[MBA] Case Study : People's Home Gadgets (PHG)
People's Home Gadgets (PHG) is a relatively young company that competes in the consumer electronics and appliances industry (TVs, computers, kitchen appliances, etc.). It has quite a large selection of items, and the range of the products PHG carries spans the price spectrum of very low cost to very high end. For example, some of the company's kitchen ovens cost just under $400, while others cost well over $4,000. The company also has low-end affordable televisions under $400, as well as very pricy large plasma televisions that cost over $6,000. Throughout the price range, PHG strives to be a low-cost leader for the quality of the product. Compared to its competition, PHG offers a very competitive, if not the lowest, price. In addition to the cost focus, PHG prides itself on providing exceptional one-on-one customer service. In fact, the name of the company--People's Home Gadgets--is intended to reflect both the strategy and the philosophy of the organization. With a focus on costs and customer service, the name reflects the company's concern with the financial burdens customers face as well as the vast amounts of information that customers must process when making purchasing decisions.
The name PHG also refers to the company's philosophy for managing customer service representatives: The company cares about its employees' long-term well-being and success. Most customer service representatives who work at PHG are typically hired through personal referrals of current employees, or occasionally an advertisement will be placed in the newspaper when more than one opening exists. Each month, customer service representatives receive product training to explore the new products they will be selling to ensure that they are knowledgeable and can respond to customer questions. To motivate them to sell, they are rewarded on a commission-based pay plan. What is interesting about this particular incentive plan is that the customer service representatives have some discretion regarding the final price of the products. Most products have a standard markup of 10% to 25%, of which the employee gets a portion. While many of the products sell for the list price, sophisticated buyers and repeat customers are often able to negotiate lower prices for their products. The challenge with this plan is that the company has a reputation for low costs, and customer service representatives who are not willing to negotiate the sales price are viewed as going against this objective. By lowering the prices, however, they are cutting into their own take-home pay.
Up to this point, the company has done fairly well, and it now has six stores on the East Coast between Philadelphia and New York. With a focus on low costs and customer service, the company has been able to sustain reasonable growth--it just opened two new stores--and a modest level of customer satisfaction among its consumers. At the same time, however, while the customer service representatives seem to be fairly happy and work hard, their turnover is around 70% per year. This turnover obviously involves costs associated with constantly hiring new employees, and it also has a negative impact on customer loyalty and the level of experience of the customer service representatives.
As the company has grown, Lukas Phillips, president of PHG, has realized that he doesn't have the time or expertise to attend to all the issues related to policies for managing people. Recognizing that it is time to hire a full-time director of HR, Lukas has decided to hire Paula Hillman. Paula has seven years of experience in HR in a manufacturing facility located nearby. Although Paula's experience is in manufacturing, Lukas was encouraged by her enthusiasm for creating a fun and effective workplace. During the course of their discussions, Lukas told Paula that his main goal for her in her new job is to design an HR system that reduces the turnover among customer service representatives, encourages them to work hard toward the company's competitive advantage of low costs and high customer service, and adheres to his principles of taking care of employees.
Answer the following questions by applying the concepts learned in Chapter 14. Also, conduct literature reviews on the subject of discussion and use to support your case study answers:
1. Provide advice to Paula regarding the nature of the HR system she should recommend for the customer service representatives at the six stores.
2. Identify a key strategic performance driver for this organization.
3. How do the customer service representatives contribute to the strategic performance driver you identified?
4. Design an HR system to realize the strategic performance driver you identified. Be certain to explain how you would (a) design the work environment, (b) manage employee competencies, and (c) manage employee attitudes and behaviors.
People's Home Gadgets (PHG)
PHG: People's Home Gadgets is newer companies which produces items in wide range of price that can address demand of low income consumers to higher. For e.g. it produces kitchen oven costing $400 as well as over $4,000. It offers lower price and leading that market. Customer representatives receives incentive from sales they commit. To achieve higher sales customer representatives lower the price which contained markup 10% to 25% so that visiting customers don't return empty hand. By reducing the price with given margin sales representatives are lowering their own income because the price they charge is linked with their incentive. PHG have expanded its stores on six places. Hired by referral and public offering the sales representatives are not staying longer as much as 70% turnover rate.
Analysis of Case
One of the market leader with lower competitive price PHG is unable to sustain its' CSRs which have direct impact on customers' perception towards that company. Paula is hired recently to take care of HR system. This case aims to discuss steps taken by Paula and possible steps that could achieve organizational goals.
Nature of HR system
To retain customers CSRs should focus on customer satisfaction and provide competitive price. In given case new HR manager should implement funny work environment and regular interaction. Promoting sales by reducing price is not only way of getting higher revenue but higher level of convincing capacity and quality products are also factors for being market leader. Retaining customers is linked with employees' retention too. So those six stores should implement participatory HR system where customer as well as employees could feel uniqueness than other competitors.
Strategic performance driver
Strategic performance driver are activities that can enable a company realizing its source of competitive advantages. Some drivers are operational efficiency, reduced overhead and higher productivity. Some company may comply innovation in technology too. In given PHG the suitable key strategic performance driver is operational efficiency.
Contribution on strategic performance driver (Operational efficiency)
Customer Sales Representatives CSRs are now awarded certain sum that they have been success on selling. To achieve Operational efficiency CSRs can maintain regular reporting of customers visiting and make keywords that best addresses taste of customers. So that when some customer come in contact with CSRs then customers can feel they are treated special. Also taking short time on each customer rather than letting customer bored by overloaded talks will help CSRs convince more customers per hour. Operational excellence is gradually increased as CSRs are more experienced on their course of service.
Design of HR System
To achieve strategic performance fined Paula is hired as HR head. She should focus on maximizing sales as well as employees retain contrast to 70% turnover. Operational efficiency being the key strategic performance driver.
As already discussed to achieve operational excellence rather than spending hours on single customer be specific on matter of discussion. Long lingering and discussion might let customers feel bored. So it's better to have brief discussion. The work environment for customer's best suits having management reporting system that can enable keep track of customer preference and keywords. Good coordination between CSRs will be advantageous for organization. Although these days employees are awarded as per their competency over other don't let employees have unhealthy competition. Regular refreshing and interaction will make good sense for employees grow.
Manage employee competencies
To achieve employee competencies providing training and regular interaction. Keep a discussion session at least once in a week where each employee participate and discuss their experience during that week. Employee competency can be achieved by not overloading single employee with flood of customers. Finely tuning sections covered by employees will make good sense.
Manage employee attitude and behavior
During weekend discussion session discussed in previous paragraph, it enable employees participate on group discussion and have ability for team work. Providing personality development classes will make customer feel good of CSRs. Attitude and behavior are sharpened as CSRs get more experience handling customers more and more.
Higher turnover up to 70% suggests that there are certain shortcomings in HR system that company is currently implementing. Paula the new HR manager is responsible for redesigning HR system to fit strategic performance drivers.
Amanet.org,. (2015). The Essentials of High Performance Organizations . Retrieved 20 October 2015, from http://www.amanet.org/training/articles/The-Essentials-of-High-Performance-Organizations.aspx
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Lepak, D. &Gowan, M. (2010). Human resource management: Managing employees for competitive advantage. Upper Saddle River, NJ: Pearson/Prentice Hall