- Changes to the incremental system were widely resented, except by a few high-flyers.
The system was introduced very quickly by the previous consulting firm. They did not explain why the organisation was introduced and advantages of using it. There are a number of reasons why employees resent the system. Firstly, lack of communication before the system was introduced and during the system implemented. Secondly, there were no a consulting staff in the organisation to help the consulting firm to carry out the system. The consulting firm was not familiar with the organisation situation, therefore, they will not launch it successfully without research and investigate. Thirdly, a few high-flyers know they could reach the top, but most of employees were not sure and may feel very low chance to get the top. They did not want more challenge. Last but not least, there were only limited numbers of people in each department in the different grade. The best performance grade A only available to 5 per cent of the staff in any departments. It means even If an employee’s performance can get grade A, but the organisation only offers limited number of people in each department, and then he gets paid less than he deserve. He will feel his performance is ignored. Obviously, it will definitely cause resentment.
- Many employees felt the system was not used fairly or consistently. All felt the grade limits were unfair.
There are four reasons which many employees felt the system was not used fairly and consistently. First of all, the new system used the salary grade scale for appraising performance. Dessler (2003a) defines salary grade scale as a scale that lists a number of traits and a range of performance for each. The employee is then rated by identifying the grade that best describes his or her level of performance for each trait. The salary grade scale seems objective, but it may result in unfairness as, different managers probably see good performance differently. For example some managers may say quality of work is good, some may say creativity is good. Another reason is still because of managers, they may tend to avoid the highest and lowest rate, most of subordinates at average or probably rate unfriendly employees lower. Thirdly, there did not have a clear and relevant appraisal criteria and principle which can be followed. According to Human resource management, Torrington et al (2002b) defines appraisal as
‘used to improve current performance, provide feedback, increase motivation, identify training needs, identify potential and let individuals know what is expected of them.’
Appraisal is very important part of the system process. However, if the organisation has a lack of objective criteria, it also will cause troubles. Because managers and employees did not know which part of job they will be assessed on and relate it on their payment, the system could not carry out fairly and consistently. Finally, according to Dessler (2003b) defines appraisal as evaluating an employee’s current or past performance relative to the person’s performance standards. Therefore, the appraisal should review employee whole period, it is not fair to only review current performance and forget previous performance.
- Most employees felt their development needs were ignored. The reward levels were too small to motivate employees.
When employees get what they deserve, they can work more productive and self-motivated. Dessler (2003c) states reward can be financial reward such as salary and bonus and non-financial reward such as promotions and time offs. According this, the organisation should motivate employees in two ways, but they did not do it very well, they could not satisfy employee needs and reward levels too small, because the organisation seems not regard their needs, no matter financial reward and non-financial reward, motivation was not enough. It probably will result in another big issue which will be unable to retain better employees. Therefore, this issues has to be addressed in the reforming system, otherwise, the performance management system will fail again.
- Those departments that did set objectives found high levels of competitiveness between staff and an unwillingness to support others.
Generally, competition is benefit to organisation’s development and improvement. However, staff lacked support for each other, in order to win the competition and then achieve the good grade. The competition was not meaningful and lost its balance. Team work had been damaged as well. It also generated the essential openness, commitment and trust difficulties in the team. It means managers did not coach and introduce teamwork in right way. They have to get people to think their performance in team can be regarded. The organisation can not afford sloe workers.
- Employees did not feel the line managers were objectives in their assessments. Some line mangers expressed discomfort with the process. They did not understand why the system was introduced including some line managers. Reviews were not generally carried out during the year.
Some line managers even confused with the system which caused review to be carried out. Line Managers did not know how to do, what to do and when to do exactly. Employees could not get feedbacks from managers to find out where they were doing well, where they need to improve, and how to improve. Armstrong, as cited by Foot and Hook (1999) defines performance management as a process which is owned and driven by line mangers. From this can be seen that line managers have very important roles in this whole process. It is one of main reasons why the new system was failed, because line managers did not have professional training for operating appraisal, they did not know much about the system and discomfort with it. They must have special training in how the system operates and responsibilities.
3.4 Detail of reforming the system
From research carried out by the new consulting firm, it is not hard to see that the performance management system has to reform and re-launch immediately, if the organisation wants to retain it. After analysing all the causes of dissatisfaction with the system, identifying issues should be addressed and ways to change the system as below:
- Establishing more clear appraisal criteria
Once employees have done their jobs and been appraised, they expect to be paid reasonably. Appraisals criteria can provide opportunities to review the person’s performance and make salary decisions. It also can help managers better manage company’s performance and carry out appraisals fairly and consistently. Employees are able to use criteria to track their performance in relation to the targets. Kaplan and Norton, as cited by Torrington et al (2002c) state an organisation should assess individual performance based around four different perspectives which are:
‘Financial measures – such as sales growth, profits cash flow and increased market share.
Customer measures – that is, the customer perspective, which looks at, for example, delivery time, service quality, product quality.
Internal business measures – cycle time, productivity, employee skills, labour turnover.
Innovation and learning perspective – including such elements as ability to innovate and improve.’
Different types of company or job may have different concerns, but the combination of four appraisal aspect putting organisation objectives results-oriented appraisal and self-development appraisal together. As can be seen, the mix of criteria can work well.
- The need for more communication and explanation
Everyone is concerned how they can get paid, how much they can get paid. No one likes to see their salary going down and stay the same every year after hard working and great contributions. Communications can effectively help employees better understand how they are being paid and appraised. They have to ensure all the employee understand and familiarise with the process and how they will be evaluated.
The organisation can encourage individuals to do self-appraisal. Torrington et al (2002d) point out in light of the subordinate’s comments, managers might amend some of the ratings that they have given and also ask them to sign the completed appraisal form to show that they agree with their grade. If employees do not agree with their grade, allow them to discuss freely. This is not only can encourage employees to participation in the appraisal process, but also can overcome dissatisfactions directly.
Managers should continuous communicate with their employees. Managers should coach employees and remove obstacles to performance excellence. Review expectations, if the employee is unaware of these expectations, they must be made clear and a commitment made that they will be met. If expectations are not being met for some other reason, managers must first learn why. Get employees to talk freely, managers should be supportive and listen what they say.
- Objectives should be SMART
The individual should always define their objectives to meet the organisation objectives. To achieve organisation objectives is purpose of the system. According to Mullins (2002b) the goal-setting process is of important to all types of organisations and facilitates the attainment of objectives. From it can be seen, setting individual objectives is very important. The individual should define their objectives SMART which are specific, measurable, achievable, relevant and timed to contribute to organisational objectives and support objectives achievement.
According to the new consulting firm research, employees and line mangers all did not understand the system and process. Some line managers even discomfort with the process. Therefore, they all should be given training, especially for line managers. Dessler (2003c) states the best performance appraisal system is one in which the manager makes an ongoing effort to coach and monitor employees, instead of leaving evaluation to the last minute. Obviously, as the system is carried out by line managers, it is very important that the line managers receive sufficient training in performance management process, in order to carry out this new system well. They should know how to use of rating fairly and consistently.
- Performance feedback should be given after assessment
Performance feedback, which include recognising, evaluate strengths and weaknesses, identify development opportunities. They can find out how well they are doing and how to improve. In order to enable the individual to know how different people view their performance, the organisation can use 360 degree feedback. Torrington et al (2002e) state
‘[360 degree feedback] is collected from every angle on the way that the individual carries out their job: from immediate line manager, peers, subordinates, more senior managers, internal customers, external customers and from themselves.’
360 degree feedback, which provides a wide range of information from different groups. As can be believed, the individual can develop their self-awareness and find out their strengths and weaknesses from it.
Individual team members and the organisation will both benefit from the teamwork. Managers should always encourage collaboration rather than competition. People work together rather than against each other. To built high-performance team, cross-function team. There are various ways to encourage teamwork, which are to establish team performance measures, reward good performance teams such as bonuses and the organisational members, trained in the skills of teamwork, respect and work with another. To build a collaborative system, leading people work together, every individual has the different value and talent, they can share and learn from each other. Today, the survival of any business depends on collaboration.
- Grade system need to change and more motivated
Superior team performance deserves to be rewarded financially. To increase the salary scale, in order to more motivate employees to work hard and effectively. There are no limited number people to get grade A, as long as to meet appraisal criteria. Anyone get grade A can move up 3 increments, anyone get grade B can move up 2 increments, anyone get grade C can move up 1 increment, anyone get D would remain put and anyone get E would move down one increment. At the same time, the organisation should also have reward system, combination of financial and non-financial rewards. To increase motivation, in order to influence employees’ positive respond in attitude and performance.
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4.0 Conclusion
In summary, the performance management system helps organisations to better achieve their objectives and performance-related pay can encourage employees’ quality work. However, there are also various reasons the system failed including appraisal criteria, communication, individual objectives, training, feedback, teamwork and motivation. If any one of these issues are not addressed properly, the performance management system can not re-launch successfully.
5.0 Recommendation
The system should be re-launched with care, especially it was not successful at first time. The steps should carry out are:
- First, analyse the organisation’s situation and find out the root of the issues. In order to overcome the problems and avoid it happening again
- Consult with and involve employees. To minimize disagreement, ask employees for opinions, how do they think what fair is, how they build the system. Their opinions can through a survey, interview or focus groups. It is very important to make sure all the employees and managers understand and accept it.
- Provide more meaningful and clear appraisal criteria.
- Training should be provided.
- To reform the system. The new system should address all the issues analysed above and ensure each part of system and process is reasonable. The organisation must be certain they can carry out the entire requirements and changes before re-launch the system.
Bibliography & Webliography
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Armstrong, M (2000) Rewarding Teams UK: The Institute of Personnel and Development.
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Armstrong, M (1994) Human Resource Management 4th Edition, Kogan Page. Cited in Foot, M & Hook, C. (1999) Introducing Human Resource Management 2nd Edition. Longman Modular Texts.
- Armstrong, M and Baron, A (1998) Performance Management – The New Realities. London: IPD.
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Bowen, B. R. (2000) Recognizing and rewarding employees USA: McGraw-Hill.
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Dessler, G. (2003) Human Resource Management. 9th Edition, USA: Pearson Education.
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Dictionary.com (2004) Visited 29th April 2004. URL:
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Kaplan, R. and Norton, D. (1992) The balanced scorecard – measure that drive performance. Harvard Business Review. Cited in Torrington, D., Hall, L. and Taylor, S. (2002) Human Resource Management 5th Edition, UK: Pearson Education.
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Maddux, B. R. (1987) Effective Performance Appraisals USA: Crisp Publication.
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Mullins J. L. (2002) Management And Organisational behaviour 6th Edition. UK: Pearson Education
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Torrington, D., Hall, L. and Taylor, S. (2002) Human Resource Management 5th Edition, UK: Pearson Education.
