Executive Summary
The report explores strategic management and strategic human resource management (SHRM) for Aristocrat Leisure Limited. The company has made losses in the recent past.
As a result, SHRM is necessary for turnaround and global strategy the company is pursuing. This is change management process for the company.
The report also explores how the company has applied principles of SHRM such as resource-based and employees’ behaviors in its strategic management.
At the same time, it also presents both internal and external environment of Aristocrat. The company faces social issues of gambling, risks, stiff competition, and changes in technology. However, the company has opportunities in growing markets, use of technology, and its global brand.
The company can only utilize its human resources for competitive advantage through recruitment, training, retaining, and managing performance. Thus, Aristocrat must focus on all the human resource life cycle when creating strategic advantage.
The report also presents SHRM plan for the next 12 to 36 months, which focuses on SHRM for change management.
Objective of the Report
The objective of this report is to explore the strategic management and strategic human resource management issues for Aristocrat Leisure Limited, and develop a strategic HRM plan in an attempt to solve issues identified.
Research Methodology
The report involved gathering relevant data from the company annual reports and review of the available literature on SHRM practices in the industry. This enabled the report to present a complete SHRM practices and HR policies of Aristocrat.
The report concentrates on HR aspects of the company so that we can understand issues that have led to decline in sales volumes of Aristocrat. It critically analyzed these issues so that it can present a conclusive plan.
Limitations
The report presents views of Aristocrat human resources in a single locality. However, the company has the global presence. It infers that the cultural aspects of the report may not give a complete insight of Aristocrat workforce diversity.
The report also relied heavily on the company annual reports and perspectives of the HR department. This may present bias due to self-reporting.
Strategy: Matrix and discussion
Turnaround strategy
Currently, Aristocrat Leisure Limited (Aristocrat) is using turnaround strategy to improve its business and profits around the globe. In 2004, the company made sales in excess of 1.1 billion Australian dollars with over 2000 human resources.
However, Aristocrat Leisure Limited experienced difficulties in Nevada and failure to conclude business deals in South America (Aristocrat, 2012).
The company attributed its decline in revenues in 2008 to the US global financial crisis. On the contrary, competitors like International Game Technology, GTECH Holdings Corporation, and WMS Industries among others noted growths in revenues.
As a result of these declines in revenues, the company management had embarked on budget cuts and widespread retrenchment of staff that covered every part of the business. However, the company still faced challenges of the euro crisis and market conditions of 2009. It made a net loss of $157 million.
Aristocrat shall apply strategic human resource management (SHRM) principle to deal with this situation. This is usually a resource-based approach in order to create a competitive advantage.
Barney referred to a competitive advantage as “when a firm is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors” (Barney, 1991).
Aristocrat must create sustainable competitive advantage through unique human resources, resources for positive value, resources with imitable quality, and resources that competitors cannot substitute. Thus, SHRM must create competitive advantage through human resources for turnaround strategies.
First, employees must provide value to Aristocrat for turnaround strategy. This implies that Aristocrat labor force must consist of various skills in technology, gaming industry knowledge, and problem solving.
In addition, these skills must exist at different levels among management in Aristocrat and in different locations around the world especially in the US where the gaming industry remains competitive (Barney, 1991).
Second, Aristocrat must recognize that human resources for creating competitive advantage are rare. Wright and McMahan note that human resources with high ability levels are rare because of general distribution ability (Wright and McMahan, 1992).
Thus, Aristocrat must ensure that its current employees and potential recruits have the highest ability levels. In this sense, Aristocrat must be thorough in selection processes because of difficulties in attracting and retaining employees of the highest ability.
Therefore, the process of acquiring new staff must take into consideration the staffing needs, recruitment and selection of new staff as well as compensation programs (Ulrich, 1991).
Third, Aristocrat must ensure that its human resources have “inimitable quality for competitive advantage” (Ulrich, 1991). Therefore, SHRM practices must instill this quality by selecting the best talent in the gaming industry.
Fourth, Aristocrat must note that it cannot substitute its human resources that enhance competitive advantage amidst its retrenchment undertaking. Therefore, it must retain all productive employees across all business units around the globe (Barney, 1991).
Global strategy
Aristocrat must also create human resources strategy that focus on its global strategy. In Japan, the company struck a joint venture deal with Sammy Corporation (Aristocrat Hanbai). This process also followed a change in the name to Aristocrat Technologies.
Aristocrat entry into the Asian market presented new challenges to the HR in terms of cultural differences. In the US, Aristocrat had challenges getting a license for its operation in Nevada. At this time, Australia was implementing new restrictions in the gaming industry (Aristocrat, 2012).
The company used acquisition strategy to expand its presence in the US markets. In the year 2001, it acquired Casino Data Systems. In 2002, Aristocrat improved its stake in Aristocrat Hanbai by acquiring 40 percent stake in Sammy Corporation.
Still, in the same year (2000), Aristocrat acquired Hanson Distribution Company of the US, and the New York Lottery.
After acquisitions in Japan and the US, the company turned to Russia. Aristocrat began product distribution in 2003. In the same period, the company entered into a “strategic alliance with Mikhon Gaming Corporation of the US” (Aristocrat, 2012).
After this period of acquisitions in 2003, the company started incurring losses due to collapsed sales deals. Aristocrat revenues declined as well as its market value.
First, it is clear that Aristocrat did not put into place any SHRM for its globe workforce. The company did not recognize the importance of cultures in formulating HR strategies in Japan, Russia, and the US.
Second, series of expansion strategies resulted into massive losses and declines of the market value of Aristocrat.
Agency and transaction cost theory is applicable in solving these issues. It can allow Aristocrat to concentrate on both the environmental and related human factors that may force it to internalize transaction processes to reduce costs. Transaction costs occur due to “monitoring, negotiating, evaluation, and enforcing exchanges among organizations” (Jensen and Meckling, 1976).
Strategic management analysis (SWOT and PEST)
SWOT analysis
SWOT analysis will provide advantages to Aristocrat through identification of areas where it can concentrate and create a marketing niche. It will enable Aristocrat to understand the gaming industry across the globe. At the same time, it will show threats to enable the company formulate strategies to mitigate such threats.
Table 1: SWOT analysis (Source: Aristocrat, 2012; RocSearch, 2005; Fahrenkopf, 2001)
The PESTEL analysis
Economic factors
The global recession of 2008 and the euro crisis affected Aristocrats revenues from 2009 to date. These factors affected consumers’ behaviors and market conditions. Aristocrat did not close some sales deal in South America because of its customers’ withdrawals (Aristocrat, 2012).
Changes in the exchange rates also affected Aristocrat’s earnings as the US dollar became weak against other currencies. However, these factors remain difficult to predict, and Aristocrat must prepare for them (Jensen and Meckling, 1976).
Political factors
Aristocrat operates in politically stable countries. However, changes in taxes and regulations affect the company business activities. For instance, Australia introduced new laws to guide its gaming industry as the State of Michigan turned to the gaming industry for extra revenues (Aristocrat, 2012).
Initial license acquisition in the State of Nevada was difficult for Aristocrat. The industry must monitor its reputation through provisions of gaming tax revenues.
Different countries have gaming board with strict regulatory commissions that require effective internal controls to minimize risks, promote cost effective structure, and insight of the industry contribution to the economy (Aristocrat, 2012).
Social factors
In the US, consumers blame the gaming industry for the rise in pathological gambling. Such approaches have influenced consumers’ emotions, attitudes, opinions and interests regarding the gaming industry (Fahrenkopf, 2001).
People have also linked the gaming industry with crimes, corruption, and bankruptcy. Therefore, Aristocrat must ensure effective risk management systems and compliance (Aristocrat, 2012).
Technological factors
Technology in the gaming industry is ever changing. This trend results into advanced products with low costs (RocSearch, 2005). Aristocrat must also match its competitors in introducing new technology in the gaming industry at competitive prices.
Legal factors
The gaming industry remains among the most regulated in the world due to social concerns it raises in society. Consequently, legal issues are likely to occur with severe consequences of expensive lawsuits. Aristocrats must guard against such occurrences (Aristocrat, 2012).
Cost leadership strategy
Aristocrat has suffered declines in its revenues. The company should adopt low cost leadership strategy in order to improve its sales. This shall help the company establish competitive advantage. The company budget cuts and restructuring approaches should lead to efficiency and small size (Mello, 2010).
Aristocrat should rely on its human resources and technology in order to achieve cost leadership strategy. Low prices shall ensure that the company increases its customer base. However, Aristocrat may also use a combination of superior products, cost leadership, and excellence customer service to increase market share (Mello, 2010).
Implications for HRM practices: Life cycle
The success of Aristocrat shall depend on the decision-making abilities of its management team. In this case, HR department must make significant decisions for competitive advantage so as to improve the company’s revenues.
Retention
Aristocrat HR must retain valuable human resources when it is retrenching or when such employees express willingness to leave. The company can achieve retention strategy based on personalized and meaningful rewards systems.
Retention shall help Aristocrat to reduce staff attrition, costs of acquisitions and training, enhance productivity, customer loyalty and profitability (Mello, 2010). At the same time, the company shall achieve efficiency and quality standards in delivery of services.
This process must include career development programs. According to Bernthal and Wellins, organizations with proactive leadership development strategies and succession plans have shown improved business growths (Bernthal and Wellins, 2006).
Aristocrat must establish an effective succession plan that focuses on the business continuity by looking at talents and leadership qualities (Stone, 2002).
Aristocrat HR must develop a plan that shall identify multiple talents for its future business strategy based on the gaming industry trends. The company must evaluate current leaders, potential successors, and their levels of competence.
This implies that Aristocrat can turn to external human resources if their current employees have insufficient abilities. Thus, effective, career planning and development of employees’ skills shall ensure that Aristocrat has skills for the future and employees’ commitment (Mello, 2010).
Recruitment
The resource-based perspective views human resources as a limited resource. Thus, attracting and recruiting the best talent in Aristocrat must involve a robust selection process that provides opportunities for applicants to demonstrate their abilities (Stone, 2002).
Aristocrat must understand capability requirements in its restructuring program. This shall enhance effective and consistent recruitment process. This process also ensures that the company does not spend much resource on recruitment and selection processes.
The company must plan recruitment and selection of potential employees. This is because the labor market has become highly competitive, and Aristocrat must select employees that will develop its talent pool (Mello, 2010).
The company should create its list of alumni, relationship with other organizations, and better working conditions such as flexible working programs to attract the multigenerational workforce.
The search for talent must consider the global labor market due to the company’s presence in various countries (Mathis and Jackson, 2011).
Aristocrat must know the exact people it needs to retain or take responsibilities. However, the approach may not always give the best result because of its subjectivity.
Thus, the company must adopt an integrated approach that considers multiple aspects of employees’ capabilities and willingness to accept leadership and responsibilities. Thus, keeping employees’ data is necessary for SHRM.
Performance
Managing performance must become strategic role for the HR given the poor performance of the company in the previous, and the difficulties in getting highly qualified and experienced staff. Performance management shall also ensure that employees increase their levels of performances.
However, in most instances, many organizations still have not embraced the culture of performance review. This is because they fail to notice “the strategic link between HRM and performance review in creating competitive advantage” (Nankervis, Compton and Baird, 2005).
Aristocrat must give all employees chances to improve their performances. Thus, performance review should be objective to allow employees perform their jobs based on Aristocrat’s culture and value.
Aristocrat should manage employees’ performances for strategic objectives. Performance management involves identification of strategic goals of an organization.
The main outcome of performance management concerns employees’ retention, pay increase, incentive and rewards, promotion, career planning, training and development and disciplinary actions.
This is the only Aristocrat can achieve strategic business objectives and improve profitability from its human resources (Armstrong, 2003).
Develop
Aristocrat must develop its talent pool for strategic positioning. Aristocrat must recognize areas that need talent development. This is necessary for the future development of careers and succession plan.
Aristocrat should focus on developing high potential areas and areas that drive the company’s revenues. This shall ensure that the company maintains efficient and productive workforce (Stone, 2002).
The HR department must spearhead talent development in Aristocrat. This process also requires engagement of individuals and data based on past performances.
Separation
Strategic Human Resource for change management mployees may decide to leave the company voluntarily, or the management may retrench them. However, Aristocrat must only retrench workers that can no longer serve the company’s strategic objectives.
Fig. 1 Strategic Human Resource for change management
Strategic HRM plan for the next 12 to 36 months
Setting the strategic direction
Aristocrat aligns HR policies with its mission, vision, and strategic objectives. This stage involves identifying and adopting innovative HRM policies for competitive advantage and reinforcing employees’ behaviors (Schuler and Jackson, 1987).
The process involves analysis of the external environment and its impacts on Aristocrat, identification of strategic goals, and consultation.
Designing HRM System
Aristocrat shall focus on “selecting, designing, and aligning HRM policies with the gaming industry best practices so as to reduce risks” (Aristocrat, 2012).
The company shall adopt IT in most of its operation. This must focus on cost-benefit analysis. Aristocrat shall also promote diversity in HR at this stage.
The company will identify HR policies and plans that can support turnaround and global strategies, HR best practices, and review of the recruitment procedures Schuler and Jackson, 1987).
Arranging for the employees
In this stage, Aristocrat must determine needs of the business in terms of human resources. Workforce plan and succession plan are mandatory for the company, and lack of them can indicate poor strategic planning.
These plans shall show strategic HR needs of Aristocrat. They must show the steps Aristocrat shall take to attract and retain the best talent in the industry (recruitment, selection, and reward) (Mello, 2010).
Aristocrat must perform workforce requirements at all levels of the business across the globe and integrate the needs with the organizational broad strategies. It will ensure effective delivery of services and coordination of the organization at all levels.
At this stage, Aristocrat shall review competencies, jobs, strategic objectives, workers’ profiles, competencies need, and the possible gaps for the future (Nankervis, Compton and Baird, 2005).
Getting the necessary human resources
Aristocrat must concentrate on recruiting, selection, hiring, placing, training, and deploying human resources on strategic areas of the business. The process must identify training needs of Aristocrat both for now and the future.
Aristocrat shall evaluate recruitment and selection processes to ensure these processes meet its strategic objectives, identify training needs, and implement training systems and a culture of a learning organization (Mathis and Jackson, 2011).
Enhancing investment in human resources
The aim of this stage is to develop needed business skills, competencies, and instill appropriate employee behaviors for Aristocrat effective performances.
This process shall also create a culture of a learning organization in Aristocrat. The company must also review internal risk management processes at this stage (Mathis and Jackson, 2011).
This stage must aim at utilizing employees’ skills and competencies for increasing performances. Employees must express satisfaction with training and tools offered for performing the job.
This stage also identifies the need for teamwork, work flexibility, and aligning of competencies and skills with the strategic objective of Aristocrat. At this stage, Aristocrat must also review its performance and reward systems based on individuals’ performances and industry best practices (Mathis and Jackson, 2011).
Aristocrat must review career development, performance appraisal, learning culture, reward systems, promotion, and dismissal of employees.
Review of Aristocrat available skills, competencies, and performance
Aristocrat must assess how all the changes and inputs have impacted on its overall performance. This stages looks at how changes the company implemented have affected performances, skills, and competencies development. It also reviews the effectiveness of HR practices, procedures, and plans (Stone, 2002).
The process must be specific to certain objectives by using performance metrics based the balanced scorecard. This facilitates objective review of results against key performance indicators (KPIs).
This process must be a regular practice at Aristocrat. The company must concentrate on reviewing its culture, succession plan, SHRM approaches through KPIs and conducting thorough revisions and adapting of the HR strategies (Mathis and Jackson, 2011).
Conclusion
Aristocrat must realize that SHRM processes can change its performance as HR strategies have significant inputs in transforming its strategic objective. However, this process must rely on the overall objectives and goals of the company.
Therefore, Aristocrat must align its organizational goals, business strategies, HRM policies and practices and employees’ behaviors for strategic performances. At the same time, the management team must also adopt a similar approach, and support strategic, competitive strategy of an organization.
In this sense, implementing HR policies and practices is necessary to the success of Aristocrat in terms of driving a competitive strategy through employees and other resources.
Aristocrat leadership must also show commitment to support these change processes for achieving the overall organizational goals. Therefore, HR practices and policies must be superior to develop superior performances. The role of SHRM in Aristocrat shall focus on improving loss making trends the company experiences.
Recommendation
The company should align its turnaround and global strategies with the human resources strategy. In this case, HR department must apply the five elements of HRM life cycle. It must protect employees who add value to the company.
Aristocrat must also develop its human resource to manage risks such as social, regulatory, consumer behaviors, and financial market activities in the company.
For effective turnaround and global strategies, Aristocrat should adopt cost leadership to increase sales volumes and revenues. The company should put on hold any plans for expansion until the revenues increase.
The company must also adopt a resource-based approach in managing its skilled human resources for creating competitive advantage.
The company should share its global strategies with its employees for effective implementation.
Aristocrat should also develop its technological resources in order to develop products for its cost leadership approach.
Table 2: Strategic HRM Plan Matrix
Adapted from: (Mello, J 2010; Mathis and Jackson, 2011; Schuler and Jackson 1987; Stone, 2002; Aristocrat, 2012)
Reference List
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