MPP Assignment - Final - Vincent Low

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<p>Analysis of UIT Hong Kong Sales Team Poor Performance and High Staff Turnover</p> <p>By Vincent Low Hock Mun MBA Student Henley Business School, University of Reading Henley, UK</p> <p>Assignment for Managing People and Performance December 20, 2009</p> <p>2|Page</p> <p>ContentsAnalysis of UIT Hong Kong Sales Team Poor Performance ...............................................................1 and High Staff Turnover.......................................................................................................................1</p> <p>...............................................................................................................................................................1 1 Abstract..............................................................................................................................................5 2 Introduction........................................................................................................................................5 3 Analysis of the Issues.........................................................................................................................6 3.1 External Realities.........................................................................................................................6 3.2 Structure and Culture within UIT.................................................................................................7 3.3 HRM in UIT &amp; the role of Line Managers...................................................................................8 3.4 Psychological Contract between UIT and the Hong Kong Sales Team........................................9 3.5 The Importance of Psychological Contract and Discretionary Behaviour....................................9 3.6 Breach of the Psychological Contract........................................................................................10 3.7 Wrong Performance Measurement leading to Poor Reward System..........................................12 3.8 Poor Training and Development................................................................................................13 4 ACTION PLAN................................................................................................................................14 5 Justification, Benefits and Implications............................................................................................14 5.1 Applying the Bath Model to UIT...............................................................................................14 5.2 Devolving some HR Functions to the Line Manager.................................................................15 5.3 Train Line Managers to manage the employee engagement.......................................................16 5.4 Managing the Psychological Contract and Discretionary Behaviour.........................................17 5.5 Setting Performance Measures and designing a total reward system.........................................18 6 Reflection and Learning....................................................................................................................20</p> <p>3|Page</p> <p>4|Page</p> <p>1 AbstractThis paper will examine why UITs Hong Kong Sales Team is suffering from poor performance and high staff turnover with emphasis on the Human Resource functions.</p> <p>Data for the analysis was gathered via interviews with the Sales Manager, and members of the Hong Kong Sales Team. However, quantitative data is not available as the HR department has refused my request for access.</p> <p>The paper will examine the various interdependencies between the Psychological Contract, Employee Engagement and Performance.</p> <p>The results of this paper indicate that there is a close connection between breaches in the psychological contract with the high turnover rate. Various theories and Frameworks were applied to arrive at a plausible solution to resolve UITs Hong Kong performance issues.</p> <p>2 IntroductionUnited Information Technology, Co. Ltd., (UIT) was setup in 2000 by 5 Individuals, all with substantial experience doing business in China. By the end of 2007, UIT had become the top Chineseowned company providing Data Storage Solutions in China according to International Data Corporation (IDC) (IDC, 2008). The market in which UIT operated in is one where the competition is intense, from well known international brands like EMC, HP and IBM, to small Taiwanese manufacturers like Promise and Infortrend. Within China, UIT had a well established brand, but outside of China, the brand was an unknown and untested entity.</p> <p>UIT had its main office in Beijing, where all the administrative functions are headquartered. It also has sales offices in Shanghai, Shenzhen and Hong Kong. The Hong Kong Sales office also housed its 5|Page</p> <p>international sales team, where this author, as the Regional Sales Director for South Asia, shares an office with the Hong Kong Sales Team. The Hong Kong Sales team consist of 1 Sales Manager, 2 Sales Executive, 2 Technical Engineers and 1 Sales Administrator. The Sales Manager reported to the Sales Director, who is based in Beijing. Unfortunately, the Hong Kong sales team, which was set up in January 2008, is suffering from a high staff turnover rate. The Sales Manager post has already been refilled twice and both sales executive positions have been refilled once in 2009. Only the 2 technical engineers and the sales administrator positions remained unchanged. This led to the inevitable low morale in the Hong Kong Sales Team, manifesting itself in the way the technical and administrative staff would eat lunch as a group (citation needed), while the sales staff typically lunched alone. There was little bonding between the sales staff and the support staff. The high sales staff turnover also meant that the Hong Kong Sales Office had not met any of its revenue and profit targets to date and it was the only sales office in UITs China operations that is consistently underperforming. It has also become a concern to the Board as the Hong Kong sales team was dragging down revenue and profit for the enterprise as a whole.</p> <p>Although there are other factors contributing to the poor performance of the Hong Kong Sales team, this author believes that the factors that directly can be attributed to the HR functions are: Lack of HR Policies and Line Management. Breach in the Psychological Contract. Wrong Performance Measurement. Poor Training and Development plans.</p> <p>3 Analysis of the Issues.In order to get a better understanding of the issues involved, let first understand the context in which the Hong Kong Sales Team is operating in.</p> <p>3.1 External RealitiesWith Chinas one party rule providing the necessary stable political platform for economic development (Younis et al, 2008), Chinas economy continues to grow during a time when most other developed economies are still recovering from the financial crisis of a year ago. This is also reflected in UITs revenue stream, where revenue generated in China still accounts for 6|Page</p> <p>95% of its total revenue.</p> <p>The China indigenous innovations rule, where a product must</p> <p>contain some elements of intellectual property that is owned by indigenous Chinese, effectively provides a level of protectionism for UIT products. Almost all of UITs customers come from the Central Government, provincial government, state-owned-enterprises, or medium to large local Chinese companies that would typically follow the purchasing policies set by the Chinese Central Government. This created a very strong China first focus within the company, even among its top managers.</p> <p>Unfortunately, the advantages enjoyed by UIT in China did not apply to the Hong Kong Sales team. Hong Kong, due to its history, has its own laws and governance, and the protection and stability that was found in the mainland did not extend into Hong Kong. Hong Kong was suffering from a bad recession in 2008 and 2009 and many enterprises and organisations had reduce, frozen or delayed purchases of external storage solutions. Also, Hong Kong was a mature market for external data storage, where large multi-national competitors of UIT have already been entrenched for many years. With the recession, many IT managers were also cautious of buying new and untested brands, preferring to stick with brands that were stable and familiar. UIT products also did not contain any significant technological advantage over its competition, as all the equipment are build to industry standards. All these contributed to slow sales, which exacerbated the sales team feeling of inadequacy.</p> <p>3.2 Structure and Culture within UITUITs corporate structure closely reflects it organisational culture. UIT structure can be</p> <p>described as a mechanistic organisational (Burns and Stalker, 1995) which is characterised by highly centralised management control, with clearly defined formal roles for both managers and staff, and a narrow span of control with an average of 3 to 4 staff per level. This form of hierarchy sits well with the Chinese as it also reflects the values and management style of the current set of top managers, which is still heavily influenced by Confucian ethics. Expert knowledge is quite often subjugated to power of position. This leads to little dissent, but also does not encourage creativity or initiative from staff.</p> <p>UITs mechanistic organisation would fit in Charles Handys culture model as a an orgnastion with Role Culture (C. Handy, 1985); where there is a clearly defined role for managers and staff, and that power comes from the persons title rather from his expertise. This cultural model of UIT is further supported if we apply Hofstedes cultural dimension (Hofstede, 2001) 7|Page</p> <p>to UIT. We find that the cultural measurement for China and Hong Kong share very similar cultural views, with great tolerance for Power inequality as indicated by their Power Distance scores. This also fits with UIT management style and culture.</p> <p>3.3 HRM in UIT &amp; the role of Line ManagersAlthough UIT has over 400 staff, its HR functions are rather limited. UITs Human Resource department is located in Beijing and the department is only responsible for:</p> <p>Non-managerial Recruitment Performance Management and Appraisals Training of new non-managerial Staff, in co-ordination with Product Department</p> <p>Legge, K. (1989), according to her article, would have classified UITs HR functions as primarily that of Personnel Management and would suggest that UITs HR function does not encompass a strategic nature. Majority of the personnel functions resides with the Sales Director, who was responsible for job design, managerial recruitment, approval of new hires, dismissal, setting of performance indicators, performance evaluation and benefits and communications with employees. It can be also be argued that the current HR strategy would be that of the Best Fit model (Boxall and Purcell, 2003a) where UIT cost leadership strategy fits into the description of Cost Leadership in a High Technology manufacturing environment. Unfortunately, the Hong Kong Sales Manager had neither power nor influence apart from setting local sales targets for his 2 sales executives, which in itself is subset of his targets, as assigned to him by his Sales Director. According to Purcell et al (2003a), Line Managers bring HR policies to live. In this case, the Hong Kong Sales Manager is hampered by the fact the position did not confer any control over recruitment, development and remuneration of his people. The accepted tradition of HR Management has been for HR specialist to provide support and services to line managers but with the control of majority of the HR functions being either in the hands of the HR department or with the Sales Director, the Hong Kong Sales Manager capacity to manage these resources effectively is greatly diminished (Armstrong, M., 2001).</p> <p>8|Page</p> <p>3.4 Psychological Contract between UIT and the Hong Kong Sales TeamWhen an employer hires an employee, most employees would be offered a formal contract of employment, stating the terms of their hire. This is an example of a formal employment relationship. However, contemporary HR practitioners also believe that an unwritten contract also exists between the Employer and the Employee and this is called the Psychological Contract. The psychological contract was described by Schein (Schein, E. 1965) as: The unwritten expectations operating at all times between every member of an organisation and the various managers and others in that organisation... Each employee has expectations about such things as salary or pay rate, working hours, benefits and privileges that go with a job the organisation also has more implicit, subtle expectations that the employee will enhance the image of the organisation, will be loyal, will keep organisational secrets and will do his or her best.</p> <p>The Psychological Contract is also defined by Armstrong (Armstrong, M., 2001) as the combination of beliefs held by an individual and his or her employer about what they expect of one another.</p> <p>3.5 The</p> <p>Importance</p> <p>of</p> <p>Psychological</p> <p>Contract</p> <p>and</p> <p>Discretionary Behaviour.We need to understand why a breach of the psychological contract can lead to a decline in performance and commitment from the employee. discretionary behaviour as making the sort of choices that often make up a job such as the way the job is done, the speed, care, innovation and style of job delivery. Discretionary behaviour is at the heart of the employment relationship since it is hard for the employer to define and then monitor and control the amount of effort, innovation and productive behaviour required. Purcell (Purcell, J., 2002) describes</p> <p>9|Page</p> <p>Employee chooses how conscientiously to they should undertake their job but this choice of how, and how well to do things may be an unconscious choice and can be withdrawn at any time, usually when the employee perceived that the organisation has breached its part psychological contract with the employee. The employee may feel that the organisation no longer cares about employee, or the employees future, or opinions. Ultimately, no matter what incentives or remedial actions the organisation may use to encourage positive discretionary behaviour from the employee, it is up to the employee whether to give it or not, as the case may be. And when there is collective withdrawal of positive discretionary behaviour, the morale and performance of the organisation will suffer. Our own experience tells us there are times when morale is low, or the buzz has gone, or everyone just wants to go home as soon as possible as is the case with the Hong Kong Sales Team.</p> <p>3.6 Breach of the Psychological ContractFrom the Hong Kong Sales Team point of view, they believed that the company has failed to fulfil some of the aspects listed by Armstrong (Armstrong, M. 2001). The team has the following grievances: Unf...</p>