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Rahul R.

Nakhe
Roll No. 2542
Executive MBA I

Role of HR in Product Pricing and Sales


Turnover
with respect to
IT projects and FMCG

Assumptions
1. Suggestions are applicable to profit based organizations whose
primary goal is to increase the profit margin
2. Suggestions made are applicable to Indian IT industry and FMCG

Human resource management and its functions Human resource management (HR) is the management of an
organization's workforce, or human resources. It is responsible for the
attraction, selection, training, assessment, and rewarding of employees,
while also overseeing organizational leadership and culture, and ensuring
compliance with employment and labor laws. In circumstances where
employees desire and are legally authorized to hold a collective
bargaining agreement, HR will also serve as the company's primary liaison
with the employees' representatives (usually a labor union).
Dave Ulrich lists the functions of HR as: aligning HR and business strategy,
re-engineering organization processes, listening and responding to
employees, and managing transformation and change.
In practice, HR is responsible for employee experience during the entire
employment lifecycle. It is first charged with attracting the right
employees through employer branding. It then must select the right
employees through the recruitment process. HR then onboards new hires
and oversees their training and development during their tenure with the
organization. HR assesses talent through use of performance appraisals
and then rewards them accordingly. In fulfillment of the latter, HR may
sometimes administer payroll and employee benefits, although such
activities are more and more being outsourced, with HR playing a more
strategic role. Finally, HR is involved in employee terminations - including
resignations, performance-related dismissals, and redundancies.
At the macro-level, HR is in charge of overseeing organizational leadership
and culture. HR also ensures compliance with employment and labor laws,
which differ by geography, and often oversees health, safety, and security.
In circumstances where employees desire and are legally authorized to
hold a collective bargaining agreement, HR will typically also serve as the
company's primary liaison with the employee's representatives (usually a
labor union). Consequently, HR, usually through industry representatives,
engages in lobbying efforts with governmental agencies (e.g., in the
United States, the United States Department of Labor and the National
Labor Relations Board) to further its priorities.
The discipline may also engage in mobility management, especially
pertaining to expatriates; and it is frequently involved in the merger and

acquisition process. HR is generally viewed as a support function to the


business, helping to minimize costs and reduce risk.
Now, let us see what role HR can play in Product Pricing and Sales
Turnover w.r.t. IT Projects and FMCG.

A.Product pricing
For a Profit based organization, the goal is to make more and more money
(through Profit making) now and in future. Profit margin (%age) for a
product can be increased in 2 ways:
1. By increasing its price
2. By reducing its cost
The second way of increasing profit through reducing costs is more
appealing because:
a. The IT industry and FMCG are price sensitive because of
Commoditization
Presence of multiple competitors
Price sensitivity of the customers (end customers in India for
FMCG and the US and the Europe based organizations for IT as
an effect of recession)
Competition from cheaper Chinese products in some
segments in FMCG as well as IT
b. To keep product costs down is challenging because of inflation also.
c. Even for niche segments of these markets, profits can be increased
by reducing costs
Increasing price depends upon what a customer is seeing as value in the
product, what competitors are offering, what alternatives are available,
etc which is out of purview of HR.
Profit can be increased or price can be reduced by reducing costs of
product. Manufacturing cost, overheads and SG&A costs form cost of a
product. Labor cost is directly affected by HR. Quality cost, material cost
and non-manufacturing costs like sales and administration overheads are
indirectly affected by HR through recruitment, training, motivation, etc. In
short, each and every cost is directly or indirectly affected by HR.
With this scenario, the role of HR is becoming increasingly challenging.
The suggestions are:
1. Align HR and business strategy e.g. if a company wants to be a low
cost company, HR should try to reduce employee related cost in
every possible way without affecting performance.
2. Plan for manpower requirement in line with the organizations
pricing strategy in terms of number of people, skill sets, total
employee cost, jobs to be outsourced, etc This is an annual
exercise which needs to be done carefully by giving due attention to
manpower required vs manpower available with skillset in picture,
employees retiring and those leaving voluntarily, etc.

3. Recruit new people rightly skilled for job - e.g. software skills for IT
jobs, language skills for overseas jobs, etc.
4. Recruit people with right salaries/costs to keep total employee and
in turn product cost down.
5. Train the manpower for required skills (effectiveness, product
quality).
6. Motivate them through policies and procedures, rewards, incentives,
etc t improve their efficiency e.g. flexible timing for employees
working in overseas IT projects and sales, rewards for achieving
client satisfaction / exceeding sales turnover.
7. Rightsize the workforce (increase or reduce size of workforce)
according to the predicted sales turnover/volume.
8. Outsource jobs that are low skilled (e.g. drivers, cooks, cleaning etc)
to reduce employee costs.
9. Perform routine HR jobs like payroll processing and performance
appraisals in time (part of continued commitment to organization
through employee satisfaction).
10.
Continued communication with employees to keep them
informed about policies, business news, etc.

B) Sales Turnover:
In IT industry, the projects are of long duration and are less in numbers
(less sales events). The time required from contacting the customer to
closing a deal is long. Skilled and experienced sales people are required
but in less numbers. The customers may be overseas with different
cultures and languages. The employee turnover for sales force is less.
Customer requirements dont change rapidly.
For FMCG, as the name suggests, sales events are very high in number.
The time to sell is less. Experience and skill requirement from sales force
is less but number of sales people required is high. The employee
turnover for sales force is more. Customer requirements change rapidly.
Sales promotion is done through advertising, free product offers etc.
With these characteristics, suggestions are
1. Plan for manpower requirement in line with the expected sales
turnover in terms of number of people, skill sets, etc.
2. Recruit new people rightly skilled for job (e.g. knowledge of trends in
IT, local language skill for FMCG in different regions, communication
skills, etc)
3. Train the manpower for required skills (trends in software, mass
marketing in FMCG)
4. Motivate them for effective and efficient working through policies
and procedures, rewards, incentives, etc. These may be different
than those applicable to other employees.
5. Retain the sales workforce in IT through attractive offers.
6. As sales force turnover and required number is high in FMCG,
constant recruiting may be required.

7. Perform routine HR jobs like payroll processing and performance

appraisals in time (part of continued commitment to organization


through employee satisfaction).

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