HRM Theories and Their Application at Tesco and Next Retail Companies


HRMTheories and Their Application at Tesco and Next Retail Companies

HRMTheories and Their Application at Tesco and Next Retail Companies

Humanresource management is among the most significant practices thatdetermine the success of any organization. This is because humanresources are the most critical assets that companies possess, andthe effectiveness with which they are managed affects the capacity ofthe firm to utilize other assets to achieve the organization’sstrategic objectives (Coyle, 2013, p. 12). Effective human resourcemanagers make the best use of the available HRM models in ensuringthat all human resource practices are based on informed decisions andtheories whose effectiveness has been proven. A careful applicationof the human resource management theories, concepts, and models iscritical, especially in the organizations operating in thecontemporary business environment where the human resource issues areever increasing. This paper will address the HRM issues at Tesco andNext companies that operate in the retail industry, and explain howtheir HRM practices can be guided by relevant theories and models toachieve their strategic objectives.

Inoutline, the structure of this paper consists of three major parts.The first section focuses on the background of the two companies,Tesco, and Next Plc. The background section addresses three majorfactors, which include the history and development of each company,the strategic objectives that each of the companies intends toachieve, and HRM issues affecting each of the companies at themoment. Some of the HRM issues and practices addressed include thestaff training and development, employee reward and motivation,maintenance of healthy and safe working environment, employeerelations, employee turnover, and employee satisfaction.

Thesecond section addresses the application of human resource managementtheories in resolving the HRM issues affecting the two companies.Different theories and models discussed in this section explain howhuman resource practices can be improved with the objective ofhelping the companies achieve their strategic objectives. The softHRM model can be used in addressing the employee relation issues. Inaddition, theory Y and the theory of social exchange can be used toaddress the association between the management and employees. Thehigh-performance model and reinforcement theory will help managementin addressing employee compensation issues. The management can usethe staff training and development model in addressing issues ofunskilled and semiskilled staff in Next Plc. The issue of stressfulworking environment at Next Plc can be addressed using transactionalmodel.

Lastly,the paper concludes that human resource practices are critical to alltypes of organizations. However, the management of human resourcepractices can be more effective if guided by relevant HRM theoriesand models.

Backgroundof the two companies, Tesco and NextPlc


Tescois a U.K. based company that operates in the retail industry. Tescowas started in the year 1919 by Jack Cohen (Sahni, 2014, p. 1). Overthe years, Tesco has diversified its geographical coverage, and itnow operates in Turkey, China, Ireland, Poland, United States,Malaysia, and Europe, among other countries. Tesco is rated as thethird largest retail firm in the world and the first in the U.K(Tesco, 2014, p. 2). Currently, Tesco has about 5,381 stores in theworld, where 2,666 of them are located in the Great Britain. Thecompany employs 472,000 people who run its stores in all 14 countriesthat it operates.


Similarto other large companies, Tesco has a clearly defined strategic planthat it intends to achieve in the long-run. Tesco’s strategic planhas many components, but five of them are directly related the humanresources practices. First, Tesco intends to comprehend and addressits customer needs in line with the market trends (Tesco, 2014, p.5). Secondly, Tesco intends to enhance its services and other storefacilities with the objective of attracting more clients and increaseprofit earning capacity. Third, Tesco will adopt new technology andfocus on productivity enhancement in order to generate more profits.Fourth, Tesco will maximize its efforts for the corporate socialresponsibility. The achievement of these components of Tesco’sstrategic plan will require the contribution of the human resources.Lastly, Tesco will develop its employees’ skills through trainingsessions and techniques (Tesco, 2014, p. 5).

CurrentHRM challenges at Tesco

Employeecompensation has been a major challenge and the cause of conflictbetween the management of Tesco and its members of staff. Members ofstaff who are located in various parts of the world accuse themanagement of giving them substandard wages. For example, about 9,000employees working in Irish stores planned to go on strike in order todemand a pay rise (Leyland, 2014, p. 1). This implies that Tescoemployees feel that the wages they receive are below the requireminimum wage rates. This is a major factor that can reduce theirmotivation, thus hindering the company from achieving its strategicobjectives.

Apartfrom the claim that they are underpaid, employees at Tesco havealleged that the management has continuously failed to include themin the decision-making process, especially in matters that affecttheir affairs. For example, Tesco’s decision to close the Pinnaclesdepot that dealt with fresh foods and the subsequent movement of itsemployees to a nearby depot at reduced salary was received assurprise by employees (Star, 2013, p. 1). This means that employeerelations are critical issues that Tesco should address in order toenhance the company’s capacity to pursue its strategic objectives.

Employeeturnover is another human resource management issue that Tesco shouldaddress through the use of relevant models and theories. Research hasshown that Tesco is one of the multinational firms with the highestrate of employee turnover, which currently stands at about 75 (CMR,2014, p. 1). The major cause of this phenomenon is a lack of employeesatisfaction with their present job at Tesco. In addition, the lackof employee motivation at Tesco has significantly contributed towardstheir desire to look for employment opportunities elsewhere.

Tescois also likely to face some challenges regarding the changemanagement. Although changes in the management are, in most cases,intended to enhance the organizational performance, it can alsoresult in some HRM challenges. This is a common occurrence inorganization that undertake changes without adequate involvement ofall stakeholders that intend to fill competitive positions. Tesco hasundertaken significant changes in its leadership since the year 2010when its CEO Terry Leahy retired (Kemsley, 2013, p. 1). The processof filling the CEO’s position resulted in some employee relationschallenges, especially among the managers who missed the position. Inaddition, internal changes implemented by the new CEO have beenchallenging and unsettling.


NextPLC is a multinational company with headquarters in England, UnitedKingdom. Next operates in the retail industry with the main focus onhome products, footwear, and clothing. The company was formed in 1864by Joseph Hepworth, but its actual brand “Next” was formed in1982 (Next Plc, 2014, p. 1). Next has been growing over the years toits current status of a multinational chain of retail stores withabout 700 stores, where 597 of them are located in Ireland and theUnited Kingdom and 200 of them in Europe, Middle East, and Asia(Shannon, 2012, p. 1). Next’s entry into the international markethas been achieved through different approaches. For example, thecompany entered into the Asian and the Middle East markets throughfranchising and into the United States through joint ventures. Thetotal number of employees working with Next was estimated to be54,507 at the end of 2013 (Shannon, 2012, p. 1).

Next’sstrategic objectives

Theprimary strategic objective of Next is to increase the shareholderwealth in the long-run, but these strategies will be achieved throughthe accomplishment of a series of other objectives. For example, NextPlc will increase its range of products with the objective ofincrease its market share and attracting more customers fromdifferent market segments (Next Plc, 2013, p. 1). Next PLC willincrease the profitability of its store space by conducting the storeappraisal that is consistent with the financial criteria. Inaddition, Next PLC will increase its overall profitability throughonline sales in the United Kingdom and other market segments. Otherstrategies that will be used to increase the company’sprofitability include efficient sourcing of products, cost control,and stock management (Next Plc, 2013, p. 1). All these strategicobjectives will require the contribution of human resources that NextPLC owns.

CurrentHRM challenges at Next PLC

Theretail industry, which Next Plc operates in, is one of the industriesthat rely much on the unskilled and semiskilled employees in thedelivery of its services. Next PLC is not an exemption, and it has alarge number of these categories of employees in its stores and alsoa group of suppliers who have little skills in their respectivefields of operation (Varley, 2009, p. 39). The tendency of theplayers in the retail industry to employ semi-skilled and unskilledemployees is based on the notion that their operations in this sectordo not require a lot of skills. However, there is not a singleindustry in the contemporary world that does not require specialskills to achieve its strategic objectives. Therefore, lack of skillsamong the technical employees is a key challenge that Next PLC shouldseek to address using the most appropriate theories and models.

Nearlyall, if not all, multinational organizations operating in the retailindustry acknowledge that a diverse workforce is among the keysuccess factors in their industry. To this end, players in thisindustry, including the Next Plc, employ people from differentcultural and religious backgrounds, which brings in a diverseworkforce that is needed by the company to penetrate different marketsegments (Chakkarath, 2010, p. 3). However, the effectiveness withwhich individual firms manage this diversity of employees is the keydeterminant of their competitive advantage. This implies that thedecision by Next Plc to recruit employees from various backgrounds isnot necessarily sufficient to achieve the desired competitiveadvantage. There is a need for a company to apply the relevanttheories, concepts, and models to harness the diversity and convertit into a source of competitive advantage.

Apartfrom giving low compensations and forcing employees to work for longhours, firms in the retail industry often fail to focus on the safetyof the working place for the their employees. A company review hasshown that Next’s workplace is stressful for most of its employeeswho work for long hours (Lincoln, 2014, p. 1). The company allocatesunpredictable shifts to its employees and does not orient its newemployees, which gives them a hard time to execute their roles. Thestressful working environment implies that Next Plc does not caremuch about the safety, well-being, and the health of its employees.

Lackof employee motivation is one the current challenges that Next Plcshould seek to address. Lack employee motivation at Next can beconfirmed by lack of satisfaction, poor performance, lack ofcommitment, and a high rate of employee turnover (Lincoln, 2014, p.1). Although the company is in a position to recruit new employeesonce the old ones have quitted their jobs, the motivation of theexisting workforce is critical for the achievement of the firm’sstrategic objectives. This means that Next Plc should focus oneffective knowledge management and ensure that ensure that itcaptures and develops the knowledge of experienced employees.Therefore, Next Plc should make the best use of experiencedemployees’ knowledge and avoid the ‘don’t care attitude’where the management believes that it can recruit any number ofemployees once the experienced ones decide to leave the company. Thiswill show employees that their contributions are appreciated, thusmotivating them to work hard and help Next Plc achieve its strategicobjectives and goals.

Applicationof HRM theories


Thesoft HRM model

Differenttheories can help the retail company in addressing its current HRMchallenges and guide its operations towards the achievement of thestrategic objectives. However, different theories and models shouldbe applied in different situations and with the objective ofaddressing different challenges. The soft model can be used toaddress the challenges associated with the change in management,which includes the failed communication between employees who failedto get the top position and the CEO (Kemsley, 2013, p. 1). The softmodel holds that harmony and commitment at work can be achieved bypromoting a two-way communication between the workforce and themanagement (Kidombo, 2012, p. 12). A two communication between theCEO and other employees (including the management) will enhance theflow of work and the overall organizational performance. This willallow the Next Plc to achieve its strategic objective of increasingthe profit earning capacity. However, this will be achieved if theCEO works hard to win the minds as well as the hearts of theemployees and the management with the objective of generatingcommitment to objectives, goals, and strategies. A healthyrelationship between the CEO, other managers, and employees willcreate an environment that will help the company pursue itsstrategies.

TheoryY and the theory of social exchange

Thetwo theories can be used to guide the management of Tesco Plc inenhancing the participation of members of staff in the process ofdecision making and improving employee relations within theorganization. Theory Y holds that employees seek for autonomy andfreedom to do challenging tasks by themselves (Khurram, 2012, p. 1).This theory assumes that employees are disciplined and consider thework to be a natural activity. This implies that employees should beincluded in the process of decision making and be allowed to executethose decisions without being micromanaged. In addition, the socialexchange theory holds that obligations at workplaces are generatedthrough regular interactions between the stakeholders who are in thepositions of reciprocal interdependencies (Kular, 2008, 5). Thismeans that Tesco should harness social engagements with employees,especially in the process of decision making. This is a significantapproach that can be used in addressing the issue of the closure ofthe company’s depot at Pinnacle and deploys members of staff byinvolving them in the process of making such a significant decision(Star, 2013, 1). Employee engagement motivates them and reduces thetendency of the workforce withdrawing from its roles. Successemployee involvement will help the management in maintaining healthywork relations and motivate employees to work towards the achievementof Tesco’s strategic objectives.

Reinforcementtheory and the high-performance model

Poorcompensation is among the major challenges that pose the threat ofTesco’s failure to accomplish its strategic objectives. Employeesof Tesco, who work in different stores, have been complaining thatthey are paid substandard wages (Leyland, 2014, p. 1). Thisdemonstrates a lack of understanding among the Tesco management teamsof the relationship between employees’ compensation and theachievement of the strategic objectives. The reinforcement theoryholds that employees can be motivated to work by their externalenvironment as long as it is properly developed (Odunlade, 2012, p.1). Employee compensation is one of the factors that motivateemployees to change their behavior and either demonstrate theircommitment towards the achievement of the organizational goals orwithdraw their commitment. This implies that Tesco should focus onwages that are commensurate with employees’ performance in order tomotivate them to work hard and help the company in pursuing itsstrategic objectives. In addition, the high-performance modelhighlights other strategies that Tesco can use to motivate employees.These approaches include the availability of functional proceduresfor handling grievances, performance appraisal, and promotion(Thatcher, 2010, p. 5). A successful combination and application ofthese strategies will help Tesco in addressing all challengesassociated with the lack of employee motivation, which will in turnhelp the company in achieving its strategic objectives, such asincreased profitability and improved capacity to address customers’needs.


Employeetraining and development model

Stafftraining and development is vital for organizations that areoperating in the contemporary business environment. This is becausethe success of the organization is highly dependent on the competenceof its employees and their capacity to deliver services to the targetclients. In the case of Next Plc, the company has been employing alarge number of unskilled and semiskilled employees with anassumption that its services do not require a lot of expertise (Saad,2013, p. 39). Next should avoid this misconception and embark on theexercise of training its employees and facilitating other types ofemployee development strategies.

Accordingthe employee training and development orientation model, the processof learning is a direct product of employee motivation (Saad, 2013,p. 87). This means that the Next Plc should take the initiative ofshowing employees the significance of the training programs and whatthey should expect after undertaking the training sessions.Enlightening employees on the significance of the training programsgives an insight into their career, thus motivating them to undergothe training and development processes. In addition, Next Plc shouldapply the Mayo effect, which states that both external and internalfactors (such as incentives and sales target) can motivate employeesand create in them the desire to acquire new skills (Tesco, 2012, p.3). This implies that Next Plc should use all means possible tomotivate its employees to undergo training. However, it would benecessary to conduct skills audit of all employees in order todetermine the type and the level of skills that each employee needs.

Thetransactional model and safe workplace environment

Thetransactional theory holds that the stress among employees arisesfrom environmental demands that threaten their well-being. Inaddition, the theory assumes that the stress is a direct product of atransaction between environment and individual employee (Dewe, 2012,p. 27). This implies that the environment that employees aresubjected to by the employer is the key determinants of whetheremployees will find the workplace stressful or not. In this respect,it can be concluded the Next Plc employees find their workenvironment stressful because of the work conditions (such as longworking hours and lack of orientation of the new employees) thecompany provides for its workforce. The stressful workplaceenvironment can be reformed by eliminating factors that makeemployees feel stressed and frustrated while at work. In addition,the management of the Next Plc can use the utilitarian theory tocreate a healthy and a safe workplace environment. Utilitarian theoryholds that actions should be judged to be wrong or right depending onwhether they promote the happiness of others (Gusdorf, 2010, p. 5).This means that the management of Next Plc should maximize thehappiness of employees by giving them safe and healthy workingconditions. Although employees are expected to benefit much from anymeasures taken to improve the working conditions, the company willgain more because a safe environment will motivate employees to workhard and desire to remain in the firm. This will increase thecompany’s performance and address the issue of employee turnover.


Humanresource management is a critical exercise that cannot be avoided inany firm irrespective of the industry it operates in or its size.However, an effective management of human resources requires theapplication of appropriate and relevant theories, concepts, andmodels that can help the management in enhancing the human resourcemanagement practices. This implies that, although the managementteams have the autonomy to manage their employees in their own ways,HRM theories and models can give better guidance and help themanagement in addressing different HRM issues. In the case of TescoPlc, the HRM theories can help the management in dealing with humanresource issues, such as lack of an appropriate reward system, pooremployee relations, high rate of turnover, and change management. Inthe case of Next Plc, HRM theories can be applied when addressingdifferent issues, including staff training and development, diversitymanagement, maintenance of healthy and safe working environment, andlack of employee motivation. The capacity of the management toaddress these issues using the relevant theories will help the twocompanies to achieve their clearly defined strategic objectives.


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