Performance Compensation, Importance of the Performance Management Processes - Case Study Example

Performance compensation xxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date PERFORMANCE COMPENSATION Business unit strategy- Supply Chain Americas procurement department Similar to any other small business unit (SBU), the procurement department will have an elaborate business mission that will be completely distinct from those of other departments. Besides that, it will identify and define a group of competitors in addition to developing strategic developments that are independent of other business units. To ensure effective control and organization, the department will have a separate management team with decision making authority. Furthermore, the department will develop its own strategic plan rather than using the commonly used collaborative approach or the corporate led approach. Strategies to be applied in this department will be directed towards answering two major questions: what is the best way to improve performance and what are the unit strengths. Hampson et al (2008) states that once these questions have been answered, the SBU can establish its mission, set objectives and develop strategies to meet these objectives. The strategies outlined below will be employed by the procurement department to elevate its game in terms of adding significant value to Supply Chain Americas. Establishing a governing supply chain council The major role of the governing council is to align the strategies of the supply chain with the overall company strategy. Essentially, the council will comprise of top leaders of the supply chain as well as business unit managers, corporate executives and other influential organization leaders. The council will ideally hold regular meetings to discuss matters pertaining to the supply chain. According to Baily et al (2008), procurement departments often struggle for recognition in the organization simply because their objectives and strategies collide with those of the company. In respect, the role of the supply chain governing council comes in handy as it constantly and consistently validates that the supply chain strategy is consistent with the corporate strategy. The council will also help the procurement department to remove barriers that might hinder potential success within the department and the company as a whole. In most cases, such barriers are in the form of individuals who might be against the departmental developments. Through collaborative efforts, the council will hinder the barriers and in the process propel the department to levels of high performance (Bower 2003). Besides that, the council likens the department to the executive department which is in turn likely to attract the support of the business unit stakeholders. Finally, the council will have the ore mandate to oversee cross-functional communication within the department. An effective governing council is one that gives opportunity to business unit leaders to give ideas concerning future projects and strategies (Hampson et al 2008). Aligning and staffing the procurement department It is often difficult to organize the supply chain function in way that will bring commensurate benefits and maximize its effectiveness to the organization. Some companies prefer to embed proficient supply chain professionals into various business units while others would rather have centralized operations. The procurement department within Supply Chain Americas will utilize a hybrid of these two approaches that will combine decentralized execution with a centralized strategy to improve service. Staffing within the department is obviously paramount to its success. Staff members should constantly be provided with new knowledge and skill according to their respective areas of specialization. Additionally, it is imperative to select managers with strong relationship management and communication skills, focus on value creation and have the ability to think strategically (Federgruen and Yang 2011). Leveraging systems and technology Whilst business systems and supply chain technologies have evolved rapidly over the recent past, many procurement departments seem unwilling or possibly unable to leverage these opportunities to bring better automation within the business units. A more alarming situation is when the department fails to realize the value made inn technological investments. Contrary to this, the procurement department within Supply Chain Americas will maximize existing technologies as well as develop new ones so as to provide clarity into business intelligence process and management information (Hamati et al 2008). Establishing alliances with keys suppliers Hamati et al (2008) notes that companies with state of the art procurement functions work closely with their suppliers even after the deal has been signed. This has recently been given the term “supplier relationship management”. However, this has been contest by some scholar terming it as one-way communication that tends to order how the supplier should conduct himself. In this respect, the term “alliance management” has been adopted to indicate a joint management responsibility for both the buyer and the seller. Supply Chain Americas procurement department will establish an alliance management program which will be aimed at ensuring that performance measurement objectives are achieved, develop continuous improvement goals, create platforms for problem solving and provide mechanisms to ensure health and vibrant buyer-seller relationships. The task, roles and responsibilities of the procurement operations manager The procurement operations manager holds a critical position that will basically entail the execution of initiatives created by the corporate procurement organization. Ideally, the manager should be a strategic thinker who will be able to shift proposed strategies into practice. The roles and responsibilities of the procurement operations manager are discussed below: Category supply chain integration Integration is a central theme in procurement management. Integration is viewed in different perspectives including integration through connecting trading partners’ information systems to enhance information flow and transparency, use of internet capabilities as an integrator, sharing information to facilitate consolidation of decisions amongst stakeholders of the supply chain, cross-functional integration in a supply chain context and linking market strategy with logistic methods and systems. As such, the procurement operations manager at Supply Chain Americas will have the role of ensuring early “inside-out” procurement involvement in category innovation and supply chain projects. Besides that, he will be mandated to collect data regarding Foods category programs and needs. This information should be obtained from the supply chain, brand development and category development. The results should then be discussed with Material Procurement Managers. The procurement operations manager will also be contact point among all the supply chain stakeholders such as business unit managers, corporate managers and suppliers. He will interact and influence various internal groups within the business unit concerning technical matters and propose possible solutions to the problems. In relation to integration, the manager will play a major role in ensuring that category needs, methods and systems are aligned to the supply market capabilities (Plomp 2009). Supplier Collaboration & Innovation The procurement operations manager will be expected to develop and maintain quality relationships with suppliers. Even better, he should be in a position to conduct quarterly business review as well as develop supplier scorecards for purposes of evaluating performance of the procurement function. Through various networking techniques, the operations managers will also identify new suppliers and thereafter determine the optimal set of providers of goods and services. Monczka et al (2011) asserts that it should also the responsibility of the procurement operations manager to champion and develop innovative ideas, principles, technologies, concepts and theories and present them to suppliers so as to influence their strategies. Develop business unit strategies The procurement operations manager should have a core competence in formulating and executing strategies for both short- and long-term objectives. He will present recommendations to leadership and partners to the department in relation to the best practice in supply chain issues. To ensure sustainable strategies, the manager will develop teams depending on the different areas within the category, coach them appropriately and provide them with necessary training programs and resources to sharpen their skills and competencies. Furthermore, the procurement operations manager will develop global strategies through making strategic alliances with other global players as well as global suppliers who would propel the procurement department to success through cutting down cost thus increase overall company productivity (Reinartz et al 2004). Performance management process (PMP) PMP is basically designed to be a year-round partnership between employees and their managers in the process of reviewing job performance, coaching and planning. Unlike other systems of performance appraisal, PMP takes into account not only the employee’s accountability but also on a set of five behaviors that influence their performance: observing work hours, leadership, problem-solving initiative, teamwork and customer service orientation (OPM 1999). Mentzer et al (2001) states that performance management is the process of creating a shared understanding of what is to be achieved and how it is to be achieved within the department. Performance management is a cyclic process involving three basic components: planning, coaching and reviewing. Planning Planning is generally the foundation of the overall performance management process. At this stage, the procurement operations manager will draft statements of accountability, discuss expectations of the accountability with team members and discuss expectations against the set of five behaviors earlier mentioned. Being the initiation stage, the manager will also explain to departmental employees the meaning of PMP, define job requirements and roles and work with employees to reach a consensus regarding performance standards. At the end of the planning process, all stakeholders in the department should be have an understanding of what the process is all about, why the department uses the process, how it works, what is expected of employees in various roles and when performance is reviewed and assessed. However, disagreements are sometimes possible during the planning phase and in such cases, the reviewer should be consulted to resolve the conflict so that all parties are left on a fair ground (Shafudah 2011). Coaching Coaching does not have a time line; its takes place throughout the year. Cardy (2011) posits that coaching can be irregular but should conducted as frequently as possible to enable regular exchange of feedback. Employees always want to hear from managers whether they are executing their duties in accordance to performance standards formulated during the planning phase. Coaching is therefore, considered as a reinforcement of what was discussed in the planning phase, helps employees to determine their progress and gives the procurement operations manager the opportunity to encourage employees’ development. Additionally, coaching is a good opportunity to identify problems as early as possible and hence correct them before they cause irreparable damage to the organization. Coaching in most cases is informal and does not require a lot of preparations. If it was done several weeks since the last session, the manager only needs to review the employee’s accountability and development plan on the PMP form, make notes on topics that need to be discussed and review notes of previous coaching sessions. Effective coaching is one where the manager praises the employee and shows them ways of correcting problems they might be having on the job. Ideally, the talk should be about filling the gap between expectations about performance and actual performance. Reviewing Reviewing is the culmination stage of the entire performance management process. Essentially, the review should take place two times in a year: Mid-year and end of year. During the mid-year review, the manager does not fill comments on the PMP form as this is only done during the end of year review. Year-ends reviews set pace for the next year’s PMP planning phase. Reviewing should be seen as a process of identifying and evaluating obstacles, failures and successes that have occurred throughout the year. Like the planning and coaching sessions, reviewing should be done privately to protect confidentiality of the employee. While rating performances, the manager should be aware of potential errors that might lead to systematic biases such as general bias error, halo effect, proximity errors, central tendency errors and logical rating errors. Rating should be based on the accountability and behavioral standards that were set at the planning phase. At the end of the year-end review the manager fills in the summary and development section of the PMP where he gives the employees strengths and weaknesses (Mentzer et al 2001). Importance of the performance management processes The performance management processes of planning, coaching and reviewing will clearly reinforce the strategies of the procurement department. For instance, the coaching sessions, as noted, significantly play part in identifying weak points in the organization and thus enable their timely correction. This will not only assist to align the business unit strategies with the overall corporate strategy but will considerably reduce wastage of resources. Besides that, the performance management process will enable proper staffing of employees in various sections within the department. This is because the strengths and weaknesses of each employee will be determined after completion of the year-end review which makes it easy to know the best position for an employee. The process of performance management generally fosters a sense of collaboration and sharing of ideas. As such, subordinates can make contribution regarding innovations and technologies that can drive the department to achieving its goals. There are several ways in which the performance management process will add value to the organization. The entire process makes employees realize whether their work make positive or negative contribution to the organization’s mission, vision and goals. Cardy (2011) maintains that this increases employee engagement and subsequently improves service delivery. Additionally, when managers and employees are aware of their specific duties and expected results, ambiguities in the workplace are eliminated hence increasing efficiency and productivity. In other words, performance management process enables one to clarify and think about their role in the company. Performance management process also facilitates communication within the workplace. It is a good opportunities for members to exchange and hear views of other away from the normal pressures of work. Through this process, managers and employees can identify ways in which to improve their performance and also discuss their career prospects and direction with mentors. It is a platform for setting objectives for further career development which is certainly a cornerstone for the organization’s development. Outstanding efforts do not go unrewarded in performance management processes. Mentzer et al (2001) notes that since one of the key objectives of performance management process is to increase performance, rewarding employees will increase their engagement, productivity and ultimately add value to the organization. References Baily, P, Crocker, B, Farmer, D, Jessop, D, and Jones, D 2008, Procurement principles and management, Harlow: Financial Times. Bower, D 2003, Management of procurement, London; Thomas Telford. Cardy, R 2011, Performance management: Concepts, skills and exercises. New York: M.E. Sharpe, Inc. Federgruen, A, and Yang, N 2011, Procurement strategies with unreliable suppliers, Operations research, Vol. 59(4), p. 1033-1039. Hamati, A, Seifi, H, and Sheikh-El-Eslami, S 2008, Optimal selling price and energy procurement strategies for retailers in an electrical market, Electric power systems research, Vol 9(2), p. 1-10. Hampson, K, Walker, D, and Ebooks Corporation 2008, Procurement strategies: a relationship-based approach. Chinchester: John Wiley& Sons Mentzer, J, DeWitt, W, Keebler, J, Min, S, Nix, N, and Smith, C 2001, Defining supply chain management, Journal of business logistics, Vol 22(2). Monczka, R, Scannell, T, Carter, P, and Carter J 2011, Accelerating innovation through effective supplier collaboration. 95th ISM annual supply management conference, April 2010. Office of Personnel management (OPM), Oklahoma 1999, Performance management process handbook. Oklahoma: Department of Libraries. Plomp, M 2009, Procurement maturity, alignment and performance: a Dutch hospitality case comparison. 22nd Bled eConference e Enablement: Facilitating an open, effective and representative eSociety, Bled Slovenia. Reinartz, W, Krafft, M, and Hoyer, W 2004, The customer relationship management process: Its measurement and impact on performance, Journal of marketing research, Vol. XLI, p. 293-305. Shafudah, E 2011, Appraisal performance management process: A case of the directorate of customs and excise, Ministry of Finance, Namibia. Masters dissertation. Read More