Problem: Describe 5 HR problems in the case. Illustrate your answer with specific case examples.
Jack could not believe that his once-successful online furniture retail store, Jack Inc, which had had the reputation as an industry leader in the niche online furniture market with an exciting future, could now be facing bankruptcy. He wondered how the company's financial position could have deteriorated in such a short time. As he waited to meet with his finance manager, Jack reflected on the events of the last 12 months. Background Jack Inc., founded in Sydney, had grown to become industry leader in the niche online furniture market, with innovative designs and manufacture of high quality, hand-finished, reasonably priced, furniture. The digital retailer grew rapidly during Covid-19 with sales trebling, as the retailer took advantage of the shift to online shopping. Jack believed the company was successful because of its first mover advantage in the online furniture market, its ability to react quickly to market trends, and its reliability in the delivery of high quality, hand-finished, reasonably priced products, which Jack attributed to its hardworking, talented, employees. Employees in the online store possessed sophisticated technological and marketing expertise while the factory workshop employed highly skilled craftsmen (all crafts people were men). Jack's approach to HR Jack had been in the furniture business all his life and believed he knew what it took to meet online customer needs, as well as to run a factory. Despite a substantial increase in the number of staff employed over time (employees now numbered over 100 in the online business, factory workshop and new Darwin office, discussed below), Jack saw no need to develop a strategic approach to HRM or to introduce formal HRM policies or practices. He believed that these initiatives would make the company inflexible and unable to seize business opportunities as they arose. In additions, functions such as finance, marketing and production were Jack's priority. As a result, Jack Inc. had no personnel or HR department, although Ella, with a degree in HRM, administered payroll. Ella had suggested to Jack to consider appointing a manager with responsibility for HRM given the increased size of the business. Aside from Ella's responsibility for payroll, HRM activities were undertaken by Jack and his trusted line managers. These managers had either an e-commerce back- ground or were highly skilled craftsmen. None had a formal HR background. As a result of decision making by individual managers, HR decisions were sometimes unfair and contradictory. However, Jack believed this approach provided the company with speed and flexibility. While there was no formal performance appraisal or performance management system, Jack believed that he and his managers were in position to provide guidance to employees as needed, and stress performance expectations, especially that all employees work hard. Jack and his line managers tended to intervene after a problem occurred (e.g., poor customer service, problems with product design/quality etc) by taking the employee/s aside to discuss the issue/s, and provide remedial on the job training as they saw fit. Jack saw any further, formal training or career development as personal development and thus expenses that should be incurred by the employee. But Jack was 'paternalistic', treated his employees like family with Jack Inc's culture family-like, and placed great emphasis on loyalty. Company-sponsored familiar, social gatherings were frequent and as 'family members', all employees were expected to attend. He believed that his employees felt secure and had a harmonious working relationship with management, as evidenced by low employee turnover. The Darwin market As borders began to re-open following the Covid-19 pandemic, to capitalize on the company's strong online market position in Australia, and provide new growth opportunities, Jack decided to open a bricks and mortar store in Darwin. He believed that a physical shop front would be core to the company's omnichannel future and serve as a competitive advantage for how customers want to shop today. Not only would it deliver a better shopping experience for customers in Darwin, but Darwin would be a gateway to the highly lucrative, online, Asian market. Jack borrowed close to half a million dollars to fund Jack Inc's expansion. Despite no skills inventory or any real awareness of the Darwin labour market, Jack decided that the manager of the new Darwin footprint should be selected from existing (Sydney-based) staff. He believed that someone with the right attitude and personality would be key to 'fit' and the best candidate. Jane, with a sales and marketing background, was delighted when she was offered the position. In her early thirties, Jane had lived in Darwin with her parents during her high school years. Jane was ambitious, loyal, and with no dependents, mobile. Despite not having any management experience, or indeed any work experience outside of her present job at Jack Inc, Jane and Jack both believed that she could comfortably manage sales and marketing, as well as any future international business because she had studied these subjects in her business degree. Having relocated to Darwin, Jane's first task was the recruitment and selection of staff for the Darwin office. Jack Inc had no written job descriptions or person specifications because Jack regarded such things as bureaucratic nonsense. Despite no formal HR planning, Jane and Jack decided that for Darwin to be successful and a gateway to other Asian markets, 7 employees were needed - three sales representatives, a personal assistant to Jane, and three employees with expertise in online design and marketing. Jane took a leaf out of Jack's book and also sought applicants on the basis of attitude and personality, who were enthusiastic and ambitious, and preferably had a sales and marketing background or experience. Because of the weak labour market, Jane found that she was able to hire university and VET graduates for all positions, although they required higher salaries because of their formal qualifications. Jane was disappointed when Jack queried the level (and costs) of these staff, and insisted that payroll be administered by Ella in the head office in Sydney. Once hired, new employees were introduced to each other and then left by Jane to 'get on with the job'. Jane felt confident that employees would be able to handle their jobs, and that the Darwin office could maintain effective communication with head office via the company's intranet. For the first six months the Darwin office seemed to be 'tracking nicely'. A major company with a large distribution network had asked Jane to expand the business into Malaysia via a joint venture. Additional international opportunities were also alluded to, should the initial joint venture succeed. Jane saw this as a great opportunity to show off her managerial abilities to Jack. As months went by, and despite some early initial sales success in the Darwin market, the furniture styles that appealed to Jack Inc's online customers failed to gain traction in Darwin. The competitive situation worsened with the recent introduction of the entry of online competitors with more innovative, customised furniture designs at substantially lower prices than those offered by Jack Inc - particularly the arrival of a very large, European-based MNC that had more appealing computer assisted designs, and sophisticated production technology that meant it could produce comparable quality furniture, albeit in the form of furniture flat packs at substantially lower prices. At the same time, the joint venture proposal for Malaysia fell through. Tensions rose in the Darwin office due to the introduction of Jane's unrealistic sales targets, the refusal by Sydney-based Jack to change designs or reduce prices, and ongoing payroll problems caused by this role being performed by head office. As the pressure to improve performance increased, Jane became more aggressive and demanding towards workers. With a substantial cost base in the Darwin market and few sales, Jack in turn, began to angrily express his concerns to Jane. The precarious financial position was made worse by a downturn in the local Darwin economy which meant severely reduced customer spending - in the event customers did want to purchase Jack Inc's designs. Disappointed with the sales performance, Jane lost confidence in her employees and insisted that they constantly check in with her. Jobs that had given people responsibility, freedom to make decisions and use their initiative became micromanaged, as Jane assumed all decision making, with even minor matters having to be referred to her. This amplified Jane's workload, which, along with head office pressure, caused her to become extremely quick-tempered and stressed. Staff morale plummeted as Jane's outbursts became more frequent. Her PA and two sales representatives quit after Jane fired a popular staff member who was caught shopping on the Internet during their lunch hour. When the employee pointed out that it was during their lunch hour and there existed no policy on Internet usage, Jane retorted that an Internet policy was not needed as everyone knew that internet surfing/personal shopping during work hours was not allowed. By the end of the year, Jack Inc's Darwin office was in a dire financial position. Morale was at an all-time low, with employees openly searching online during workhours for employment opportunities elsewhere. And in Sydney... Meanwhile, in Sydney, Jack Inc's factory had been affected by environmental protestors who had discovered that the timber used to make the furniture was taken from protected rainforests. Two trainee carpenters who held strong environmental values 'downed tools' to join the protestors. A local TV crew filmed the protest, with the trainee carpenters in the company's uniform portrayed in the media as the face of the protest. The protest caught the attention of several key industrial customers who cancelled their orders. This was particularly problematic as the online business's sales had been in decline after Covid-19-related restrictions were lifted. Jack felt betrayed by his workers, who he perceived to be 'family', and emailed them to let them know they had been dismissed, effective immediately. Shortly afterwards, Jack Inc received a letter from the workers' lawyer claiming unfair dismissal. The once-popular online furniture retailer was in a dire financial position and Jack is frantic. He now believes that Jane's appointment to the Darwin office was a mistake. Although Jack's knowledge of employment law tended to be minimal, he is worried that the closure of the Darwin office could result in Jack Inc being faced with large claims for breach of contract regarding employment and lease arrangements. In particular, he is worried about what he should do with Jane. Although no written employment contract existed, Jack had verbally promised Jane that she could stay in Darwin for at least two years in order to justify her move to Darwin. Jack has engaged you to provide advice to him.