Investigation and Analysis of a Performance Management System - Volkswagen Company - Case Study Example

Investigation and Analysis of a Performance Management System Institution: Instructor: Course: Table of Contents Investigation and Analysis of a Performance Management System 1 Executive summary 2 Introduction 3 Volkswagen Company Performance Management 4 Volkswagen Overview 4 Volkswagen Strategy 4 Volkswagen Corporate Culture 5 Problem Recognition and Diagnosis 6 Solutions and Recommendations 7 Documentation 7 Appraisal form 7 Job specification 8 Individual Development Plan 8 360-Degree Feedback 9 Training 10 Reward Systems 11 Pay for performance compensation 13 Conclusion 14 Reference 15 Executive summary Every company operating its business either locally or internationally needs impressive strategic objectives to be able to seduce as many customers as possible. The purpose of the research is to identify ways to systemize and strengthen the present performance management in Volkswagen Company. The basics elements involved include identification of determinable performance indicators and collection of accurate performance data. In addition, factors that could ensure a dynamic performance management system were identified. Nevertheless, the paper proposed various compatible compensation and rewarding systems that could be introduced to enhance smooth functioning of the performance management system in Volkswagen Company. Introduction Performance management is the present key word needed to cut throat completion and organization leadership battle[Gun07]. Basically, performance management is a complicated and a wider function in the human resource department. According to Lawrie, et al. (2004), performance management is a systematic process through which organization performance is improved by improving team member’s performance. Nevertheless, performance management includes frequent communication, implementation of workers development systems, rewarding achievements and continuous progress review[Cha12]. Performance management is observed as vital evil and most companies dread the process. A report by Lawrie, et al. (2004), reported that most organizations are not satisfied with their performance management systems. A combined report by World at Work and Sibson consulting indicated that, 58% of the respondents in their 2010 survey concerning performance management systems graded their organisations C or below. In the same survey, 47% of the respondents noted that performance management system enhanced their organizations attain their strategic objectives[Cha12]. According to Gunaratne and Plessis (2007), out of 610 studies on performance evaluation in various organizations, 30% of performance reports led to a reduction in workers performance. Generally, the workers felt the process was biased and others found it nom-motivating. The dismissal opinion on performance management squarely falls on the managers shoulders. This is because manager’s lacks bravery to carry out discussions on productive performance and grant feedback that can lead to increased performance (Lawrie, et al., 2004). Volkswagen Company Performance Management Volkswagen Overview Volkswagen Company is a German based company involved in automotive manufacturing. In 2011, it was the world largest manufacture in terms of unit sales; also, it enjoys a large market share in Europe for over three decades now[Don03]. Historically, Volkswagen Company was founded in 1937, producing its first car branded ‘beetle’. Volkswagen production has increased since 1965 when it acquired Auto union, granting it an opportunity to manufacture the first post war Audi models[Don03]. Some of the Volkswagen cars include Volkswagen Passat, Golf, Touran, Toureg and Sharan. Presently Volkswagen company shares are inscribed and traded in both domestic and worldwide stock exchanges. Volkswagen Strategy According to Ferdinand K. Piëch, Volkswagen Company chairman, the company focuses on positioning itself as a global economic leader among the automobile manufacturers. Ferdinand outlines four goals defined by the company aimed at making Volkswagen the most enchant and prosperous automaker in the world by 2018. The first goal aims at spreading out sensible novelty and technologies in order to emerge world leader in customer gratification and excellence. The second goal aims at raising the unit sales to more than 10 million a year. The third goal aims at heightening returns on sales by 5% before tax. The final goal intends to make Volkswagen company building a first class team, by becoming a top employer. In addition, the company focus is producing cars that are environmental friendly, which will remain successful products even at daring economic conditions[Baw08]. Volkswagen Corporate Culture To overcome completion and become a top performer the company has been employing enthusiastic workers who offer their best in terms of performance [Baw08]. The company believes that a balance between results and demand performance is the best prerequisite for maximum performance and outcomes. For this reason, the company ensures that they do not overstretch or under stretch workers, so that they can deliver top performance and drive the company to success[Baw08]. In addition, the top management ensures that they lead by example; to achieve this; the company management demonstrates exemplary leadership and ensure there is a constructive corporation between the management and employees. Moreover, the company introduced a ‘mood barometer’, which offers employees to express their opinions so that they can actively involve themselves in the organization of the company[Don03]. A research conducted by pendse (2011), reported that work objectives, job assignment, compensation and pay for performance are the problems faced by Volkswagen Company. These problems originate from performance management and if not taken into consideration can push the company below the market average. Statistically, the company directly employs Over 450,000 workers worldwide[Pen11]. The company is an outstanding player in the automobile manufacturers, an industry that has implemented E-commerce to design complex vehicles with computerized components. In addition, most automobile manufacturers use E-commerce to facilitate customer communication through internet[Gun07]. Presently, automobile manufacturers are forced to produce more with less. Volkswagen Company aims at reducing the employee’s supervision, whereby employees are expected to schedule their own work and at the same time manage their team. The company offloaded unskilled labour and replaced them with multi skilled workers who can help the organization fulfil its objectives and goals of becoming a global leader in the automakers in terms of quality, and customer value[Baw08]. Problem Recognition and Diagnosis In 2011, Bi-survey an external agency conducted a survey to over 6000 employees of Volkswagen company in four countries namely, China, US, Germany and South Africa. The survey was meant to serve as an audit to HRM systems. The main aim of the study was to learn how workers observed their management, their work, and HRM department. The results exposed key areas in the HRM system that was discerned to be below the industry average. The audit identified the problems to be, job assignment, pay for performance work objectives and compensation[Pen11]. Long before the audit, the human resource management (HRM) department, had outlined some improvement opportunities such as discerned lack of progressing opportunities, untimely performance feedback and discerned unevenness in the company’s rewarding system[Baw08]. In addition, the HRM department observed that, employees lacked knowledge regarding to the goal and managerial facets related with the performance management system. Solutions and Recommendations According to Business wire (2009), performance management concept is principal to productive organization. Basically, performance management is a process of monitoring workers performance in relation to job demands over a given time and then developing an appraisal for it. Lawrie, et al. (2004) posited that, performance management main purpose is to provide workers with feedback then serve as means for career and personal development. In addition, performance management establishes objectives, which are used for training programs after appraisal. Offered with the study findings it was evident that there were discerned gaps in the company developing changes in the automakers industry[Pen11]. Pendse (2011) recommended that, Volkswagen Company must revise its performance management system and heighten its connection to the company’s mission, returns, and strategic objectives. The following are the recommendations for dealing with issues in Volkswagen company performance management. Documentation According to Lawrie, et al. (2004), a company’s performance management cannot be effective if the required format is incongruous. In the study Pendse (2011) recommended that Volkswagen Company to backup performance management system with appraisal form, job specification and individual development. Appraisal form Pendse (2011) noted that Volkswagen present appraisal form is not in a position to assess competence, performance, efficiency and areas for improvements focusing on the company mission, objectives and returns. The suggested form addressed these deficiencies by clearly itemizing goals that are achievable, measurable, precise and related to performance management. For instance, Volkswagen company goals of producing differentiable products by 2018 and its related strategy of novelty can only be achieved by encouraging creativity, novelty behaviours and stressing pliability to change. In this regard, a productive goal for company engineers is to file three products associated gadgets before the next appraisal[Pen11]. Job specification Gunaratne and Plessis (2007), posited that job specification should not be a one sided process. In this regard, employees should be involved to heighten the likelihood of acceptance. Employees should take part in its development and the standards setting must be acceptable to the employees. In addition, the goals should be acceptable to all workers, and its standards should be under the workers control[Cha12]. Pendse (2011) recommended that, Volkswagen Company apply participative approach to develop its job specification. In this perspective, all managers and workers were elected to draft down skills required to enhance effective performance management. Individual Development Plan The development problem can be solved through a performance management system that expedites the development of the individual and broadens on the suggested job specification[Cha12]. Therefore, there is a need to push for the introduction of identity provider. In addition, the personal objectives and motivation of the workers should not be ignored, because ignorance can lead to decrease in the employee’s performance[Don03]. The admonition is that the workers personal goals and objectives must be coherent with Volkswagen Company’s strategy, mission, returns, and goals. The proposed identity provider was to contain the worker’s information and skills. The identity provider was to act as a documentation proving that the employee is qualified to perform the job[Pen11]. In addition to this, the study recommended that Volkswagen continue to offer career education, counselling and planning information to its workers so that they can improve their efficiency and enhance the company to achieve its goals. Pendse (2011) recommended Volkswagen Company to use internet-based programs, which had merit of serviceableness and had monitoring options. 360-Degree Feedback Traditionally, performance evaluation was observed as downward communication exercise in which the manger told the workers how their performance scorecard read[Hel11]. This increased risk of biasness through the error of central tendency. Pendse (2011) recommendation was the application of 360-degree feedback process, in which different processes can approve assessment. The self-appraisals, which were part of 360-degree examination system, according to Hellqvist (2011), they tend to boost workers morale and satisfaction. Sahoo and Jena (2012) posited that, an employee who conducts a self-evaluation is much likely to become non-protective. Self =assessments can be used to expose areas that need improvements and help those utilizing it to set a personal goal for their future development. Moreover, the process enables workers to exercise an influence on the performance evaluation of the top management through upward effect. This means that the overseers receive ratings on their performance from various employees. A study conducted by Hellqvist (2011) reported that upward feedback initially improved manager’s performance who previously had been poorly rated. This was a result of communication between the top management and workers regarding to upward feedback. Volkswagen Company is a multi-international company with many expatriates across the globe. Therefore, incorporating 360-degree feedback into its performance management can work wonders. In this regard, the workers need assessment and need assistance in career programming. Consequently, 360-degree feedback is an enormous valuable since it is a performance improvement tool, which levels the two sources of assessment information[Pen11]. Training Volkswagen company HRM department outlined job assignment as a vital issue that affected the company overall performance[Pen11]. Sahoo and Jena (2012) posited that, job assignment problems are associated to an unsuccessful coupling between job requirements and employees individual skills. According to Gunaratne and Plessis (2007), a competent performance management system highlights incompatibility and feebleness. In Pendse (2011) recommendation, mangers should be trained on how to formulate job specifications, comprehend scoring methodologies such as graphic rating scales and informal global assessment. In addition, managers should be trained on how to avoid discrimination during performance assessment. Pendse (2011) observed that, through training the mangers were expected to understand how to reward employee’s preferences, understand the integration between rewards and performance, and how to serve as employee’s counsellors. To ensure that performance management is comprehended and accepted by all workers, Volkswagen Company should train the individuals performing rating. In addition, employees need advanced skills in order to use the leading-brink technologies such as business planning re-engineering (BRP) programs, economic resource planning systems (ERP) and E-commerce systems. Consequently, Volkswagen is a global company hence it should be able to work with individuals from different cultural values to improve its overall performance, through global functioning and out sourcing. Reward Systems Reward program is closely knotted to the performance management. Based on the study, performance and compensation were the vital problems in Volkswagen Company. Generally, rewarding wanted behaviour is judgmental in developing an environment that arouses individuals in their works and nurturing the company expansion[Hel11]. Due to increased global competition, Volkswagen Company requires an ‘efficient rewarding’ plan organized to the performance management system, to heighten its competitive advantage over its competitors. Hellqvist in his report exhibited that an efficient rewarding system increases the employee’s performance motivation to about 40%. The study braced motivational influences of merit pay globally. For instance Busi and Bititci (2006) noted that, white-collar workers in America braced the notation that performance be a crucial determinant of the amount of salary the workers should be paid. In addition, Hellqvist (2011) observed that, salary for performance has promoted safekeeping and attraction to workers. Salary is a powerful motivator because it offers direction to other reward, such as prestige and status. According to Pendse (2011), some employees prefer time off rather than monetary rewards, because every employer has his/her own motivator. Therefore, Volkswagen company management should heighten its understanding on the types of rewards to implement in its performance management system. According to Kihn (2010), in spite of the fact that reward arouses efficient performance, many organizations do not have supportive infrastructure that can enhance effective rewarding system. For instance, in Pendse (2011) study, it was observed that merit increased in a company with well-formulated reward systems. In this regard, Volkswagen Company failed to attain its intended impact, from a compensation and pay-performance point of view. This is because its top management were unable to separate capital and poor performers. As a result, poor performers were over rewarded, while the best performers were under-rewarded[Pen11]. This act of ignorance prompted managers to rate all employees as same performers. Kihn (2010) posited that, reward systems could fail when the company sets goals too high. In this regard, Volkswagen Company can use Human Performance Technology practitioners to enhance efficient goal setting by stressing the importance of accepting and achieving them. For instance, implementing novelty-based goals does not give assurance that all innovation will be successive. Therefore, the reward system must embrace occasional failures whereby workers can be rewarded according to their long-term path instead of the current success/failure[Kih10]. In addition, workers should be offered an opportunity in goal setting, by this it will ease the goal acceptance among the workers leading to increased productivity. Lawrie, et al. (2004), posited that during implementation and evaluation of reward system, organizations should ensure workers discern a connection between the performance management system and reward system. It is worth noting that, assessments without consequences can lose their efficiency faster. This means that employee motivation to perform a task is affected by the results of lacking set objectives. Lawrie, et al. (2004) asserted that, rewards are crucial and hence they must be fair in comparison with other employee’s rewards under the same department. For instance in Volkswagen Company, there is inequality in the reward system. Whereby, some employees received more rewards, especially under performers [Pen11]. Therefore, Pendse (2010) recommended that managers should understand the connection between rewards and individual performance. In addition, Volkswagen Company rewards have been confidential since the establishment of the company in 1937[Baw08]. This pulled back the legitimacy of their rewarding system since; employees could perform poorly because they were no means they could compare their rewards with that of their co-workers. To address this impairment Pendse (2011) recommended that Volkswagen Company’s management share information regarding to rewarding formulae so that employees can compare their rewards to other workers within the same salary grade, job specification and job title. In addition, Pendse (2011) recommended that Volkswagen Company clearly outline the objectives of the rewarding system in relation to the company’s goals, value and strategic goals. Pay for performance compensation According to BBC (2009), angry stakeholders called for executive compensation limitation in and instead advised companies to compel pay for performance programs, this was in response then global financial downturn[Cha12]. However, Gustavo Manso, a finance professor at MIT’s school of management argued that, those punitive actions were not the logical way to support novelty. In a research conducted by UCLA School of management, it was observed that companies experimenting innovation, inducements that fail to penalize failures and promotes success enhances innovation to the business[Bus09]. In its experiment, UCLA noted that compensation scheme that endures early failure and reward long-term success promotes novelty. ULCA recommended that, to implement such schemes organization need to combine long-term stocks options and short and severance agreements[Hel11]. Consequently, polices that block usage of these instruments have a negative effect on novelty. In this regard, Volkswagen can implement this principle to enhance attainment of long-term strategic goals. In addition, Volkswagen Company should implement friendly compensation schemes that enhance novelty and exploration by protecting people from potential failure[Pen11]. Conclusion It is essential to assert that performance management system can lose its productivity when it takes place in isolation and not in line with the company strategy. It is recommended that the two to be integrated together to expedite motivation. In addition, the company was recommended to train workers on intricacies of performance management system. From the study, it was evident that specifying the objectives of the rewarding system improves workers performance, which in turn enables the organization to meet objectives and goals. Volkswagen Company should terminate secrets related to merit increases by notifying workers about the average value given to employees doing the same job. Finally, performance improvement department should create a corrective action that will enhance to rise under performers to an acceptable level in the organization. Conclusively, Volkswagen should focus on individual development planning with accent to the company’s goals. Reference Gun07: , (Gunaratne & Plessis, 2007), Cha12: , (Sahoo & Jena, 2012), Don03: , (Hammonds, 2003), Baw08: , (Bawaba, 2008), Baw08: , (Bawaba, 2008), Pen11: , (Pendse, 2011), Hel11: , (Hellqvist, 2011), Kih10: , (Kihn, 2010), Pen11: , (Pendse, 2011), Bus09: , (Wire, 2009), Read More