I.

EXECUTIVE SUMMARY

Virgin stands as an example of the benefits and success to be derived when top management realise that simply managing people is not sufficient, but investing in the human element that is responsible for all aspects of the operations, will reap tangible rewards. Virgin approach recognised that human resource management should not just be approached from a series of procedures, polices and systems but should be balanced with a keen interest in the people of the organisation through which key objectives are met. II. INTRODUCTION

In 1970 Richard Branson initiated the Virgin firm as a distributor of records. Today, after establishing itself in the airline, cellular phone and financial industries (just to name a few) Virgin continues to successfully explore and invest in diverse and innovative businesses. Interestingly, for a company that is obviously marketing and business savvy, it s Group Motto Our people come first , (IBS Research Center, 2009) speaks to the influence and impact of its strategic human resource management. This report looks at the success of the Virgin Group of Companies through the eyes of strategic human resource management by firstly analysing the organisational culture that nurtures success and high performance. Richard Branson s leadership and management have significantly contributed to Virgin s culture and as such the correlation between both will be explored. Thirdly, the models and theories utilised to shape and manage such a dynamic workforce will be examined. Finally, recommendations on cost cutting measures from a human resources management point of view will follow. III. THE VIRGIN CULTURE

The common theme at all Virgin companies is that the human resource capital is important and is the major component of its brand. As such, the Virgin culture revolves around communicating the core values, instilling the right attitude; maintaining acceptable behaviours and engaging staff. From all reports, the dominant organisational culture at Virgin can be described as constructive. Using the descriptors arising out of a research conducted in 2004 by Human Synergistic International, the general culture of the organisation fits the profile based on four specific key behaviours (Gourley, 2004): 1. Achievement (set goals, pursue a standard of excellence)

At Virgin, employees are not only encouraged to be innovative; they are expected to explore new ways of achieving. Management are given the resources and empowered to develop and grow new business and innovation, excellence and performance are rewarded and celebrated.

2.

Self-Actualising (be creative, learn and grow)

A key component in the human resources management system is that of assisting employees at all levels to realise their full potential. In contrast to many other organisations whose appraisal system is likely to lead to negative consequences in the event the employee fails in a particular role, at Virgin staff is given the opportunity to excel at another Virgin company or in another role (Knowledge@Warton, 2005). This method, along with other personal developmental efforts, not only assist staff in maintaining key basic needs as espoused by Maslow, but encourages them to "the full use and exploitation of talents, capacities, and potentialities. " (Abraham-Maslow n.d.). 3. Humanistic Encouraging (be supportive and helpful one another)

Team work and collaboration are key aspects of the culture at the Virgin Group and helps to balance any counter productive output of high achievers. While the organisation operates as a conglomerate of companies, inter-team and intercompany networking and communication are common especially for problem solving efforts. 4. Affiliative (build relationships with one another)

A natural outcome of Humanistic Encouraging as well as the personality and style of the founder and owner, Virgin s human resources efforts are such that creates the environment for personal networking efforts and relationship building. To encourage relationship building, the human resource management team creates avenues and forums for such via formal and informal events. With such key behaviours present, the transference and perpetuation of Virgin s core values is more readily done and accepted. The brand of itself is known for quality, value for money, challenging the establishment and a fun work environment (Parsley, 2005). While branding may be a marketing responsibility, Virgin acknowledges that a truly sustainable culture starts and continues with the employees. The instilling of these behaviours has its roots in the personal values, personality, attitude and character of the founder and owner, Michael Branson, who is a key driver of Virgin s culture. IV. BRANSON S LEADERSHIP AND MANAGEMENT STYLE

From all observations, Branson can be described as a charismatic, participative Transformational Leader, which may have its genesis in his personality, personal credo and character. As a leader he: 1. Has an ever expanding vision of Virgin and readily communicates such to employees, customers, stakeholders and the general public.

2. Is sensitive to the environment, both local and international. Due to his innovative nature, he is always on the lookout for new ideas, interest and opportunities to differentiate Virgin s offerings. 3. Is sensitive to employee and customer needs. This trait is a main contributor to the current culture and focus of the organisation and has been filtered to all levels of management and human resource management practices. 4. Takes risks. His ventures, both personal and professional, involve an unorthodox and unconventional approach and are often used as a motivator to employees to innovate, think differently and maintain their individuality. While he may not classify his leadership or management style according to any model or theory, there are evidences that he engages a number of best practices which are in keeping with the Blake Mouton Managerial Grid Team Leadership; Transformational Leadership and key principles of Theory Y. There are indications of an equally high focus on productivity and employee relations and an emphasis on team building, motivation and participatory management (Mind Tools, 2011): 1. Encouragement of independent thinkers (Higgins, 2010). According to Blake and Mouton, having employees actively participate in key activities and contribute to the development of processes and procedures will encourage buyin and commitment (Mind Tools, 2011). Virgin employees are encouraged to have a passion for new ideas and to think differently . Branson himself is known for thinking outside the box and is unconventional in his approach to business. 2. Reward innovation (Higgins, 2010). In keeping with Theory Y, employees are rewarded, recognised and celebrated both at a team and individual level. Staff are encouraged to be innovative and this behaviour is rewarded both tangibly and intangibly. 3. Open-door policy Branson postulates open communication and has ensured that there are various avenues available to staff to communicate their concerns, ideas, challenges and views not only to management but to him. These includes one-on-one meetings with him (Higgins, 2010); blogs, intranet, letters and informal dinners. 4. Nurtures a caring environment, one of trust and responsibility. Branson has stressed the importance of recognising and caring for the people of his companies and believe that this is significant to a high performance environment. (Knowledge@Warton, 2005. 5. Using Peer-to-Peer Motivation (Knowledge@Warton, 2005) Branson encourages the development of informal leaders as well as staff participation in decision making and activities. An example would be peer nomination of top performers.

From all accounts, it is evident that Branson is the main influencer of Virgin s culture; to the extent that it appears that the Virgin group of companies and the founder/owner are intricately connected and naturally associated to each other. As such, one of the challenges of strategic human resource management is ensuring the sustainability of the Virgin Brand which requires that core values and key elements of the culture are appreciated, accepted and displayed by all staff. V. CORRELATION - BRANSON S LEADERSHIP AND VIRGIN S CULTURE

Long before a formal structure was implemented for the management and transference of the desired values of Virgin, Michael Branson s leadership style, personality, personal work values and ethics played a significant role in shaping and influencing the current culture of the organisation. As the founder of Virgin, Branson ensured that the corporate culture (that of the executive, external stakeholders and relationships with trade unions) reflected what he deemed to be key components of a successful organisation. This was then transferred to the wider organisational culture and evident in its operations and decision making. Using Hofstede s Five Dimension Model of Culture (ITIM International, 2009) to analyse the Virgin culture, it may be described in broad terms as having:
Small Power Distance Index - Much effort has been made by the founder and is seen in internal best practices, to remove the traditional barriers to communication and decision making that generally widen the power distance between the management and employees. Branson has espoused the engagement and empowerment of staff and has inculcated a collaborative and participatory culture.
Weak-Uncertainty Avoidance Index Risk taking and innovation is encouraged. Indeed, this is a major characteristic of the organisation and can be viewed as a key success factor. By venturing into diverse businesses over the years and by his own personal example, Branson has led the way for employees to think differently and to openly challenge the modus operandi.
Collectivism as opposed to Individualism While individual performance is rewarded, the structure and operations of the Group suggest that team work and cohesion is valued. As such, core values are integrated and accepted by staff as the general standard of behaviour.
Femininity inclined as opposed to Masculinity This can be seen by the great emphasis placed on employee relations, engagement and satisfaction and its service orientation. Certainly, achieving is encouraged and rewarded, however it is clear that the quality of life enjoyed by the employees are of great concern to management.
Both Long-Term and Short-Term Orientations are present, with the executive and staff focused on building and sustaining the brand, through

consistency, short-term goal setting, medium to long term strategic plans and expectations and the founder focused on continuity. With such key behaviours present, the transference and perpetuation of Virgin s core values is more readily done and accepted. The brand of itself is known for quality, value for money, challenging the establishment and a fun work environment (Parsley, 2005). As such, while other factors may contribute, it is highly probable that Virgin s employee engagement contributes significantly to the organisation s business success. The Service-Profit Chain model supports this theory as strategic human resources management plays a significant role namely in the first half of the chain. Figure 1 below shows the Service-Profit model in relation to Virgin s employee-customer-stakeholder focus and the strategic human resource management components. Key aspects of this model falls under the ambit of human resource management in the areas of workplace design; job design; employee selection and development; employee rewards and recognition and tools for serving customers. These areas are significant to the temperature of the internal service quality. Noted in the leadership and management style of Branson and the management team, is recognition that the success is largely based on the psychological state of the employees. In other words, to successfully continue to grow, expand, develop and venture into unknown industries require the commitment and engagement of the organisation s human resources. Therefore, management efforts are mainly concerned with getting the best from staff, not by traditional control techniques, but by: 1. 2. 3. 4. 5. 6. 7. 8. Communicating the vision and getting buy in Modelling the desired culture and core values Employing the right staff Training, coaching and developing staff in the Virgin way of life Motivating employees Recognising and rewarding performance Empowering staff by giving them responsibility and input Creating a comfortable work environment, inclusive of tools.

VI.

THE ROLE OF STRATEGIC HUMAN RESOURCE MANAGEMENT

Having established that the culture of Virgin is significant to the brand success and that the culture is generally described in terms of human behaviour and their display of choice attitudes and actions, it is therefore reasoned that the sustainability of this culture would be a key objective of the organisation and a specific goal of human resource management. Since the culture is of strategic importance to the company, any human resource management effort must be deliberate and tied into the overall strategic direction of the organisation.

Inherent in the management of the human resources at Virgin are both soft and hard models (Gill, 1999). Soft models and theories espouse the humanistic nature of human resource management; employees are to be valued and evident in practices should be the consideration and concern for their input, welfare and needs. Hard models focus on the resource management aspect of human resource management and stresses close integration of HR polices, procedures and activities and the organisation s strategy. The principles from the Matching and Harvard Models will be used to analyse Virgin s human resource management approach. A. Matching Organisational Strategy and Human Resource Efforts

The Matching Model of HRM can be used to analyse and link Virgin s strategic management efforts and the crucial role that HRM plays in these efforts. Figure 2 is a modification of the matching model by Devanna et al. It shows the relationship between the external forces (economic, political and cultural); the internal dynamics (mission, strategy, structure) and the human resources management in which the human resources cycle operates. This model can be used to identify the procedures and systems required to maintain the high performance culture, attract and maintain loyal customers and meet targets and profits. As a multi-industry and international organisation, Virgin is faced with diverse external influences, forces and competition which require a keen attention and monitoring of the external environment. To compete in such an environment Branson and his management team has had to identify and maintain their competitive advantage. This competitive advantage in inherent in the organisation s human resources and is reflective in its mission and values which have been communicated and interwoven with the various strategies of every company. The organisation structure, although it has been argued as not being cost effective, has been adopted to firstly reap the benefits of flat structures and small teams, which includes no bureaucracy (IBS, 2009). Instead of having single large departments or operating units that provide services to the groups (marketing, HR etc.) each team is afforded its own operating team and structure. This approach has assisted in ensuring that the culture of the organisation is maintained and that the managers and staff are empowered. This resulted in the formation of teams that readily take ownership of the company, believing that they at least have a psychological stake in the company which then leads to a higher commitment and interest in the company s success.

To ensure that the organisation is successful, the human resources management strategies must be aligned with ensuring that the competitive advantage is maintained. As such the use of both soft and hard HR approaches are necessary.

Drawing on the key descriptors from Truss (1997), the hard and soft elements can be analysed using the following factors: 1. 2. 3. 4. 5. 6. Recruitment and Selection of Employees (hard) Involvement of HRM in Business Strategy (hard) Organisational Flexibility (hard) Productivity and Success Measurement (hard) Relationship between management and staff (soft) Training, Development and Promotion of Management and Staff (soft)

1. Recruitment and Selection of Employees (hard) At Virgin, the recruitment and selection of employees is not just seen as a function of just filling a vacancy but is closely tied to protecting and maintaining the culture and brand values of the Virgin group (HR Leader, 2003). Branson has been quoted as stating that Virgin will go on way beyond me by hiring inherently Virgin people (Higgins, 2010). As such the focus of the HR professionals at Virgin is to identify potential staff that espouse key character and attitudinal qualities that are part of the Virgin culture. In this sense recruitment and selection is a hard HR concept that requires a process that has a high success rate. The process includes identifying and documenting the qualities (personal, character and behavioural) that are necessary along with the required professional qualification and experience. The process is also systematic and involves a stringent method of identifying customer-focused, competent staff that will complement the organisations culture. Another aspect of the strategic efforts that involves a strong HR perspective and input is the organisations approach to setting-up new companies. Current staff, those that have shown a propensity to leadership the Virgin way and a strong affiliation to the core values and vision of the organisation are asked to assist in setting up and managing new companies. This not only benefits the organisation as a whole, but the individual in terms of motivations, rewards, development and growth. 2. Involvement of HRM in Business Strategy (hard) The strength and reputation of the Virgin brand is a key success factor, especially for future endeavours. It has also been recognised at Virgin that to create a powerful external brand you need to create a culture that supports it (Colyer, 2003). This speaks to the strategic involvement of human resource management. Creating a culture or internal branding involves a unified and concerted approach to managing and influencing the people of the organisation, which is the responsibility of the People Departments of Virgin as well as the management teams. 3. Relationship between management and staff (soft)

Branson has invested much effort from the inception of his companies to build and maintain a trust relationship at Virgin. This concept is not so much a strategic effort but one that is borne on appreciating the value, significance and individuality of people. Creating such an environment has it benefits both to the

staff and management. It is accepted at Virgin that a comfortable, enjoyable work environment positively impacts staff morale and satisfaction. This in turn impacts their productivity and profitability of the organisation. The environment of trust is built by ensuring that communication is open and frequent both to management from the employee and to the employee from management. Staff are encouraged to participate in idea generation and they are praised for performance.. 4. Training, Development and Performance Management and Staff (soft and hard) In conjunction to hiring the right person, continuous learning by all staff is important to the continuity of the success of the culture. Workshops and training are utilized in the transference of skill and values. To improve this system and to ensure that a structured process in place to encourage and monitor development, it is recommended that individual developmental plans for each staff is prepared and reviewed on an annual basis. This plan would identify possible career paths, required learning needs would assist staff in working towards set goals. B. The Importance of People

Having established the need for policies and procedures to drive the human resources management efforts, it is recognised and has been stressed that the human element is the motivator behind the policies and procedures. Figure 3 below shows how Virgin has incorporated the principles of the Harvard Model by making the interest of key stakeholders its primary focus.

As acknowledged by Branson (Parsley, 2005), the key stakeholders in order of importance are the employees, then the customer, followed by other stakeholders (investors, shareholders etc.). As the model shows, the stakeholders interests are not just the initial input in the system but it is also the end result of strategic alignment of the organisation s strategic direction and human resources management goals. It is also the link that ensures continued success. This along with the situational factors has impacted the choices made to manage employees. Identifying and addressing the needs and requirements for happy employees has led to policies that outline dress, timekeeping, performance management and recruitment (just to name a few). The outcome has been engaged and high performing employees who in turn have contributed significantly to the sustained growth, development and profitability of the Virgin. Analysing the outcomes, learning from the best practices and identifying areas to improve would further impact how the stakeholders interests are managed as well as assist in anticipating the situational and environmental factors. VII. RECOMMENDATION

With the threat of the global economic downturn, inflation, an increasing unemployment rate, uncertainty or decline in many industries and increased competition, it would be of strategic importance that consideration be given to how the human resource management can assist the organisation in staying competitive and profitable. A possible area of concern in the human resource management of Virgin Group is the high cost attached to its management of people. Unlike many organisations which reap cost saving benefits with having centralised operating units (e.g. Finance, IT, HR etc.), each Virgin company is an independent company. While the benefits of this approach are significant, it is prudent to consider alternative approaches. This may require a partial re-structuring of the organisation. A partial adoption of market-based and process-based structures may prove to be beneficial in this regard. For example, in Europe, companies such as Virgin Holidays, Virgin Holiday Cruises and Virgin Holiday & Hip Hotels basically target similar markets. While there may be differences in the niche that each company targets, it is likely that there are many similarities in operating style and requirements of each company. As such, instead of duplication, certain group services can be provided for these three companies such as IT management, Administrative Support and People Management. Departments or units that manage what may be considered unique operations of the organisation such as Marketing should remain under the ambit of each company head. VIII. CONCLUSION Many analyst and industry observers, question the sustainability of Virgin after the departure of Michael Branson. Many suggest that there may be a possible change as Branson is seen as the culture of Virgin. However based on internal reports and limited available data, structures and systems are in place to ensure continuity and development of the brand. Formalising key processes and developmental systems would assist in ensuring that the companies possess the tools and skills and that the culture as created by the founder is maintained. Reference & Bibliography Abraham Maslow The Father of Modern Management n.d., Self-Actualization [online] http://www.abraham-maslow.com/m_motivation/SelfActualization.asp [Accessed 20 January 2011]. Anthony, W. P., Kacmar, K. M. and Perrewe, P. L., 2006. Human Resource Management: A Strategic Approach. Fifth Edition. Mason, OH: Thomson. Changing Minds.org n.d., Leadership Styles, [online]. Available at: http://changingminds.org/disciplines/leadership/styles/leadership_styles.htm [Accessed 19 January 2011]. Colyer, E., 2003. Promoting Brand Allegiance Within, Brand Channel, [online]. Available at: http://www.brandchannel.com/features_effect.asp?pf_id=171 [Accessed 19 January 2011]. Crush, P., 2010. Exclusive: Sir Richard Branson talks to HR magazine about leadership, HR Magazine, [online]. Available at:

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