CASE STUDY Responding to contextual change: a challenge for HRM Lifeline Insurance is an established company offering life insurance

CASE STUDY Responding to contextual change: a challenge for HRM Lifeline Insurance is an established company offering life insurance, funeral insurance, income protection insurance and several other niche insurance products. It has been in business for more than 40 years and has grown substantially in that time. It employs about 300 people, who are based in its Melbourne office. Sarah has been the HR manager at Lifeline for the past five years. During that time, she has introduced several initiatives designed to enhance attraction and retention. These initiatives have been successful. The company has a turnover rate substantially lower than the industry average, and attracts strong fields of applicants when jobs are advertised. It has a reputation for being an excellent employer offering great working conditions, opportunities for training and career development, competitive pay and rewards, and a high quality of work life. As a result, it has a stable, experienced workforce. One of Sarah’s initiatives has been an annual employee survey. These have revealed increasing levels of job satisfaction and, overall, a positive organisational climate. Employees have indicated a strong commitment to the company and an appreciation of the culture and level of support. However, in recent times, competition in the industry has increased with several new players entering the market. In addition, the economy has been in a period of downturn. Both of these factors have had an impact on Lifeline’s bottom line, and while it is still profitable, the outlook is less than encouraging given that economic conditions are tipped to worsen in coming months, and are expected to be depressed for some time. In response to this, the Board of Directors commissioned a review of the organisation by an independent consultancy firm. The firm looked at all of the company’s operations with a view to identifying savings and efficiency improvements to help it remain competitive through the tough times ahead and into the future. The consultant’s report has just been released. Copies have been circulated to all the company’s senior managers including Sarah for comment. The recommendations include: • Reducing overall employee numbers by 20 per cent through restructuring and streamlining of business processes • Reducing expenditure on non-essential training and development programs • Reducing expenditure on employee wellbeing initiatives such as health checks, stress-management programs and healthy lifestyle programs • Reviewing remuneration and employee benefits such as performance bonuses, salary packaging arrangements and discounts on the company’s insurance products • Outsourcing of payroll and recruitment functions, with a consequent reduction in the size of the HR department. Sarah is concerned about these recommendations, as they seem to signal a very different approach to managing the workforce. At the same time, she recognizes that the company must respond to its changing context or risk becoming uncompetitive.

QUESTIONS

1. Using one or more of the theoretical frameworks outlined, discuss how the consultant’s recommendations reflect a possible change in the company’s approach to HRM.
2. How might the recommended changes affect the psychological contract between the company and its employees?
3. Given their different perspectives, how might senior managers, line managers, and employees react to the recommendations?
4. How should Sarah respond to the recommendations?

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