Performance Management of Human Resources - Essay Example

Performance Management of Human Resources Name: Course: College: Professor: Date: 15. Balanced Scorecard A balanced scorecard is a strategic management tool which is used in both business and business organizations to align activities to vision, mission and strategies of the organization, enhancing internal control and evaluating organizational performance. Balanced scorecard is a performance measurement tool that adds non-financial performance measures to tradition performance measures which only utilized financial results as a performance measure of an organization. The balanced scorecard gives executives and managers an intensive and balanced view of the performance of organizations thus leading to effective strategy development and implementation. According to balanced scorecard, an organization is supposed to be viewed in four perspectives which include learning and growth, business process, customer perspective and financial perspectives. Besides, managers are required to develop metrics, gather data and execute an analysis based on the four perspectives (Balance Scorecard, Inc, 2009). The balanced scorecard has become popular and has been adopted by many business and non-business organizations such as Hilton Hotels, Wells Fargo, Chemical Bank and the U.S. Army among other organizations. The balanced scorecard supports corporate strategies better than other performance measures. Most importantly a balanced scorecard improves the effectiveness of performance measurement system since it not only focuses on financial performance but also other non-financial aspects of an organization (Frigo, 2002, p.9). One of the strengths of balanced scorecard is that it enables managers to align investments, initiatives and actions with strategic goals of a business organization. Besides, it utilizes both financial and non-financial aspects to determine the performance of an organization. Its ability to be applied in business and not-for profit organizations is also a major strength (Kanji, 2002, p.157). However, the balance scorecard has some weaknesses which have made some managers reluctant in adopting it. Failure to come up with a way to form a quantitative linkage between non-financial and expected financial returns is a major weakness. Besides, the balanced scorecard does not use a state of art improvement system. Lastly, the system fails to define the metrics applied effectively thus causing more confusion among the users (Schneiderman, 2006). 16. Compensation Management Compensation management is an integral section of human resource management which focuses in motivation of employees and improvement of effectiveness of an organization through appropriate remuneration. Compensation management involves establishment of compensation systems designed appropriately to cater for strategic goals, business objectives as well as employees’ interests. Job analysis, salary surveys and development of effective pay structures are important aspects which need to be considered for effective compensation management to be attained (Cieri, 2007, p.557). 17. Strategy of Compensation Management A strategy of compensation management is a mechanism which is utilized by managers to establish and implement the most effective compensation system which will not only boost the performance of an organization but also boost the motivation of employees. A strategy of compensation involves identification and provision of compensation packages to employees that are well aligned with business objectives and goals. Such a move ensures that all interests of major stakeholders of a business organization are addressed effectively. An effective strategy of compensation management advocates for special measures regarding compensation to be taken in order for an organization to minimize its employee turnover. A strategy of compensation management is the one which minimizes employee turnover rate while at the same time resulting to increased competitive advantage. An effective strategic compensation system meets the needs of employees thus motivating them and increasing the rate of employee retention substantially (Cieri, 2007, p.558). 18. Job Evaluation and its Relation to Compensation Management Job evaluation is orderly and systematic process which is utilized by human resource managers to determine the value of a job in relation to other jobs. The major objective of a job evaluation is to identify the right compensation rate which will attract and retain high qualified employees thus enhancing the competitiveness of an organization. Though job evaluation is different from job analysis, it follows job analysis process in order to gather data for evaluation. Job evaluation includes establishment of worth of a specific job in a job hierarchy and comparison of relative intrinsic value within a business organization. Job evaluation is related to compensation management since one has to perform a job evaluation exercise in order to establish the right class or group of a certain job in an organization for compensation purposes. Job evaluation enables managers to determine the right compensation rate which should be applied in a certain job to motivate employees, minimize employees’ turnover rate and restore or enhance competitive advantage of the organization (Armstrong, 2003, p.10). 19. Limitations of Job Evaluations Despite the importance of job evaluation in compensation management, various limitations have been pointed out. To start with, job evaluation lacks scientific precision since there is no standard list of factors or elements to be considered during the evaluation of the jobs. Besides, job evaluation relies more on internal standards for fixing salaries for jobs thus creating a large room for manipulation by managers. Job evaluation may also result to a poorly evaluated wage rate which discourages employees thus leading to increased employees’ turnover rate (Bose, 2002, p.224). In addition, some methods of job evaluation are too complicated to be understood by all organizational stakeholders. As a result, trade unions or employees will always refuse implementation of such evaluation methods or treat it in suspicion thus creating human resource issues. Lastly, job evaluation assumes jobs of equal value are equally attractive to workers. This is not the case in real life. For instance, though engineering and aviation jobs may be of same value according to job valuation, other factors such as fear may discourage workers from the aviation profession. In this regard, in real life pilots are supposed to receive high salaries than their engineering counterparts (Bose, 2002, p.225). 20. Motivation & Equity Theory The equity theory of motivation states that all employees compare job level inputs and outputs with those of their counterparts thus they actively seek to eliminate any inequalities identified. For instance, if employees discover that their efforts are being rewarded correctly, a state of justice prevails. On the other hand, if employees of a certain organization or department perceive that they are being treated unjustly as compared to others, an equity tension is likely to be experienced. Existence of a state of justice within an organization leads to increased motivation among employees thus enhancing productivity of the organization at large. However, when an equity tension is experienced, the degree of motivation in employees is reduced significantly. Human resource managers must ensure that a state of justice is perceived by employees all the time in order to maintain or enhance the motivation of employees thus boosting their productivity (Porter & Steers, 1991, p.127). 21. Issues to Consider Before Designing a Compensation Policy There are various issues which need to be considers by managers in order to develop an effective compensation policy. One of the major issues to consider is the state of the labour market. The managers must identify the competitors of the organization for human capital in order to compare their wage rates. Besides, the human resource managers must consider the level of competitiveness of the organization. The managers must determine whether the organization should lead the market, match the market or lag behind the market as far as wage rate is concerned. Leading the market in terms of compensation rate will boost employees’ morale while lagging behind the market will lower the motivation of employees. Moreover, identification of the factor to base the compensation policy on is very crucial aspect. The managers must determine whether to base the compensation policy on individuals and their competencies or on the job to be executed. Job based compensation policy is usually advocated for when the worth of the job can easily be determined in the market place (Singer, 2002, p.57). 22. Compensation Philosophy Statement and Leniency of a Compensation Philosophy Element Statement A compensation philosophy is an apparent statement of intent that is established to give direction to compensation decisions. A compensation philosophy is supposed to reflect a clear understanding of an organization’s intentions and desired level of competitive advantage in the market. The philosophy serves as a reference for employees, labour unions and managers on how an organization handles decisions regarding employees’ compensation (Singer, 2002, p.56). For example, “All-time Supermarket aims at recruiting and retaining well qualified employees and to compensate workers for their contribution to productivity of the business organization. Jobs will be assigned to wage grades and ranges and salary ranges will be revised regularly to reflect the market”. On the other hand, leniency of a compensation philosophy element statement is an apparent statement which prevents allocation of favourable ratings to all employees without making any substantial differentiation among the employees (Singer, 2002, p.56). 23. Compensation Methods and Practice There are various compensation methods which can be utilized by managers in business organizations. The compensation methods can be divided into three major categories notably direct, indirect and non-monetary compensation. Direct compensation method is payment of employee salary annually, monthly or even daily as well as any other performance-based pay. Some examples of direct compensation method include base pay, incentive pay, stock options as well as bonuses. Indirect compensation method includes provision of legally acquired public protection programmes to employees. Examples of legally acquired public protection programmes include retirement programmes, social security, health insurance, transport expenses as well as paid leave. Non-monetary compensation method involves provision of benefits to employees which do not entail intangible value (Singer, 2002, p.121). However, in practice many managers or organizations combine different compensation methods in order to motivate employees effectively and enhance competitive advantage of their respective organizations significantly. By mixing the compensation methods, managers are able to come up with compensation packages which are as individual as workers who receive them. For instance, many organizations offer bonuses to employees who meet their production target within a certain period of time. Besides, supervisors and managers are provided with transport and entertainment allowances. In this regard, combination of different compensation methods to form a single compensation package is the best practice which enhances employees’ motivation and improves the competitiveness of an organization (Singer, 2002, p.121). References Armstrong, M. (2003). Job evaluation: a guide to achieving equal pay. ISBN 0749439661: Kogan Page Publisher. Balance Scorecard, Inc. (2009). Balance scorecard basics, Retrieved http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx Bose, C.D. (2002). Principles of management and administration. ISBN 81203929: PHI Learning Pvt. Ltd. Cieri, H.D. (2008). Human resource management in Australia: strategy, people, performance. 3rd ed. ISBN 0070135037: McGraw-Hill. Frigo, M.L. (2002). Strategy and the balanced scorecard. Strategic Performance, 84(5), p.6. Kanji, G.K. (2002). Measuring business excellent. ISBN 0415258227: Routledge. Porter, L.W. & Steers, R.M. (1991). Motivation and work behavior. New York: McGraw- Hilll. Schneiderman, A.M. (2006). Why balanced scorecards fail, Retrieved November 6, 2009, from http://209.85.229.132/search?q=cache:WaNMzRigR9cJ:www.schneiderman.com/AMS_publications/Why%2520BSCs%2520Fail/fail.doc+weaknesses+of+balanced+scorecard&cd=2&hl=en&ct=clnk&gl=ke&client=firefox-a Singer, P.M. (2002). Developing a compensation plan for your library. ISBN 0838908160: ALA Editions. Read More