Strategy
The organisation’s strategy in terms of long-term goals and distinctive competencies should be taken into consideration before introducing or making changes to the HR policies. The organisation should identify if its strategy would fully support the new HR policies. This would require the recognition of the HR policies as key in the company’s strategy and as a crucial element in the decision making process.
The success of HR policies will depend on the acceptability by the company’s corporate decision makers. For a company to utilize the HR policies as intended, it would require the top managers’ support. They would need to be in touch with the workers so as to make sound decisions that would propel the company to greater heights of achievement.
It is very unfortunate that most companies ignore the HR policies or place them secondary to other concerns. This makes it impossible to put in place a reliable process of formulating effective strategies to manage the human resources of a company. This is a clear indication that the corporate decision makers need to recognise the HR policy formulation and implementation as an essential part in running the company.
A survey conducted to find out the opinion of company top managers on the influence of HR policies in the company’s strategies revealed varied opinion on the matter. They expressed both offensive and defensive opinions on the topic. However, the majority acknowledged the importance of spending time and resources on HR policy activities. This opened a window whereby the workers are comfortable with the company and strive to produce best quality products. Companies that put HR policies as part of their strategies experienced higher employee satisfaction and improved performance.
Though the findings of the survey are promising to a great extent, there still exist hurdles emanating from less managerial support within a few companies in successful formulation and implementation of HR policies. Several factors hinder the managers from fully supporting these strategies. Firstly, some managers do not know the importance of HR policies or lack the know-how in implementing them. Secondly, some managers are likely to overlook issues pertaining to successful implementation of the policies. This may be due to ignorance or perceived loss because of the additional costs involved. Finally, the management may develop preconceived notions that may marginalise efforts to develop effective HR policies.
Workforce
Work-force is another important element in the five factor framework. It concerns factors dealing with the demographics such as homogeneity of the workforce. The HR policies should ensure that the workforce is fully supported to produce desired results. This like uniformity will consider issues to do with education, work experience, and skills possessed by the workers during their service. The demographic factors may have serious implications on the HR policies if not looked into carefully.
The skills possessed by the workforce are essential for the success of the company. This requires the company management to be able to understand what is needed by the workforce for effective production. This will avoid the management from creating ambiguous HR policies by involving the personnel in their formulation and implementation. Successful implementation of the policies will enable the management to avoid constant interference of the workers in a bid to give guidelines. This will minimise confusions emanating from either too much or too little guidance by the management. Therefore, an effective HR policy will ensure that the level of direction from the management is effective in making the workforce produce optimally.
The HR policies help plan the workforce effectively. This enhances team performance as every worker is geared towards achievement of a specific goal. It enables workers to gain greater concern for the interests of the company and their fellow colleagues. With proper planning, a company is set to deliver as required by the market hence fulfilling the overall goal.
It is crucial for the human resources department to possess excellent communication and organisational skills. This will ensure success in playing their role of developing and implementing effective HR policies within the organisation. Moreover, the human resources department needs to develop effective networks within the company that will capture the views of the workforce. This will help in decision making by the top management regarding the workforce. It would also create an avenue for relaying important information to the workforce regarding company requirements. The feedback system will monitor the reactions and views that can then be communicated to the top management for review.
All members of the human resources department need to acquire certain skills to effectively deliver the HR policies to the workforce (Klikauer, 2007). It is essential for them to be creative and resourceful, and have passion to dig deep into issues relating to the personnel. They should also be able to deliver important insights that can be utilised in policy formulation. This will need the incorporation of a broad array of expertise in the department through inclusion of persons with different educational and work backgrounds. This will ensure that the experts produce unbiased HR policies targeting the workforce.
Culture
According to Baron and Kreps (1999), culture within an organisation refers to the work attitudes, norms of conduct, and the assumptions or values that influence or direct behaviour in the company. The HR policies are hugely based on the cultural aspects of an organisation. Many companies claim that the HR policies are an integral part of the business due to their cultural structure (Schein, 1999). However, there are discrepancies when it comes to implementation and proper utilisation of the policies.
More often than not, most departments within an organisation may fail to understand the crucial role played by the human resources department. They may have a general picture but often lack the details. The policies formulated by this department do affect all the workers in a given organization. The department provides staff and manages their affairs during their service in the company. This includes the essential function of formulating policies. However, most organisations fail to fully recognise this essential function.
A threat faced by the policy formulating body is lack of cooperation from other departments. Since the findings may influence the company’s strategy, some departments may give false information that exaggerates matters on the ground. This arises as a result of lack of proper knowledge of the policy formulation function.
The organ dealing with policy formulation under the HR department may not have sufficient number of staff. This results in overworking of the existing staff, who are often under-trained and are given other responsibilities in addition to their direct job duties. In some cases, less funds, materials and equipment are allocated to this function making the employees fail to adequately deliver their mandate.
Sometimes other departments fail to communicate their needs to the HR department clearly. For formulation of effective HR policies, extensive information networks must exist within the organisation. The networks within a department must not specialise only with what is affecting their department, but should utilise the views from other departments as well. This will ensure the formulated policies harmonise the needs of the company in question. However, many departments develop a sense of ownership that makes them generate views that are not a complete representative of the company. This may distract the HR policy formulation process.
In order to overcome the challenges, a company may need to inculcate a culture of strong leadership. This will ensure that the organisation speaks in one voice. The management also needs to develop credibility culture. This will make the workforce share genuine views on what needs to be included in the HR policies. The result will be respect for professional in the entire organisation.
Technology
This is yet another essential element of the five-factor framework that includes a broad spectrum of ideas. Technology as an element is concerned with the conversion of labour inputs to outputs. This means that it seeks to identify the organisation and coordination of tasks. It identifies required skills for employees, monitors the personnel, and contemplates the task creativity and ambiguity (Baron & Kreps, 1999).
For one to be included in the human resource function dealing with policies, one has to be fully trained in areas that would make them deliver their mandate. At the present moment, recruitment to the human resources department is highly competitive due to the high number of graduates with proper qualifications. However, the company needs not only to get the best for the job, but also invest in appropriate and extensive training for HR policies function to succeed.
The employees will require excellent presentation skills, knowledge of international business and culture, interpersonal skills, computer literacy, linguistic, analytical and research abilities. These skills will help them execute their duties effectively when formulating and implementing the HR policies.
Monitoring and evaluation will be essential to prevent moments of failure (Shore, 2012). This will require the HR to keep track of its functions regarding policies. To do so, the HR department will need to monitor the employees’ reaction to policies, overall quality of work, level of effort, and more importantly, the feedback from customers. Similar to all effective operations, the HR department will require a control system that would ensure productivity of the employees. However, the control mechanisms need not to constrain employee activities. This may inhibit creativity.
Customer feedback is very important as a measuring tool of the effectiveness of the HR policies. Customers’ comments will help the management make necessary adjustments to the policies in a timely manner. The feedback will determine whether the policies are aligned to the customer expectations. The system will also enable the HR department understand policy contributions and assist in justification of the budget, role, and position.
The human resource department requires unique individuals who will effectively carry out the duty of policy development and implementation. The team is crucial and the members will be charged with the responsibility of formulating policies that will challenge conventional thinking, counter cultural attitudes, and provide a solution that will include the competitive environment.
However, it is difficult to control performance due to high level of job ambiguity (Baron & Kreps, 1999). This is so due to the fact that tight control does inhibit creativity. In order to avert failure, the HR department may introduce controls on the scope of policies it formulates. This will ensure a clear understanding of what is expected under given policies. The management of the HR department must ensure that the policies are clearly outlined, given the deliverables and boundaries. It will help the company maintain a realistic expectations upon implementation of policies.
Environment
The external environment is the final element of the five-factor framework. It considers economic, legal, political, and social forces. Societal forces are based on widespread norms and acceptances. It also includes corporate social responsibility of a given company or organisation (Ferris, Rosen, & Barnum, 1995). Political forces include expectations of both the government and the corporation. Legal forces concern the legislation requirements that the corporation need to adhere to. This includes the rights pertaining to workers both as individuals and as a group. The economic forces constitute conditions in the market that may influence the competitive economy and the extent of labour mobility, among other economic pressures faced by the organisation. These environmental factors do influence policy formation by the HR department. It especially influences corporate ethics and the ability to maintain ethical standards.
It is a common misconception that the HR policies are aimed to legitimise illegal business competitive practices. This paints a picture of unfair competition by the company in a bid to pressurise the workers to produce outcomes. As a result, many people view the policies negatively jeopardizing effective implementation. However, such public opinions often have fewer repercussions on the performance of the company. This is because the policies establish outlined code of conduct to be observed by the workforce (Barling, 2008). It is important to note that policies that introduce unethical practices create confusion, disgruntlement, and misaligned judgment (Marchington, Wilkinson, & Sargeant, 2005). Subjecting employees to such practices may force them to produce less quality work or resign from the workforce.
Political and legal forces are essential when formulating policies in the HR department. However, it is difficult for legislation to cover all the areas outlined in a policy. This leaves room that may lead to introduction of unethical practices. It is at the jurisdiction of the management to adopt ethical methodologies or provide guides that support ethical conduct when creating the HR policies (Trevino & Weaver, 1997).
Economic forces are pertinent in the formation of HR policies. Since companies are in a competitive environment, there is the need to establish an effective HR department. Even though labour turnover and mobility is high in the HR department, a perceptive firm will not cease making additional investments through training of its employees. It is a common practice for companies to lure workers to join their HR department. This has detrimental effects on the original company. This will require reinvestment of resources in replacing and training new staff. Overall, a company has to formulate policies that will steer its production to greater heights. It has to strategically position the company in the market so as it is able to maintain or improve its performance in the market.
Basic Explanation of Privatization
According to Sheshinski & Cavla (2003), privatization theory is a key component in a structural reform program. Its main aim is to achieve microeconomic efficiency that fosters economic growth in both developing and developed countries. It reduces public sector borrowing by eliminating unnecessary subsidies. Microeconomic theory reveals that incentives and contraction of problems create inadequacies caused by public ownerships hence calling for privatization. This is because managers of publicly owned firms peruse political agendas making less effort to ensure good management. This is different in private firms. Privatization is said to increase profitability and efficiency in both competitive and monopolistic sectors. Profitability increase is explained by productivity increase reflecting on the market power.
Q1. The United Kingdom electricity industry was privatized over twenty years ago. Explain what privatization is and describe how the industry was divided into various companies in three distinct segments
In the United Kingdom, after privatization of the great British energy two decades ago, IoS investigations conducted by H. Cox (2012) exposed British energy rip-off through privatization, which was not working for the people. This can be perceived as a failure in the implementation of energy privatization. The investigation has evidently exposed giant rip-off for British tax payers, which had been championed by Thatcher government and implemented on new labour laws focusing on nationalization for the United Kingdom to private sectors. The big six United Kingdom energy firms have been accused of holding a stranglehold two-thirds market share of the consumers in their respective regions. This is in the wake of realizing that over 70% of households in the United Kingdom have the same supplier of electricity. This number increases to 85% in some regions. This has undermined the capacity of the government and Ofgem regulator to ensure that competition in the energy market is effective leading to a closer monopoly due to domination of some regions by a single supplier. As a result of these effects, David Cameron pledged in the House of Commons to make these big six energy suppliers to reduce power tariff for households. This led to intervention by the Prime Minister, who clashed with the Liberal Democrat Energy Secretary Ed Davey with support from Efgem. They both advocated for a simplified tariff system allowing customers to easily switch between firms offering electricity (Merrick 2012).
According to Merrick (2012), energy industry in the United Kingdom has been divided into big six energy firms that have been segmented geographically into Northern Scotland, Midlands, and Southern segments. Northern Scotland SSE inherited its network from Scotland Hydro board providing retail electricity in South Wales and southern region. Midland region is further divided into east and west midlands in Yorkshire.
To solve this problem, Yate (2012) insists that the government should take back energy companies. Both suppliers and wholesale producers should be brought back into public ownership to control over exploitation of the taxpayer. Also as a recommendation for better electricity supply, the government of the United Kingdom should reverse current system and disband the premium of loyalty paid by old customers (Merrick 2012). This is an act of exploiting the tax payer obtaining excessive profits, which is not justified.
Q.2. Explain the market structure of the retail supply of electricity in the UNITED KINGDOM and discuss the impact this has on the performance of Npower and its customers. Compare this to other market structures.
British gas holding has 76% (the largest retail share) of the United Kingdom market nationwide, EDF dominant in London with 74% market share supplying 73% of homes with electricity in South East and 71% in South West. Npower, on the other hand, is a key player in West Midlands holding 65% of the retail market share. This is in reference to 65% share in Yorkshire and 64% in North East. E.ON Company has 69% in East Midlands, 68% in Easter region, and 67% in North West. Northern Scottish, SSE holds 85% of the retail market electricity in South Wales, 82% in Southern region, and overall 80% energy share. SSE has been offering exceptional service standards making it the best recognized firm in energy market. It is mainly focused on customer satisfaction and uSwitch. Scottish power holds 82% in Southern Scotland and 73% in Northern Wales. These figures do not ally to dual fuels according to Merrick (2012).
Npower had been expecting a larger market share in West Midlands favoured by its history. This is because most of the Midland electricity Board customers has remained under the newly formed name. Generally, customer turnover rate has been impressive with some leaving and others coming back showing loyalty to the company. Npower holds that many people in midland electricity board prefer Npower rather than British Gas as “the Gas Board”. Npower provides incredibly high value to its customers and also those based in the North East where it feels as members of the two communities.
Npower has also been projecting consumers' annual spending to be 208.37 pounds for 1,620 of electricity, 531.78 pounds for 11,260 kWh of gas, which was a hike of 8.8%. British gas, on the other hand, has been trying to reduce their tariffs using an automated apology for delays due to big number of customer calls. E.ON takes no frees for phone calls and takes less than a minute to respond to a client and handle his business need. It has been offering energy discounts of 3% for 12 months, but this does not apply to situations when price rises. It is similar to remortgaging a house. This standard charge is 787.93 pounds. An energy discount of 752.69 pounds and a fixed value of 776.48 pounds were offered. The fixed two for E.ON was 816.39 pounds, which was 5% above standard unit, but one is immune against price hikes. It had increased its prices in 2012 for ‘big six’ companies that announced the increases hoping to maintain their profit levels. SSE takes seven minutes to respond aiming to reduce its rates, like the British Gas, where they aim to reduce daily charges from 16.44 to 14.8 with paperless billings. The Scottish power estimates a bill of 816.57 pounds using online quotas, but when using phones it amounts to around 755 pounds.
Due to the prices and customer focus, Npower proves to be better and more economical in the United Kingdom energy sector.
Through research, evaluate whether the privatization of the electricity industry in the UNITED KINGDOM has been a success. Use a range of academic sources to justify your answer. You will need to think about this in terms of investors in the companies, customers of the companies and the Government’s divestment.
Privatization of energy industry in the United Kingdom has not been a success as opposed to privatization in other industries, like train facilities. The research conducted by various organizations revealed that there has been an exploitation of the taxpayer since privatization of the energy industry. Government official figures indicated that companies supplying electricity to homes have inherited their network from former utility boards. These companies are seen operating in a closer monopoly. The companies have been mocking customer switching to gain better deals as a justification of competitive market setting.
Department of Energy and Climate Change (DECC) has revealed that customers who have maintained their old electricity suppliers have been paying more than the newly switched ones. Home suppliers annually charge an average of 31 pounds more than non-home suppliers for electricity. This is in the effect of premium placed on customer loyalty. Energy firms have also constantly pushed up fuel bills beyond inflation rates from 80 pounds to 112 pounds. This has caused an outcry of British Energy because of increased annual average household bill. The competition that existed in 1980s has evolved to monopoly in different regions in the United Kingdom.
Government removing Ofgem controls has played a key role in encouraging monopoly of these major energy players causing its failure due to little competition among them. This has raised political concerns as the parliament has been forced to intervene. Labour was naturally capitalized, which turned to be a public suspicion, and hatred emerged towards electoral political issues. Shareholders and investors in the energy sector have been referred as fat cats by Tory press due to their returns at the expense of the taxpayer (Warner 1997).
Ms. Flint reveals that, it is no wonder that energy giants in the United Kingdom have been hiking up energy bills when they already have stranglehold over entire energy market. Citizens of the United Kingdom have been complaining about big six electricity giant suppliers and, actually, there is only one supplier in town. The fact that 70% of other citizens in other regions are served by a single supplier indicates that the market is not functioning as intended (Merrick 2012).