The Role of Human Resource Department in a Manufacturing Company
Any organization in the manufacturing sector would require human capital to grow and prosper. At present in Australia, the manufacturing industry is one of the fastest growing service industries. As such, the industry contributes to a major chunk of the national economy, roughly 12 % globally (Cania, 2014). Without valuable human resources, no company would be able to make progress in this fast paced industry. In the manufacturing companies like Volkswagen Australia, the department of human resources plays a crucial role in ensuring the overall success of the organization and provides it with a competitive edge in the ever changing and dynamic business environment Jackson, Schuler and Jiang, 2014). The process of organizational development is one that emphasizes on optimized utilization of a company’s human resources. Although manufacturing companies like Volkswagen are growing at an alarming rate, the workforce is unfortunately shrinking. In Australia, the average age of a highly skilled laborer in this industry is almost 55; this affects the productivity of the overall workforce. In the second chapter of Robin Kramar’s book on human resource management, the authors Jamali and Afiouni discuss that one of the major challenges that the human resource department in a manufacturing company faces is attracting of potential employees and retention of existing ones (Kramar, 2013). The following essay will focus on the key challenges of the human resource department in manufacturing sector (using Volkswagen as an example) with special emphasis on legal, ethical and safety concerns, performance management, diversity and work life balance, employee turnover and retention and motivation and rewards as employee retention strategies.
Cania (2014) states that the human resource department of a manufacturing company would be responsible for the development of policies and strategies which would cover all the myriad concerns and interests of the employees. These include recruitment and selection, organizational development and design, change management, performance management, attitude towards the organization, employee and industrial relations, personnel data management, evaluation, training and development, compensation and rewards programs (Gamage, 2014). Ekwoaba, Ikeije and Ufoma (2015) state that the workforce in a manufacturing company is mainly divided into two segments – the management and the workers. The main function of the human resource department in a manufacturing company would be to act as a mediator between the two segments (Kramar & De Cieri, 2005). For instance, most manufacturing companies have witnessed periods of unrest, strikes or strife on part of the workers. Even Volkswagen has witnessed a number of such strikes in 2017 to protest against low wages. In such cases, it is the human resource department that is expected to step in. In a manufacturing company, one of the major responsibilities of the human resource department is employee retention and turnover.
Employee Retention as a Crucial Goal
Bansal (2014) claims that employee retention should be the primary focus of every organization. As the name suggests, employee retention is a concept in human resource management which deals with the ability of an organization to retain its existing employees. Retention of employees is an organizational goal which ensures that a company is able to retain its talented workforce, reduce turnover rates and foster a positive working environment which boosts employee morale and promotes engagement. In other words, employees who feel appreciated are twice as more likely stay back with a company. Cloutier et al. (2015) argues that providing employees with privileges, compensation, incentives, recognition and competitive pay are just some of the strategies that can help retain existing employees. In the highly competitive business environment today, manufacturing workers have a plethora of options ahead of them. If they happen to be dissatisfied with certain aspects of their current place of work, they need not think twice before switching. For example, in order to retain their employees, Volkswagen offers its employees a number of benefits like rewards and recognition, compensation in the case of mishaps, paid parental leaves and so on. Hancock et al. (2013) argue that a certain percentage of employee turnover is normal for any company. However, specific industries like manufacturing would be more susceptible to the dangers of high employee turnover rates. This could be due to the legal and safety concerns, wage issues and difficulty levels of work that is traditionally associated with his time of work.
Stanley et al. (2013) claims that one of the major factors that affect the levels of employee turnover would be the attitude of the workers towards their company or their line of work. For instance, in manufacturing industries, it is estimated that the job satisfaction levels are often low which could cause employees to leave. Hausknecht and Holwerda (2013) argue that the more committed an employee feels to his job, the less likely he is to leave. For in the case of Volkswagen, it was found that nearly 25% workers in the factories failed to report for work on time on most days. Accordingly, the company reported a high rate of employee turnover (Mowday, Porter & Steers, 2013). According to Terera and Ngirande (2014), there are a few factors which contribute to low employee retention rates and consequent high employee turnover. For instance, a lack of a clear and progressive career path could lower the morale of the employees. Similarly, financial insecurities are another major contributing factor for employee turnover. Aruna and Anitha (2015) argue that a large number of millennials working in the manufacturing industries are troubled by financial insecurities. In fact, surveys showed that nearly 52% workers in manufacturing companies were worried about their finances and were dissatisfied with the quality of work they were compelled to do. Aguenza and Som (2018) claim that ineffective communication in the workplace is another factor that contributes to high employee turnover rates. In companies like Volkswagen, there is often a major gap in communication between the workers and the management. While the latter often fails to communicate their decisions and policies, the former is often unable to communicate their grievances and concerns. Such miscommunication could lead to employees feeling demotivated and unappreciated, which could trigger their decision to leave.
Factors Leading to High Employee Turnover Rates
According to Bryant and Allen (2013), compensation and performance appraisal systems are some of the most common methods of ensuring employee motivation and employee retention. At every manufacturing company, each employee will have a set of goals and objectives which they would have to fulfill. On the attainment of these goals, feedback (especially appraisal) can prove to be instrumental in boosting the morale of the employees. Raines (2013) argues that in the manufacturing industries, most of the managers fail to provide honest and candid feedback to the employees. This can make the employees feel unnoticed and even underappreciated. Dobre (2013) defines employee motivation as goal oriented behavior or an incentive to act. For the human resource department, it is essential to identify and make use of ways that would best motivate an employee. The most common methods of employee appraisal include incentives, bonuses, rewards and recognition and compensation. The promise of such rewards and recognition and compensation programs would determine how an employee feels about his job and whether he would be willing to put in the extra effort. For example, if Volkswagen extended its performance appraisal systems to all employees of the company, it would be a smart strategic move on the part of the human resource department. This is because such methods of employee motivation would ensure that the employees are committed to their work and would thus contribute to the optimal achievement of the company objectives.
According to Gupta and Shaw (2014), compensation is an important aspect of employee motivation which of frequently ignored in a number of companies, especially in the manufacturing industry. It is common knowledge that employees would be better motivated to work harder if they received sufficient payment and returns on their efforts. In fact, it is the pay scale and the promised benefits and privileges that lure in new talent in an organization (Van Hoye et al., 2016). Also, the increase in consumerist attitudes amongst people and high levels of competition in the economic environment has led to an increased desire for money. In other words, through compensation, companies would be giving their employees exactly what they want – monetary benefits. Lazaroiu (2015) however claims that compensation can be in any form ranging from indirect financial payments to direct financial payments. An example of direct financial payment would Volkswagen which ensures that their employees and workers get increments at regular intervals. There is a significant hike in salary when the employees are promoted from one level to another. Other forms of monetary compensations would include performance bonus, commissions and even profit sharing. However, Yamoah (2013) claims that at present, a number of nontraditional incentives and compensation programs are being introduced by companies. For example, in some companies like Volkswagen, employees or workers who demonstrate exemplary performance in a particular month would be rewarded in kind. This could be in the form of tangibles like cars, houses or even vacations.
Employee Motivation and Rewards
Arnaboldi, Lapsley and Steccolini (2015), performance management is of utmost importance in some specific industries, like manufacturing. Performance management would refer to the process where both employees and managers work together to plan, evaluate and also review the work objectives of the former and their contribution to the overall performance of the organization. It must however be argued that performance management is different from annual performance reviews. This is because it entails a continuous setting of goals and objectives, assessment of progress and providing of candid feedback on the performance levels of employees. Bach (2013) claims that in the manufacturing companies, performance management should be job specific. For instance, in the case of Volkswagen, the parameters used for performance measurement of the top managers would be different from that used in the case of the factory workers. It should also be aligned with the strategic direction and company culture. The most important characteristic of a performance management system is accuracy; failure to paint a vivid picture of the employees’ performance levels would be detrimental to the performance of the organization as a whole. The function of performance management system in a manufacturing company would not simply entail evaluation of company performance. It would also highlight strategies and tactics that the company can use to motivate employees, boost their morale and improve the overall productivity of the workforce. A performance management system should also be able to highlight the various flaws and glitches within the system and point out room for improvement. As such, the human resource department would be required to provide constructive feedback for each employee and establish a plan for future improvement. For example, in Volkswagen, the performance management system in Volkswagen is based on a collaboration between the management and the employees. Co-determination rights and employee representation is an integral aspect of the company’s success.
Vukši?, Bach and Popovi? (2013) suggest that there are several tools for performance management. In manufacturing companies, there is a huge workforce and it would be impossible for the company management to pay due attention to each individual employee or evaluate their performance manually. In that case, utilization of performance management software would help in streamlining the strategic management of a company. Such software would offer traditional reviews on employee performance, is employee friendly and paves the way for easy and hassle free reporting. Usage of such tools and software would foster employee development within the manufacturing industry.
Compensation and Performance Appraisal Systems
Martin (2014) claims that any organization is a conglomeration of various individuals, each with a different set of ideas, concepts, values, cultures and traditions. In the manufacturing industry which usually has a huge workforce, there are bound to be conflicts between people belonging to different cultures and traditions. Most manufacturing companies thus use diversity management strategies to retain existing employees and attract new ones. For instance, Volkswagen has a diverse workplace and plans to implement a robust diversity management system by the year 2020, in order to create a positive workplace culture and an inclusive organization environment. Such an initiative would also reduce bias and discrimination in the workplace. Canas and Sondak (2013) argue that if employees perceive bias or discrimination in the workplace, they are twice as more likely to leave. Multicultural and diversity management is a common term used in a number of manufacturing companies which validate and recognize individual and cultural differences between people. The essential principle on which diversity management in an organization is based is that of respect and acceptance. All the workers in a company need to recognize and accept the fact that different employees have different ideologies and beliefs and therefore, a degree of tolerance must be maintained. Strategies for this would include mentoring initiatives within the company, training and awareness programs and so on.
Deery and Jago (2015) are of the opinion that a steady work life balance is another crucial factor that determines the employees’ intentions to leave. Rife and Hall (2015) have proved that apart from monetary advantages, the working environment in a company is what determines employee retention. In the seventh chapter of Robin Kramar’s book on Human Resource Management, Holland claims that changing work structures have had an impact on employee performance (Kramar, 2013). The workers in the manufacturing companies require a standard work life balance – or a healthy balance between the professional and personal lives. Kirby (2017) shows that every one in four employees working in an organization is prone to professional burnouts. Such employees are likely to leave their companies within a period of two years. On the other hand, employees who feel that their organization supports them and offers a steady work life balance, are likely to stay back. Jones, Burke and Westman (2013) justify the impact of work life balance on employee retention and employee turnover from a psychological point of view. For instance, a number of employees at Volkswagen have complained about exceptionally long working hours, which often causes them to miss important personal events or social gatherings. If this trend continues, the employees will begin to wonder if the monetary benefits or bonuses or salary they have received compensates for the effort they are putting in. If employees feel that they are putting in and giving up more than what they are receiving from the company, they are likely to leave. Thus, it is important to incorporate strategies that ensure a healthy work life balance – like flexible working hours, a paid vacation for top performers and health check-ups from time to time, to ensure that the employees are mentally and physically fit for work.
Importance of Compensation in Employee Motivation
Aswathappa (2013) claims that the human resource department of an organization is responsible for ensuring that a code of ethics are adhered to within the organization. In the fifth chapter of Robin Kramar’s book on Human Resource Management, the authors Wilcox and Lowry stress on the importance of ethics in business (Kramar, 2013). The code of ethics within the manufacturing industry is based on the principle that an employee should treat others as he would treat himself. Various companies use strategies like social media to implement their code of ethics (Gelinas et al., 2017). These factors directly contribute to the levels of organizational commitment and job satisfaction, which would further affect the intentions of the employees to leave. If an employee feels that the work he is doing or the work that his supervisors are doing is ethical or meaningful in nature, he or she is more likely to stay, thus reducing employee turnover. Furthermore, the human resource department of an organization has certain legal obligations as well – these include contracts of employment, non disclosure agreements, terms and conditions related to operations, harassment, wage and labor laws, conciliation and arbitration, equal employment opportunities, human rights, safety issues and so on. Moreover, as Tong et al. (2015) state, the manufacturing industry is a high risk sector with high chances of occupational health risks. For instance, the workers are expected to handle dangerous materials, heavy machinery, work outdoors and are often subjected to hazardous materials. This increases chances of errors and accidents, some of which are potentially life threatening. In that case, the human resource department would have to implement strategies like safety training which would educate the new and existing employees of the company about potential health hazards and reduce chances of such mishaps.
To conclude, it can be said that employee retention and recruitment are two of the most important aspects within any industry, specifically the manufacturing sector. Manufacturing companies like Volkswagen rely entirely on the performance of their human resources. The ability to attract and retain employees would depend on a number of factors – the working environment, the performance management system, the compensation and privileges provided by the company, the attitude of the workers and so on. These factors determine the attitude or the perception of the employees towards their company. If the job satisfaction and organizational commitment of the employees is high, the employee retention and recruitment levels will be high, thus reducing the employee turnover.
Performance Management in Manufacturing
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