A brief analysis of the situation and pending decision problem, as presented in the case, and as relevant to your answer. This should be exceptionally brief and you should assume the person reading the Assignment is familiar with the details of the case.Identification of the major issues surrounding the organization or individuals involved with the organization.Identification of alternate courses of action to address the issues identified.The decision or recommendation for action, with the appropriate supporting arguments.The case question is designed to guide the direction of your analysis in the case. Your analysis should address and ultimately answer the question.
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GB520: Strategic Human Resource Management
Assignment Rubric
These papers are related to specific issues or cases and will vary in length. In all cases, papers must be well
referenced and in APA format. The papers will be evaluated using the following rubric.
At least 20% of a case study paper grade is related to composition that includes organization, writing style, and
mechanics. Often, composition issues also impact the grading of the assigned focus paper topic content
because composition impacts the effective presentation of your ideas and material.
Case Study Analysis Rubric
Grade
Content, Focus, Use of
Text/Research, and
Organization
100%
100
50%
points
50 points
90–
100%
90–100
points
Response successfully
answers the Assignment
question(s); thoroughly uses
the text and other literature.
Includes a strong thesis
statement, introduction, and
conclusion. The main points of
the paper are developed
clearly. All arguments are
supported well (no errors in
logic) using outside sources as
assigned.
Sources are primarily
academic journals, with
thoughtfully used Web sources.
References are applied
substantively to the paper
topic. Skillfully addresses
counterarguments and does
not ignore data contradicting its
claim. Refers to sources both
in text and in the reference
page.
Analysis and Critical
Thinking
Writing Style, Grammar, and
APA Format
30%
30 points
20%
20 points
Response exhibits strong
higher-order critical thinking
and analysis (e.g., evaluation).
Paper shows original thought.
Grammatical skills are strong
with typically less than one
error per page. Correct use of
APA when assigned.
Analysis includes proper
classifications, explanations,
comparisons, and inferences.
Appropriate to the Assignment,
fresh (interesting to read),
accurate (no far-fetched,
unsupported comments),
precise (say what you mean),
and concise (not wordy).
Critical thinking includes
appropriate judgments,
conclusions, and assessments
based on evaluation and
synthesis of information.
Assignment is in 12-point font.
Narrative sections are double
spaced. Assignment is free of
serious errors; grammar,
punctuation, and spelling help
to clarify the meaning by
following accepted conventions.
Grade
80–89%
80–89
points
Content, Focus, Use of
Text/Research, and
Organization
Response answers the
Assignment question(s) with
only minor digressions;
sufficiently uses the text and
other literature. Provides a good
thesis statement, introduction,
and conclusion that require
some revision but that form a
good basis.
Analysis and Critical
Thinking
Writing Style, Grammar, and
APA Format
Response generally exhibits
higher-order critical thinking and
analysis (e.g., evaluation).
Paper shows some original
thought.
Internally, each section has
good organization. Transitions
found between and within
sections are mostly clear and
effective. Generally appropriate
to the Assignment, accurate (no
far-fetched, unsupported
claims), precise, and concise.
Includes a title page and
reference page.
Develops the main points
clearly.
Critical thinking includes
adequate judgments,
conclusions, and assessments
based on evaluation and
synthesis of information.
Supports most arguments
concretely (no logical errors)
using outside sources as
assigned.
Analysis includes adequate
classifications, explanations,
comparisons, and inferences.
Some sources are
nonacademic with over reliance
on Web sources. References
not always clearly tied to
development of ideas. Does not
ignore data contradicting its
claim, though the refutation
may need additional support.
Refers to outside sources in the
text and reference page.
Grade
Content, Focus, Use of
Text/Research, and
Organization
Analysis and Critical
Thinking
Assignment is in 12-point font.
Narrative sections are double
spaced. Assignment contains
some minor grammatical and
punctuation errors. Few
misspellings. Citations
generally, follow APA guidelines
(perhaps one or two minor
errors).
Writing Style, Grammar, and
APA Format
Grade
70–79%
70–79
points
Content, Focus, Use of
Text/Research, and
Organization
Response answers the
Assignment(s) with some
digression; sufficiently uses the
text and other literature.
Provides a thesis statement that
needs revision. The introduction
and conclusion do not set up or
close the paper very effectively.
Shows too little original thought
(strings of citations that are not
developed to support the
thesis).
Main points are adequately
defined in only some areas of
the paper; points may be
overemphasized or repeated.
Some arguments are supported
with outside research, but
others may not be. Relies too
heavily on personal experience
or one source. The paper does
not meet the source
requirements. Some obvious
counterarguments are ignored
or not well refuted.
60–69%
60–69
points
Response answers the
Assignment question(s), but
digresses significantly;
insufficiently uses the text and
other literature.
Analysis and Critical
Thinking
Writing Style, Grammar, and
APA Format
Response exhibits limited
higher-order critical thinking and
analysis (e.g., application of
information).
Sentences are occasionally
wordy or ambiguous; tone is
too informal. Grammatical skills
are adequate with no more than
two to three errors per page.
The paper is not well
organized. Sections lack
transitions and several
sentences may be monotonous
or confusing. The overall
structure of the Assignment is
not effective. Appropriate in
places, but elsewhere vague
writing interferes with the
development and clarity of the
main points. Numerous
grammatical and punctuation
errors.
Analysis includes limited
classifications, explanations,
comparisons, and inferences.
Critical thinking includes limited
judgments, conclusions, and
assessments based on
evaluation and synthesis of
information.
Response exhibits simplistic or
reductive thinking and analysis
but does demonstrate
comprehension.
Misspellings are more frequent,
but they are the sort spell
checkers do not catch, such as
“effect/affect.” An attempt at
APA citation was made, but
there are multiple errors larger
than a misplaced period.
Narrative sections are not
double spaced.
Sentences are generally wordy
and/or ambiguous; tone is too
informal. Grammatical skills are
inadequate, clarity and meaning
are impaired, and typically three
to five errors per page.
Inadequate use of APA format.
Grade
0–59%
0–59
points
Content, Focus, Use of
Text/Research, and
Organization
Response insufficiently
answers the Assignment
question(s); insufficiently uses
the text and other literature.
Analysis and Critical
Thinking
Writing Style, Grammar, and
APA Format
Response exhibits simplistic or
reductive thinking and analysis
and demonstrates limited
knowledge on the subject
matter.
Sentences unclear enough to
impair meaning; tone is
inappropriate and/or
inconsistent. Grammatical skills
are incompetent for college
level; typically six or more
errors per page. Unacceptable
use of APA format.
STRATEGIC HR MANAGEMENT
Student Workbook
Reyes Fitness Centers, Inc.:
The Strategic HR Opportunity
By John Sherlock, Ph.D.
This case study has been adapted from the original version of the case study found at
www.shrm.org. The submission instruction is the portion that has been adapted.
Project team
Project leader:
John Sherlock, Ph.D.
External contributor:
Sharon H. Leonard
Project contributor:
Editor:
Design:
Production:
Nancy A. Woolever, SPHR
Courtney J. Cornelius, copy editor
Kellyn Lombardi, graphic designer
Bonnie Claggett, production/traffic specialist
© 2008 Society for Human Resource Management. John Sherlock, Ph.D.
2 © 2008 Society for Human Resource Management. John Sherlock, Ph.D.
Reyes Fitness Centers,
Inc.: The Strategic HR
Opportunity
Overview
This case describes a growing mid-size U.S. company in
the Southeast in the fitness club industry. The recently
hired HR director is given the opportunity by the
organization’s CEO to propose HR initiatives to help the
business meet its strategic goals. The case gives students
the opportunity to deepen their understanding of
strategic HR management.
Learning O bjectives
Students completing this assignment will be able to:
1.
2.
3.
4.
5.
Demonstrate basic business acumen in terms of
organizational finance, strategy planning and
execution.
Understand the philosophy behind developing an HR
scorecard and its link to strategic human resource
management.
Understand the process used to develop an HR scorecard.
Align HR deliverables with organizational strategy.
“Sell” the HR scorecard concept(s) internally.
Introduction
Lori Patrick’s conversation earlier that day with Mike Lowe, the company’s
CEO, kept running through Lori’s head during her 45-minute rush-hour
commute home. “What a great opportunity Mike’s given me,” she thought.
“The CEO of this organization believes in the value of HR and asked me to
tell him how HR can help the company meet its strategic goals. When I was
studying for my master’s in HR, we kept reading and talking about how HR
needs to position itself as a strategic business partner; but I didn’t think I
would get the opportunity so soon in my career.” Lori had been the director
of Human Resources with Reyes Fitness Centers, Inc. (RFC) for only a couple
of months. She had been attracted to the position in part because it offered her
first opportunity to oversee all of HR, and because of her interview with Mike
Lowe. Lowe was fairly new to the company (just less than two years) and was
highly regarded by the founder and chairman, John Reyes, and the rest of the
board of directors as a strategic thinker and someone with proven ability to
inspire and motivate staff. Lori knew from the interview with Lowe that when
he said employees were the key to RFC’s future, he meant it.
© 2008 Society for Human Resource Management. John Sherlock, Ph.D. 3
RFC Background
Reyes Fitness Centers, Inc. was launched in May of 2009 by John Reyes with
$150,000 of his own funding and some investment capital from three college
friends from the University of North Carolina, Chapel Hill, where they were
business majors attending the university in the mid-2000s. The first center
was located in Raleigh, NC, and was an immediate success. The center offered
a full range of workout equipment, exercise classes, personal trainers, an
outdoor pool, on-site daycare, and even a small restaurant. Additional private
investment was secured and RFC expanded rapidly from 2009 to 2012, opening
approximately three new centers a year throughout the Southeast. By the end of
2012, RFC operated 28 fitness centers, grossing $51 million in revenues and $1
million in net income. Figure 1.0 below provides the financial performance of
RFC and its comparison to competitors.
4 © 2008 Society for Human Resource Management. John Sherlock, Ph.D.
Figure 1.0 – 2007 RFC and regional competitor Financial Performance
(numbers rounded)
RFC
O’Malley’
s Fitness
center
Constant
Fitness
Muscle
Mania
Hard
body
Gyms
Day Spa
Gross revenue
$51M
$25M
$120M
$45M
$35M
$164M
Total expenses
(including
taxes, interest,
depreciation)
$50M
$24.75M
$119M
$43.5M
$34M
$163M
Net income
$1M
$250K
$1M
$1.5M
$1M
$1M
Employees
900
450
1,100
825
750
2,100
Financial
performance
trends 2004-2007
Flat
annual
net
income.
Flat annual
net income.
Decreased
annual net
income
due to
expansion.
5% annual
growth in
net
income.
5% annual
growth in
net income.
Decreased
annual net
income
due to
acquisitions.
Discussion Question:
1) From the table above, what are three observations about RFC’s financial
performance relative to their competition?
By 2012, John Reyes had general managers overseeing each center and had
gradually removed himself from day-to-day oversight of the company. He
had become interested in other business ventures and, as a result, his board
encouraged hiring a CEO and other senior management team members to
oversee the growing enterprise. He hired 48-year-old Mike Lowe as the new
CEO of RFC in late 2012, and Reyes assumed the role of chairman. This
CEO position was the second in Lowe’s career. He had more than 20years’
experience in the fitness equipment industry; before coming to RFC he had
been the CEO of a smaller fitness center company in California that had
been acquired. Lowe’s transition as CEO had gone quite well in Reyes’, the
board’s and in Lowe’s view. Lowe had been somewhat concerned about
being micromanaged by Reyes, but he was given complete autonomy over
the operations of the company and was expected to involve the board only in
strategic leadership issues.
© 2008 Society for Human Resource Management. John Sherlock, Ph.D. 5
The Fitness Center Industry
While the fitness center industry grew dramatically in the mid to late 1990s
(more than 20 percent annually), overall industry growth had slowed
considerably, as most towns now had two to three fitness centers within
close proximity.
As shown in Figure 1.0, RFC is considered a medium-sized fitness center
enterprise. While some competitors (Day Spa and Constant Fitness in
particular) continue to focus on large-scale, either through acquisitions of
smaller fitness clubs or by opening new fitness centers, many others (including
RFC) have reduced the number of new clubs being opened.
There is as much emphasis on health and recreation as ever in the U.S. Industry
reports suggest that the outlook for fitness centers in general is quite positive,
although some consolidation may occur because certain markets have been
saturated with too many clubs to remain profitable. However, the market in the
Southeast (where RFC operates) is still growing and market saturation is not
anticipated for at least five years.
Fitness centers hire a variety of professional and support staff. Some focus on
personal training and employ a large number of certified professional trainers
who work with members during club hours (typically 5-6am until 10pm,
although the more body-building oriented gyms have recently started offering
24-hour service). In addition to housekeeping and front desk staff, fitness
centers employ customer service representatives who can assist existing members
with questions and also act as sales representatives, giving tours of the facility to
prospective members.
RFC Strategy
During Lowe’s tenure, RFC opened just one new fitness center (just outside
of Atlanta, GA). This modest club expansion is consistent with the threeyear financial strategy the RFC board has agreed on, where the focus is on
growing the profitability of existing clubs by increasing member enrollment and
retention. The company is privately held by a small group of investors and the
board wants it to stay that way. The board has discussed positioning itself for
acquisition by one of the larger fitness club chains at some point in the future. It
is agreed that improving the bottom-line (i.e., net income) performance of RFC
will only help in this regard.
Within Michael Porter’s classic framework of various business strategies, (see
Michael Porter of Harvard University Five Forces research) RFC’s strategy most
closely aligns with Porter’s “focus” strategy, where a company focuses
on serving the needs of a particular market segment to achieve a competitive
advantage. RFC has positioned itself as a place where the whole family can
enjoy fitness and social activities. RFC has deliberately chosen not to compete
6 © 2008 Society for Human Resource Management. John Sherlock, Ph.D.
with gyms that cater to body builders with large free weight workout areas,
24-hour access, onsite training supplement sales, and “no-frills” amenities.
RFC’s strategy is to attract families by offering a wide variety of fitness offerings
including cardio equipment; free weights and circuit training weight machines;
personal training; and exercise classes (such as Pilates, yoga, stationary cycling,
etc.). Most RFC fitness centers have a snack bar where nutritional smoothies and
other healthy snacks can be purchased. All RFC centers offer extensive locker
room facilities and on-site daycare. Newer RFC fitness centers have small indoor
basketball courts and TV lounges to appeal to the 10- to 16-year-old age
group.
From his first day on the job, Lowe has stressed to the staff that he wants them
to be strategic in how they approach their daily, weekly, and annual activities
and projects. By that he means that they should consider how their jobs
contribute to RFC being able to provide a fitness club experience to couples and
families that is superior to any of the competition. He has worked diligently with
his senior management team and the board to understand how RFC creates
value for its customers, employees and investors. The business model
for how fitness centers make money is fairly straightforward: profitable firms
grow by recurring monthly member revenue (via new member recruitment and
existing member renewal) while maintaining relatively stable fixed costs and
low variable costs. Lowe has worked to identify both financial and nonfinancial
variables that drive RFC performance. By locating RFC fitness centers in uppermiddle-class locations and focusing marketing efforts on couples and families,
RFC has been successful recruiting new members. Research data shows that
members typically do not have issues with the RFC monthly dues. Member
feedback indicates that having a friendly place for the whole family to stay fit is a
driver of member value.
RFC Strategic Challenges
As with most start-ups, the early strategy for RFC focused on growing revenue.
They did this by opening several clubs each year and offering new club
promotions to attract members. RFC experienced rapid revenue growth (more
than 20 percent annually) through 2012. However, several of the RFC centers
are not reaching their profit goals. Mike Lowe tried to address this by
implementing operational efficiencies when he first came on board at RFC, but
he soon realized that the profit challenges were driven in large part by a
customer retention problem. While a certain amount of turnover is expected in
the industry (due to competing clubs, families moving out of the area, etc.), the
best industry data RFC can find relating to member retention shows that their
member retention is approximately 20 percent lower than industry average.
An analysis of member records shows that members often join during a special
promotion (where the initiation fee is waived) but then rarely use the center
© 2008 Society for Human Resource Management. John Sherlock, Ph.D. 7
and fail to renew. A telephone survey of members (lapsed and current) reveals
that “non-use” was one of the reasons for members not renewing or stating they
were unlikely to renew. An analysis of member-visit frequency shows that more
than 50 percent of members in 2013 hadn’t even visited their RFC fitness
center two times per week. The hypothesis is that members who aren’t going
to their RFC fitness center frequently are far less likely to see sufficient value to
renew. Another concern is member feedback that RFC staff members do not
provide very good or excellent customer service. Lowe, senior management, and
the board have had extensive discussions about the member retention problem.
While part of Lowe’s strategy to increase profits is to enroll more members in
existing fitness centers, those profits will be short-lived if members stay only one
year. Data also shows that membership cost, quality of offerings, amenities, etc.,
are all rated highly.
Lori thinks about these strategic issues and how HR might affect them.
“There’s no question that problems with customer service and member
retention come down to people issues. It is affected by the type of people we
bring on board, how they’re trained and how their performance is managed
and rewarded.”
RFC Organizational Structure
The organizationa …
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