Synergies Created by a Strategic Fit between Business and Human Resource Strategies : An Assessment of Transnational Tea Firms in Kenya [1 ed.] 9781443850797, 9781443848435

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Synergies Created by a Strategic Fit between Business and Human Resource Strategies

Synergies Created by a Strategic Fit between Business and Human Resource Strategies: An Assessment of Transnational Tea Firms in Kenya

By

Wilson J. Osito Odiyo

Synergies Created by a Strategic Fit between Business and Human Resource Strategies: An Assessment of Transnational Tea Firms in Kenya, by Wilson J. Osito Odiyo This book first published 2013 Cambridge Scholars Publishing 12 Back Chapman Street, Newcastle upon Tyne, NE6 2XX, UK British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Copyright © 2013 by Wilson J. Osito Odiyo All rights for this book reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. ISBN (10): 1-4438-4843-3, ISBN (13): 978-1-4438-4843-5

This work is dedicated to my dear wife Carol, without whose dedicated support and unfailing love it would have been impossible to piece together, our sons James Allan and Timothy Jakes Odiyo, my mother Phelgona and above all to Almighty God, whose grace has been more than sufficient.

TABLE OF CONTENTS

List of Tables ............................................................................................... x List of Figures............................................................................................ xii Acknowledgements .................................................................................. xiii Abstract .................................................................................................... xiv List of Acronyms and Abbreviations ......................................................... xv Operational Definition of Terms .............................................................. xvi Chapter One ................................................................................................. 1 Introduction 1.1 Background to the study 1.2 Statement of the problem 1.3 Objectives of the study 1.4 Research questions 1.5 Significance of the study 1.6 Scope of the study 1.7 Limitations of the study Chapter Two .............................................................................................. 10 Literature Review 2.1 Introduction 2.2 Corporate Strategies 2.3 Business Strategies 2.4 Human Resource Strategies 2.5 Approaches to Strategic HRM 2.6 HR Linkage and HR Integration-the HR Triad 2.7 Synchronizing business planning with HR planning 2.8 Strategic importance of measuring Productivity 2.9 Flexibility in the face of constant change-Need for a Learning organization 2.10 Employee Commitment

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Table of Contents

2.11 Human Resource Development 2.12 Strategic fit 2.13 Strategic Synergies 2.14 Strategic Concerns of Kenyan Tea Firms 2.15 Empirical Literature 2.16 Summary 2.17 Theoretical Framework 2.18 Conceptual Framework Chapter Three ............................................................................................ 49 Research Methodology 3.1 Introduction 3.2 Research Design 3.3 Target Population 3.4 Sample Design 3.5 Data Collection Methods and Instruments 3.6 Validity and Reliability of Research Instrument 3.7 Data Analysis Procedure Chapter Four .............................................................................................. 53 Data Analysis, Presentation and Interpretation 4.1 Introduction 4.2 Major business strategies 4.3 Integration between business strategies 4.4 Human Resource Strategies 4.5 Integration of HR strategies 4.6 Strategic HRM processes 4.7 Strategic Fit 4.8 Synergies created by Strategic Fit Chapter Five ............................................................................................ 101 Summary of Findings, Conclusions and Recommendations 5.1 Introduction 5.2 Summary of findings 5.3 Conclusions 5.4 Recommendations 5.5 Suggestions for further research

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References ............................................................................................... 125 Appendix 1 .............................................................................................. 131 Cover Letter for Questionnaire Appendix 2 .............................................................................................. 132 Questionnaire for Human Resource Managers Appendix 3 .............................................................................................. 140 Questionnaire for Managers in Charge of Strategic Business Units Appendix 4 .............................................................................................. 147 Pilot Study Letter Appendix 5 .............................................................................................. 148 Letter from Kabarak University, Institute of Postgraduate Studies, Quality Assurance and Research to NCST Appendix 6 .............................................................................................. 149 Research Authorization Letter from National Council for Science &Technology Appendix 7 .............................................................................................. 150 Research Permit from National Council for Science & Technology

LIST OF TABLES

1.1 International data on organizations with business and human resource strategies 2.1 Kenya’s cost of Production compared with other producer Countries (US $/Kg of Made Tea) 2.2 Role Behaviours appropriate for different Strategies 3.1 Target population 4.1 Generic strategies 4.2 Horizontal integration 4.3 Vertical Integration 4.4 Diversification 4.5 Acquisition 4.6 Divestiture 4.7 Number of years strategies are envisaged to work 4.8 Factors affecting successful implementation of strategies 4.9 Identification of core competencies 4.10 Satisfaction of Customer needs 4.11 How to improve working methods and systems 4.12 Correlation results for integration of Business Strategies 4.13 Continuous Learning 4.14 Performance management 4.15 Job redesign 4.16 Job rotation 4.17 Reward management 4.18 Teamwork 4.19 Downsizing 4.20 Recruitment 4.21 Extent of Multi-skilling 4.22 Mode of compensation 4.23 Basis of compensation 4.24 Organization structure 4.25 Correlation results for HR integration 4.26 Approaches to formulation and implementation of HR strategies 4.27 Strategic fit between cost leadership and HR strategies 4.28 Strategic fit between Differentiation and HR strategies 4.29 Strategic fit between Divestiture and HR strategies

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4.30 Strategic fit between Acquisition and HR strategies 4.31 Strategic fit between Diversification and HR strategies 4.32 Strategic fit between Vertical integration and HR strategies 4.33 Strategic fit between Horizontal integration and HR strategies 4.34 Regression results for relationship between strategic fit and Employee Commitment 4.35 Regression results for relationship between strategic fit and Employee Flexibility 4.36 Regression results for relationship between HR integration and Employee productivity

LIST OF FIGURES

2.1 Formulating HR Strategy 2.2 Sequential Strategic HRM Model 2.3 Model of Empirical approach to Strategic HRM2.4 The Human Resource Cycle 2.5 Conceptual Framework 4.1 Benchmarking as part of strategy formulation 4.2 Competitor analysis as part of strategy formulation 4.3 Average cost of production per kilogram made tea (2006-2010) 4.4 Mean percentage cost of production accounted for by labour cost (2006-2010) 4.5 Productivity in Kilograms Green leaf per Labour Day (2006-2010) 4.6 Expenditure on training (2006-2010) 4.7 Extent to which HR development and career management are part of management philosophy 4.8 Extent to which the firms are learning organizations 4.9 Extent to which the employees work in teams 4.10 Management Level of head of HRM 4.11 Mean Total numbers of employees (2006-2010) 4.12 Average number of employee by category (20062010) 4.13 Separation cost 4.14 SHRM processes

ACKNOWLEDGEMENTS

I wish to, in a very special way, express my gratitude to my Ph. D thesis supervisors, Dr. Ronald Chepkilot and Dr. Isaac Ochieng for meticulously guiding me through the demanding process of thesis writing, sometimes at great personal inconvenience to them. May God bless you both.

ABSTRACT

This study seeks to establish the synergies created by achieving strategic fit between business and human resource strategies in transnational tea firms in Kenya. The research was necessitated by the fact that though these firms formulate and implement one form of business strategy or the other, there are no significant attempts to achieve a strategic fit between the business and human resource strategies. It therefore sets out to determine the extent to which these firms formulate and implement both business and human resource strategies, if there is a strategic-fit between the two and the concomitant synergies achieved by the fit. A literature review was conducted to link this research to the existing theoretical framework as well as empirical research findings in an attempt to fill some of the gaps. The research, which adopted a descriptive design, was conducted at seven transnational tea companies in Kenya. The 27 respondents, chosen through census, comprised 20 Managers of the strategic Business units and 7 Managers in charge of the human resource function at these companies. Most of the data was collected by way of questionnaires, personally administered to ensure clarification where necessary. Finally, the data is analyzed using descriptive and inferential statistics and findings presented in table, graph and text form. The study found that once business strategies are decided upon, human resource strategies that both complement and justify them are formulated and implemented. The study further established that strategic fit leads to several synergies in the organizations, among them enhanced employee commitment, employee flexibility and employee productivity, all of which are crucial for competitive advantage. These synergies notwithstanding, HR strategies need to be as explicit and clearly stated as the business strategies. It is necessary that HR is represented at the board of director’s level, and that the firms outsource the non-core activities. The study findings will be useful to employers and employees, government economic planners, scholars, management consultants and management students. Key words: synergies, strategic fit, business strategies, human resource strategies

LIST OF ACRONYMS AND ABBREVIATIONS

CEO

Chief Executive Officer

GDP

Gross Domestic Product

HPWS

High Performance Work Systems

HR

Human Resources

HRD

Human Resource Development

HRP

Human Resource Planning

HRM

Human Resource Management

KIPPRA

Kenya Institute for Public Policy Research and Analysis

SHRM

Strategic Human Resource Management

UNDP

United Nations Development Program

OPERATIONAL DEFINITION OF TERMS

The following definitions have been adopted for the terms used in the study. Aligned HRM process. In this approach, HR strategy is developed together with the business strategy. They may be presented and discussed together but are distinct outcomes of parallel processes. By considering them together, there is a likelihood that they will influence each other and be adopted as a cohesive whole. Acquisition. A strategy through which one firm buys a controlling or one hundred percent interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio. The management of the acquired firm reports to the management of the acquiring firm. Benchmarking. Evaluating the sustainability of advantages against key competitors, comparing the way a company performs a specific activity with a competitor or other companies doing the same thing. Business Process Outsourcing. Obtaining work previously done by employees inside the company from sources outside the company. In view of rising labour costs, tea companies have begun to outsource non-core activities while retaining only activities directly related to tea growing and processing. Business Process Re-engineering. The radical redesign of business processes to achieve major gains in cost, service or time. It strives to break away from the old rules and procedures that have become ingrained in the organization over the years and not seriously questioned since their establishment. Business Strategy. This implies a series of systematic and related decisions that give a business a competitive advantage relative to other businesses. In this study, business strategy is also referred to as competitive strategy (Bennet, 1999).

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Competitive Advantage. The capability a company possesses that adds value to its target customers and is superior to that of its competitors. It sets the company apart from other market players. Commitment. The acceptance of and belief in the organization’s goals and values. Employees identify with organizational goals which are consistent with their own goals (Armstrong, 2009). Core competencies. Something a company does well, relative to other internal activities. Corporate Strategy. The attempt by those who control an organization to find ways to position their organizational objectives so they can exploit the planning environment and maximize the future use of the capital and human assets. Distinctive Competencies. Something a company does well relative to its competitors. Downscoping. Referring to a divestiture or some other means of eliminating businesses that are unlimited to a firm’s core business, this is a set of actions that cause a firm to strategically refocus on its core businesses. Downscoping has a more positive effect on a firm’s performance than downsizing. Downsizing. Reduction in the number of a firm’s employees and sometimes in the number of its operating units, but which may or may not change the composition of businesses in the company’s portfolio. For Kenyan tea firms, it has mainly been carried out in the area of employee reduction. Flexibility. Providing the capacity to manage planned organizational change and enable the organization to be adaptive and responsive to the ever-changing needs of shareholders, customers etc. (Armstrong, 2009). Generic Strategies. Three general types of business strategies that are commonly used by any firm to achieve competitive advantage. They can be applied by any firm, i.e. they are not unique to any industry. They include cost leadership, differentiation and focus.

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Operational Definition of Terms

Human Resource Development. A systematic process of training and growth by which employees gain and utilize skills, knowledge, attitudes and insights to carry out the work in their organizations. It deliberately prepares them for their role in the achievement of strategic objectives. Becton and Schraeder (2009) suggest that although there are many changes required for HR to become more strategic, it should aggressively pursue, among key activities, the development of employees. Human Resource Strategy. This involves the decisions and actions which concern the management of employees at all levels in the business related to the implementation of strategies directed towards creating and sustaining competitive advantage. For tea firms, the strategies employed have mainly focused on employee reduction through the use of contract and part time workers (Armstrong, 2009). Integrated HRM Process. Where HR strategy is an integral part of the business strategy, along with all the other functional strategies. Learning Organizations. Organizations structured around the idea that it should be set up to enable learning, share and seek knowledge and create opportunities for new knowledge to help firms constantly renew themselves in view of the ever-changing business environment. Mergers. This is a strategy through which two firms agree to integrate their operations on a relatively equal basis. Few true mergers occur because one party is usually dominant with regard to market share or firm size. Restructuring. This is a strategy through which a firm changes its set of businesses or its financial structure with the overall objective of being more competitive. Separate HRM process. A distinct HR plan is developed. It is both prepared and considered separately from the overall business plan. It focuses on HR issues and, so far as possible, looks for businessrelatedness of the information obtained. This approach perpetuates the notion of HR as a staff driven, functional, specialist concern. Strategy. Large-scale, future-oriented plans for interacting with the competitive environment to achieve company objectives

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Strategic fit. The integration of human resource considerations into the overall corporate planning and strategy formulation procedures. In this study, it is the level at which Human Resource and Corporate Strategies are aligned and geared towards achieving the same objectives (Armstrong, 2009). Synergy. When two or more activities or processes complement one another to the extent that when undertaken in unison, the total output is significantly greater than when they are done individually. The idea may be summarized by the phrase “making two plus two equal five.” For the purpose of this study, these are the benefits accruing to the organization when Human Resource and Business Strategies are consistent with one another. This concept is derived from Systems theory (Bennett, 1999). Takeover. A special type of acquisition strategy wherein the target firm does not solicit the acquiring firm’s bid. Many takeover bids are not desired by the target firm’s managers and are referred to as hostile. Transactional HR activities. The day-to-day transactions such as benefits administration, record keeping and employee services. Strategic Human Resource Management goes beyond these activities and focuses on the benefits for business of the human resources. Transnational Tea company. A tea-growing and processing company carrying out business in Kenya but which is a subsidiary of a larger company outside the country, most having their parent companies in Europe.

CHAPTER ONE INTRODUCTION

1.1 Background to the study Industries are characterized by trends and new developments that gradually or speedily produce changes important enough to require a strategic response from participating firms. The popular hypothesis about industries going through a life cycle from rapid growth, to early maturity, through to saturation and decline helps to explain industry change but is still incomplete (Thompson and Strickland, 2003). More importantly, there are driving forces that have the biggest influence on what kind of changes take place in the industry, firm structure and competitive environment. Major examples include the emergence of the internet and e-commerce and the increased globalization of industry. In an increasingly competitive business environment, companies inevitably move towards identifying their core and distinctive competencies, and have to engage in strategic management (Thompson and Strickland, 2003). The achievement of any set of corporate objectives, however, requires the deployment of the two most basic resources—money and people. Deficiency in either can reduce the best-laid strategy to a valueless pipe dream. Organizations seem to find it difficult to develop human resource strategies which are linked to business strategies, despite widespread recognition that this is important (Hussey, 2000). Table 1.1 below presents the percentages of international organizations with both business and human resource management strategies. The scenario in Table 1.1 below exists because the task of strategic human resource planning is more complex than that of providing the needed capital. Worthwhile human resource planning can only take place if the human resource function is regarded as a genuine partner in the management team. The organization can only do the job efficiently if the right quantity and quality of management and non-management personnel are on board.

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Chapter One

Table 1.1 International Data on Organizations with Business and Human Resource Strategies. Business Strategies % Yes, written 75 Yes, unwritten 17 No Strategy 7 Don’t know 1 Total 100

HRM Strategies Yes, written Yes, unwritten No Strategy Don’t know Total

% 56 25 18 1 100

Source: Tyson (2006, 90).

However, it is not enough to believe that the implementation of Human Resource Management (HRM) policies and practices within the framework of integrated Human Resource (HR) strategies will have positive impact on results. According to Armstrong and Baron (2007), too often in the past personnel practitioners have had to justify their proposals by asking management to accept them, not as proven catalysts for the attainment of corporate objectives but as an act of faith. While there is no shortage of experts calling for HR to be more strategic, recommendations for accomplishing this goal are not as plentiful (Becton and Schroeder, 2009). The truth, however, is that human resource planning, human resource forecasting and other scientifically quantifiable modes of tying both present and future human resource quality and quantity to the business strategy ought, ultimately, to contribute to organization performance. In the past, one of HR’s primary roles has been to ensure compliance with laws, rules and regulations. Although this is still the case, and always will be, many recent developments have led to a strong emphasis on results (US office of Personnel Management, 1999). The purpose of HR has now been recognized as the articulation of what an organization intends to do about its HRM policies and practices, both now and in the long term. Walker (1992) suggests that the two following types of processes should be used in Strategic Human Resource Management (SHRM): the integrated process, through which HR strategy is an integral part of the business strategy, along with other functional strategies, and the aligned process whereby the HR strategy is developed together with the business strategy. They may be presented and discussed together but they are distinct outcomes of parallel processes. By considering them together there is a likelihood that they will influence each other and be adopted as a

Introduction

3

cohesive whole. Lastly, the separate process is whereby a distinct HR plan is developed, and is both prepared and considered separately from the overall business plan. It focuses on HR issues and, as far as possible, looks for the business-relatedness of the information obtained. This approach perpetuates the notion of HR as a staff-driven, functional, specialist concern. Whichever process is used, a mutually reinforcing and interrelated set of personnel and employment policies and programmes, which jointly contribute to the achievement of the organization’s strategies, needs to be developed. In other words, business and human resource strategies need to be coherent and geared towards achieving competitive advantage. Although it is generally agreed that different organizations and different corporate scenarios require different HR strategies, Armstrong (2009) differentiates between two basic types: (a) general strategies, including high-performance working, high commitment and high-involvement, and; (b) specific strategies, relating to different aspects of human resource management such as learning, development, reward etc. Although each organization tackles Strategic HRM on its own and follows whichever approach is appropriate to its circumstances, Armstrong and Baron (2007) argue that certain themes stand out, such as the modification of values, behaviours and attitudes. According to them, some key components of the HR strategy can be pointed out as investing in intellectual capital, performance management, job design, the reward system and the work-life balance. Armstrong (2009) suggests that in the process of formulating HR strategies, it is important to achieve a vertical fit, that is integrating the business and HR strategies, as well as a horizontal fit (or bundling), that is achieving coherence and mutual support between various HR strategies. What is not in doubt is that business strategy needs to be dovetailed into the right quality and quantity of human resources. Without attracting and retaining the right people, in the right jobs, with the right skills and training, an organization cannot succeed (US office of Personnel Management, 1999). The HR strategy ought to influence the business strategy, and in turn be influenced by it. A merger between two firms, for instance, almost always results in the new organization having several pairs of functional managers. An emergent retrenchment HR strategy must therefore be put in place to ensure the organization benefits and is not

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Chapter One

disadvantaged when one manager is chosen and the other left out. Similarly, divestiture sees the less successful branch of an enterprise cut off, stopping it from being a drain on the other business units. Certainly there is need, in such situations, to “right size” organizations by eliminating unnecessary work and responding to economic, legal, technological and consumer changes. In this situation, thought must be put into the human resource component even as the business side is brought to a close. An appropriate HR strategy encompassing such issues as separation costs, outplacement and retraining of staff, if necessary, must be envisaged and planned for. In addition, business leaders must come to terms with the cost of the sudden, unplanned reduction of employees, as well as the psychological impact of corporate downsizing on the remaining employees. On the other hand, growth strategies such as expansion or diversification necessitate the recruitment, selection and actual hiring of additional human resources, of the right quantity and quality and at the right time. The firm therefore needs to put in place superior HR strategies, targeting the areas of training, development, compensation, quality of work life etc. to be competitive in the labour market. Kamoche (1992) noted that there was not a strong tradition of long-term strategic management in Kenya. This weakness went back to the 1960s and 1970s when the government fostered a policy of import substitution ostensibly to discourage imports and establish a local manufacturing industry. Unfortunately, rather than give the much-needed impetus to a nascent industry, this policy created a protected and largely inefficient local industry. The relative weakness of long-term strategic planning, Kamoche argues, is also explained by the fact that the subsidiaries of multinational companies had, to a large extent, relied on their head offices in matters of strategy and policy formulation, which invariably boiled down to short-term, tight reporting schedules. This situation led to a combination of strategic planning and a less rational and less objective approach which resembles a “gut feeling,” and this has implications for the viability of SHRM. There is little evidence to demonstrate that the situation has changed, and, as Yabs (2007) argues, strategic management approaches in Kenya have been introduced slowly and gradually, and not much has been written on their spreading. Indeed, many consultants in Kenya have attributed the

Introduction

5

unsatisfactory performance by many firms to the limited use of strategic management approaches. Businesses in the formal sector in Kenya are generally unlikely to hire more workers as they are convinced that the costs of doing so will exceed the benefits. They therefore choose to either maintain their operations at lower levels than they would if the benefits of hiring more workers exceeded the costs, or increase the use of machines in their operations as substitutes for employing workers as their preferred means of expanding their operations (UNDP, 2007). Nowhere is this truer than the tea industry, where traditionally labour intensive jobs such as tea plucking are becoming increasingly mechanized due to the ever-rising labour wages. These firms therefore need to take a strategic view of their human resource requirements. Due to the seasonal nature of their operations, coupled with susceptibility to such external phenomena as wage rates, foreign exchange rate fluctuations and international prices, they walk a tight rope in terms of labour numbers and costs.

1.2 Statement of the problem The fact that management has to be concerned with deliverables rather than abstractions has now been sufficiently recognized and HR practitioners are aware of the current mantras of “be strategic” and “be a business partner,” but how they can achieve these things has not always been explained. In practice, many more organizations around the world see the need for business strategies than see the need for human resource strategies. Kenyan Tea firms, like most international organizations, formulate and implement one form or another of business strategies, but studies have neither brought out any attempts at achieving a strategic fit between the business and human resource strategies nor the synergies associated with achieving this. The closest study, that by Dimba and K’Obonyo (2009), focuses on the effect of SHRM practices on the performance of multinational manufacturing companies. No tea company was studied and the aspect of strategic fit is not discussed. Due to their labour intensive nature, these tea firms require major decisions on human resources. For most of them, labour related costs constitute up to 60% of the total cost of production (Task Force Report on the Tea Industry, 2007). It is therefore crucial that every effort is made to first achieve a strategic fit between the business and HR Strategies and second to realize the synergies associated with the fit. The matter of

Chapter One

6

strategic fit is even more important now as it is established that for HRM practices to impact on performance there must be a particular “fit” between a firm’s HRM practices and the firm’s competitive strategy (Wright and Snell, 1998). This study therefore seeks the additional benefits (synergy) associated with business and HR strategies being formulated and implemented together, rather than each working alone.

1.3 Objectives of the study The general objective of this study is to identify the synergies created by a strategic-fit between the business and human resource strategies of transnational tea firms operating in Kenya. Specific objectives are: (i) To find the major business strategies employed in the last five years, as well as those formulated for implementation in the next five years. (ii) To establish whether there is integration between the various business strategies employed. (iii) To find out the major human resource strategies employed in the last five years as well as those formulated for implementation in the next five years (iv) To establish whether there is integration between the various human resource strategies employed. (v) To identify which SHRM processes are used by the firms, i.e. integrated, aligned or separate. (vi) To establish the extent of strategic fit between various business and human resource strategies. (vii) To determine whether strategic fit between business strategies and HR strategies is a predictor of synergy in the firms.

1.4 Research questions (i) What are the major business strategies employed in the last five years and those formulated for implementation in the next five years? (ii) Is there integration between the various business strategies employed?

Introduction

7

(iii) What are the major human resource strategies employed in the last five years and those formulated for implementation in the next five years? (iv) Is there integration between the various human resource strategies employed? (v) Which SHRM processes are used by the firms, i.e. integrated, aligned or separate? (vi) What is the extent of strategic fit between various business and human resource strategies? (vii) Is strategic fit between business strategies and HR strategies a predictor of synergy in the firms?

1.5 Significance of the study The findings of this study are a significant pointer to the synergies associated with the achievement of a strategic fit between the business and human resource strategies for tea industry players. These firms are prone to cyclical changes in weather patterns and the resultant changes in production levels and prices. Furthermore, currency exchange rate fluctuations affect incomes from tea as it is predominantly grown and processed for export. Short-, medium-and long-term strategic plans should consider these expected changes. The firms need to decide, for instance, on the ratio of permanent to seasonal employees appropriate for their operations. Among other costs that a firm could incur is interest on bank overdraft which can occur following unforeseen cash flow problems. Whatever business strategy is chosen, it is necessary that human resources be equally strategically managed so as to deal with longer-term people issues. An integration of the two would ensure that the human resource strategy supports the accomplishment of the business strategy, and indeed helps to define it. In addition, it would help deal with micro concerns about organizational efficiency, effectiveness, structure, values, culture, quality, commitment, performance, competence and management development. Present and future employees of the tea firms need to be assured of a predictable manner of handling the contracts between them and their employers, especially on issues to do with termination. The findings of this study will, where corporate downsizing has been decided on as the appropriate business strategy, afford the workers the benefit of wellplanned employment/redundancy practices.

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Chapter One

Since employment level and its stability are major challenges for government planners at the national level, by achieving rationalization of employment in the tea industry, the government will reduce the problem of unemployment while the exchequer will be guaranteed continued revenue from corporate tax paid by these firms as well as a sustainable flow of foreign exchange. Future researchers and those in academia, principally the universities, are expected to use the findings of this study not only as a basis for further research to fill the gaps identified but also as a source of new knowledge.

1.6 Scope of the study This study is limited to the seven transnational tea companies with a presence in Kenya. In particular, it focuses on the business and human resource strategies of these firms, the details of which were found from company documents as well as from the managers in charge of strategic business units and human resource management. The study was conducted at various strategic business units which are also profit centres. However, because these firms largely produce one product, that is tea, the study makes no distinction between corporate level and business level strategies. Coherence is therefore sought between business strategies on the one hand, and HR strategies on the other hand. Furthermore, the study does not focus on functional strategies. As the concept of SHRM is about adaptation and integration of the human resources with the strategic business needs of the firm, the position of the human resource function transcends all the other functional areas, such as marketing, finance, production, research and development. Moreover, functional strategies, being short-term, narrowly-scoped plans that a company uses to achieve short-term objectives, would not address the medium- to long-term aspects of strategic fit that the study aims to achieve.

1.7 Limitations of the study Strategy has always been emergent and flexible, and is never for the present. Therefore, longitudinal studies offer the best option for researching strategy effectiveness. Since this study was conducted at one point in time, the researcher employed forecasting techniques while

Introduction

9

remaining aware of the possibility of sudden changes even to the best-laid plans. Strategy is not realized merely by formal statements but comes about also by actions and reactions. It was therefore necessary to deduce strategy from what the firms actually do, not what they say they do. The search for a contingency model that matches HR and business strategies is limited by the impossibility of modelling all the contingent variables (in this case, all the matching HR and business strategies), the difficulty of showing their interconnection, and the way in which changes in one variable have an impact on others. In order to overcome this shortcoming, the researcher limited the matching of business and HR strategies to a selected range of commonly-used strategies. In addition, any variables that showed signs of multicollinearity were dropped. Part of the information sought was classified as confidential by the organizations being studied. The respondents were, in certain instances, unwilling to answer all the questions in the questionnaire or had to seek permission from the upper echelons of management. The researcher persuaded them by indicating that the findings of the research would not only be disseminated back to them for decision making in their organizations but would also be kept confidential by, for instance, not mentioning any respondent or his/her organization by name. The letter from the National Council for Science and Technology played a major part in getting the respondents to make the required information available. In addition, the researcher made use of company documents and publications of tea industry organizations, such as the Tea Board of Kenya, to fill any gaps.

CHAPTER TWO LITERATURE REVIEW

2.1 Introduction This chapter presents a review of the relevant theoretical and empirical literature from books, refereed journals, research projects and the internet.

2.2. Corporate strategy Strategic management is that set of managerial decisions and actions that determine the long-term performance of corporations. The study of strategic management emphasizes the monitoring and evaluation of external opportunities and threats in light of comparative strengths and weaknesses to generate and implement a new strategic direction (Hunger and Wheelen, 2007). It is a continuous, iterative process aimed at keeping an organization as a whole appropriately matched to its environment (Certo and Peter, 1993). Certo and Peter further state that organizational environments are constantly changing and organizations must be modified accordingly to ensure that organizational goals can be attained. Ireland, Hoskisson and Hitt (2009) see strategic management as a process which entails the full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above-average returns. Thus, a firm does not engage in strategy formulation and implementation merely to achieve average returns. The first step in the process is to analyze its external and internal environments to determine its resources, capabilities and core competencies. With this information, the firm develops its vision and mission, formulating its strategy. Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy. Strategic management is a continuing set of decisions and actions resulting in the formulation and implementation of strategies designed to achieve the objectives of an organization. It starts with the assessment of the organizational environment, specifying objectives to be achieved, developing plans for

Literature Review

11

strategic change and implementing the chosen strategies. The strategies have, however, to be continuously reviewed, contingent on prevailing competitive environment. In addition, the business strategy must be developed at the same time as the other functional strategies, including the HR strategy. Ireland et al. (2009) add that it is a dynamic process, as everchanging markets and competitive structures are co-ordinated with a firm’s continuously evolving strategic inputs. Yabs (2007) argues that the purpose of engaging in strategic management is to try and reduce future uncertainty. The main aim of any strategy is to promote the continued viability of the enterprise (White, 2007), and this requires an accurate reading of what the business landscape looks like today and will look like in the future. There must be continuous revision of the strategic position because any change will throw up new opportunities and threats. The strategic position thus cannot be static. Strategic decision makers articulate direction and save the organization from “change-by-drift.” They formulate a vision of the future that allows them to see more clearly what steps to take, building on present capabilities and strengths. According to Bennett (1999), strategies do not result from conscious once-and-for-all decisions and/or a grand master plan, but rather are formulated step-by-step via interactive process of experimentation, probing the future, learning from experience and then “adding-on” to the existing policies. Due to uncertainty in the economic, political and social environment, the planning horizon for most organizations has shifted from five years down to three or even two years. However, capital-intensive businesses will typically plan over a longer period than labour-intensive businesses (Tyson, 2006). The basic dispute, though, is whether the best strategies emerge from a systematic and detailed process or from vision, opportunism and the ability to respond to events. Emergent strategies develop naturally and, hopefully, should be totally relevant to the current events and operations. The people who determine such strategies “learn by doing” and tailor their decisions to the needs of the present situation (Bennett, 1999). This debate is particularly relevant to the tea industry in Kenya, which is subject to various, rapidly-changing factors such as currency fluctuations, wage levels, weather patterns and international tea prices.

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Mintzberg (1994), however, contends that all business strategies have a mixture of systematically-arrived-at plans and elements that emerge slowly, over time. He argued that executives seek to manage stability by formulating coherent plans and implementing them vigorously, while at the same time identifying patterns and breaks in trends. Prior to this, Mirvis and Marks (1992) provided insights into the subject of corporate strategy. According to these researchers, since the late 1980s a trend of corporate MADness (Mergers, Acquisitions and Downsizing) has emerged, especially among multinationals. Several factors account for this corporate Madness, among them increased global competition. For many firms the market place has grown from a regional or national scope to a global scope. As trade barriers tumble only a handful of large competitors in industries have survived. The consolidation of companies into multinational mega corporations has resulted in a few Asian, European and North American competitors fighting for worldwide market share. A second factor influencing the proliferation of Mergers, Acquisitions and Downsizing is rapid technological change. One obvious way to build competitive advantage becomes offering good quality products and services at low cost by reducing expenses. In most organizations, the path towards cost control begins by slashing head count and the associated payroll costs. Finally, Mergers, Acquisitions and Downsizing have become part of management fad and fashion. As early as the early nineties, investment bankers were already warning senior executives to “eat or be eaten”—to gobble up other companies before they were gobbled up themselves. Some chief executive officers were already jumping on the cost-cutting bandwagon to show their boards of directors that they were leading the way toward a “lean and mean” machine (Mirvis and Marks, 1992).

2.2.1 Schools of Strategic Thinking Throughout time, a large amount of thinkers have addressed the issues related to business strategy systems from many different angles. To a large extent, the differences in perspectives can be understood from a wide range of base disciplines on which the strategy arguments are based, examples being economy, biology, anthropology, philosophy and politicology. Mintzberg (1998) emphasizes this broad diversity of perspectives in the debate and has identified two main distinct schools in strategic thinking; the prescriptive or positioning school of thought, and

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the descriptive or learning school of thought. Mintzberg further classifies the prescriptive school into design, planning and positioning schools, and descriptive school into entrepreneurial, cognitive, learning, political, cultural and environmental schools. The prescriptive school of thought views strategy formulation as a process that is analytical in nature. The central approach to improvement depends on the strategic positioning of the organization in the context of its industry (Mintzberg, 1976). As a result, this school of thought emphasizes being factual in the strategy analysis, largely depending on the analysis of collected data that portrays the state of the industry in question. The use of this school of thought in strategic management transformed institutional management into a science whose processes should be carried out based on scientific methods that include collecting and analysing data. This approach is most effective for use in the first stages of strategy development (Prahalad and Hamel, 1996). The first of the prescriptive school, the design school, holds that strategy systems are prescribed to be deliberate in nature and strategy formation is regarded as a process of conscious thought. Responsibility for that control and consciousness rests with the chief executive officer, who is therefore the main strategist. The strategy systems are regarded as a design process completed when strategies are fully formulated, and it is only after these unique, explicit and simple strategy processes are completed that the formulated strategy can be implemented. Second, the planning school, which has its roots in systems thinking, states that strategy systems are prescribed to be the controlled, conscious processes of formal planning. However, responsibility for their execution rests with staff planners. In comparison with the design school, resulting strategies from this process are made explicit so that they can be implemented through detailed attention to objectives, budgets, programs and operating plans of various kinds. The last of the prescriptive schools, the positioning school, has its roots in economics. According to this school, strategy systems are prescribed to focus on strategies that are generic and identifiable with positions in the marketplace, since the marketplace is perceived to be economic and competitive. As with the design and planning schools, strategies coming out of this process are first articulated and then implemented. The main difference is the strong focus on the external environment, especially

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market structures, which are believed to drive deliberate positional strategies (Mintzberg et al., 2005). The application of prescriptive strategies to strategic management, however, neglects other factors that may influence or affect the strategy made. There are various external factors that may affect the strategy formulated and these include culture, politics, power, weather and social elements. The school’s focus lies on the external environment within the competitor market. Thus, the market determines the deliberate positional strategies reached (Simon, 1993). In the context of the Kenyan tea firms, these external factors also include foreign currency exchange rates, labour wage increments and fluctuations in international tea prices, thereby undermining the applicability of this school of strategic thought. The descriptive school of thought, on the other hand, views strategy formulation as a process that is emergent in nature—a dynamic process that depends on the coming and going of trends. The process involves paying close attention to what works and what does not for the organization (Mintzberg et al., 2005). According to this school of thought, strategies must emerge gradually over time, allowing organizations to learn and adapt. Additionally, it gives solutions for complex and unpredictable situations in strategy formulation. Thus, the method is efficient for complex and continuously changing scenarios (Levinthal and March, 1993). In view of its recognition that strategy formulation and implementation ought to be contingent on the prevailing and ever-changing environmental factors, this school of thought has greater applicability to the Kenyan tea industry, which is characterised by a great deal of instability and uncertainty. According to the first of the descriptive schools, the entrepreneurial school, strategy systems are described as processes existing mainly in the mind of the leader. Strategies are believed to be specifically about the leader’s sense of long-term direction and vision of the enterprise’s future. The second school of thought, the cognitive school, with its roots in psychology, sees strategy systems as cognitive processes that take place in the mind of the strategist. Strategies thus emerge as perspectives, in the form of concepts, maps, schemes and frames, that shape how people deal with inputs from the environment. Thirdly, the learning school, also rooted in psychology, sees strategy systems as processes of learning over time in which formulation and implementation activities are intertwined and indistinguishable in nature. This is mainly due to the complex and unpredictable nature of enterprises and their environments.

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According to the power school, with its roots in politicology, strategy systems are mainly shaped by power and politics, whether as a process inside the enterprise itself or as the behaviour of the enterprise as a whole within its external environment. Strategies that may result from such processes tend to be emergent in nature and take the forms of positions and ploys more than perspectives. According to the cultural school, with its roots in anthropology, strategy systems are processes of social interaction, based on the beliefs and understandings shared by the members of an enterprise. An individual acquires these beliefs through a process of acculturation, or socialization, which is largely tacit and nonverbal, although sometimes reinforced by more informal indoctrination. The members of an enterprise can therefore only partially describe the beliefs that underpin their culture, while the origins and explanations may remain obscure. The last of the six descriptive schools is the environmental school which has its roots in biology and according to which strategy systems are mainly about responding in a natural manner to the corporate external environment. The external context presents itself to the enterprise as a set of general forces, and is therefore the central factor in the strategy making process. The enterprise must respond to these external forces because otherwise it would be “selected out” (Mintzberg et al., 2005). Amidst the merits of the descriptive school of thought lie limitations that may make the attainment of a strategy elusive, expensive and time consuming. The learning school of thought could lead to a strategy not being developed as the organization goes in cycles trying to figure out what works and what does not. Secondly, it could lead to a constant strategic drift, with the management never able to agree as to what works. Therefore, this could affect an organization’s stability. The method cannot yield a solution promptly, and thus is least useful in situations of crises where a quick strategy formulation is desired. Additionally, the step by step approach that builds up the strategy may not result in a totally sound strategy. Finally, the method could prove to be expensive over time because there are expenses linked to the learning process (Mintzberg et al., 2005). A comparison of the two broad schools of strategic thought show that in the prescriptive school of strategic management, the upper echelon makes the decisions. Subordinates have no role in management decision-making processes, they simply follow the dictates of their superiors. Conversely, the descriptive school values the input of the lower ranks of the company

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ladder. Decision making in descriptive strategic management starts from the bottom and moves upward. Prescriptive and descriptive strategic management schools further differ in the formulation of strategy. In a company that uses a prescriptive style, managers focus on the strategy formulation process, wanting to make sure they use the correct process. However, the descriptive school places a higher value on the content of the strategy, and descriptive strategic managers care more about what the managers decide rather than how they decide it (Sarfin, 2012). In addition, the two schools of strategic management do not see eye to eye on when the planning process should take place. Prescriptive strategic managers believe that strategy must be planned well in advance, and they do not take changing conditions into account. Descriptive managers, on the other hand, accept that the decision-making environment can be unpredictable. They prefer to be spontaneous and not to stick with a fixed, unchanging plan. In addition, the descriptive and prescriptive strategic management styles do not share the same desired outcome. Prescriptive strategic managers seek to formulate a strategy that enhances performance, while improved functioning matters to descriptive strategic managers, but not exclusively. They also want the company to survive, and they believe in learning from any experience that could help the business better succeed.

2.3 Business strategies Business or competitive strategies are those adopted to strengthen the position of the organization in the market. They deal with how to compete in the market, which products or services are to be developed and offered to which markets, to what extent the organization meets its customer needs and the extent to which the organization meets its objectives of long-term profitability, market growth and efficiency. They provide basic direction for strategic actions and are the basis of co-ordinated and sustained efforts directed towards achieving long-term business objectives (Pearce and Robinson, 2009). The concept of business competitive strategy was derived from Porter’s (1985) classification of generic strategies into cost leadership, differentiation and focus. A firm can obtain average returns in an industry despite the presence of strong competitive forces if it concentrates on overall cost leadership. However, the strategy requires a high relative market and other advantages, such as favourable access to raw materials or the ready

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availability of cash to purchase the most efficient equipment. The differentiation strategy involves the production and marketing of unique products for the mass market. Approaches to differentiation include developing unique brand images, unique customer service, unique product features and unique distribution channels. Focus strategy, on the other hand, is essentially a strategy of segmenting markets and appealing to only one or a small group of consumers or individual buyers. The logic of this approach is that a firm that limits its attention to one or only a few market segments can serve these markets better (Porter 1985). More recent and non-traditional business strategies include business process outsourcing and business process re-engineering. Business process outsourcing may be necessitated where managers are distracted from concentrating on critical activities. Many of these activities, mainly in the nature of services, may be entrusted to outsiders and be carried out by them equally if not more efficiently and more economically on the basis of their specialization and expertise. Non-core staff are therefore offloaded from the organization (Mellahi, Frynas and Finlay, 2005). Business process re-engineering, on the other hand, requires the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance such as cost, quality, service and speed. The intent is to streamline an operation and adapt it to existing market realities, and it further aims at co-ordinating functions to create a leaner, smoother and faster organization as well as eliminate unnecessary levels of work or nonvalue added activities (Malik, 2006). Furthermore, since the late 1980s a trend of mergers, acquisitions and downsizing has emerged particularly among multinationals due to technological change and global competition. One obvious way to build competitive advantage therefore becomes offering good quality at low cost by reducing expenses. In most organizations, the path towards cost control begins by slashing the head count and associated payroll and benefits costs. Whatever business strategy a firm pursues, they are primarily concerned with: co-ordinating and integrating unit activities so that they conform to organizational strategies(achieving synergy), developing distinctive competencies and competitive advantage in each business unit, identifying product or service market niches and developing strategies for competing

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in each, and monitoring product or service markets so that strategies conform to the needs of the markets at the current level of evolution. Whereas corporate level strategies specify the actions a firm takes to gain a competitive advantage, by selecting and managing a group of different businesses competing in different product markets, business level strategies indicate the choice the firm has made about how it intends to compete in individual product markets, that is gaining competitive advantage by exploiting core competencies in specific product markets (Ireland et al., 2009). To the extent that they both focus on overall performance, business strategies are similar to corporate strategies; indeed, business strategies are designed to support corporate strategies. However, in contrast to the corporate level strategies, they focus on only one rather than a portfolio of businesses. However, in a single product company corporate-level and business-level strategies are largely the same (Rayner and Associates, 2010).

2.4 Human resource strategies The process of formulating HR strategies involves deciding on the HRM options and then making appropriate strategic choices. It has been noted by Cappelii (1999) that the choice of practices that an employer pursues is heavily contingent on a number of factors including business and production strategies. The process of developing HR strategies involves the adoption of a contingent approach in generating strategic HRM options and then making appropriate strategic choices. There is seldom, if ever, one right way (Cappelii, 1999). Armstrong and Baron (2006) reinforce this view and state: “The HR strategy of an organization must be contingent on the needs and circumstances of that organization. The actual strategic elements depend on the requirements and context of the organization.” Fig.2.1 below depicts the HR strategy formulation process starting by deciding who is to be involved, defining the business strategy, identifying the business needs to be achieved by the HR strategy, defining the specific HR strategies to be implemented and finally preparing and implementing the action plans.

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Fig. 2.1 Formulating HR Strategy

Decide who is to be involved and how Define Business Strategy Analyse the context

Identify business needs Identify key HR issues

Develop the Strategic Framework

Define the specific HR strategies

Asses HR capability and resources required Prepare Action Plans Source: Armstrong and Baron (2007)

Armstrong and Baron (2007) divide HR strategy formulation into two approaches. The first is a classical sequential approach based on the assumption that there are formal and well-articulated business strategies and a logical flow from the defined mission of the organization to formulation of business strategy within the context of the internal and external environment of the organization, setting up strategic plans, and finally to the delivery of programs for implementation (Fig. 2.2).

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Fig. 2.2 Sequential Strategic HRM Model

Mission Business Strategy Internal environmental scan

HR strategic Plans

External environmental scan

HR implementation programmes Source: Armstrong and Baron (2007)

The second approach is an Empirical needs-based approach (Fig. 2.3) which sees strategic HRM as a much less orderly affair than the classical sequential approach envisages. The empirical approach to strategic HRM has elements of the sequential approach but goes further to be cognizant of the HRM strategy formulation and implementation process, which can only be meaningful within the context of continuously reviewing the implications of emerging business environmental changes. Fig. 2.3 Model of empirical approach to strategic HRM

Business issues, needs and intentions

Analysis of environment

HR strategies to meet business needs

Programmes for implementation of HR Strategy Source: Armstrong and Baron (2007).

Analysis of core competencies

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Wright, Snell and Jacobsen (2004), on their part, identify two approaches to HR strategy formulation: the inside-out approach, and the outside-in approach, making the following observations about HR-strategy linkage; the inside-out approach begins with the status quo HR function (in terms of skills, processes, technologies etc.) and then attempts (with varying degrees of success) to identify linkages to the business (usually through focusing on people issues), making minor adjustments to HR activities along the way. On the other hand, within the outside-in HR approach, the starting point is the business, including the customer and competitor and the business issues they face. The HR strategy then derives directly from these challenges to create real solutions and add real value. They suggest that the most advanced linkage is the integrative one in which the senior HR executive is part of the top management team, and is able to sit at the table and contribute during development of the business strategy. This study seeks, among other things, to find out whether the HR strategies are formulated using the inside-out or outside-in approach. The view by Wright et al. (2004) is shared by Hussey (2000), who states that human resource management must have a place at the management table, to dine from the full menu of information and free discussion. If the production quantity and quality and market figures are core to a business strategy, so too must the quality and quantity of people that will make the production and marketing figures a reality. Since this study considers restructuring and downsizing strategies, among others, it is important to consider what Ivancevich (2004) calls the “human face of downsizing.” According to him, in downsizing people are laid off, friends and colleagues are given new job responsibilities and feelings of trust and job security are threatened. The emotional impact of being laid off or having a colleague laid off can result in stress-related health problems. In addition, Korman (1994) refers to regrouping after downsizing and other forms of restructuring requiring employees to perform at peak levels so that more work can be accomplished with fewer resources. However, the stress and uncertainty that accompany downsizing detract from employee well-being, work-group performance and overall organizational effectiveness. Although many firms do an excellent job of providing a safety net to laid-off employees through outplacement, counselling and severance pay, they do not look at the tremendous psychological effects a reduction in workforce has on the surviving employees who must help the firm recover. Failing to deal with these survivors undermines the benefits of downsizing and can be disastrous.

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Korman (1994) emphasizes, however, that carefully planned and executed downsizing can prune the organization of dead weight, both in terms of individuals and business units. Downsizing can also spark organizational regeneration. The right mix of visionary and charismatic leadership skills can rally employees around the notion that downsizing is not only a defensive tactic to cut costs but a turning point at which to examine and improve the ways in which work is approached and conducted in the organization. The act “unfreezes” the organization and its people and provides a rare chance to dramatically change corporate culture and reinforce a new way of doing things. Downsizing survivors report considerably less confidence and trust in their employers than do employees whose firms have not experienced layoffs (Mirvis and Marks, 1992). Downsizing should make organizations more effective and competitive and instil confidence in the future, but apparently it may have just the opposite effect. The point is that the strategy of cost reduction is not secured when, for instance, 10% of employees walk through the door for the last time with their redundancy cheques. The organization needs to go into the details of job roles and expectations, define the competencies required and decide on performance standards required of those remaining in the organization. The necessity for strategic HRM notwithstanding, anecdotal and empirical evidence indicates that HR is not quite there yet. For example, in a survey conducted by the Society for Human Resource Management only 56% of respondents reported that their HR departments had a strategic plan in place (Fegley, 2006).

2.5 Approaches to Strategic HRM There are a number of models within which the framework of the strategic HRM concept describes various approaches to its development and implementation. These approaches include the Best Practice Approach, Best-Fit Approach and Configurational Approach (Armstrong and Baron, 2006). The Best Practice Approach is based on the belief that there is a set of best HRM practices and that adopting them will lead to superior organizational performance (Armstrong and Baron, 2006). The best known set is Pfeffer’s (1994) list of the seven HR practices of successful organizations: employment security, selective hiring, self-managed teams, high

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compensation based on performance, training, flatter organizational structure and information sharing. However, according to Gooderham, Parry and Ringdal (2008), even those bundles that impact on performance play only a relatively modest role in terms of explaining overall performance. Off-the-shelf HRM bundles of practices are inadequate. There is need for HR practitioners to become more embedded in their organizations’ strategic processes so that their offerings are more strategically integrated. .

The Best-Fit Approach offers a solution to the shortcomings of the BestPractice Approach. This approach holds that the aim of SHRM is to provide a fit between the policy goals of HRM and the business. The HR strategy of an organization must be contingent on the needs and circumstances of that organization (Guest, 1989). According to Armstrong and Baron (2006), the Best-Fit Approach has been accepted by most of the commentators as being more important than Best Practice. There can be no universal prescription for HRM policies. This is not to say that good practice should be ignored, but having learnt what works and what does not in comparable organizations, it is up to the firm to decide what can be adapted to its particular strategic and operational requirements. Bennett (1999) adds that the strategic approach to HRM involves the integration of personnel and other HRM considerations into the firm’s overall corporate planning and strategy formulation procedures. It is proactive, constantly seeking new ways of utilizing the labour force in a more productive manner, thus giving the business a competitive edge. Under the Best-Fit Approach, strategy formulation is about preferences, choices and matches rather than an exercise in applied logic (Mintzberg, 1994). It is an empirical approach to formulating strategy which starts with tuning into the process of business decision making at the top, identifying the key business issues and needs and thus being able to describe, in broad terms, the strategic intentions of the business. It is then possible, in conjunction with stakeholders such as line managers and other employees, to determine the strategic HR options available. Furthermore, it has to take account of the needs for the consideration of strategic fit and flexibility (Armstrong and Baron, 2006). The problem with “best- fit” is that the search for a matching model of HRM is limited by the impossibility of modelling all contingent variables, the difficulty of showing their interconnection, and the way in which changes in one variable have an impact on others (Armstrong and Baron, 2006).

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The Configuration School draws attention to three beliefs: first, that strategies may vary according to the life cycle of the organizations, second, that they depend on the sector of the organization, and third, that they are about change and transformation(Purcell, 2001).The key issue in the Configurational perspective is the argument that a given HRM practice, regardless of its situational superiority, is unlikely to yield substantial benefits at the organizational level unless it is combined with other effective practices (Lepak and Shaw, 2008). This perspective suggests that a configuration of a set of internally-aligned HRM practices will have a much greater ability to explain variation in organizational performance than single HRM practices taken in isolation (Delery, 1998).The above views are reinforced by Gooderham, Parry and Ringdal (2008) who argue that HR practitioners should not only select but also adapt strategically relevant HRM practices and thereafter monitor their strategic impact. Perhaps the most well-known configurational study was conducted by Huselid (1995). In a large cross-industry study, he demonstrated that a system of practices, labelled a High Performance Work System (HPWS), was positively and significantly associated with important organizational outcomes. The core characteristics of the HPWS are leadership that empowers others, a relentless focus on strategy and results, open sharing of relevant information, borderless sharing of power, a team-based organizational structure, and teamwork reinforced through rewards (Rayner and Associates, 2010). This study places emphasis on the Best- Fit Approach while remaining cognizant that even the best strategic fit can only be achieved through certain appropriate but adaptable practices, as espoused by the Configurational Approach.

2.6 HR Linkage and HR Integration—the HR Triad Strategy implementation involves the activities and choices required for the execution of a strategic plan (Hunger and Wheelen, 2007). Successful strategy implementation depends on the skills of working with others, organizing, motivating, culture building and realizing a strong fit between strategy and how the organization does things. Line managers and HR professionals need to cultivate an atmosphere in which employees would willingly and enthusiastically work towards the attainment of the business strategy.

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To keep people focused on what everyone is striving for, many companies create visions, missions and values. While a company’s vision statement may seem very general to outsiders, if formulated with the deliberation and input of many employees, it can take on great meaning, especially for the management of human resources. In addition, company values often suggest how employees are to be treated and what is expected from them in return (Jackson and Schuler, 2001). Used wisely, HRM activities can transform a lacklustre company into a star performer but used unwisely, they create havoc. “In some companies, existing approaches to managing human resources reflect chance and happenstance” (Jackson and Schuler, 2001). Whether a company chooses its HR policies carefully or somewhat haphazardly, those policies and practices can have powerful effects. To ensure the effects are positive rather than destructive requires the active involvement of three key players, namely the HR Triad consisting of HR professionals, line managers and employees who are affected by the HR policies and practices. The special expertise of the HR professional is used by, and in cooperation with, line managers, other administrative staff, and all first line employees in every department. Line managers are responsible for outcomes, HR professionals provide special expertise while employees share the responsibility for the outcomes. According to Jackson and Schuler (2001), each of these groups has several roles and responsibilities for creating alignment. Firstly, line managers need to understand, communicate and act in line with the vision, mission and values of the organization. In addition, they need to recognize the importance of organizational culture to the firm’s performance and direct efforts to building an appropriate culture. Moreover, line managers must assist HR professionals in determining the behaviours needed to implement the firm’s strategy and encourage them among employees. They should also understand and communicate implications of the firm’s structure to employees’ development and career advancement. Furthermore, line managers must understand and hone the new managerial behaviours needed for an empowered workforce and continuously monitor the internal environment to ensure the many components are aligned.

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Secondly, HR professionals must align HR policies and practices with the vision, mission and values of the organization. In addition, they must help line managers and other employees understand the importance of organizational culture and develop HR practices that send a clear and consistent message about the desired culture. Furthermore, HR professionals, in collaboration with line managers, determine the behaviours needed to implement the firm’s strategy and develop policies and practices to support the needed behaviours. Moreover, they should develop HR policies and practices that enhance development of expertise that fit the firm’s structure and support collaboration across units. Additionally, HR professionals should help line managers and employees adjust to empowerment and teamwork, and assist in monitoring the alignment of human aspects of the internal environment. Finally, they should recommend and help to implement changes when needed. Thirdly, employees have to focus their efforts on contributing to the mission and behave consistently with the values of the organization. In addition, they need to seek to understand the organization’s culture and its implications for their own behaviour and adapt to changing conditions, where appropriate. Furthermore, they should learn which behaviours are needed to implement the firm’s strategy and develop the skills needed for strategy implementation. Moreover, the employees should assist other employees with needed behaviours and skills and recognize the possible conflicts that arise due to the development of loyalty to organizational units. Additionally, employees should channel efforts into activities that are consistent with the organizational goals, accept the need for job design improvements and assist in job redesign efforts by providing input for improvements and feedback about the effects of changes to job design. They should also monitor their own needs and requirements and seek changes as needed. From the foregoing, each segment of the Triad needs to have an input in the SHRM process. Graham and Bennett (1998) note that HRM seeks to integrate the human aspects of the organization into a coherent whole and to establish high-level employee goals. Gratton (2003) contends that the future relationships between Human Resource professionals, line managers and CEOs also need to be revisited, meaning that they need to work together very closely. The human resources team has to be a very confident “mirror” of what is happening in the company and must be adept at understanding employee motivations and aspirations, while at the same time, it needs to be highly sophisticated in its understanding of key human resource practices and processes. Laabs

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(2000) adds that human resource professionals of the future will add value by becoming “phoenix leaders,” defined by their ability to make five essential contributions: they allow issues that confront the organization to emerge, use the people to resolve those issues, prioritize and allocate resources to address those issues, set ownership free so that everyone can deal with those issues, and stimulate learning. People issues are thus key to organizations of the future and this study aims at establishing the place of people issues in the organizations studied. Tea companies have hitherto been labour-intensive organizations, where the pre-eminence of people issues in the quest to formulate and implement business strategies cannot be gainsaid.

2.7 Synchronizing business planning with HR planning Radical strategic changes seldom occur without a bit of chaos. Indeed, some organizations seem to thrive on chaos (Jackson and Schuler, 2001). According to Bennett (1999), disorder and confusion are endemic to business situations, and management should focus on the best means for responding to uncertainty and change. He sees management as unable to control long-term future activities because of the unpredictability of future environments. In the tea industry, examples of dynamic forces, which are constantly pulling business in different directions, include international tea price changes, foreign exchange fluctuations, weather patterns and unionised worker wages. Most organizations however strive to impose some order and keep chaos under control during strategic change by engaging in systematic planning (Jackson and Schuler, 2001). Because of this unpredictability, human resource planning in terms of statistical forecasts may be unreliable but simulation and scenario building may be preferable as ways of taking decisions on future skills and numbers requirement. Due to its dynamic nature, the human resource planning process often requires periodic readjustments as labour market conditions change (Ivancevich, 2004). The HR implications of strategic change should not be treated as an afterthought or left out of the business planning process. By planning for the human side of the integration, merging companies can build trust and prepare people for the changes they are about to undergo (Jackson & Schuler, 2001). Human resource issues are a major part of any strategic change effort. Similarly, HR planning should not occur in isolation from

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business issues. Historically, the goal of human resource planning was simply to serve relatively predictable business needs. For example, if the business was growing at 10%, top management would continue to add to the workforce by 10%—it worked before, it would work again. Human Resource Planning was and still is concerned with the demand and supply of labour and problems arising from the process of reconciling these factors. Any human resource planning system has to be based on the analysis of demand and supply and the plans and decisions which follow these analyses (Tyson, 2006). According to Tyson, HR planning, however sound, has to be fully integrated into the other areas of the organization’s strategy and planning for it to be meaningful. Since the environmental changes are often unpredictable, managers use scenario planning whereby several alternative business scenarios are developed and strategic issues that would be associated with each scenario are identified. Human resource planning for the different scenarios still involves numbers, but often also involves crafting and communicating mission and value statements, ensuring that managers as well as all other employees understand and buy into the process of continuous change and adaptability, crafting HR strategies to help ensure that the company has the competencies and behaviours needed, systematically designing and aligning HR activities to address the concerns of multiple stakeholders, developing methods to monitor the effects of change, being alert to signals indicating that plans should be considered or modified and integrating all of these activities with other change efforts in areas such as finance, marketing and operations (Jackson and Schuler, 2001). The foregoing position was later reinforced by Armstrong (2009), who distinguishes between “hard” and” soft” human resource planning. The former is based on quantitative analysis to ensure that the right numbers of the right sort of people are available when needed. The latter is explicitly geared towards creating and shaping the culture of the organization so that there is a clear integration between corporate strategy and employee values, beliefs and, ultimately, behaviour. Hard or soft, HR planning needs to create interactive links between business objectives and people planning activities. In times, and in industries, of greater stability, forecasting HR needs and planning the steps to meet those needs is largely a numbers game. Forecasting efforts aim at (a) developing estimates of how many people

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with which skills would be needed, (b) forecasting the likely supply of people and skills, and (c) implementing plans to ensure that the right number and type of people are available at the right time and place. If the supply of people is expected to exceed the projected needs, downsizing plans may be developed. If the projected needs are greater than the anticipated supply, aggressive recruiting plans may be developed. The quality of forecast depends on the accuracy of information used and the predictability of events (Jackson and Schuler, 2001). The shorter the time horizon, the more predictable the event and the more accurate the information. Furthermore, as stated by Armstrong (2009), it would seem that employers quite simply prefer to wait until their view of the future environment clears sufficiently for them to see the whole picture before committing resources in preparation for its arrival. The perception is that the more complex and turbulent the environment the more important it is to wait and see before acting. The tea industry is characterized by great instability. There is unpredictability in terms of weather patterns, world tea prices, currency exchange rates and wage levels. HR planning, in these circumstances, cannot be a simple exercise, but getting it right is more important than for organizations in more predictable environments. The firms must observe a delicate balancing act between permanent labour force and what Ivancevich (2004) refers to as contingent workers, that is temporaries, part timers, contract or leased workers and other individuals hired to handle extra job tasks or workloads, between management and the other cadre of workers, skilled and semi-skilled workforce, young and aged employees, and other delicate staff balances. Human resource planning was an integral part of this study as it sought to establish how the optimum numbers and skills necessary for the attainment of business strategy are arrived at.

2.8 Strategic importance of measuring productivity In its more idealistic moments, HRM posits work as liberating, as productive play and a route to a form of self-actualization. Yet it also has a contradictory performative streak, wherein play needs to be measured, controlled and manipulated, and if the player disagrees then the HRM manager needs to enforce the rules of the game—productive play by all means, but only on HRM terms. HRM is therefore a science of freedom and control with the emphasis on control (Bolton and Houlihan, 2007).

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Performance measurement and feedback serve many purposes in organizations. The common objectives served by measurement and feedback are enhancing employee motivation and productivity, facilitating strategic planning and change and ensuring legal compliance (Jackson and Schuler, 2001). The emphasis, for some time now, has been on improved performance by increasing the capabilities of employees, but even the most capable employees will not perform well unless they are motivated to do so. Performance management systems address the issue of motivating employees to ensure that capabilities are fully utilized. A major development regarding future human resources management, which has come to the fore in recent times, is to determine the value of the various human resource functions as they impact on adding value to the organization (Nel and Werner, 2004). This is not only in terms of internal efficiency but, according to Grigg (2003), should also be reflected in human resource management’s contribution to shareholder value. Shareholder demand will increasingly lead to an increase in the “soft” areas of ethics and culture management as well as “hard” areas of contribution to the bottom line. Gratton (2003) identifies various issues to be considered for HR, being a mixture of hard and soft areas including: how HRM adds value, by asking what can be outsourced, taken on by line managers, or simply skipped, and how HRM can manage outsourcing. Other concerns include determining who has the skills of a strategic partner, how these skills can be developed and, from a structural perspective, how HR Managers can develop organizations capable of knowledge dissemination and innovation. Lastly, HR Managers need to ensure that employees remain engaged and committed during times of turbulence. Jayne (2002) states that there is a drive towards achieving a win-win deal with a growth surge in coaching and mentoring, team building, leadership development, up-skilling, personal development and providing a work/life balance. These, along with technological advances and increased outsourcing, are encroaching on the traditional human resource management roles such as recruiting, administration, payroll, performance assessment and training. According to Bates (2002), HR practitioners who aspire to leadership roles within the profession will have to become more strategic, more proactive and more involved in the overall business of their organizations. The most

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successful HR people will be those who can think “from the outside in,” that is, from the customer back to the organization. Numerous authors agree that a new model for the role of Human Resources Management is necessary. The new model must emphasize the strategic functions of human resources professionals as business partners. To become a fully-fledged partner in business, the human resource department must evaluate their roles, practices and effectiveness (Nel and Werner, 2004). In the past, HR Managers have concentrated on transactional and traditional activities. These activities are still necessary but transformational activities now assume their rightful place. According to Storey (1989), the hard version of HRM emphasizes that people are important resources through whom organizations achieve competitive advantage. These resources have therefore to be acquired, developed and deployed in ways that will benefit the organization. The focus is on quantitative, calculable and business-strategic aspects of managing human resources in as rational a way as for any other economic factor. The emphasis of measurement of HR contribution notwithstanding, Human Resource Management, in theory and practice, has both strategic (and economic) and normative (or legitimacy) dimensions. Indeed, Thomson (2007) argues that these dimensions and the tensions between them have become embedded in contrasting HR approaches, a position that will continue to exist into the foreseeable future. The soft version of HRM has its roots in humanism, an approach devoted to human interests that views people as responsible and progressive beings. It also traces its origin to the Human Relations school of thought founded by Elton Mayo in 1933, and which believes that productivity is directly related to job satisfaction, and that output of people will be high if they like their co-workers and are given pleasant supervision. People, like other inputs, must however be seen not as ends in themselves but as a means to a higher end, being the achievement of business strategy. They need to contribute to and be a major source of competitive advantage. This study is cognizant of the fact that both soft and hard models of HRM are a reality but both are a means to achieving organizational objectives. Indeed, even if the rhetoric of HRM is soft, the reality is often hard, with the interests of the organization prevailing over

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those of the individual. Based on research, there is general and consistent evidence that the use of HRM systems relates to measures of workforce and organizational performance (Lepak and Shaw, 2008).

2.9 Flexibility in the face of constant change— the need for a learning organization In a globalized economic world, experienced as the forum for competition, which spans the world, change is proving to be the only reliable constant. More than ever before, businesses need to be ready and able to adapt constantly and flexibly to the changing economic, technological and social context in which they operate (Habbel, 2002). This results in challenges which management can only overcome with a comprehensive and wellfounded strategic view. According to Jackson and Schuler (2001), because the environment is changing so dramatically, human resource planning has become more dynamic and more focused on strategic issues. This is necessary to address the constant state of organizational transformation. Therefore HR, according to Becton and Schraeder (2009), must develop new skills and competencies, increase knowledge and skills related to the business and analyze business needs and close the gaps identified. The transformational activities create long-term capability and adaptability for the firm, and they include knowledge management, management development, cultural change and strategic redirection and renewal. These activities have the great strategic value for the organization (Jayne, 2002). To cope with constantly changing situations, firms need to learn from the past and current activities, systematically review the lessons learnt from recent experience and hence develop rapid and flexible responses to fastchanging environments (Bennett, 1999). Indeed, organizations must be completely flexible in the twenty-first Century because markets are chaotic and resource needs are unpredictable. Individuals must be correspondingly flexible and self-reliant as there is no one-way to think about or do anything anymore (Schultz and Noël, 2004). Dyer and Ericksen (2005) argue that the future of HRM in terms of creating value lies in the ability of the systems to develop an agile and flexible workforce. Flexibility is supposed to provide the capacity to manage planned organizational change and enable the organization to be

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adaptive and responsive in the face of unanticipated pressures at all levels of the organization (Kamoche, 1992). Due to this need for employee flexibility and agility, strategic management must aim at creating organizations that are adept at learning, unlearning and relearning. They must become learning organizations. A study by Adhikari (2009) found that HRD professionals help to integrate HRD functions and organizational objectives by creating a learning environment. Hunger and Wheelen (2007) state that strategic management demands that the organization becomes a learning organization, one skilled in creating, acquiring and transferring knowledge and modifying its behaviour to reflect new knowledge and insights.

2.10 Employee commitment According to Jackson and Schuler (2001), research on integration following mergers and acquisitions, for example, show that the HR implication of strategic change should not be treated as an afterthought or left out of the business planning process. By planning for the human side of integration, merging companies can build trust and prepare people for the changes they are about to experience. This view is shared by Newell and Scarborough (2002) who argue that HRM makes its contribution to business strategy by shaping the core competencies of the organization. These competencies are enhanced, they argue, by the development of employee skills (human capital) and by increasing trustful interaction between employees (social capital). Social capital encourages more effective co-ordination and innovation through the sharing of knowledge via informal networks based on trust, which leads to higher commitment, which in turn leads to high performance. Staff should feel they possess a common objective. They will therefore experience a sense of affinity within the organization and want to pursue a common cause. Congruence is evident in the absence of grievances and conflicts within the organization, and in harmonious industrial relations (Bennett, 1999). Torrington, Hall and Taylor (2005) propose a model which relates entry and exit of staff with promotion and development in the organization. One axis of the model is supply flow. They argue that, strategically, organizations that focus on internal supply tend to see people as assets

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with long-term development value rather than costs in terms of annual expenditure. The other axis is labelled the assignment flow and describes the basis in which individuals are assigned new tasks in the organization. The criteria for allocation may be in terms of individual contribution to organizational performance or group contribution which Torrington et al. (2005) identify as factors such as loyalty, length of service and teamwork.

2.11 Human Resource Development Scholars have proposed considering intermediate linkages between SHRM practices and organizational performance, and the general consensus is that SHRM practices do not lead directly to organizational performance but rather they influence firm resources such as human capital or employee behaviour and it is these resources and behaviour that ultimately lead to performance (Katon and Budhwar, 2006). Adhikari (2009) suggests that to manage performance, a clear link between organizational objectives and outcomes should be established by developing human capital base in organizations. This capital base is developed through continuous Human Resource Development (HRD). Mainstream approaches to HRD take the organization and the match between the employee and work/context as a starting point. Success in HRD activities is judged relative to their contribution to the organization’s overarching purpose through their instrumental value (Tikkanen, 2005). Lepak and Shaw (2008) share the above views and state that HRM systems are used to elicit the needed role behaviours among employees to help realize an organization’s strategic objectives. Conceptually, this implies that employee behaviour, shaped by development, among other things, mediates the HRM system-performance relationship. Markowitsch et al. (2002) conclude that competition between companies and countries is no longer dominated by access to capital, equipment, systems or location. Increasingly, it is the capability of people to generate, share and deploy knowledge for value-adding purposes which makes the difference. Moreover, multinational companies have increasingly appreciated that it is people’s performance, and not just their accredited levels of knowledge and skill, that makes the major difference to organizational performance in the global economy. People must therefore not merely be educated for but deliberately prepared for their role in the achievement of strategic objectives. Becton and Schraeder (2009) suggest that although there are many changes required for HR to become more

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strategic, it should aggressively pursue, among key activities, the development of employees, providing opportunities for education, training and professional development. Average competence improvement should not be the only aim, but increasing the weakest performing group’s competences and performance should also be considered (Kesti and Syvajarvi, 2009). HRD is a systematic process of training and growth by which employees gain and utilize skills, knowledge, attitude and insights to carry out the work in their organizations efficiently and effectively (Armstrong and Baron, 2006). While development activities may improve performance in one’s current job, this is not typically its objective—its major concern is to prepare people for the roles they may have in the future by creating employees who are capable of implementing the overall organization strategy. In essence, therefore, even the best laid strategies will not work without adequately prepared human resources. Mohrman and Lawler (1997) believed that Strategic HRD practices should contribute to business strategy based on their knowledge of the competencies and capabilities of the organization, and their understanding of the organizational learning that will be required to support specified strategic directions. Garavan (1991) points out that HRD is best seen as the strategic management of training, development and management of professional education interventions, so as to achieve the objectives of the organization while at the same time ensuring the full utilization of the detailed knowledge and skills of individual employees. From the foregoing, HRD Practices are the valued components of management in contributing to business strategy and organizational learning. This study recognizes the important place of employee development in the achievement of strategic objectives and seeks to establish the moderating role it plays between strategic fit and the synergies realized as a result.

2.12 Strategic fit Guest (1989) views strategic HRM as largely about integration. He sees the key policy goals for HRM as adopting a strategic approach—one in which HR strategies are integrated with business strategies. The end product has to be a matrix of people and business-centred activities. The aim is to provide strategic fit and consistency between the policy goals of HRM and the business. HR planning should not occur in isolation from business issues. Possible changes in HR policies and practices should be

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considered in the context of issues related to other tangible and intangible resources, including finances, technology, physical resources and the firm’s current and desired reputation. The need for close co-ordination and collaboration between line managers and HR professionals during strategic planning, therefore, cannot be overemphasized. Graham and Bennett (1998) see strategic approach to HRM as the integration of personnel and other HRM considerations into the firm’s overall corporate planning and strategy. It is proactive, constantly seeking new ways of utilizing the labour force in a more productive manner, thus giving the business a competitive edge. Practical manifestations of the adoption of a strategic approach to HRM may include: incorporation of a brief summary of the firm’s basic HRM policy into its mission statement, explicit consideration of the consequences for employees of each of the firm’s strategies and major new projects, designing organization structures to suit the needs of employees rather than conditioning the latter to fit with the existing form of organization, and having the head of HRM on the firm’s board of directors. More than ever before therefore, human resource managers are expected to contribute to productivity and quality improvement, the stimulation of creative thinking, leadership and the development of corporate skills. The relationship between HR and management is becoming more collaborative, and HR executives are beginning to earn a seat at the management table, while HR offices are becoming more consultative and involved in the day-to-day line management activities. However, to become a full strategic partner, HR needs to build its own internal competencies to deal with organizational issues, educate itself on organization programs and missions, and find ways to offer creative and innovative solutions to organization wide issues (U.S. Office of Personnel Management, 1999). Dahmen (2002) states that human resources and the bottom line are not strangers to one another but need to be linked, and successful human resource people will be able to define what they deliver to the bottom line. HRM must determine the value of various human resource functions as they impact on adding value to the organization (Schulz and Nel, 2004). This is not only in terms of internal efficiency, but according to Grigg (2003) should also be reflected in human resource management’s contribution to shareholder value. Managers therefore need to measure the return on people practices to allow them to only choose those which would

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allow an organization the best return on their investment in human resources. Therefore, HR issues are a major part of any strategic change effort, whether the change leaders recognize it or not. If, according to Guest (1987), human resources can be integrated into strategic plans, human resource policies cohere, line managers have internalized the importance of human resources and this is reflected in their behaviour, and employees identify with the company, then the company’s strategic plans are likely to be more successfully implemented. This study seeks to offer indications of the sort of approaches that, subject to fitting them into the right context, are likely to assist in the delivery of sustained improvements in business performance. It lays emphasis on the importance of preparedness for expected and unexpected changes in the business environment as well as associated human resource requirements by the multinational tea firms, therefore encountering them with the minimum cost possible to the firm and the least psychological and financial challenges to the employees. This is especially important in the agricultural sector as the leading employer and the tea sub sector as the leading foreign exchange earner in the agricultural sector. In the recent past, these firms have reacted to the sudden threats to their bottom lines with the rushed introduction of tea-plucking machines in place of human labour. A thorough understanding of the industry in which they operate would lead to coherent business and human resource strategies that would make an impact on the performance of these firms and further reduce susceptibility to the vagaries of weather and international tea price changes.

2.13 Strategic synergy Synergy occurs when two or more activities or processes complement each other to the extent that, when undertaken in unison, the total output is significantly greater than when they are done individually. The idea is neatly summarized by the phrase “making two plus two equal five” (Bennett, 1999). In this study, synergy is achieved from the interface between HRM and strategic management. It takes the notion of HRM as a strategic, integrated and coherent approach and develops it in line with the concept of strategic management (Boxall, 1995). The aim of strategic fit, therefore, is to generate organizational capabilities beyond what an individual strategy

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would achieve on its own. The extra capability is achieved through ensuring that the organization has the skilled, engaged, committed, motivated and productive employees it needs to achieve sustainable competitive advantage. In addition, synergy can be achieved by “bundling,” wherein several HR strategies are developed and implemented together, so that they are interrelated and therefore complement and reinforce each other (MacDuffie, 1995). Strategic advantages in particular business areas do not yield requisite benefits automatically unless all parts work together smoothly. The concept of synergy is all about this. Synergy is an economic effect in which the different parts of the firm contribute unique sources of heightened value when managed as a single unified entity. Organizational units, more often, can be more successful together than working alone (Rao, 2011). Synergy is an important concept for managers because it emphasizes the importance of working together in a co-operative and co-ordinated fashion. To obtain special benefits in the form of cost savings, a better grip of the markets, full exploitation of scarce managerial talent, joint sharing of technology etc., firms often have good relations and strong alliances with suppliers, creditors and customers. Team members share equipment, customer lists and other information that helps the small companies to go after more business than they could without the team approach. The primary job of managers, then, is to identify and leverage the firm’s competitive advantage by sharing resources across closely fitting businesses to create new sources of value that form the basis for building synergy. In actual practice, finding a close fit among the firm’s different businesses is not easy. The firm may often find that its competitive advantages do not lend themselves well to application in other industries or markets. A firm specializing in housing finance business, as a result, may find the going tough if it were to venture into auto finance or consumer finance business. In a field marked by intense competition and cut-throat rivalry, the only way to build and sustain competitiveness is to make the firm’s unique advantages both as distinctive and enduring as possible. The more distinctive the firm’s resources (capabilities, skills and technologies), the more difficult it is for competitors to copy and imitate the firm’s synergy. A truly distinctive skill or competence will enable the firm to lower costs, enhance differentiation or accelerate learning in ways faster or better than its competitors (Rao, 2011).

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2.14 Strategic concerns of Kenyan tea firms The agricultural sector contributes 24% of the GDP and provides 70% of the total employment in Kenya. Specifically, 19% of the formal waged workers are in agriculture (KiPPRA, 2009). As a major contributor to economic growth and a major provider of employment, the business and human resource strategies adopted by the agricultural firms and tea firms in particular (since tea is the leading foreign exchange earning crop), have important implications for poverty and equity concerns in the country. Indeed, the industry directly and indirectly supports about three million people, making it one of the leading sources of livelihood in the country. In the period 1990–2005, Kenya’s average annual labour force growth was about 3%, which is one of the highest in the world (KiPPRA, 2009). This labour force can only find work if the largest employing sector, agriculture, continues to thrive through a suitable mix of corporate and human resource strategies. Kenyan firms export semi-processed, low value produce. The limited ability to add value to agricultural produce, coupled with high production costs (e.g. prices of energy, infrastructure, fertilizers and labour) makes Kenyan agricultural exports less competitive in global markets (Kenya Vision 2030, 2007). Kenyan tea is largely exported in bulk with value added teas in packets forming less than 10% (Tea Industry Task Force Report, 2007). In the international markets, these firms are therefore price takers. A case in point is tea sold through the Mombasa Tea Auction, which is dominated by foreign buyers. Mombasa is the only tea auction in East Africa catering for tea from Kenya, Uganda, Rwanda, Burundi, Zambia, Tanzania, the Democratic Republic of Congo, Madagascar, Malawi and Mozambique (Africa Tea Brokers Limited, 2010). In the last ten years, global tea production has outstripped demand by about 2.4% annually, while it is expected to grow at 1.8% yearly over the next decade. Consequently, average global auction prices have been declining (Task Force Report on the Tea Industry, 2007). Additionally, the cost of production has been escalating, causing great uncertainty as to the future of the tea business. Kenya is among the highcost producers, ranking third in the world and first in Africa (see Table 2.1 below). Among the factors identified as contributing to the high cost of production is labour cost, which stands at 60% of the overall cost of production (Task Force Report on the Tea Industry, 2007). In this regard, stakeholders in Kenya have realized the need for the industry to re-

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evaluate itself and make a strategic shift to remain profitable and globally competitive. In addressing the threatened bottom-lines, these firms do not have the luxury of a wide range of strategic options. Because they cannot increase prices, they must take care of the costs. These firms need to operate in a situation of macroeconomic stability, that is, stability of prices, inflation, interest rates and exchange rates. The existing situation, which is one of macroeconomic instability, erodes business confidence (KiPPRA, 2009). Table 2.1 Kenya’s cost of production compared with other producer countries (US $/Kg of Made Tea) Producer

Cost of Production

Sri Lanka

1.89

North India

1.63

Kenya

1.33

Rwanda

1.32

Uganda

1.20

Tanzania

1.16

Malawi

1.14

Zimbabwe

1.11

Vietnam

0.81

Indonesia

0.58

Source: Technoserve, Tanzania Tea Competitiveness Study (2007).

2.15 Empirical Literature Singh (2002) carried out research on strategic HR orientation and firm performance in Indian businesses and reports that there is a positive link between HR policies and practices and workforce motivation and loyalty on the one hand, and sustainable competitive advantage on the other. Singh (2002), however, notes that the study findings could be limited in generalizability as they may apply to the Indian context only. A study on the influence of strategic fit between business and HRM strategy on HRM effectiveness and organizational performance in Taiwanese manufacturing companies by Wang and Shyu (2007) found that

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the alignment between the business and HRM strategy was the key factor of success for organizations. When the HRM strategy and business strategy were aligned, the effectiveness of HR practices and organizational performance were better than “that of not aligned” by contingency perspective. The findings of Gooderham, Parry and Ringdal (2008), who carried out a study on the impact of bundles of strategic human resource management practices on the performance of European firms, both support and cast some doubt on the value of HRM for firm performance. They found that while certain HRM bundles do have an impact on performance, this should not be exaggerated. One of the limitations, they note, is that whereas most researchers control for generic strategy, they do not test for strategic fit. They admit that it may be the case that the bundles the HRM practices firms are employing in their sample have not been sufficiently aligned with their strategic goal. Ketokivi and Schroeder (2004), in a study on manufacturing practices, strategic fit and performance, a routine-based view, state that evidence clearly points towards the strategic contingency argument. This implies that as far as competitive performance is concerned, practices must be implemented for the right reasons. This study goes beyond the role played by HRM best practices and examines the critical role played by strategic fit. The study recognizes that HR practitioners, in order to maximize the impact they can have within their organizations, should not only select but also adapt strategically relevant HRM practices and, thereafter, examine their strategic impact. Dimba and K’Obonyo (2009), in a study on the effect of strategic human resource management practices on performance of manufacturing multinational companies in Kenya, the moderating role of employee cultural orientations and the mediating role of employee motivation, found that all the variables of SHRM, except recruitment and selection, were positively and significantly correlated with performance. Furthermore, they found that motivation affected firm performance. Dimba and K’Obonyo (2009) noted that most studies examining the relationship between SHRM practices and organization performance have been conducted in developed countries, principally the UK and the US, and theirs is therefore an attempt to understand the Kenyan context.

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Whereas Dimba and K’Obonyo’s (2009) target population was multinational manufacturing companies who were members of the Kenya Association of Manufacturers, none of the tea companies were studied. Moreover, this study goes beyond SHRM practices to the benefits of coherence between the business and HR strategies.

2.16 Summary The constant throughout previous theoretical, conceptual and empirical works is that the strategic approach to HRM can and does improve performance. The emphasis, however, has largely been on HR practices that make an impact on business performance. Some studies have identified sets of high-performance or sophisticated HR practices and demonstrate that using more of such practices raises performance levels. What has not received much attention is vertical integration between business and HR strategies. Where such studies have been conducted, such as by Wang and Shyu (2007), they have been far removed from the Kenyan and African situation. Where studies have been carried out in Kenya, as in the case of Dimba and K’Obonyo (2009), emphasis has been on HR practices. Furthermore, Dimba and K’Obonyo concluded that the Western model of SHRM practices in multinational corporations operating in developing countries is questionable. This study seeks to fill the knowledge gap regarding the extent to which transnational tea firms in Kenya have succeeded in achieving a strategic fit between their business and HR strategies, as well as the synergies achievable from the realization of such a strategic fit. This is with the realization that HR strategies ought to be contingent on the business strategies of the organizations.

2.17 Theoretical framework This study is based on the Best-Fit or Contingency theory of SHRM which holds that different types of HR strategies will be suitable for different types of business strategies, emphasizing that HR strategies should be congruent with the context and circumstances of the organization (Armstrong, 2009). In line with this theory, the study seeks first to establish if there is coherence between the business and HR strategies employed by the transnational tea firms, and second to determine what synergies are created by the strategic fit between the two strategies.

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The Best-Fit perspective can be contrasted with two other approaches, namely: the Universalist perspective and the Configurational perspective. The Universalist (Best-Practice) perspective holds that some HR practices are better than others and all organizations should adopt these practices and that there is a universal relationship between individual best practices and firm performance. In contrast, according to the configurational perspective or bundling, a strategy’s success depends on combining vertical or external fit and horizontal or internal fit so that a firm with bundles of associated HR practices should have a higher level of performance, provided it also achieves high levels of fit with its competitive strategy (Delery and Doty, 1996). One of the foundations of the Best-Fit approach is found in Fombrum et al. (1984), who proposed a basic framework for SHRM shown in Fig. 2.4 below, which demonstrates how activities within HRM (selection, training, performance appraisal and reward management) can be unified and designed to support the organization’s business strategy (shown as organizational performance in the diagram). Fig. 2.4. Human Resource Cycle

Rewards

Selection

Performance

Appraisal

Training Source: Fombrum et al. (1984)

The model provides a framework to show how selection, appraisal, development and reward can be mutually geared to produce the required type of employee performance. Best-Fit can be perceived in terms of vertical integration or alignment between the organization’s business and

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HR strategies. There are three models, namely: lifecycle, competitive strategy and strategic configuration (Armstrong 2009). The lifecycle Best-Fit model is based on the theory that the development of a firm takes place in four stages: start–up, growth, maturity and decline, in line with Product Lifecycle Theory. The basic premise of this model is that the human resource management’s effectiveness depends on its fit with the organization’s stage of development. As the organization grows and develops, human resource management programmes, practices and procedures must change to meet its needs. Consistent with growth and development models, it can be suggested that human resource management develops through a series of stages as the organization becomes more complex (Baird and Meshoulam, 1988). The competitive Best-Fit strategy comprises three strategies: Innovation (being the unique producers), Quality (delivering high quality goods and services to customers), and Cost Leadership (the planned result of policies aimed at managing expenses) as identified by Porter (1985). To achieve the maximum effect, it is necessary to match the role characteristics of people in an organization to the preferred business strategy (Schuler and Jackson, 1987). Accordingly, Schuler and Jackson produced the descriptions of appropriate role behaviours, set out in Table 2.2 below. Another approach to Best Fit is the proposition that organizations will be more effective if they adopt a policy of strategic configuration (Delery and Doty,1996) by matching their strategy to one of the ideal types defined by theories such as those produced by Bird and Beechler (1995). This increased effectiveness is attributed to the internal consistency or fit between the patterns of relevant contextual, structural and strategic factors. Bird and Beechler (1995) classify business strategies into defender, prospector and analyzer. To begin with, defenders create a secure market share with moderate, steady growth, narrow product market domains, and limit their search for new opportunities and instead focus on internal ways to enhance organizational effectiveness. Next, the prospector strategy is characterized by rapid growth and continued resource deployment/ redeployment, particularly of management and technical personnel. They continually search for market opportunities and regularly experiment with potential responses to emerging environmental trends. Lastly, firms with the analyzer strategy can compete in not only the early phase of product development when the emphasis is on uniqueness, but also later when efficient mass production becomes necessary to be competitive. The

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pursuit of effectiveness in pursuing new product markets while simultaneously maintaining a presence in existing domains necessitates an ability to be efficient, yet flexible in production technologies. Finally, these firms tend to share characteristics of both prospectors and defenders. Table 2.2 Role behaviours appropriate for different strategies

Innovative

Quality

High degree of creative behaviour

Relatively repetitive and predictable behaviours

Cost-leadership Strategy Relatively competitive and predictable behaviours

A relatively high level of co-operation and interdependent behaviour

A more long-term or intermediate focus A modest amount of co-operative, interdependent behaviour

A rather shortterm focus Primarily autonomous or individual activity

A moderate degree of concern for quantity

A high concern for quality

Modest concern for quality

An equal degree of concern for process and results

A modest concern for quantity of output High concern for process(how the goods or services are made or delivered)

High concern for quantity of output

Low risk-taking activity Commitment to the goals of the organization

Low risk-taking activity A relatively high degree of comfort with stability

A longer-term focus

A greater degree of risk taking A high tolerance of ambiguity and unpredictability A low degree of risk taking

Source: Schuler and Jackson (1987)

Primary concern for results

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2.18 Conceptual framework The relationship between strategic fit and synergy can be conceptualized as shown in Fig. 2.5 below. This study uses this model as its conceptual framework to show how coherence between the business and human resource strategies results in the creation of synergy for the organization. It shows that synergy is achieved when business and HR strategies are integrated with each other rather than each working alone. Indeed, findings from a large number of studies have produced evidence of a positive relationship between SHRM and performance (Armstrong and Baron, 2007). Synergy can be understood in terms of three indicators; employee commitment, employee flexibility and employee productivity. Firstly, Employee commitment, as defined by Porter et al. (1974), is the relative strength of the individual’s identification with, and involvement in, a particular organization. Components of commitment include identification with the organization's goals and/or mission, long-term membership in the organization and intention to remain with the organization, often termed loyalty and high levels of extra-role behaviour, that is, behaviour beyond the required performance. The aim of employee commitment is to shape desired employee behaviours and attitudes by forging psychological links between organizational and employee goals. In other words, the focus is on developing committed employees who can be trusted to use their discretion to carry out job tasks in ways that are consistent with organizational goals (Guest, 1987). Employee commitment was measured by such parameters as employee turnover, absenteeism rates and grievance levels. Secondly, Employee Flexibility is the creation in employees of the skills and capacity for rapid redeployment. The goal of flexibility is to provide the capacity to manage planned organizational change and enable the organization to be adaptive and responsive in the face of unanticipated pressures (Guest, 1987). Flexibility was measured by such parameters as acceptance of change, teamwork and organizational learning. Thirdly, employee productivity was measured by average kilograms of green leaf plucked by an employee per year. All these outcomes are, however, subject to the extent to which employees are deliberately equipped to achieve organizational strategy through such practices as appropriate training and development.

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Fig. 2.5. Conceptual framework

Independent Variable

Dependent Variable

Strategic Fit (Alignment of Business and HR Strategies) HR Strategies -Continuous Learning

Synergies

-Performance management -Expansion-recruitment -Downsizing -Job redesign

Employee Commitment

-Job rotation -Reward management

Employee Flexibility

-Teamwork Employee Productivity Business Strategies -Cost Leadership -Differentiation -Focus -Vertical Integration -Horizontal Integration -Acquisition -Diversification

-HR Development -Trade Unions -Government Policy -Political Change

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The rationale of the conceptual framework rests on the advantages of having an agreed and understood basis for managing both the business and people issues in the long term. Underlying this rationale is the concept of achieving competitive advantage through SHRM. Competitive advantage is the essence of competitive strategy, encompassing those capabilities, resources, relationships and decisions which permit an organization to capitalize on opportunities in the market place and to avoid threats to its desired position posed by competitors. The management of people is a key link to generating a competitive edge. An organization’s HR strategies, policies and practices can be used to ensure the firm has higher calibre people than its competitors. These unique talents among employees, including superior performance, productivity, flexibility, innovation and the ability to deliver high levels of customer service, are ways in which people provide a critical ingredient in developing an organization’s competitive position.

CHAPTER THREE RESEARCH METHODOLOGY

3.1 Introduction This chapter describes the methodology used in the study. It comprises a detailed account of the following: research design, target population, sample design and sampling procedure, data collection instruments, data collection procedures, methods used in data presentation and analysis.

3.2 Research design The researcher used descriptive design to determine the characteristics of the target population, examine associations between variables and to assess expected behaviour. Kerlinger (1973) defines descriptive research as “a system of empirical enquiry in which the scientists do not have direct control of independent variables because their manifestations have already occurred.” The subject is observed in a completely natural and unchanged environment. Descriptive research studies, according to Kothari (2004), are those studies concerned with describing the characteristics of a particular individual or group. It is concerned with specific predictions, the narration of facts and characteristics concerning individual or group situations. This research studies and describes the situation as it is, without attempting to alter the independent variables.

3.3 Target population In 2011 there were seven transnational tea companies operating in Kenya. The target population of the study comprised the seven transnational tea companies. The respondents were production managers of the twenty strategic business units and the seven managers in charge of the human resource function at these companies, making a total of twenty-seven (see Table 3.1 below).

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Table 3.1. Target population

Company

Managers in charge of Strategic Business Units

Managers in Charge of Human Resources

Total

1

4

1

5

2

3

1

4

3

4

1

5

4

4

1

5

5

2

1

3

6

2

1

3

7

1

1

2

Total

20

7

27

3.4 Census design Due to the small size, the researcher studied the entire population rather than a sample. As a general rule, one should not use any sample with less than 15 units of analysis, but preferably one with more than 25 units (Huysamen, 1991). This position was later reinforced by Johnson and Christensen (2008), who recommended that whole populations should be studied when they number one hundred or less. That way, without too much expense, there can be complete confidence that one knows about the total population. The study therefore involved all twenty-seven respondents.

3.5 Data collection methods and instruments The researcher obtained an introductory letter from Kabarak University, Institute of Postgraduate Studies and Quality Assurance to the National Council for Science and Technology as assistance in obtaining permission to carry out research from respondents in the organizations. The research permit was issued and went a long way in enabling the researcher to gain co-operation from the respondents. Strategic business plans covering the past five years as well as those covering the next five were, where available, obtained from respective companies and compared with human resource planning documents. Staff inventories (detailing age, experience,

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51

academic qualifications and other training and competences) and staff productivity profiles were also obtained. Questionnaires were personally administered to senior line managers in charge of strategic business units as well as those in charge of HRM. The personal administration was necessary in order to seek and offer clarification in cases of ambiguity, as well as to gather in-depth information on both business and human resource strategies.

3.6 Validity and reliability of the research instruments According to Patton (2002), validity refers to “the extent to which an instrument can measure what ought to be measured.” It is the extent to which an instrument asks the right questions in terms of accuracy and meaningfulness, which are based on research results (Mugenda and Mugenda, 1999). In designing an instrument that would yield valid data, the researcher, with the input of the supervisors, specified the domain of indicators which were relevant to the variables being measured to ensure that they contained all possible items that would be used in measuring the variables. According to Mugenda and Mugenda (1999), the reliability of the instrument is the measure of the degree to which a research yields consistent results after repeated trials. In order to test the reliability of the instruments to be used in this study, the split half method was preferred because it has a major advantage of eliminating chance error caused by differing test conditions. Scores on the odd numbered items were correlated with the scores on the even numbered items. Cronbach’s Alpha Coefficient of 0.70 confirmed the reliability of the instruments.

3.7 Data analysis procedure The first step in analysis was to edit the data of any errors such as incompleteness or inappropriate marking of responses. Secondly, coding and classification were done to reduce mass data obtained to a form suitable for analysis. Descriptive statistics such as means, percentages and frequencies were used to analyze various business and human resource strategies, as well as the SHRM processes used. Pearson’s Product Moment Correlation Coefficient was calculated to determine the level of fit between business

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strategies and human resource strategies, each on their own, followed by the business and HR Strategies against each other. To test the prediction of synergy by strategic fit, regression analysis was used. Results are reported cumulatively except for instances where comparisons or unique findings need to be singled out. The cumulative analysis aims at establishing trends that can eventually be generalized to the target population. Data is presented in tables, graphs and text form. Information gathered from company documents is reported directly to complement information in questionnaires. Data on non-quantifiable items is reported in descriptive form.

CHAPTER FOUR DATA ANALYSIS, PRESENTATION AND INTERPRETATION

4.1. Introduction This chapter presents the findings of the study by analyzing the data obtained from the respondents. Primary data was collected through questionnaires administered to a total of twenty-seven managers of transnational tea companies and from whom a 100% response rate was obtained. Secondary data was obtained from publications and strategy documents of the various companies, as well as publications of the Tea Board of Kenya. The data analysis aims at realizing the study objectives, the overall one being to identify the synergies created by the strategic fit between the business and human resource strategies at the seven transnational tea companies in Kenya. Specific objectives include finding the major business strategies employed in the last five years as well as those formulated for implementation in the next five, to establish whether there is integration between the business strategies, to find the major human resource strategies employed in the last five years and those formulated for implementation in the next five, to establish whether there is integration between the various human resource strategies employed, to identify which SHRM processes—integrated, aligned or separate—are used by the firms, to establish the level of strategic fit between various business and human resource strategies and, finally, to determine whether strategic fit between business strategies and HR strategies is a predictor of synergy in the firms. Data is analyzed using descriptive and inferential statistics, and descriptive statistics are used to summarize the data collected during the study, which involves working out the means, percentages and frequencies. Tables and frequency and bar graphs are used to render the results into comprehensive information. Pearson’s Product Moment Correlation Coefficient is calculated to determine the level of fit between business strategies and

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human resource strategies, each on their own, followed by the business and HR Strategies against each other. To test the prediction of synergy by strategic fit, multiple regression analysis is used. The analysis has been made with the aid of the Statistical Package for Social Sciences and presented according to the objectives of the study as follows.

4.2. Major business strategies The first specific objective of the study was to determine the business strategies employed by the transnational tea companies over the last five years, as well as those formulated for implementation over the next five years. The objective was guided by the research question—what are the major business strategies employed by the transnational tea companies over the last five years as well as those formulated for implementation over the next five? The essence of determining these strategies is to correlate them with the human resource strategies over the same period and therefore establish if there is strategic fit between the two. The study finds that the following business strategies of cost leadership, differentiation, focus, horizontal integration, vertical integration, diversification, acquisition and divestiture are employed by the organizations in varying degrees. Data regarding the business strategies is analyzed and presented under the various headings below.

4.2.1. Generic strategies The findings of which generic strategies are employed by the organizations are presented in Table 4.1 below. From these, 12 respondents, representing 60% of the total population, indicated that their organizations had adopted an overall cost leadership strategy. Differentiation and focus strategies were each picked by 4 respondents, representing 20% each. Keeping costs at the lowest possible level is therefore the most important overall strategy for these organizations. This is true irrespective of the specific business strategy adopted. Cost control is especially important as the firms do not determine the prices of their products; rather, the prices are determined by the tea brokers at the auction. Controlling costs then becomes the best way to maintain or improve their profit margins.

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Table 4.1. Generic strategies Generic Strategy Cost leadership Differentiation Focus Total

Frequency 12 4 4 20

Percent 60 20 20 100

4.2.2. Horizontal integration Horizontal integration is the combination of firms operating in the same industry and at the same stage of the production/distribution chain. The findings on the formulation and implementation of this strategy show that 13 respondents (65 %) felt that horizontal integration is of absolutely no importance to their organizations. One respondent (5 %) each felt that horizontal integration was being employed to a degree equivalent to 30% and 40% respectively while 3 respondents (15%) indicated that horizontal integration strategy had an 80% value to their organizations. Only 2 (10%) indicated this strategy had been employed to a degree equivalent to 90% value. It can be concluded from the findings that though most of these firms are not taking over other firms in the industry, horizontal integration is still of some importance as 35% of them are engaged in it. The high percentage of respondents indicating that Horizontal integration is of no value is an indication that the firms have not seen any strategic need of coming together so as to gain economies of scale. However, for those who indicated its usefulness, this can be attributed to collaboration in research and development in the area of seeking high yielding tea clones as well as marketing. The findings are presented in Table 4.2 below. Table 4.2 Horizontal Integration Scale of importance 0 3 4 8 9 Total

Frequency 13 1 1 3 2 20

Percent 65 5 5 15 10 100

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4.2.3 Vertical Integration Vertical integration strategy involves takeover among firms in the same industry but at different stages in the production or distribution chain by taking over distributors or suppliers of raw materials. Findings on this strategy are presented in Table 4.3 below and show that 8 respondents (40%) felt that vertical integration was of absolutely no importance to their organizations. One respondent (5%) felt that vertical integration was being employed to a degree equivalent to 60%, while 6 respondents (30%) indicated that vertical integration strategy had a 30% value to the organizations. Three respondents (15%) indicated that it had been employed to a degree equivalent to 80%. Only 2 (10%) indicated that it had been employed to a degree equivalent to 90%. The findings show that, on the whole, 60% of these firms are engaged in vertical integration. This has been done by growing and transporting green leaf to their own factories instead of buying from small-scale growers, as well as some establishing tea brokerage firms to ensure better bargaining power, leading to better prices for their products. Table 4.3. Vertical Integration Scale on importance 0 6 7 8 9 Total

Frequency 8 1 6 3 2 20

Percent 40 5 30 15 10 100

4.2.4. Diversification A basic strategic decision is whether a firm should concentrate on the activities it performs best, to the exclusion of other lines of business, or whether it should diversify into different fields especially by producing new products. From the study, 13 respondents (65%) felt that diversification was of absolutely no importance to their organizations. One respondent (5%) felt that diversification was being employed to a degree equivalent to 40%, while 2 respondents (10%) indicated that diversification strategy had a 50% value to their organizations. One respondent (5%) indicated it had been employed to a degree equivalent to 70% value. Another 2 respondents (10%) indicated it had been employed

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to a degree equivalent to 80% value. Only 1(5%) indicated it had been employed to a degree equivalent to 90%. From the forgoing, these firms continue to grow and process mainly tea. However, 35% have diversified into other products such as flowers and trees. Those who have diversified to products other than tea have done so to mitigate against fluctuations in performance brought about mainly by sudden and unexpected changes in tea prices and currency exchange rates. The findings are presented in Table 4.4 below. Table 4.4. Diversification Scale on importance 0 4 5 7 8 9 Total

Frequency 13 1 2 1 2 1 20

Percent 65 5 10 5 10 5 100

4.2.5. Acquisition A firm may acquire another in the business area in which the purchaser already operates or an unrelated business. From the findings on the use of acquisition business strategy, the majority, 18 respondents (90%), felt that acquisition was of absolutely no importance to their organizations. Only 1 respondent (5%) each felt that acquisition was being employed to a degree equivalent to 70% and 80% respectively. The very low uptake of acquisition business strategy, coupled with the relatively low use of horizontal integration and diversification, is proof that though the industry is affected by external factors, this has not reached the point of firms wanting to divest from the business. There are therefore few opportunities for acquisition. These findings are presented in Table 4.5 below.

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Table 4.5.Acquisition Scale on importance 0 7 8 Total

Frequency 18 1 1 20

Percent 90 5 5 100

4.2.6 Divestiture The majority of respondents, 18 (90%) felt that divestiture was of absolutely no importance to their organizations. Only 1 respondent (5%) each indicated that divestiture was being employed to a degree equivalent to 60% and 80% respectively. Very few of these firms have therefore divested from all or part of their businesses. Low levels of divestiture, like low levels of acquisition, are indicators that though the businesses are affected by a multiplicity of factors, the firms are still largely content to continue carrying out business. These findings are presented in Table 4.6 below. Table 4.6. Divestiture Scale on importance 0 6 8 Total

Frequency 18 1 1 20

Percent 90 5 5 100

4.2.7. Mergers All respondents indicated that their organizations have not carried out and are not envisaging any mergers as a strategy to achieve their objectives in the short- to medium-term. Due to the fact that the firms are content to continue carrying out their business, no firms are being offered for mergers or takeovers.

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4.2.8. Liquidation There are absolutely no cases of liquidation in these organizations, with all respondents indicating that their organizations have not been involved in any liquidation as a strategy to achieve their objectives. The investors are intent on holding onto their investment in anticipation of better trading conditions in the future.

4.2.9. Number of years over which strategies are envisaged to work Fourteen respondents (70%) indicated that their business strategies cover a period of three to five years, while 6 (30%) indicated that their strategies cover periods of between six and ten years (see Table 4.7 below). Most of the strategies are therefore formulated and implemented over the short- to medium-term. This can be attributed to the fact that there are often sudden unexpected changes in the industry and therefore strategies can only be realistically formulated and implemented for the short- to medium-term. Table 4.7. Number of Years Strategies are Envisaged to Work Years 3_5 6_10 Total

Frequency 14 6 20

Percent 70 30 100

4.2.10. Factors affecting successful implementation of strategies This study identifies several factors that affect the successful implementation of chosen business strategies, thereby causing sudden changes in strategy. The US Dollar/Kenya Shilling exchange rate (since tea is sold in US dollars) was indicated by 6 (30%) respondents to be the most important factor affecting the successful implementation of chosen business strategy. Changing weather patterns and international tea prices were each noted by 4 (20%), while labour wages and technological changes, because they can often be foreseen, were each indicated by only 3 respondents (15%). Of all the factors affecting the successful implementation of business strategies, currency exchange rate, the study found, is the most unpredictable, followed by weather patterns and international tea prices. The situation is worsened by the fact that the firms have no control over these changes. The findings are presented in Table 4.8 below.

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Table 4.8. Factors affecting successful implementation of strategies Factor Weather patterns Dollar/Shilling Exchange rate International Tea prices Labour Wages Technological Changes Total

Frequency 4

Percent 20

6

30

4 3

20 15

3 20

15 100

4.2.11. Strategic management practices The study sought to find out the strategic management practices employed by the transnational tea companies, as it is within the overall strategic management environment that specific business and HR strategies can be employed, with a view to attaining strategic fit between the business and HR strategies. The findings are stated below. 4.2.11.1. Mission, vision and values This study finds that all the companies have written mission statements, which overall, concentrate on producing consistent high quality tea at the lowest cost and selling at the most competitive prices. There was frequent mention of investing in people through training and health and safety, as well as investing in efficient technology so as to maximize shareholder value. All the companies have a vision of becoming leading tea producers in East Africa and even the whole of Africa. Some of the stated values include integrity, ethics and social issues through corporate social responsibility and environmental protection. In addition, the researcher was able to obtain formal organization structures, complete with job descriptions. At least one document indicated specific objectives to be achieved within specified time frames.

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4.2.11.2. Key performance indicators on which business objectives are based All the respondents indicated that they had identified their key performance indicators including product quality, cost of production, employee productivity, tea prices, employee satisfaction and customer satisfaction. 4.2.11.3. Core competencies Ninety percent of the Managers of strategic business units indicated that they had identified their organizations’ core competencies, with the remaining 10% indicating they had not (see Table 4.9 below). The core competencies varied slightly between the different strategic business units but included high quality product, use of appropriate technology, alternative marketing channels to the Mombasa tea auction, quality management systems (including training of human resources), and adoption of international standards (including ISO 22000 and various social and customer audits regarding the safe and quality production of tea). Table 4.9. Identification of core competencies

Yes No Total

Frequency 18 2 20

Percent 90 10 100

4.2.11.4. Benchmarking Figure 4.1 below presents the frequency of use of benchmarking in strategy formulation. Only 20% of the managers of strategic business units indicated that they engage in benchmarking all the time, while 30% engage in benchmarking most of the time. The majority (40%) only engage in benchmarking sometimes while 10% do it seldom. Overall, the findings indicate that benchmarking is only regarded as a very important strategic management instrument by 50% of the managers, those of whom use it either always or most of the time

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f Fig. 4.1. Bencchmarking as part of strategy formulation

Fre equency of e engagement in Benchma arking as part of strategy formulation f

40 40 30

35 Percentage

30 25

20

20

10

15 10

5 0 Always

Most of the time

Sometimes

Seldom

4.2.11.5. Coompetitor anaalysis Fig. 4.2 bellow presents the frequency y of use of ccompetitor an nalysis in strategy form mulation. Only 20% of the managers of sstrategic busin ness units indicated thaat they alwayss carry out com mpetitor analyysis. Forty fiv ve percent use compettitor analysis most of thee time, whilee 35% only use this technique soometimes.

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Fig. 4.2. Com mpetitor analysiss as part of strategy formulatioon

4.2.11.6. Hoow the firms seek s to satisfy fy customer n needs In seeking to satisfy cuustomer needss, the tea coompanies have limited options. Sixx respondents (30%) indicaated that the m most importan nt options are improveed quality of their t product (so as to get bbetter prices at the tea auction) andd better distribution channeels, especiallyy for the prod ducts that are privatelyy sold, that iss not through the Mombasaa Auction. Fiv ve (25%) cited producct differentiattion, while on nly 3 (15%) ccited appropriate price. This is mainnly attributed to t the fact that tea prices at the auction arre largely determined bby the buyers rather than th he sellers (Tabble 4.10). Table 4.10. Satisfaction of customer needs n Option Product Differentiatiion Appropriatee Quality Appropriatee Price Distributionn Channels Total

Frequenccy

Percentt

5 6 3

25 30 15

6 20

30 100

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4.2.11.7. Envisaged improvements to working methods and systems All the business units had certain intended changes to the methods and systems of work to be used to accomplish improvements to productivity. Six respondents (30%) each cited training and HR development and Business Process Reengineering (BPR) as the most important ways to improve productivity. Five (25%) cited technological change, while 3 (15%) cited Business Process Outsourcing (BPO). This is an indicator that BPO, as a method of reducing unproductive labour, has not been fully embraced by these firms. The findings are presented in Table 4.11 below. Table 4.11. How to improve working methods and systems Way Training and HR Development Business Process Re-engineering Business Process Outsourcing Technological Change Total

Frequency

Percent

6

30

6

30

3

15

5 20

25 100

4.2.11.8. Measurement of cost of production In view of the fact that the tea firms are price takers, the study sought to find out how much their costs of production have fluctuated over the past five years. The findings presented in Fig. 4.3 below show that, save for 2007, the cost of production per kilogram made tea has been on an upward trend, rising most significantly between 2008 and 2009.

Data Analysis, Presentation and Interpreetation

65

Fig. 4.3. Averrage cost of prooduction per killogram made teea (2006–2010)

At the samee time, the peercentage of th he cost of prooduction acco ounted for by labour reelated costs haas also been on o a steady risse (see Fig. 4.4 4 below), reaching 58% in 2010. Labour L is therrefore the moost significantt cost for these firms and it is no wonder they have, amongg other measu ures, been keen to introoduce mechannization, especcially in tea haarvesting. Fig. 4.4 Meann percentage coost of productio on accounted ffor by labour co ost (2006– 2010)

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4.2.11.9. Prroductivity measurement (2006–2010) ( The study ssought to findd out the levels of labour pproductivity in n the last five years, aand as shown in i Fig. 4.5 bellow, productivvity rose betw ween 2006 and 2008, annd then begann to decline. This T decline ccoincided with h the shift from full-tim me, long-term m employment to an increassed use of con ntract and seasonal woorkers. Fig. 4.5. Prodductivity in kiloograms green leaf per Labour D Day (2006–2010)

4.3. Integratioon between the busineess strategiees The secondd specific objective of the study was to establish iff there is integration between the different business strateggies employed d by the transnationaal tea compannies. The objective was guuided by the research question: is there integrattion between the t business sttrategies employed? In order to esttablish integraation between n the businesss strategies employed, Pearson’s Prroduct Momennt Correlation n Coefficient ((r) was calcullated. The findings of the study inndicate integrration among the various business strategies ass it shows thhat complemeentary strateggies are used together, whereas nonn-complementtary strategiess are not. Thee findings are shown in Table 4.12 bbelow.

Diversification

Vertical integration

Horizontal integration

Focus

Differentiation

Cost leadership

Pearson Correlation Sig. (2tailed) Pearson Correlation Sig. (2tailed) Pearson Correlation Sig. (2tailed) Pearson Correlation Sig. (2tailed) Pearson Correlation Sig. (2tailed) Pearson Correlation Sig. (2tailed) 0.017 1 .

.

-.673(*)

0.017 .700(*) 0.011 .742(**) 0.006 .770(**) 0.003 .806(**) 0.002

0.012

-0.385

0.217

-.638(*)

0.026

-0.332

0.292

-.697(*)

Differentiation -.673(*)

Cost leadership 1

0.557

0.189

0.508

0.212

0.676

0.135

.

1

0.011

.700(*)

.697(*) 0.012

Focus

0

.974(**)

0.522

0.169

.

1

0.676

0.135

0.006

.742(**)

0.217

Horizontal integration -0.385

0.003

.783(**)

.

1

0.522

0.169

0.508

0.212

0.003

.770(**)

0.026

Vertical integration -.638(*)

Table 4.12. Correlation results for the integration of business strategies

Data Analysis, Presentation and Interpretation

.

1

0.003

.783(**)

0

.974(**)

0.557

0.189

0.002

.806(**)

0.292

-0.332

Diversification

0

.994(**)

0.004

.761(**)

0

.971(**)

0.413

0.261

0.001

.839(**)

0.251

-0.359

Acquisition

0

.994(**)

0.004

.761(**)

0

.971(**)

0.413

0.261

0.001

.839(**)

0.251

-0.359

Divestiture

67

Pearson Correlation Sig. (2-tailed) Pearson Correlation Sig. (2-tailed)

-0.359 0.251 -0.359 0.251

** Correlation is significant at the 0.01 level (2-tailed).

* Correlation is significant at the 0.05 level (2-tailed).

Divestiture

Acquisition

68 .839(**) 0.001 .839(**) 0.001

0.261 0.413 0.261 0.413

Chapter Four .971(**) 0 .971(**) 0

.761(**) 0.004 .761(**) 0.004

.994(**) 0 .994(**) 0

1 . 0.135 0.676

0.135 0.676 1 .

Data Analysis, Presentation and Interpretation

69

From the findings, cost leadership has a moderately strong negative correlation with differentiation (r=-0.673), focus (r=-0.697) and vertical integration (r=-0.638). Differentiation often leads to higher costs related to research and development, focus means the cost structure remains largely the same, while vertical integration may lead to either increased costs or costs remaining the same. These strategies are therefore unlikely to be used together with cost leadership. All the other strategies may be employed together as they have weak correlations. Differentiation has a strong positive correlation with focus (r=0.700), horizontal integration (r=0.742), vertical integration (r=0.770), diversification (r=0.806), acquisition (r=0.839) and divestiture (r=0.839). This is an indication that these business strategies are complementary and therefore often used together. Focus, on the other hand, has a strong positive correlation with differentiation (r=0.700) and a moderately strong negative correlation with cost leadership. Whereas focus strategy concentrates the firm’s products on its existing line of business, it may be necessary to, at the same time, slightly differentiate the products to gain advantage over the competition. Focus can therefore be used together with differentiation but not with cost leadership. Horizontal integration has a strong positive correlation with differentiation (r=0.742), diversification (r=0.974), acquisition (r= 0.971) and divestiture (r=0.971). This implies that all these strategies are used together with horizontal integration. Vertical integration also has strong positive correlation with differentiation (r=0.770), diversification (r=0.783), acquisition (r=0.761) and divestiture (r=0.761). Horizontal integration and vertical integration, the findings indicate, are complemented by differentiation of products to gain competitive advantage, diversification to mitigate the effects of fluctuating tea business profitability, and acquisition to take advantage of economies of scale. At the same time, vertical integration has a moderately strong correlation with cost leadership (r=-0.638) due to the fact that it may, in the short run, require an increase in cost to bring the acquired firm to the same technological and management level as the acquiring firm. For diversification, the findings show a strong positive correlation with differentiation (r=0.806), horizontal integration (r=0.974), vertical integration (r=0.783), acquisition (r=0.994), and divestiture (r=0.994). Since Diversification entails introducing products other than tea, it is

70

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easily complemented by differentiation, horizontal integration, vertical integration, acquisition and divestiture. Acquisition has a strong positive correlation with differentiation (r=0.839), horizontal integration (r=0.971), vertical integration (r=0.761) and diversification (r=0.994). Acquisition may mean taking over firms of the same or different level, leading to complimentarity with horizontal integration and vertical integration. Divestiture has a strong positive correlation with differentiation (r=0.839), horizontal integration (r=0.971), vertical integration (r=0.761), and diversification (r=0.994). As a firm divests from one business, it can obtain other businesses which it considers to be in its strategic interest through the process of horizontal and vertical integration. Differentiation and diversification can also be used for the purpose of improved competitiveness.

4.4. Human Resource Strategies The third specific objective of the study was to determine the human resource strategies employed by the transnational tea companies over the last five years as well as those formulated for implementation over the next five. The objective was guided by the research question: what are the major human resource strategies employed by the transnational tea companies over the last five years as well as those formulated for implementation over the next five? The essence of determining these strategies is in correlating them with the business strategies over the same period and to therefore establish if there is strategic fit between the two. The study finds that the human resource strategies of continuous learning, performance management, job redesign, job rotation, reward management, teamwork, downsizing and recruitment are employed by the organizations in varying degrees. Data regarding the human resource strategies is analyzed and presented under the various headings below.

4.4.1. Continuous learning The researcher asked the HR Managers about the importance of continuous learning as a HR strategy geared towards creating an organization skilled in creating, acquiring and transferring knowledge and at modifying its behaviour to reflect new knowledge and insights. The findings are presented in Table 4.13 below.

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Table 4.13. Continuous learning Importancce of strategy 0 4 6 8 9 Total

Frequen ncy 1 1 2 2 1 7

Percent P 14 14 29 29 14 100

Fig. 4.6. Expeenditure on training (2006–2010)

Two responndents (repreesenting 29% %) each indiccated that co ontinuous learning waas of 60% and 80% importance too their orgaanizations respectivelyy. One responddent (5%) ind dicated that coontinuous learrning was being emplooyed to a deggree equivalen nt to 40%andd 90% respecctively. A further 1 resspondent (14% %) felt that co ontinuous learnning was of absolutely a no importan ance to theirr organization n. The findinngs demonsttrate that continuous learning is an importan nt strategic H HR strategy in these organizationns, as 72% of the HR manag gers indicatedd that it has ab bove 60% importance. Continuous learning l is necessary to maake employees flexible in order too cope with the ever-chaanging busineess environm ment. The importance of non-stop leearning is further supportedd by the steady y trend of increases in expenditure on o training beetween 2006 aand 2010. Thee findings

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on training expenditure are presented in Fig.4.6 above and indicate that over the five years, the expenditure on training tripled.

4.4.2. Performance management The study sought to understand the importance of performance management as a HR strategy, whose import is the maximization of productivity and compensation based on results. The findings are presented in Table 4.14 below. Table 4.14. Performance management Importance of strategy 8 9 10 Total

Frequency 1 4 2 7

Percent 14 57 29 100

The majority, 57%, indicated that performance management is of importance to a degree equivalent to 90%, while 29% of the respondents felt the degree of importance to be equivalent to 100%. Fourteen percent put the level of importance at 80%. From the findings, all the HR Managers put the importance of this strategy at 80% at least. Due to the escalating labour costs, it is important that performance is generally well managed in order that the firms can retain fewer people but with higher productivity and performance. Performance management is therefore one of the most important HR strategies employed.

4.4.3 Job redesign Redesigning jobs to better interface between the employees and their jobs is another possible HR strategy that the firms could employ. The findings, presented in Table 4.15 below, however indicate that 86% of respondents currently feel that this strategy has absolutely no value to them, while only 14% use it but to a very limited extent, represented by only 10% importance. The firms have not yet appreciated the contribution to the performance of appropriate job designs coupled with paying attention to workplace ergonomic factors.

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Table 4.15. Job redesign Importance of strategy 0 1 Total

Frequency 6 1 7

Percent 86 14 100

4.4.4 Job rotation Job rotation as HR strategy may be undertaken by progressively moving employees to all departments of the organization to enable them to holistically understand the operations of the organization. The findings regarding the extent to which job rotation strategy is used are presented in Table 4.16 below. Table 4.16. Job rotation Importance of strategy 0 4 6 7 Total

Frequency 4 1 1 1 7

Percent 57 14 14 15 100

From the findings, job rotation is not used much as a HR strategy. The majority, 57% of the respondents, indicated that job rotation has absolutely no role among their HR strategies. The rest, 43%, indicated it had a role but in varying degrees. This is due to the fact that the focus has not been on developing employees for future and organization-wide roles—they have mostly been trained to fix short-term skill deficiencies.

4.4.5. Reward management The study sought to understand the importance of reward management as a HR strategy geared towards maximization of productivity and compensation based on results. The findings are presented in Table 4.17 below.

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Table 4.17. Reward management Importance of strategy 5 6 8 10 Total

Frequency 1 2 3 1 7

Percent 14 29 43 14 100

The majority, 57%, indicated that reward management is of importance to a degree equivalent to between 80% and 100%, while 29% of respondents felt the degree of importance to be equivalent to 60%, and 14% of respondents put the level of importance at 50%. The findings demonstrate that all the HR Managers put the importance of this strategy at 50% at least. Reward management is therefore one of the important HR strategies employed. It is noteworthy, however, that greater importance is attached to performance management than reward management, which is an indicator that though the firms insist on superior performance, rewards for this type of performance are not as readily forthcoming. This leads to short-term performance gains which cannot be sustained in the long run.

4.4.6. Teamwork The researcher asked the HR Managers about the importance of teamwork as a HR strategy, whose import is in having employees work in teams rather than as individuals, so that the organization can benefit from their varied strengths. The findings are presented in Table 4.18 below. Table 4.18. Teamwork Importance of strategy 0 4 6 7 8 10 Total

Frequency 1 1 1 2 1 1 7

Percent 14 14 14 28 14 14 100

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A very significant 70% of respondents indicated that teamwork is of importance to a degree equivalent to 70%, while 28% of respondents felt that the degree of importance is equivalent to between 40% and 60%. Only 14% of respondents indicated that this strategy is of no use to their organizations. The findings demonstrate that the HR managers feel this is a very important HR strategy as it contributes to employee commitment. A very significant 70% of respondents indicated that teamwork is of importance to a degree equivalent to 70%, while 28% of respondents felt that the degree of importance is equivalent to between 40% and 60%. Only 14% of respondents indicated that this strategy is of no use to their organizations. The findings demonstrate that the HR managers feel this is a very important HR strategy as it contributes to employee commitment.

4.4.7. Downsizing Downsizing as a human resource strategy is usually used when the number and skills of employees available in an organization are excess to requirements, for instance when part of the business has been sold or when, due to the introduction of a more efficient means of production, fewer people are required to carry out the same level of operations. This study sought to find out the importance of the downsizing strategy to these firms. The findings of the study are tabulated in Table 4.19 below. According to the findings, the majority (87%) indicated that downsizing is of importance to a degree equivalent to at least 50%, while only 14% indicated it is of absolute insignificance. From the findings, it can be concluded that downsizing is an important HR strategy meant to redress the high and escalating costs of labour in the immediate to medium term. Table 4.19. Downsizing Importance of strategy 0 5 8 9 Total

Frequency 1 2 2 2 7

Percent 13 29 29 29 100

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4.4.8. Recruitment The study sought to know about the importance of recruitment as a HR strategy, whose aim is to increase the number of employees following expansion of the organization’s operations. The findings are presented in Table 4.20 below. Table 4.20.Recruitment Importance of strategy 0 1 Total

Frequency 6 1 7

Percent 86 14 100

From Table 4.20, 86% of the HR Managers indicated that the organizations do not use recruitment as one of their HR strategies, that is the firms are not expanding the quantity of their human resources. Only 14% indicated that recruitment is used, but even then at only 14% importance. The findings show that there is a net downsizing of the labour force (as opposed to expansion) in order to check the rising labour costs.

4.4.9. Work-life balance From the findings of the study, work-life balance is still a new concept in these organizations. Indeed, all the HR Managers indicated that work-life balance is not one of the strategies they use.

4.4.10 Strategic HRM practices The study sought to find out the strategic human resource management practices employed by the transnational tea companies, as within the overall strategic HRM environment specific HR strategies can be employed with a view to attaining strategic fit between them and the business strategies. 4.4.10.1. HR development and career management as part of management philosophy All the HR Managers agreed that their firms have well-defined HR development policies. Specifically, the results presented in Fig. 4.7 below

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show that 288.6% of the HR H managers indicated thatt HR development and career manaagement are an a integral parrt of their maanagement ph hilosophy, saying that tthey are practticed to a very y large extentt. A similar peercentage indicated that HR development and caareer managem ment are practticed to a large extent while 14.3% indicated thaat they are praacticed to som me extent. Those who ssay that these two are practticed only to a small extentt made up another 288.6%. From the findings, HR deveelopment and career managemennt are strong teenets of SHRM M, as the majjority (57.2%) say that they are praccticed either to t a large or veery large extennt. Fig. 4.7. Exteent to which HR R development and a career mannagement are paart of management philosophy

4.4.10.2. Trransnational Tea T Companies as Learniing Organizations The study soought to estabblish the exten nt to which thhese firms aree learning organizationns, that is, whether w they skilfully s integgrate the reso ources of information,, technology and people to o produce annd then effecttively use new knowleedge to continnually find ways w to satisfyy customers and a other stakeholderss. The findinggs, presented in n Fig. 4.8 beloow, show thatt only 5% of the HR M Managers feeel their firms are to a veryy large extentt learning organizationns. Forty five percent p feel th hat their organnizations are, to a large extent, learnning organizattions. Anotherr 45% feel theeir organizatio ons are, to some extentt, learning organizations, wh hile only 5% ffeel their orgaanizations are, to a verry small extennt, learning org ganizations. T The findings show that,

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although thee firms are laargely learnin ng organizatioons, this charaacteristic, which enabbles organizattions to embrrace and adoopt change in n a most flexible mannner, is in mosst cases still a work in proggress, and the managers m do not readily and automaatically associiate their firmss with this con ncept. Fig. 4.8. Exteent to which thee firms are learn ning organizatioons

4.4.10.3. Woorking in teaams The study ssought to findd out whetherr employees in these orgaanizations work in team ms and, in parrticular, sough ht answers to tthe extent to which w this happens. Booth the managers of strategiic business unnits and those in charge of human reesource manaagement indiccated that theeir employeess work in teams, with 57% saying the employeees work in teeams to a larg ge extent, while the remaining 43% said they work in teams too some extentt (see Fig. 4.9 below). None of the managers m indiicated that team amwork existeed in their organizationns to a very laarge extent or,, indeed, to a small extent. It can be concluded, ttherefore, thaat teamwork iss neither veryy well nor verry poorly developed. T This finding can be associated with thee findings on n learning organizationns, which are likely to havee their employyees working in teams. The organizzations have em mbraced both practices, butt both are stilll works in progress.

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Fig. 4.9. Exteent to which thee employees wo ork in teams

4.4.10.4. Mu ulti-skilling Table 4.21 shows the finndings on a Likert L scale inndicating the extent to which empployees of the t studied firms are m multi-skilled. All the respondents indicated thaat there was a certain level of multi-skillls in their employees. It is, howeveer, evident thaat there is stilll a low level of multiskills as shoown by 20(74% %) of the resp pondents indiccating that there is only some extentt of multi-skillling. Only 1(4 4%) indicated that the employees are multi-skilledd to a very larrge extent, witth 4(15%) indiicating that th hey are, to a large extennt, multi-skilled. Two (7%)) felt that theyy are only mullti-skilled to a small eextent. The reespondents fu urther said thaat these emplo oyees are required to uutilize their multi-skills m at work. w Table 4.21. Extent of mu ulti-skilling Extent of M Multi-skillingg Very Large extent Large Extennt Some Extennt Small Extennt Total

Frequencyy 1 4 20 2 27

Perrcent 4 15 74 7 7 100 1

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4.4.10.5. Human asset accounting The managers were asked whether they engage in human asset accounting by quantifying the economic value of people to the organizations in order to provide input for managerial and financial decisions. All of them agreed that they engage in human asset accounting through productivity measures and overall performance appraisals. Human asset accounting is one of the distinguishing characteristics of the move from personnel management to human resource management and, indeed, to SHRM. The findings show that these organizations not only practice HRM, but also SHRM. The quest to increase employee productivity is realized by measuring employee attainments, especially their productivity in terms of green leaf plucked per labour day. 4.4.10.6. Modes of compensation Table 4.22 below shows the importance attached to the various modes of compensation by these organizations. The most important mode is piece rate, representing 85%, followed by fixed basic pay (11%) and bonuses (4%). The foregoing shows that the firms are productivity-centred and therefore have adopted a Performance Related Pay (PRP) system. The PRP system is mostly applicable to the tea pickers, while the supervisory and clerical staff, referred to as “Upper Tier,” have a fixed basic pay. Bonuses are occasionally paid for any productivity over and above the expected. The firms are, however, not interested in the long term well-being of the employees as attested by the fact that they have absolutely no employee stock ownership or profit sharing schemes. Table 4.22. Modes of compensation Mode of compensation Fixed Basic Pay Piece rate Bonuses Employee stock ownership Profit Sharing Total

Frequency

Percent

3 23 1

11 85 4

0 0 27

0 0 100

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4.4.10.7. Basis of compensation Table 4.23 below shows the importance attached to the various factors that determine compensation in these organizations. The most important determinant is performance, representing 81%, followed by experience and seniority (7%). Academic qualifications, fixed pay for a day’s work and fixed salary grade all play a peripheral role at 1% significance. Like the modes of compensation, these factors are an indicator that the firms are productivity-centred. Factors such as academic qualification are important, but only as long as they aid the employee in performing well. Table 4.23. Basis of compensation Basis of compensation Performance Experience and Seniority Academic qualifications Fixed Pay for a day’s work Fixed salary Grade Total

Frequency

Percent

22

81

2

7

1

4

1 1 27

4 4 100

4.4.10.8. Management level of head of HRM The heads of the HRM function, and therefore the people in charge of SHRM, at these organizations are largely at the Top Management level (85.7%). The remaining 14.3% are at the board of directors levels. Whereas the findings show that HR is still largely absent from the board level, where decisions regarding strategy are made, it must be appreciated that it has since moved above both the lower and middle management level. The findings regarding the management level of head of HRM are presented in Fig. 4.10 below.

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RM Fig. 4.10. Maanagement levell of head of HR

4.4.10.9. Orrganization sttructure typee Seventy onne percent of the organiizations studiied, and org ganization structures seen, have talll structures consisting off several man nagement layers with a highly centtralized decisiion making syystem (see Table 4.24 below). Thiis explains why w the conccepts of team m work and learning organizationn are yet to be fully utilized. Table 4.24. Organization n structure Structure Tall Fllat Tootal

Freq quency 5 3 7

Perccent 71 29 9 10 00

4.4.10.10. E Employee num mbers and em mployee prod uctivity Fig. 4.11 prresents the meean number of o employees per firm for the years 2006 to 2010. The numbeers were stead dily declining uuntil 2008. Du uring this period, the firms realizedd the need to reduce the eemployees as a way of reducing their overheadss. They initiaally got rid oof the less productive employees, leading to inncreased prod ductivity in kiilograms of Greenleaf G plucked per Labour Day of those who remained. Thhis can be seeen in Fig. 4.5 above, w which shows productivity p increasing as tthe employee numbers (Fig. 4.11) go down. Too this extent, therefore, thhe firms succceeded in reducing theeir overheads through increeased producttivity. Fig. 4.1 11 further

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shows that from 2008 to t 2010 the employee nuumbers started to rise steadily, buut that this tim me an increasse in temporaary employeees strictly contributed to it. Fig. 4.11. Meean total numbeers of employees (2006–2010)

Fig. 4.12 shhows the averrage number of o employees by category. Between 2009 and 20010, there waas an increasee in temporaryy employees paid p on a piece rate baasis but who do not benefiit from any otther overhead ds such as salaries whiile on leave, service gratu uity etc. The permanent em mployees who left duue to natural attrition and other reasonss were partly replaced with the tem mporaries and partly p with machines.

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o employees by y category (20006–2010) Fig. 4.12. Average number of

The balancee between perrmanent and temporary t woorkers is furth her shown by the increase, from 20008, in service gratuity g expennses paid to permanent p employees lleaving emplooyment (Fig. 4.13). 4 The firm ms preferred, once and for all, to inccur this expennse and then reetain a lean w workforce. Fig. 4.13. Sepparation cost

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4.5. Integration of HR strategies The fourth specific objective of the study was to establish whether there is integration between HR strategies employed by the transnational tea companies. The objective was guided by the research question: is there integration between the various HR strategies employed? In order to establish whether there is integration, Pearson’s product moment correlation coefficient (r) was calculated. Findings of the study indicate integration between specific related HR strategies as it shows that complementary strategies are used together, whereas non-complementary strategies are not. The findings are shown in Table 4.25 below. The findings of the study indicate that continuous learning HR strategy has a moderately strong positive correlation with reward management (r=0.644) and strong positive correlation with downsizing (r= 0.766), implying that training is accompanied by rewarding those who have a propensity to learn and transfer the learning to the job. As downsizing is carried out, those who remain need to be afforded the skills and capabilities necessary to shoulder the additional responsibilities. Performance management has a strong positive correlation with reward management (r=0.730) and a moderately strong positive correlation with downsizing (r=0.614). These results show that those who perform well are also adequately compensated, while at the same time, once performance is improved, there is no longer need to retain the less productive labour force. Job redesign, the findings show, has a strong positive correlation with job rotation (r=0.952), while job rotation, in addition to the strong positive correlation with redesign, has a strong positive correlation with recruitment (r=0.952). When jobs are redesigned, employees often need to be moved to jobs in which they fit best, while job rotation may make it necessary to recruit additional staff into jobs from which others have moved.

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Reward management

Job rotation

Job redesign

Performance management

Continuous Learning

Pearson Correlation Sig. (2tailed) Pearson Correlation Sig. (2tailed) Pearson Correlation Sig. (2tailed) Pearson Correlation Sig. (2tailed) Pearson Correlation Sig. (2tailed)

Performance management 0.138 0.668 1 . 0.095 0.768 0.155 0.629 .730(**) 0.007

Continuous Learning 1

.

0.138

0.668

-0.129

0.689

0.15

0.641

.644(*)

0.024

0.971

-0.012

0

.952(**)

.

1

0.768

0.095

0.689

Job redesign -0.129

Table 4.25 Correlation results for integration of HR strategies

86

0.506

0.213

.

1

0

.952(**)

0.629

0.155

0.641

Job rotation 0.15

.

1

0.506

0.213

0.971

-0.012

0.007

.730(**)

0.024

Reward management .644(*)

0.829

-0.07

0.864

-0.055

0.456

-0.238

0.255

-0.357

0.001

.841(**)

0.427

0.253

0.965

-0.014

0.034

.614(*)

0.004

.766(**)

0.542 0.069

Downsizing

Teamwork

0.971

-0.012

0

.952(**)

0.255

-0.357

0.768

0.095

0.689

Expansion/ recruitment -0.129

Teamwork

0.542 -0.357 Pearson Correlation 0.069 0.255 Sig. (2tailed) .766(**) .614(*) Downsizing Pearson Correlation 0.004 0.034 Sig. (2tailed) -0.129 0.095 Expansion/ Pearson recruitment Correlation 0.689 0.768 Sig. (2tailed) * Correlation is significant at the 0.05 level (2-tailed). ** Correlation is significant at the 0.01 level (2-tailed).

-0.055 0.864 0.253 0.427 .952(**) 0

-0.238 0.456 -0.014 0.965 -0.357 0.255

0.971

-0.012

0.001

.841(**)

0.829

-0.07

Data Analysis, Presentation and Interpretation

0.456

-0.238

0.18

0.415

.

1

0.965

-0.014

.

1

0.18

0.415

87

.

1

0.965

-0.014

0.456

-0.238

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Reward management, in addition to the strong positive correlation with performance management, has a moderately strong positive correlation with continuous learning (r=0.644) and a strong positive correlation with downsizing (r=0.841).People who have shown a strong tendency for continuous learning, which leads to better performance, need to be rewarded for it. At the same time, better individual performance may make it necessary to reduce labour as the firm then remains with fewer betterperforming employees. Teamwork has a moderately strong correlation with continuous learning and downsizing, an indicator that learning makes people better appreciate working in teams. Furthermore, people can be trained to work in teams in order to achieve the synergy that comes with working together, and not separately. At the same time, those who remain in the organization after a downsizing exercise need to work together more closely for psychological support.

4.6 Strategic HRM processes The fifth specific objective of the study was to identify the strategic human resource management processes used by the firms. The objective was guided by the research question: which strategic human resource management processes are used by the firms? The essence of asking respondents about the strategic HRM processes used by their firms was to find out how coherence between the business and HR strategies is arrived at. In addition to establishing that the HR implications of the business strategies are always clearly spelt out, the study found that 57.1% of the HR Managers use an integrated process, while 42.9% use an aligned process. None of them use a separate process (see Fig. 4.14 below).For the majority, therefore, HR strategy is an integral part of the business strategy, along with all the other functional strategies. For the 42.9% who use an aligned process, HR strategy is developed together with the business strategy. They may be presented and discussed together but they are distinct outcomes of parallel processes. By considering them together, there is the likelihood that they will influence each other and be adopted as a cohesive whole.

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Fig. 4.14. SH HRM processes SHRM processess

57.1 60 42.9

Percentage

50 40 30

Percent

20 10 0 An integrated P Process

An aligned process

4.6.1.. Approachees to formulation and im mplementatiion of HR strrategies Findings onn the approacches to formu ulation and im mplementatio on of HR strategies arre shown in Table T 4.26 below. Seventy ttwo percent of o the HR Managers use the Best-Fit B Apprroach, whilee Best-Practtice and Configuratioonal Approachhes are each used by 14% % of the HR Managers. M For the majoority of the managers, m thereefore, there is a recognition n that it is up to the firm m to decide what w HR strateegies can be aadapted to its particular p business straategies and opperational requ uirements at a particular tim me. Those who use beest-practice beelieve that theere is a set oof universal best HRM practices, annd that adoppting them will w lead to suuperior organ nizational performancee. The Connfigurational approach m means the use of a combinationn of bundles of HR practices with highh levels of fitt with its competitive strategy.

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Table 4.26. Approaches to formulation and implementation of HR strategies Approaches Best-practice Best –fit Configurational Total

Frequency 1 5 1 7

Percent 14 72 14 100

4.7. Strategic fit between business and human resource strategies The sixth specific objective of the study was to establish the existence of strategic fit between business and related human resource strategies currently employed by the firms. The objective was guided by the research question: is there strategic fit between business and human resource strategies employed by the firms? In order to evaluate the existence of strategic fit, Pearson’s Product Moment Correlation Coefficient (r) was calculated for each business strategy against each HR strategy. The findings are presented in the sections below.

4.7.1. Strategic fit between Cost Leadership and related HR strategies Findings of the study show strategic fit between Cost Leadership and related HR strategies. Cost Leadership had strong positive relationships with the following HR strategies: Performance Management (r=0.850), Reward Management (r=0.888) and Downsizing (r=0.800). At the same time, it had a strong negative relationship with Recruitment (r= -0.850). Reduced costs come as a result of better performance per employee, which is in turn motivated by better reward. At the same time, downsizing of excess labour leads to reduced costs. The findings are presented in Table 4.27 below.

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Table 4.27 Strategic fit between Cost Leadership and HR strategies HR strategies Continuous Learning

Pearson Correlation Sig. (2-tailed) Performance management Pearson Correlation Sig. (2-tailed) Job redesign Pearson Correlation Sig. (2-tailed) Job rotation Pearson Correlation Sig. (2-tailed) Reward management Pearson Correlation Sig. (2-tailed) Teamwork Pearson Correlation Sig. (2-tailed) Downsizing Pearson Correlation Sig. (2-tailed) Expansion-recruitment Pearson Correlation Sig. (2-tailed) * Correlation is significant at the 0.05 level (2-tailed).

Cost leadership 0.108 0.838 .850(*) 0.0302 0.51 0.302 0.489 0.325 .888(*) 0.018 -0.4 0.432 0.800(*) 0.056 -0.850(*) 0.032

4.7.2. Strategic fit between Differentiation and related HR strategies Findings of the study show strategic fit between Differentiation and related HR strategies. Differentiation had strong positive relationship with the following HR strategies: Continuous Learning (r=0.838), Job Redesign (r=0.850) and Job Rotation (r=0.888). At the same time, it had a strong negative relationship with Recruitment (r=-0.850). For Differentiation to work well there is need for training in new ways of work (Continuous Learning), Job Redesign and Rotation to fit employees to their new roles. A firm making a differentiated product makes use of the same people, but trains them and redesigns and rotates their jobs, thereby having a negative correlation with Recruitment. The findings are presented in Table 4.28 below.

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Table 4.28. Strategic fit between Differentiation and HR strategies HR strategies Continuous Learning

Pearson Correlation Sig. (2-tailed) Performance management Pearson Correlation Sig. (2-tailed) Job redesign Pearson Correlation Sig. (2-tailed) Job rotation Pearson Correlation Sig. (2-tailed) Reward management Pearson Correlation Sig. (2-tailed) Teamwork Pearson Correlation Sig. (2-tailed) Downsizing Pearson Correlation Sig. (2-tailed) Expansion-recruitment Pearson Correlation Sig. (2-tailed) * Correlation is significant at the 0.05 level (2-tailed).

Differentiation .838(*) 0.108 0.51 0.302 .850(*) 0.032 .888(*) 0.018 0.489 0.325 -0.4 0.432 0.332 0.52 - 0.850(*) 0.032

4.7.3. Strategic fit between Divestiture and related HR strategies The findings of the study show strategic fit between Divestiture and related HR strategies. It had strong positive relationships with the following HR strategies: Job Redesign (r=0.991), Job Rotation (r=0.956) and Downsizing (r=0.944). At the same time, it had a strong negative relationship with Recruitment(r=-0.991). When a firm partly divests from a business it has been carrying out, people previously working in the sold segment of the business often have their jobs redesigned and rotated so as to remain relevant to the organization. Those who are excess to requirement are then downsized. The findings are presented in Table 4.29 below.

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Table 4.29. Strategic fit between Divestiture and HR strategies HR strategies Continuous Learning

Pearson Correlation Sig. (2-tailed) Performance management Pearson Correlation Sig. (2-tailed) Job redesign Pearson Correlation Sig. (2-tailed) Job rotation Pearson Correlation Sig. (2-tailed) Reward management Pearson Correlation Sig. (2-tailed) Teamwork Pearson Correlation Sig. (2-tailed) Sig. (2-tailed) Downsizing Pearson Correlation Sig. (2-tailed) Expansion-recruitment Pearson Correlation Sig. (2-tailed) ** Correlation is significant at the 0.01 level (2-tailed).

Divestiture -0.086 0.871 0.012 0.983 .991(**) 0 .956(**) 0.003 -0.008 0.988 -0.227 0.666 0 .944(**) 0.038 - 0.991(**) 0

4.7.4. Strategic fit between Acquisition and related HR strategies The study findings show a strategic fit between Acquisition business strategy and related HR strategies. It had strong positive relationships with Job Redesign (r=0.991) and Job Rotation (r=0.956), and a weak positive relationship with Downsizing (r=0.038). At the same time, it had a strong negative relationship with Recruitment (r=-0.991). When a firm acquires another, jobs need to be rotated and redesigned in order to synchronize the operations of the two firms. The findings are presented in Table 4.30 below.

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Table 4.30. Strategic fit between Acquisition and HR strategies HR strategies Continuous Learning

Pearson Correlation Sig. (2-tailed) Performance management Pearson Correlation Sig. (2-tailed) Job redesign Pearson Correlation Sig. (2-tailed) Job rotation Pearson Correlation Sig. (2-tailed) Reward management Pearson Correlation Sig. (2-tailed) Teamwork Pearson Correlation Sig. (2-tailed) Downsizing Pearson Correlation Sig. (2-tailed) Expansion-recruitment Pearson Correlation Sig. (2-tailed) ** Correlation is significant at the 0.01 level (2-tailed).

Acquisition -0.086 0.871 0.012 0.983 .991(**) 0 .956(**) 0.003 -0.008 0.988 -0.227 0.666 0.038 0.944 -0.991(**) 0

4.7.5. Strategic fit between Diversification and related HR strategies The study findings show a strategic fit between Diversification and related HR strategies. It had strong positive correlation with Job Redesign (r=0.974), Job Rotation (r=0.932) and Recruitment (r= 0.974). Product diversification often leads to Job Redesign and Job Rotation in order for the human resources to fit into new roles necessary to produce the diversified product. It may also be necessary to recruit some new staff to fill the skills gap. The findings are presented in Table 4.31 below.

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Table 4.31. Strategic fit between Diversification and HR strategies HR strategies Pearson Correlation Continuous Learning Sig. (2-tailed) Pearson Correlation Performance management Sig. (2-tailed) Pearson Correlation Job redesign Sig. (2-tailed) Pearson Correlation Job rotation Sig. (2-tailed) Pearson Correlation Reward management Sig. (2-tailed) Pearson Correlation Teamwork Sig. (2-tailed) Pearson Correlation Downsizing Sig. (2-tailed) Pearson Correlation Expansion-recruitment Sig. (2-tailed) ** Correlation is significant at the 0.01 level (2-tailed).

Diversification -0.074 0.889 -0.061 0.908 .974(**) 0.001 .932(**) 0.007 -0.048 0.928 -0.24 0.647 -0.1 0.851 .974(**) 0.001

4.7.6. Strategic fit between Vertical Integration and related HR strategies The study findings show a strategic fit between Vertical Integration and related HR strategies. Vertical Integration had a strong positive relationship with Job Rotation (r=0.824). When a firm takes over another in a different stage of the product cycle, employees may need to be rotated so as to fit into newly created jobs. The findings are presented in Table 4.32 below.

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Table 4.32. Strategic fit between Vertical Integration and HR strategies HR strategies Continuous Learning

Pearson Correlation Sig. (2-tailed) Performance management Pearson Correlation Sig. (2-tailed) Job redesign Pearson Correlation Sig. (2-tailed) Job rotation Pearson Correlation Sig. (2-tailed) Reward management Pearson Correlation Sig. (2-tailed) Teamwork Pearson Correlation Sig. (2-tailed) Downsizing Pearson Correlation Sig. (2-tailed) Expansion-recruitment Pearson Correlation Sig. (2-tailed) * Correlation is significant at the 0.05 level (2-tailed).

Vertical integration 0.489 0.325 0.027 0.959 0.695 0.126 .824(*) 0.044 0.426 0.399 -0.053 0.92 0.309 0.552 0.695 0.126

4.7.7. Strategic fit between Horizontal Integration and related HR strategies The study findings show a strategic fit between Horizontal Integration and related HR strategies. It had strong positive relationships with Job Redesign (r=0.957), Job Rotation (r=0.944) and Recruitment (r=0.957). When a firm takes over another at the same stage in the product cycle, jobs may be rotated and redesigned, while more employees may need to be recruited to take care of additional responsibilities. The findings are presented in Table 4.33 below.

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Table 4.33. Strategic fit between Horizontal Integration and HR strategies HR strategies Continuous Learning

Pearson Correlation Sig. (2-tailed) Performance management Pearson Correlation Sig. (2-tailed) Job redesign Pearson Correlation Sig. (2-tailed) Job rotation Pearson Correlation Sig. (2-tailed) Reward management Pearson Correlation Sig. (2-tailed) Teamwork Pearson Correlation Sig. (2-tailed) Downsizing Pearson Correlation Sig. (2-tailed) Expansion-recruitment Pearson Correlation Sig. (2-tailed) ** Correlation is significant at the 0.01 level (2-tailed).

Horizontal integration 0.037 0.945 -0.112 0.833 .957(**) 0.003 .944(**) 0.005 -0.082 0.877 -0.034 0.949 -0.014 0.979 .957(**) 0.003

The above results imply that for every business strategy formulated and implemented by these firms, there is coherence with an appropriate HR strategy. The study therefore established the presence of strategic fit between business and HR strategies.

4.8. Synergies created by strategic fit The main objective of the study was to identify the synergies created by strategic fit between business and human resource strategies. In order to test for the synergies created by strategic fit, the study made use of multiple regressions by setting up three models representing the prediction of strategic fit on each of the three broad categorizations of synergies, Employee Commitment, Employee Flexibility and Employee Productivity. The models and their discussion are presented in the sections below.

4.8.1. Relationship between strategic fit and Employee Commitment Table 4.34 presents the multiple regression analysis of the prediction of Employee Commitment by a number of independent variables representing

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strategic fit between business strategy (focus) and HR strategies (continuous learning and teamwork). The model shows that R square of all the independent variables acting together is 0.939, which means that 94% of the variations in Employee Commitment are caused by strategic fit. The findings further show that focus (business strategy) alone only explains 14% of the achieved employee commitment. Since the beta coefficient for all the independent variables—Focus (0.118), Continuous Learning (0.569) and Teamwork (1.059)—is p