Organization Background
AMCOM Communications Limited Inc. is an Australian company that deals with varied investments in technological and high speed connectivity service products such as cloud computing services, speed connectivity, communication tools, and internet communication tools to government, corporate, and wholesale customers (White, 2011). Consumers can access these technological products and tools from mobile and web platforms. Marketers, traders, and other users can easily connect with their audiences using these technological and financial products offered by AMCOM Communications Limited Inc. Over the last five years, the company has faced financial trouble and declining revenues forcing the company to implement a strategic therapy to minimize the increasing operational costs. Other challenges brought about by the declined revenues included declined profits, dwindled market share and loss of market share. However, evaluation of the company’s operational costs revealed that AMCOM Communications Limited was spending nearly 40% of its total revenues on employees.
The other challenges related to the workforce include:
- AMCOM Communications Limited Inc. was facing massive losses because of running a large employee capacity
- The senior management and other top management officials were engaged in wrangles due to politicking thereby killing the morale of the workforce. Teams within the company lacked the morale, and most employees seemed less motivated (McMullen, & Morse, 2014). The existence of many structures within the company meant that the company’s management might have been over structured with senior executives being part of the problem.
- Declining sales could be associated with perceived quality issues (Whiteley, 2010)
- The company’s cost structure had a lot of defects because it allowed employees to enter a lot of putting additional overtime. For this reason, a massive retrenchment at the company seemed inevitable
Organization Analysis
During the analysis of challenges associated with human capital at AMCOM Communications Limited, the company’s board of management identified the following strategies to adopt during the retrenchment process.
- Reduce the employment capacity by 50% in order to minimize operational costs and promote responsiveness from employees
- Recognize, train, and motivate the remaining staff members
- Improve the level of product quality and service provision
- Increase the utilization of the strong resource factors from the company
AMCOM Communications Limited board of governance enlisted the help of HR managers to implement the retrenchment process and Balance Scorecard (Taylor, & Baines, 2012). Each strategy was taken and placed in an appropriate perspective.
Balance Scorecard for AMCOM Communications Limited
Organizational Costs
The AMCOM Communications Limited incurs different types of costs in its operational activities. First, there are sunk costs that have already been incurred by the company and cannot be recovered. These costs include those the company incurred during the acquisition of assets such as buildings. Second, the company incurs non-sunk costs when it makes specific decisions. For instance, the decision to retrench employees will be associated with numerous costs that will cater for compensation, restructuring, and legal costs if the laid off workers decide to sue the company. Another category of costs incurred by AMCOM Communications Limited comprises of outlay costs incurred during the production and distribution of goods and services. Outlay costs are often referred to as absolute costs. Opportunity costs are incurred when the company foregoes certain opportunities. For instance, when employees fail to work according to company policies and decide to pursue their own objectives, AMCOM Communications Limited foregoes the benefit it could have gained if employees could have utilized their time wisely in executing the company goals and objectives. Finally, the last category of costs incurred by the company are the social and economic costs. These costs are incurred at the macro-and-micro-level of operation. Even though these costs are generated at the production unit of the firm, most of these costs are paid to the society and not the company.
Performance Analysis
Financially, AMCOM Communications Limited is performing badly. Sales have been decreasing over the last three years. The Cash Ratio and Current Ratio are low meaning that AMCOM Communications Limited is unable its cash obligations in the short run. The asset turnover ratio is decreasing thereby implying a low asset utilization by the company. The company’s profit margins are significantly low, and the operating expenditures for the company constitutes a large portion of the company’s total revenue. Worse still, this increase in expenditure to be increasing steadily over the coming years.
Although AMCOM Communications Limited might be limited in implementing strategic controls, an analysis of its resources shows that the company is still capable of wringing out additional capital and cash revenues. The financial muscle and restructured human resources can help the AMCOM Communications Limited to change its course and strengthen its position in the market. AMCOM Communications Limited can also alter its pricing control to enable it to compensate for declining revenue. Overcoming the declining revenue requires the review of the company’s revenue management streams to help the company to reposition itself in the market (Janove, 2011).
Critical Decision
Based on the internal and external analysis of the company, restructuring the human resources remains the major decision that must be adopted by the company (Courtney, Lovallo, D, & Clarke, 2013). Even though restricting of human resources is associated with financial and ethical implications, reducing the size of the workforce by 50% would not only enable the company to address its performance issues but also help the company to reduce operation costs and increase efficiency in product and service delivery. Moonlighting, inappropriate systems, obsolete procedures, poor customer service, lack of accountability among management executives, and declined financial performance are some of the advantages that the company is likely to avoid by implementing a restructuring program. The decision making body will consider aspects such as improved financial viability in both the short-term and long-term period, progressive customer service efficiency, increased outreach, transparent accountability, and implementation of a new management policy (Moskowitz, Drnevich, Ersoy, Altinkemer, & Chaturvedi, 2011).
On the other hand, AMCOM Communications Limited’s board of management must have to deal with ethical issues and considerations following the retrenchment procedures. The process will have devastating consequences to all individuals involved in the retrenchment exercise (Klitgaard, & Elmelund-Præstekær, 2013). First, the company is getting rid of experienced employees who have accumulated years of experience while working at the company. Second, retrenched employees are likely to suffer from embarrassment because they might feel less competitive or unappreciated for the services they offered to the company. Their sense of self-esteem will be hurt badly. Other issues to be suffered on an individual perspective include financial issues, depression, and uncertainties over their future (Klitgaard, & Elmelund-Præstekær, 2013). Equally, retained employees are certain to suffer from the loss of their colleagues and will also be involved in constant worries over the fate of their future. Finally, the board should consider the costs of retrenchment to the company. Other than the losses associated with the loss of talent, some employees might decide to sue the company for the loss of their jobs. As such, the company should be ready to pay the associated legal costs or associated compensation to the affected employees.
Time frame
The time frame for the retrenchment process will be executed as per section 189 of the Fair Work Act. However, the retrenchment process at AMCOM Communications Limited depends on the rate at which consultations will be finalized, and the total number of consultations entered with customers. The company will adopt a sound retrenchment practices characterized by a good communication strategy, transparency, and it will adhere to legal and reputational risks. The exercise will be executed within an extended period not exceeding two years.
Analysis of possible solutions
The three likely threats that might occur as a result of retrenchment include loss of skills, depression on the retained and retrenched employees, and possible legal suits. To offer potential solutions to these problems, the idea of losing experienced manpower can be compensated by training the retained manpower and equipping them with the necessary skills required (McMullen, & Morse, 2014). In doing so, the company would have reduced the number of redundant workers and improved the quality of the existing workforce. Concerning the effects of depression on retrenched and existing workers, AMCOM Communications Limited can hire consultancy services from forensic psychologists to offer counselling to affected workers. Equally, the company can offer attractive retrenchment packages to the retrenched employees to enable them finance their unforeseen financial obligations and cater for expenses during their brief periods of unemployment (Kwon, & Hein, 2013). Finally, AMCOM Communications Limited can avoid cases associated with legal suits by following the right retrenchment procedures as defined in the Fair Work Act. The company should also adopt a sound retrenchment procedure that is free from any form of bias and corruption. All retrenchment policies should be adhered to the detail.
Financial and non-financial decision-making tool
Heuristic and bias
The decision-making tool will enable the management to minimize risks associated with the complex task of laying off employees by assessing the probabilities of the associated threats occurring (Masip, Garrido, & Herrero, 2009). Anchoring heuristics will be used to make estimates of the threats occurring based on the possible occurrence of the issue and adjusting the aspect into obtaining the appropriate decision. Equally, representative heuristics will be used to judge the likelihood of AMCOM Communications Limited facing possibility of the identified threats. The management can base their decisions on the likely effects that might result from their retrenchment effects. Biases should be avoided at every situation during the decision-making exercise.
Cost-Benefit Analysis
This decision-making tool will assist the management to make decisions based on future financial projections that might result from implementing the retrenchment policy (Masur, & Posner, 2012). For instance, the problem of a high volume of redundant workforce has been associated with declined revenues and low-profit levels. If AMCOM Communications Limited reduces the size of its workforce to a manageable capacity, efficiency will increase and eventually, financial implications of their decision would be positive. If the projected differences between the costs and benefits are positive, then the decision of the board should be ruled in favor of the decision to retrench the workers.
Recommendation
Based on the analysis conducted in the above sections, AMCOM Communications Limited should pursue the decision to retrench 50% of its workers. Even though this move is associated with financial, ethical, and legal consequences; it is more likely to become beneficial to the company in the long run. The following measures should be adopted during the retrenchment exercise:
- Offer rewards, attractive rates, and benefits to the retrenched employees to help them finance their expenses within a short run (Kwon, & Hein, 2013). Equally, the benefits packages to retained employees should be reviewed in order to encourage to help in the restructuring process at the company. Without a commitment from the retained employees, the objectives of the restructuring process would not be realized.
- AMCOM Communications Limited must implement a new product development product to increase its level of productivity and expand its revenue streams and possibly. New product development will also enhance the impact of the company in the market
- The company should transform it human capital, utilize existing assets, and formulate restructuring strategies based on the outcome of its internal strengths and market opportunities. Leveraging the company’s strong cash flow and revenue generating capabilities.
- Adopt a sound management and retrenchment policy characterized by transparency and lack of biasness
- Offer attractive payouts to senior management officials to encourage them enhance their commitment to organizational objectives (Kwon, & Hein, 2013)
Reference List
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