Wal-Mart: Performance Management System - Case Study Example

Wal-Mart: Performance Management System Name: Lecturer: Course: Date: Table of Contents Table of Contents 2 Introduction 3 Situational analysis 3 Current performance management system 5 Performance Review Cycle 5 Annual performance review 6 Performance improvement plan 6 Fit between the PMS and the company strategy 7 Recommendations 9 Conclusion 9 References 10 Introduction Performance management describes a process that is prone to constant revision to identify the areas for improvement, and to determine whether all the components of the organisation are working effectively and efficiently to attain the desired organisational goals (Armstrong & Baron 2005). Put differently, it refers to a process of management architecture to ensure that the organisation along with its resources work in a coordinated manner to attain the organisation’s goals. It also helps determine whether some components of the organisation need some adjustment to enable them integrate all the required components (Armstrong 2009). . In all, performance management promote organisation’s efficiency, thus promoting business success. This paper outlines, analyses and assesses the performance management system that Wal-Mart uses to achieve its key strategic goals of competitive pricing, Situational analysis The company has the goal of attaining price leadership. The company’s management focuses on driving the company towards being a price leader, since the company believes that pricing strategy conforms to a direct approach for achieving performance and attracting customers. This implies that the company’s business strategy and measurement of performance has to relate to price leadership. As a market leader in sustainability, employment opportunity and corporate philanthropy, the company is a multinational retail corporation that operates a chain of warehouses and discount department stores. It is currently the largest private employer with some 2.2 million employees (Walmart 2013a). It is also the largest retailer globally. Currently, Wal-Mart has around 8,500 stores in 15 countries. The company has been at the frontline of introducing technology use in its distribution centres as a result cutting down on its shipping costs and delivery time. Advanced computer systems such as track inventory have been introduced resulting in fast and efficient checkout time and reordering. In the recent past, wireless in-store systems have also been introduced resulting to improved customer service. The company has the largest net sales globally with consolidated net sales of around $114.9 billion and an operating income of $6.3 billion as of 2013 (Walmart 2013b). The company has one of the best retail link computer systems that ensure fast and efficient inventories. The company’s global presence and global repute has helped it become increasingly competitive. Among its largest competitive advantages are its advanced logistics systems, as the company can ship merchandise from any of its numerous distribution centres hence providing cheap and efficient routes. Additionally, it has its distribution centre used specifically for online orders. Wall-Mart’s competitive low pricing strategy has enabled the company attract low income as well as high income customers. The company has a large highly motivated employee bases attributed to the company’s strategy of motivating workers through paying them higher minimum wage (Walmart 2013a). However, Wal-Mart has a bad reputation for having discriminatory policies. For instance, the company’s female workers sued the company for its policies that denied them promotions while at the same time paying men higher than women even in situations where they are in a similar job group (Walmart 2013a). Current performance management system At Wal-Mart, performance management entails harnessing several people management practices such as learning and development, with the aim of making the company attain its overall goal or becoming a market price leader. Wal-Mart integrates PMS to ensure that individuals and teams within the organization are assessed and managed in ways that achieve improved levels of organizational and individual performance and development. Through performance management, Wal-Mart also hopes to establish a culture where employees can take responsibility for continual service delivery improvement, as well as employee skills and capabilities (Ellis & Onyeizung 2011). In which case, Wal-Mart hopes that effective performance management would facilitate collaborative approach which would subsequently influence individual performance, individual development and organizational outcomes. Performance Review Cycle Performance Review Cycle (PRC) is essentially a continual process comprising three key meetings between the manager and the affected employee. The process entails participation, frequent direct discussions and feedback concerning issues such as employee’s performance, job description, resources and career objectives. It can indeed be effective in building a challenging and supporting working environment. As a process, an initial meeting for personnel development and performance planning is called (Anon 2006). Subsequently, discussion and feedback takes place. In all, active participation takes place to ensure the company managers have reached a consensus on operational requirements for individuals and teams. At this stage, identification or strengths and weaknesses of the staff takes place to identify what areas should be improved to optimize employee engagement through creation of an environment where capable employees work towards a common objective (Armstrong & Baron 2005). Annual performance review Here, Wal-Mart conducts annual performance review on a phased basis. The first phase extends from the company’s executives to the subordinates. The process requires that top managers or the company’s executives convene meetings and ensure that performance review cycle is carried out. Within the regional structures, the first phase comprises encompassing area management and regional management teams (Carleton 2009). It can be an effective means of identifying ways in which employees can be assessed and trained in line with corporate objectives of price leadership. Performance improvement plan Performance improvement plan describes a time bound process for formally addressing an issue of performance. Wal-Mart uses the process when looking to address performance issues that have failed to be improved through typical formative feedback (Carleton 2009). At Wal-Mart, it is specifically used for managing performance in a unit or department. It further requires constructive discussion between the management and their direct report concerning wanting areas in performance that have been identified. Generally, it is not a disciplinary procedure. In any case, if performance is not improved, then it is passed to other supportive HRM process, who will further assess, train and develop affected employees (Boateng 2011). Fit between the PMS and the company strategy Based on the SHRM theoretical model of contingency perspective of “best fit,” Wal-Mart has different corporate strategy as it targets competitive pricing compared to differential strategy used by most retail stores. The company’s PMS interacts with the company’s strategy thus resulting to organizational performance. From the perspective of performance management, Wal-Mart has instituted high performance standards and job designs. One of the company’s strategies for ensuring improved performance includes mandatory participation of local managers in employee performance appraisal meetings. This is since it provides an opportunity for the associates and their managers to get to know each other from the beginning. Wal-Mart also intends to treat relationships between the workers and managers in the true sense of partnership. The management has emphasized the spirit of encouragement. Whenever the employees have ideas, complaints and suggestions, these can be reported directly during the staff appraisal meetings (Boateng 2011). Performance is an outcome of specific actions. In which case, an individual’s performance is equivalent to an individual’s motivation and ability. The process has continually been used in reviewing the success of failures of work-related tasks within an organization. The performance management system for Wal-Mart recognized the contributions and roles of the organisation’s performance measured. Depending on the level of management, PMS has serves a critical role of setting the context of the priorities the objective, role and accountability of personal development (Armstrong 2009). Wal-Mart depends on performance measurement and analysis. The measurements are derived from the strategies of the company. Additionally, they serve to provide important information about the company’s key processes, outputs and results (Baumgartner & Levey 2013). Data from analysis of the PMS provides critical information for planning purposes, reviewing overall company performance, data for improving processes and operations and data that could be compared with competitor’s performance with bench marks for best practices (Armstrong & Baron 2005). Further, PMS provides a valuable opportunity for recognizing and rewarding employees who aim at achieving the corporate objectives. Further, it offers valuable feedback as well as instructions to employees. It also offers managers essential framework for assessing employee performance (Bento & Bento 2006). Recommendations Based on the contingency model of “best fit,” it is perceivable that Wal-Mart needs to improve on its PMS if it has to be more relevant to the company’s strategy of competitive pricing. In which case, based on resource-based model, the company’s resources can be used as source of competitive advantage. For instance, the company should focus its PMS more on improving human capital resources such as skills, expertise, intelligence and judgment of employments can be aligned with the company’s strategy (Armstrong 2009). Concerning the company’s present employment practices, the “contingency model of best fit”, suggests that many areas still need improvements. For instance, aside from the assessment, employees should be trained further on weak areas as learning can be an essential source of competitive advantage (Ehtesham 2011). Conclusion In sum, performance management is an effective way that Wal-Mart uses for determining shared understanding about what should be achieved, as well as an approach for managing employees to heighten the likelihood of achieving success. The process provides a broad spectrum of information on the performance drivers that Wal-Mart can use to improve staff competence to achieve optimal performance. It draws attention to the significance of integrating the human resource as well as information and processes to realise corporate goals and objectives. Wal-Mart operates under the assumption that performance management has to be integrated hence allowing the management and the employees to share responsibility in ensuring accountability, setting organisational goals and financial performance. 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