Constructing A Business Case For An HRM Initiative: Importance Of Cost-Benefit Analysis, ROI, And Short/Long-Term Evaluation

HRM initiative

In today’s world where markets are essentially transforming into a global marketplace, diverse cultures and multi-cultural formats of organizations just cannot be ignored anymore (Boadway, 2016, p. 1569). Effective communication is becoming an essential business tool to self-sustenance. HRM faces a challenge to manage effectively such multi-cultural expectations. As opined by Chiang et al. (2017, p. 237), some of the common challenges on this front for entrepreneurs and HRM as well, in developing fruitful relationships with individuals or businesses from varied cultural backgrounds are:

• Reactive approach to adapting different cultural business expectations
• By not interpreting business ethics, formality, hierarchy etc. works and impacting decisions and negotiations on the way
• Coming across as impatient, aggressive and unapproachable in business
• Not transforming to a ‘we’ culture from a ‘me’ culture
• Unintended body language goof ups

For the project, the subject of cross culture management development programme has been selected as a HRM initiative for a Chinese mobile giant –Xiaomi. Also called as ‘Apple’ of China. Xiaomi’s funda has been good quality offerings at low price. Just in its 7^th year of operations, Xiaomi has made a name as an industry leader in China market and in 2016 it had started venturing out of China as part of its global strategy. Along with technological challenges, trade barriers, patent rights and various other challenges ahead, it faced a bigger gamble inside the organization itself, in its operation – to manage its slowly becoming diverse workforce. Attrition was on the rise just when the company was expanding and it needed more people to manage jobs, posts and effectively produce results in their responsibility areas (Connell and Burgess, 2016, p. 171).

Human Resource was asked to put together a strategy to combat the hovering issue of attrition that could catapult to a crisis scenario if not managed in a planned way. HRM along with other strategic position holders mainly from Finance and Operations planned to put together a MDP programme focussing on cross culture management after a lot of investigation of data (Ehnert et al. 2016, p. 91).

A committee was created by HR which included the following key stakeholders across organizations:

• HR Lead
• Finance Lead
• HR Recruiter
• Financial analyst
• Operations Lead
• Organizational Consultant

HR Lead was selected as the position understands the human resource value with respect to organization goals and objectives. Finance Lead was selected because he is supposed to understand the financial implications-long and short term for events that have occurred and planned for the organization (Rimi et al. 2017, p. 47). HR recruiter was selected to check the recent trends in hiring and interpretation of departmental reports pertaining to reasons of attrition. Financial Analyst was selected for interpretations and findings that need to be done to present data wise facts of past attritions and its effects. Operations Lead was called in to provide insights into ongoing issues in operations and how the human resources were impacting the operations across his department. The daily challenges, conflicts and situations leading towards attrition. Organizational Consultant was called in to put in together all the individual facts into a big picture and help people interpret the pointers and work towards a smooth plan to counter the issues being faced by the organization (Menshikova et al. 2017, p. 311).

The committee had recognised the problem as handling of attrition rates effectively as their challenge. Various data were analysed to check their current and past statuses to see what impact it had laid in operations/HR/Finance and other streams across organization. Data analysis specifically from HR showed a spurt in attritions and complaints from team members pertaining to behaviour of team managers. The attrition levels were at staggering 38% Upon further digging, it was revealed that issues usually were happening with new recruits and newly appointed managers from overseas. This acted as an eye opener for the committee who were looking at potential threat of instability of workforce and deteriorating morale. Hiring had been on the rise from last quarter or two and it would be in no time that the phenomenon could repeat across departments and at lot of levels with the numbers going up. The OD consultant suggested they work on MDP programme to manage the cross-culture and changing internal environment. They now had the task of finding out the financial impact the attrition rate had at present and if the situation was going to come around with implementation of an organization wide MDP programme (Imperatori, 2017, p.93).

Importance of cross-cultural communication in a global marketplace

The team sat down to analyse the financial repercussions of the attrition. They had to find out the activities that were affected after an employee resigned. They could roughly categorise it to 4 main steps:

1. Exit formalities
2. Looking for replacement through recruitment and selection
3. Hiring, Induction and training
4. Pressure for team to perform and share duties till the new resource is ready

Furthermore, about 20 indirect and direct tasks came into notice upon a resignation.

On recommendation from the OD Consultant and suggestion from HR lead, it was decided that there needed to be made a provision of cross cultural management development programme which needed to be implemented companywide across locations to arrest the problem. The programme was aimed at:

1. Increase awareness
2. Know facts appropriately before commenting on history, politics, culture, industries, strengths of nation, national pride matters etc.
3. Increase cultural rapport to make the path of professional respect and human behaviour sensitive to others needs and wants concrete
4. Build a culture of mutual respect and accepting each other

The data investigated by the HR recruiter and the financial analyst returned that 38% attrition happening in the organization amounts to approx. 28% of annual compensation of the employee. 38% attrition amounted to approximately $ 11 million, at 28%, the figure stood at $30,80,000

The management needed to be convinced to invest a programme of this sort to counter the issue of attrition and stop further deterioration of employee morale. For this, they needed to show some analysis that proved their point.

The committee sat down to conduct a cost benefit analysis to check what goes in and what came out. Their findings could be roughly categorized into the following table:

The committee agreed that some of the costs that would go in in implementing the programme were:

1. Training Needs Analysis Costs – to find out the real on ground scenario experts would have to be deployed, their cost, compensation of training programme designers, chart papers, handouts, media procurement
2. Training costs such as fees, facility cost, rental of venue, lodging boarding costs of trainees, transportation costs
3. Loss of man hours, the number of hours the participants will be off work

Value = Benefits-Cost

Some of the long term and short term benefits are:

1. Knowledge about culture will increase empathy and further on modify behaviour to improve intercultural relationships. More people know about background and upbringing of an individual, they are appreciative of how and why a person behaves in a situation or what his/her expectation are
2. With embedding of a cultural assimilation training program, members of one culture can smoothly fit and adapt into other cultural systems. With proper training, instilled values of a good team and refreshed outlook towards a diverse work culture it is easier for people to stretch their tolerance, expectation and try and fit in trusting the organization
3. Better prepares expatriates or junior level associates handle discomfort expectations better. Often even experienced expatriates who have lot of exposure to travelling to foreign countries work with different people face issues within a multi-cultural workforce. A proper exposure to the current work culture in the system and setting right expectations may go a long way in helping them cooperate, fit in and share knowledge and experience. For the new comers, such a training programme helps them keep an open mind.
4. Cultural assimilation with inputs on language, sensitivity and field training helps reduce time to establish business contacts or manage team members properly (Imperatori, 2017, p. 59). People make friends quickly if they can interpret and use the language in their environment. The cultural assimilation programmes would assist in learning the language and assist them better to blend in
5. Improve tolerance of other cultures and respect it.
6. Experiential approach to trainings helps develop necessary skills for productive performance, positive local interactions. Simulations, direct interactions, role plays etc. are good strategy to training individuals in group and learn in a fun way
7. Reduced attrition levels owing to better team managers and management. More the managers are self-aware and respectful they would be able to keep together and get productivity out of teams. Improved team cohesion also points out to good team management
8. Lesser complaints to HR. When team members would relate and appreciate cultures of each other, kisser frictions would take place leading to lesser grievances
9. New recruits are better trained with handling challenging situations before being released to the system

ROI calculations were based on

1. Impact on resources
2. Gestation time to implement

The committee agreed that MDP program was supposed to provide them with greater ROI owing to its long-term benefits. Committee discussed and expected the voluntary attrition to go down by at least by 10% for at least the coming 3 years. There would be an expected savings of $30,80,000 annually(approx.) and $92,40,000 over course of three years. The calculation of costs of conducting the LDP was approx. $10,00,000. The net business impact over course of two years would be ($30,80,000-$10,00,000=$20,80,000)

ROI = [(Benefits-Cost)/Cost of investment] *100

Or, [$20,80,000/$10,00,000] *100 = 208% (approx.) or 624% at end of 3 years.

It is important to put in place an evaluation programme for periodical interventions to check if the programme is going as expected and gaps that may need to be filled to make the programme better.

Both quantitative and qualitative techniques need to be deployed as evaluation tools to monitor progress. A case study could also follow.

Using different methods to check if same results are coming up would help in building a strong case to the top management to get their approval.

Criteria used were on patterns of a common framework used to evaluate the effectiveness:

1. Through reaction and content of trainees
2. Knowledge gain of participants
3. Application of knowledge at work
4. Organizational benefits achieved
5. ROI

Pre-training and post training feedback forms could come handy in collecting data from participants, self-assessment questionnaires, face to face interactions, knowledge based assessment questionnaires, situational behaviour quizzes, performance indicators already in use in the organizations and many more (Seeck and Diehl, 2017, p. 921).

Some of the short-term evaluation programmes could be:

1. Interview protocol
2. Self-evaluation of programs

Some of the long term evaluation processes would be targeted to collect data for checking

1. Impact on Employee morale
2. Attrition levels
3. Lesser employee complaints around behavioural and cultural intolerance
4. Change in working environment
5. Smoother acceptance and adaptation of multi-cultural members in to the working environment
6. Improved work productivity and efficiency with a diverse culture

Case study: Xiaomi

Such evaluations require monitoring the effectiveness of MDP programmes periodically. Without proper monitoring and recording of evidence, over time; the gaps would not be visible in the programme and accurate diagnosis would take further time and investment of resources of organization (Ren and Chadee, 2017, p. 157).

With the introduction of a MDP programme properly structured and carried on by experts, Xiaomi’s challenge towards managing a cross cultural environment would become manageable and with cooperation from top management and participation of employees help turn things around positively.

The MDP programme, was expected to affect the organization at three levels mainly:

1. Employee Productivity – local norms and regulations compliance is one of the challenges faced by expatriates. Exposure to experiential training programmes which increase self-awareness, appreciation and tolerance of local culture and behaviour always improves the job performance. In a business environment, where various cultures interact, it is necessary that the absence of a proper cross cultural training programme does not impede communication and interpersonal relationships among colleagues. Due to the absence of a common cultural framework, it is easy for friction to occur. A training programme of this structure could assist in breaking down barriers to interpersonal relationships and differences in culture by fostering communication
2. Employee Retention – Attrition posed itself as an operational challenge at Xiaomi. Implementation of the MDP programme across levels and locations would assist in retaining multi cultural workforce better. No matter the employees are new or experienced. When people learn about themselves and others, they become more aware, it encourages them to build healthy relationships and conduct themselves in acceptable formats for work by building trust. It keeps the motivation levels up in teams. People use common ground instead of brooding over differences. The CCT encourages a sense of mutual respect and there are lesser instances of people resigning
3. Successful venture – With a stable workforce tuned to realizing the goals and objectives of the organization, the organization is only poised to gain from the implementation of the programme

The project was an eye opener as it highlighted the important of respect for different cultures and how humongous a challenge it is for HR Managers to keep the momentum of the work environment while taking care of people sentiments at the same time. A person could be an asset to the organization but he is also expected to be progressive in his attitude and should keep on making efforts throughout to walk ahead with his team members. Leadership should teach his team to respect each other and keep them together as well.

The organization as big as Xiaomi trying to venture into the world has expansion in its plan of growth. The entire plan could collapse if right people are not in the system. A good OD intervention would help to create the vision and convert it into a successful support system for the organization.

It was evident that cultural diversity benefits were numerous but without a proper cross cultural training programme, its benefits could not be realized in an organization. Cross cultural training or CCT helps minimize the negative effects and multiplies the positive effects of diverse work culture. A good and effective CCT programme assists expatriate to master the language which in turn helps them establish healthy relationship with local contacts which is fruitful for the organizations growth. However, it is to be noted that this alone cannot make them savvy in the new environment. CCT also shortens expatriates’ time to blend in to the new environment, familiarizes them with what to expect and increases their productivity overall.

Xiaomi realizes the fast changing market and daily tech innovations are the constant things of present and it must be internally strong to take the legion ahead and establish a valuable brand. 

References

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