Identify key HR strategies of Philips

Executive Summary
This report contains a study of major factors which affected Philips during the
economic downtown as well as in its competitive environment. The report also
analyses how Gerard Kleisterlee, CEO of Philips took over Philips in 2001 during a
time when the company was making losses.

This report also analyses how Philips regained its brand value and market share
under Gerard Kleisterlee’s leadership. Kleisterlee admitted the loss was due to flaws
in the organization and economic conditions. This report shows how Kleisterlee
opted to restructure the organizational strategies and revived Philips. The report also
indicates in detail the new strategy which was to promote a more cooperative
approach than working on a single division, which led to ‘one Philips’. This report
also indicates the improvements in Philips after implementing these new cultures and
shows how these improvements were measured using performance measurement
models.

Identify the key strategic HR choices and the changes to Philips’ culture made by
Gerard Kleisterlee between 2001 and 2007. To what extent were they necessary and
how, specifically, did they contribute to the improvement in the company’s
performance?

‘It would be too easy to attribute all our problems to the general economic situation.
Despite the excellent year we had in 2000, several problems were already beginning
to surface. Some of our processes are not up to benchmark standards, our
fragmented organization makes us carry too high costs for infrastructure and
overhead, and we have allowed too many low-growth, low-margin businesses to
develop. They account for an unacceptably high percentage of our total portfolio.
Consumer Electronics, for instance, which accounts for around a third of Group sales,
has not been performing well enough for several years.’- Gerard Kleisterlee.

Strategic HR choices.
Taking charge at a time when the company was making losses, Kleisterlee, who had
worked for Philips all his professional life envisaged making Philips a high-tech
pioneer. Working towards this goal, Kleisterlee started a strategic and cultural reform
process. For that, he had to embed some HR policies, not only to change the culture
of the business but to reduce the cost base as well and he did that by asking for
centralization and decentralization.
 Identify key HR strategies of Philips

The organization had grown rapidly over a short period caused of the focus on core
competencies. This growth combined with increasing diversity and emphasis on the
logistical performance required change.

Redesign of the organization was necessary for the following reasons:

1. More flexibility
2. Enhanced quality control
3. Improved quality of work
4. Greater efficiency
5. Capitalising on the available capabilities

These reasons combined with bad company results led the management to decide to
implement self-managing teams. A pilot group consisting of employees from various
departments was formed to ignite the change process.

DEPICTING BUSINESS STRATEGY

AMO being the heart of strategic HRM helps in identifying the ability, motivation,
and Opportunities of employees. Their ability was shown in the way they adapted to
the change of redesigning the business structure and motivated them by
encouraging them to participate in strategic conversations with comprehensive
training and subsequently delivering the required standards. This allowed a
cooperative approach with different divisions to achieve a common goal.

Rebranding was necessary for the company as most of its products in the U.S. were
not associated with the Philips brand which was troublesome as they did not meet
the expectations of the customers. Hence, they transformed into a simpler and more
market-driven organization using the ‘Sense and Simplicity theme.

The advanced technology is in coherence with marketing strategies to design a user-

friendly product.

The implementation of these business strategies resulted in the company’s

performance.

Hence it increased the market share, profitability, and brand value of Philips.

As Philips is an electronic company innovation is a key to growth and success in the

electronics industry. Its innovativeness has been rendered as the competitive
advantage that it has a proud history of from its founders.

Product innovation is the result of a new way to solve customer problems and
involves the introduction of an effective product. This might include improvement in
 Identify key HR strategies of Philips

functional characteristics and ease of use. It develops customer support however the
risk of costly R&D can erode shareholder returns.

Working on these performance measures helped them reach their overall goal of
being a ‘Hi-tech Pioneer’ through customer satisfaction and market growth.

Business Strategy – HR Policies

 Cost-effectiveness. Suggestions from staff, telecom, and consultants.
 Innovation. Merge SBUs to come up with new ideas and reward them.
 Change in culture. Employees stick with the firm due to faith and trust in the
Chief Executive.

Philips culture change

Gerard Kleisterlee who lives Philips brand and its products made his thoughts and
organizational philosophy of founders clear among his employees and guided them
where they need to progress and reasoning for the company’s reputation. Philips
divisions were broken apart without any communication with other divisions and
Philips as a whole performance. Kleisterlee came up with the idea of implementing a
change of culture in the company depending on the trends of the workforce and
working habits for better results. Unifying the divisions of Philips was done using the
technique.

Selection criteria: Kleisterlee started the selection criteria by centralization

collaboration between the semiconductor division and CE division which have a
similar workforce that would also benefit from grabbing market share. Philips
management selected a pilot group consisting of employees of various departments
to start the change of cultural process. From this pilot group, others could help
themselves to learn and implement themselves and participate.

Top management and Socialisation: Kleisterlee adopted an operational policy that is

a mixture of centralization and decentralization which helps in motivating employees
to have a clear objective of the company’s goal. By using decentralization Philips
generated €150 million in savings by having staff suggestions. He implemented the
‘Towards One Philips’ initiative where employees were encouraged to participate in
strategic conversations and brainstorming sessions. He rebuked executives of the
company towards the goal when there were failures in company results. The
company’s managers and higher authorities led the training sessions for the
functional and divisional managers to display their skills toward growth. Employees
were made to interact with different firms which helped them in improving their
knowledge, and technology and socializing themselves in a different environment.
 Identify key HR strategies of Philips

Organizational culture: This culture change was adopted by the employees and the
results were amazing, which helped Philips to boom itself in the market by grasping
more market share. The cultural change was favorable to the company as it was
made to lead to the goal of the company and it was measured by having an
engagement survey where it measured brand promotion. Employees had faith in the
leadership of Kleisterlee who had kept the division of the company linked.

There was a pilot group that was formed of various departments before, who
adapted this change and from them, other employees had a great inspiration to
learn and implement it by themselves. Employees were given full detail of the
reasons for the cultural change in Philips. This adoption of change and outcome
resulted in showing leadership qualities.

To what extent was change in culture necessary

Philips had grown rapidly over a short period, caused by core competency, and the
growth with diversity combined with bad results led to a change in the culture of
Philips.

The cultural change was needed due to the political, social, and technological factors
affecting the organization. As Philips was a Dutch company and globalizing itself into
other parts of the world where these factors affected the organization, due to the
regulatory changes in the US such as the Sarbanes-Oxley act these changes had to
be made to flourish. Moreover, in the technological R&D department where a huge
amount of cash was spent which did not lead to a product’s market under the Philips
brand.

The competition was increasing rapidly in the market. Sony, LG, Samsung, GE, and
Siemens being their top competitors in the market had to change their culture and
also in research and development to build their brand value again. As Philips had
differences in their divisions and none of them were interlinked and had similar work
culture made them difficult to approach and overcome issues that occurred.

Redesigning was necessary for Philips as the employees lacked teamwork, flexibility, lack of
internal information; the quality of work was up to-to the Standardization, and
empowerment in Philips was lagging.

How culture contributed to improvement in Philips’s performance

Operations: The centralization culture which was implemented included all the
factors such as human resources, payroll, and finance which enabled the top-level
management to observe and measure the techniques of operations. The
reorganization in the cost structure cut down the costs by 12% from the goods and
services, which were bought whose total cost amounted to 66% of total revenue.
 Identify key HR strategies of Philips

Joint ventures with LG and collaborations were flourishing which gave Philips the first
mover advantage in the cathode ray tubes and flat screen panels for TVs.

HRM: In Kleisterlee’s leadership employees had faith and employee turnover saw a
rapid change as he held all the divisions together with a single motive of one Philips
initiative.

Decentralization after being deployed employees worked towards the growth of the
company and staff suggestions were taken into consideration, top-level management
gave out the internal information for the employees to know how the company.
Empowerment by decentralization motivated the employees to have strategic
discussions and teamwork. MA’s mixture of these attitudes and work culture showed
an enormous amount of growth in the company.

BALANCE SCORECARD:
Using the balanced scorecard, Philips aimed at communicating the company’s vision
and strategy to the employees and letting them know the role they were required to
play in realizing its mission.

As a part of the balanced scorecard, Philips identified the factors that were crucial for
running its business and creating value. These were called CSFs. The CSFs were
grouped under 4 perspectives – competence, process, customer, and financial.

Internal perspective:
Critically appraise.

 Defining- goals, responsibilities, and tasks.

 Planning- budgets, resources, staffing.
 Executing- changes, quality, forecasts.
 Delivering- training, releasing staff, lessons learned

PROPOSAL FOR CE:

TQM:
 Customer focus: CE keeping customer desires in mentality need to innovate
and develop products that are fit for purpose.
 Process management: The top-level management need to maintain the
structure by driving out fear, and barriers between staff and make the
adoption philosophy simpler by creating the purpose of improvement of
products and services.
 Identify key HR strategies of Philips

 Process improvement: Process improvement can be done through self-

improvement training and product knowledge in all departments. Flexible
work hours for employees.
 Total participation: Participation of the whole company is required in all
aspects from staff to top-level management.
 Planning process: Minimise cost by working with fewer suppliers. Adopt and
institute leadership from top-level management. Inspection to achieve quality
and profits.

Value-based performance measurement

 Identify specific organizational objectives:

 The main objective of CE is to look forward to being the best-appreciated
brand serving customer needs and desires using quality service. This can be
done by selecting appropriate strategies and designs.
 Identify value drivers:
 The value drivers of CE are their stakeholders, customers, and their innovation.
Keeping these into consideration they need to perform by creating
technological products and customer knowledge, market place and
implementing it into products and services. Keeping abreast of trends and
issues design needs to be executed. Empowering customers with suggestions
to improve product development and expectations. Flexible work hours for
employees.
 Develop action plans, select measures, and set targets:
 Top-level management and line managers play a crucial role in this part where
employees need to be motivated towards the company’s goal and long-term
profits. Line managers should have a systematic approach to deploying action
plans depending on the tasks and motivating others to work and share ideas
in the team for the benefit of the company. Installing workouts, social
gatherings and standardization motivate the employees to bring out the
process within them. Selective work measures need to be taken care of by
positioning targets for the team.
 Evaluate performance:
 Performance can be measured by relating the performance of the company to
a benchmark that was or should be set by the company beforehand.

Performance can also be evaluated using these below-shown factors.

 Customer feedback and complaints.

 Income from operations.
 Market share in value.
 Identify key HR strategies of Philips

 Labour turnover.
 Value of product sold: sales.
 Brand value/index.
 End user satisfaction.
 Comparing the profit increase from previous years.

Identify key HR strategies of Philips (ukessays.com)

Making benefits flexible for employees

Philips India has also introduced a policy along the same lines. The 'MyBenefits@Philips' program
aims to provide flexible benefits (insurance and non-insurance) according to the employees' needs.

"Philips has existed for more than 80 years. The demographics of our employees are ever-changing.
Around 65 percent of our workforce comprises millennials. With these changing numbers, we began
questioning our age-old policies. Were they catering to the needs of today's workforce?" says
Armaan Seth, head, of human resources, Indian Subcontinent, Philips.

After speaking to 1000 employees in the organization through internal surveys and focused group
discussions, the Company came up with the 'MyBenefits@Philips' initiative to make benefits more
flexible as per the needs of the employees.

After analysing the responses of the staff, the Company decided to flex some of the
insurance benefits, such as medical, accidental, and education. However, some
benefits remain fixed as they are constant throughout the lifecycle of an employee,
such as birthday gifts, marriage gifts, and leaves. The health and lifestyle benefits
are also flexible.

The Company has segmented its workforce into three major categories based on age less than 30,
between 30 and 45, and 50 and beyond.

"The needs and requirements of employees change over their lifecycle. Through MyBenefits@Philips
we tried to understand the different needs of an employee at different stages of life and cater to
their specific requirements," mentions Seth.

Analyses of employee needs revealed that those below 30 and single wanted to invest more in their
learning and development, lifestyle, and parental insurance cover. The married employees with kids
were more interested in increasing the insurance coverage for their spouses and parents. They were
more focussed on achieving work-life balance and wished to begin investing in their retirement
plans.
 Identify key HR strategies of Philips

Employees who were 45 and beyond wished to see an increase in children's education cover, life
cover, and medical cover.

The family insurance also covers the in-laws of employees in addition to their immediate family
members.

The MyBenefits@Philips initiative works on a points-based selection procedure. The employees are
given certain points that they can redeem for their flexible benefits.

The distribution of points to the employees is done based on the organization’s spending on fixed
benefits. Suppose the organization spends Rs100 on fixed benefits, the employees will be given the
same in the form of 100 points, and then the employees enjoy the flexibility to spend these points as
per their individual needs, every year.

"An employee is free to invest all the points in lifestyle if that is what she/he chooses to do. The
Company will still provide insurance cover benefits to some extent." shares Seth.

Employees can also put in extra money from their own pockets in addition to their points. If an
employee wants to go for a huge life cover policy of around one crore, the individual can use the
points and pour in extra money from her/his salary and still get a cheap deal from the market.

"It was a bit difficult to convince the stakeholders internally for this big shift from fixed benefits to a
flexible benefits plan, but I think it is a business imperative. Also, it will enhance employee
engagement and build a better relationship with the employees," shares Seth.

Apart from this, Philips also ran a diversity and inclusion campaign called

'REAP' (respect, empower, acknowledge and preserve) which was launched this year on
International Women's day. Under this program, several activities were introduced to support
gender diversity.

There were women-mentoring programs on leadership qualities, to enhance women's business

acumen and provide them with career guidance.

Workshops were also held for the managers to remove biases to support diversity and inclusion
through interactive sessions and role plays. It focused on removing gender bias and generation bias.

The organization also ran a program called 'He for She where male employees came forward to
share stories highlighting how they took a back seat to support their partners in their professional
lives. This was pretty similar to what happened in Reckitt Benckiser's #HeDaresSheDares challenge
campaign, where employees from across the world posted videos on various social media platforms.
These videos told stories of how they supported women employees in their professional journey.

Seth shares that there has been a very positive outcome of such campaigns.

In terms of numbers, the retention rate in women has increased. The number of women in the
workforce has gone up significantly, especially in the commercial side of the business- from nine
percent to 20 percent.
 Identify key HR strategies of Philips

"Diversity and inclusion are about starting a conversation. It is not just about gender diversity, but
can [also be about people coming from different regions and parts of this country and working in a
team together," shares Seth.

Not many companies in the industry, or for that matter in the business world, have such flexible
policies to support a diverse culture in their organizations. It is heartening to see companies thinking
out of the box to initiate such programs and introduce such innovative solutions to personalize the
policies and benefits for their staff.

Philips – Making benefits flexible for employees (hrkatha.com)

THE HIR IN G PR OC E S S A T PHI L I PS

The hiring process at Phillips is complex and takes between two to

three months. The hiring process requires multiple phone screening
and interview sessions and typically involves an online application and
at least one in-person interview.

While the hiring process is intense, the online application process is

quick and easy. Connect your LinkedIn profile and upload your resume
and cover letter, which takes around five minutes. Once your
application is processed and reviewed, Phillips responds with whether
or not the hiring process is moving forward.

The first round following the review is a phone screening, which is your
chance to learn more about the position, the team, and Phillips. If you
agree that you are a good fit for the position, the hiring team invites
you for an interview at the end of the call. If not, the company provides
information about joining the Talent Community to discover other
opportunities.

This interview is held either with the potential manager or the team.
Additionally, the number of interviews you have varies according to the
position, location, and team. Anticipate job-specific, behavioral, and
personality-related questions to assess how well you align with
the company culture and team dynamics. Other common
Phillips interview questions include:
 Identify key HR strategies of Philips

 Why should Phillips hire you?

 What is the most essential part of the job you are doing?

 What would you change about Phillips, if anything?

 Mock scenarios related to the position

 How would you go about completing a task you thought

impossible at first if your manager asked you to do so?

 What types of activities or hobbies do you enjoy outside of work?