Assignment 2
Case study analysis: Happy Coffee
(Wordcount: 2106)
by
Tran Dam Duc
Student ID: S3920786
Lecturer: Dr. Roger Epworth
Presented to
RMIT University
School of Business and Management
August 2021
TABLE OF CONTENT
I. Introduction 02
II. Organizational Culture and Structure 02
[Link] analysis
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III. Human Resource Practice 05
[Link] analysis
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IV. Conclusion 06
V. References 07
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I. Introduction
Founded by Ms. Nguyen in 2006, from a single shop, Happy Coffee has been marking
its presence across Vietnam with 28 branches, providing jobs for almost 200 people.
Happy Coffee’s expansion sets a clear example of successful entrepreneurship.
However, the company recently encountered a significant crisis as one of its Ho Chi
Minh city branches had to shut down permanently due to its inability to cover
operating expenses. In addition, it is recorded that six other Happy Coffee stores have
not been generating any profit. Up against possible closures of more branches, the
company needs to hastily develop a reactive problem management approach. This
paper consists of in-depth analysis, potential solutions, and recommendations for Happy
Coffee.
II. Organizational Culture and Structure (Poor leadership)
1. Case Analysis
First and foremost, leadership appears to be one of Happy Coffee’s most vulnerable
weaknesses, as there is a minimal amount of devotion and communication among
managers from different levels. Mintzberg (1973) suggested that leadership is one of
the ten roles that a manager should be able to enact. While management is about
dealing with a high level of complexity as it adds a degree of order and sustainability to
technical variables such as product quality and profitability (Kotter 1990). Leadership,
on the other hand, is more of a social endeavour, concerning the ability to persuade
others to act in a suitable manner (Bennis 1989). Despite their distinction, both are
critical to the success of an organization. Most businesses nowadays aim towards a
combination of excellent leadership and management to maximize the potential of their
employees. Specifically, effective leadership is determined by a set of components such
as insight, self-awareness, continuous communication and reinforcement, and
successful recruitment of followers who are willing to act (Klingborg, Moore & Varea-
Hammond 2006). Back to the case, both Ms. Nguyen and Mr. Tran of Happy Coffee
show their inexperience in leading as managers. Evidently, for months prior to its
closure, Mr. Tran’s branch was suffering from a drastic sales drop, reaching 40% loss in
the final month. Mr. Tran had the obligation to address such significant issues with the
head office to come up with solutions, in which he failed to do. On the other hand, Ms.
Nguyen and Happy Coffee’s top-level managers share the responsibility of maintaining
a comprehensive overview of their branches’ performances. According to Charles E.
Notar (2008), a leader is accountable for shaping the organization's future by
broadening mental frontiers to identify and address not only current but also future
difficulties. The case study revealed only when the branch was closed that Ms. Nguyen
decided to open an investigation with Mr. Tran to identify the issues. Consequently, the
lack of attentiveness and communication between the two levels of managers in the
company was one of the causes of the failure of Mr. Tran’s branch.
Moreover, Mr. Tran made a statement about how he felt overburdened as all decisions,
no matter how trivial, had to go through him. This ineffective empowerment process
exemplifies the inexperience of Happy Coffee's top-level management and leadership.
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Particularly, psychological empowerment in organizations refers to individuals'
perceptions of their ability to define job duties, complete meaningful work, and influence
significant choices (Yukl & Becker 2006). In this case, Happy Coffee’s inflexible work
authorization system would affect the productivity of individuals. Janse (2018) stated
that working under an authoritarian leader can cause demotivation among people due to
lack of creative development and fear of sanctions. Therefore, an obstinate working
environment can result in a high absence and turnover rate as it triggers job
dissatisfaction.
2. Solutions
Develop and secure a Business Performance Measurement (BPM) system:
As noted in the case analysis, Happy Coffee was oblivious to its business performance,
which resulted in the late initiatives to prevent the closure of Mr. Tran’s branch.
Therefore, the company must develop a BPM system to rectify these issues in the long
run. A BPM system is a combination of performance indicators defined by four separate
measurement perspectives, such as financial, customer, internal, and learning and
growth (Kaplan & Norton 1996). Furthermore, Lynch and Cross (1992) mentioned that
this system requires a 2-way communication mechanism to establish the organization’s
strategic vision. Building a high-quality BPM system can assist Happy Coffee in
resolving its lack of communication between managers while providing deeper insights
to the head office regarding the accomplishments or struggles of each branch.
Restructure work authorization and empowerment process:
Among the several causes for his branch's failure, Mr. Tran surmised that poor
customer experience was to blame. He also mentioned that his efforts to seek customer
satisfaction were obstructed by the lack of experienced and committed employees when
his fresh recruits usually quit after a few weeks. Such a high turnover rate is indicative
of issues that directly impact the working environment and employee morale at Happy
Coffee. As a result, the company needs to revaluate its organizational structure,
including management and leadership tactics, especially when six other branches are
also underperforming. In this case, a more effective empowerment approach should be
considered as it offers benefits such as higher commitment and increased job
satisfaction and innovation (Yukl & Becker 2006). Redesigning this process means
granting employees freedom of choice and more access to decision-making, hence
greater job autonomy. More autonomy in the workplace is projected to result in better
job satisfaction, since employees have more control over their efforts and work
schedule, along with an enhanced sense of individual responsibility (Nguyen, Taylor &
Bradley 2003).
3. Recommendations
Frequent staff meetings:
Under the current circumstances, Happy Coffee needs to organize meetings with its
top-level and branch managers to build a reactive problem-solving strategy that
addresses their concerns and viable solutions. Lehmann-Willenbrock et al. (2017)
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indicate that, besides idea generation, solution development, and decision-making, staff
meetings can also help companies to achieve organizational phenomena such as
leadership influence, relationship building, and better shaping of employee attitudes. At
Happy Coffee, these meetings should be convened twice a month for branch managers
to update their branches’ struggles to those with higher authority and capability in
problem management before things get out of hand. Moreover, there will be plenty of
opportunities for branch managers to share their achievements and lines of expertise.
Even though these meetings require extra time and resources, the significant benefits
they bring to the table are well worth considering.
Leadership development programs:
With visible leadership flaws as mentioned in the case analysis, it is highly
recommended for Happy Coffee to invest in leadership development programs.
Specifically, these courses are designed to provide managers from different levels with
a set of key fundamentals that can help them achieve organizational goals more
effectively. According to Divyapriyadharshini and Devika (2020), these programs are a
company’s top instruments for retaining a visionary and consistent leadership team.
Investing in leadership development shows that Happy Coffee cares and looks forward
to influencing its employees to perform better. Additionally, the most effective corporate
leadership development programs are tailored to participants' specific circumstances,
such as their unique personal, business, and market difficulties. By exploring leadership
difficulties through evaluation and training, executives can strengthen their potential to
lead through change and drive superior business outcomes (Divyapriyadharshini &
Devika 2020). Therefore, through these programs, Ms. Nguyen and her team should be
able to strengthen their leadership skills, while acquiring a thorough overview of their
company’s operational aspects.
Information Technology application:
Nowadays, the exponential growth of Information Technology (IT) significantly impacts
businesses. The term "Information Technology" refers to any technology that enables
humans to generate, modify, store, communicate, and spread data with higher accuracy
and speed. IT combines high-speed processing and communication capabilities for
data, audio, and video (Mgunda 2019). Most businesses, including coffee shops, use an
inventory ordering and control system to manage their daily sales. This system is
capable of generating and storing customers’ orders, fraud detection, and inventory
management. Implementing this system in Happy Coffee’s stores can help reduce a
branch manager’s workload and improve productivity as it grants employees more
access to placing and fixing incorrect orders without any trust issues.
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III. Human Resource Management (Poor Compensation
Strategy):
1. Case Analysis
Human resource management (HRM) is considered as one of the most valuable tools
and assets to an organization and without proper human resource practices, the growth
of an organization would be limited (Armstrong 2006). Further investigation revealed
that a weak compensation strategy was to blame for the high turnover rate and
employee dissatisfaction at Mr. Tran’s branch. According to Ivancevich (1998), it is
HRM’s responsibility to deal with compensation in the form of financial and benefits that
an employee would receive. In brief, compensatory benefits are things that an employee
values and desires that the employer is able and willing to provide in exchange for the
employee's contribution (Cascio 2006). Compensation is more than a paycheck; it is a
comprehensive incentive system comprised of set policies and procedures regulating
the compensation package (Walker 2006). Failing to build a viable compensation
system can have a detrimental effect on productivity, employee job satisfaction, as well
as the firm's general reputation and performance (Negash et al. 2014).
Back to the case study, an ex-employee at Mr. Tran’s branch admitted to Ms. Nguyen
that she was not enjoying her job at Happy Coffee. She added that, regardless of the
quality of her performance, she was unable to boost her income as there were no
bonuses or special rewards for high performers. Using a quantitative research method,
Darma and Supriyanto (2017) conducted a study that ascertains the impact of
compensation in various forms on employees' productivity and engagement towards
work quality. As a result, the poor compensation strategy is an irrefutable component of
job dissatisfaction at Happy Coffee, especially when its employees believe that exerting
further effort is pointless because they would receive nothing extra in return. This issue
is alarming and requires instantaneous enhancements as the dissatisfaction of
employees can do serious damage to Happy Coffee’s customer experience and
reputation.
2. Solutions:
Reform compensation strategy:
Happy Coffee’s compensation system desperately needs a reorganization if the
company wants to retain its employees and improve job satisfaction. To develop and
maintain an effective compensation strategy, it is critical to identify its core elements.
According to Baeten (2010), Spaans (2010), and Prasetya & Kato (2011), compensation
is divided into two categories: financial and non-financial. Financial compensation refers
to monetary rewards earned by an employee as a result of his or her exceptional
performance at work. Non-monetary compensation, on the other hand, includes career
growth, job design, training and involvement, work atmosphere, and recognition.
Securing a comprehensive understanding of these fundamentals would help Happy
Coffee’s top-level managers to come up with an enhanced approach to compensation.
Furthermore, Ms. Nguyen and her team should do an in-depth analysis of their current
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concerns to ensure that the new compensation system can extract the maximum value
from its employees while also improving their morale.
3. Recommendations
Employees’ recognition and reward system:
Among various HR practices, employee recognition and reward systems can be an
effective approach that strengthens Happy Coffee’s compensation strategy. Different
studies conducted by Deeprose (1994), Pratheepkanth (2011), and Qureshi, Zaman &
Shah (2010) stated that reward and recognition systems have the capability to improve
employees' performance, eliciting them to do more than necessary. Mr. Tran’s ex-
employee mentioned that poor income and little connection with her co-workers and
manager were the main reasons for her unhappiness. Therefore, besides rewards,
recognition is also a nice gesture for managers to motivate their employees and show
them appreciation.
Flexible work schedules:
As most people seek a balance between work and life, offering flexibility in the work
schedule can enhance employee recruitment and retention, job satisfaction, and
commitment (Omondi & K’Obonyo 2018). Additionally, more access to work schedules
can help improve productivity and reduce absenteeism as employees show less
concern about work-life conflicts and focus better on their given tasks. Thus, when
managed appropriately, flexible work arrangements can benefit both the organization
and its employees, particularly those with high turnover and absence rates, such as
Happy Coffee (Rousseau 2001).
IV. Conclusion
In conclusion, as a company develops, there will be difficulties that it has to overcome
daily. As Happy Coffee faces its first actual crisis, how Ms. Nguyen and her team
respond will determine the company's future. This paper indicates that Happy Coffee’s
vulnerabilities lie within its organizational culture and structure, leadership, and
human resource practices. As CEO, Ms. Nguyen needs to reassess her company’s
struggles and rank them accordingly to their level of threat before developing a reactive
problem management approach based on the case analysis, solutions, and
recommendations outlined above.
V. REFERENCE LIST
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