Reference no: EM131113707

Provincial Wine Corporation (PWC) launched on April 1, 2012. Prior to its incor- poration, customers could purchase wines from three organizations in the metro area: (1) Provincial Liquor Corporation (PLC), a provincial Crown corporation which sold wines, spirits, and beers; (2) Vintage Wines Inc. (Vintage), a private com- pany that sold higher-end, specialty wine products not available at PLC; or (3) small agency outlets that were not government-run and had a small inventory of Canadian wines. The newly formed PWC is a merger of PLC and Vintage. The current merger has resulted in 20 PWC stores in the metro area. On average, each store has one manager, two assistant managers, and 14 full-time and 30 part-time employees. Full- time employees work 37.5 hours a week while part-time employees are guaranteed a minimum of 25 hours a week. As permanent employees, they receive pay and a full benefit package (e.g., pension, medical, etc.). In addition, there are approximately 60 casual workers who can be called in as needed and can work at any of the metro stores. These casual employees are not guaranteed a minimum number of work hours a week. They are paid the same hourly rate as permanent employees but have no access to the organization's benefit plan. All non-managerial employees, whether full-time, part-time, permanent or casual, are unionized.

Luke Davis (CEO), Kate Hong (Vice-President Retail Sales & Operations), and Jason Williams (Vice-President HRM) are discussing the strategic plan for PWC for the next five years. Luke feels strongly that the key business strengths relate to the product knowledge of the staff, the extensive variety of wines available in each store, and customer service. As he stresses, the province still allows the existing agency stores to offer some wine products. If PWC stores do not provide great service, products, and product knowledge, there is a huge threat-customers can simply go to one of the numerous agency outlets that still exist throughout the metro area. This threat is even more significant as the provincial government has recently hinted that agency outlets may soon be able to sell non-Canadian wines, allowing these nonunion outlets to compete more directly with product offerings of PWC. As Luke stresses, the agency stores also have an operational advantage of lower labour costs as none of the agency outlets are unionized.

Kate adds that from an operational perspective, employees need to be encour- aged to maximize sales while ensuring social responsibility (i.e., not selling to und- eraged people, not selling to those under the influence, etc.). Kate also stresses that information sharing between staff and teamwork are key to business success, as employees often have to assist others, cover for each other, etc. However, she feels that this area needs improvement. She proposes that PWC increase training and move toward having employees work in teams to facilitate knowledge sharing.

Jason then starts to focus on the HRM implications. The organization is in transition. About 80 percent of the full-time employees came from the former PLC, and were formerly covered by the provincial government's collective agree- ment. A new collective agreement was signed when PWC was formed, with the understanding that the new operation had to generate sufficient revenues to cover its own operating cost and maintain its current level of contributions to the provin- cial government in terms of taxes on alcohol. Failure to meet these financial goals would result in PWC being shut down. In fact, at the time of formation, there was pressure from some members of the legislature that PWC should be a standalone, non-government-based, private company like Vintage. However, the social respon- sibility associated with alcohol sales resulted in the organization remaining within the public sector.

Given the environment at the time of formation, the union and management realized that they needed to reach a settlement that would help ensure the long- term viability of the newly formed PWC. The union encouraged the workers to accept the 2012 deal, even though wage increases were lower than what other pro- vincial employees received. The union argued that this was needed in order to firmly establish the organization and enhance job security. The resulting collective agreement provided a $1,000 signing bonus in year one, and a one percent increase over the next three years. The resulting contract also allowed PWC enhanced staffing flexibility with the ability to hire more part-time and casual workers. Such hiring provisions did not exist in the former PLC. However, the contract required that any employee who worked a minimum of 1,800 hours in a two-year period would be converted to permanent part-time status.

Three years after the initial collective agreement was signed, the restructuring has taken place, and the operation has seen many changes. While the organization lost money in year 1, it has now achieved its financial goals of covering costs and contributing tax dollars to the province; new products and new in-store wine-tastin

equipment have been introduced; and there has been an increased use of casual staff for peak periods (weekends and the holiday season). However, as they map out the strategy for the upcoming five years, they realize that their largest cost is labour but also that the success of any future quality and product improvements will require employee engagement. Therefore, the human resources strategy of Jason's department must mesh with the overall business strategy.

As they prepare to map out the plan, they have been hit with unexpected financial news. Over the past six weeks, oil prices have plummeted, causing both a stall in the overall Canadian economy and a drop in the Canadian dollar. The rapid drop in the loonie over the past two months means that all wines purchased from the U.S. are now 13 percent more expensive, while European wines have increased by 8 percent. This is due solely to exchange rate effects. Locally, a number of large firms have laid off staff, and a few higher-end restaurants (which purchase their speciality wines from the organization) have shut their doors. While no one had expected this financial slump, estimates are that oil prices, a leading cause of the economic slow down, will remain low for at least a year.

With this as the backdrop, they start to form a plan that will continue to ensure financial stability, product quality, and a stable, committed workforce.

QUESTIONS( 1 page each question)

1. What type of union strategy is PWC using?

2. Do you see evidence of the managerial trends of high-performance work practices, nonunion employee representation, and nonstandard work practices present in the case?

3. Has there been a strong linkage between the industrial relations and busi- ness strategies of the organization? To what extent?

4. Given the case at hand, what would you suggest the firm do in terms of making changes to its current strategies?