HR Policies and Strategies Role in Attaining Competitive Advantage Abu Dhabi National Oil Company Contents

HRPolicies and Strategies Role in Attaining Competitive Advantage: AbuDhabi National Oil Company

Contents

Executive Summary 3

Introduction 3

Background of ADNOC 4

Background of ADNOC’s Human Resource Management 5

Human Resource Planning at ADNOC 6

HR Practices 6

Staffing and Recruitment 6

Training and Development 7

Compensation and Appraisal 7

Good Communication Channels 7

Union-Management Relationship 8

HR Strategies 8

Low Price Strategy 8

Differentiation Strategy 8

Employee Participation Strategy 9

Performance Management Strategy 9

Organizational Strategy 9

HR Policies 10

Ethical Policies 10

Corporate Social Responsibility 10

Health and Safety Policies 10

HR Outcomes 10

Measurement of Human Capital 12

Human Resource Accounting (HRA) 12

Employee Surveys 12

HR Audit 13

HR Metrics, Statistics, and Ratios 13

HR Scorecard 13

CONCLUSION 15

References 16

APPENDICES 17

HRPolicies and Strategies Role in Attaining Competitive Advantage: AbuDhabi National Oil Company

ExecutiveSummary

Human Resource Management(HRM) is significant for the running of any organization, especiallyif the organization has several employees. The term HRM is mostlyused to depict formal systems used by organizations to manage people.HRM is one of the most important departments in an organization. Themain purpose of HRM is to improve an organization’s productivity byoptimizing the input and contributions of employees (Lawler &ampBoudreau, 2012). The work of the human resource manager is to monitorand motivate employees to ensure that they are working underfavorable conditions. HRM department has three functions staffing,work designing and employee benefits or compensation. HRM strategiesare aimed at monitoring employees’ contribution and input to theoverall performance of an organization. HRM strategies must be inline with the organization’s overall objectives. In other words,HRM strategies must relate to mission and vision of the organization.The duty of HRM is basically to obtain, develop and keep talent. Italso aligns employees with the business to improve their productivityand contributions towards achieving the main goals of theorganization. An organization with a strong human resource departmentachieves its intended goals faster (Lawler &amp Boudreau, 2012).Developing good HRM strategies helps companies to achieve acompetitive advantage as a result of an increase in productivity.

Introduction

Human Resource Management isone of the most significant factors that guarantee success in anyorganization. This is because HRM offers insight to the organizationabout the mood, abilities, and functions of its employees. HRMpolicies can be used as a marketing strategy to achieve more marketshare and competitive advantage. Proper implementation of HRMpolicies increases the efficiency of employees leading to improvedquality and speedy production (Lawler &amp Boudreau, 2012). Thediscourse attempts to investigate the role of HRM strategies inachieving a competitive advantage using Abu Dhabi National OilCompany (ADNOC) as the case study.

Backgroundof ADNOC

ADNOC is the fourth leadingcompany associated with energy and related sector, and the largestcompany in United Arabs Emirates (UAE). ADNOC was formed in 1973 tosupply oil not only in the domestic market but also the internationalmarkets. It is entirely owned by the state, and its main focus isenergy and oil. The country greatly depends on ADNOC to ensuresuitable distribution and deployment of main resources. ADNOC and itsgroup of companies manufacture and transport petrochemical relatedproducts on a global scale. These companies have expanded theiroperations hence perform key tasks like exploration and production ofoil. The main activities conducted by ADNOC group are based on gasprocessing and oil refining. The prime objective of ADNOC is to find,extract and sell energy and oil related products domestically andinternationally. The efforts of ADNOC group are focused on exploringand discovering new areas to boost their businesses. The long-termobjective of ADNOC to the state is to develop and maintainlong-standing sustainable energy growth in the country. As a result,the government has heavily invested in this sector since itrecognizes the importance of energy and oil (www.adnoc.ae).

Backgroundof ADNOC’s Human Resource Management

It is mandatory for a bigcompany such as ADNOC to invest in human resource strategies (Noe,2006).This is because the company has many employees working togetherto realize its goals. There is a need for a well organized humanresource department to manage all the employees working in differentfields of the company. The company has about 26,500 employees. Toeffectively manage all employees, the company has developed suitableHR policies that guide them to perform their duties diligently. Thetop management has been constantly involved with the human resourcedepartment to realize and sort out any negative effects and influenceof its workers. The HR department has formulated various methods ofmeasuring the performance of the workers to determine their level ofinput.

ADNOC has many international,organizational and technical staff hence the human resourcedepartment is vital for the monitoring and sustenance of the staff.The department has been attentive and dependable with increasing thenumber of UAE citizens in its workforce. The HR department hasestablished training programs for both internal staff and aspirantswho want to be part of the company. Some of the major activities thatthe HR is involved in include performance appraisal, job planning,job design, career development, training, measurement of work, and soon (Marcel &amp Mitchell, 2006). The HR department works closelywith the Employment Development Department to ensure career and skilldevelopment for its employees. The human resource department makessure that employees are correctly chosen, trained, assessed,recommended, developed and finally retained. The HR department alsoensures effective implementation of human resource strategies acrossthe group of companies. This department is also responsible forproviding special services to the employees. Such services mayinclude employee housing, medical care, cost control coordination,public relations, and management of records. Consider Appendix 1 forthe Harvard approach to HR.

HumanResource Planning at ADNOC

Humanresource planning is commonly attributed to recruitment and retainingsufficient workforce for the company. Therefore, the company’s topmanagement is vigilant to keep tabs on the HR department to be ableto predict workforce pattern and to find out whether there is a needfor the additional workforce. Currently, ADNOC is hiring moreemployees based on the Group National Recruitment program that statesthe need for increasing employees of UAE nationality. The companyalso relies on cheap labor from the Indians for its groundwork.

HRPractices

As discussed earlier, HumanResource Management has three main functions: procuring employees,developing workers, giving incentives and retaining employees. TheARDM model (which means “Acquiring, Rewarding, Development andMaintaining and Protecting”) develops ethical policies andencourage social responsibility. The ARMD model states that successin HRM is achieved when the employees of the company are highlyskilled and when these employees are given tasks that fit theirskills and abilities (Marcel &amp Mitchell, 2006). HR practicesinclude

Staffingand Recruitment

ADNOC hires new employeesusing the Group National Recruitment Program (GNRP) hiring processand guidelines. The GNRP department first evaluates submittedapplications. UAE nationals will be prioritized since several postshave been reserved specifically for them. However, this is regardedas a kind of discrimination towards other nationalities. In normalcircumstances, recruiting is based on skill and knowledge. Aninterview will involve matters like technical skills, learningability, previous exposure in related projects, previous employmenthistory, years of experience, and so on. Employees with lowest postscan be recruited without interviewing them.

Trainingand Development

Trainingis important to ensure that the employees acquire relevant skillsrequired to perform their duties. Training leads to development sinceit gives a better understanding of the duties that a worker issupposed to do. In other words, training can be used to evaluatewhether the employees are suitable to perform a specific task. ADNOCoffers extensive training to its employees and other outsiders thatwish to be part of the company.

Compensationand Appraisal

Compensation and Appraisal inADNOC are donein accordance withthe performance of the workers.Employees holding larger posts are equipped with computers, stockoptions, and other opportunities while hardworking ones are motivatedand commended for the nice job done. Moreover, payments are evaluateddepending on the post occupied by the workers. Employees with muchworkload or responsibilities are well compensated to ensure that theyare motivated and satisfied. Appraisal system is used not only tocongratulate good performance but also to correct poor performance.

GoodCommunication Channels

ADNOC group of companies hasestablished an excellent channel of information sharing between itssubsidiary companies. This has enabled it to acquire relevantinformation from various departments. In addition, through the HRdepartment, employees can make inquiries regarding any queries thatthey need explanation. It is also the work of the HR department todesign a job description for the workers hence informing them oftheir expected tasks and duties.

Union-ManagementRelationship

Union-management relationshipis important because it helps the company to reduce costs. ADNOC hasgood union-management with Indians employee for cheap labor. It alsohas good relations with companies that they acquire machinery from.For instance, ADNOC obtains most of its machinery from China.Negotiations between unions are made to increase profits to bothparties. Therefore, good relationships between unions help thecompany to acquire a competitive advantage over rival companies.

HRStrategiesLowPrice Strategy

ADNOC may choose to compete byselling goods at low prices, but it must guarantee that its operatingcosts are as low as conceivable to exploit high profit. In somesituations, it is important to derive human capital from independentcontractors. This way, the company is capable of minimizing HRexpenses. When put together with other methods of reducing businessexpenses, the company may achieve significant profits (Noe, 2006).

DifferentiationStrategy

Several views can offerproductive ideas about how ADNOC can differentiate its products andservices. These lucrative ideas can come from anyplace. For example,advisory board members, equity partners, and full or part-timeemployees may often be a rich source of originality. ADNOC’s HRdepartment and internal culture are famous for fostering employeeinvention, by giving different workers some time off to work onventures of their interest (Marcel &amp Mitchell, 2006).

EmployeeParticipation Strategy

Highly trained employees maypermit the company to attain a superior product that will bemagnificent hence allowing the company to charge a premium. This iscommon in cases of luxury products and services. Furthermore, mostrival companies are contending grounded on the excellence of theirgoods and services (Marcel &amp Mitchell, 2006). Though it may becostly to hire, develop, and preserve highly accomplished workers whocan enhance significant value to the company, the expense can bedirected to the customers in the form of “premium pricing.”

PerformanceManagement Strategy

ADNOC’s source of advantageis based on operating efficiency. Skillful and competent workers mayfind means of reducing production expenses, which boosts operatingmargins. A robust culture that is marked by high employmentengagement, confidence, and motivation, can enhance efficiency, andeventually, lead to rise in profits (Noe, 2006). To achieve this, thecompany must ensure vigorous participation of its employees towardssome decision-making processes.

OrganizationalStrategy

The main function of thisstrategy is to increase efficiency and reduce costs. The structure ofADNOC is arranged in such a way that if offers flexibility and growthregarding sales, market share and profits. The organization strategyis also used to achieve product differentiation, corporate socialresponsibility, innovation and research development.

HRPoliciesEthicalPolicies

In any organizational, thereis a need for formation of ethical policies to maintain ethicalbehaviors in the working premises. ADNOC’s HR department hasemphasized the need to behave ethically at work. The HR departmenthas conducted several researches to identify factors that may lead tounethical behaviors. Some of these factors include individualfactors, organizational factors, cultural factors, organization’sculture, ethical policies and codes and even the influence ofsupervisors (Noe, 2006). Then the HR department finds effectivecorrective measures and disciplinary actions to take for employeesbehaving unethically. See Appendix 2.

CorporateSocial Responsibility

This is an important policysince it helps the company to be responsible towards the society andenvironment. CSR activities are used to ensure that the company doesnot cause any harm to the environment or society. One of thecompany’s main objectives is to explore oil without causing harm tothe society and environment.

Healthand Safety Policies

The company has put upimportant health and safety policies to prioritize safety among theemployees. As a matter of fact, employees who work in the onshore andoffshore fields are a high risk of injuries hence adequate safetypolicies are put in place to avoid such cases. The company has set upa health unit to cater for injuries.

HROutcomes

One the main objective ofimplementing HR strategies, policies and practices is to increase theperformance of the company. ADNOC Company has benefit so much frominvesting in HRM practices. Research has identified that thesebenefits can be categorized into three dimensions: organizationaloutcomes, financial outcomes and employee (HR) outcomes depending onthe type of practices implemented (Lawler &amp Boudreau, 2012).

Organizational outcomes aremeasured in terms of customer satisfaction. It is important for ADNOCto find out how the strategies, policies and practices implementedare being perceived by the clients and customers. Organizationaloutcomes also focus on the efficiency of the company’s operations.Examplesof organizational outcomes that ADNOC has achieved includeperformance efficiency, increased productivity, innovation,flexibility, cost-effectiveness, product and service quality, as wellas economies of scale (Noe,2006).Succcesful formulation and implementation of HR strategies has takenADNOC a step closer to achieving the overall objectives.

Financialoutcomes measure the amount of financial advantage that HR practicesinfluence. The financial outcome of ADNOC is mainly measured in termsof net margin. Net margin is the ratio of the company’s net profitsto the total revenues.Examples of financialoutcomes enjoyed by ADNOC include profits, sales, increasing oildistribution channels and market share, and of course economies ofscale. The research indicates that ADNOC is stable in terms ofrevenue and profits.

EmployeeOutcomes are benefits gained from the employees in terms ofperformance, increased productivity, and skill. HR practices arefocused on motivating the employees so that they are satisfied. Whenemployees are satisfied, the company is able to attain optimalefficiency as a result improved performance (Noe,2006).HR practices are also used to ensure good working environment andteamwork. Examples of HRrelated outcomes include employee attitude, cognitive and behaviourssuch as trust in management, job satisfaction, organizationalcommitment, intention to quit and absence due to illness and so on.

Measurementof Human Capital

It is important to evaluateand measure HR activities to identify the degree of success towardsthe company (Marcel &amp Mitchell, 2006). HR activities can bemeasured qualitatively or quantitatively. They can also be measuredby identifying direct outcomes or impact on organizational measures.

HumanResource Accounting (HRA)

HRA is a popular techniqueused to measure the performance of employees in an organization.ADNOC has been keen to use this method because it improves thesharing of information between the company, stakeholders and theemployees. Furthermore, the HRA measurements and results can be usedin various decision-making processes. However, it has been arguedthat this method regards employees as the company’s assets thatareviewed to unethical. This is because the company hence does not ownemployees they should not be treated as human assets.

EmployeeSurveys

Employment surveys are oftenused to assess HR policies such as culture climate and engagement.This include observing how the employees perform their duties andevaluating their performance about the overall performance of thecompany. ADNOC has always performed employee surveys to determinewhether they fit the job description. Employee surveys can also beused to identify the degree of risk involved when performing tasks.

HRAudit

A company conducts HR auditsso that it can assess and evaluate HR activities. Audit results canprovide meaningful information to identify which sectors and policiesare working well or need improvement (Lawler &amp Boudreau, 2012).HR audit involves monitoring all aspects of the HR performance andgive conclusive results pertaining what aspects of the company areperforming well or need enhancement. HR audit identifies specificproblems encountered by HR department and gives appropriate controland corrective measures.

HRMetrics, Statistics, and Ratios

These are methods used tomeasure the performance of the HR activities and policies. Theyinclude monthly turnover rate, revenue per employee, yield ratio,human capital cost, HR to staff ratio, return on investment andpromotion rate. The metrics and formulas are used to identifyspecific HR objectives. Other metrics used by ADNOC to measure HRMinclude absence employee ratio, worker’s compensation incidentrate, overtime per individual contributor headcount, and averageemployee age.

HRScorecard

HR scorecards mostly focus onthe HR competence, HR practices, and HR systems among other HRaspects. Scorecards may vary depending on the functions of thescorecard. For example, the performance scorecard is used to measurethe level of performance of the employees, while the workforcescorecard is used to measure the overall input of the employees(Lawler &amp Boudreau, 2012). The company has developed differentscorecards depending on the metrics used. Ideally, the company hasmade efforts to maintain a balanced scorecard across the board.

ADNOC usually uses performanceappraisals to assess how an employee or team acts, including theknowledge and skills they posses. Performance appraisals give a wideroutlook of individual or team performances and productivity (Lawler &ampBoudreau, 2012). During performance appraisals, a balanced scorecardoffers a broad dimension of the company because it illustrates howeach employee or team influences the company. ADNOC balancedscorecard mainly focuses on the financial goals, customersatisfaction, business processes, and innovation/learning goals. Forinstance, the business operations should satisfy customer interests,while innovations and learning goals should generate enough financialoutcomes (see appendix 4).

From the balanced scoreboardof ADNOC, financial goals are considered the most significant HRoutcomes. The other three dimensions are also significant since theyaffect the financial goals. A balanced scorecard helps ADNOC toeffectively manage HR practices to determine the success of thecompany because it helps to find out what must done to optimizeproductivity as an oil company. A balanced scorecard for ADNOCfocuses on determining the main goals and finds effective ways tomeasure and evaluate how these goals have been achieved and theiroutcome. This helps the company to create an HR value chain that islinked with organizational strategies to justify its performance andachievement of goals to relevant stakeholders. These achievements canbe identified by financial outcomes like revenue and costeffectiveness, and non financial outcomes like training, servicequality and labor productivity.

Some of the metrics used tomeasure HR performance and outcomes in a balanced scorecard includeproductivity, market share, profitability, leadership, stakeholderresponsibility, public responsibility, environmental responsibility,legal and ethical behaviors, employee attitudes and motivation, andtraining and development. Thus a balanced scorecard, throughperformance evaluation and feedback, is used by the company bringabout improvement (Lawler &amp Boudreau, 2012). Therefore, themetrics used must be focused on a single strategy that should beconnected, reliable and mutually supporting.

CONCLUSION

ADNOC has been keen to developHR strategies that will help it to attain market leadership and gaincompetitive advantage. This hasbeen done by the creation of effectiveHR policies and ensuring that there is a good implementation of thesepolicies (Marcel &amp Mitchell, 2006). Over the years, the companyhas developed to become one of the top global refiners anddistributors. Appropriate HR planning and associations have been themost relevant aspect of the company’s HRM. The HRM department hasidentified relevant in identifying an issue that concern employeesand finds adequate means to resolve these issues. It is, therefore,important to make sure that the company employs highly skilledpersonnel to increase the chances of acquiring more productivity.

References

Lawler,E., &amp Boudreau, J. (2012).&nbspEffectivehuman resource management a global analysis. Stanford, Calif.: Stanford Business Books, an imprint of StanfordUniversity Press

Marcel,V., &amp Mitchell, J. (2006).&nbspOiltitans: National oil companies in the Middle East. Washington. D.C.: The Brookings Institution.

Noe,R. (2006).&nbspHumanresource management: Gaining a competitive advantage&nbsp(5thed.). Boston, Mass.: McGraw-Hill

APPENDICES

Appendix1: Questionnaire

Questionshanded in to a senior manager (Dr. Patrick Ibin Jong) in HRdepartment

SectionB: Personal Information

1.For how long have you worked for this company in your presentcapacity?

1-2 years (1)

4-6 years (3)

2-4 years (2)

6 years and above (4)

2.How many employees does the company have?

Thecompany has 26,500 employees

3.Which departments have you served in?

Currently,I am the assistant manager, HR department. I have previously, workedin the IT department as a director, Sales department as a procurementofficer, and Operations department as a junior officer and assistantadministrator.

SectionB: Close-ended questions

  1. Where do you place the firm in terms of HR policies?

The company has of lateimplemented various HR policies and strategies to conform tointernational standards as well as engage all employees effectively.Today, our company is one of the best in Abu Dhabi in implementingeffective and appealing HR policies

  1. How has the company performed in terms of productivity and profitability over the last 10 years?

The company has seen increasedproductivity and profitability over the years. We continue to seeincreased profits due to implementation of HR best practices, whichhave enabled the employees to engage well and enhance theirproductivity. Although some subsidiaries such as ADNOC Distributionhave realized losses over the years, the entire company has realizedprofits.

  1. Does the company have a HRM handbook?

Yes, the company has a HRMhandbook, which defines the rules of business, engagement, employeerelations, and the best practices

  1. What is the relationship between the different departments of the company?

At times, the variousdepartments have experienced constraints due to the sense that theycarry different roles, all of which require the engagement ofemployees. However, the company has always cultivated the bestpractices such as teamwork, excellent conflict management approaches,and effective decisions applications to ensure that the departments’relationships remain cordial.

  1. Which training and HR tools has the company applied?

The company has usedtechnology-based techniques such as interactive media, web-basedprograms, and PC-based techniques. Other tools include on-the-job andoff-the-job training techniques, Tutorials, Mentoring, Case studies,self-assessments, conferences, field trips, and job rotation allunder the tool kit.

  1. What are the most predominant focus areas and points in the company’s HR policy?

Employment engagement,training and development, job retention, and productivity

  1. What are the most predominant challenges experienced by the management and the HR department regarding strategies employed to attain competitive edge?

Bearing in mind the number ofemployees, the company has faced challenges in cultivating the bestmethod for recognizing employees’ best efforts, the most effectivetool for engagement, and the best method for realizing full potentialfor all employees.

  1. How has the company employed technological approaches to achieve business success factors?

The company has implementedvarious technology mechanisms in its HR department and otherdepartment such as Financial Management Systems, Employee MonitoringSystems, and E-Procurement Systems among others. These systems haveenabled the company to identify solutions effectively and monitor allactivities effectively.

  1. Which are some of the ethical challenges the company has faced in regards to human resource?

The company has faced variousethical challenges such as diversity, safety, discrimination andharassment, privacy, legal compliance, distribution of rewards acrossdepartments, and questions on compensation and governance.

  1. How has HR best practices affected productivity?

The HR practices haveincreased productivity as they have eased hiring and development ofemployees as well as allowed the HR department to implement policiesthat ensure effective employment engagement.

SECTIONC: Open-ended questions

Tickwhere appropriate

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

  1. The company employs HR best practices and policies

1

2

3

4

5

  1. The management has put mechanisms to advance the HR department

1

2

3

4

5

  1. The company aligns its operating strategy with Transition to Business Leadership (TBL)achievement

1

2

3

4

5

  1. The management continually analyses the company TBL and HR policies

1

2

3

4

5

  1. HR department has employed satisfactory employee training strategies

1

2

3

4

5

  1. Employment engagement is key in HR policies

1

2

3

4

5

  1. The employee training techniques are adequate

1

2

3

4

5

  1. The company uses on-the-job and off-the-job development and training methods efficiently

1

2

3

4

5

  1. The company HR policies and strategies are sustainable

1

2

3

4

5

  1. The management commendably co-operates with other departments to ensure sustainability

1

2

3

4

5

Appendix2: Harvard Approach

Appendix 3: Factorsaffecting ethical behavior at work

Appendix4: A Balanced Scorecard

Strategic performance metrics

Cost effectiveness

Position in the industry

Revenue and profit margins

Percentage market share

Annual revenues

Organization strategy metrics

Favorable CSR practices

Customer index satisfaction index

Rate of customer compliments or complains

Customer metrics and outcome metrics

Quality customer oriented service metrics

Employee strategy, behavior and capacity metrics

Employee turnover

Employee motivation and productivity

Employee customer based behavior metrics

Employee commitment and participation

Percentage of successful employees

Strategic HR Activity metrics. (Which HR practices contribute to efficiency)

Part one

Part two

Recruitment and placement processes

Part three

Training and development of employees

Part four

Compensation

Part five

Employee Relations

ADNOC basic strategy. HR practices to attain strategic goals.

Create consumer based workforce

Embedded core values of ADNOC

Encourage employee growth and learning through motivation

Emphasize the importance of business partnership with related businesses.

Corporate responsibility practices