ORGANIZATION DEVELOPMENT AND HRM
This report provides an analysis of the case on Autumn Leaves Aged Care Inc. The researcher uses Organizational-level diagnosis model to identify issues and provide recommendations. The paper includes analysis of PEST and Porter’s Five forces on the aged care industry. The paper presents case summary followed by a thorough discussion evaluation of three tools of Organisational-level diagnosis model known as Inputs, Design Components and Outputs.
Indian Ocean Developments (IOD) was known as a traditional organization with a strong reputation for organizational stability and time-bound results. The Chief Financial Officer (CFO), Ced Pearce, identified opportunity to enter into the aged care industry. Ced's business strategy about entering in aged care industry was based on three premises including the growth in population of retired baby boomers, the demand for high quality accommodation and the opportunities for private sector by government. After approval of Board members, the IDO lawyers completed paperwork and finally Autumn Leaves Aged Care, Inc. was inaugurated. Ced separated himself from the administrative tasks and focused primarily on establishing facilities for aged care and ensuring capital arrangements for business expansion. The organization faced severe challenges in the backdrop of surging construction costs, the beginning of global financial crisis during 2008 and the subsequent reduction in tax concessions to aged care industry. Thus, the banks were unwilling to offer loans and the administration decreased assessment concessions. The unavoidable factors adversely impacted Autumn Leaves revenue sources, cash flows and debt repayments, and thus the survival became the biggest question for Ced as he had to justify Board of Directors regarding project halt or continuation.
3.1.1 GENERAL ENVIRONMENT
This section demonstrates political, economic, social, and technological circumstances and conditions on the emerging aged care environment.
The political environment directly influences the operations of the aged care services facility in ways that result in opportunities and threats to the establishment. Ced concluded that the political environment was favorable for (IOD) to diversify its investments to aged care. He observed that the government was luring private investors to invest in aged care facilities through attractive tax concessions. For instance, Ced’s approach to leadership as CFO of Autumn Leaves was the first downfall of an organization that had not kicked off. It would have been more prudent for him to first study the details and the aged care market before borrowing funds to rapidly expand the business. This way he would have realized that the business was not as lucrative as he thought before committing more funds. Secondly, he didn’t realize whether his project could survive without tax concessions. In fact, the economic recession in 2008-2009 triggered an amendment in the country’s fiscal policy leading to reduction in tax concessions due to financial problems of Australian government (Ingles, 2009).
Economic forces may include factors such as interest rates, Gross Domestic Product (GDP), unemployment rates, levels of disposable income and growth of the economy that usually tend to move in cycles (Makos, 2013). The GST implementation, shortages of building materials and labor market problems contributed to rising house prices with a negative impact on new construction projects in Western Australian housing market during 2007. Next, the economic turmoil during 2008-2009 reduced economic growth, thereby leading to increase in unemployment rate and subsequent decline in housing demand (ABS, 2006).
Source from (Wilkins, 2015)
Based on a qualitative research conducted in Australia’s aged care industry, many low socioeconomic status baby boomers have not planned for their retirement. Instead, they survive on daily wages to make ends meet. The biggest challenge for these low income middle-aged baby boomers is they don’t make any real monetary savings and are concerned about having insufficient funds for their old age amid financial problems. These people argue that it’s government’s responsibility to support financial support schemes and retirement benefit. Educated and successful baby-boomers and of middle and upper middle class; however, invest in retirement plan, pension funds and protection programs (Quine et al, 2006). This shows that Autumn Leaves should specifically focus on care facilities for low income baby boomers who would face severe financial crisis in old age, and thus unwilling to invest in high quality accommodations. The company could expand its target market by considering this evident socio-cultural factor.
Australia, known to be the leader of innovation in the aged care industry, produces a wide set of aged care equipment and technologies. It has greatly developed competency in hospital data management systems and tools for interactions, such as aged care facility management software. It is consistently developing and testing their new systems. For instance, The Centre for Research on Ageing (CRA) focuses on researching through aged care services, ageing and dementia. They aim to enhance the well-being of older people. Examples of their research include models of service delivery, quality of care issues and approaches to care. Healthcare information, also known as E-health has the ability to enhance the quality of aged care services while lowering expenses. For aged care facilities to run effectively, it is vital for quick and efficient communication as data are required to be communicated promptly across different locations. E-health enables the patient’s information to be shared effectively across areas of the facility (Commonwealth of Australia, 2013); (IcareHealth, 2013).
3.1.2 INDUSTRY STRUCTURE
Porter's model (2008) is grounded upon the premise that the outer environment is a critical impact in procedure advancement (Mathooko & Martin, 2015). The five forces are as under:
BARGAINING POWER OF SUPPLIERS
Since there is only limited medical care equipment and construction material suppliers within Australia, the bargaining power of suppliers and ability to control prices is high (Gary, 1998). Thus, they find themselves able to compel the association to give more consideration regarding the needs of the suppliers than the associations needs.
THREAT OF NEW ENTRANTS
The vital introduction must be delicate to the passage of any new firms going into the opposition. Since huge resources are needed to establish an aged care centre with well-trained employees, accessibility and facilities, it is difficult for new companies to enter into this industry (Wong et al, 2015).
BARGAINING POWER OF BUYERS
For instance the ability of buyers to pressurize and make an impact on the pricing of the services will affect the bargaining power (Gupta et al, 2015). Wilson (2015) also indicated that there will be a rapid demographic growth in Australia, which leads to growth in housing demand and low bargaining power of buyers.
THREAT OF SUBSTITUTE PRODUCTS OR SERVICES
There are only residential aged care homes which also serve as nursing homes providing accommodation for older Australians (Bhar et al, 2015). Thus, it is very hard for these aged care homes to be replaced by other accommodations.
RIVALRY AMONG EXISTING COMPETITORS
There are well-established organizations such as Moran Health Care Group that will pose a strong rivalry to Aged Care Inc. Thus, older Australians will naturally prone to choose an established organization because of their brand recognition and positive word-of-mouth (Veloutsou and Luiz, 2009).
3.2 DESIGN COMPONENTS
Ced is responsible for strategic decision-making at Autumn Leaves; however, the core strategy errors include (1) venturing into an unfamiliar aged care industry without extensive market research and focus on only three broad premises (2) no clear allocations and instructions were given to follow up the projects. IOD strategic leadership is also responsible for above failure for reasons such as lack of communication with their employees, giving extra authority to Ced, avoiding control and support role to Ced in project completion.
3.2.2 Human Resources (HR) Systems
Ced made a crucial strategic lapse of not hiring the right manpower with related skills set and knowledge-base to manage aged care project operations. Apparently, there was no evidence regarding use of viable HR system, and thus the core functions of selection, training, planning, retention and compliance were neglected at Autumn Leaves. IOD Board is equally responsible for the disaster because it approved project without a clear HR system.
Ced did not implement any operational hierarchy for the work activities because he was the CFO instead of well-trained professional manager. He did not oversee the entire operation, instead he did what he thought was important such as finding funds to expand the business and delegated as much as he could and even called for a few favors from elsewhere. IOD Board also didn’t monitor Ced's proceedings and development of the business instead made him the sole strategic leader of Autumn Leaves.
3.2.4 Measurement System
IOD Board didn’t develop any periodic measurement and performance appraisal system to analyze results of CED’s efforts of revolutionizing Australian aged care industry. Hence, the company suffered considerable financial losses and the project had become a disaster during 2008 – 2009 during the financial crisis. Ced did not plan any contingency measures to revitalize aged care facilities without any tax concessions. In short, IOD Board and Ced are jointly responsible for this failure because their business plan lacked managerial considerations and adequate justifications for positioning of Autumn Leaves in complex age care industry of Australia.
Ced surely neglected the first step of strategy development i.e. vision, mission, clear goals and financial projections for Autumn Leaves. Ced had no strategic direction on how he could manage the project and there were no alternative plans in case of external setbacks. He solely focused on attaining capital investment to construct facilities but lacked marketing insights about generating business from his activities. In short, Ced didn’t design a unique organizational culture for Autumn Leaves that would have a stand-alone business. IOD Board is also responsible for not providing strategic vision to Ced regarding transforming a new idea into a profitable venture instead arranged him funds that were later squandered.
Organization performance output results in the form of market penetration, product development, market development and diversification that also impacts the financial performance such as profitability, liquidity, ROI, EPS and other indicators. Next, the stakeholder satisfaction indicates the level in which the organisation meets the expectation of different groups of people such as customer, investor and employee satisfaction.
Ingles, D. (2009). The great superannuation tax concession rort. The Australian Institute, Research Paper No. 61