Enterprise Rent-A-Car: Transformation

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Enterprise Rent-A-Car (ERAC) has gone through a business transformation to boost its capabilities and drive competitive differentiation. Despite extensive investment in training and an institutionalized value system, the downstream benefits of client satisfaction, work-life balance, and productivity are suboptimal. In this report, integrated change initiatives are proposed to address the identified cultural issues and performance gaps. The goal is to achieve notable improvements in staff retention and service quality in the increasingly competitive car rental industry.

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Analysis

Assuming that the organizational practices at the Alabama and Florida branches are replicated in all other EERACoffices, four symptoms that would elicit a need for change can be identified. They include gaps in the staff incentive programs, performance appraisal, and formal training.

A review of the Six Box diagnostic model can help identify specific areas and systems that need to be changed. Regarding purpose, ERAC’s vision and mission both center on service quality and value system and creating an optimal workplace environment. However, the clear organizational goals connected to these statements are lacking. The structures in ERAC involve an efficient use of up-to-date technology in mobility solutions such as WeCar, as a response to competitive pressure (Fuller, 2015). Product development is streamlined through programs like Flex-E-Rent service. However, management issues and poor inventory control (overbooking reservations) remain prevalent in the branches, affecting sales and performance. Concerning rewards, ERAC has a weak incentive program. Employees work more hours per week for less compared to rival firms.

Relationships at ERAC are constrained by limited top-down communication. Branch visits by top executives to observe first-hand employee struggles and customer experiences are low. The leadership style in the case appears to be autocratic, which explains the lack of work-life balance at the ERAC branch and limited staff development opportunities. The top management is less responsive to employee issues. As a result, sales and customer service have been affected. Helpful mechanisms implemented at ERAC have been technological platforms and market penetration to 8,000 locations worldwide. These approaches have been instrumental in meeting organizational objectives.

External Analysis

The external factors impacting change in this organization are provided in the table below. The environmental pressures related to specific opportunities and threats are explained in detail in subsequent sections.

Environmental Pressures Opportunity Threat
Fashion – Work-life balance
– Organizational culture change
– Leadership development
– Employee turnover
– Innovation and technology
Mandate – Training
– HR laws and policies
– CSR activities
– Lack of economies of scale
– State and federal labor laws
Geopolitical – Retaining talented employees
– Geographical expansion
– Recruitment decisions
– Co-branding with local government
– Competitive rivalry
Market decline – Digital marketing strategies
– Strategic partnerships with airlines and hotels
– Budgetary constraints
– Fuel prices
Hypercompetition – Brand differentiation
– Competitive offers
– Entry barriers
– Large car schemes by manufacturers
– Station-based systems

Fashion

From the case, opportunities for better performance lie in work-life balance, organizational culture change, and leadership development. Reducing daily shift and week hours would be an intrinsic motivator in this service industry, leading to improved morale and productivity. With the increasing shifts in workforce composition, opportunities for organizational culture change exist. Current demographic trends call for flexible work schedules to motivate the millennial staff (Earl, Taylor, Roberts, Huynh, & Davis, 2017). The development of business leaders who will drive future organizational growth is a competitive strategy in this industry. However, changes in innovation and technology and high employee turnover to rival firms with better terms are key threats pertinent to this case.

Mandate

A strong competitive position in car rental services is a strategic priority. Providing career advancement avenues to staff is a common competitive strategy for preventing turnover. Assuming that labor laws vary between jurisdictions, compliance with local HR regulations and policies presents opportunities to promote workplace diversity and avoid legal penalties. Organizations, including ERAC, are expected to be active in the corporate social responsibility (CSR) domain to strengthen their reputation (Ling, Xin, & Shuming, 2018). Thus, the firm has an opportunity to promote green initiatives – such as hybrid cars – and improve its public image. However, a lack of economies of scale and unfavorable state/federal labor laws are a threat to profitability in this industry.

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Geopolitical

The opportunity for growth in the car rental industry comes from retaining talented employees, and increasing sales or revenue, and recruitment decisions. Staff retention through incentive programs is one-way stability in the workplace can be improved (Al Mamun & Hasan, 2017). The organization has an opportunity to boost sales/revenue by expanding to new untapped areas. Further, assuming a decentralized recruitment approach, the likelihood of tapping into the local pool of talented managers is high. However, co-branding with local government as a part of an integrated transport system and intense competition are key threats to survival in this industry.

Market Decline

The car rental service is a vibrant market with several competitors. The organization has an opportunity to innovate in digital marketing strategies to strengthen its competitive position. Strategic partnerships with airlines and hotels would also help boost declining sales. However, budgetary constraints and high fuel prices (assuming few electric rental cars) are a threat to these initiatives.

Hypercompetition

Differentiating a brand from competitors in the car rental service is a key competitive strategy. Opportunities to improve brand reputation exist in providing competitive offers to customers and effective management of reservations. High entry barriers mean that the firm can consolidate its competitive position in the market. However, large car fleets operated by vehicle manufacturers and station-based systems are a threat to car rental services (Future Market Insights, 2020). These players may displace operators.

Internal Analysis

Specific strengths and weaknesses are inherent in organizational pressures and functions that support or impede change. Using the cultural web model, many underlying cultural issues can be exposed. Identified paradigmatic assumptions include competing on employee training and technology while existing rituals and routines are related to values of hard work and customer service (Palmer, Dunford, & Buchanan, 2017). Stories and symbols reinforce collaboration with communities and partners in the talent search. Control systems are used in performance appraisal and R&D while power structures depict the upper-management as the most influential organ and some autonomy at the branches. The organizational structure reflects limited task integration; hence, coordination between branch- and upper-level management is required.

The structural dilemma identified relates to differentiation vs. integration of roles. Based on Hofstede’s model, high power distance between the upper- and branch-level management and long-term orientation of organizational values are the key cultural barriers relevant to the case (Orlando, Renzi, Sancetta, & Cucari, 2017). The factors of the internal environment are provided in the tables below.

Organizational Pressures Strength Weakness
Growth – Geographical diversification
– Diversified portfolio
– High sales inventory
– Cash flow problems
Integration and collaboration – Strategic alliances with airlines and car dealers
– Partner reward programs
– Limited vertical integration
Identity – Strong brand identity – High booking reservations
New broom – Strong trainee program – Less diversified workforce
Power and politics – Autonomous management at branch level – Limited support from upper management
Organizational Functions Strength Weakness
Management – A strong management training program
– Rapid advancement in the corporate ladder
– Centralized decision making
– Ineffective performance appraisal
Marketing – Strong distribution network
– Newmarket entry
– Mechanisms for addressing customer issues
Accounting/Finance – Strong financial position and profitability – Liquidity problems in some branches
Information systems – Automated rental reservation service – Limited technology training
Research and development – New product development (WeCar) Fewer innovative products than competitors

Organizational Pressures

Growth. Geographically diversified operations (8,000 locations) constitute a strength that should be built further. Leveraging its market experience and capital base would make expansion into untapped markets possible. A highly diversified portfolio, ranging from SUVs to exotic cars and minivans, is another unique advantage (Enterprise Holdings, 2020c). A high sales inventory (booking reservations) is a weakness that will potentially impact revenue. Cash flow problems constitute another disadvantage that affects operations and staff incentives.

Integration and collaboration. Strategic alliances with Air France and Hilton Honors are a strength that needs to be developed to enhance competitiveness. Reward programs to loyal clients, including points for miles covered, are another unique advantage (Enterprise Holdings, 2020a). Limited vertical integration with car dealers and technology vendors presents a disadvantage to the business.

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Identity. A strong brand identity in the car rental market has been built over the years. The trainee program is among the best in the industry. Quality and customer value are the pillars of brand identity (Lord, Dinh, & Hoffman, 2015). However, the failure to address booking reservations constitutes a weakness that is leading to customer dissatisfaction.

New broom. The trainee program and accelerated promotions are strengths critical to new broom changes. Experience opportunities for newly hired managers serve to prepare them for higher roles. Hiring staff from local contexts has led to a less diversified workforce, a disadvantage to the company’s growth prospects.

Power and politics. The branch management exercises some autonomy from head office influence. This decentralized leadership strategy is a strength that needs to be built. The upper management does not seem bothered with customer and employee issues at the branches, a weakness that may affect productivity.

Organizational Functions

Management. A renowned employee training program is an advantage to the firm. The rapid advancement of entry-level staff up the corporate ladder is another strength that would lead to a pool of management talent. Centralized decision-making is a disadvantage that affects operations at the branches. Ineffective performance appraisals reduce staff morale and productivity.

Marketing. A strong distribution network due to strategic alliances with airlines and hotels is a marketing strength. Entry into new markets helps expand operations to untapped segments. Weak mechanisms for addressing client issues have an impact on customer satisfaction.

Accounting/finance. A strong strategic position and profitability over the years indicate an efficient financial management function. Liquidity problems in some branches constitute a weakness that needs to be addressed. The goal is to boost bottom-line performance.

Information systems. Patented innovative solutions are a strength to the firm. The car rental service, Rental Management System, increases efficiency in the reservation process for various corporate clients (Enterprise Holdings, 2020b). Limitations in employee technology training are a weakness impacting the firm.

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Research and development. New product development, including We Car, is a strength that needs to be built. Limited solutions to customer service constitute a weakness. Additionally, fewer innovative products than competitors are a disadvantage impacting competitive positioning.

Readiness for Change Analysis

The change proposal being considered is transforming staff benefits, performance appraisal, and leadership development. The items in the assessment tool that are relevant to ERAC can be found in the table below.

Financial justification of the change proposal 7
Costs of change clearly predicted 6
Comprehensive implementation plan prepared 7
A winning over strategy identified 6
Clear success criteria identified 7
Total 33

A score of 33 indicates that considerable anxiety will be experienced when implementing the change (Palmer et al., 2017). Therefore, strategies to reduce resistance to change are required.

Formulation

Transformation in staff benefits is required to achieve the goals of higher staff morale and productivity. Outsourcing payroll and benefits management to third-party firms is a first-order change that would address employee compensation and free up resources for other core businesses of the firm. Additionally, localized data-driven talent programs that monitor individual performance are recommended to support adequate compensation and work-life balance at the branch level. A second-order initiative is varying the benefits by region and country to reflect revenue generated by a branch and unique workplace challenges. Establishing a global payroll policy that assigns accountability among HR and finance departments would create transparency in staff benefit processes and career development. A process-based approach to leadership development would promote succession planning at the organization. Hiring and recruitment based on the required skill sets should be managed locally, while training and development should be handled at the central HR division.

Implementation

Based on Kotter’s eight-step model, outsourcing the payroll system will begin by presenting a business case for change to the upper-level management by the branch manager. Next, a coalition involving the HR manager, providers, and staff representatives would spearhead the initiative for two months to obtain buy-in. The team will create a strategic vision for payroll management and share it with staff. A three-week training on performance appraisal processes will empower staff. Based on data, short-term wins – rewards to the best-performing employee – will be identified after a month. The gains will be consolidated by using champions (branch managers) before being institutionalized through a global payroll policy after a year.

Plan to Address Resistance

The involvement of all employees and management throughout the change process and leveraging interactive communication technology will help reduce resistance.

Communication Plan

Various tools will be used to reach all employees. Staff emails, internal memos, and social media will be employed to communicate the change (van Sandwijk, 2019).

Image of Change

Improved productivity and staff morale will project an image of change in the organization. Training and team-building initiative will also promote the transformation.

Lessons Learned

The short-term wins will be institutionalized through local policy and later global processes. This approach will help promote staff morale and productivity in other branches.

Evaluation

Element Milestones Markers of Success
Individual to collect data Branch manager
Measures to be used Productivity and customer satisfaction An increase in performance and fewer complaints measured monthly
When to collect data After every three months
Reporting Upper-level management

Conclusion

The change proposed in this report entails the outsourcing of the payroll system to ensure data-driven compensation. The expected outcomes include improved staff morale and productivity. A bottom-up implementation approach is envisioned for this change.

References

  1. Al Mamun, C. A., & Hasan, N. (2017). Factors affecting employee turnover and sound retention strategies in business organization: A conceptual view. Problems and Perspectives in Management, 15(1), 63-71. doi:10.21511/ppm.15(1).2017.06
  2. Earl, C., Taylor, P., Roberts, C., Huynh, P., & Davis, S. (2017). The workforce demographic shift and the changing nature of work: Implications for policy, productivity, and participation. Age Diversity in the Workplace, 17, 3-34. doi:10.1108/S1877-636120170000017002
  3. Enterprise Holdings. (2020a). Enterprise partner rewards programs. Web.
  4. Enterprise Holdings. (2020b). Mobility and innovation. Web.
  5. Enterprise Holdings. (2020c). About enterprise rent-a-car. Web.
  6. Fuller, C. (2015). Enterprise holdings – Three brands under one roof! Web.
  7. Future Market Insights. (2020). U.S. car rental industry: Overview, analysis, and forecast. Web.
  8. Ling, M., Xin, C., & Shuming, Z. (2018). Corporate social responsibility in organizational behavior and human resource management: Literature review and prospects. Foreign Economics & Management, 40(6), 59-72. doi:10.16538/j.cnki.fem.2018.06.005
  9. Lord, R., Dinh, J., & Hoffman, E. (2015). A quantum approach to time and organizational change. Academy of Management Review, 40(2), 263-290. doi:10.5465/amr.2013.0273
  10. Orlando, B., Renzi, A., Sancetta, G., & Cucari, N. (2017). How does firm diversification impact innovation? Technology Analysis & Strategic Management, 30(4), 391-404. doi:10.1080/09537325.2017.1313405
  11. Palmer, I., Dunford, R., & Buchanan, D. A. (2017). Managing organizational change (3rd ed.). Boston, MA: McGraw- Hill Irwin.
  12. van Sandwijk, G. (2019). Communicating your organizational vision with the cultural web.

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