The alignment of the HR strategy to the company’s strategy
This case study dates back to 2007 when Carmen Nicula was the Human Resources Director at FrieslandCampina Romania. During her mandate, 2006 – 2013, Carmen had a strategic role and was a member of the Executive Board. The case study was presented by Carmen Nicula at a conference.
The article written based on the case study was revised and updated in 2022.
FrieslandCampina Romania is the Romanian country’s branch of The Dutch Royal FrieslandCampina with a history of over 150 years and one of the most important dairy companies in the world, with branch offices in 38 countries in Europe, Asia, Africa, and South America. The company is specialized in the manufacturing of dairy products. At the international level, FrieslandCampina has over 23.000 employees and a revenue of 11.1 bn euros (2020) according to
FrieslandCampina Annual Report 2020.
FrieslandCampina entered the Romanian market at the beginning of 2002. The company closed 2020 with a turnover of 469.5 mil. lei, plus 4%, a net profit of 29.7 mil. lei, and 574 employees according to
public sources.
FrieslandCampina Romania offers a wide range of products: milk, yogurts, cream, special cheese, ice cream, and desserts. Among the brands in the portfolio: Napolact, Frico, Campina, Milli, Oke, Dots.
Investment in people – a recognized source of competitive advantage
The present case study highlights the impact of FDI on the increased quality of Human Resources Management and the real need of the alignment for the HR strategy to the company’s strategy.
Research overview
The key findings from a survey by Deloitte together with Economist Intelligence Unit (2007), conducted globally, concluded:
- More than 85% of all survey participants said that people were vital to all aspects of their company’s performance, particularly their top strategic challenges.
- The top people’s concerns for senior business executives were: creating a high-performance culture (79%), talent management (76%), leadership development (76%), training and development (63%).
- The vast majority of them (82%) expected HR to be perceived as a strategic, value-adding function.
HRM as strategic integration got support from Huselid’s (1995) research finding that those organizations that link HRM practices to company strategy report higher financial outcomes. The more of the high-performance HRM practices that are used, the better the performance as indicated by productivity, labor turnover, or financial indicators.
Combs et al. (2006) who carried out a meta-analysis of 92 studies on the relationship between HRM and company performance, found that an increase of one standard deviation in the use of high-performance work practices (HPWP) is associated with a 4.6% increase in return on assets (ROA), and with a 4.4% increase in turnover.
The foundation of a value-added HR function is a business strategy that relies on people as a source of competitive advantage and a management culture that embraces that belief. The HRM systems that develop and maintain a firm’s strategic infrastructure should be considered a very important investment.
The role of HRM at FrieslandCampina Romania
FrieslandCampina understood the role of HRM and that the HR system should be based not only upon added value but also on moral values (economic approach & relational rationality); in this way, major benefits could be expected to all parties concerned. People were at the top of the strategic agenda for FrieslandCampina.
There was a clear movement regarding the role of the HR department in FrieslandCampina. In the beginning, the emphasis was on Administrative Expert, Employee Champion, and Change Agent roles, but after foreign investment, the Strategic Partner role was on top, HR professionals participated in the process of defining business strategy, moving strategy to action, and designing the HR practices that aligned with the business strategy.
In order to accomplish that, FrieslandCampina Romania had the support of the “mother” company, FrieslandCampina (especially, Corporate Human Resources), through the transfer of know-how, best practices, participation in multinational project teams, training, workshops on FrieslandCampina Training Platform, coaching and mentoring, etc.
To smooth the progress and the transfer into the practice of the human resources goals, at FrieslandCampina Romania, we measured the extent to which FrieslandCampina Romania’s core values (reliable, dedicated, and vital) were perceived as existing in the organization in our day to day activities and were valorized by our employees (the level to which they considered organizational values as their own values as individuals).
A mission was set for the HR Department: “Becoming a reliable and strategic partner in supporting business objectives and future development needs of our organizations through a continuous improvement of all HR activities, strategic and operational, with direct impact on the quality of our human capital.”
The alignment of our HR strategy to the company’s strategy had as a foundation the so-called contextually based human resources theory (Paauwe, 2004) where the understanding of business and the environmental factors affecting the business was very important in order to set an appropriate HR strategy.
The scheme below explains the process of defining the HR strategy starting with the analysis of Product/Market/Technology dimension (PMT) and the key issues raised by this dimension. Then, we analyzed the Social/Cultural/Legal dimension (SCL) and the key issues for HR. After that, we answered the question: what was the choice? Finally, we formulated the HR strategy as a response for those aspects.
The alignment of the HR strategy to FrieslandCampina Romania strategy
PMT dimension
- Raw material price increase
- Stronger, aggressive competition
- Less brand loyalty
- Innovation, time to market
- Sophisticated buyers
- Concentration of trade
- Price-sensitive consumer
Key issues
- More new products
- Accelerate innovation
- Operational efficiency
- Product quality focus
- Brand awareness
- Selling price adjustments
- Higher discounts
Configuration
- Strong brands
- Decentralized/autonomous
- Wide range of dairy products
- Acquisitions
- Financial health
- Reorganization phase
Dominant coalition
- Managing Director
- Human Resources Director
- Management Team
- Employees
- Unions
SCL dimension
- Health & safety, labor regulations
- Work-life balance
- Trade unions/work councils power
- Competition on labor market
- Mobility of labor
Key issues
- Collective Labor Agreements negotiations
- Unions/Work Councils consensus
- Recruitment & retention of the right people
- Competitive compensation
HR Strategy
Innovation
- Multifunctional teams
- Develop and retain the right people
- Creativity development programs
- Develop/reward innovation systems
Quality
- Stronger mentality towards quality
- Employer branding
- Employee Attitude Survey
- Corporate Social Responsibility (CSR) programs
Efficiency
- Performance Management systems aligned with business goals
- Develop and reward cost efficient initiatives
- Monitor manpower efficiency
- Clear & fair remuneration policy
- Improve internal communication
Further on, there are detailed two HR activities that were in our focus in our HR strategy: first, Develop and retain the right people, part of the Innovation focus; second, Employee Attitude Survey, part of the Quality focus.
1. Develop and retain the right people, part of the Innovation focus
The right people for our organization were those characterized by the three core values of the company: reliable, dedicated, and vital. That aspect was the first investigated during the selection process. We were hiring people with high compatibility between their individual values and our organizational values as that would facilitate a better performance. Of course, we were not neglecting the competencies aspect. The candidates must have had a good level of competencies for the vacant position (in terms of knowledge, experience, abilities, etc.). But what made the difference between two good candidates was the compatibility with our company values.
HiPo (high potential young employees) were part of our “right people” and we developed a special program for them in order to improve their competencies (functional and behavioral) and to create and maintain a very good motivational and retention level.
The “Investing in developing high potential young employees – an important factor in assuring the competitiveness on workforce market” project intended to develop, within a year, the abilities and managerial skills of young employees with high potential for development, so that they can successfully handle a promotion in a management position, on a superior hierarchic level.
General objectives in the project
- Develop management quality and entrepreneurial spirit.
- Increase the competitiveness of the workforce and increase productivity at the workplace in the context of Romania’s integration in the European Union.
- Increase the social and economical potential of the company.
The aim (specific objective) of the project was the development of managerial skills for young employees with high development potential in order to help them successfully handle promotion in higher positions, within a year.
Expected results
- A list of individual needs for development for the 30 employees from the target group.
- Specific competencies developed regarding future needs/expectations for these 30 employees from the target group.
- Management skills developed for the target group.
- Other firms in the region (minimum 20) would be informed about the development model used in the project.
The 30 young employees identified as having high potential were selected through internal evaluations as having a high potential for development, people the company wanted to promote on a high level in future years.
Selected HiPo participated in a series of activities
- Developing needs evaluation (through the method of “development center”)
- Group consultancy for development (an activity in which every participant from the target group established specific objectives for development according to the individual needs identified through the development center and according to the needs of the company and elaborated a plan for development by taking all the steps necessary to reach the objectives)
- Management skills training
During the group consultancy meetings, conducted according to the principles of self-managed learning, the participants were coached to identify their strengths and weaknesses, write down an Individual Learning Contract (a plan of objectives and actions), apply and monitor the actions comprised in the Individual Learning Contract, and, at the end of the period, elaborate a final report comprising their results and evidence to support those results.
Training activities were organized for developing managerial competencies:
- Developing and improving human relationships at the workplace
- Time management
- Delegation of responsibilities. Organizing and conducting efficient meetings.
- Managerial decision making
- Efficient conflicts approach. Primary negotiation.
- Relationships developing at work – Teams
- Managerial decision making in the context of working on a project: Project Management
- Motivation of Employees. Efficient Leadership Style
Next steps
After finalizing the project, the developing high potential young employees model would be replicated in the company that initiated the project (with its own resources) but also in the other companies from the Group.
2. Employee Attitude Survey, part of the Quality focus
For us, the survey represented a Talent Management tool having as a goal the development of people and improving business performance, but also a tool for organizational change (post-survey change process).
About the survey
It was a yearly anonymous survey that took the pulse of the organization. It was conducted for the first time in FrieslandCampina Romania in 2006.
The survey included the personnel with management and execution functions from all the Group’s entities and all the departments, around 30% of the total number of FrieslandCampina Romania employees.
The impact
In the first part of the survey, the employees had to express their perception on a series of important organizational aspects such as objectives, structure, motivation, conflicts, change, communication, and leadership.
The second part of the survey investigated the perception of the employees about FrieslandCampina’s core values, regarding both their presence inside FFR and their importance for employees themselves.
Next steps
After finalizing the project, the developing high potential young employees model would be replicated in the company that initiated the project (with its own resources) but also in the other companies from the Group.
Conclusion
The role of the HR strategy is to support the company’s performance. Only an aligned HR strategy to the company strategy can achieve and demonstrate this role in practice.
We should see the effective strategy implementation of the HR strategy as the key mediating variable between the HR architecture and the company performance.
References
- Combs, J., Liu, Y., Hall, A., Ketchen, D.(2006). How much do high-performance work practices matter? A meta-analysis of their effects on organizational performance. Personnel Psychology, 2006, 59, 501-528.
- Deloitte (2007). Aligned at the Top. How business and HR executives view today’s most significant people’s challenges and what they’re doing about it. The Economist Intelligence Unit.
- Huselid, M.A., (1995). The impact of human resources management practices on turnover, productivity, and corporate financial performance. Academy of Management Journal, 38/3, 635-672.
- Paauwe, J. (2004). HRM and Performance: Achieving Long-Term Visibility. Oxford: Oxford University Press.
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