Human Resource Management and Organizational Culture Qualitative Research

A human resources (HR) department plays a vital role in any large organization. The department is responsible for recruiting highly skilled individuals who carry out specific duties, and also has to develop loyalty and enhance the morale of employees in the company. The HR also deals with issues concerning performance evaluation, employee benefits and compensation, and adherence to company and personnel policies.

The department is therefore responsible for developing a favorable corporate culture that serves these purposes within an organization. Without a capable HR department to hire, culture, and inform employees, the company is destined to fail.

Microsoft Corporation, a US-based multinational technology company, is one of the biggest and most successful firms in the world. For a company of such a high level to compete in the technology industry, investment in the brightest minds is vital for it to retain its market leadership status. Microsoft has always been regarded as a great employer because of its attractive remunerations, benefit programs and work culture.

As the company grew rapidly in size in the 1990s, however, it lost most of the important aspects in its corporate culture that had made it the favorable destination for job-seekers. People began to feel that the company was too big, resulting into several disadvantages for the employees.

People who left said that bureaucracy had increased and internal politics had started to dominate in regular proceedings in addition, key decisions were only approved by top management, hence discouraging the culture of risk taking and innovation. The number of middle managers had also increased as the company added more layers of management due to its enlarged workforce, thus slowing down the decision making process.

Microsoft was trying to a great extent, to fit everybody in various roles and creating new job positions, but wasn’t paying attention to some of the underlying problems that come with a large workforce. By increasing the number of management levels, the organizational structure changed and became tall and rigid.

A tall vertical structure resulted into lesser roles for the various management levels, which restricted employee freedom and responsibilities. The tall hierarchical structure made it difficult to communicate messages and ideas especially if they have to go through each layer of administration.

Morale among employees decreased since it became unclear how the promotion ladder looked like. Therefore, company policy, administration and working conditions may lead to job dissatisfaction if they are not favorable towards the employees.

In the late 1990s, the top management at Microsoft decided to take a comprehensive restructuring of the company. The main aim of the program was to change the company’s attention from being product oriented to customer oriented. The program was also intended to counter some of the drawbacks of its large size and form a new culture at Microsoft.

Higher level managers were given more power so as to speed up the decision making process in order to encourage innovativeness. In the early 2000s, several of Microsoft’s former and current African-American and female employees filed discrimination charges against the company, resulting into a negative public image.

The lawsuits accused the company of unfair promotion and performance evaluations methods, unequal pay packages and wrongful termination of employment. The lawsuits were subsequently converted into class action suits to cater for all former and current black and female employees respectively.

The lawsuits also specified that Microsoft managers were allowed to exercise discretion when making performance evaluation, which tended to reveal racial and gender biasness. Microsoft refuted all these claims by saying that it had always been committed to diversity.

Microsoft started to take measures that would boost its public image, such as being more open and respectful towards others. It also committed itself towards enhancing communication to a form that would be acceptable by its employees.

The bad publicity led to a sharp decline in stock prices in the period between late 1999 and mid-2000. Stock options were then perceived as the major contributor of employee benefits, and the low stock prices meant that they no longer served as the motivating factor. Steve Ballmer became the CEO in 2000, and faced an uphill task of motivating employees and lowering the high staff turnover. (Chakraborty, 2010 151)

Microsoft’s profits declined sharply in the following, from year 2000’s US$ 9 billion to 2002’s US$ 5 billion. In order to cut costs and improve on its bottom line, Microsoft decided to reduce some of its employees’ benefits in 2004.

Some of the cut-backs included a reduction of the percentage discount on the stock options from the current 15 percent to 10 percent, a reduction in the vacation time for new employees from three weeks per year for two years to two weeks per year.

Employees were directed to make a US$ 40 co-payment in case they chose to buy brand-name drugs instead of buying FDA (US Food and Drug Administration) approved generic equivalents of the said drugs. Microsoft also instructed new parents to take 4 weeks of paid leave within the first 6 months of parenting, which came with an additional 8 weeks of unpaid leave.

Although these measures were meant to save the company an estimated US$ 1 billion per year, they were not received well by employees as the staff attrition rate increased from 6.7 percent to 9.4 percent between 2002 and 2004.

Due to inflation, family requirements and other personal needs, benefits are an integral part of an employee’s job, which affects their level of satisfaction and commitment towards the company. Many companies today have to choose between profits and appealing benefit programs. If an organization opts for profits, it risks lowering employee motivation or even losing a few good employees to competitors.

A company should therefore aim at maintaining its qualified employees by ensuring job satisfaction, since the cost of losing good employees is usually higher than the cost of retaining them. Employees are more powerful now than in later years due to increased job opportunities and growing economies. They expect an employer to offer reasonable pay, vacation time, pension plans as well as other benefits.

Microsoft in this instance failed to consider what motivated the employees when it started to concentrate solely in its own needs. By cutting back on the benefit program, Microsoft was already taking steps that were sure to de-motivate the people.

Thus from the above, employees also don’t like a work environment characterized by too many rules since they always feel like they are the ones who are being targeted. Companies should therefore play a balancing act of meeting their goals while maintaining the needs of their staff.

Targeting employees’ benefits in a cost restructuring program will cause employees to be disengaged at work, which leads to further costs for the company.

Disengaged workers will also be less loyal to the company, thus causing a significantly high employee turnover rate. Companies ought to involve employees in the formulation of policies and ask for feedback before implementation of new policies, rather than announcing their date of effect, as was the case with Microsoft.

Employees at Microsoft were beginning to get frustrated by the changes in the company to such an extent that began calling themselves ‘Microserfs’. The mood in the workplace was dampened by even the slightest of changes, such as the removal of towels in the locker rooms.

The HR department had not anticipated such an effect on the workers, claiming that the benefits in place were still far better than the industry’s standards. Microsoft’s delay in launching a key product, Windows Vista, also lowered the employee’s spirits and they began to wonder why all those decisions were being made. Ballmer decided to change the head of the HR department so as to counter personnel grievances. (Kanfer, 2008 45).

Lisa Brummel was appointed as the head of the HR department in April 2005, and was given the task of motivating and retaining the employees. She first realized that the company had to change from its previous ‘one size fits all’ system to a diverse system that incorporated the needs of individual employees. The system that was in place applied to all workers without paying attention to their individual requirements.

Clearly, Microsoft was not in touch with its employees’ needs. In this case, communication in such a system is ‘one way’, as the top management imposes its requirements on all employees without asking for feedback thus, employees will tend to believe that they are not valued by the company, which results in low motivation and instances where employees talk negatively about the company with their peers.

A work environment that is perceived to be fair and consistent gives employees little to criticize about. A favorable work place enables employees to focus more on their work and contribution towards the company, rather than gossip and unrest.

A new policy should therefore be explained to the staff beforehand, so that the employees understand its intention and whether it is necessary. If such a policy has never been implemented in the past, employees have a right to know why management has decided to enforce it. Employees also prefer an environment where expectations are clear, and where rules apply to everyone in the organization.

A key aspect to consider in creating job satisfaction is the capability of an employee to realize that there are potential opportunities for career growth and promotion. Employees who are given opportunities to better their careers at an organization will tend to be more productive, and will save the company the time and costs incurred in recruitment exercises.

Training programs should aim in developing employees by first realizing individual interests. If well perfected, these programs will develop future company leaders who may lead to good results since they have grown with, and fully understand the company.

Brummel made efforts to communicate with the employees so at to identify areas that led to work dissatisfaction. She realized that even though Microsoft offered satisfactory salaries, workers were not content on the current performance appraisal system. Employees also said that they did not fully understand the compensation and benefit programs.

Microsoft therefore lacked clear criteria for providing recognition. Brummel responded by introducing the ‘myMicrosoft’ program which offered features such as career development, various discounts, management training as well as on-campus services, which caused mixed reactions.

The ‘myMicrosoft’ plan involved a career development program, which enabled the company’s employees to plan their careers by elaborating on a promotion plan. Management training was meant to enhance accountability and roles among managers.

Employees could also get discounts on various services such as vehicle repair and housekeeping. On-campus services such as food options and access to laundry and dry-cleaning were also meant to enhance employee welfare. She also started an internal blog and an intranet portal where employees could write their suggestions.

The compensation and performance evaluation system that was previously in place was termed as the ‘forced curve system’. The system awarded ratings on a scale of one to five, and was used to measure annual performance and ‘long term potential’ of the employees.

Employees were ranked and placed on a curve, whereby the highest rated employees made up the first 15 percent of the curve while 10 percent made up the bottom part. A-listed employees received raises, stock options and training while ‘B’ employees, the middle 70 percent of the curve, received lower raises.

Employees who were in the bottom part of the curve received no raises or bonuses, and were either given advice on how to improve or relieved of their duties. Many employees disapproved this system since it only awarded the best ranking to a fixed number of people, even though more employees may have performed well enough to deserve the ranking.

A forced distribution system is a just an example of a technique used in multiple person evaluation, others are ranking, paired comparison, group appraisal and human resource accounting. A common feature of all these methods is that they evaluate an employee in comparison to another.

Some of the limitations of the forced distribution system are; it’s quite difficult to evaluate people who possess different behavioral characteristics, the system only illustrates the position of an employee but it fails to portray how better or worse off an employee is when compared with a peer, its very tasking when a manger has to rank a large number of employees and furthermost, there is no clear guideline to follow when ranking employees, and this gives room for biasness.

The ‘forced curve system’ only increased pressure among employees since the workers in the bottom half of the curve were not only struggling to get noticed; they were fighting to retain their jobs.

Employees were therefore judged according to their position on the curve regardless of the fixed number of workers who could be in a given grade. Brummel modified the system, maintaining the grading system and bonuses but did away with appraisal based on an employee’s position on the curve.

A favorable appraisal system needs to identify all employees who are performing according to or above their expectations, so as to award merit instead of seniority. Merit systems are always based on performance and can offer good grounds when making promotion decisions.

Training and development programs should also be formulated, whereby employees are educated on the proficiency they should display if they want to receive better raises or promotions. Feedback helps to inform an employee about their current performance and what they can improve on so as to go up the corporate ladder.

Feedback also reveals reasons as to why an employee performed satisfactorily or poorly. Such reasons will be useful for an employee’s personal development. Therefore, not all employee benefits should to be based on a monetary basis.

The “Commitment Rating” system was subsequently introduced as the new basis for bonuses while a three-tiered ranking system was launched as the relevant factor for stock options and an employee’s long term potential. The new system still ranked employees in the three classes; “outstanding”, “strong” and “limited”, but ensured that the number of employees who could be in each group was not fixed.

Microsoft also came up with several other perks in order to boost motivation, such as discounts on hybrid cars and a transport service that served several residential areas. A new workplace was set up that had open areas in which employees could interact. Office walls were glass white boards that could be used by employees to write anything, from art to new ideas, and the setting could be customized according to individual needs.

The aim of the “Workplace Advantage Strategy” was to encourage team work. Workers could also choose from a range of available designs how they wanted their offices to look like. This strategy was in contrast to the ‘one size fits all’ strategy that was previously in place. An internal survey was subsequently conducted to get reactions about the new workplace design.

The survey showed that most of the team work, about 70 percent, done previously was through informal ways, although there was no specific informal meeting place for employees in the various groups. The new workplace design made it easier for employees to interact freely with each other, which fostered brainstorming sessions. All these changes were meant to boost employee morale.

Teamwork, if correctly managed, can also lead to job satisfaction. Management should ensure that there are mechanisms put in place that handle disagreements, so as to make sure productivity is not impacted negatively. Managers who encourage teamwork and handle conflicts will realize increased productivity in work groups, and employee motivation.

Employees are also more satisfied when they get a chance to work in favorable team environments. Managers should encourage groups to arrive at their own conclusions, without necessarily specifying for a given result from the teamwork. Instead, employees should be trained on the importance and relevance of group work. (Mathis, 2007 48).

The quality of the work environment is significant feature to consider since it contributes to job satisfaction. An internal work environment is composed of respect and the reception that employees receive from their peers and management. The physical work environment is made up surrounding features as well as the working conditions.

A well designed workspace will have a positive impact on an employee’s conduct and performance. Physical elements will not lead to the desired results unless management focuses on the welfare of its staff.

The first task of management is to realize that employees are influenced by everything around them, from lighting, ease of movement to orderliness of the workplace. Therefore, procedures ought to be followed to ensure that only the favorable features of the environment are left behind.

The physical environment should be fostered in a way that is appealing to employees, since they will be using it on a regular basis. A comfortable workspace has a significant effect on the satisfaction and productivity of employees. Employees who rely a lot on team work should have open areas that encourage interaction and collaboration.

However, provisions should be made to allow for private workplaces, so as not to infringe on an employee’s privacy. An attractive workplace has a large impact on how other environmental factors affect an employee.

An appealing work environment will be advantageous to both the company and its employees, since the staff will be satisfied and hence lead to improved attitudes. Satisfaction among employees increases their loyalty towards the company, and they will thus be more productive.

Microsoft Corporation soon experienced the benefits of improved employee motivation. The staff turnover rate decreased to 8.3 percent in 2007, from 10 percent just two years earlier. Employees could now feel that they were valuable, and this resulted into increased loyalty. The company’s revenues were also positively affected, jumping from US$ 39.788 billion in 2005 to US$ 51.122 billion in 2007.

Microsoft enforced the improved performance appraisal system in 2007, whereby 37 percent of employees received a rating of “outstanding”, 58 percent got an “achieved” rating while only 5 percent had “underperformed”.

Employees welcomed the new system since it was more transparent than the previous version. Employees also place more value on a proper feedback mechanism that links rewards to performance, which in turn causes more job satisfaction. (Vanita, 2003 45)

Employee recognition plays a critical role in developing and maintaining employee satisfaction. Programs put in place should be fair, correct and should have appropriate timing. Awards should also be in the right amount, not too many and not too few. They should be few enough so as to increase their value but at the same time common enough so that all employees believe that the rewards are attainable.

Positive feedback encourages an employee to perform better next time, as compared to a reprimand which warns an employee from repeating an undesired result again. A good recognition program will thus communicate vital values that employees should develop so as to reach their potential, and ultimately lead to the achievement of broader organizational goals.

Increased motivation allows employees to exercise creativity and innovation in the workplace, which will in turn have a favorable impact on the company’s profitability and competitiveness. Management should therefore focus on employee motivation so as to encourage innovativeness, rather than basing all its efforts on performance evaluation.

Companies that encourage their employees to think outside the box will find out how knowledgeable they are. Employees also offer a cheaper means of solving problems, as compared to hiring consultants. Brainstorming allows employees to come up with new ideas and challenge old ones, without fear of criticism. (Bratton, 2001 96).

Empowered employees will be more resourceful and more innovative, and the company will be in a better position to compete in the industry. Management should realize that even though empowerment resides in an employee, the company is responsible for developing policies that bring about empowerment. Companies that continue to empower their employees encourage leadership and responsibility.

Most companies don’t apply this concept because they are not willing to forfeit some control to their employees, or tend to apply it selectively to only a few members of staff. A culture that employs empowerment correctively will reap the benefits, due to better service delivery and a motivated workforce. (Torrington, 2008 152)

In conclusion, organizational culture has a direct effect on employee job satisfaction and performance. A culture that allows for open communication, interaction and training will increases employee motivation, which has a major influence on the company’s profitability. Management should for this reason ensure that the right systems are in place to allow for a favorable work environment.

Development of this culture is therefore a responsibility of senior management, if they are keen on lowering employee attrition rates. When a company lacks of clear management policies that aim on employee empowerment, then such a culture is virtually unachievable.

Employees also have a significant role to play in the formulation and development of a favorable culture. Their duty is to disclose issues that they feel would affect their work environment, as well as coming up with suggestions on how they could improve on their job performance.

Management’s role is to assess the employees’ morale on a regular basis, and identify areas that result into low productivity, rather than hoping that employees will adapt to all new policies. A contented workforce is one that has favorable interactions between employees and the company, the end result of which is synergy and unity in the achievement of overall organizational objectives.

References

Bratton, J., 2001. Human resource management, Theory and practice. New York: Routledge.

Chakraborty, B., 2010. Employee motivation and retention strategies at Microsoft. New York: Sage

Kanfer, R., 2008. Work motivation past present and future. New York: Routledge.

Mathis, R., 2007. Human Resource Management. New York: Cengage Learning.

Torrington, D., 2008. Human Resource Management. New Jersey: Prentice Hall.

Vanita P., 2003. Effective communication in human resource development. New Jersey: Atlantic Publishers.