Talent Management Assignment: Business Case Analysis Of Volkswagen Group

Question

Task: CASE STUDY VW

Volkswagen Group (VW AG), a German multinational automotive manufacturing corporation, is one of the most well-known firms in the automobile industry, and the largest manufacturing group worldwide. The Group´s brands regarding passenger cars are Audi, Bentley, Bugatti, Seat, Skoda, Lamborghini, Porsche, and considering the commercial vehicles are Scania and Man. The company employs around 600.000 employees around the world, operates in 20 European countries and a further 10 countries in the States, Africa, and Asia, and sells vehicles in 153 nations globally.
Their business strategy is to become the market leader within the field by 2025. They plan to promote autonomous driving and launch fully electric cars by using mobility apps, lowering R&D and factory costs, while saving from battery costs. Among their strategic objectives are a solid level of digitalization across all functions, regions, and brands, and the accomplishment of more partnerships. When it comes to HRM strategy, performance is prioritized with a focus on a diverse workforce, opportunities for personal growth, and fair compensation benefits. ´´Empower to transform´´ is the strategic approach that has been followed since 2017 and on. According to ´´ TOGETHER-STRATEGY 2025´´, the female workforce is expected to reach 25% of all employees operating in production plants by 2025. However, the Group´s human capital has been through structural changes since 2015 and after the emission scandal. The Environmental Protection Agency (EPA) revealed the VW´s carbon emissions cheat when after conducting tests on vehicles discovered that 482.000 diesel cars were emitted up to 40 times the permissible Nitrogen oxide fumes in the States.

The corporate sustainability scandal was not only translated to a loss of trust and reputation, but to penalties in the International Council on Clean Transportation (ICCT), legal costs, recalls, and compensational adjustments. Senior executives together with the CEO were suspended from their positions. The VW proportion rate was dropped by 24%, $ 25 billion was paid to fines, and 30% of customers were not considered loyal anymore. Also, around 200 employees were dismissed for breaking internal ethical policies, and the Environmental Protection Agency in the USA claimed that the Group put in danger the public due to lung diseases and premature deaths. Currently, VW has been again through a new challenge due to the pandemic, and people management changes have been a reality. In 2020, the Group´s global sales showed a decrease in all brands at an average score of 15% and announced 3.000 layoffs. A further workforce reduction is to be due by 2023.

Questions To Be Answered In The Talent Management Assignment:
1. VW Group clearly states its sustainability policies, relates its values, and regularly publishes a CSR report. Apart from the relatively current emission scandal responsible for damaging the environment and harming human health, VW was hit with disruption during the corona pandemic in various business areas beyond sales such as line management and HR staffing. Reflect on employee morale within the firm was hit with multi-million-dollar lawsuits. Evaluate morale considering the planned ongoing layoffs. Determine its impact.

2. Forecast recruiting, and retention issues VWs HR department might face as they are confronted with scandals and layoffs. Critically formulate an approach for HR to attract and retain new, millennial talent that is particularly sensitive to corporate activity that impacts the environment and future generations.
3. Compare and contrast Porter’s three types of business unit strategies with Miles and Snow’s defender or prospector strategy: Analyse all aspects of the two approaches and highlight the pros and cons of each about the kind of company VW Group is and the products the company produces. Demonstrate which of the two strategies is best suited to the company structure of VW Group and explain why you have chosen one strategy over the other using examples that support your choice.
4. Provide an alternative conclusion: Assess and recommend another kind of strategy that may best fit VW Group in the future to deal with possible future scandals and be more flexible in dealing with market forces. Justify why you think so.

Answer

Answer 1:
The business case of Volkswagen Group focused in this talent management assignment has stated its policies on sustainability, related it to its organisational values and published its CSR report. The VW Group has got involved in an emission scandal, which has damaged the environment as well as harmed the human health. This has disrupted the image and reputation of the company. The company terminated the employees involved in breaking the international ethical policies of the organization. The company has also faced huge disruption due to the sudden outbreak of the coronavirus pandemic. They have not only faced problem in their sales but also in their HR staffing and line management. To cope up with the huge losses, the company has resorted to employee laying off. The carbon emission scandal with which VW Group’s name was associated led to huge losses for the company. They had to bear legal costs, pay for compensation adjustments and also bear the expense of recalls. The company had to layoff around 200 employees who were found guilty of breaking the internal ethics of VW. After this the employee morale was lowered due to the layoffs and also loss of brand image of VW.

During the time of Covid-19 pandemic, the company had to bear the burden of the recession caused by the Lockdown. The global sales figures for all the brands under VW Group declined during the pandemic. The company resorted to planned layoffs to compensate for the loss of business. During 2020, around 3000 employees were laid off, while another workforce reduction plan is set for 2023. The act of employee layoff always has a negative impact on the minds of the employees. The people’ management is a very crucial part of the HRM strategy. Thus, the performance of the employees needs to be evaluated and poor performance must be checked and reviewed for improvement. However, layoff is not a solution to performance issues (Cregan et al, 2021). But due to the corporate sustainability scandal, dismissing those 200 employees was necessary. The layoff of the employees has a negative impact on their morale. The layoffs aggravate the stress level of the employees. They tend to burnout and feel insecure about their job. This not only decreases the morale but also reduces the job satisfaction and faith in the organisation. The employees tend to put in less effort and get less involved in the organization, its operations and decisions. This impacts the overall productivity of the employees and performance of the organization. This perpetual change in the workforce management would eventually lead to higher turnover, poorer company performance and poorer job, reduced willingness of the employees to cooperate with each other, etc. (Jabeen and Katsioloudes, 2013).

The employee layoffs have an adverse effect on the workforce and their mind-set. Therefore, it is the responsibility of the HR department of VW Group to communicate clearly with the employees. They need to keep the cause behind the layoff clear before the employees to avoid misunderstanding. The employees need to know the reason why 200 employees were dismissed during the emission scandal. They should also be informed that due to the financial losses and drop in sales during the pandemic, the company is unable to maintain a huge workforce. Therefore, they are laying off those employees whose performance is not meeting the expectations of the company. The change that has occurred due to the pandemic has to be imbibed into the organizational structure. Thus, to adjust with the new normal, VW Group has to cut down on their workforce. The constructive feedback would facilitate the employees to enhance their performance and secure their jobs during such crisis period. The downsizing by the company would threaten the employees. The employees lose their sense of wellbeing. The employees would consider the company to have behaved unfairly or unjustly. The workforce reduction plan of VW Group in 2023 would create greater insecurity among the staff. The employees would lose their interest to work and also start believing that their efforts towards the organization would not be rewarded.

Answer 2:
The VW Group might face problem in attracting talent and retaining the existing employees. The main reason behind this are the carbon emission scandal for which the company has lost its prestige in the market and the layoffs during the pandemic. The new talents will refrain from joining the VW Group as they would not want to associate with any company which is involved in some scandal or dispute. These talented candidates might also fear losing their jobs seeing the aggressive layoff measures of the company. They would not be interested to join such an organization which resorts to layoff to address the declining sales. The existing employees of VW Group would also want to look for better job opportunities and leave the job as they know that their jobs are under huge uncertainty. They could anytime lose their jobs like their 3000 fellow colleagues who suffered due to the layoff.

In this situation, it would be challenging for VW Group to have a strong and productive workforce. The company would be facing recruiting and retention challenges. The HR department has to take strategic actions to attract talent and retain the employees so that it wards off the issues like layoffs and scandals. The HR department or the HR managers need to plan and implement an approach to attract and retain the new, millennial talents. These HR strategies should be aligned to the organisational goals, business environment and sustainability goals. In order to attract the new talents and retain the existing talented employees, the hiring managers must meet the needs of the workers. The needs of the candidates or employees might be regarding hiring, career expectations or on-boarding. The new, millennial talents might demand perks, advancements in career or work-life balance from their job. To nullify the impact of the layoffs and scandals, VW Group has to provide better pay packages to attract talents, better appraisals and rewards to retain the employees and adequate scope for professional skill enhancement and career growth. The job needs to offer the employees the chance to prove their potential. The employee retention and talent acquisition are very important for an organization as it determines the success and health of the organization (Kristiana et al, 2021). The stress, time, cost of training and hiring employees are significant aspects of an organisation. When an employee leaves the organisation, it has a negative effect on the business outcomes. There are six crucial factors which play an important role in employee retention. These include acknowledgement at work, people and culture of the workplace, workplace environment, ongoing training, mission and values’ alignment and offering meaningful benefits.

At VW Group, the new talents can be attracted and existing employees can be retained by following certain measures. These include demonstration of a pleasant and accepting work culture, using the latest, modern technologies, lucrative salary, etc. The employees look forwork-life balance (Hongal and Kinange, 2020). Thus, they choose to join organisations offering flexible work schedule. The talented candidates today would not be satisfied only with an attractive pay pack. They seek for more; for instance, better job position, more challenging assignments and better skill development. The VW Group has already lost their reputation for being associated with scandals. To cover up this aspect, the organization must focus on CSR and corporate sustainability plan which might attract new talents and yield trust among the existing workforce. The company has further gained a bad reputation for laying off its employees to compensate for the loss of sales and revenue during the pandemic. Therefore, they need to boost the morale of its existing employees by offering them better perks, rewards and benefits that would retain them in the company. The company must also keep in mind that they should reach out to those candidates who will benefit the company. Thus, the hiring process should be strategically planned. The company needs to provide referral bonuses. The talented candidates or employees must get scope for growth within the organization. The planned layoff strategy of the HR department in consultation with the other departments of the organization can backfire if the talent attraction and retention is not well-planned and structured (Mangisa, Schultz and van Hoek, 2020).

Answer 3:
The Porter’s typology and Miles and Snow’s typology, both are based on the idea of strategic equifinality. This refers to the ability of the organisation to emerge successful through varying managerial strategies. The Porter’s strategies are more of a generic form. In contrast, the strategies of Miles and Snow’s are more specific in form. The Porter’s generic strategies are based on the economic aspects which are centred on the source of an organisation’s competitive advantage along with the target market of the organisation. The typology of Porter’s stresses on the cost of the firm, its product differentiation or product non-differentiation as well as market focus (Adelakun, 2020). If the company VW Group utilises the Porter’s three types of business unit strategies, the company must decide first for targeting its products towards the mass market versus the market focus and market niche. Furthermore, VW Group has to determine whether the organisation wishes to differentiate the products or minimise their costs. By differentiation, it refers to differentiating in a way such that the organisation would forego the lower costs. This could lead VW Group to develop a set of strategies between such options. The strategies that may or may not have the required focus, may or may not have been differentiated or those which may or may not have lower costs or any such strategy combinations.

In contrast to the strategy typology of Porter, the strategy typology of Miles and Snow’s is more specific in its nature. The strategies of Miles and Snow’s are mainly based on four kinds of businesses. These four types include the prospectors, the analyzers, the defenders and the reactors. The prospector is an organisation that introduces new goods or services in the market. They are mainly the risk takers. These prospectors constantly strive to meet the challenges in the market and remain flexible in their approach (Narayanan and Fahey, 2005). The defender as per Miles and Snow’s are those organisations which protect and safeguard their current markets. They main stable growth and further serve their existing customers. The analysers would be those firms which emphasize moderately on innovation for maintaining its current customer satisfaction and current markets. The reactors are finally those organisations which have no particular approach towards the business. No organisation actually wants to come under the reactor category. This is a situation or category in which an organisation falls when the market scenario is uncertain and unpredictable. The sudden outbreak of the coronavirus pandemic has brought many organisations under this category. There are pros and cons of both the Porter’s three types of business unit strategies and the Miles and Snow’s defender or prospector strategy. For VW Group going by the Porter’s strategies would not be suitable. Though the strategies emphasize on focus, cost leadership and differentiation, which would give the company an added edge in the market over its competitors, yet the strategies would not work for VW Group considering the lawsuits, scandals, layoffs and reduced sales due to the pandemic, which the company is witnessing currently. For VW Group, it would be better to follow the defender strategy of Miles and Snow’s. VW Group has its established brands in the market. Thus, at present it does not need to enter the market as a prospector. In the uncertain pandemic situation, introducing new products would be risky. Thus, going by the defender strategy would be beneficial for VW Group. The company would be benefitted by this strategy because they are not currently trying to change their market position. VW Group is currently aiming at defending their position in the market. VW Group has to maintain its market position, resisting the scandal, layoffs and pandemic. The company is aiming at enhancing its margins. The defender position should not be maintained by VW Group for long as it is a bad sign for successful businesses. If they assume the defender position for long, their competitors might capture the market. VW Group considering its present scenario has to focus on margins and efficiency. They also need to make investments in R&D for maintaining their position during the pandemic crisis. These would be facilitated by the defender strategy. However, the risk of defender strategy is that the company might fall behind the increases and miss the new opportunities to rise (Adelakun, 2020).

Answer 4:
The VW Group can be benefitted by the defender strategy. However, besides this strategy an alternative to this could be the reactor strategy following the strategies of Miles and Snow’s. This reactor strategy is usually not suggested to any company. But if one considers the current market scenario and the amount of uncertainty that has been caused by the pandemic, preceded by the scandals and the lawsuits, reactor strategy would be effective for VW Group at least until the market situation is normalised and attains stability.

The reactor strategy would facilitate VW Group to deal with the possible scandals in future. Furthermore, this strategy would ensure more flexibility to the company so that they can handle the sudden changes in the market and market forces. When an organisation like VW Group adapts the reactor strategy, they try to focus on their external environment. The company would be able to change its strategies based on the threats as well as opportunities that arise in the market and how they impact the company (Pezzutto et al, 2018). The reactor strategy is always recommended to the smaller organisations and not to huge companies like VW Group. However, the covid-19 pandemic has left the world in a distorted state. In such unpredictable and unprecedented situations, the huge companies like VW Group could also play safe in the market by following the reactor strategy. The market situation is agile and so an easy to change strategy is needed for VW Group. The company has been fighting for improving their brand image after they faced the carbon emissions scandal. The sudden crisis created by the pandemic had taken them aback. The company was just recovering from the damage caused by the scandals, and in no time, they had to adopt the layoff strategy to compensate for the loss of sales during the pandemic and lockdown. The reactor strategy would be helpful for VW Group in future if they face similar situations. This reactor strategy would facilitate adapting their brand position depending on the market scenario. However, the reactor strategy is not a solution for VW Group, which they can continue following in the long run. The reactor strategy lacks the required analysis or planning which can ultimately prove to be fatal for the organization. In the immediate situation, considering the unpredictable and poor market forecasts, the VW Group can resort to the reactor strategy. In the mid or long term, the company has to take to defender strategy and eventually prospector strategy. There are certain advantages and disadvantages of the reactor strategy. For instance, the VW Group has to make least investment in their R&D while following the reactor strategy. The reactor strategy’s another benefit is that it is outward focused (Akingbade, 2021). This strategy has certain cons like it makes the company slow to the market. VW Group can fall behind if they follow the reactor strategy for long. The VW Group would fail to assume the position of the leader in the market if they continue with the reactor strategy for long. The reactor strategy safeguards and shields the organisation against changes. The company can easily make any amendments for adjusting with the market situation. However, this would not be a permanent solution. To conclude, it can be said that the organisations need to move between the strategies instead of sticking to one. The VW Group needs to move between the strategy options. Considering the unprecedented market situation and crisis, the VW Group has to move between the available strategic options. It can start with the reactor strategy to sustain in the fast-changing market, followed by the defender strategy as the company already has its market position established. The company however needs to innovate and assume the prospector position. In this position or strategy, the company would be launching new products which will improve their market position. Finally, VW Group has to adopt the analyser strategy so that they can maintain their market growth. In fact, as there are various brands under the VW Group, the company can adopt varying strategies for various products and markets.

References
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