Unit 6: Principles of Management (DingDong Ltd)
Exemplar Coursework for BTEC Level 3 Business Studies
Sample Assessment Material for Dingdong Ltd (June 2022)
Introduction
DingDong Ltd is a parcel delivery and private taxi hire company founded in the UK by Sami and Akthar. After 15 years of operation as a private taxi hire company, DingDong Ltd began to struggle due to increased competition and decided to diversify into the parcel delivery market in 2019. The parcel delivery market had grown by 35% in the previous 10 years with small, independent businesses accounting for 30.3% of the total market share. The UK parcel delivery market is projected to achieve 2.3 billion parcels by 2023.
Sami and Akthar have identified the following goals for DingDong Ltd:
Continue to expand and consolidate growth with the parcel delivery industry.
Increase the contribution to the profit of each delivery.
Current Human Resource Planning at DingDong Ltd
Recruitment
When DingDong diversified into parcel delivery, they used internal recruitment to recruit drivers from their existing team of taxi drivers. The drivers felt they could fit the parcel deliveries around their taxi-driving work.
A drawback of internal recruitment is the skill gaps that can emerge. Despite the primary roles of taxi drivers and delivery drivers being very similar, the introduction of the delivery service required skills related to warehouse management of over 1500 parcels each day. This led to complaints about missing parcels that could have been avoided if warehouse management skills were brought in with externally recruited staff.
Financial Motivators
DingDong Ltd are using piece-rate pay with their delivery drivers as they are paid a fixed rate per successful delivery.
A drawback of piece rate pay is quality control as workers may rush their work to generate output and make mistakes affecting quality. In the case of DingDong, many parcels were lost or damaged (12% in Jul - Dec 2021) leading to complaints from customers. This could lead to a negative brand image reducing future sales.
Another drawback of piece rate pay is the inconsistent income for drivers. As employee pay is dependent on output, drivers are subject to financial insecurity which can be stressful. Some of DingDong’s drivers have applied for more secure positions in the warehouse with a fixed hourly rate and staff turnover rates are high. This is potentially due to rival firms like BOXIT offering more desirable remuneration packages such as guaranteed 150 days a year of work.
Non-Financial Motivators
A non-financial method of motivation used at DingDong Ltd is job enlargement. This is by providing an opportunity for the existing taxi drivers to take on extra roles as delivery drivers. This adds more variety to their role but at a similar level of difficulty.
A drawback of job enlargement is resistance to change as employees feel the new tasks may increase workload and become overwhelming. At DingDong Ltd, several drivers resigned immediately when Masoor emailed the drivers with the new procedures regarding route tracking. When additional tasks are added without proper management and communication, it can have a negative impact on morale, in this case leading to resignations.
Another drawback of job enlargement is the lack of specialisation benefits. As drivers are switching between roles of taxi drivers and delivery drivers, they are not working full time in their role of delivery drivers. This limits the opportunity for them to repeat tasks related to their new role and become more proficient in them. The large number of parcels that are not arriving on time could be due to a lack of familiarity the drivers have with the delivery routes and technology. Should this be the case, training would be more appropriate than threats to end contracts.
Zero Hours Contracts
DingDong Ltd is attempting to overcome a shortage of reliable staff by using a combination of temporary staff, agency workers, subcontractors and employees on zero-hours contracts. Zero-hours contracts are employment agreements in which the employer is not obligated to offer working hours and the employee is not obligated to be available for work.
A drawback of zero-hours contracts is the financial uncertainty for employees. Driver’s income is unpredictable and driver satisfaction rating was reported as very low at 76% in Jul - Dec 2021 compared to 93% in Jan - June 2020. Staff turnover has also increased from 4% to 29% and absenteeism/declined delivery has increased from 0% to 16% in the same period. These are all indicators of low morale which can be a significant contributor to poor quality and service.
The Impact on Existing Human Resource Planning at DingDing Ltd and its Goals
Goal 1: Continue to expand and consolidate growth within the parcel delivery industry.
Internal recruitment, piece rate pay and zero-hours contracts all provide flexibility in adapting the size of the workforce. This has supported DingDong Ltd in the rapid expansion of their operations from 68,750 in early 2020 to 425,000 in late 2021 which directly supports their first goal to expand within the parcel delivery industry. However, the percentage of absenteeism/deliveries declined by staff has increased from 0% to 16% in the same period which represents missed growth opportunities. As piece rate pay and zero-hours contracts can demotivate employees due to the financial uncertainty they create and job enlargement strategies can overwhelm workers, it could be deduced that the current human resource planning strategies are responsible for the rising number of decline deliveries which may directly contribute to the organisation not meeting their first goal.
Goal 2: Increase the contribution to profit of each delivery.
Internal recruitment is cheaper than external and piece rate pay reduces labour costs as employees are not paid for any time they are not productive. Job enlargement strategies should also improve productivity through increased morale reducing labour costs per unit. The human resource planning strategies should therefore support the second goal to “increase the contribution to profit of each delivery”. However, the data presented shows that this has declined from 25% to 9% between Jan - June 2020 and Jul - Dec 2021. A range of human resource planning strategies implemented by Sami and Mansoor could be responsible for this. For example, the use of internal recruitment and job enlargement can limit the skills and expertise of staff, reducing the quality of their work. At DingDong, the number of parcels being delivered on time declined from 95% to 76% and the percentage of parcels lost or damaged increased from 1% to 12% strongly indicating an issue with staff morale and/or competence. As the employee satisfaction rate declined from 93% to 76% during the same period, there appears to be an issue with morale which is also supported by the data on staff turnover which has risen from 4% to 29%. High turnover means Sami and Mansoor are faced with higher recruitment and onboarding costs which will make it more challenging for them to meet their second goal of increasing the contribution to profit of each delivery.
Recommendations
Managing Change Through Training
The drivers at DingDong Ltd have faced significant changes in their job roles as a result of the diversification into parcel delivery. One of the changes that appears to have caused issues is the introduction of parcel tracking technology used to issue, accept and track deliveries. The primary method of communicating the use of this technology appears to be through email and computer-generated text messages with drivers facing the threat of losing their contracts should their delivery rate fall below 95%.
A more effective method to manage this change is through training. Sami and Mansoor have no experience in warehousing or storage, reducing their ability to provide effective internal training making the option of external training the most desirable option. As external training uses specialists in the skill being acquired, Sami and Mansoor can hire trainers who have a large amount of experience in using parcel tracking technology. This means they can upskill staff faster and share experiences of common mistakes and how to overcome them. This can lead to an increase in parcels delivered on time and a reduction in parcels lost or damaged. These reductions in mistakes could reduce costs leading to an increase in the contribution to profit of each delivery.
Reducing Staff Turnover Through Job Security
According to Maslow, job security is a safety need that people become anxious about meeting once their basic survival needs have been met. This can be seen at DingDong when several drivers resigned after receiving the news that they would lose their contracts if they did not meet delivery targets. Competitor, BOXIT Deliveries Ltd, offers more secure contracts with guaranteed employment of at least 150 days per year and guaranteed hours a week in advance and enjoys higher employee satisfaction and retention rates than similar businesses.
Sami and Mansoor should consider strategies to meet employees’ safety needs through more secure employment contracts. Although strategies such as piece rate pay and zero hours contracts offer them flexibility to expand, they are reducing the feelings of job security amongst staff which is likely leading to high turnover rates which can hinder them in meeting their objectives of expansion and profit. By increasing the ratio of staff on more permanent contracts who are paid by either the hours worked or on a monthly salary rather than jobs completed in time, drivers will have a more predictable income which should support them in meeting their safety needs and contribute to reduced staff turnover. As staff turnover declines, Sami and Mansoor can reduce recruitment and onboarding costs which can increase the profit per delivery and have the opportunity to upskill their drivers which should prevent further declines in the percentage of parcels delivered supporting their expansion goal.
Improving Performance Through Appraisals
Performance appraisals are methods used to assess the performance of employees over time against predetermined targets. Sami and Mansoor can conduct performance appraisal meetings with their drivers. This would help them to improve the performance of their drivers by uncovering the reasons behind the rise in lost/damaged items from 1% to 12% and the reduction in parcels delivered on time from 95% to 76%. Discussions may identify training or support that can be offered to improve performance in these areas which may improve these metrics and support DingDong’s expansion goal. Appraisal meetings would also provide an opportunity for more open communication between Sami, Mansoor and the drivers to discuss the employee satisfaction rate which has dropped from 93% to 76% along with the staff turnover rate increase from 4% to 29%. Appraisals may allow the managers to show their appreciation and offer solutions to issues they are facing which could improve morale and in turn reduce staff turnover. As DingDong is experiencing high recruitment costs, improving staff retention could reduce costs contributing to their goal of increasing profits per delivery.
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