Private company BAE System changed their organisation cultural program. Senior management decided to use a comprehensive tool therefore. Balanced score cards were used as a main tool to manage the change.
Company was able to create a monthly report based on a visual appealing of scorecards online. All information was shared and company had better control over the change management.
Company’s scorecards were based on cause, effects and outcomes.
One of BAE Company’s employees stated that, “the more you understand the scorecard and the more you get used to reading it, the more you see these connections and the more you understand that you’ve got a complex set of connections.’
2.5 Performance Appraisal
The Appraisal system enables to measure individual’s performance, identify development and training needs and highlites eployees‘ potential. It can improve employees and company’s performance. Appendix 13
However, Edward Lawler, professor of business at University of Southern California, declared: "Performance appraisals are dead."
Gabriella Jozwiak, HR magazine Journalist, stated:”Every workplace has its idiosyncratic seasonal events, and HR is perhaps most visible during the annual performance appraisal; because employees dislike them. They are time-consuming, involve too much paperwork, HR would even do better to drop them altogether and find a better performance-management tool.”
See appendix 5
360° appraisal offers an effective way of acceptable, managers-saving-time appraisal.
See Appendix 6
According to Pau et al,”360 ° feedback could damage company’s structure, as 10.6% of companies using 360 ° feedbacks have decrease in shareholder value. He also states that it valuable feedback but serious problems regarding privacy and effectiveness appear. Company should convert the process into effectiveness creator not destroyer.
However, Bauer et al. stated that 360 ° feedback could cause tension and between peers when promotions and bonuses are at stake.
See appendix 7 Disadvantages and Advantages of 360° feedback
When the appraisal is constructive, and appraisee participates he/she tends to be more positive and motivated to perform better and improve.
HIS Company’s appraisal system design is not efficient and it does not fulfil its purpose.
Working appraisal system has to be design and (2.8 Pay Structure) competency pay structure should be introduced. It should be held bi annually.
CPS is assed via regular appraisals to facilitate a pay progression.
This will ensure that employees do not consider appraisal system as a waste of a time but as a promotion opportunity. This will encourage our employees and motivate them to perform better and ‘’look forward’’ to the process.
2.7 Job Design
According to MBA, ‘’ Job design can be define as the process of putting together various elements to form a job, bearing in mind organizational and individual worker requirements, as well as considerations of health, safety, and ergonomics.’’
Frederick Winslow Taylor described it ‘’as purely mechanistic, but it was discovered the importance of workers' relationship to their work and highlighted the importance of job satisfaction.’’
The main aim is to improve job satisfaction, improve quality of output and resolve problems According to Environmental Health and Safety Office (University of Toronto),’’ rearranging activities could release fatigue and boredom.’’
This is linked with Maslow’s hierarchy of needs model; esteem needs stage. Maslow states that this includes self respect and esteem of peers. Self-respect includes confidence, strength, freedom and achievement. ‘’
Job can be improved by job enlargement, rotation, enrichment and simplification.
The most suitable job design system for HIS is a job rotation system. It resolves inflexibility problems in The Product Development Division. Employees will develop new skills and gain new experience. All employees will have knowledge of other products. Knowledge of peers’ work will help to understand peers’ position. It could improve a team work issue. Therefore, they will co-operate better and create a well performing unit.
Job rotation frameworks could improve working environment in the Clerical department and the product development division. Rotation and regular changing working positions can directly affects employee’s motivation as the daily routine of employees work is broken; job becomes different, more interesting and more challenging. Employees feel more empowered, trusted and valued asset of the company.
However, the sales division’s performance will improve by implementation of job enlargement, as job rotation is not possible, as all consultants work from home. As consultants ‘ level of performance is low and customers complain, this framework includes additional training which is needed to increase employees’ knowledge and skills, such as communication. They will be given more tasks related to their work, more autonomy and flexibility.
HIS is a subsidiary of a German insurance company; job enrichment should be implemented on the Board of Directors. Implementation of changes will give directors more autonomy and authority over the branch in UK. They could alter company’s strategy which is not as effective in UK as in Germany. Opportunity to make strategic and company’s cultural changes decisions would motivate them and give them opportunity to use their skills and qualifications. The job will be challenging again and their performance will improve.
Job simplification was not considered, as it would not satisfactory resolve problems within the company. This framework simplifies the work and divides it into small sections. However, this would not increase motivation or commitment as our system needs more radical changes.
2.8 Pay Structure
Pay structure is a system of awarding employees by salary according to levels of grades or bands.
J. Stephan and G. White identified person and performance based pay system.
Appendix 8
Companies are constantly looking for a way to improve employees’ performance, so they design pay structure which promotes s link between individual/team and company, flexibility and acquisition of skills.
There are different kinds of pay structure such as performance pay, competency-based pay, skills-based pay and contribution pay.
HIS company utilises a traditional job based payment system composed of six narrow grades with four salary points; opportunities for promotions occurs annually during appraisal. There is no further progression after reaching the highest grade.
The report will focused at competence based pay as it appears to be the most relevant to HIS Company.
Competence based pay employee is paid according depth and range of skills and knowledge which are actively used by employee performing the job. As Brown and Armstrong stated (1999), “Competency-based pay can be defined as paying for the development and application of essential skills, behaviours and actions which support high levels of individual, team and organisational performance.”
There are two methods how to design effective CPS. It is mostly related to broad banded pay structure and a job family structure.
The most effective method for HIS Company will be combination of family structure and broad banding. Each family branch (See appendix 10) will have a different broad banding system, as each individual job family requires possession of different skills, knowledge and abilities. Communication, IT skills, multitasking etc. are relevant for the clerical division. The boards of directors have ability of strategic and tactical thinking, strong leadership, higher qualification and previous relevant experience in economic fields.
Broad banded structure is mostly effective for redesigning pay structure.
This system is affective to solve retention and recruitment problems in the product development Division as employees gaining competencies can be moved onto next spinal column.
See Appendix 9
Payment system of Bank of England is set according to the nature and requirements of the position and the necessary skills experience needed to perform the job.
Details of the Bank’s payment structure can be seen Appendix 11
Rewarding Staff
Reward System is an organisational system dealing with rewards to its employees.
It is believed by many mangers that payment is only reward employees expect.
Armstrong stated that (2002, p.4), the reward system is integration of company’s policies, processes and practices and they are rewarded according their performance, contribution, skills and competence.There are two types of rewards; intrinsic and extrinsic rewards.
Extrinsic rewards include the basic needs such as payment, job security, ability to pay bills and recognition. In Maslow Hierarchy Pyramid of Needs, this condition is at the bottom place; financial reward. (Maslow reference)
In order to increase motivation, job satisfaction and increase commitment, intrinsic needs should be a priority of the reward system.
Intrinsic rewards include job satisfaction, a feeling of completing challenges, social fulfilment and enjoyment. These requirements are at the top of The Hierarchy Pyramid of Needs. They are called psychological rewards.
Good working reward system should address issue such as recognition, compensation, benefits and appreciation. It should support attraction of new employees, encouragement higher work performance and commitment.
In order to not to omit any of mentioned issues, company should percept its employees as valuable assets, liabilities, customers and most of all corporate allies.
Appendix 13
to design and accommodate reward system in the most efficient way The Total Reward System is the most suitable framework to follow.
Appendix 2
Our company HIS has to improve its reward system in order to solve long lasting issues mentioned above in the report such as lack of commitment, low motivation, retention, problems with recruitment etc.
To solve above mentioned problems following measures should be applied at all divisions.
Appendix 15
Extrinsic part of a reward system is a pay structure, which was (see 2.8 Pay Structure) mentioned before in the report should be implemented. This is an extrinsic part of a reward system. The structure will give employees an opportunity to proceed, develop and implement their skills.
The Clerical Division has problems with motivation and fluctuation of a work load and a monotonous nature of their work.
Intrinsic rewards will be training, which will give employees a change to learn and obtain new knowledge to be able to develop their skills and competencies.2.7 Job Design
As the clerical division’s work is erratic; employees should be offered a flexible-time work. They will be able to divide the work according their schedule. This will make them feel empowered and entrusted.
To improve performance and motivate the staff a work measured scheme will be introduced. Month objectives could be set such as amount of processed applications. If employee reaches the objective, reward will be given in a form of voucher and a certificate of employee of the month.
The employees should be offered a package of benefits. Appendix 15
The Sales Division 20 employees encounter problems such as lack of commitment, low performance and lack of knowledge due to ineffective training. Additionally, customers have been complaining about misleading product information.
To overcome lack of commitment, employees will be offered a package of benefits, (Appendix 16) and company’s mobile phone to improve communication with customers and the line manager.
Lack of information about HIS products and inefficient training will be solved by redesigning present training and extending to three- four weeks training to make sure that our employees are knowledgeable about our products. To ensure, employees will deal with customers in the best way, bonus commission will be introduced, but only for satisfied customers. Consultants will be given an opportunity to take an additional training to increase a chance for promotion and stepping up in the salary spine. This will motivate them to serve our customers as excellent as possible.
Employees could feel excluded from company’s processes as they work from home. The communication with their line manager will be more on face-to-face basis.
To motivate them and make them feel trusted the job will be redesigned.2.7 Job Design
The product development division aces problems such as inflexibility, bad team work and retention.
Inflexibility will be solved by a job rotation.2.7 Job Design.
To resolve the team work issue, the team work bonus will be introduced. If the team performance will be above average, the team will be awarded by a financial bonus.
The division will be offered a flexible benefit package. Appendix 15
It is vitally important that the line manager of each division is directly involved within the team. . According to CIPD Survey (2006), Reward Management, attitudes and abilities of line managers were the main inhibitors to the successful implementation of a reward strategy.
Managers could reward employees by a verbal praise, flexible working, and family friendly policies or engage them in training or interesting project work. Appendix 14
According to Gerahty’s research, 80% of the extent to which an employee is engaged is down to the approach of their line manager.
Managers can directly affect employees’ confidence by providing support, consulting, coaching and establishing trust. According to Hewitt Associates survey 2009, 62% of employees consider that their manager motivates and inspires them. This provides company with productive and innovative employees.
Line managers are also responsible for dealing with underperforming employees. According to Xperts HR Surveys, 9 out of 10 companies believe, line managers are responsible for underperformance. However, six out of ten employers disagree: "Managers are confident and competent in managing underperformance in my organisation."
The Board of Directors lack a dynamic and necessary commitment.
To solve these problems and motivate and make them feel job satisfaction job enrichment should be implemented. 2.7 Job Design.
They should be offered package. Appendix 15
However, as the board of directors are key players they should be offered more extensive benefit package.
Additionally they should be offered a hybrid pension. Appendix
They should also feel fully valued for their qualifications and skills and their wage should be appropriate to the function their represent.
All rewards for the board Directors are supposed to be transparent and public available.
Finish Company, Metsäliitto Cooperative’s board are paid €5,800 monthly and €600 per meeting. The Chairman was paid a total of €85,440.
If COE director’s contract is terminated by the Boar, the person is eligible for 24 months of salary. If the director terminates the contract, no compensation is paid out.
Heidrick and Struggles stated that,’’ Board members do acknowledge that CEO compensation is frequently too high. For the last 10 years more than 25% of board members have said it is generally too high, and 50% agreed it is too rich in some high-profile cases.’’
Conclusion and Recommendations
Performance management system is a process which measure and evaluates performance of employees and overall company. PM utilises company’s employee’s full potential and abilities. It has been widely discussed if PM is linked to HR practices such as appraisal, rewards, pay system, training etc.
Performance management process needs to be measured to evaluate and improve the system. SMART objectives have to be set so PM system can be measure by number of reached previously set goals. William Deming PM circle is a tool utilised to manage company’s performance.
In order to measure company’s effectiveness from all point of views, balanced score cards were introduced.
Performance appraisal is a procedure which allows employee and line manager to discuss and evaluate individual’s performance .It is unpopular within line managers, as it is time consuming and uncomfortable for them.
360° appraisal is a process which supports appraisal in order to obtain more honest and constructive performance feedback. HIS will be able to evaluate employees’ performance and identify any potential arising issues. This will be ties with competence pay structure.
Job design process includes redesigning present job system according employees needs to increase their performance and job satisfaction.
Company will introduce job enlargement for the executive division, job rotation for development and clerical division and job enrichment for the sales division.
Pay structure is a system setting requirements which employees are enumerated accordingly. HIS company will benefit from competence pay structure which is based on paying for employee’s ability to apply their skills and knowledge.
Reward system recognises individual employees’ achievements and is given intrinsic or extrinsic from or reward. HIS company should offer all division different kind of benefit packages, training advantages and motivational objectives.
Recommendations are discussed in Recommendations section Appendix 17
Appendix 1
Appendix 2
The total Reward framework covers areas such as work balance, recognition, company’s culture and employee’s development. The scheme recognises the fact that payment is not only one motivational tool. It includes tangible; such as performance shares, bonuses, base salary, holidays etc., and intangible rewards such as work life balance, inspiration, growth opportunity etc.
Appendix 3
Planning stage consists of identification of desired behaviour required to reach set objectives, production of plan to reach objectives and preparation of personal plan in order to enhance abilities and knowledge of employees to create desired behaviour.
Objectives have to be SMART; Specific, Measurable, Accurate, Appropriate, Relevant and Timed.
Acting stage consists of application of set plan to reach objectives, while adjusting the plan according to appearing external changes.
According to Michael Armstrong and Angela Baron (2005), checking or monitoring stage is “managing performance all year around”. This process requires regular monitoring and evaluation of efficiency of countermeasures taken against external or internal changes affecting the plan and determining the success of reaching set initial objectives.
Acting stage requires assessing of reached objectives, putting controls into place to prevent reappearance of past issues. If objectives have not been accomplished, the whole process is repeated until objectives are accomplished.
Following stage is enduring during which policies should survive even during crisis. Policies should become collective as they hold company together and finally measurement and management. This is performed for example by balanced score card approach.
Figure 1 Demi's Performance Cycle
Appendix 4
Balanced Score cards
Score cards are divided into quadrants. These are objectives and each of them has measure to reach the objectives.
Each quadrant is dedicated to different stakeholders.
Financial quadrant matters to people who have a financial stake in organisation such as owners, or lenders.
The customer quadrant is design for buyers and users of the organisation’s service and products.
Learning and growth and business processes are focused at organisation and employees.
The number of quadrant can vary, but four is an ideal number as a scoreboard with higher number of quadrants could lose its focus and therefore purpose.
As the score boards are divided into sections, it enables company to focus at sections individually and pay it a full attention. According to Liz Murby and Stathis Gould , that scoreboard is popular because of its flexibility. It enables line managers to be proactive, as the balanced score board monitor ongoing performance. Any arising issues can be resolved before they negatively affect company’s performance. For example, customer complaints can be resolved before they lead to reduced customer retention.
Ongoing attention to all problems will make employees feel taken care of and level of commitment and motivation will increase.
Appendix 5
360 ° evaluation method incorporates feedback from a range of people within the company such as peers,
managers, subordinates and customers. Evaluation done by one person is combined with rating from other sources. The main purpose of the process is to provide performance feedback from multiple prospective.
Appendix 6
According to CIPD, performance appraisal is ’’an opportunity for employees and line managers to discuss each individual’s performance, development and required support from managers.’’
It is considered to be a managerial tool rather than performance management itself. However, it is an important part of performance management.
Performance appraisals are usually carried out by line managers. However, they could have a subjective approach to appraisals, tension between managers and would prefer to overtake awkward discussions.
Carol Kulik and Hugh Bainbridge (2005) stated that, “In general, line managers would prefer less responsibility for people management activities.”
The process of appraisal varies from company to company. According to Mullins (2010, p.514), “appraisal makes employees aware what is expected from them, and the yardsticks by which their
performance and results will be measured. “
Appendix 7
Appendix 8
Appendix 9
Categories of pay structure system
There are different criteria such as age and seniority, this can be qualified as a personal development criteria. Knowledge and skills can be qualified as a development based pay.
Appendix 10
Broad Banded
The width of broadband columns can be altered according different kind of job. It can be applied on a job family structure, where each family branch has a different kind of broad banding width of columns.
The range of payment can range from 30% to 50% from the minimum wage.
Appendix 11
Family structure payment system design is divided into different branches which each of them represents different group of jobs with the similar nature, for example administration, development, executives etc.
In HIS case it is The Clerical Division, The Sales Division, The Product Development Division and the Board of Directors.
Appendix 12
Appendix 13
Appendix 14
Appendix 15
All departments are given minimum benefit package, however they should be offered an across benefit flexibility. According to Lawler 1981, the flexible or cafeteria benefits allow individuals to pick benefits to match their criteria. Lawler, Mohrman and Ledford, 1992 stated that company gets the best value for the money, as employees get only what they want and be satisfied in the same time. They also mentioned that it creates an advantage as employees are treated as mature adults able to take care about their welfare rather than ’’baby sited’’ by the company.
Appendix 16
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