Analysis on Cafe Espresso - Case Study Example

Running Head: CASE STUDY ON CAF ESPRESSO Case Study on Caf Espresso In Harvard Style By Reflecting on the approaches to strategic human resources management, analyse the approach to SHRM adopted by Ben Thomson and Kam Patel at Cafe Espresso. The case of Caf Espresso highlights the importance of strategic human resource management in the success or even mere survival of a business organisation. Drawing from the experience of the coffee shop, it should be noted that strategic human resource management can apparently save a company by making it more competitive in the market. At the start of the case, we can see the Caf Espresso in turmoil because of the internal problems and external challenges that it faces. It can be recalled that market leadership and dominance brought about by its first-mover advantage has been eroded by the intensity of rivalry from its players which copied its business model. Thus, from being the number one in the market, Caf Espresso has slipped to the number three position. Internally, the company suffers high staff turnover and low employee morale thus, hampering the ability of the workforce to convey excellent customer service. In this situation, two personalities have been instrumental in regaining the leadership which had been enjoyed by the specialty coffee retailer-the charismatic Chief Executive Officer Ben Thomson and the new global HR director Kam Patel. In solving the problem that the company faces, Ben Thomson has drawn the company's intended direction while Kam Patel aligned its workforce with the identified goals and objectives. This example illustrates how strategic human resource management works in a business organisation. The Chartered Institute of Personnel and Development (2007) defines strategic human resource management as a "general approach to the strategic management of human resources in accordance to the intentions of the organisation on the future direction it wants to take" adding that "it is concerned with longer-term people issues and macro-concerns about structure, quality, culture, values, commitment, and matching resources to future need." What becomes apparent in these definitions is the function of the human resource department to align the company's workforce for the attainment of its goals. Human resource alignment calls for the integration of people with the results the company is trying to obtain (CIPD 2007). Doing this provides various benefits for a business organisation. In the case of Caf Espresso, this is manifested by the competitive advantage that it enjoys from the alignment. The importance of human resource in a business organization is emphasized by strategic human resource management. John Purcell who is known to have pioneered in this field, highlighted the importance of employees in his research which emphasized the huge role played by the company's workforce as "strategic partners." This research strongly supports the highly economist viewpoint of Grant (2002: 219) of "aligning employees with organizational goals." Schuler and Jackson (1987) gave a more precise description on how management should "align" their workforce to support the company crafted strategy. Their conclusion was: If management chooses a competitive strategy of differentiation through product innovation, this would call for high levels of creative, risk-orientated and cooperative behaviour. The company's HR practices would therefore need to emphasise "selecting highly skilled individuals, giving employees more discretion, using minimal controls, making greater investment in human resources, providing more resources for experimentation, allowing and even rewarding failure and appraising performance for its long run implications" - on the other hand if management wants to pursue cost leadership (the model) suggests designing jobs which are fairly repetitive, training workers as little as is practical, cutting staff numbers to the minimum and rewarding high output and predictable behaviour. (Boxall and Purcell 2003:53-4) As mentioned above, the strategic transformation in the case of Caf Espresso is carried out by two personalities who took their part in strategic management. It should be noted that as with other functional units, strategic human resource management is comprised of two aspects: strategic planning and strategic implementation. Strategic planning refers to the company's efforts setting its direction by identifying where it is, where it wants to be, and how it chooses to go there while strategic implementation goes beyond the planning and does what the company intends to do. Strategic implementation of human resource management means performing activities that support organizational mission accomplishment and measuring how well those activities contribute to achieving organizational strategic goals. It should be noted that both of these aspects of strategic human resource management goes hand in hand. Good strategic planning is indispensable because being able to map out the best course for the organization will determine its success. On the other hand, good strategic planning is worthless unless it is implemented efficiently (Thomson & Strickland 2004). Ben Thomson undertook the strategic planning process in the transformation of Caf Espresso. As a charismatic leader, his approach was to personally expose himself to the company's stakeholders in order to acquaint himself with their concerns. Thomson embarks on an external environmental analysis by looking at the current trends in the market to determine customer preference. The CEO also generated the lists of necessary strategies employed by the industry players and identified their strengths. After doing looking at specialty coffee industry, he is able to come up the company's vision or what the company wants to achieve. In the case of Caf Espresso, this is to retain its market leadership expressed by Thomson as "To be the number one coffee house of choice across the globe." In order to do this, the CEO recognized that it needs to provide what the customer prefers together with the key success factors in the industry. Thus, Caf Espresso wants to take on a new direction of offering not just a tangible product which is coffee but the "coffee experience." This mission is encapsulated in the company's new value statement-Nowhere else makes you feel this good-in order to communicate its newfound dedication in conveying the best coffee experience in the industry primarily through the extension of excellent customer service. In trying to sell the coffee experience, Thomson has identified the large contribution of the human resource. In the company's quest of providing excellent service, it needs to focus on its people because of their being in the front line of the business operations. Baristas are the ones who interact directly with the customers every time they visit any retail outlet. Thus, Caf Espresso recognized that efficient people are the key in extending excellent experience thereby promoting and selling the company's new value proposition which is the "coffee experience." It should be noted that baristas are the customers' direct contact point to Caf Espresso as they are in the front line of its operations. After a review of the internal situation of the company, Thomson finds out that it faces challenge in its workforce posted by the low morale, high employee turnover, and low industry compensation. The CEO then has taken a strategic management approach, that is, the need to align the business organization's workforce to its identified goals and strategies. This included his initiation for a refurbishment programme and the introduction of a new HR strategy through the appointment of a new global HR director. Kam Patel, the new global HR director did most of the strategic implementation needed for the organizational change. Following John Purcell's approach to strategic human resource management, she transformed the workforce and labeled them as "Partner Resources" calling them individually as "Partners." The changes she instituted focused on revamping the different functions of human resource management including recruitment, training and development, talent management, and motivation. Patel recognized that having the provision of excellent customer service largely depends on the quality of its workforce. In turn, having high quality partners starts with the recruitment of people who is aware of the preferences and expectations of a typical Caf Espresso's customer. Building on that, the company provided training in order to enhance the strengths and competences of the baristas. Caf Espresso has also taken an innovative approach in motivating its employees. Kam Patel opted to revamp the industry's established idea that baristas should be paid below the minimum. Apparently, her efforts are concentrated on giving the baristas what is known as total reward which has both monetary and non-monetary components. Caf Espresso began to pay its employees above the industry average and offer them necessary benefits. The company also offers non-monetary benefits through learning and development programs and company ownership. It should also be noted that Caf Espresso take a step further by emphasizing the importance of teamwork through its mentoring scheme and empowerment by accepting comments and suggestions of baristas through its magazine. The total reward system served not just as a motivational technique for the company's partners but also ensured employee retention. Thus, they answer the problem of low morale and high staff turnover. Lastly, Kam Patel undertook the strategic implementation by installing control in order to measure the company's expectations with the workforce's actual performance. This performance management scheme allows Caf Espresso to take corrective mechanisms once the strategies in place are not working as they should. Drawing on your answer to question 1 and the concerns raised by Ben Thomson and Kam Patel in the final paragraph of the cas , how would you develop the HR strategy to ensure Cafe Espresso continues to attract and retain customers. The main challenge faced by Caf Espresso is sustaining regained market leadership. Recognizing the fact that the company has capitalized and banked on its human resource in order to enhance its performance in the industry, the most rational strategy for it to employ is transforming this competitive advantage into a sustainable one. The issue raised by the Ben Thomson and Kam Patel is the threat of competitors copying its now established human resource strategy. Even though Caf Espresso was able to move out of the industry turmoil, the problem of sustaining the position becomes a problem. It should be noted that the business organization has long enjoyed its market leadership which was attained through its first mover advantage but competitors was able to copy the business model, replicate, and even enhance it to the detriment of Caf Espresso. Now, the company has pioneered another breakthrough in the industry which irrefutably can be copied by its competitors. After building in its human resource, Caf Espresso faces the threat of having its training replicated by its competitors. Even the motivation and compensation structure of the company can likewise be adapted by other organizations in the industry. In terms of training, it should be noted that competitors will be quite slow to catch up since training has already been started by Caf Espresso. Though competitors may commence their own seminars, it will not be as identical as what is practiced by the company. The training's uniqueness and the timeline needed for the implementation will hinder competitors from having the efficiency of the market leader. Even if training and development programs cannot be replicated, Caf Espresso still faces the risk of having its employees pirated by other specialty coffee shops through the lure of higher compensation and benefits. With the competitor's effort to battle head on with Caf Espresso, this situation is possible especially if they recognize that the human resource is its primary competitive advantage and that programs can't be totally copied. Caf Espresso can minimize this risk by intensifying its effort in making partners co-owners through stock ownerships. As employees realize that they are owners of the company they are working for, they will be encouraged to work harder for it. This move will also insulate Caf Espresso from the threats of its human resource transferring to another competitor. It is recommended that Caf Espresso respond to the challenge by continuing to invest in human resource department. The specialty coffee shop should capitalize on what it has started and work up by introducing improvements which arises from market development. It is essential that the company transform its human resource from being a competitive advantage into sustainable advantage which cannot be copied by any player in the coffee industry. The human resource department should be given a chance to express what they perceive as important customer needs which are lacking through a monthly forum. The company can do this by scheduling an informal meeting for baristas where they would tackle the problems that they have for the previous month. From the problems identified, Caf Espresso will prescribe solutions. This move will enable the business organization to uncover the trends in the consumer market and identify the needs which are not currently addressed by its baristas. From these meetings, the company can schedule seminars where the solutions identified are formally presented to all of the baristas. In order to lessen the hesitance of barista of stating their difficulties and hardships, Caf Espresso will also establish a reward system where a staff is rewarded every time his/her suggested measures are put in place. From the vision created by Ben Thomson to become the number one global coffee shop, it is apparent that Caf Espresso is eyeing the possibility of operating abroad. In so doing, there arises a question of how baristas abroad should be trained in order for them to have the efficiency, commitment, and dedication of the staff in the mother company. Because of the intense competition in the market, Caf Espresso needs to be consistent in its provision of customer service wherever its coffee shops are located. However, it should also be noted that differences in world culture must be taken into consideration if it wants to win in every market. Recognizing the need to have a global and local approach to human resource management, Caf Espresso should align its workforce to meet the needs of its different market. For one, it is recommended that the specialty coffee shop have a more decentralized structure for its HR department by giving regional units more authority in decision making. Recognizing the differences in culture, each regional unit should also design its own training and learning and development program which take into account the disparity in the preferences of consumers abroad. Though Caf Espresso might want to put in place a standard in customer treatment, this should be enhanced by finding more ways in serving clients. Baristas should also be hired in the basis of their knowledge of the local culture in order to convey the "Caf Espresso experience." The company can also opt to vary its reward scheme according to employees' needs. For example, in lower income countries, high monetary benefits should be more emphasized than the others. Lastly, the Caf Espresso can transform its human resource team into a sustainable advantage by instilling into them the importance of extending a customized service. Baristas should be trained to respond to individual customer needs. Caf Espresso can do this by requiring their partners to at least know the name of their regular customers and their personal preferences. Coffee products could also be modified according to the liking of each client. Lastly, baristas should be sensitive to each customer's needs. References Boxall, P. and Purcell, J. 2003, Strategy and Human Resource Management Palgrave Macmillan Grant, R. 2002, Contemporary Strategy Analysis: Concepts, Techniques, Applications (4th edition) Malden, MA: Blackwell Publishers. Schuler, R. & Jackson, S. 1987, 'Linking competitive strategies and human resource management practices', Academy of Management Executive 1(3): 207-219 CIPD 2007, Strategic Human Resource Management, Retrieved 13 August 2007 from http://www.cipd.co.uk/subjects/corpstrtgy/general/strathrm.htm Read More