H&M Strategic Human Resource Management
H&M Strategic Human Resource Management
SEMESTER: 1
YEAR: 2010-11
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TABLE OF CONTENT
S.NO. DESCRIPTION PAGE NO.
1 Executive summary 3
2 Human resource management 4
3 Aim of the study 4
4 Background of the company 4
5 Mission statement of H&M 5
6 Main competitors 5
7 Strategic human resource management 5
8 Strategic human resource management challenges 6
9 Strategy of H&M 6
10 Human resource cycle 7
11 Human resource in H&M 8
12 Recruitment and selection 9
13 Recruitment and selection process of H&M 11
14 Training and development function 13
15 Training & development in H&M 16
16 Reward management 17
17 Performance management 18
18 Role of HRM in success of H&M 19
19 Recommendation 20
20 Conclusion 21
21 References 22
22 Appendix 24
EXECUTIVE SUMMARY
The purpose of the study is to identify the future potential of the markets of H&M. The
company deals in fashion for women, men, children and teenagers. H&M’s mission
statement is ‘Fashion and Quality at best price’. This study consists of strategic human
resource challenges, leadership, reward management and team management. All the
data is collected from various internet sources, journals, magazines and books on the
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competitors, company, and market factors. In this the process of identification,
evaluation and analysis is followed to know the various human resource challenges and
various theories that are used by H&M. The study also includes the various HR policy
and functions of H&M. There are various recruitment and selection policies that are also
taken into consideration. The management intends to explore the complexities involve
within, outside and internationally –of these envisaged challenges, and requires advice
on the possible strategy for the application of a change management initiative for H&M.
It is believed that a comprehensive understanding of the idea behind each criticism and
strategies will help inform better judgment on the subject.
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HUMAN RESOURCE MANAGEMENT
Human resource management helps in hiring the right person at right place, want their
people to do their best, proper utilization of time and helps to give proper training to
their employees. HRM helps in employing right person at right place with right skills.
HRM encourage the employees to achieve the organizational goals and high
performance of the company.
The main aim of the study is to critically analyze and valuate the strategic human
resource management of H&M. The study will include the HR function and policy of the
company. We will also study the recruitment and selection procedure of the company.
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H&M was established in 1947 by Erling Persson in Sweden. The first H&M offer high
quality fashion and quality at its best price. The company deals in fashion for men,
women, teenagers and children. H&M also deals in cosmetics, accessories and
footwear. They have around 2000 stores across the world. Online shopping is currently
available in Sweden, Finland, Norway, Denmark, Germany, Austria and UK. All the
stores are refreshed with new items on daily basis. The collection is created by around
100-in house designers together with pattern and buyer makers. The company has
around 28 production offices around the world. The company does not have its own
production units; instead have around 700 suppliers mainly in Asia and Europe from
where it buys its goods. They have around 16 production units around the world. H&M
has about 76,000 people working in the company. H&M’s employees are very dedicated
and focused for their work which makes a major contribution to company’s success. The
company provides proper training and special courses to their employees which is paid
out of the company’s budget. Moreover the company believes in individual ability and
motivates them to grow further. The turnover for the year 2009 was SEK 118,697
million. Germany is H&M’s number one market producing more than 25% of the sales.
‘Fashion and quality at the best price’ is the company’s mission statement.
MAIN COMPETITOR’S
ZARA
GAP
UNITTED COLORS BENETTON
NEW LOOK
NEXT
RIVER ISLAND
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Strategic human resource management means formulating and executing human
resource policies and practices that produce the employee competencies and behaviors
the company needs to achieve its strategic aims. For example, one of FedEx’s strategic
aims is to achieve superior levels of customer service and high profitability through a
highly committed workforce, preferably in a nonunion environment. SHRM link’s HRM
to achieve the strategic goals and objectives of the company.
Strategy of H&M
The main strategy of H&M is to provide fashion and quality at the best price. The annual
report of the company for the year 2008 mainly emphasize that ‘quality’ relates to two
things; products of the company exceeding expectation of the company and the second
is that the customers are being satisfied with the company. Commercial mindset,
simplicity, constant improvement, cost consciousness and entrepreneurship are the
main strong values of the company. (AR1 2009)
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In the annual report for the year 2008, the CEO of H&M Rolf Ericsson said that the long
term goals of the company is to “Make fashion available to everyone, give the customer
a fashion experience that strengthens H&M brand”. They also state that the goal of the
company is also to increase the number of stores to 10 to 15% every year while
focusing on continued profits and quality of the products. In 2010 the company plan to
add around 240 more new stores.
To achieve the targets H&M has to focus on the following main aspects of its business
concept:
Price: the price can be controlled by limiting the middlemen, buying the right
product from right production markets, effective distribution procedures, reducing
economies of scale by buying in large volume.
Design: in-house designing of the products and then completely outsourcing it.
Quality: quality conscious with extensive testing with least damage to
environment.
Merger and acquisitions: continue acquisitions and mergers will be helpful in
growth of the company.
The human resource manager has to perform some functions in any organization. The
human resource managers carry out various distinct functions like line function,
coordinative function and staff functions. From the below diagram we can see that
performance is the main function of all human resource components. The best suited
people are selected to perform the particular task. Then motivating the employees to
work hard and then rewarding them for their performance. Reward, appraisal and
development in human resource system are based on the concept of ‘corporate culture’
so as to sustain the values of the company and to support the system. (Bratton, j. and
Gold, J.2007). The below table explains the concept of human resource cycle.
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Reward
Performance Appraisal
Selection
Development
The corporate objective of H&M is to expand worldwide and hence with the continuous
increase in the employee strength. The staff H&M is spread approximately across 33
countries which come from different cultural background. Their strategy is to recruit local
people whenever they open they open the new store. The main policies of H&M can be
categorized as:
Overall policies and values: the website of the H&M indicates that the company’s
main objective is to be a good employer. At H&M, the HR activities are guided in
such a way that every individual have equal fundamental rights. This means that
every one will have fair wages and working hours. They all will have full freedom
of association to the opportunity for overall growth and development within the
company.
Employee relation and voice: H&M’s employees have equal right and
opportunities to discuss any work related issues directly with the management.
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Every employee have the right to choose and to decide who should represent
them in the workforce. H&M have good relations with the trade union and they
welcome such relation where ever they operate. The company thinks that such
relation are essential for the betterment of the company.
Promotion: Mr. Pär Darj, head of HR at H&M said that, “Internal recruitment and
job rotation enable the company to grow quickly.” (AR1, 2009). This states the
H&M policy related to promotion.
Employee development: H&M gives its employees full and equal opportunity to
grow and develop within the organization which in turn will help the company to
grow more quickly.
Rewards: H&M not only reward the employees through promotion and job titles
but also focus on rewarding people by giving them more opportunities and
responsibilities.
Recruitment is all about choosing ‘a right person for right job’. Recruitment is defined by
various authors:
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PLANNED: An organization always need new employees this may because of new
recruitment policy of the company or due to some other changes.
UNEXPECTED: There may be any unexpected happening in the company like death of
an employee or some accident or may be due to illness etc. These all leads to
unexpected recruitment.
These are the major recruitment factors which are taken into consideration before doing
recruitment in an organization.
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Source of recruitment
Internals Externals
These are the main sources of recruitment from where an organization can hire its
employees. The main priority of an organization is to recruit internally and then take into
consideration the external sources.
H&M group has around 76,000 employees. The ability of an employee and their
entrepreneurial spirit make them the best assets of H&M. The corporate culture of H&M
has been one of the major factor in enabling them one of the world’s largest fashion
company and at the same time enjoying the high profitability.
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In H&M personal qualities are given more preference than formal qualification.
According to the head of HR department of H&M all the university credits and great
grades in the world does not give any guarantee of getting a job or a fast-track career.
The company look for people with right personality, more than anything else. H&M belief
that skills can be gathered as you go, but you cannot taught personality and right
attitude to a person. Since the tempo of the company is always high and is a fast
growing company, therefore employees who are self driven and who have the capability
of direct communication are the main requirement of the company. Hence people who
likes decision making and responsibility are recruited by the company. Therefore
information provided by the career sites, and from the interviewed candidates shows
their love for fashion with their focus on sales. These are the basic requirement for H&M
to recruit the employees and drive its basis for selection process. This feedback from
candidates indicates that the interview is mostly ‘structured situational based’
(Armstrong (2006), p.447), which include latest fashion trends and customer service.
The selection is followed by panel of interviews and sample test. Candidates are filtered
at each stage of selection process.
INTERNAL RECRUITMENT: This means when the company hire from their own staff.
This is mainly the first choice of recruitment by the company.
EXTERNAL RECRUITMENT: outside people are encouraged to apply for the job in the
stores, from the career website. The company doesn’t offer any work experience
placement or summer jobs. H&M mainly recruits local people for their new store.
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employees
Training is the process of teaching new employees the basic skills they need to perform
at their job. Robin writes that:
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Optimum utilization of resources
Increase in productivity
Increases efficiency of the employees
PROCESS OF TRAINING
1. Need analysis: the first step is to identify the specific job performance skills
required by the employees.
2. Instructional design: in the second step the organization compile and produce
the training program content, which include workbooks, activities and exercises.
3. Validation step: a small presentation is made by the manager to address the
trainees.
4. Implementation: in this step the training program is implemented on the target
employees.
5. Evaluation: the success or failure of the program is evaluated.
TRAINING METHODS
Training must be provided by all the personnel, whether or not academic education at a
university, college or technician was a prerequisite of employment. The following are the
various methods of training:
On-the-job training: it means having a person to learn a job by actually doing it.
Every employee whether he is a mail room clerk or a CEO of he company gets
on the training. Managerial on the job training include job rotation, coaching
approach and action learning.
Types of on-the-job training
Apprenticeship training
Lectures
Programmed learning
Audiovisual- based training
Computer based training
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Internet-based training
Off-the-job training: there are many off the job training and developing
managers.
Within an organization training and development have many applications. This include:
DEVELOPMENT:
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TRADITIONAL AND MODERN APPROACH OF TRAINING &
DEVELOPMENT :
Traditional approach: according to this approach there was no training facilities given
to the employees as it was thought that managers are born not made.
Modern approach: according to this approach the companies have realize the
importance training and development. They have turn out to give fruitful results.
Designer
Evaluator
Each employee in H&M has to undergo a training process. The training period depends
on staff to staff. In 2009, for a new staff the average number of days are 10, for existing
sale staff it is 1 and for existing management positions the training period is 5. All the
training in H&M is mainly in-house (classroom, stores and one to one) which is written
and produced by the H&M staff. For some areas like ‘buying’ external training is
provided. E-learning concept is also initiated as a new subject.
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However, H&M mainly focuses on “just-in time”, on-the-job and hands on learning. For
instance, when the company open its first store in Japan, the employees who were
locally recruited were sent to Norway and Germany. This is done basically to gain
experience and to learn the existing operations. H&M claims that they provide
structured opportunities for hands on, work place and on-the-job based training. (career
site).
REWARD MANAGEMENT
Quality of work
Engaged
Performance
Enabling environment
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Everyone want to be recognized for his or her work and their contribution make in the
maintenance, establishment and development of the company. This involve not only the
basic pay, but include many incentives like fringe benefits. This may differ from
employee to employee depending on their post. Every organization have different
criteria of measuring the performance of the employees. Some involve length of service
while other involve performance appraisals or it may be type of job or company
performance. The modern approach is gradually replacing the traditional approach.
TYPES OF REWARDS
There are two types of rewards: intrinsic and extrinsic. Extrinsic rewards are mainly for
satisfying the basic needs, survival and security. They are mainly given to lower level
employees. Intrinsic rewards are mainly for the higher level employees like directors
and the managers.
The career website of the H&M indicates that the company offers many benefits like
incentive bonuses, staff discounts, company sick pay, pension scheme and private
health care schemes. The HR head of the company indicates that they do not
considered pay structure and titles as motivational tools. Though more and more
opportunities for the fulfillment of employee’s aspirations are provided more. Apart from
these employees satisfaction is the main reward as derived from the career website and
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the annual report of the company. Thus H&M gives more emphasis on relational work
along with transactional reward. H&M reward management strategy is link with HR
strategy of ‘job rotation’, ‘open doors’ etc in consistent with other HR areas which
includes recruitment/selection, organizational culture etc. this becomes essential for the
fulfillment of H&M strategy of fast growth.
H&M has adopted an integrated and strategic approach for achieving there
organizational goal through the improved performance of the employees. The growth of
the employees and the organization are inter related. The practice of the shop manager
i.e. to review the daily business with their subordinates is the part of performance
management activity. This indicates that H&M has been successful in bringing the
managers and subordinates as a team. Delegation of authority to manage the shop’s
activity is the key factor for the success of an organization.
This section basically includes how HRM practices have made the contribution in the
success of H&M as an organization. H&M is a successful multinational company. The
main success of H&M basically lies in the business model of the company. All the
designing procedure is being done internally and centrally. The whole manufacturing is
being outsourcing with no compromise on the quality of the product. The company has
their local retailing with hired places, and that to with local staff and local shop mangers
with full power to take the decisions. The reason behind the success and growth of the
company lies in H&M’s formatted strategy in line with corporate strategy. While entering
into the new market the company does not lose their core values which can be seen
evaluated from their annual report. The company is successful in managing all the core
values in respect of country and cultural differences.
The elements of HR strategy, (Armstrong (2006), pp. 123-146), like in house training,
improving performance through local recruitment, job rotation, increasing commitment
and total rewards have been in HR procedures and strategies and are practiced by the
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company. Thus the HR strategies of the company are one of the reasons for the
success of the business.
H&M is expanding its business in almost all the countries. By their HR procedures and
policies, all the staff for their new store is recruited locally. Moreover the company also
practices job rotation and movement of their employees from one location to another by
internal recruitment like promotions. This help in bringing the people of different culture
to work together as a team for the success of the organization. The HR strategy as
stated in the annual report is as:
To fulfill the people’s expectations of H&M, company has develop the global
guide lines on equal rights, diversity and against discrimination.
H&M has good relations with trade unions and they maintain such relations
where ever the company operates.
The success of the company indicates that the HR practices have been successful in
managing the diversity in groups and teams.
The group sale excluding VAT of H&M for the financial year 2009 is SEK is 101,393 m,
which is an increase of 15% if we compare to the same month of the last year. The
profits after financial items of the financial year was SEK 22,103 m. the group profit of
the company after tax was SEK 16,384 m. the increase in sales during the year was
weak, which may be due to several factors. This may be because of recession and also
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the fact that the market was discount-driven. The average number of employees in
2009 was 53476.
RECOMMENDATIONS
According to the study, H&M should maintain its strategic growth and try to seek new
opportunities in this apparel market. The company should try to become the largest
market for trendy clothes. H&M should try to expand its online selling. They should try
and maintain their positive outlook for the future market. H&M should try increasing its
sales in the existing stores. They should try and maintain the quality of the products as
the consumers gives more attention to quality than price or they can price the item
based on the quality offered. H&M should try and improve more on customer
satisfaction. Moreover to increase the sales at the existing stores H&M can improve the
product quality as the consumers are more sensitive about the quality than on pricing.
H&M can also price the item based on the quality. They can even use bamboo fabric
and becomes the number one to use that and can have the first mover advantage. H&M
can introduce the products with innovative features i.e. combining the high skilled and
experienced designer that to with modern technology e.g. simulation. The company can
even sell other brand cosmetics like L’Oreal, Maybelline, etc. H&M can do more
advertisement specially when introducing the new product. They can improve customer
satisfaction using surveys. The company should try and provide full collection in all the
stores. They should start online selling in every country. The company should train the
employees much better and should always motivate them. H&M should keep on doing
regular surveys which will help the company in gaining more ideas and improving on
their drawbacks.
CONCLUSION
It can be concluded that the company is growing rapidly and is opening its branches in
many parts of the world. H&M has fully balanced the needs of autonomy, coordination
and control and even maintained the appropriate balance between them. The best part
of H&M is that the employees can communicate freely and easily. Proper training and
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development is provided to the employees who mark them as the best assets of the
company. The company is open to customer’s ideas and initiatives. Moreover every
employee contributes their experience as there are various challenges that are faced by
them. And most important the H&M never compromises on its quality and always tries
to give best at the best price. They also have a major impact on HR aspects like
recruitment needs, facilitating rewards, pension schemes and proper training and
development to the staff. Moreover in 2011, H&M is ready to open its three stores in
Croatia, one in Split and two in Zagreb. H&M is also ready to enter in Singapore and is
opening its first store in Autumn 2011 which is located on Orchard road. Therefore,
H&M has the full ability to compete in the apparel industry.
REFERENCES:
Books:
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Gooch, L. and Cornrlius, N.(2001). Recruitment, Selection and introduction in a
diverse and competitive environment. In Cornelius, N. (ed.). Human resource
management: A managerial perspective(2nd Edition). Cornwall: Thomas Learning.
Reports:
Larenaudie, S.R. (2004), Inside The H&M Fashion Machine, Time Magazine
Available at
http://www.time.com/time/2004/style/020904/article/inside_the_h_m_fashion_01a
.html
[accessed on 15th December 2010]
DWYER, J. (2010), A Clothing Clearance Where More Than Just the Prices
Have Been Slashed, The New York Times
Available at
http://www.nytimes.com/2010/01/06/nyregion/06about.html
[accessed on 15th December 2010]
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Press service of H&M
Available at
(http://www.hm.com/gb/press__press.nhtml)
Available at
(https://hm.myvurv.taleo.net/main/careerportal/)
Available at
http://www.vogue.co.uk/news/daily/090617-jimmy-choo-collaborates-with-hm.asp
Websites:
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Available at
www.hm.com
[Accessed on 13th December 2010.]
APPENDIX
HR DATA
EMPLOYEES
EMPLOYEES PER JOB CATEGORY (% OF TOTAL WORKFORCE)*
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Store manager: 0.92
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RATIO OF SALARY BETWEEN WOMEN AND MEN*
Store manager: 0.92
Department manager (in-store): 0.95
Visual merchandiser: 0.94
Sales advisor: 0.97
Warehouse employees: 0.95
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