Performance Management System - Coursework Example

Introduction Organizations speak of their ‘embedded values’ and announce their ‘visions’ for the organization for the next five years. According to Mayo (2004) both these – the values and visions convey the kind of company they want to be. Mayo suggests that organizations do not have values; only people do. The vision that a company has includes the kind of organizational behavior expected, and the goals expected to be delivered through employee productivity and performance. In an effort to attain the organizational objectives, firms try to understand human behavior and assess those it considers to be high performers. The leadership behaviors needed to realize the organizational goals and the organizational goals are increasingly becoming intertwined. If the organization is determined to achieve its goals it would work towards attaining people capable of delivering these goals and then make efforts to retain them. This requires a regular performance appraisal of the people but according to Falconer (2004) a fifth of the UK’s largest employers do not have any performance management system in place. Thus there remains a gap between theory and practice, between the rhetoric and reality of human performance management in contemporary organizations. A performance management system (PMS) is supposed to be an ongoing process of communication between the supervisor and the employee. It focuses on issues of performance, development and achieving workplace results. The right PMS should be such that individual performance is aligned with the organization’s missions and goals. The planning process starts with clear and defined goals set before the employee along with the expectations (Connell & Nolan, 2004). The job description is also reviewed at the beginning of the performance cycle along with the employee should any changes be felt necessary. A study by Personnel Today and PeopleSoft, the HR software supplier conducted an online poll of 900 businesses. The research revealed that 19 percent of the businesses with more than 5000 staff did not have any performance management at all in their organizations. Forty-six percent of employers with fewer than 100 staff did not have any performance management system in place. Organizations claim to link business performance with management practices but these are more rhetoric than reality according to Falconer. The philosophy of the founder of Marriott was “Take care of Marriott people and they will take care of Marriott guests” (Cannon, 2002). They believe that “Hands-on managers” are absolutely vital to continuing the Marriott culture. Their practices were not in alignment with their visions values and employees were leaving the organization or forming unions as they were dissatisfied with the management. The managers need to possess the people skills in being able to support, inspire, encourage, lead and listen to associates. With the changed business environment, emphasis should be on soft skills like conflict resolution and stress management instead of technicalities. This is another example of a company that has its ‘visions’ laid out but there is no alignment with the people practices. Rhetoric of practices It is assumed that the larger organizations carry out the so-called performance management practices but the reality is that they do not even have the basic tools to align the people management and the business practices (Falconer, 2004). Despite widespread recognition to align people policies with the strategic business needs, only a tiny fraction has taken steps to integrate performance management system into business practices. Organizations do not even have a computerized system to run the performance management practices. Another reason why performance management fails is because the skills of the staff are not monitored and there is often a gap between the job requirement and the skills that the staff possess. Staff turnover is not taken as a performance measure. Talent management has not been a priority for most performance management systems. Microsoft has six company values out of which some focus on human capital processes such as recruitment and development (Mayo, 2004). Others look at ways of working, priorities and what customers should expect. To achieve both requires integrated effort in both organizational change and personal feedback and development. This can become a reality if innovative people are recruited, there are ways to encourage and reward them and appropriate training is provided to them. Mayo cites the example of a company that had five values that made up the acronym PRIDE – performance excellence, responsiveness, integrity, dedication and empowerment. According to Mayo three of these were highly aspirational and away from reality. In addition, they were contrary to the infrastructure and ways of working. A strong culture and a determined effort is required to make the rhetoric a reality. Rhetoric of the appraisal The interpretation about appraisal itself differs. Appraisals can provide the information that which would help people to interpret the significance of their jobs and provide a framework accountability and feedback (Fisher, 1995). This information is essential for those who value personal growth but not all people are interested in personal growth. Those who have low concern for feedback and growth would prefer to be left alone to do their jobs. The rhetoric about biased and malicious appraisers – appraisers can diminish confidence of the subordinates. Hence the individuals avoid appraisals as it would diminish their confidence. A properly structured and applied appraisal system can help reduce distractions and promote an increased level of trust within the organization (Schraeder, Becton & Portis, 2007). Performance appraisal systems provide a forum for collaboration in setting goals for the employees. During the appraisal when individual goals and objectives are aligned with those of the organization, it may reduce uncertainty. Feedback is essential for employees as failure to provide a feedback can have negative implications. Without a system of feedback employees keep guessing whether they are on the right track or whether they should chart another course of path. At regular intervals or at fixed periods, a feedback is taken on the performance which brings out the strengths and weaknesses of the employee and highlights the areas where development is needed (Connell & Nolan, 2004). While many believe an annual feedback or appraisal or attention is enough, according to Cascio (1995) it demands daily attention (cited by Connell & Nolan, 2004). Once a year has not been considered sufficient to identify and discuss job strategies and weaknesses of individuals or teams. The process of review is part of the planning process where there is a two-way communication between the supervisor/manager and the employee with focus on development. Regular communication is an integral part of performance management. The purpose of the PMS is to enhance two-way communication which could further the interests of the organization. Most often the PA system has been used as a means to gather information for personal decisions like rewards and promotions, rather than using it as a tool to identify weakness that could determine the training needs of the employees (Kennedy & Grogan, 2001). The PA system is also believed to encourage short-term performance at the expense of long-term planning, discourage risk-taking, build fear by pitting people against each other, and undermine teamwork as people are encouraged to work for themselves instead of the company. In nutshell, it has been considered unreliable and inconsistent as a tool. Appraisals can be meaningful if they are provided immediately after an incident or as soon as the behavior to be appraised has been perceived. If there is a time lapse, then the recollections of the performance results fade. Even if the accuracy may remain intact months later, the opportunity to provide motivation and useful feedback is lost. Research suggests temporary reduction in productivity following PA which could range from three to six months. Companies like Nokia have also experienced that it actually erodes performance over time as people realize that goals are achievable and hence a positive appraisal assured (Nikols, 2007). PA systems hamper organizational agility. They provide financial leverage to employees and unions as well as to management. The rating system in many organizations is also not in order due to which many organizations struggle during appraisal (Falconer, 2004). They carry out a subjective appraisal rather than an analysis of their competency framework. Rhetoric of motivating employees According to Connell and Nolan a performance management system is supposed to motivate the individuals to be committed to the organization and to enhance the customer service but Falconer states that employee motivation has been found to missing in most organizations and hence they fail to achieve the business objectives. It is supposed to be a business tool, contend Connell and Nohan, and it is meant to help organizations as well as individuals to achieve their visions, goals, and strategic objectives in the work environment. It is not a one-time event but an ongoing process for development and is critical for the individual and the organization. Each employee shares the responsibility and is accountable for making it a success. The objectives have to be clearly defined and the means of attaining these objectives have to be also clearly laid down. Training and development should include skills which are job-related and also that are not related (Vermeulen & Crous, 2000). This helps in motivating and enhancing self-esteem as the employees feel the organization cares for them. Motivation is essential for retention and succession planning in today’s scenario. Rhetoric about training Training forms an important component of the PMS according to Connel and Nohan. It encourages communication to build trust and develop a work environment that focuses on continuous improvement and increased productivity. Training has to be ongoing, should be organization specific, it should take into account the future needs of the organization and training should be at the appropriate level (Vermeulen & Crous, 2000). In the past, performance appraisal has been extensively used as a parameter to determine the training needs (Leat & Lovell, 1997). Each participant undergoes a rating process which helps to contrast his or her task role with various performance or behavioral ideas. The individual performance is then ranked against those of other employees and then linked to some form of reward. This has now been found to be ineffective and redundant primarily because the validity of such evaluation rests on the appraiser. There are various flaws in this system of determining the training needs. While it could reflect the personal bias of the appraiser, the employee too may over-emphasize where goals are known to be monitored, or de-emphasize where goals have not been set. Rhetoric between performance and pay Performance measurements too have come under increased scrutiny in recent years. Ninety percent of the human resources executives are dissatisfied with the current performance feedback system. Many argue that lack of objectivity in their completion, inappropriate timing of such a review and the lack of appropriate content have lead to their unpopularity among managers and subordinates alike. Organization use performance-related-pay (PRP) as a part of the PMS. With the increased competitive environment due to globalization, PRP has become an important toolkit for optimizing human resources in the face of competition. PRP influences not just the economic performance but also impacts the issue of pay inequality. PRP has been defined as a “method of payment where an individual employee receives increases in pay based wholly or partly on the regular and systematic assessment of job performance” (ACAS, cited by Lewis, 1998). Lewis (1998) agrees that introduction of performance-related-pay (PRP) was to enhance employees’ motivation but organizations do not always meet with success. Incentives depend on the business cycle stage of the firm. The reward system is based on the assumption to attract, motivate and retain people and PRP attempts to restructure these assumptions. Money linked to performance targets has varied opinion – some feel it is the sole motivator while others feel that motivation is purely intrinsic and money should never be linked to it (Hendry et al., 2000). The managers face difficulties when they have to determine an individual worker’s contribution to the overall performance of an organization (Belfield and Marsden, 2003)). Amidst uncertainties, managers risk overpaying the workers for their contribution, in which case the workers are likely to withdraw the effort they put in for the compensation. Under such circumstances, it is better to pay the workers on the basis of input. The workers are also likely to withdraw their effort if they consider the compensation unfair. The rhetoric of knowledge of staff competence and potential The competence based assessment has been criticized as people perform successfully for different reasons at different times and under different sets of circumstances (Currie & Darby, 1995). Even what are known as identical jobs differ and identical list of competencies and similar job descriptions can hide important variations in how management conducts itself. Competencies should not be specific to the company alone but competencies for the managers have to be defined as well. The assessment made by different managers also can differ. Studies reveal that it would affect ratings if the opinions of different managers differ. Another problem that arises is that top managers usually base their judgments on their experience but they may have different competency files from others (Belfield & Marsden, 2003). Reward systems invariably reflect the assumptions and prejudices of top managers and HR professionals. Performance management has to be seen as a management process. It was also found that most often managers are not aware what rating to give to staff. Sometimes they gave high rating because they did not know what rewards it would translate into. According to Schraeder, Becton & Portis (2007), they give high ratings that exceed true performance to avoid conflicts and unpleasant consequences. It has also been suggested that the same process or agenda cannot work for different categories of people or for different departments. This instills fear into the people and they also fear that cultural differences would not be taken into account. The rhetoric of Future planning Organizational culture may be unsuitable for the future of the organization. The culture of the organization and the competencies has to be focused on to make that clear link between the business objectives and the performance of the people on a daily basis (Falconer, 2004). When businesses fail to make this link, they give up their attempts at performance management. Organizations do not even take into account the future skill gaps during the recruitment process or even during the planning stage. Succession planning and senior management development or identifying senior managers is not considered an important issue. The rhetoric of staff reward Rewards need not always be monetary. They can be in the form of non-monetary perks like opportunities for the development like attendance at courses or projects and seminars. It has also been suggested that rewards are intrinsic in nature and serves as a great motivator. Ryan and Deci (2000) believe that “motivation produces”. According to SDT intrinsic motivation is the tendency to seek out novelty and challenges. Intrinsic motivation requires supportive conditions to maintain and enhance these tendencies. Intrinsic motivation requires a sense of autonomy. Without deadlines and pressures the output is better and a controlled approach can reduce initiative. Feelings of self-worth, accomplishment and pleasure from using and developing one’s own skills provide the employee with “intrinsic rewards” (Gallagher & Einhorn, 1976) which is superior to any material reward. People are moved to act by different types of factors. They can be motivated because they value an activity or because there is a strong external coercion. It could also be from a fear of being surveilled or from a sense of personal commitment (Ryan & Deci). The PMS can be rendered ineffective if the employees are made to produce results under pressure and pay is always related to performance, as in the case of Snow Brand Milk in Japan. The support of senior management is essential is determining the PRP. At the same time, pressure can result in disastrous results. Snow Brand Milk was the largest producer of milk and dairy products by 2000 in Japan. The brand was so powerful that consumers in blind taste test preferred the competitor but when they saw the Snow Brand, they wanted nothing else. As deregulation increased competition, even Snow Brand had to bring down prices as private brands were found on the shelves. The pressure to cut costs was paramount and the factory units resorted to unethical and unhealthy production conditions until a disaster struck affecting 13000 people. One of the three primary reasons was attributed to pressure for results which forced the plant managers to resort to unethical and illegal actions (Finkelstein, 2005). As Ryan and Deci have clarified that different factors motivate different people, rewards too have a role to play in motivation. Gallagher and Einhorn contend that extrinsic rewards of money and threats of punishment decrease intrinsic motivation while verbal praise and similar positive external reinforcement increase intrinsic reward. Money and control should not become the reason for behaviour as attention is diverted to the rewards. Verbal praise augments an internal motivation as it reinforces the competence and self-determination reactions that arise after the work is completed. Another discrepancy that was revealed during the research cited by Falconer (2004) was that the targets were set between the appraiser and the individual without taking into account the business needs when assessing performance. It is normally the HR staff that is entrusted with the responsibility to appraise and assess the performance of the employees. It has been found that line managers are constantly in contact with the employees and for most of the employees their immediate superiors represent the management of the company (Brewster & Larsen 1992). If these managers have the responsibility and authority to control and reward the employees directly under them, it could enhance productivity and effectively work out better for the organization. The personnel specialists have practically negligible interactions with the employers and it is felt that line managers are appropriate to handle the issues relating to staff under them. They are suitable to motivate and bring out the best from the staff. Huselid, Becker & Beatty (2005) contend while the HR professionals are responsible for hiring the staff in the first place but performance problem can only be identified by the line managers. The HR views the entire workforce equally but the line managers may prefer a more differentiated system. Here change in organizational culture is necessary because the firm’s culture may make it impossible to treat execution of the workforce strategy anything more than an administrative core. The costs of such a strategy may not be immediately apparent but benefits are definitely there as the success of workforce indicates firm performance. If all the jobs are treated equally, the firm may under-invest on top performers and over-invest in underperformers. As a result the high performers leave while the low performers stay which eventually leaves a mark on firm’s performance. This justifies the role of line managers play in differentiating and identifying the workforce. IBM for instance caters to on-demand business and to service the clients it needs Adaptive Workforce (ADWF). IBM has adopted this strategy to integrate strategy/policy, process, organization, and technology to ensure that the resource supply and demand information is available throughout the business to match critical skills to client needs, on demand. In firms like IBM, the strategic value of a job cannot be left to an outside method of job evaluation. The line managers and the senior executive team have to be fully involved in assessment. There is no market equivalent to determine the strategic value of a job and the workforce strategy requires investing in human capital that have the capability to contribute to the firm’s strategic success (Huselid, Becker & Beatty). Thus it has been found that there is a wide gap between the theories and the practical approach that an organization adopts. Most companies do not have a proper assessment system in place. The rhetoric exists in every field like motivation, training, performance-related-pay, the appraisal system itself. Unless each of these factors is altered or the procedures changed, the performance management system would continue to bring out distorted results. Technology has to be used to provide continuous human capital support and this has to be a strategic decision rather than just another HR event. Linking performance to pay has not been considered a viable approach as the results become more subjective. The secret lies in giving the line managers more responsibility as they are the ones that interact and understand their subordinates better than the HR department. To deliver the performance management system properly the line managers have to be entrusted with the task and if this happens organizations would not abandon their attempts at performance management. Performance management can add value only if the line managers are allowed to assess the subordinates, as it is likely to be more accurate. Changes to the system could enhance its effectiveness. One of the most effective ways to bring about change is to have periodic and timely appraisals rather than making it an annual event. An informal and ongoing system of appraisal would go a long way in motivating the employees and establishing and maintaining a healthy relation between the employees and the supervisor. The organizational goals would also be in alignment with the goals of an individual. Without incorporating the changes, the theories would continue to remain rhetoric rather then become realities. References: Belfield, R. & Marsden, D. (2003). "Performance pay, monitoring environments, and establishment performance", International Journal of Manpower Vol. 24 No. 4, 2003 pp. 452-471 Brewster, C. Dr. & Larsen, H. H. (1992). Human Resource Management in Europe. Cranfield Institute of Management Library Cannon, D. F. (2002). Managing Service Quality. Volume 12 Number 2 2002 pp. 87-99 Connell, J. & Nolan, J. (2004). 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