Recommendation

The crucial elements have to account for pace and flexibility of Marriott International’s overall team and synergy base, HRM management needs strengthening of job roles and performance to maintain Marriott’s award winning relations with the employees worldwide. For practically driven hotel industry and its strategic business environment, no single company is powerful enough to define market expansion alone but, there should be ample planning and support to stay longer in the business and if possible a lifetime service to people, to the customers believing in  Marriott International’s mission and vision. Thus, without strategic endeavour and Marriott’s collaboration, growth expansion strategies will fall short of its desired objectives and purpose like undeniable entry barriers, restricted expansion laws that government makes into the hotel industry and its operational access and foreign investments consideration. Therefore, Marriott International had to collaborate with the industry guidelines in order to expand markets in other areas in Hong Kong wherein some tacit knowledge to the real financial highlights of the company will be a factor for Marriott International’s growth expansion in many countries. Since, Marriott International has been in the global scenario of strategic business, with access to the hotel industry market, effective planning and execution is imperatively needed for Marriott International to continue leading in the coming years. In addition, Marriott Internationalneed to scale its operations to be better prepared for future competition. In comparison with other players, in step with industry demand and adjust to actual industry cycles. Competitors may achieve some streamlining and focus by reduction as dramatic downsizing can do more harm than good. There is a need to focus more on local area expansion before it can go ahead with a much more fulfilling consideration to adhere global expansion, as growth strategies in an instance are for the approval and deliberation of Marriott International board of executives.

 

Conclusion

Therefore, strategic standing and Marriott International’s business strategy competence has been keeping the company on top of its business leadership, and management as well as innovative culture adaptation wherein Marriott team exercise the value of customer services and satisfaction through exclusive promotions and privileges given to loyal customers and high performing employees. There is about Marriott’s way of putting strategic drivers be on the right fit for change and that there can be concerns leading to Marriott’s decision to expand their markets and have a better outsourcing base for Marriott’s unique products and services for hotel operations, being considered to be one of Marriott’s key strategic value and competence factor. The external and internal environment of Marriott serves was ideally a real means of the company’s recent standing in the market particularly, the Hong Kong Market. The growth expansion strategy is a positive and effective option for Marriott International in the coming three years wherein reassessment and reinvention of business strategies and functions matters the most. Marriott International perceived as one of the leading hotel services as of the present time, leading to a long term partnerships with stakeholders and work based collaboration among Marriott executives, heads and employees, the growth of Marriott International for expansion purposes will cling to the volume of better customer service that produces satisfaction and trust among Marriott customers, loyal customers having happy faces.

 

References

David F (2009) Strategic Management: Concepts and Cases, 12th edition, Pearson Prentice Hall, pages 270-282.

Kosonen M (2004) Driving for excellence in performance – the role of the controller, Paper presented at the Business. Controller workshop, IIR Finland Oy, Helsinki, 27 September

Marriott International Annual Report, 2008, 2009

 

MSN Money Report (2010) Marriott International Inc. (7/9/2010)

HUMAN RESOURCE MANAGEMENT

Human Resource Planning: the role of people, its challenges and advantages, and compensation strategy

 

Every organisation – profit or non-profit in nature – considers employees as its most fundamental asset. In order for such organisations to maximise their assets, they should manage the employees’ working conditions as well as its immediate environment in the most intelligent and efficient way possible ( 1998). As  and  (1996) suggest, human resource must be allowed to be involved in making work-related decisions to further improve the organisational structure. Furthermore, the proper way of structuring of tasks among the employees strengthens the organisational performance (, 1989). As various operating industries are aiming for competitive advantage and sustainable development among its management and operations, there are numerous actions that are being implemented and directed to the eventual success and growth of the company’s human assets. Similarly, globalisation issues increases the pressure among the industries and intensifies market competition. In competition, there is motivation in every business to improve and develop their objectives. For an enterprise to succeed in local or global competition, hence, there is a continuous plan to develop human resource management techniques such as planning.

This paper presents a comprehensive discussion on how human resource or people in the designer restaurant organisation can contribute to its human resource planning. Also, it critically analyses the potentialities of compensation strategy on whether or not it will benefit the designer restaurant in achieving its strategic direction.

 

The Role of People in Human Resource Planning

Planning is commonly known as the process of formulating in advance as organized behaviour or action. While it is true that people do not always plan their actions, it is inherent for any organisations to plan. However, whether dealing with the context by which planning is occurring or whether on the individual or organisational level, the process takes shape according to the prevailing attitudes, beliefs and goals that are involved. Planning is absolutely important for future human resource needs and possibilities. The firm's objectives should reflect standards of success in financial and competitive performance, as well as acceptable levels of risk and rates of long-term growth ( 2004) in the process of planning. The essence of human resource planning is the presence of a concrete plan of getting the right people particularly the employees as well as coaches in the given right place and time (and  2000).  (1995, ) provide a definition of HR planning as an attempt to predict future business and environmental demands and needs on an organisation and to similarly provide competent people to carry out business needs and gratify demands. Human resource planning is not simply a component of the HR function but it is perceived as a process that focuses on identifying an organisation's labour needs under varying conditions and at the same time developing the interventions and initiatives essential to satisfy those identified needs ( and  2000). HR planning is an essential aspect of human capital development ( and  2001, ).  and  added that human resource planning includes "job analysis, career planning, and other activities designed to identify what is best for the organization as a whole" (). Thus, it is a very essential as aspect of HR function towards every organisational growth and achievement.

HR experts and organisational leaders are involved in performing related series of tasks that ensure suitable human resources particularly on its identification, recruitment, selection, and development. They do so to improve business results and to remain at full alert, poised to do battle at a moment's notice. The knowledge and management of an organisation's human resources is pivotal to its responsiveness. In order to achieve organisational optimum performance, the role of people and organisational management needs to change from reactive to proactive. If it is to be used to an organisation's competitive advantage, it needs to go beyond merely attracting and retaining good people who will work in specified jobs. Management should also strive to gain a complete understanding of its workforce and develop organisational systems and processes that enable individuals to add value within a larger organisational unit ( and  1989). Then the question is: how the various people in the designer restaurant organisation can contribute to its human resource planning efforts.

Treating the employees as champions and as significant aspect of the organisation naturally results to other positive outcomes. Positive outcomes may come in form of a very constructive suggestion from an experienced member of the workforce.  and  (2000) welcome the input and recommendations of employees, particularly those who show a high level of mastery in his/her given area of expertise. For the given case, the employees of the designer restaurant must freely air their comments, suggestions, and feedbacks. It is identified that upper members of the organisation are responsible for the major decision making and taking mechanisms but the important contribution of employee’s suggestions is also given of sufficient value. A good suggestion from the labour force may result to the improvement of the overall organisational performance ( and  2000). A number of empirical studies have concluded that understanding people and organisational practices have a significant effect on the organisation, which leads to high performance and productivity (,  and  1999). One good example that identifies this relationship was the study conducted by  and  (1996). Utilizing 590 profit and non-profit-oriented firms, the researchers concluded that HRM practices like staffing, selection, and training are positively associated with organisational performance. At the organisational level, HR professionals engage in human resource planning, as well as recruitment and selection, redesigning the organisational system (including culture, structure, managerial practices, and work environment), and compensation and remuneration program ( and  2000, ).

Employees’ suggestions must be acknowledged properly by the management. As organisational performance is achieved through HRM functions, they mould the employees as significant contributors to the firm ( 2002). In return, the learning that is experienced by the employee in the working environment particularly in the designer restaurant is applied. Having the appropriate skills that are honed to the maximum level, people and organisational management practices will subsequently lead to the attainment of various goals of the organisation. From this relationship, it is then appropriate to conclude that the understanding of people and organisational management directly connects to the success or failure of the organisation. And the recognition of valuable suggestions counts a lot.

 

Challenges and Advantages in Human Resource Planning

            The core value of human resource planning as well as other HR functions like recruitment and selection is the enhancement of organisational competitiveness and renewal of existing capabilities that serve as the motivating factors of the whole organisation ( and  2000). Today's HR highly developed extensively in its sophistication and strategic planning processes ( 2004).

Human resource planning is a method of systematically arranging the future. It also includes putting into place a plan designed to address upcoming performance problems or productivity and quality requirements. Thus, the advantage of such process is the reduction of risks and threats that create impact to the whole organisation and its productivity.  By addressing unknown variables through HR planning, organisations have the opportunity to support and configure their expectations to guarantee definite and positive outcomes. Failing to do so would lead to uncertainties that will eventually create another organisational difficulty. The failure to conduct human resource planning endangers the organisation's future success.

Similarly, human resource planning is incorporated with the organisation's strategic plan that mainly involves development as well as other organisation-wide initiatives, which reveals a strong interdependency among other HR activities such as employee recruitment, selection, orientation, appointment, performance management, the learning and change process, career development, and compensation and rewards ( and  2000, ). If the process is not integrated in approach, it cannot optimistically create and develop the type and quality of labour forces needed to guarantee developmental organisational regeneration and competitive inclination.

The challenges of HR planning include the needs of the business, competitive pressures, and future HR trends and requirements ( and  2000, ). It is presupposed that organisations have their individual business needs and requirements. These may refer to the needs of better business returns, productivity, quality, value, competence, safety, and customer satisfaction. These needs likewise create anxiety within the bounds of the organisation, hence contributing to the other pressures directly related to the employees. To address such, a smart organisation should learn to anticipate resurging occurrences and how the quality and quantity of human resources can provide the given business needs. In general, businesses are motivated to meet future organisational needs, for this is also a determinant of organisational growth. For the issue of competitive pressures, this is apparently connected to the emerging culture of competition among the various industries in the global marketplace. An organisation is given the option to fight such pressures or succumb to its effects. To solve this, it is important for organisations to immediately formulate business solutions that can adequately respond to their competitors and among these solutions are the sufficient and competent human resources. This is practically effective if incorporated with the benefits of employee training and development. Lastly, the HR function is facing future trends that basically affect and transform its conventional functions. It is necessary to forecast future HR requirements as a result of emerging trends for the reason that the organisation will be ready with whatever circumstance that will occur. Thus, it will condition itself by having increased workforce quality and quantity, project outcomes, and minimise potential organisational hazards especially in the HR activities.

 

The Benefits of Compensation Strategy in Achieving Strategic Direction of Designer Restaurant

 

            Human resource management literatures proved that employee performance and productivity – individual or team, is likely interconnected with an agreeable remuneration system. Hence, managing remuneration, reward, or compensation is an important HR function. Given the existing circumstances regarding compensation present in the case of designer restaurant, a compensation strategy is a good action to solve such issues. Primarily, compensation serves as a very persuasive motivational factor in any working environment.

According to  and  (2004, ), employees become committed to perform well if organisations value and reward them especially in their set jobs. As a result, the organisation accomplishes more and it can then reward employees more and attracts and retain more talented employees. This leads to even higher organisational performance. It also involves developing a variety of HRM practices that motivate people to peak performance with accompanying rewards. Staffs, in turn, are more committed to the organisation and more responsible for their own behaviours (contribution, learning, development, etc.).

HRM practices can also influence levels of motivation through the use of performance appraisals, pay-for-performance incentives, and internal promotions systems based on merit (, , and  2003, ). HRM practices can also influence the design of work so that highly motivated and skilled employees can use what they know in performing their jobs ( and  2002, ). Giving incentives on a favourable performance appraisal is an example of a positive reinforcement that will impact the attitudes and behaviour of employees particularly those who show efficiency and mastery of the job. This mechanism falls under performance management functions handled by HR managers.

            However, there are some positive and negative consequences in giving incentives as compensation strategy. Incentives work as a positive reinforcement when used as a motivational factor and reward system ( 2001, ). It motivates employee to work for a common goal. On the other hand, rewards and incentives insinuate competition among employees, thus, breaking the perspective of teamwork ( and  2004, ). A compensation system that only rewards individual performance is not consistent with sustaining teamwork ( 1995, ) because the compensation system tells employees which behaviours will be rewarded and which will be punished (. 2004, ). If the system strictly reinforces individualistic behaviour, without any consideration for collaboration or collective goals, then teamwork behaviours will be inhibited.

In relation to the traditional system of incentives and incentives based on customer satisfaction in a variety of industry, the both possess similar operations. There is no significant difference in performance management except to the fact that they involve two different workforces but still working on one objective –growth in the case of designer restaurant operations. The potential solution to a balance incentives or rewards management lies in the hand of an effective HR manager and efficient HR function.

 

References