Rewards and Benefits in Volkswagen - Case Study Example

Resources Activity: Rewards and Benefits in Volkswagen Name: Institute: Human Resources Activity: Rewards and Benefits in Volkswagen Introduction Technology is indefatigably advancing, and risk capital is cautiously discovering its way back into the market while modernism continues to progress in the manufacturing and technology fields (Sahoo & Jena, 2012). Arguably, Ferguson (2001) asserts that most corporations’ talent pool has slowly begun to dry up and with vastly varied motives than during technology thunder climax. Ferguson (2001) further claims that the fundamental reason for this is based on the fact that baby boomers generation has started retiring while the global population growth rate is reducing. In this regard, many professionals who will be left in the industry when the technology bubble burst will no longer have the technical knowledge necessary for the modern companies. Essentially, recruiting is costly and time-consuming, and with the fact that the pool of available technical talent is flinching, rather than developing, talented staff retention is rapidly becoming the most cost-efficient strategy for maintaining the company needs (McDonald, Bailey, Oliver, & Pini, 2007). Workforce initiatives influence organizations by helping them to strategically aligning their talented employees and formulate strategic goals of the company, which implicitly improve the relationship amid the organization and employees, strengthen the organization culture, and lead to massive yield and competence. As a result, a stronger and more importunate competitive advantage and positive ROI is generated. In this regard, the study seeks to review the Human Resources activity: rewards and benefits, in Volkswagen Australia Company. Volkswagen Australia Overview Generally, Volkswagen Company is a 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 (Hammonds, 2003). 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 (Hammonds, 2003). 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. 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. To overcome completion and become a top performer the company has been employing enthusiastic workers who offer their best in terms of performance. 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. 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 (Sahoo & Sahoo 2009). 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 (Hammonds 2003). A research conducted by Pendse (2011), established 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 (Pendse 2011). 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 (Gunaratne & Plessis 2007). 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. Problem Identification 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 Australia. 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 (Pendse 2011). 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. In addition, the HRM department observed that, employees lacked knowledge regarding to the goal and managerial facets related with the performance management system. Basically, nearly all workers are motivated by both extrinsic and intrinsic rewards; thus, to be successful, Volkswagen’s reward system should distinguish both motivation foundations (Cadwallader, Jarvis, Bitner, & Ostrom, 2010). Every reward system is rooted in the hypothesis of drawing, retaining and inspiring the employees. According to Rosenau, Lal, Lako, and Piselli (2012), monetary rewards are crucial reward system’s element, however, there exists other things that inspire workers and impact their performance level. Actually, a number of studies have established that in the midst of workers interviewed, they have all concurred that money is not the most essential motivator, with some studies establishing that money has a negative or demotivating impact on workers (Cong & Nguyen, 2013).  Modern emphasis on commitment-development programs as well as quality-enhancement teams is generating a new beginning for monetary inducement of pay-for-performance strategies. Rosenau et al. (2012) posits that modern monetary incentives make up below 5 percent of the Australian employee’s compensation. In this regard, most business enterprises implement substitute compensation/reward systems to augment local and global competition. Essentially, the competitive basis for the mounting emphasis on performance-established reward is organization’s cutting expenses, reorganization, and improving overall performance. Forsyth (2012) claim that to make sure the compensation or reward system motivates the preferred activities and is effectual; it is critical to cautiously reflect on the strategies and reward employed and make sure the rewards are connected to or anchored in performance. Fundamentally, for Volkswagen to be successful, their system of performance measurement should be attached to reward. What’s more, rewarding employees for their individual performance must be a continuous management action, not only a yearly pay-connected custom. Besides, plans for rewarding workers’ contributions as well as performance consist of both financial and non-financial approaches (Hellqvist, 2011; Lawrie, Cobbold, & Marshall, 2004). According to Busi and Bititci (2006), goal-setting theory was inductively developed inside organizational psychology more than a two decades period, rooted in a number of field and laboratory studies. In essence, these studies exhibited that particular goals brings about an upper level of job performance than perform simple or unclear goals, theoretical goals. Provided that an individual is devoted to the company goal, he possesses the vital capacity to achieve it, and lacks inconsistent goals; thus, there will be an affirmative, linear connection amid job performance as well as goal complexity (Ferguson, 2001). Since goals pertain to prospect esteemed results, goal setting is primarily an inconsistency generating procedure, and it entails dissatisfaction with employee’s current state as well as the need to accomplish an outcome or object. According to Gunaratne and Plessis (2007), goals set the key principle for performance with complacency. It is worth noting that goals are encouraging since they need one to accomplish a lot so as to be contented. Success feelings in the place of work crop up to the level that employees develop and meet work setbacks by following and accomplishing goals that are significant and suggestive. Self-efficacy, in tandem with goals, over and over again intercede or partly intercede the impact of other probable variables for motivation, like character behaviour, response, involvement in management, monetary rewards, and job independence. Basically, feedback is the fundamental mediator of goal setting, whereby the company must commit themselves to the goal so as to trail their employee’s growth; which is facilitated by self-efficacy. Remedial Actions According to June, Kheng, and Mahmood (2013), 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, Cobbold, and Marshall (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 (Pendse, 2011). 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. 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 sought after behaviour is judgmental in developing an environment that arouses individuals in their works and nurturing the company expansion (Hellqvist, 2011). 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. Kihn (2010) 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, McDonald, Bailey, Oliver, and Pini (2007) 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 (Pendse, 2011). 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 (Kihn, 2010). 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 (Pendse, 2011). 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. 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 (Sahoo & Jena, 2012). 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 (Sahoo & Sahoo, 2009). 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. 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 (Pendse, 2011). Training Volkswagen company HRM department outlined job assignment as a vital issue that affected the company overall performance (Pendse, 2011). Mattox and Jinkerson (2005) 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. Hellqvist (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 (Cong & Nguyen, 2013). 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. Conclusion In conclusion, Organizations and members of staff do not persistently concur upon which certain activities make up service merit. Worker or pay reward is a subject that has produced considerable concern in the midst of practitioners as well as academics. This has prompted them to ask how imperative does money motivate employees, and to what extent business enterprises pay for individual performance, plus does paying for performance enhance performance or does it come with unwanted consequences. For Volkswagen Australia Company to succeed in managing performance, the company’s top management should make use of reward systems, pay for performance compensation and training. 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