How to Maintain 7-Eleven as the Market Leader in Convenience Retailing

EXECUTIVE SUMMARY

            Human resource development (HRD) plays a vital function by maximizing employee expertise to achieve the main objectives of an organization. This is done by methods that enable organizations to compete with the emergent changes in business strategies. The key function of HRD evolves from the onset of information technology which is deemed useless without the intervention of skilled manpower. It is in this light that HRD determines the implementation of the needed techniques for business success.

Two factors have influenced the evolution of HRD toward a more active role in the formulation of business strategy: (a) the centrality of information technology to business success, and (b) the sustainable competitive advantage offered by workforce expertise. These two factors work together in such a way that the competitive advantages they offer are nearly impossible to achieve without developing and maintaining a highly competent workforce.

7-Eleven is convenience store in Hong Kong that seeks appropriate strategy to maintain it leadership in the industry. This paper has analyzes its organization and its competitors as well as the industry as a whole. Having analyzed the internal and external environment of the organization, a performance-based development strategy is the identified appropriate strategy for the organization. In addition, an improvement plan is formulated to give the organization a guide for the execution of the plan.

There are already 600 superstores and convenience stores in Hong Kong today not including their outlets. Competition is more dynamic today and organization must possess flexibility in order to cope up with the dynamic changes in the industry. However, with the increase of working women, convenience stores sales have increased in the year 2006. Convenience stores have increasing become popular giving 7-Eleven more opportunities to expand. However, in order to attain sustainable competitive advantage human resource development plays a vital role in the success of any organizations objectives through development of its employees.

 

INTRODUCTION AND BACKGROUND OF THE STUDY

 

Convenience Retailing in Hong Kong

 

             (2006) has reported that “in 2005, food and drinks total retail sales has reached to $6.4 billion which represents a 6 percent growth comparing to 2004. In January to August 2006 retail sales has increase 6.2 percent for traditional markets and 6.3 percent for superstores compared to the same period in 2005.

Retail establishments in 2006 amounts to approximately 15,083, which includes 85 supermarkets and convenience store establishments in which would total to 1,634 stores if branch outlets are included and 14,998 wet market stalls and “mom and pop” shop operators. Retail shops in Hong Kong generally are very small in size, about 98 percent of which hire less than 10 employees.

Traditionally, Hong Kong consumers shop for food daily because of a preference for fresh food. Much of the shopping is still done in traditional markets including wet markets and mom-and-pop shops. However, sales in supermarkets are increasing. The supermarket’s share in terms of retail sales has risen from 44 percent of total sales in 1995 to 54 percent in 2005. Many supermarkets in Hong Kong now have successfully tapped the fresh food market by offering fresh foods at very competitive prices and providing a comfortable shopping environment, which is very different from traditional wet markets. In 2000, only $524 million worth fresh/chilled meat, fish, fruit and vegetables and frozen food were sold in supermarkets. The sales values of the same category in supermarkets greatly expanded to $684 million in 2005, increasing 31% over 2000.”

 

Source:  (2006)

 

Source:  (2006)

 

 

In short, as according to (2006), “wet markets are strong in fresh foods, while supermarkets are strong in processed, chilled and frozen, high added value, and canned food products. The competition between wet markets and supermarkets has intensified in recent years. Some wet markets have turned air-conditioned and provide free shuttle to nearby residential areas. In the next few years, the Hong Kong Government has earmarked over $77 million to improve the environment of wet markets. Meanwhile, more and more supermarkets have been renovated to make sales of fresh meats possible and to enhance the overall experience of the convenience shopping at a supermarket.”

According to the latest figures available, in 2004 there were 85 supermarkets in Hong Kong but only 9 of them had 5 or over branch outlets. About 63 supermarkets had only one store without any branch outlets ( 2006).

In the past decade, there has been a substantial decline of small supermarket operators. Between 1997 and 2004, the number of supermarket operators decreased by 31 percent whereas the sales and the number of persons engaged in the supermarket industry rose by 11 percent and 29 percent respectively (2006). These figures reflected that the supermarket industry has been growing but in a way not favorable to small operators. Many small operators left the market due to severe competition.

Source: (2006)

 

There are two dominant supermarket chains in Hong Kong: The Wellcome Co. Ltd. (247 outlets with 20 superstores) and ParknShop (over 226 with 46 superstores). ParknShop and Wellcome account for about 80 percent of the supermarket turnover. Both supermarkets are able to work closely with real estate developers to open stores in strategic locations, thus maintaining their significant market share ( 2006).

In the past decade, a “superstore” concept has emerged in the operation of supermarkets, blending the Western supermarket style with a traditional Hong Kong wet market. Superstores offer traditional Chinese fresh food like live fish, meats, ready-to-eat foods and market-style fruit and vegetables as well as the most extensive range of international products.

Almost all Hong Kong supermarkets require listing fees, that is, a fee charged to allow a new product to be put on their shelves. This is a one-off fee for a trial period. The listing fees are extremely negotiable and vary greatly among different supermarket chains. Major supermarket chains, such as Wellcome and ParknShop which have many branch stores, have expensive listing fees. Industry sources revealed that key supermarket chains may charge HK$1,000 (US$130) per SKU for each of its store ( 2006). A 30 percent discount may be offered to certain suppliers. The discount offered varies tremendously depending on the popularity of the products and the bargaining power of the supplying companies. Agents/importers will not bear this cost, which is transferred to their principals. In short, all supermarkets require listing fees except those belonging to Japanese department stores.

Hong Kong consumers usually demands for numerous trading term from Hong Kong food retailers, such as promotional discounts; back-end income (flat rebate per year that a U.S. exporter has to pay to the retail chain based on the annual turnover); D.G.A. (Distribution allowance - the fee that the supermarkets charge for distributing the products from its warehouse to its many branch stores); and incentive rebate (a percentage of turnover rebated to the supermarkets in case sales exceed the agreed amount). It can be expected that the bigger the supermarket, the harsher the trading terms. For general reference, about 15 percent of the annual turnover has to rebate to the major supermarkets and 8 percent to small ones (2006). Agents representing very popular items with large turnover usually have a stronger bargaining power and will be able to negotiate for a lower rebate rate.

Different products have different mark-ups. A dried fruit importer revealed that an importer usually operates on a mark up of 5% to retailers who would then mark up another 30% to 35% to consumers (2006).

There is excellent potential growth in Hong Kong’s retail food market for U.S. grocery store items, particularly new and different items, as food retail outlets continue to increase and diversify. Because of established ties and traditional relationships, most of Hong Kong’s supermarket chains traditionally looked to Britain, Australia, New Zealand, and Canada for supplies. In recent years, however, buying habits are shifting and many more American items are now available on local grocery store shelves. Supermarkets tend to use consolidators to help them source new products which are popular in the United States.

There are around 950 convenience stores in Hong Kong. Two major chains dominate the market: 7-Eleven (711 outlets) and Circle K (238 outlets). They are targeting the customer age group of 15-35. Convenience stores are characterized by round-the clock operation. Since only a limited choice of brand names is available and prices are generally less competitive, most purchases are “convenience” in nature, i.e. goods are normally bought in small quantities for immediate consumption. Good sales items include packaged drinks, beer and snack food. The average store size of a convenience store is 1,000 sq. ft. Listing fees are also required for convenience stores.

According to a study, Hong Kong can accommodate 1,200 convenience stores (2006). The primary strategy of convenience stores is to increase services providing "convenience" to consumers and to increase the number of stores so as to reach economies of scale.

Despite faring below expectations, Hong Kong retail sales witnessed a strong growth in October 2006 as the Asian nation saw its retail sales jumping to US$ 2.3 Billion, up by 6.9% year-on-year, reports Associated Press on December 1 2006 (2006). Retail sales volume also increased by 5.2 % compared to last year (2006).

Current consumer boom boosted by increasing wages, lower lending rates & recent boom in stock market has been the mainstay of Hong Kong retail industry & the current scenario suggests that the consumption is likely to remain stable in near future.

 

7 Eleven Background Information

7-Eleven is an international franchisor, licensor, and operator of the largest chain of convenience store in eighteen countries including: Canada, United States, Mexico and Puerto Rico in the Americas; Norway, Sweden and Denmark in Europe; Taiwan (Republic of China), People’s Republic of China (China), Hong Kong, South Korea and Japan in East Asia; the Philippines, Thailand, Malaysia and Singapore in Southeast Asia; and also Turkey and Australia.

The company was founded in Oak Cliff, Texas, USA, which is now part of Dallas, USA, in 1927, and started to use the 7-Eleven name in 1946; 7-Eleven purchased a chain of stores in 1964 called "Speedee-Mart", which initiated the company's entry into franchising. Supermarket chain Ito-Yokado, which operates 7-Eleven stores in Japan, purchased the majority interest of The Southland Corporation in 1991. In 1999, The Southland Corporation changed its name to 7-Eleven, Inc.

Initially, these stores were open from 7 am to 11 pm, which was unprecedented at the time, hence the name; however, most 7-Eleven stores are now open twenty-four hours per day, seven days per week. 7-Eleven's most popular private label products include: Slurpee, a partially frozen carbonated and non-carbonated beverage, available in a number of flavors, and the Big Gulp super size sofdrink in 32, 44, 52(Xtreme Gulp), and 64 (American) fluid ounce sizes. In 2005, 7-Eleven introduced their largest soft drink product, the 128 fluid ounce (1gallon) Team Gulp.

In November of 2005, Seven and I Holdings Co. completed the purchase of 7-Eleven, Inc., turning the American publicly traded conglomerate into a publicly traded Japanese conglomerate. Seven-Eleven Japan is itself a subsidiary of Seven & I Holdings, which also owns the Japanese Denny’s chain of restaurants and Ito-Yokado.

In Hong Kong, 7-Eleven is operated by Dairy Farm since 1981. There are over 600 stores in the city in 2005. About half of them are franchised stores. In September 2004, Dairy Farm acquired Daily Stop, a convenience store chain located mainly in the territory's MTR and KCR stations, and converted the Daily Stop stores to 7-Elevens in the spring of 2005.

7-Eleven in Hong Kong offers items such as food and drink, magazines, medicines, CDs, and MP3 songs. Extra services include the sale of postage stamps, recharging Octopus Cards, and ATM machines found within the store premises.

The company opened its 711th Hong Kong store July 11 (7-Eleven Day), 2006 in the Causeway Bay district of the city (www.7-Eleven.com.hk). With most locations being in urbanized areas, approximately 40 percent are franchised stores.

7-Eleven in Hong Kong offers items such as food, beverages, newspapers, magazines, medicine and cigarettes. Sandwiches, pizza, microwaveable Dim Sum, meal boxes and other Chinese-style snacks are available for purchases.

The Hong Kong 7-eleven 24-hour convenience store was launched in Hong Kong in 1981 and was acquired by Dairy Farm Group in 1989.  Having a long presence in the market and a well-known brand both internationally and locally, 7-eleven has customers from all walks of life and serving some 15 million customers per month.

7-Eleven, operated on a franchise basis, is able to expand the number of stores quickly. 7-Eleven is owned by Dairy Farm, which is also the parent company of the giant supermarket chain of Wellcome. Many of 7-Eleven stores are strategically located in MTR (subway) and KCR (train) stations, popular shopping malls and housing developments throughout Hong Kong.

 

 

Competitor Analysis

            7-Eleven is currently have various competitions which includes superstores, hypermarkets, convenience stores and even traditional markets. However, the biggest competitor of 7-Eleven today are Circle K convenience stores, ParknShop and Wellcome. Currently, in Hong Kong there are already more than 600 supermarkets and convenience stores.

ParknShop opened its first superstore in 1996 with a floor area of 45,000 sq. ft. Presently, its largest supermarket in Hong Kong has a floor area of 72,000 sq. ft. giving customers a modern one-stop shopping solution. The store sells over 20,000 product categories ranging from snacks to electrical household appliances. The ParknShop supermarket chain carries two own-label product lines, namely PARKnSHOP and Best Buy, first introduced in 1995.

ParknShop is also associated with three other supermarkets by the name of Great, Taste, and Gourmet. These high-end supermarkets are after the more affluent clientele. They are ideal outlets for innovative, quality and priced international food products. These stores also carry a wide selection of organic products. Great adopts a stylish international food hall concept and its flagship store offers over 46,000 gourmet items. The first 35,000 square feet TASTE food galleria was opened in November 2004, and features more than 25,000 quality food items sourced from around the world. Gourmet, opened in 2005, occupied 15,000-square-foot store offering a selection of over 20,000 products carried across 30 merchandise categories of quality and premium foods. The average expenditure per customer for Gourmet and Taste is expected to be $18 and $13 respectively.

In addition Wellcome also is a competitor of 7-Eleven which is also is owned of Dairy Farm. Wellcome, will also be opening an upscale supermarket in Hong Kong’s central commercial area catering to the more affluent clientele. The new store called Three Sixty will be opened in mid November. With a floor area of 23,000 square feet, it will be Hong Kong’s largest retail outlet for organic and natural products. About 6,000 items or 70 percent of the items in the store will be organic or natural products. The store will include an organic sector for baby products. “Health” and “natural” are the key concepts of this store.

 

Name of Retailer	Ownership	Food Sales US$	No. of Outlets	Location	Type of Purchasing agent
Wellcome	Hong Kong	over $1 billion	261, 27 of which are superstores	Hong Kong	Importers/Agents Exporters Consolidators
ParknShop	Hong Kong	over $1 billion	215, 45 of which are superstores*	Hong Kong	Importers/Agents Exporters Consolidators

Source: (2006)

 

ParknShop and Wellcome account for almost 80 percent of the supermarket turnover. Both supermarkets are able to work closely with real estate developers to open stores in strategic locations, thus maintaining their significant market share.  Because of their significant market share, they are able to make suppliers offer goods to them at very competitive prices, so that they are able to set retail prices lower than their competitors’.  Consequently, it is difficult for small competitors to survive and new players to enter into the market.

Moreover, a new development in 2003 is that ParknShop expanded into 24-hour convenience store operations.  The supermarket giant has opened a number of stores under the name ParknShop Express on a trial scheme and may expand the network across Hong Kong if the experiment succeeds.  Currently, there are about ten Express stores.  ParknShop has intrinsic competitive advantages over its rivals because it can use the leverage of the group’s existing infrastructure to offer products at low prices.  The stores carry the products as other convenience stores such as cooked food, drinks, newspapers and magazines.  In a bid to lure customers, the 1,000 products offered by ParknShop Express are priced at the same level as those being sold at ParknShop.  This is in contrast to other convenience store operators charging at a premium of up to 15 per cent from those selling at supermarkets. 

In the convenience store, Circle K is the a competitor of 7-Eleven. Circle K is continuing to expand. A Circle K representative revealed that average purchases per customer had dropped to HK$10.62 (U.S.$1.56) for the first three quarters of 2002, down 7% from a year ago (USDA Foreign Agricultural Service, 2006).

Retailer Name	Ownership	No. of Outlets	Location	Purchasing Agents	Year Established	Client’s Age
Circle K	Hong Kong	180	HK	Importers Agents	1985	15-35

Source: (2006)

 

 

SWOT Analysis

Strengths

            Majority of the goods that 7-Eleven Store are low prices sue to low cost of operations. Also, 7-Eleven is more convenient to customers. Consumers could avoid the long checkout lines, crowded parking lots, and traffic. There are many choices of shopping methods; browsing the aisles, using product search, and choosing from a shopping list customized from frequently bought products. They could shop 24/7 since the store is open for 24 hours in 7 days. The store also offers variety of selection from fresh to processed food and whatever shoppers would need.

 

Threats

            However, despite the strengths, the store has also its weaknesses. One of which is inventory inefficiency in which they would experience stock outs. Moreover, with the presence of superstores, their current marketing strategies have been overshadowed. In addition, low performance of workers also has negative effect on the efficiency of the store.

 

Opportunities

            7 Eleven has also some opportunities. With the problem of information dissemination, an opportunity to acquire new technology for more efficient operations can now be possible. Also, 7 Eleven has been already known by the people as a store open in 24 hours they have the advantage over it. In addition, the company also got the most strategic locations of their stores. Moreover, the company can still expand their business and open some more stores especially in China which got the opportunities of expansion with its large market.

 

 

 

Weaknesses

            With the lax government regulations in trade, more international competitors are entering Hong Kong. Increase in competition is a great threat to 7 Eleven. Also, with the increasing high levels of educated people, consumers are now more skeptics and are more demanding. In addition, the traditional markets in which people can purchase fresh fruits and vegetables are still in its popularity in Hong Kong. Moreover, 7 Eleven has high employee turnover which is a sign of bad management.

 

 

IMPLEMENTATION

            Since a convenience store is both a goods and service business, it is important that the workers have the ability to give the best service to customers and availability of goods is also important.

            7 Eleven, despite market competition, is a market leader in Hong Kong today. However, with the continuous enter of international companies, it is important for 7 Eleven to maintain its leadership in the convenience store industry. Superstores are already emerging in the country which are mostly are also beginning to open 24 hours.

            From the SWOT analysis, the company faces various problems that are needed to have a solution. It is recommended to concentrate on some areas. One of the areas that have a major impact on offering goods and service is the efficiency and effectiveness of the people doing the work.

            One of the major objectives that the company should concentrate is the improvement of their workers. A strategic human resource development must be implemented within the company.

            Human resource development (HRD) plays a vital function by maximizing employee expertise to achieve the main objectives of an organization. Human resource development (HRD) has served the needs of organizations to provide employees with up-to-date expertise. According to  (1994) Advances in HRD models and processes have kept pace with the increasingly sophisticated information and production technologies that continue to diffuse throughout our nation's most vital industries. During this period of rapid technological development, the HRD function could be relied upon to support a broad range of business initiatives that required a competent workforce.

Critical business issues, from new marketing strategies to innovations in production technology, were based on, among other factors, the performance capabilities of those expected to use these new work systems. As a factor integral to business success, employee expertise itself has been expanded through effective programs of employee development.

Expertise is defined as the optimal level at which a person is able and/or expected to perform within a specialized realm of human activity (1994). In short, the development of workplace expertise through HRD has been vital to optimal business performance.

However, according to  (1994), today's business environment requires that HRD not only support the business strategies of organizations, but that it assumes a pivotal role in the shaping of business strategy. Business success increasingly hinges on an organization's ability to use employee expertise as a factor in the shaping of business strategy. As a primary means of sustaining an organization's competitive edge, HRD serves a strategic role by assuring the competence of employees to meet the organization's present performance demands.

Along with meeting present organizational needs, HRD also serves a vital role in shaping strategy and enabling organizations to take full advantage of emergent business strategies. Both the strategy supporting and strategy shaping roles of HRD have distinctive features that are evident in the business practices of successful companies.

The rationale for using HRD interventions to support business objectives is to enhance employee expertise through HRD increases the likelihood that business objectives will be achieved (1995; 1994).

For example, education and training used to support business objectives at Motorola is typical of the challenges and opportunities faced by many organizations in today's business environment. What Motorola discovered earlier than most organizations that began introducing new sophisticated technologies into the workplace was that their employees did not have the skills to make full use of the technologies (Agrawal, 1994). Companies that compete in the fast-paced communications market where customers are particularly innovation-conscious must deliver high-quality, reliable products despite short product development cycles. Motorola sought production advantages through both the integration of new technology and the development of employee expertise. Motorola offers on- and off-site classroom education and training, laboratory training, and structured training in the workplace for employees at all levels of the organization. In addition to supporting Motorola's successful pursuit of its business objectives, many of its education and training initiatives serve as examples of best practices against which other organizations' HRD functions benchmark their performance. Thus, Motorola provides an early and influential example of HRD used to support business objectives.

Training and other initiatives associated with total quality management have been critical in transforming marginal manufacturing plants into successful facilities ( 1994). HRD continues to be a primary vehicle for assuring mandated levels of employee competence and public safety in highly regulated sectors like the nuclear power industry (1994).

In addition, HRD is moving beyond a role that is exclusively supportive of business strategy. Moreover, HRD is assuming a more influential role at the point of strategy formulation and is becoming one of the key determinants of business strategy. Jacobs and Jones (1995) posit the argument that "Organizations in the new economy have come to realize that employee expertise is a vital and dynamic living treasure. The desire for employee expertise is meaningless unless an organization can develop it in ways that respond to the business needs."

However, some Organizations have rushed to embrace information technology as a way to improve overall efficiency and reduce costs. Yet, it is not the information technology itself, but the way information technology is thoroughly integrated into major business processes, that represent the greatest opportunity for the successful transformation of outdated business processes (1993). However, those who have successfully used information technology to improve business performance will quickly point out that these advantages will not materialize without highly competent people to both implement and utilize these innovative work systems.

The human capacity must exist to use information technology to maximize performance. Employee expertise is critical to an organization's ability to capitalize on the vast opportunities afforded by information technology. HRD is then in a strategic position to assure that the required expertise is available and effectively utilized.

Organizations in market leadership positions realize sooner or later that human resources are ultimately the only business resource with the creativity and adaptive power to sustain and renew an organization's success despite changing market conditions (1993). The development of employee expertise provides a potentially inexhaustible source of ideas for further innovation and increased productivity because the most basic output of the highly competent employee knowledge is not used up in the process of producing it (1989). Investments in employee education and training increasingly fund the development of an infrastructure to support the sustainable competitive advantage that a highly-trained workforce provides. Developing employee expertise at all levels of the organization and using knowledge as a catalyst for growth and competitive advantage represents a major frontier in organizational performance that is only now beginning to be fully appreciated (1994;  1995).

            HRD serves a broad range of interests and outcomes in organizations. The primary purposes to be served by HRD can range from programs intended to meet the personal development needs of individuals such as identifying individual learning styles or personal financial planning to HRD programs necessary for everyone in the organization such as programs addressing a new performance appraisal method or role changes secondary to structural reorganization.

            In addition, knowledge drives product innovation and employees are the carriers of that knowledge. As a vehicle for the continuous development of employee expertise, HRD is a crucial antecedent to successful business strategy. In these situations, HRD actively shapes strategy. In other business contexts, strategy may be based on providing reliable, high quality products in stable markets less affected by continuous innovation. Strategies for assuring reliable service and consistent quality, like those followed by food processors and electric companies, are supported by HRD after strategy has taken shape. Because their customers want quality and consistency, these companies rely on HRD to support the expertise needed to insure these outcomes.

 

 

 

 

PERFORMANCE IMPROVEMENT PLAN

            In order for 7-Eleven convenience stores to maintain its leadership in the market of Hong Kong, an improvement plan should be conducted in the human resource development of the organization. The company should undergo a series of reorganizations. The company should work on downsizing. Performance-based development strategy is the appropriate strategy to use to increase the organization, the team and the individual to be more efficient and effective. It is a strategy that focuses obsessively on bridging the gap between anticipated and actual business results. The HRD should be the major driver in scoring their improvements. 7-Eleven should take an effort to fundamentally alter the way performance of the organization’s performance.

            7-Eleven currently is the market leader in the convenience store over its close competitor which is the Circle K. To maintain this market rank, 7-Eleven should redefine the organization. In order to this, objectives are identified.

 

Objectives

1. To ensure that people across the organization understand its vision
2. Create a work environment in which it is possible to pursue this vision
3. Coach people on how to collaborate effectively within their own units and across business lines
4. Improve the problem solving and decision making abilities of individuals and teams
5. To develop processes for streamlining operations, rebuilding teams and opening new lines of communication
6. To remove organizational barriers that hindered productivity and profitability
7. To increase trust between the people in the organization

 

New Mission

            7-Eleven convenience stores should decide on redefining the organization. To begin, middle- and upper-level managers should recruited for change teams responsible for designing and implementing a re-engineering process. Their objectives were formidable: to restructure the organization; to eliminate fragmented, inefficient and costly work processes through downsizing and other means; and to create an environment where managers could manage, not just perform transactions.

            A comprehensive systematic analysis should be taken and accomplished to look not only at the mission of the organization but also the relationship of every individual in the organization. Evaluation on the goals and practices of the organization should also be undertaken. In addition, most importantly, evaluation efficiency, role clarity and value added of every individual in the organization should be undertaken.

            With the emerging of more competitive environment in Hong Kong, 7-Eleven would require further development of the employees of the organization to attain the competencies necessary for the success of the business. The organization need to operate at the highest possible levels of effectiveness. HRD team plays a major role in managing the implementation of the re-engineering effort of the organization.

            In order to attain these objectives and mission of the organization, a performance-based development strategy will be implemented.

 

The Performance-Based Development Strategy

It is crucial for an organization to replace traditional, static developmental approach with a more flexible and dynamic responses ( 1991).  Some existing parts of the performance-based development model would be appropriated with some modules from other methodologies will be adapted (1991; 1991; 1991; 1988). The strategy approach that will be develop will have an emphasis on improving individual, team and organizational effectiveness which would offer the most promising strategy for strengthening 7-Eleven short- and long-term competitive position. In addition, this approach will also yield a clear-cut measure of the impact of HRD performance on business results.

Performance-based development begins by looking at a unit's business expectations and at its actual results. The job of the HRD business consultant will be to determine which factor or combination of factors (individual and organizational) is causing the gap between anticipated and actual business results. Through the development of a diagnostic process, the consultant will search and identify the root cause of a performance problem. Later in interactive consultation with the client, the HRD consultant will design customized developmental actions to eliminate the mutually acknowledged deficiencies and to improve results.

HRD’s first task is to discover the source of a deficit or the root cause which is actually the most difficult and consequential task. Three computer-linked diagnostic tools that are designed and adapted are particularly useful to the HRD business consultant trying to ferret out the roots of a client's performance problem:

1. The "open organization profile" measures the current state of productivity. This tool takes the organization's mission, strategy, history, culture and goals into account.
2. The "team development assessment" uses questionnaires, surveys and interviews with individual contributors to assess team effectiveness. The evaluation focuses on the business's goals and purposes, its operations, how people interact and overall performance.
3. The behavior of individual employees is also studied in depth. This research provides a profile of what an employee should know in comparison to what the employee does know.

These tools and others support the performance-based development process will be used by HRD in every intervention. The process will normally take the following courses:

 

Research

Numerous diagnostic tools which include personal interviews, surveys, questionnaires and on-site observation will be used to have a detailed and comprehensive picture of the organization. The main objective of the diagnostic tools is to specify business needs and understand the nature of the current difficulty. Having conversation with the people at every level and observing intra and interdepartmental transactions will also be conducted.

 

Analysis and Feedback

Once the data is compiled, the information will be stored in computer-based systems where HRD will have immediate access to and can analyze abundant data quickly. This analysis will enable to determine the strengths and weaknesses of an individual, a team or an organization and to identify the factors inhibiting performance.

The finding will be reviewed in group settings for organization development and in consultative sessions for individual development. Data will be shared to come to a conclusion of what the performance problem. In this way, the root cause of the performance gap would be fully understood by the organization and the individual.

 Action

After data are collected and performance gap has already been identified and understand by the organization and the individual, implementation of action program will commence which would be intended to counteract the problems hindering performance. With full commitment of the organization with the program, it would be easier for the improvement plan to be conducted and implemented. 

 

 

Execution of the Plan

            The execution of the plan is intended for the improvement of the performance of the organization, team and individual. Mainly, HRD’s responsibilities are to improve organizational effectiveness, to create agile, high-performing teams, and to increase the skill levels of individuals to meet business objectives.

 

The Organization

The development of organizational effectiveness will relatively take a long range process for any organization and particularly with 7-Eleven. It intends to improve a business unit's ability to solve problems and to adjust to changing conditions. Such organizational development activities will be designed to contribute to 7-Eleven operations and management in several ways:

Ø  To assist business leaders in defining a strategic direction that will result in improved business focus and increased profitability.

Ø  To streamline workflow processes within and between functions to yield greater efficiencies.

Ø  To create results-focused teams.

Ø  To improve organizational problem solving processes.

Ø  To increase the organization's ability to adapt to change.

 

One tool that will be used extensively in our organizational development is the Open Organization Profile ( 1993). An automated instrument, it asks respondents to rank themselves, their team members and others in their unit in three categories: alignment with the business goals; their ability to respond to internal forces; and their ability to react to the marketplace and other external challenges. It provides an accurate measure of the degree of cooperation and effectiveness in a business unit.

 

The Team

Increasingly, teams are handling key jobs in 7-Eleven dynamic business of convenience stores. Having numerous branches of the stores around Hong Kong, different teams handle its own store problems and decision making. The team’s effectiveness will be measure in the following conditions:  

Ø  The business leader must show a strong commitment to the team's work.

Ø  All team members must share a common understanding of and a commitment to the team's purpose and goals.

Ø   Individual team members must bring the proper mix of skills to their work.

Ø  The processes that enhance interaction and communications must be in place.

 

HRD will be creating a Team Development Process that systematically assesses a team's effectiveness against these criteria and produces training programs to address specific deficiencies. A number of assessment tools will be developed and adapted to evaluate teams and their characteristics depending on the objectives of the particular team.

 

The Individual

The approach to individual development will concentrate on the core competencies that are integral to effective job performance in 7-Eleven.  Six categories of knowledge have been identified that constitute the basic core of learning required of people throughout the organization. Depending on the requirements of their specific jobs, employees must have varying levels of knowledge of these categories:

Ø  The company's products

Ø  Finance

Ø  The convenience store system, from network operations to legislative issues

Ø  The operations of sales and service

Ø  The electronic database systems used throughout the company

Ø   Leadership and management

 

HRD will used as assessment tool which is the Individual Contributor Competency Assessment Profile, which will evaluate an individual's command of these core competencies. Other professional capabilities are measured by this tool as well, including skills in planning, problem solving, communicating, influencing others and innovating. Furthermore, the Profile assesses job proficiency, the quality of work produced, the degree of customer focus, adaptability to change, willingness to assume accountability, and teamwork skills.

The competency assessment will give a 360-degree profile of the job holder. It includes a self-assessment as well as evaluations by the individual's manager, co-workers and subordinates. The data is compared to a profile developed for the particular position which specifies the attributes and skills needed to perform optimally in the job. Most important, this assessment serves as the foundation for a customized action plan to deal with the employee's unique developmental needs.

Performance-based development for individuals will integrate classroom training, self-study and computer-based instruction. It will be built around the core business interests of 7-Eleven which include product knowledge, sales, customer service and the service delivery system. To help ensure cost-effective delivery of core training, employees will have access to these programs through their desktop computers.

 

 

Future Performance Targets

Like many other large organizations, 7-Eleven is facing a future with the prospects of periodic, if not continual, cost-cutting and downsizing. This sobering reality often translates into intense pressures to come up with fast answers and quick fixes. Consequently, HRD's toughest challenge in moving forward in re-engineering journey will be to sustain and leverage significant practice changes and gain that will be made. However, this will be done demonstrating the value of performance-based development strategy, showing how it supports the goals of the business and contributes to the bottom line.

HRD will maximize awareness and build buy-in of performance-based development across the organization. Especially in a climate of caution and retrenchment, we must aggressively market the efficiencies, the rigor and the discipline that this powerful strategy can bring to the business

However, the work of HRD does not end with the diagnosis, design and delivery of appropriate development activities. Crucial to HRD's performance-based approach are systems that track the impact of development activity on business results (Zenger and Hurgis, 1982).

 

 

CONCLUSION

To maintain the top-performing competitor of 7-Eleven in the industry, everyone on staff needed to understand the business goals and objectives. The organization need to create a work environment where everyone worked together to support the business and take ownership for its performance. The human resources development approach will give the organization the tools to address issues of non-performance, to isolate deficiencies and to identify the steps needed to improve results."

Today, a systematic process is in place to identify and eliminate any performance problem. The foremost responsibility of HRD consultants is to pay close attention to the client's bottom line while analyzing why the business isn't achieving the results it wants. Clearly, the failure to achieve desired business results can stem from many causes: a key manager may be ineffective; a cross-functional team may not be operating productively; employees may not be well-versed in a new product or service; or an organizational obstacle may exist.

It generally takes the HRD team a week or two to compile and interpret diagnostic data, which is used to pinpoint the source of the business' performance problem. Next, these findings are communicated to the client, along with a recommended course of action. HRD also prepares a cost-benefit analysis showing how the benefits of the solution outweigh the costs of the proposed action plan. If the business accepts HRD's recommendations, a consultant maps out appropriate training and organizational development activities.

The tools, tactics, processes and strategy that will be adapted and adopted have been customized to fit the organization's needs. HRD in the organization plays a vital role in the success of its business.

HRD needed to be obsessive about linking individual and organization development to the bottom-line, making sure that you deliver exactly what the business needs and what it wants. It is important to examine the successful models and practices that now exist then adapt them to fit your organization's particular conditions. Emphasizing the competencies of the development staff is also vital to build credibility for the business unit. In addition, it is important to use a development approach that is performance-based, not activity-oriented and focusing on effective management, not the volume of transactions.

 

 

 

 

 

 

 

 

 

 

 

 

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