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STRATEGIC ISSUES IN HR: ZARA CASE

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Strategic Issues in HR: Zara Case

Demographic Changes

Over the past two decades, the role of demographic science in the world has increased

dramatically. Particularly in business and marketing, demographic variables have been widely

used, as needs, preferences, and product consumption intensity are often related to them. By

studying the population as potential consumers of goods and services, Zara can regulate the

volume of sales, prices, and advertising of their goods according to the most effective way and

make decisions about opening new outlets. With all the necessary data, Zara can make decisions

based on consumer preferences, needs, and living standards. Demographic analysis is likewise

necessary for making decisions about workforce allocation policies within the company.

Demographic shifts significantly affect the business process, and it is necessary to analyze the

demographic transformations in Spain to evaluate their impact on Zara as one of the most

successful retail companies.

Aging Population

Nowadays, Spain faces a new round of socio-economic problems and demographic

transformation. One of the main demographic changes that Spain is facing is population aging

(Diaz et al., 2020). Advances in medicine, vaccinations, disease treatment, and general health

care have increased longevity. Moreover, the fall in Spain's birth rate is closely linked to the

increase in the availability of contraception and the change in the roles of the sexes in society

(Diaz et al., 2020). These factors have led to an increased demand for products and services that

meet the older population's needs, including fashionable clothes for a mature audience,

comfortable shoes, and accessories.

Demographic trends are reflected in the structure of consumers, which led to a new
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direction of marketing, considering older buyers as a target audience. Working with the segment

"50+" opens up prospects for implementing the concept of integrative marketing, which assumes

that the implementation of the requirements of consumers of older age groups is attractive to

consumers of other ages (Diaz et al., 2020). Population aging has directly affected Zara, causing

the need to include older adults in the target audience of goods. Older people have a wealth of

consumer experience, becoming more demanding of both the quality of goods and the level of

service.

Therefore, the need for Zara to adapt to the new working environment is now

significantly evident. It includes creating a more comfortable workplace, improving accessibility

and safety, and adjusting working hours and schedules (Parry and Urwin, 2010). An aging

population emphasizes managing diversity and inclusion in Zara. Different age groups have

unique needs and preferences, and organizations should strive to create work environments that

accommodate these differences and provide equal opportunities for all workers, regardless of age

(Van Dalen, Henkens and Schippers, 2009). Moreover, an aging population contributes to the

automation of industries, the introduction of robots, and the eventual increase in productivity.

Thus, an aging population is the reason for the need to adapt to new conditions, including the

need to automate processes to facilitate the process of work and shopping.

Migration

Another no less important demographic change in Spain is the tremendously increasing

migration. Spain's population reached 47,394,000 by 2021, of which 5,375,000 were migrants

(Ribas-Mateos, 2020). In the twenty years since the beginning of the strong immigration influx,

the structure and number of residents of foreign origin in Spain have stabilized. Nevertheless,

migration flows in the country are unevenly distributed over the territory. It has led to the
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development of opposite trends: on the one hand, an outflow of people from the interior, and on

the other, a concentration of migrants in metropolitan areas, especially in Madrid and Barcelona

(Ribas-Mateos, 2020). From today's perspective, it seems unusual that Spain was a donor of

labor in the second half of the twentieth century. However, the established mobility paradigm

was significantly transformed at the turn of the 20th and 21st centuries.

Migrants with different clothing preferences and tastes influence Zara, changing the

demand for certain trends and types of clothing. Migration leads to a population transformation,

making it necessary for Zara to adapt the collections according to the new requirements (Ribas-

Mateos, 2020). Another aspect that reflects the impact of migration on Zara is the immediate

increase in competition. Hardworking migrants often open local businesses, which affects

changes in pricing policies, margins, and marketing strategies of the entire industry. At the same

time, migration opens up new opportunities; the emergence of new cultures and styles expands

the range of products and attracts new customers. Retailers, including Zara, adapt their

collections to reflect different ethnic groups (Jha and Veeramani, 2021). Diversity of styles is a

necessity for modern clothing brands, as the needs and tastes of people from different countries

have unique characteristics.

Gender Roles Transformations

Equally important among the demographic factors is the change in gender roles. It

occurred due to the mass entry of women into the labor market in all developed countries,

including Spain. Spain has experienced a transition from a traditional agrarian society to a

modern industrialized economy (Linz, 2019). The increase in educational attainment and female

employment has resulted in women becoming more involved in the economy, therefore,

assuming more independent roles. Moreover, in Spain, the feminist movement has helped to
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change stereotypes and perceptions of gender roles and to create new opportunities for women

(Linz, 2019). Retailers such as Zara accommodate these transformations by offering a variety of

clothing and accessories that reflect the different styles and needs of both men and women. The

change in social roles is directly reflected in the transformation of collections. Business clothes

for women are increasingly appearing on store shelves, emphasizing the growing number of the

female sex among the able-bodied population. At the same time, there are fewer and fewer truly

feminine and masculine products, blurring the boundaries between genders.

As a rapidly expanding international retailer, Zara has a significant impact on the fashion

market and may have some influence on demographic changes in the industry. Above all, it is

known for responding quickly to fashion trends and offering current collections (Jha and

Veeramani, 2021). In this sense, Zara can influence demographic changes by offering fashion

solutions that meet customers' diverse needs and preferences in different age groups and ethnic

groups. Zara, as a successful retailer, contributes significantly to the retail industry as it creates

new jobs and influences employment processes (Jha and Veeramani, 2021). As an international

company, it operates in different countries and must consider local cultural patterns and

consumer preferences. The brand should take into account the demographic transformation to

form organizational strategies because this is the main key to the success of the organization.

Human Resources Role

The human resources department of Zara is not only a functional unit but,

correspondingly, the face of the company because it is in the human resources department that

any applicant begins to get acquainted with the organization. Its importance stems primarily from

the volume of its goals. The goal of the HR department of Zara is to contribute to the

achievement of the company's objectives by providing the company with the necessary personnel
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and the effective use of the potential of workers (Allam et al., 2020). Recruitment of employees

utilizes specially developed strategies: submission of information about vacancies to mass media

and employment services, application of selection methods, testing, procedures of adaptation of

specialists, and subsequent professional development.

The quality of recruitment has a direct impact on the success and efficiency of the

organization. Moreover, the HR department designs and implements employee training and

development programs (Brewster, 1997). Personnel development contributes to employee

motivation, job satisfaction, and career growth. Overall, Zara's HR department plays a critical

role in attracting, developing, and retaining talented employees, creating a positive work

environment, and ensuring the effective functioning of the organization as a whole.

HR strategies are significant at Zara, aiming to effectively manage human resources and

achieve the organization's strategic goals. A key element of merging business approach to HRM

is a culture of transparent communication and trust within an institution (Grundy, 1998). As a

global retail fashion brand, Zara strives to maintain an innovative and trustworthy organizational

culture and develop highly skilled and talented employees. Zara's HR strategies focus on creating

a flexible and adaptive workforce that can respond quickly to change and maintain high

operational efficiency (Allam et al., 2020). Organizational development is often thought of as

managing organizational structure, but this is far from the case. There is no single structure or

system of the company for the improvement of which organizational development has nothing to

do (Grundy, 1998). Therefore, the efficiency of Zara’s organizational development directly

depends on how well the strategic priorities of the company's development are understood at all

levels of management.

Problems of Personnel Management and Recommended Solutions

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To a large extent, any company depends on its employees' efficiency. Modern personnel

management theories are based on recognizing the increasing importance of each employee's

personality, studying one's motivations, and properly shaping and adjusting them according to

the company's strategic objectives. However, the personnel management system has a rather

complex structure. It includes such subsystems as staff planning, recruitment, dismissal,

personnel training and development, motivation, work organization, assessment, and attestation

of personnel (Brewster, 1997). All this requires managers' knowledge in various areas, including

management, psychology, and strategic planning. In Zara, organizing a personnel management

system that will solve the enterprise's problems and help eliminate existing personnel

management concerns is crucial. Current personnel management issues in Zara can be divided

into three groups.

The first of these relates to the fact that senior management and employees do not

thoroughly understand the social role of the organization. This lack of understanding prevents

clear and long-term goals for the organization's development and, as a result, leads to a lack of

strategy for achieving them. The clash of interests of social groups, which often want to improve

their situation at the expense of other groups and the whole society, occurs because some

members do not understand their social role (Ulrich and Brockbank, 2005). The next group of

concerns in human resource management is the lack of understanding of the differences between

humans and other resources. Human resources are an emotionally intelligent human response to

external influences. It explains the response of personnel to certain management practices.

Continuous cooperation between the organization and its staff and the ability of staff to

improve themselves in working together are crucial human resources features. Moreover, the

diversity of cultures and languages creates additional communication barriers between staff and
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management (Hofstede, 1980). The third and final group of problems is the lack of proper

attention to the personnel, their motivations for behavior, and identifying their significant needs

and problems at this or that moment. All this leads to deception and dissatisfaction with the

expectations of the personnel, which in turn influences fast personnel turnover and increases

expenses for training new employees.

The existence of problems and difficulties can be explained by the passive behavior of

employees, associated with the underdevelopment of needs and the paucity of motivation.

Moreover, the company has a paternalistic consciousness, when the employee is used to

receiving everything from the state and the organization rather than earning (Allam et al., 2020).

In this regard, the main task of personnel management is the most effective use of employees'

abilities following the enterprise's and society's goals. It should ensure the preservation of each

person's health and establish relations of constructive cooperation between team members and

management (Brewster, 1997). To a great extent, successful production development in modern

conditions depends on personnel competitiveness. It can be achieved by constant personnel

training, increasing their qualification, and strategically determining their quantity.

Based on the needs of the employees and the company, it is necessary to introduce the

necessary stimulating measures. The theory of expectations states that the presence of a person's

need is not the only condition for the emergence of motivation to achieve a given goal. An

important condition is the person's expectation that the type of behavior they choose and their

actions will actually lead to what they want (Hofstede, 1980). Thus, three key factors affecting

motivation must be considered when developing recommendations: goals, the expectation that

achieving a result will be rewarded, and its value.

Effective Training and Development

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Unfortunately, nowadays, the situation when the organization does not pay enough

attention to identifying the training needs of different categories of employees is quite typical.

Furthermore, professionals involved in the organization of staff training often do not know the

methods and procedures for the effective performance of such work. Zara employees in these

conditions are forced to make up for the lack of knowledge and skills needed to work

independently. Thus, introducing a training system is the first recommendation necessary to

increase the motivation and organizational effectiveness of the company. The lack of attention to

the work to identify the training needs of employees creates serious problems for the

organization (Pilbeam and Corbridge, 2010). It is forced to pay for training that may not be

necessary, and as a result, it risks a decrease in interest in training and professional development,

and it is unwilling to think about its professional growth. Thus, a systematic analysis of the

training needs of different categories of staff is the first step in implementing a training system. It

is necessary to determine which forms and training methods will best meet the company's

interests (Barney, 1991). This analysis should be derived from the strategic objectives of the

company and the objectives of the individual departments.

Training is the most effective way to add value to an organization's human resources and

increase the impact on employees, and its importance cannot be overstated. The success of any

business depends on the team's skills, and there are two ways to build a strong team to hire more

and more professional people or to develop existing employees so that they gradually grow

(Kandola and Fullerton, 1998). If a manager chooses the first option, one will constantly search

for the perfect employee, and it is an illusion. It is more profitable to direct it inside the business

and increase the professionalism of those who already work there. By engaging in the training

and development of personnel, management shows concern for employees, and they feel grateful
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for the fact that they are invested in them, and in return, they try to produce a valuable result in

the workplace (Labour Force Survey, 2008). Employees who learn the same information and

work with the same technology share a common information field and interact more efficiently.

Recommendations and the Role of Human Resources in Their Implementation

Human Resources is a business unit that oversees employment-related functions such as

recruiting, payroll, compensation management, hiring, performance management, and exit.

Despite its long history, today's human resources department is more important than ever. Over

time, human resources managers have become strategic partners in creating a productive

workforce and reducing attrition rates. In 2020, about 90% of HR leaders had an influential voice

in their organization's strategic determinations, up from 80% registered in 2019. (Jha and

Veeramani, 2021). As a result of this growing dignity, human resources has become a strong

representative of employee interests. Human resources managers now have a higher voice in

shaping company policy for employee well-being. While human resources primarily govern

operations such as recruiting and payroll, it is furthermore accountable for designing a validating

work climate and boosting motivation when required.

The Porter-Lawler theory is based on the assertion that several factors influence human

motivation, the most important of which are: effort expended, results obtained, rewards,

perceptions, and satisfaction (Torrington et al., 2010). Recognizing achievements and rewarding

employees is not easy, requiring consideration of the quantity and quality of work and all the

circumstances of the emergence and development of behavioral motives. Therefore, Zara must

implement a suitable strategy for managing subordinates. One primary guidance for the Zara HR

crew is to create a workplace appropriate for workers' productivity. (Higginbottom, 2002). A

supportive work environment gives employees the confidence to discuss issues they care about.
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To accomplish this, three basic steps will be provided through which HR can create a positive

workplace culture.

The first of these relates to supporting diversity across the organization. Today's

workplaces have workers of distinct religions, ethnicities, bodily capabilities, and genders

performing jointly. In this environment, treating all employees fairly and equally is important

and a legal obligation (Equal Opportunities Commission, 1999). Human Resources must develop

awareness programs, create codes of conduct, moderate dialogues between employees and

employers, and track employee data to ensure equal treatment. This way, Zara can create a

culture that values and encourages diversity. It should include establishing nondiscrimination

policies, promoting equality, and creating a workplace where every employee feels accepted and

respected (Equal Opportunities Commission, 1999). Incorporating diverse perspectives and

experiences can foster innovation and unlock employees' potential.

The next step in implementing the recommendation includes protecting whistleblowers.

Workplace misconduct and fraud often go undetected because victims feel afraid or fear

retaliation. In these cases, human resources should act as a trusted confidant (Barney and Wright,

1998). Employees should be able to report their concerns without revealing their identity. In this

way, they will be protected from losing their jobs or becoming victims of disclosing information.

Employee surveys are equally important because they allow hiring managers to gauge

employee satisfaction and expectations. Adams' theory of fairness states that people always

subjectively evaluate the ratio between the reward received and the effort expended to achieve it

and compare it with those of other employees doing similar work. The reaction to unfairness

varies among workers but is always negative and includes a decrease in efficiency and self-

esteem. At the same time, surveys can assist human resources in collecting data about valuable
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things for employees, for example, pain matters, anticipations, and spots for advancement (Hall

and Torrington, 1998). They will enable managers to measure existing processes' effectiveness

and assess the impact of new policies. Zara should develop performance measurement systems

that are objective, fair, and transparent. It would include setting clear goals and expectations,

regular performance evaluations, and manager feedback. Such a system would allow employees

to understand their strengths, areas for improvement and growth opportunities.

Depending on business requirements, employees may be asked to upgrade or retrain to

perform their duties more effectively. The role of Human Resources is to provide training and

development programs to help employees acquire new skills and sharpen existing ones (Barney

and Wright, 1998). Tools such as e-learning, mobile apps, gamification, and virtual reality must

be used. These programs, which may be mandatory or optional, equip employees with the

knowledge they need to perform and advance their roles and foster their individual professional

development.

The Industry's Practices

Other companies' most promising and proven practices became the basis for forming

recommendations for human resource management at Zara. Firstly, it should be noted that by

studying the experience of other major market players and their falls and growths, it is possible

to form the most effective strategy that considers the shortcomings of competitors' strategies.

Due to the analysis of various practices, several main aspects that use successful corporations to

interact with employees and raise their motivation level are formed. H&M is identified as the

main competitor of Zara and the company which leads in innovations. Its experience allowed it

to form changes and provide recommendations for the policy of Zara.

The first concerns the need to create more simple and, at the same time, not less effective
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communication channels. The experience of H&M demonstrates that surveys are one of the most

easily implemented means to obtain valuable information from employees (Mahardika and

Santika, 2021). The proposed system of incentives and surveys in Zara company will help to

achieve mutual understanding between the staff and management. Moreover, technology that

greatly simplifies information exchange should be emphasized as one of the best practices. In

particular, Zara should consider using digital platforms, internal social networks, or regular

employee meetings to share ideas, suggestions, and feedback. It will help increase employee

engagement and create a sense of belonging to the team.

Modern retailers are actively using innovative methods to train and develop employees.

These experiences form the basis of recommendations for the company, allowing employees to

gain knowledge and skills more effectively and increasing their motivation and interest in

learning. As importantly, leading-edge retailers are actively working to create a work

environment promoting diversity and inclusion. For example, H&M focuses on creating equal

opportunities for all employees, combating discrimination, building diverse teams, and

encouraging ideas and opinions from diverse cultural and gender groups (Mahardika and

Santika, 2021). It starts with the hiring process; a modern company should be open to welcoming

everyone who has the right qualities, and race, gender, and age should not be a deciding factor.

Based on the recommendations, Zara will follow suit, developing diversity programs, training on

cultural differences, and creating an inclusive corporate culture. Thus, analyzing industry best

practices helped identify and adapt successful practices to Zara's specific needs and goals.

Reflective Statement

The formation of a modern management system in the organization requires the use of

appropriate management tools. It should include organizational innovations in personnel

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remuneration management to stimulate appropriate productive behavior. The organization's

personnel comprehended within the framework of this study as a special economic entity is

heterogeneous in its composition and structure, performs numerous roles, and differs in several

parameters. It predetermines the need to develop not solely an adequate system of remuneration

but correspondingly the strategy of personnel remuneration based on the organization's key

competencies, reflecting its competitive advantages.

The reward management module provided valuable knowledge and insight into the

effects of benefits on the organization. It has enabled an opportunity to explore different aspects

and concepts of reward management, as a result of which it is possible to form an analytical

statement concerning Zara. Rewards management plays a key role in HRM since it is related to

attracting, retaining, and motivating employees. According to expectation theory, employee

motivation depends on their expectations about the affinity between effort, performance, and

reward (Torrington et al., 2010). In the context of Zara, compensation management should

concentrate on establishing clear links between employee performance and receiving fair

rewards.

Organizations around the world that pay proper attention to human resources as their

central core and continually increase the motivation of their employees tend to be more efficient

and successful. According to social exchange theory, compensation management should include

competitive salaries, bonus programs, social benefits, and professional development

opportunities (Torrington et al., 2010). Developing and implementing effective motivational

models will enhance competitiveness, productivity, and, ultimately, the organization's

profitability. Moreover, it will allow Zara to reach a new level of economic development and

realize the company's capabilities on a global level. If managed successfully, these human
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characteristics provide multiple benefits to the organization.

Rolfe's (2001) theory can likewise be applied to the reward management process. The

first aspect of the model allows one to determine its essence within the brand. At Zara,

compensation management helps define the corporate culture and values and establish a

framework for expected employee behavior (Jha and Veeramani, 2021). It creates a sense of

belonging to the company and keeps employees highly motivated. Equally important in the

context of this theory is purpose. The primary aim of compensation management is to attract and

retain talent at Zara. At the same time, goals will be met by setting the applicable incentives as

professional development opportunities to maintain and enhance employee performance.

Based on the above, Zara should focus on developing and implementing an effective

rewards management system. It will help to attract and retain talented employees, keep them

motivated and increase productivity (Pilbeam and Corbridge, 2010). Ultimately, properly

managed compensation will help Zara achieve its goals and strengthen its position in the retail

industry. Human resources are the heart of any organization that wants to be successful, and its

management should occupy an important place in the strategic planning of its functioning.
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