Reference no: EM133026507

HR strategy in an uncertain context: Southern Foods Limited 

Southern Foods Limited (SFL) manufacture and supply customised menu items to the food industry. Their range includes a number of savoury and sweet sauces, marinades and stuffings in a chilled or frozen form, which are developed in partnership with the food retailer. Their range of savoury sauces alone encompasses some 65 different varieties from standards like cheese and bolognese to the more exotic spicy mango salsa and Szechwan. SFL occupies a fully integrated processing plant near Chichester town centre and employs 250 people.

The increase in convenience food production and growth in the takeaway food sector has impacted very profitably on the business. The company has developed a line of relishes and sauces that Frankie's Hot Dog Restaurants Ltd (the market leader) currently use.

Frankie's is an American fast-food chain of global proportions. Big Dogs (their premier product) are now on sale in over 100 countries. They open approximately 100 new restaurants a year in the UK alone. Restaurants vary in size from large inner-city restaurants over several floors, which employ many hundreds of staff, to small units located in railway stations, staffed by only a handful of operatives.

Although Frankie's are the purveyors of fast-food meals, they have very little in common with the hospitality sector and much more in common with retailers. There is no menu flexibility, no locally determined specialities, and no need for catering expertise. The company is proud that the quality and ingredients of its individual food items are completely uniform throughout the UK, and vary little across the world. For this reason Frankie's tend to emphasise singlesupplier relationships, and have a very high level of determination over the quality, costs and ingredients of their finished products. The Frankie's emphasis on standardisation of product extends to production of their Relish Pot for their chicken (Chickie Dog) range. This menu item, which is particularly popular with children, offers a barbecue-, tomato- or curryflavoured Relish Pot accompaniment. For 15 years these pots have been manufactured at SFL.

That is not to say that Southern Foods have a contract with Frankie's. Although the company has had to make considerable changes to its production processes, it has no written contract that confirms the relationship between the massive American giant and the smaller UK company. And although Southern Foods is delighted with the business that is coming its way (Relish Pot consumption is currently running at 350 million per annum), there is a price to pay in terms of both the lack of security in the relationship and in the demands that Frankie's has placed on the Southern Foods production processes.

In order to ensure the consistency and quality of the Relish Pot, Frankie's imposes rigid standards on both the production process and employee behaviours at SFL. The company has had to install three new Austrian-manufactured machines that have cost £1 million each to buy, ship and install. In addition, the company is required to demonstrate its continued commitment to Frankie's by showing continuous development and investment in this sector of its business. Quality is measured by statistical process control. There is also an enforced emphasis on continually increasing the efficiency in the production capabilities in terms of reducing the cost per case and increasing the output per head. In line with the 'Big Boy Way' (the corporate philosophy of the American giant) a continuous improvement team measures all aspects of the process. Data must be kept up to date at all times to fulfil the demands of the Big Boy quality inspectors, who frequently drop by unannounced.

In practical terms, this demanding and unstable relationship between customer and supplier has meant that a corner of the factory in Chichester has become a micro-reflection of the American company itself. This corner is known as the B's Unit. The specialised nature of the training means that staff who work in the B's Unit are dedicated to it alone and are the most highly skilled workers in the factory. To keep costs down, staff have been cut to the minimum. At any one time two mixers, three machine operators, one palleting employee and one unit leader staff the corner. The machines run for 16 hours a day over two shifts. The B's Unit employees (14 in total) generally regard themselves as the best in the organisation and are highly committed and intrinsically motivated. In the main, they work hard. They are, however, somewhat disgruntled that they are paid the same as lower-skilled workers, and morale is showing signs of dropping. At the present time, nonetheless, productivity is slowed only when employees are sick or on leave, for they are not trained in each other's work. Cover from within other areas of the factory is not allowed under the terms set by the US organisation.

Current scenario

Two weeks ago the Big Boy inspectors dropped in with information on a new business strategy. They are intending to introduce special promotions of hot dogs influenced by international cuisine and they are requesting that Southern Foods become involved in the development and production of shorter runs of promotional relishes (the first of which will be sweet-and-sour). The potential benefits for the business are substantial, particularly if any of the promotional relishes become part of the permanent menu.

The managing director has called a board meeting to make clear the implications for the business. He has decided that there is not enough stability in promotional relishes to justify the purchase of a fourth machine. Instead he has decided to 'sweat' the current assets even harder. He has decided that the B's Unit must operate for 24 hours a day, that one of the three machines should be devoted to promotional relishes, and that more efficiency in labour costs must be made. He wants times of slow production to be eliminated. He has decided that he can afford only another six staff to cover the additional production requirements, particularly because he now considers that the B's Unit staff should be on an enhanced reward package. He also wants to be able to return to the current shift pattern in the case of the relish promotions not being continued. 

You are the Human Resource Director. You have been given a week to come up with innovative ideas that might help solve the business problems identified in the case study and also to identify areas of potential dispute within the workforce and with the unions. 

 You have decided that pursuing a strategy of human resource flexibility can solve many of the issues raised by the managing director. 

• Provide a comprehensive and critical review of the relevant literature relating to the key HR issues reflected in the case study, focussing upon flexibility but also recognising the issues in respect of employee relations and training.
• Provide a full set of recommendations detailing how to address the problems stated in the case study