Volkswagen: Strategic Management and Human Resource Practices

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Introduction

Company Profile

The selected company is Volkswagen (VW) AG, which is a world-famous multinational automobile manufacturer.

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Headquarters

The headquarters of VW Group is situated in Wolfsburg, Germany. These headquarters provide strategic leadership to twelve brands, including Volkswagen Passenger Cars, Audi, SEAT, ŠKODA, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen Commercial Vehicles, Scania, and MAN (VW AG, 2020). While VW Group’s strategic leaders operate from Germany, every brand has headquarters situated in different parts of seven European countries.

Number of employees and geographical presence

At the end of 2019, the number of employees employed by VW Group was 671.2 thousand people (VW AG, 2020). In comparison with 2018, the number of employees has increased by almost 7 thousand people (VW AG, 2020). The company is present in the majority of international markets (VW AG, 2020). It has 123 car-producing plants, among which 71 are located in Europe, 34 in Asia, 4 in Africa, 5 in North America, and 9 in South America (VW AG, 2020).

Strategic ambition

The corporate strategy of VW Group is framed by the concept TOGETHER 2025, which aims at safeguarding the future using five modules (VW AG, 2020):

  • Best Governance: a focus on building a comprehensive corporate structure to improve brand management and enhance strategic decision-making.
  • Best Performance: a focus on improving efficiency, productivity, and profitability.
  • Best Brand Equity: a focus on optimizing of profile and mission of each brand to improve their market performance.
  • Software-enabled Car Company: a focus on developing unique and the most advanced software to enhance the comfort, safety, and efficiency of cars.
  • Excellent Leadership: a focus on partnership-based, open, value-based leadership.

The company is expecting to achieve these ambitions by shifting the focus to the production of electric cars. According to Bullard (2019), while all passenger car market was trailing at 3.5 million sales per month in 2019, EV sales were growing steadily from 125,000 to 162,000 a month. VW AG plans to dominate the electric vehicle market in the nearest future by making significant investments in R&D and building new facilities (VW AG, 2020). The central focus of the company is to develop the Chinese market performance by partnering with local manufacturers and establishing new plants in China (VW AG, 2020).

Vision

The company’s mission is to achieve sustainable mobility for present and future generations (VW AG, 2020).

Mission

To become the best employer, excite the customers, and become the role model for environment, safety, and integrity (VW AG, 2020).

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Key operational areas

VW AG operates in two areas: automobile manufacturing and financial services. All the logistics, such as logistics planning, material logistics, and automobile logistics, is provided by VW Group Services (VW AG, 2020). The car manufacturing division produces and sells passenger cars, commercial vehicles, and power engendering machines of 12 brands (VW AG, 2020). The financial services include leasing, dealer and customer financing, and insurance (VW AG, 2020).

Key competitors

The most famous competitors of VW Group are Ford, General Motors, Toyota, Hyundai, BMW, BYD, and Geely.

The purpose and function of HR

The HR management in VW Group is guided by the principle “Empower to transform.” The framework is based upon the idea of a long-term partnership with employees to secure the human capital and knowledge possessed by individual talents. In their HR practices, the company focuses on “corporate governance, comprehensive participation rights for employees, outstanding training opportunities, the principle of long-term service through systematic employee retention and the aspiration to appropriately balance performance and remuneration” (VW AG, 2020, p. 149).

Thus, it can be concluded the central purpose of the HR department is to ensure that the best employees are available for the company to achieve corporate goals. The functions include hiring new employees to ensure the inflow of talented leaders and qualified specialists, training the personnel, implementing retaining strategies, evaluating the current practices, and managing changes.

HR challenges

When speaking of HR practices, the company faces several crucial problems that need to be addressed. First, the company needs highly qualified employees to maintain sustainable growth. Currently, the company utilizes several methods to ensure the required inflow of qualified staff. The strategies include investing in the professional development of employees, vocational training of young men, increasing attractiveness as an employer and development programs for specific target groups, and development for university graduates (VW AG, 2020).

Second, the company needs to maintain a high level of employee participation in the corporate decision-decision making processes (VW AG, 2020). This requires effective communication patterns and adequate corporate structure. Finally, considering the recent situation with the pandemic, VW reported almost $1 billion in operating losses (Smith, 2020). Thus, the company faces the challenge of retaining employees without significant financial implications. In order to address the problem, the company needs to optimize the HR budget and find non-financial strategies to motivate the personnel.

Aim and Objectives

Aim

The present report aims at creating a comprehensive plan for managing a change in the current HRM practices to make strategic contributions to establishing a new branch office in China.

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Objectives

  • To provide an extensive overview of current literature to understand which strategic HRM practices contribute to organizational performance outcomes.
  • To assess if the current HRM practices align with corporate goals and objectives.
  • To make specific recommendations for improving the current situation and outline a change plan based on a solid theoretic framework and analysis of current practices.

Significance and Contextual Relevance

Staffing is an essential part of HR practices that requires careful planning and implementation. Currently, VW Group hires personnel using its official website. The company’s website differs for all regions, and people from different countries are automatically redirected to the local website that provides specific job offers for each region.

The company also uses specialized websites, such as Glassdoor and Indeed.com, to look for prospective employees. The company offers a wide range of positions, from operators in plants to higher management. VW offers the development of university graduates through two graduate trainee programs (VW AG, 2020). These strategies help to secure an inflow of competent and loyal employees.

In terms of training, VW employees are offered a wide variety of on-the-job training courses ranging from personal development subjects to general company knowledge distribution. The HR department also promotes mentoring programs so that employees can learn from their more experienced colleagues (VW AG, 2020). VW also provides free technology awareness courses that help the employees to follow the pace of digitization (VW AG, 2020). The company has established VW Group Academy that partners with external providers to help the employees receive training online (VW AG, 2020).

The compensation at VW is competitive in comparison with other companies in the industry. At the same time, the company provides all the benefits, including all types of insurance, retirement plan, wellness programs, gym memberships, 401k matching, and bonus pay depending on the individual performance. All the employees have a set of KPIs for assessing their achievement.

Literature Review

Recent changes in HR functions and Their Effect on Performance

In simple words, HR management can be described as fulfilling the tasks of two key stakeholders. On the one hand, HR managers need to ensure that the company has the required human capital to accomplish corporate goals and objectives. On the other hand, HR departments need to meet the needs of employees to ensure their satisfaction and ability to fulfill their duties.

Perfect HR practice is finding a balance between these two forces to act in accordance. In general, HR functions include human flow management, performance management, motivation and retention, workforce planning, health and safety, etc. (Héder, Szabó, and Dajnoki, 2018). The functions of HR specialists are summarized in Figure 1 below.

HR functions
Figure 1. HR functions (Héder, Szabó, and Dajnoki, 2018).

HR management is guided by three basic principles (Héder, Szabó, and Dajnoki, 2018):

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  1. Employees is the most valuable resource that possesses all the knowledge, and efficient management of this resource is crucial for achieving successful operations.
  2. Business success is closely correlated with the alignment of HR practices with the company’s mission and strategic goals.
  3. Workplace culture, corporate values, and behavior of managers are central to achieving desirable performance.

VW AG understands all the key functions and organizes the HR practices perfectly. In particular, the company understands the importance of human capital and actively develops its employees. The HR management is closely aligned with corporate goals, as the company hires the best talents and provides training to achieve digitization. Finally, the company promotes the work culture of safety, diversity, and trust (VW AG, 2020).

Current trends have a significant influence on HR management. In particular, digitization has a tremendous impact on HR practices in all types of companies. HR portals, web-based systems, and web-applicant testing modified the current practices of managers. In particular, digitization is in direct correlation with communication, scheduling, time effectiveness, and employee participation (Akshay and George, 2016).

Digitization has facilitated HR practices by helping managers to acquire new instruments to meet the needs of all the stakeholders (Akshay and George, 2016). However, the inter-relationships between cost and digitization remains unclear (Akshay and George, 2016). Thus, companies around the globe need to understand the influence of digitization and utilize its benefits while avoiding its pitfalls.

VW’s HR department embraced digitization to achieve the best performance of its employees. In particular, the company created an online academy in partnership with the best learning web application providers to facilitate knowledge management (VW AG, 2020). The company also uses online services, such as the official website and HR portals, to hire new employees (VW AG, 2020).

Additionally, VW has enhanced communication by adopting corporate forums, chatrooms, virtual conference rooms, and project management software to improve communication with internal and external stakeholders (VW AG, 2020). In summary, VW AG understands the importance of digitization and utilizes its benefits to achieve improved results.

Current practices have been affected by the COVID-19 pandemic, which created significant challenges for the effective management of human resources. According to Caligiuri et al. (2020), coronavirus created additional physical and psychological distance between employees, especially inside international companies. Additionally, the pandemic led to financial problems, that led to smaller HR budgets (Smith, 2020).

HR managers experience significant difficulties while trying to meet the needs of both employers and employees. In particular, there are significant barriers to efficient “employee selection, training, support, health, and safety, as well as leadership and virtual collaboration” (Caligiuri et al., 2020, p. 1). Thus, HRM practices have changed to address the issue of managing distance within organizations. A greater impact is put on managing under uncertainty and distant collaborations using online services (Caligiuri et al., 2020).

VW was one of the organizations that were ready to address the problems associated with distance management of human resources. As mentioned previously, the company identified digitization as one of the primary objectives for the development of HRM practices, which made the company prepared for increased distance (VW AG, 2020). However, the effect of the pandemic was considerable, and the company needs to continue investments in the development of HR practices despite the possible financial problems.

Strategic HRM and Its Effect on Performance

Strategic HRM (SHRM) is building a connection between HR practices and the strategic goals and objectives of the entire organization (Boxall, 2018). There are 22 known theories and conceptual frameworks describing SHRM, including resource-based view, behavioral perspective, human capital theory, AMO framework, and social exchange theory (Jiang and Messersmith, 2018). SHRM has become a topic of increased interest over the past 20 years.

In 2016, there were around 800 articles about SHRM published in scholarly journals, while this number was only 100 in 1996 (Jiang and Messersmith, 2018). Currently, conventional HRM is in transition in the majority of organizations, even in the developing countries (Hussain, 2016). Thus, being aware of strategic management is extremely important for HR managers in all types of companies around the world.

The central goals of SHRM include advancement flexibility and innovation, development of purposeful workplace culture, enhancing financial and operational performance, and promotion of innovation (Vanderstraeten, 2018). SHRM can be advantageous only if managers constantly look at how basic HR practices, such as hiring, training, and rewarding, can contribute to the company’s goals (Vanderstraeten, 2018).

In other words, everyday practices of HR managers need to be guided by the strategic ambitions of the company. This implies that the HR department needs to constantly collaborate with other departments and upper management rather than operating in a vacuum. The goals and results of the HR department need to support other departments to achieve the harmonious development of the entire organization (Boxall, 2018). Thus, SHRM practices provide the opportunity not only to help other departments achieve their goals but also to receive help from them when needed.

Implementation of SHRM has a tremendous impact on all the stakeholders. First, according to Jiang and Messersmith (2018), SHRM boosts the satisfaction of employees. Second, SHRM is associated with an improved organizational culture that supports the achievement of strategic goals and promotes corporate values (Jiang and Messersmith, 2018). Third, SHRM indirectly affects customer satisfaction, which is crucial for increasing sales (Vanderstraeten, 2018).

Fourth, SHRM leads to improve resource management practices in all the departments (Vanderstraeten, 2018). Fifth, it enables the managers to utilize a proactive approach to employee hiring, training, and rewarding (Jiang and Messersmith, 2018). Finally, SHRM is associated with boosted productivity of the HR departments, as employees do not waste their time on strategically irrelevant objectives (Boxall, 2018). In summary, SHRM is extremely beneficial for improving the performance of organizations.

However, implementing SHRM principles may be a costly endeavor as it requires a significant amount of time and both tangible and intangible resources to achieve. Vanderstraeten (2018) describes seven comprehensive steps to achieving SHRM. The first stage requires acquiring a detailed understanding of corporate objectives. The second step is to evaluate HR capability and availability of needed knowledge to transition to SHRM (Vanderstraeten, 2018).

After that, the company needs to understand if the current HR practices support the achievement of strategic goals (Vanderstraeten, 2018). The fourth step is to identify the ideal state of HR practice and acknowledge the gap between the current and the desired state. Fifth, the company needs to select the tools and strategies needed to transition from current practices to desired ones (Vanderstraeten, 2018). The final two steps are the implementation of the identified strategies and evaluation of the results (Vanderstraeten, 2018). Even though SHRM may be difficult to achieve, companies need to invest resources into the matter to optimize operations and improve the efficiency of all departments.

Synthesis of Findings

The literature review was extremely helpful in differentiating between HRM and SHRM and identifying the steps for transitioning to the latter. The summary revealed that basic HR practices include hiring, rewarding, developing, motivating, and evaluating personnel. Recent environmental changes, such as a push to the digitization and the COVID-19 pandemic, have had a significant impact on HR practices. While digitization facilitated some of the processes, it dictated a need for additional training of personnel to embrace the change.

The COVID-19 pandemic also affected HRM practices by encouraging prioritization of managing the uncertainty and distance. The literature review also revealed the advantages of SHRM and identified seven steps that organizations need to follow to embrace SHRM practices. The following sections will use the acquired information to create an action plan for adopting a change in HRM of VW AG.

Application of Understanding and Knowledge

Current Objectives and Practices of the HR Department

Objectives

The objectives of the HR department in VW AG were briefly mentioned in the introduction to the present paper. The five central objectives of the HR department are to become an attractive employer worldwide, to have highly competent and dedicated employees, to ensure optimal working conditions, to promote open workplace culture, and to yield strategic value for the company (VW AG, 2020).

The KPIs for the HR department include internal attractiveness to encourage employees to develop inside the company, external attractiveness to hire talents at crucial moments of the company’s development, diversity index to promote inclusion and equality in the multi-national company, and external employer ranking to benchmark current practices with exemplary ones (VW AG, 2020). Thus, the secondary goal of the HR department is to improve its performance in terms of KPIs.

Current practices

The primary function of the HR department concerns staff planning. VW AG focuses on retaining valuable employees while hiring new talents at crucial moments (VW AG, 2020). At the same time, the company promotes recruitment within the company to provide all the employees inside the company to develop without parting with the organization (VW AG, 2020). At the same time, the HR department plans staffing cuts if they foresee a decreased need for labor (Gaisenkersting, 2020). VW utilizes the latest innovations in hiring practices to ensure that the company the human capital required to achieve the set goals.

VW’s HR department also manages change when it is required. Considering the recent push to digitization, the company embraced a comprehensive change on all levels that was facilitated by the HR department. In order to achieve change, the department was restructured, and leadership vacancies were open to achieve improved efficiency (Volkswagen, 2019). Thus, the HR department was the initiator for deepening the know-how of every manager and fostering inter- and intra-organizational collaborations (Volkswagen, 2019). Thus, the department’s ability to manage change is beyond doubt.

The department also focuses on employee participation, empowerment, and training. The HR department of VW AG conducts systematic awareness programs, encourages positive workplace culture, and promotes the idea of task diversity to improve employee participation and empowerment (VW AG, 2020). Due to the created atmosphere of trust and openness, the employees can contact upper managers to share their ideas and concerns (VW AG, 2020). Since the voices of employees are heard, they feel empowered, which positively affects their performance. In terms of training, it has been previously mentioned that the company utilizes the best practices and latest innovation to develop its employees by establishing training courses on a wide variety of subjects (VW AG, 2020).

Evaluation of employees is also a critical task performed by the HR department on a regular basis. HR managers assess the employees based on their individual development plan (VW AG, 2020). All the employees are evaluated against a set of KPIs created for every individual worker (VW AG, 2020). The HR managers offer growth opportunities within the company based on the results of the assessment (VW AG, 2020). Regular assessments are also the basis for changing the level of compensation of the employees. In summary, current evaluation practices help to motivate the employees and recruit inside the company.

The HR department also implements comprehensive safety practices to protect the employees from workplace hazards. The company values its employees and prioritizes health over production speed (Zemry, 2020). This is crucial to embrace the changes that the COVID-19 pandemic has brought to global attention. The HR department implements strict hygiene standards along with social distance recommended by the World Health Organization to minimize the chances of coronavirus spread (Zemry, 2020). In general, the HR department ensures that the current working conditions comply with all the international standards of workplace safety.

Alignment with Strategic Goals

Strategic ambitions of VW AG are conceptualized in the TOGETHER 2025 strategy, which is was briefly introduced in Section 1.1 of the present paper. VW AG worked out five major objectives to achieve excellence in HR practices. First, the company aims at being an excellent employer worldwide (VW AG, 2020). Second, VW needs to achieve innovation by having competent and dedicated employees (VW AG, 2020). Third, the company aims at ensuring the best working conditions. Fourth, the HR department is expected to build an exemplary corporate culture, which promotes collaboration (VW AG, 2020).

Finally, the HR department operates to make strategic value-added contributions (VW AG, 2020). In addition, the five strategic goals are to achieve the best governance, best performance, best brand equity, and excellent leadership while becoming a software-enabled company (VW AG, 2020). Table 1 below provides an analysis of current HR practices and their contribution to the achievement of strategic goals.

Table 1. HR practices and strategic goals.

HR Practice Association with a strategic KPI of Goal Explanation
Staff planning Goal: best performance. The HR department of the company assesses the needs of quality and quantity of needed human resources best on the strategic plans of the company. Current HR practices help to ensure VW has enough people in the right place at the right time to complete the strategic tasks. Staff planning helps to achieve improved financial and operational performance due to a decrease in the time needed to supply the needed human resources and optimal spending on staffing.
Change management KPI: achieving innovation;
Goals: best governance and best performance
The company’s HR department is constantly looking for ways to improve and change the current HR practices to achieve the best performance. Additionally, it helps to govern strategic changes started by the upper management of the company. Consistent change management helps to achieve innovation with an optimal amount of resources.
Employee participation, empowerment, and training KPIs: being an excellent employer worldwide; achieving innovation by having competent and dedicated employees; build an exemplary corporate culture, which promotes collaboration.
Goals: best performance
VW’s HR department conducts a series of activities to encourage employee participation and empower them. For instance, the company promotes online collaborations and encourages the personnel (including the frontline employees) to share their views and ideas (Sergio and Rylova, 2018). Additionally, training helps the employees to improve their competence in a wide variety of subjects. Having qualified staff in place helps to promote innovation. Increased qualifications of staff also help to achieve improved operational performance.
Evaluation of employees Goal: best performance. Systematic evaluation of employees performed by the HR department helps to control the individual performance of workers. The efficiency of employees contributes to the performance of the entire company.
Compensation KPI: excellent employer.
Goal: best performance.
The HR department utilizes the practices of strategic compensation by paying for performance. Such compensation practices improve the motivation of all the employees, contributing to the overall performance of the company. Additionally, compensation makes VW attractive as an excellent employer worldwide.
Implementation of workplace safety practices KPIs: excellent employer; provision of best working conditions. Workplace safety helps the company to protect the human capital, which makes the company attractive as an employer. Additionally, workplace safety contributes to the provision of the best working conditions.

The analysis of Table 1 demonstrates that VW’s HR practices are strategic in nature, as they contribute to the achievement of at least one of the strategic goals or KPIs. However, it should be noticed that when the strategic goals (best performance) are relatively broad, and almost every practice is expected to contribute to the improved performance of the company. At the same time, one of the KPIs of the HR department is to contribute to the achievement of strategic goals, which implies that the company intentionally promotes the use of SHRM practices of its HR department. Therefore, HRM is designed to be aligned with strategic goals.

Influence on Performance and Development

The impact of HR practices on performance and development was partially mentioned in the previous subsection. However, some elaboration may be required. Table 2 below juxtaposes HR practices with their influence on the company’s performance.

Table 2. Influence of HRM on performance and development.

Practice Influence on Performance and Development
Staff planning Minimization of personnel-related costs; improved speed of developmental changes.
Change management Improved efficiency and effectiveness of strategic and local changes; improved innovation performance in terms of adoption of new knowledge; facilitation of turning towards electric vehicle market.
Employee participation, empowerment, and training Improved innovative performance in terms of adoption of new knowledge and knowledge sharing; increased motivation facilitated by empowerment and employee participation; decreased turnover; improved workplace satisfaction increased attractiveness as an employer.
Evaluation of employees Improved motivation of employees; increased control over outcomes leading to efficient use of human resources.
Compensation Improved motivation; increased attractiveness as an employer; enhanced workplace satisfaction.
Implementation of workplace safety practices Increased attractiveness as an employer; improved workplace satisfaction.

Apart from the influence mentioned in the Table 2, it also crucial to mention the majority of HR practices mentioned above contribute to workplace productivity and quality of products (VW AG, 2020). These practices, in turn, lead to improved satisfaction of customers and increased sales.

Change Implementation Plan

Change management is impossible without elaborating a detailed change management plan based on a solid theoretical framework. The expected change is the establishment of a new branch office in China, which is associated with significant participation of the HR department to resolve the possible HR-related issues, such as staffing, assessment, implementation of workplace safety standards, and training. In order to assess the crucial goals of the HR department when establishing a new branch office, it is crucial to understand the factors that drive change inside the organization.

Factors driving change in VW

There is a wide variety of both external and internal factors that drive change within organizations. According to Stowell (2020), external factors include technological advancements, changes in regulations, customer preferences, competitor moves, and supply chain stability. The internal factors include insufficient performance, new executives, and implementation of new policies (Stowell, 2020). All these factors should be considered for VW AG.

The major forces that drive change in the company are external in nature, which can be expected due to the international nature of the company. First, after a scandal over the software flaws that led to increased emissions in 2015 led to decreased trust from employees (Sergio and Rylova, 2018). Second, the new EU regulations require car manufacturers to achieve 95 grams of carbon dioxide per kilometer driven to avoid sanctions (Gaisenkersting, 2020).

Third, the company meets increased competition from Chinese care manufacturers that obstruct development in the electric vehicle market (Bullard, 2019). Fourth, VW needs to address the consequences of COVID-19 pandemic (Caligiuri et al., 2020). At the same time, the company is driven by at least one internal factor, which is the increasing demands of employees (VW AG, 2020). Thus, the change implementation plan needs to ensure that all these forces are considered.

Theoretical frameworks

There is a myriad of organizational change theories that can be used for different types of companies. One of the most commonly used ones if Lewin’s three-step model. The three stages of change described by Kevin Lewin are unfreezing, movement, and refreezing (Hussain et al., 2018). During the first stage, the change leaders arouse dissatisfaction with current practices and prepare the transition (Hussain et al., 2018).

The second stage is implementing the change to transition to new practices (Hussain et al., 2018). The third stage is making the changed practices a new standard by making policies and controlling the adherence (Hussain et al., 2018). The benefits of this model are questionable for VW’s endeavor to establish a new branch office, as it lacks detail.

A model that is more suitable for managing change in VW is Kotter’s 8-step model. The first step is to create urgency, which means to spread awareness about the need for change (Burden, 2016). Second, VW needs to create a change management team (Burden, 2016). Third, the team needs to formulate the vision of the initiative’s final destination (Burden, 2016). Fourth, the team needs to share the vision with all the other stakeholders. Fifth, VW needs to identify and remove all the obstacles to achieving change (Burden, 2016).

Sixth, the change management team needs to identify the milestones (Burden, 2016). The seventh step is to build upon the change, while the final step is to integrate the change in the workplace culture. This model is more appropriate for guiding change implementation in VW as it is more detailed in comparison with Lewin’s model.

Forecasting the Demand for Human Capital

The core responsibility of the HR department during the change is to supply the company with enough human resources to open a new branch office. In order to be proactive in the endeavor, the HR department needs to forecast the demand for new employees, determine the current supply of the human capital, and identify the gap closing strategies. When determining the projected supply, the company needs to understand the possible inflow and outflow of employees (Mwamtobe, 2018). After that, specific strategies need to be identified to ensure that there are enough employees of all skill levels and specialization. Figure 2 below demonstrates the process of analysis of gap-closing strategies:

Gap-closing strategies.
Figure 2. Gap-closing strategies.

The central reason for planning the change by applying gap-closing strategies is its efficiency and attention to detail. The utilization of the method helps to identify one or several strategies to provide sufficient staffing to accomplish the goals of change. Additionally, identification of gap-closing strategies helps to align them with corporate values and goals to achieve integrity.

Table 3 below juxtaposes the current supply of employees by category with the required one. Since currently there are no employees in the new branch office at the present moment, the baseline for the Current Human Capital supply will be zero.

Table 3. Gap closing strategy.

Labor Type Current Human Capital Required Human Capital Gap closing strategy Explanation
Top manager 0 3 Transfer, Recruitment While it is crucial to transfer some of the top managers from other branches, at least one top manager should specialize in local business to ensure that the business model adheres to both corporate standards and local peculiarities.
Middle manager 0 15 Recruitment, professional development Middle managers and foremen should be hired from inside and outside the company. It will also be beneficial to develop current employees from other branches to acquire higher qualifications.
Foreman 0 50 Recruitment, professional development
General Labor 0 400 Recruitment General labor should be recruited mostly from the outside to provide new job positions in the area. This will improve the ratings of VW as an employer.

Stakeholder Analysis

The fourth step of Kotter’s 8-step theory is the dissemination of vision to all the stakeholders. However, stakeholders need to be carefully managed to avoid resistance to change and control the risks (Xia et al., 2018). The central internal stakeholders of the proposed change are the change manager, implementation team, top management of VW AG in Germany, top management of VW China, top managers of the new branch, and the new employees.

Resistance can occur at all levels; however, the most probable resistance is expected to be top managers at all three levels. The problem is that these stakeholders may have conflicting views on the proposed change, which will be associated with a significant resistance (Xia et al., 2018). Thus, a contingency plan should be established to address the possible resistance. Additionally, the contingency plan should include risk management strategies. The most evident risks are a lack of required supply of potential employees in the new geographical location, alternative government regulations concerning working conditions, and the second wave of the COVID-19 pandemic.

There are two central strategies VW should consider while addressing the resistance o stakeholders. First, systematic collaborations with all the stakeholders to ensure that a consensus is achieved (Xia et al., 2018). Second, the implementation team can promote the involvement of all the at-risk stakeholders into implementation and decision-making processes (Xia et al., 2018). These two points should be included in the contingency plan.

Moreover, it should include careful assessment of the new geographic locations for external availability of workforce, precaution measures to the COVID-19 spread (such as personal protective equipment), and close collaborations with the local government to ensure adherence to all standards. The HR personnel and the implementation team need to conduct systematic risk assessment resistance from different stakeholders to ensure efficiency and effectiveness of change. Stakeholder management plant is presented in Table 4 below.

Table 4. Stakeholder Management Plan.

Stakeholder Interest and Associated Risks Strategy to Address the Risk
Change manager Interested in satisfying all the stakeholders. Can fail to express his/her viewpoint to please other stakeholders The manager should be empowered to do using his/her best judgement, as (s)he is the most informed stakeholder.
Implementation team Interested in completing the change project and getting paid as soon as possible. Can ignore quality problems. The KPIs of the implementation team need to be aimed at both quality and time.
Top management of VW AG in Germany Interested in implementing the standards that work worldwide. May fail to acknowledge cultural peculiarities and legal frameworks. The change manager needs make sure that these three stakeholders collaborate on regular bases using functional conversation patterns. All three stakeholders need to take part in the decision-making process. The cultural peculiarities as well as local legal frameworks that might affect the new branch need to be carefully outlined and consulted during the decision-making process.
Top management of VW China Interested in applying the standards and practices that worked in the Chinese branch. May fail to acknowledge local legal frameworks and cultural differences.
Top management of the new branch Interested in achieving the results using the practices they used previously. These practices may not work in the new place. At the same time, they may not adhere to the strategic plan of VW AG.
New employees Interested in getting paid with minimal effort. The quality and the effectiveness may suffer as a result. Strategic HR practices need to be established in the new branch.

Communication and Leadership

Leadership is extremely important for implementing the change. However, the application of leadership should be based on solid theoretical ground. The leadership models that can be applied to managing change in VW are behavioral theory, trait theory, and shared leadership theory. The trait theory claims that leaders are born but not made, which implies that leaders are made based on their qualities and characteristics (Gumus et al., 2018).

The behavioral theory makes the opposite claim and insists that leaders are made in the process of self-development (Gumus et al., 2018). The theory describes ten types of leaders, including task-oriented, people-oriented, participative, indifferent, country club, status-quo, dictatorial, sound, opportunistic, and paternalistic leaders (Gumus et al., 2018). Shared leadership is distributive leadership that implies that several leaders share the responsibility of governing the team (Gumus et al., 2018).

All of the theories can be applied to the current change; however, the behavioral theory seems the most appropriate for the current situation. The problem is that the trait theory presupposes that the characteristics of leaders are to be assessed, which is difficult to accomplish. However, there are comprehensive tests that help to determine the leadership styles required for implementing the change. The shared leadership model may be inappropriate for China (Wang, 2018).

The change can benefit from democratic leaders the most due to a high possibility of resistance to change from top management at different levels. Democratic leaders tend to consult the entire implementation team before making the final decision (Mulholland, 2019). Such a focus boosts collaborations and ensures the satisfaction of all stakeholders (Mulholland, 2019).

While this approach may be associated with decreased efficiency, it can address the problem of stakeholder resistance by achieving consensus. Additionally, this leadership style will improve communication between stakeholders, as it ensures that every voice is heard. Thus, VW should look to hire a change manager with a democratic leadership style.

Recommendations and Conclusions

The analysis of the company and the proposed change generated the following recommendations:

  • The HR department in VW AG needs to concentrate the outside risk factors, such as regulations and the coronavirus pandemic, to decrease uncertainty;
  • Due to the rapid development of the electric vehicle market, the company should focus on training the personnel to promote innovation and digitization;
  • VW is recommended to use Kotter’s 8-step model and set up a change management team with a democratic leader in control of the change process.

In conclusion, VW is an international car manufacturer and provider of financial services famous around the globe. It has a well-defined set of strategic ambitions defined in the TOGETHER 2025 framework. All of VW’s HRM practices are strategic in nature. Compensation, staff planning, change management, employee training, evaluation of the personnel, and implementation of workplace safety measures contribute to the achievement of one of the strategic goals.

These practices are expected to facilitate the change process of the establishment of a new branch office in China. However, while establishing the office, the implementation team should pay close attention to forecasting the human capital demand, selecting an adequate change model, and selecting appropriate leaders to ensure smooth implementation. The analysis provided in the present paper should be viewed as the baseline for further elaborations with stakeholders.

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