Jan Samson, CEO at CalleetaCO, sat staring at the now-empty boardroom. Her board of directors had reacted negatively to Jan’s growth proposals for expanding CalleetaCO globally, leaving Jan with a big problem. Shareholders, who had bought its stock as the radio frequency identification (RFID) manufacturer led the boom in new uses for its products, were restless as financial returns slowed. In addition, board members expressed concern that CalleetaCO plants in Mexico and Vietnam were becoming the targets of activists who advocated that organizations ensure that the humane working conditions common in the United States be established in American-owned offshore facilities. Finally, board members demanded that Jan move immediately to rein in the employee costs of the U.S. operation. Those costs were growing at a rate of 12% annually, compared with an industry average of 4%. HR Vice President John Nosmas defended his practice of hiring the best, paying them well, and providing them with expensive benefit programs to keep them developing the innovative products the market demanded.
However, board members were adamant and demanded a plan at the next meeting, only six weeks away.
CalleetaCO, with its current 1,900 employees spread across three countries (i.e., the United States—1,000, Mexico—200, Vietnam—700), had grown rapidly over its eight-year existence. Although it started as a small entrepreneurial company, CalleetaCO was now challenging the top providers in its industry as it pursued its goal—to become the global leader in RFID products. RFID use exploded after the introduction of memory for passive radio transponders, which led to the production of RFID tags, microchip field radios embedded in products and used for electronic inventory. These tags were replacing traditional bar codes and manual scanning.
Electronic product coding associated with RFID has been embraced by retailers and consumers alike. Retailers such as Gillette, Hewlett-Packard, and Walmart benefit through more rapid restocking, less likelihood of out-ofstock items, and the electronic identification of product expiration dates. In addition, consumers can more easily return purchases. Applications seem unending. Members of Congress have introduced legislation to track sales of tobacco products using RFID technology, for example. New U.S. passports contain RFID tags. “Swipeless” checkouts, RFID medical alert bracelets, and security identification wristbands are on the horizon. In addition, California is likely to use RFID to comply with the 2005 Real ID Act mandated by Congress (Billingsley, 2007). However, some groups are concerned that RFID proliferation could lead to the surreptitious tracking of an individual’s purchases and other privacy violations, especially since individuals may be unaware that their purchases include RFID devices. In addition, hackers may be able to steal identity information by remotely scanning an individual’s passport, credit card, or driver’s license.
Jan’s company had grown rapidly by perfecting several of these products. To keep the innovations coming, Jan and John Nosmas devised a human capital talent acquisition and retention plan to attract the most highly skilled individuals in the industry. The company had 25 HR recruiters focused solely on identifying potential employees, 17 selection specialists to test and interview them, and above-market compensation and benefits at its U.S.
location to retain them: health, dental, and life insurance at no cost to the employee; six weeks of paid vacation annually; elder care; child care; onsite pet boarding; liberal performance bonuses; 401(k) matching at 10%; stock options; and onsite spa and exercise facilities. The programs had been incredibly successful in finding the right people to fuel the company’s innovative products.
With the company’s success had come an even larger HR department. For example, employees regularly stopped by the HR office to chat with their designated HR support representatives (there was one HR support representative for every 10 employees). The employees were thrilled with the personal service and responsiveness to inquiries on everything from health questions to veterinary referrals. Managers had access to their own HR support specialists, who handled everything from performance appraisals and salary increases to filling vacancy requests and overseeing employee discipline. When the company had formed an SSC for information technology and financial services, the HR department had balked at participating because employees were so satisfied with service levels, even though departmental costs were 20% higher than those of counterparts at competitor firms. The firm’s HRIS remained under the control of HR information technology specialists in the department, and there seemed few reasons to pursue portals. However, employees who traveled to Mexico and Vietnam had begun to complain about their inability to access HR support specialists for needed information because of time differences. U.S.
expatriate managers from CalleetaCO controlled employees from Mexico and Vietnam at the offshore locations. HRO firms had recently approached John about the possibility of purchasing or managing those locations, but John had not yet explored such a possibility.
Jan picked up the telephone to call John. She explained the problem and asked him to prepare a list of ideas that could help them both demonstrate how successful CalleetaCO’s talent programs had been and meet the board’s requirements for cost controls. Jan knew that she would need to get John to work miracles to help meet the board’s demands. She didn’t want to stop talent searches or above-average total compensation, but board members were unyielding. Unless Jan could develop a successful plan to slow employee expense growth, control the activist stakeholder groups, and ultimately improve earnings, she could easily become the ex-CEO.
Case Study Questions
1. What are the key business issues facing Jan?
2. In what ways are CalleetaCO’s HR operations contributing to the company’s success? How do these contributions support the company’s strategic goals? What changes can John make in his HR operations to meet the board’s demands?
3. Describe whether each of John’s proposed changes will hinder or help CalleetaCO achieve sustainable competitive advantage? Which ones would you choose if you were in John’s position? Defend your choices.
4. How would a balanced scorecard help Jan explain the value of her HR talent approach? Provide sample measures for each of the four categories that would support Jan in her presentation to the board.