FY021: Introduction to Business Studies: The Body Shop HRM Case Study

1. Introduction: Body Shop's HRM and FM Strategies: Analysis & Evaluation

A Human Resource Management strategy is a process for hiring, encouraging and managing employees for the accomplishment of organizational objectives. Human Resource strategy emphasizes the skills, competencies and abilities of employee and their commitment, motivation and productivity for the success of the organization. This strategy helps in enhancing communication and coordination between different departments. A Financial Management Strategy is a strategy for managing the finances of a company as well as achieving long-term goals while maximizing shareholder value. This report will contain human resource strategies of the Body Shop Company including recruitment, training & development strategies, employee benefits, rewards and incentives. Further, it will state about the financial management strategies. The Report also reviews the profit &loss and balance sheet of the company. This also includes the strengths and weaknesses of HRM and FM strategies.

1.1 Background of the Well-Known Cosmetic Brand Body Shop

The Body Shop is a well-known cosmetic and body care company. The company offers premium quality skincare and hair and body care products made from natural ingredients. It was founded by Anita Roddick in 1976 in Brighton, England. It is a global beauty brand which caters to 30 million customers globally, operating 3000 stores with 10000 employees.

2. Human Resource Management And Its Role

Human Resource Management is a procedure for the management of employees. It contains activities like recruitment, training and development of an individual for the fulfillment of organizational goals (Armstrong, 2020). HRM is responsible for planning, recruitment, team building, communicating policies, rules and performance management of the organization.

A human resource strategy is a plan to manage employees of the organization to achieve its pre-determined objectives. The strategy contains activities like recruitment, training & development. A human resource strategy is essential for the company to pool talented professionals to improve the company's reputation and productivity.

2.1 HRM strategy of the Body Shop Company

Recruitment strategy

Recruitment strategy refers to finding or hiring the most suitable candidate for a job.

• Open recruitment strategy: The Body Shop introduced an open recruitment strategy. At the time of Christmas, a partnership is made by a health and beauty retailer with movement to work on the programme, to hire people including single parents and young careers. This type of strategy aims to remove obstacles of background and educational requirement that hinders recruiting people. This strategy helps in recruiting 733 seasonal employees and leads to improved employee retention.
• Post on social media: The Body Shop Company use social media to attract suitable candidates for the job. By putting advertisements on social media, interested candidates apply for a job. The post includes information about the company`s culture, recruitment job and job role.
• Employee referrals: The Company use employee referral to recruit a candidate Employee referral means motivating your current employee to refer a potential candidate that is best suited for the vacant position (Bos-Nehles, Trullen and Valverde, 2021). It results into a lower level of employee turnover and increased profitability.

Training and Development Strategy

Training and development strategy refers to developing employee`s knowledge and skill through corporate training. This strategy is beneficial for both employees and for company. Employees get an opportunity to learn new things and the company can achieve goals.

• On-the-job training: The Body Shop uses an on-the-job training strategy. In this, the employee is directly engaged in the company's task. Employees learn new things while doing the actual work of the company (Harney and Alkhalaf, 2021). It is beneficial for both employees and employers. The employee can boost his confidence by dealing with workplace situations.
• Mentorship programs: Mentorship programs pair a new less experienced employee with an experienced professional to learn new things at the workplace. It fosters the skill development of new employees. This mentorship program helps in training a new employee with technical and soft skills like problem-solving and decision-making.

Employees Benefits

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For better engagement and productivity, the Body Shop provides various benefits to employees-

• 360-degree well-being programme: For the benefit of women employees and to support and enhance their physical and mental health during the menstrual period, the company introduced a menstruation leave policy.
• Healthy Working Environment: The Body Shop provides a safe and healthy working environment to its employees. Such an environment makes happy and satisfied employees and ensures brings out the best in them.

Reward and incentives

Rewards and incentives help in pooling the best efforts from employees and enhance the performance of the business.

• Employee of the Month program: Recognized as an employee of the month motivate employee to work with more dedication. The reward includes some benefits like a day off, a movie ticket etc.

2.2 Strengths and weaknesses of the HRM strategy of the Body Shop

The HRM strategy strengths

• The recruitment strategy of HRM enables the recruit the most suitable candidate so that effective goals can be achieved.
• 360-degree well-being program encourages the morale of employees; it motivates them to put their best efforts towards the success of the company.

Weaknesses

• The HRM strategy needs a huge amount of budget for recruitment, training & development and for offering rewards and incentives to employees.
• It affects the overall budget of the company.

3. Financial Management Strategies

Financial management plays a crucial role in running a company. Financial management involves planning, controlling and organizing activities to achieve the objectives of organization (Brigham and Daves, 2019). In the context of The Body Shop, role of financial management is to do financial planning, allocating & utilizing financial resources, management of capital, cash flow, risk and making financial reports.

Types of Financial Management Strategy

• Capital Structure Strategy: It refers to a mixture of equity, preference, debt capital and retained earnings. A sound capital structure strategy aids a business in decreasing the capital cost, and risk in the management of debt capital and maximizes the wealth of equity shareholders.
• Dividend Strategy: In this, the company decides how much amount of profits to be given to shareholders after keeping some part of profits for further investment. It helps a business generate capital for future investment with less risk and cost of capital (?irjevskis, 2021). This strategy aids in maximizing shareholder returns in the long run.
• Capital Budgeting strategy: It refers to investment in long-term assets. The company takes capital budget decisions for expansion, modernization, merger and amalgamation of a company (Sitinjak et al, 2023). Capital budgeting strategy increases productivity, profitability and shareholders' wealth.
• Working capital strategy: For running day to day operation of a company, working capital is required. It is of two types' gross and net working capital. In other words, it entails funds which company has for meeting its current liabilities from the recognized assets (Muktiadji et al, 2020). Maintaining enough working capital is important because the shortfall in working capital impacts the reliability of a company and increases the capital cost.

3.1 FM Strategies of Company The Body Shop

Gross profit ratio of the company for the year of 2022 was 51.96%, whereas in 2021 it accounted for 59.75% respectively. Referring this, it can be stated that profitability of the company decreased over the years. The net loss for 2022 is 14.70% that is in 2021 there was a net profit of 3.28% (The Body Shop International Limited, 2023). To increase the company`s profitability the company should follow a sound marketing strategy. Through advertisement, the company can attract more customer which helps increase their profits.

The current ratio of the company for 2022 is 0.87 which in 2021 was 0.96. It decreases the capacity of the company to make payments of its debt. Referring this, it can be entailed that liquidity position of the company is not good.

3.2 Strengths and weakness of FM strategy of Company

Strengths

The company has a good brand reputation; the company easily can increase its profits. Company developed specific strategies for recovering the loss occurred during the period of COVID (Shapiro and Hanouna, 2019).

Weakness

Company's strategic framework is not sound because profit is showing deteriorating trend. The Body Shop needs to reduce its expenditure which helps in profit maximization. For this, the company should focus on employing budgetary control tool. If any deviation is found the company has to take corrective measures (Grundy, Johnson and Scholes, 2022). This helps the company to increase its profits. The company`s current ratio shows that the company is not in a position to make its debt obligation.

4. Evaluation oF HRM and FM Strategy

The HRM strategy of the Body Shop Company is better than its financial management strategy. The HRM strategy of the Body Shop helps the company to achieve success. Its sound recruitment, training and development strategy brings suitable employees towards the company. Its employee benefits, rewards and incentives strategy helps boost the morale of the employee and motivate employees to give possible efforts that enable to increase productivity and profitability of the company. The financial management strategy needs a watch from the company because the company`s profits have declined.

Conclusion

As expressed, for the success of any business Human Resource Management strategy and Financial Management strategy are essential. This report discusses about roles and various types of strategies of HRM and financial management. The report contained recruitment strategies like open recruitment, employee referral, training and development strategies like on-the-job training, and mentorship. It also includes employee benefits strategies like a 360-degree well-being program, a healthy working environment and reward and incentive strategies. This report states about the role and strategies of financial management. The report highlighted the company`s strengths and weaknesses of FM and HRM strategy. In this, it concluded that the HRM strategy of the company is much better than its FM strategy. HRM strategy influences the company`s profitability, while the FM strategy needs a reality check from the company`s side.

References

Books and Journals

• Armstrong, M., 2020. Armstrong's Handbook of Strategic Human Resource Management: Improve Business Performance Through Strategic People Management. Kogan Page Publishers.
• Bos-Nehles, A., Trullen, J. and Valverde, M., 2021. HRM system strength implementation: A multi-actor process perspective. Handbook on HR process research, pp.99-114.
• Brigham, E.F. and Daves, P.R., 2019. Intermediate financial management. Cengage Learning.
• ?irjevskis, A., 2021. Brazilian Natura & Co: Creating cosmetic powerhouse. Empirical evidence of competence-based synergies in M&A processes. Academia Revista Latinoamericana de Administración, 34(1), pp.18-42.
• Díaz-Fernández, Mirta, Alvaro López-Cabrales, and Ramón Valle-Cabrera. "Strength of HRM systems and perceived organizational support as determinants of employment relationships: The perspective of HR managers and workers' representatives." BRQ Business Research Quarterly 26, no. 2 (2023): 121-135.
• Grundy, T., Johnson, G. and Scholes, K., 2022. Strategic Financial Management. Bachelor of Business Administration Programme Code: BBA Duration–3 Years Full Time, 2(1).
• Harney, B. and Alkhalaf, H., 2021. A quarter?century review of HRM in small and medium?sized enterprises: Capturing what we know, exploring where we need to go. Human Resource Management, 60(1), pp.5-29.
• Muktiadji, N., Mulyani, S., Djanegara, M.S. and Pamungkas, B., 2020. The role of financial management accountability in enhancing organizational performance in Indonesia. The Journal of Asian Finance, Economics and Business (JAFEB), 7(12), pp.845-852.
• Shapiro, A.C. and Hanouna, P., 2019. Multinational financial management. John Wiley & Sons.
• Sitinjak, C., Johanna, A., Avinash, B. and Bevoor, B., 2023. Financial Management: A System of Relations for Optimizing Enterprise Finances–a Review. Journal Markcount Finance, 1(3), pp.160-170.

Online

• The Body Shop International Limited. 2023. Online. Available through: <https://find-and-update.company-information.service.gov.uk/company/01284170/filing-history>