Human Resource Management

MRB2032
Organization Problem Identification (individual Assignment)

Lack of Motivation and Decrease on Work Efficiency

of Employees in Saipa Diesel Company

Prof: DR Muhammad Madi Abdullah

9/18/2010
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Table of contents:

Introduction ...................................................................................................................................3

Company background...................................................................................................................3

Summary of company performance:...........................................................................................4

Vision and Mission:.......................................................................................................................4

Vision:.............................................................................................................................................4

Corporate Role:.............................................................................................................................5

Company’s core values:................................................................................................................6

Organizational structure:.............................................................................................................7

Human Recourse Management in Saipa Diesel Company........................................................8

Recruitment on Saipa Diesel Company.......................................................................................8

Employees and company’s Disciplines ........................................................................................9

Employees working schedule........................................................................................................9

Environmental safety and health assurance for employees ....................................................10

Remuneration system in Saipa Diesel Company ....................................................................10

Lack of motivation and decrease in work efficiency:...............................................................11

Motivation concepts and theories...............................................................................................13

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Recommendation.........................................................................................................................16

Conclusion ...................................................................................................................................20

Appendix.......................................................................................................................................21

Introduction

Company background

Headquartered in Karaj Iran, Saipa Diesel Company was established in 1963 and named Iran

Kaveh Company and started its business with signing contract with Mack trucks Company to

assemble Mack trucks and manufacturing trailers. Saipa Diesel stopped its partnership with

Mack on 1978 and since then during this 30 years Saipa Diesel tries to have a close cooperation

with Volvo trucks Company (Sweden), Renault Company (France), and Dang Feng Company-

DFM- (China), Yutong Company (China) and Foton Company (China) to manufacturing and

assembling trucks and trailers and this cooperation leaded to company entrance to the foreign

markets and export its product to other country. Saipa Diesel Company is one of the subsidiaries

of Saipa Group the second biggest car manufacturing company in Iran (After IranKhodro).

Company product portfolio includes expanding products and product lines to cover the majority

portion of the market so the company established three subsidiary companies. 1. Rena Khas

Company was founded in 1975 in order to import tucks and agricultural machines but from the

year 2000 this part just focused on after sale service for Saipa Diesel Company 2. Kaveh Khodro
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Saipa Company was founded in 1997 to support Saipa Diesel manufacturing and assembly lines.

The Company is imported its products for the first time Asia Pacific region in 1995 and after that

the company entered to Middle East and Europe Market in 2002. Its employees are more than

1,154 direct employees. (www.saipadiesel.com, 2010)

Summary of company performance:

Saipa Diesel Company is the second biggest manufacture in Iran -after Iran Khodro Diesel- in

the field of commercial vehicle industry. The company has the market share of about 90% of

trailers and about 20% of other commercial vehicle in Iran. The Company has product in three

field of the market 1) Trucks 2) Passenger vehicle 3) superstructure. According to Iranian

calendar, for the year 1388 (21st March 2009 to 21st March 2010), Saipa Diesel Company

produced 4101vehicles which had a 42% decrease in volume and the Company net income in

this year was 12,630,000 USD in comparison with the 109,719,000 USD in the previous

financial year (21st March 2008 to 21st March 2009). Shareholders’ earning per share also

decreased from 1.86 USD in the financial year of 21 st March 2008 to 21st March 2009 to 0.21

USD in the year 21st March 2009 to 21st March 2010. Saipa Diesel Company shares are actively

traded on the Tehran Exchange Market. (www.seo.ir, 2010)

Vision and Mission:

Vision:

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Saipa Diesel Company vision is to be the market leader in commercial vehicles in Iran.

Mission:

In the mission company follow the principles as below:

 Using latest international standards and technologies with observing safety and

environmental considerations.

 Strengthening and utilizing Saipa Diesel employees’ creativities and innovation with the

aim of achieving and improvement of road transportation fleets and creating value for all

individuals involved in domestic and international transportation.

 Consolidate company relation with the top companies in this field to expand the sale and

after sale service networks.

Corporate Role:

According to its vision, Saipa Diesel Company tries to develop and support the transportation in

Iran and being the pioneer in the market. The strategic path is to support all its sector of

businesses through cross-functional strategic initiatives and "Corporate Shared Services"

functions of Finance, Administration and Human Resources, Information Technology, Corporate

Communications and Legal Affairs with observing the process of reducing cost and downsizing.

Saipa Diesel Company objectives are to obtain the following strategic goals:

 Developing the organizational strategy of the Company

 Developing the Company productivity and profitable growth strategies

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 Selling non-productive assets and reducing cost

 Developing company`s products in all field and reducing the time of delivering product

to the customers and introducing competitive price

 Increasing the employees` skills and keep the productive labor force and increasing their

productivity

 Improving human resource productivity and providing dynamic and fresh working

environment

 Attracting foreign customers and strengthening the brand equity

Company’s core values:

Customers: The Company highly considers fulfilling customer demands, needs, and obligations.

They resist satisfying their customers with excellence in quality and services

Shareholders: The Company believes goodwill and good reputation is core value of their

business, so they aim to uphold Honesty, Integrity, Professionalism, and a high level of business

ethics with having the high level of information and technology management and have a close

relation with its shareholders. The Company tries to maximize the value and profit of the share

and using high technologies and utilizing resources in the way that have the high rate of return of

capital that invested by the shareholders.

Employees: The Company is passionate about effective working environment. The employees

are trained to expand their knowledge and competencies in all individual, team and

organizational level and company oblige to providing the safe and suitable condition for them

and observing justice in all level.

Suppliers: The Company is interested in developing and supporting its suppliers in order to add

value in supply chain.

Society: in Saipa Diesel Company it is crucial to respect and practice all the organizational,

governmental International laws and regulations relevant to the company business and observe

the right of next generation rights of having the healthy and green environment.

(www.saipadiesel.com, 2010)

Organizational structure:

At the head of the organization in Saipa Diesel Company is the General Assembly which is

followed by the Board of Directors and Managing Director. Legal auditors and managing

director representative afterward Managing Director which have CEO`s office planning

manager. After that there is a financial auditors` team that continuously supervise directors`

activities. Hereafter there are four types of main executive directors that directly report to the

Managing Director:

1. Production Director who directly supervises and gets report from Production Planning

Manager, Production Manager, and Technical & Energy Manager.

2. Engineering Director who directly supervises and gets report from Planet Engineering

Manager and R & E Manager

3. Marketing and Sales Director who directly supervises and gets report from Marketing

Manager and Sales Manager. Marketing and Sales Director also indirectly gets reports

from Export Chief and Inspection and Customer Complaint Chief.

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4. Logistic Director who directly supervises and gets report from Legal Afire Manager,

Financial Manager, Human Resource Manager, and Purchase Manager.

Security Manger, Quality Control Manager, Communication Manager, and IT & Strategic

Planning directly report to Managing Director and are supervised by him.

Human Recourse Management in Saipa Diesel Company

Recruitment on Saipa Diesel Company

According to Saipa Diesel Company point of view and as the company claim employees are

considered as a strategic part of the Company represent Saipa Diesel Company to its internal and

external customers; therefore they try to have a proper and significant recruitment system to

avoid failures or wrong hiring. Due to fairness of having chance for a good position to all people

of society, their job offers is through authentic newspapers and commercials by TV, radio and

The Company website. Sincerity and integrity and avoidance of conflicts of interests, recognition

of individuals’ abilities and innovations are the basics of hiring standards for them.

As the part of Saipa Group, the Company follows the Saipa Group policy of recruitment and

doesn’t recruit the employees for long term. It has three kind of recruitment:

1. Full time employee contract: The entire contract is signed for one year and if both parties

want to continue their cooperation it will be extended for the next year.

2. Part time contract: They will sign this contract for some special jobs and for the limit

time and based on company needs

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3. Consultant contract: For the propose of doing the special project (www.saipacorp.com,

2010)

Employees and company’s Disciplines

Saipa Diesel Company has enforced discipline as a crucial and main element of creating and

maintaining perfect relationships inside and outside of the Company. The company framework

in measuring the discipline is by which discipline is upheld while having and also keeping

constant fairness and equity in treating their employees. Disciplinary measurement may only be

applied in cases where good reasons exist as well as clear proof and employees will be assessed

due process in the application of disciplinary measures.

Company’s rules and regulations are explained in detailed and with constant emphasis for

employees so that there will be complete understanding and accepting the rules and appropriate

disciplinary measures, and discipline must be in the mind of employees at all times in accordance

with practicing of the applicable Labor Laws and Regulations.

All the employees have the right to express their complaints and pursuing them if it needs more

investigation by the company authorities. Company policy is to recognize the right of every

employee to have honest complaint solving as soon as possible.

Employees working schedule

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According to Saipa Diesel, working schedule is planning for forty-eight (48) hours per week (six

working days a week starting on Saturdays and finishing on Thursdays) for its offices and

production sites. As Iran is a Muslim country, during the Holy Month of Ramadan, Muslim

employees can work six-hour per day, or a total of thirty-six (36) hours for the entire week,

without decrease in their basic income and also without effect on their normal allowances. The

company also would be closed due to some of national holiday which is mentioned in Iran

official calendar.

Environmental safety and health assurance for employees

Saipa Diesel Company is an industrial company, therefore safety and health issues are very

important in this company. Saipa Diesel Company has employees training program to maintain

their safety at all times. The company has safety officers to enforce safety rules; all employees

are required employees to use proper methods and equipment to perform jobs safely. Hence, the

company is providing safety and proper security for all its divisions and its sections. The

Company also provides all reasonable safety and security measures and issues appropriate safety

equipment such as hats, shoes, goggles, gloves, and earplugs to employees in the production site.

Remuneration system in Saipa Diesel Company

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Saipa Diesel Company claims that the company tries to provide the standard compensation and

remuneration package for its employees in all levels of working and in all different ranking.

To do so, the Company measurement is to provide the proper health care service and insurance

for the full time staffs, necessary transportation for all employees and annual leaves for full time

staffs and vacations for them as well.

Company Human Resource Problem Statement

Lack of motivation and decrease in work efficiency:

Due to decline in sale and revenue in the last financial year company management decided to

decline the volume of its labor force by -31% from 1,678 to 1,154. Although this decline

followed the Company reducing cost policy which is initiated in the year 2007 but it leads to the

situation in which most of the employees lost their margin of safety. This phenomenon has the

direct effect on employees working efficiency and motivation as most of them waiting for get the

resign letter from human resource. It is especially more critical about those workers how are

under graduate and diploma which consist 72% of the labor force of the company.

Saipa Diesel Company assume that the Company has a well-establish strong working employees

with a strong and powerful human resource department and management system, but unlike its

positive pictures that can be seen in its company reports; the company HR department face a

problem which is a big concern to HR managements and That is first, the employment policy

which leads to high turnover of the company`s employees; to employees` point of view it means

that the company couldn`t provide a really stable and secure situation for its employees as the

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longest employee contract is just for one year for the full time staff. In addition company cost

cutting policy and dismissing of 1/3rd of its labor force make the situation more unsecure and

unstable for the company staff. This situation can pose a question “How Sipa Diesel can cope

with the situation that make employee feel unsafe about its working condition?”

To answer this question the following points must be taken into consideration:

1. Saipa Diesel has a strong proper recruitment system.

2. Saipa Diesel has decent and standard working hours.

3. Saipa Diesel has a proper and adequate compensation system.

According to observation of employees’ ideas, lack of motivation still remains in their position

in the company. This problem especially exists between the experienced employees who lose

their motive in staying in the company. The leadership system of the company did not yet

realized that only pushing employees for higher productivity through good salary and allowances

is not enough to sustain the skillful and experienced employees. Most of the skillful staff think

that it`s better for them to look for the job in another company before they was told to leave the

company or their contract is not renewed by the HR management.

Motivation is very important in leadership of any company and is a big challenge for any manger

and top executive. In this situation that the Company lost lots of employees, it is very crucial for

them to keep the remained employees satisfy to have a highly work efficiency and productivity.

Therefore in Saipa Diesel Company managers must motivate the employees; because high

employees’ turnover can bring high cost for the company. This cost includes job advertising,

interview and hiring cost, and training program cost, which all will impose extra cost and time to

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the Company. The issue becomes more critical as the company still follow the policy to sign

contracts, for its full time employees, as 1+1 year contract.

Motivation concepts and theories

This is clear that for every company having motivated and high productive employees is key of

success; so retaining skillful and experienced employees is very important for the managers.

According to general motivation model there are two kinds of motivation exist. I. Intrinsic which

is the motivation that employee feels by enjoying from doing the job and self-satisfaction. II.

Extrinsic which the motivational factors that create from working environment. In other word,

People have some needs and fulfilling them result in behavior that will lead to reward them and

this reward can be intrinsic or extrinsic. It is obvious that Saipa Diesel Company remuneration

system is lean on extrinsic rather than intrinsic. It means that rewards given by others and would

not acquire by the satisfaction received in the process of performing the job. To elaborate Saipa

Diesel employees here I refer to to Herzberg two-factor theory as this theory examined both

satisfying and dissatisfying factors that affect employees’ motivation and work efficiency.2

Two-factor theory of Herzberg define the factors that make employees satisfied or dissatisfied

and result is to make them motivated or unmotivated. As it can be seen in exhibit one, the factors

are divided in two groups, I. Hygiene factors that derives from organization inadequacy to

provide proper salary, working conditions and security, company policies and administration and

interpersonal relationships all lead to dissatisfaction of employees. Here the main point is that the

presents of these factors is not a mean of being satisfied but may make employees feel neutral

towards company’s responsibilities. II. Motivators which are the presence of factors such as

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sense of achievement, recognition, responsibility, and work itself and personal growth that will

lead to employees’ satisfaction. (Herzberg, 2003)

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Exhibit 1: Herzberg’s two-factor theory, http://www.menai.ac.uk

In the case of Saipa Diesel Company, for example the company provided safety factors but this

only eliminate dissatisfaction of employees about their working environment and do not deal

with the job security and will not motivate them to high achievement and detainment in the

company. Therefore, recognition, challenges, and opportunities for personal growth are needed

for them to be strongly motivated and loyal to the company. The company must also provide

each employee with the right information which leads to employees’ high level of understanding

about the Company situation.

Recommendation
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As it can be seen from the problem statement, Saipa Diesel is faced with two major problems in

dealing with its employment. First, the employees dissatisfaction with instability in their working

position due to rapid decrease of labor force and second is company contract policy that cannot

make employees have long term outlook of their working condition and long term continues

cooperation with the Company.

HR management of Saipa Diesel Company must more get in to business and make its path

according to the company mission and act strategically to overcome these problems. According

to Herzberg two-factor theory, the managers have to both reducing hygiene factors to avoid

employee dissatisfaction, and provide intrinsic factors to make the work itself more interesting

for employees in order to satisfy them with their jobs.

In this field different solution may be suggested by researchers and experienced managers; but

this is worth mentioning that all the solutions that are prepared by the HR management must be

practical and applicable to the current company situation.

Solution can apply to the problems

As the first step Saipa Diesel Company HR management must provide a situation that make the

job enrich and valuable to the employees in order to motivate them. According to Herzberg

theory it is called job enrichment. This process is required to applying the elements of intrinsic

motivation continuously and makes employees feel unique about the job that they do in the

Company to raise up their self-satisfaction. It seems that in Saipa Diesel they failed to apply this

process successfully. As it is mentioned before company has a one year working contract policy

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for most of the employees and this make them feel they just do an ordinary job that can be done

by others easily and they are all about to exchange their position with the new persons.

According to Herzberg for job enrichment the following steps must be applied in working

process of Saipa Diesel Company:

• The job must have enough and related challenges to utilize the full ability of the

employees.

• Employees who display growing levels of ability must be given increasing levels of

responsibility.

• If a job cannot be designed to use an employee's full abilities, then Saipa Diesel

Company must consider automating the task or replacing the employee with one who has

a lower level of skill. Because, If a person cannot be fully utilized, there will be a

motivation problem.

• Another point is that when jobs are in a way that are controlled more by employees rather

than top management, this gives the employees feeling of self-steam and greater sense of

involvement and motivation which will result in lower turnover. (Porter, 1983)

Apart from job enrichment, the other suggestion is applying empowering employees to meet

higher needs. Despite the company emphasis in employees’ consultant role in mass-decision

making, Saipa Diesel is indeed hierarchical top-down level company. So one of the steps that

they must take is to flatter their company and empower employees. Increasing employees’ power

will expand their motivation for task accomplishment because employees can observe their

effectiveness.

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According to researches, most people have a need for self-efficacy that is ability to produce the

result and outcome. So empowerment of employees is crucial for Saipa Diesel Company. This

means not only traditional empowering but going beyond it.

This two last solution is given and found to be necessary because of especial hierarchical

organizational system of Saipa Diesel Company that is result of culture.

Third solution is employees’ awareness of nature of the work in their company; they must well

inform about the company policy and situation and what the goal is. The bad economic situation

in Iran leads to company decrease in operation and sales and as the result company tries to

decline the cost and have to fire many of employees but this must not lead to the situation that

other employees feel that their job position is endanger. They must be taught that this is the part

of the business and must of the company in the world do the same policy encounter to such

critical situation because the main goal is to save and enhance the business and it will not

continue if the situation change. This is the responsibility of the HR management to well inform

the staffs about the company business strategies and show them the critical role that each

employee has in these strategies. This will lead to employees feel less agitated to encounter with

the bad situation. . The Employees are more loyal and also motivated if they feel connected to

the company and are kept informed about key company issues.

As the last solution, company must provide job security environment which is failed to do so;

All the full time staffs contract is the one year and renewed for the another year based on both

party agreement. The company must change this way of recruitment because it is costly and

inefficient for Saipa Diesel and a threat for the employees as it mentioned before. The HR
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management of the Company at least and as a force major measurement can design a plan to

length the time of contract of those employees that are really skillful and their existence is

necessary for the company and makes it as the option for those employees that the company is

satisfied with their job. This could be the motivator for the employ to do their best in their

positions. This policy also can cutting the cost of company recruitment and training of the new

staffs.

Conclusion

There are lots of methods like good compensations package, annual leaves, high basic income to

increase motivation; but only monitory compensations are not enough to motivate employees,

factors such as empowerment, job security, job enlargement, job enrichment, has vital role and

raise up employees` work efficiency, and are also crucial in having high job motivation.

Hence, Saipa Diesel Company must try to apply both non-monitory and monitory method to its

system in order to have highly motivated and loyal employees in its company. It must be

regarded that intrinsic rewards are as much important as extrinsic rewards and have stronger

influence on motivating the employees.

At the end, it is worth to say that the role of HR management as the strategic part of the company

will change and enhance everyday and become more crucial as the HR Managers and Planners

must continue their plans and activities that parallel to company main strategy and beneficial for

the company both in the field of finance and efficiency.

Appendix

1. Saipa Diesel Company Organizational structure

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Source: Sapia Diesel web site: (www.saipadiesel.com )

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References:

www.seo.ir/Portals/44fa7561-56f7-47e4-a228-477ca071e439/BourseAnnouncements/880422-65.pdf.
(2010, 08 24). Retrieved from www.seo.ir.

Herzberg, F. (2003). One More Time: How Do You Motivate Employees? Harvard Business Review ,
87-96.

www.saipacorp.com. (2010, 08 25).

www.saipadiesel.com. (2010, 8 23).

www.seo.ir. (2010, 8 24).

Porter, R. M. (1983). Motivation and Work Behavior.

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