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Table of Contents

Business Plan: Aqua Diving Inc. - Part 10


Human Resource Management - Relevance to Startups

Every business function of the organization intrinsically is derived to meet the vision of the business while striving to meet the mission of the business in line with the values. If the mission, vision and values are not stated and published, there could be assumptions, even preposterous ones while creating functional vision statements and strategies (Noble, 1985). This is very applicable to the HR function as the HR-business strategy, by and large, contributes extensively to the business success of the organization. If the HR-business strategy is not aligned to the current vision, then the entire functioning of human resources goes haywire becoming a major obstacle for business success.

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One of the key failures of the HR functions is to create a business plan in few cases, and a detailed business plan in most cases. A detailed business plan is seen more as a necessary evil by most HR heads who fail to understand the fact that detailed planning always pays off in the long-run. HR professionals seem to be extremely happy with being busy rather than being busy with things that derive results. One of the things that HR professionals do and spend a whole load of time on, is making reports and reports that are so huge and voluminous that there is no executive bandwidth to read them and apply it intelligently to business. Possibly one of the things that HR professionals can actually do away with is preparation of voluminous reports that nobody has the time to read. This is one of the key things that can be done away with.

The strategic importance of functional strategies in the area of personnel management is now widely accepted. The critical actions with respect to the HR function of a new business are that the strategies should aim at the effective utilization of human resources in achieving the annual objectives of the firm and also to bring satisfaction to employees. Functional strategies of the personnel management are the basis for decisions pertaining to compensations, labor relations, discipline and control, to enhance the productivity and motivation the workforce. The organization, Professional Couriers, with the intention to go transnational is redesigning its strategy currently. However, even within its domestic operations, the organization has always maintained decent levels of employee satisfaction and has achieved its annual objective year on year very well since its inception.

Aqua Diving Inc – HR Plans

Organizational Chart - Inception

The proposed organization structure for the first resort would be as follows:

The organization is so designed to be lean and trim to contain costs in the first few years of operations. During the pre-operational phase the promoters of Aqua Diving Inc. itself would be contributing in different capacities. The recruitment of personnel would hapeen a few months before the launch and would be on boarded a few weeks before the launch. This prior on boarding would be done to train and induct all the staff in the ways and culture of Aqua Diving Inc. Since the DNA of the organization is very different from what the industry has. It is critical for the personnel to be onboarded earlier and then have them start beleiving in the methods of approach of Aqua Diving Inc. towards all stake holders and the induction period, especiallyfor the first resort is very essential.

Aqua Diving Inc. may not strictly adhere to hire-fire policy. The fundamental belief is that loyalty is critical for business success, attitudes are equally important. Skills can be developed, honed and fine-tuned if the attitudes are matching.

The organization and people therein are driven not purely by numbers but towards outcomes and delivering excellent customer experiences. It does not matter what role an individual is playing, but customer engagement and the methods used for it are paramount.

This attitudinal evaluation will be the key deciding factor in recruiting personnel. Attitudes towards customers and delivery of experiences along with loyalty is what Aqua Diving Inc. will seek in each of its team members coming on board.

The performance will be objective driven with the implementation of HR score card. The fundamental premise of using the HR score card is to ensure there not just financial and number focus but there is an overall perspective including a focus on individual development of all the personnel. Diving team members are encouraged to improve their certifications. Sailing team is encouraged similarly. The hospitality team members will be allowed to go and visit places known and raved for hospitality to learn and bring in better practices. The pesonnel at the managerial and supervisory levels are encouraged to improve their qualifications and professional certifications. All personnel irrespective of their role in the organization are expected to have basic diving certification from PADI and Aqua Diving Inc. would sponsor the costs involved for all the members.

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Organization Chart – Aqua Diving Inc. Global

There would be a central driving leadership at the corporate office based out of a central location in New York, which would be established a few weeks before expansion in United States, till then this leadership team will be based out of the first resort. This will help the leadership to also be hands-on managers and understant the complete complexities of the business and hence create plans, processes and SoPs fully grounded to the reality. The sales and marketing expenses would be high initially because of the travel needed to the target market segment location however another way of looking at it is that always that woud be the truth since the sales team would need to travel to wherever the customer is and customers rarely walk in soliciting sales.

The Central team would be:

There would be a team at each of the resorts and the structure at the resorts would be:

Budgets and their significance for a startup

Budget can be defined as a representation of the business plans for a specific time period. Budgets can be considered as extremely useful tools for communication, synchronization, success measurement tool, and also a vital source of motivation. Budgets play a very vital and significant role in the context of the modern day business management. Budgets principally act as indicators of the performance of the business for a fixed time period. Budgets also specify a variety of costs that could be incurred by the business during the same time frame. Accordingly, traditionally, and also in the contemporary era, budgets play a critical role by serving as a lead indicator in the performance management of business (The ICFAI University, 2004).

The present-day budgetary practices have their roots in the factory systems. In the past, in an era where business owners established factories creating production capacity, they used budgets were created to accommodate the fixed maximum production achievable in the established capacity. These practices permitted business owners to supervise the factory performance based on capacity dimensions that have been established. This was applicable when the entire production happening in the factory was evidently lapped up by the market place (Keerti, 2008).

The above practice was also carried into the forward supply chain until the consumer point. This was, in point of fact, valid when the entire production capability or capacity was accepted by the market place devoid of a demand-supply gap or demand surpassing the supply. This practice eventually resulted in the evolution of fixed budget practice.

Budgetary Control

It is impossible for any system of planning to be successful and resourceful without a proper system of control in place. Budgeting, in general, is closely associated with control. The use of control in the organization with the help of budgets is nothing but budgetary control. The process of budgetary control takes account of the following:

Preparation of the various budgets

Constant comparison of actual performance with that of the budgetary performance, and adjustment of budgets in the light of changed conditions (Carl L. Moor, 1986)

A system of budgetary control should essentially be flexible instead of being too rigid. There should be sufficient scope for suppleness to afford for individual initiative and drive. Budgetary control is a very vital tool for making the organization more competent and resourceful on a whole. It is a significant tool for cost control and also for accomplishing the overall organizational objectives (Carl L. Moor, 1986).

In short, budgetary control is a system that is aimed at supporting an organization in the distribution of responsibility and power, to offer it with aid for preparing, estimating, and planning for the future and to assist in the analysis of the variation between the estimated performance and the actual performance (The ICFAI University, 2004).

Budgeting encourages managers to:

  • Inquire all aspects of their work like the techniques, expertise, and people.
  • Understand the associations between the past, the present, and the future.
  • Enumerate their objectives and targets.
  • Understand the associations between their own budget and that of other managers.
  • Communicate with other members in all levels of the management.
  • Apply the principle of responsibility accounting and management by exception (Williamson, 2005).

Types of Budgets

A budget can either be a fixed one or a flexible one. Fixed budget can be defined as a budget wherein a few assumptions concerning, production and sales which are made and the same are complied over a given time period. As already mentioned, it is important to note that no kind of demand-supply gap should be present in the market or there should not be a scenario where the demand outdoes the supply (The ICFAI University Press, 2004). This kind of budget involves a single level of activity. A fixed budget performance report evaluates data against actual operations with the single level of activity as being reflected in the budget. The predominant assumption that is made in this budget is that business will work at a particular level of activity and that a confirmed production and sales will be accomplished. These budgets do not change with any kind of change in either the level of production or projected sales.

The scenario has changed considerably as a result of various factors such as consistent rise in competition, continuing globalization and an array of various other dimensions concerning present-day business environment. In the modern-day business environment, supply outdoes or surpasses demand and this increases the scope of dimensions that are to be considered and accounted for conducting business. The scenario being so, the methods of fixed budgets incidentally lack in their effectiveness to provide precise information about the health of the business to its stakeholders. “In the highly competitive environment, the survival of an organization may depend on how well stakeholders are managed. However, when managers delegate this responsibility of managing the stakeholder interests, there is no systematic way to evaluate their performance (Slovensky, 2002).”

A majority of the assumptions made in relation to the fixed budgets like the costs associated with sales, travel, communication, promotional, raw material costs, energy costs etc are no more fixed but tend to change rapidly and perhaps even significantly in the budget periods. These kinds of changes in costs and more basically the changes in the projected sales itself query the very primary basis of fixed budgets (Bell, 2002).

To address the various dimensions in relation to the dynamic business environment, the concept of flexible budget was commenced. These budgets consider the dynamic nature of business environment by accommodating an array of changes, both in the input costs and also the output volumes, consequently providing a true indication of the ground realities’ in the budget always, in contrast to the fixed budgets where the output volumes and the input costs are fixed at an implicit level (Bell, 2002).

In order for a flexible budget to be successful, it is very significant to have efficient costing systems in place which would capture the constantly changing costs of numerous activities and inputs along with capturing the irregular output volumes. In a classic manufacturing environment, a change in an input cost has a direct impact on the overall profitability of the firm. A raise in the cost would eventually indicate a direct decline in the bottom line and the same is the case conversely as well. Based on what component of the product changes in the manufacturing, the impact on bottom line could be radically different and by this means it would affect different stakeholders (Anthony, 1989).

Budgeting can be useful in practically every situation. Both public and private sector companies, irrespective of their size can use budgets. The setting up of a specific plan of organization is the first step towards installing budgetary control system in an organization. A, Budget Manual should be prepared giving details of the powers, duties, responsibilities and areas of operation of each executive in the organization.

Each department of the organization would have individual budgets to be prepared, for instance, sales budget, production budget, purchase budget, labor budget, cash budget, and finally the master budget. Interestingly, all these budgets are inter-related to one another. This indicates that a change in a single budget would imply a change in other budgets also. Due to the presence of the inter relationships amid the budgets, all managers are mandated to prepare their budgets in partnership with the other managers.

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Budgeting and Responsibility Accounting

The term responsibility accounting implies that different managers of the organization are offered the responsibility of their individual performance and eventual outcomes. By using responsibility accounting is to act immediately and control aspects or dimensions that may go wrong. Keeping a constant watch on the problem and correcting it as and when required is the fundamental objective of responsibility accounting (Ryan, 2007).

From an overall company viewpoint, budgetary control is viewed as a significant integrative control method for many modern day businesses. Budgetary controls assume that the business plan of the organization can be represented financially with the help of budgets and the same can be used as an effective device to monitor and control complex issues when confronted with. This prominence ensures that the budget is associated with the accomplishment of the overall performance targets of the organization.

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