Performance Management/ Motivational Theory Performance Management
Performance Management/ Motivational Theory
Performance Management
The main purpose of performance management is to help businesses, such as IKEA to remain competitive. To do this, the organisation needs to measure the performance of its employees. There are number of ways, in which IKEA can measure the performance of its employees. However, the most common method that the organisation often uses is called the appraisal system.
Appraisals- performance reviews
One of the ways in which employers can get feedback on employee performance is through appraisal. Appraisal can be open or closed. If the appraisal is open, the appraisee can actively take part in the review process and discuss the results. If the appraisal is closed, the report remains confidential.
The appraisal looks at what an employee's job is, how well it is being performed and at what action should be taken into account for the future. The appraisal is made up of several stages.
Setting up the appraisal system
Businesses, such as IKEA need to decide the purpose of the appraisal system and must ask themselves, 'What are we trying to achieve by appraising staff?' The organisation needs to aim to identify areas where the employee can become more effective and to set new targets both for performance and for personal development.
The organisation should set up an appropriate scheme which will achieve the targets. This may include observation, discussion, checking performance figures, etc.
The organisation needs to decide who the appraisors will be. For example, is the appraisal to be by peers assessing one another (this is known as peer evaluation)?
Carrying out the appraisal
In order to achieve an effective appraisal system, the organisation needs to carry out the following stages:
) Identify criteria- this must be clear what is being assessed and what creates satisfactory performance
2) The appraisal itself- this may involve observing co-worker's work, reviewing performance figures against targets and an interview to discuss about performance
3) Follow-up- this need to be agreed by the appraiser and the appraisee. This stage may involve identifying any weaknesses, setting out priorities for improvement, identifying any support that is required, setting out development or training needs, agreeing to future targets and reviewing dates
4) Appraisal should give a basis for rewarding productivity in those occupations where traditional bonuses and commission schemes are difficult to apply
Types of appraisal techniques
There are number of types of appraisal techniques that many businesses often use. The most common types of appraisals include:
* Self-appraisal- this involves employees assessing themselves against a series of criteria. These results can be used to make comparison with the views of others
* Upward appraisal- this is where employees are rated by their subordinates rather than by their superiors
* Peer appraisal- this involves employees on the same level within an organisation assessing each other
* 360 degree feedback- this involves getting feedback from a number of people within the organisation both above and below the appraisee. This type of appraisal is often referred as a multi-source assessment
The key features of a good appraisal interview include:
* The individual being appraised (this is known as appraisee) is given advance warning of the date of the appraisal, by the person doing the appraising (this is known as the appraisor)
* The appraisee clearly understands what will be discussed. The normal content is:
o review of past performance to date
o a review of job performance overall, including any difficulties encountered by the appraisee
o new aims and objectives for the employee set for the forthcoming year
o an assessment of training and development requirements- this links to the needs of the employee to future performance objectives
o a discussion about future career aims and progression opportunities to help employee to plan their career
* the appraisee should do most of the talking and should be encouraged to make suggestions to improve performance or develop career ambitions
* the aim of appraisal is to provide the employee and the manager a time together to concentrate on the apraisee. Many appraisees may find this motivational and satisfying
A successful appraisal aims to:
* enable the organisation to find out who deserves future rewards, such as promotion opportunities
* discover the future potential of employees
* identify the training needs which are required and link these to the business aims and objectives
* control and monitor staff performance
* give employees the time to talk about their hopes, aspirations and problems, with their line manager in private
* assist employees to identify areas where the would like to develop their skills and expertise
* bring past successes to the attention of their boss, if these seen to have gone unnoticed
* improve employee motivation by understanding and recognising their own needs
* to check the effectiveness of current practices in relation to recruitment and training
Advantages of performance appraisal include:
* it identifies areas which are unsatisfactory
* it find areas where employees need to be trained and developed
* it encourages and rewards good performance- maybe with performance-related pay in the form of bonuses or pay rise
Disadvantages of performance appraisal include:
* it can be time-consuming and therefore very expensive
* where poor performance is identified, it can be difficult to provide useful feedback
The link between performance appraisal and motivation
The performance appraisal can set out goals for improvement; identify opportunities for development of skills or for promotion. This can make the employee feel valued and therefore committed to the organisation.
Measuring performance
It is important that IKEA measure the performance of its employees, in order to find out whether they are meeting the Company's objectives. There are number of ways, in which IKEA can measure the performance of its business, e.g.:
* Performance through profit- this involve comparing profits for different years or against competitors' profits
* Performance through quality- this involves checking the quality of the products and services and making sure that they are at high standards
* Performance through productivity- this involve measuring employees productivity
* Performance-related pay- this involve ...
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Measuring performance
It is important that IKEA measure the performance of its employees, in order to find out whether they are meeting the Company's objectives. There are number of ways, in which IKEA can measure the performance of its business, e.g.:
* Performance through profit- this involve comparing profits for different years or against competitors' profits
* Performance through quality- this involves checking the quality of the products and services and making sure that they are at high standards
* Performance through productivity- this involve measuring employees productivity
* Performance-related pay- this involve awarding pay rise to those who have increased productivity (have produced more products or services)
Legislation relevant to performance
In order to manage the performance and flexibility of staff, IKEA need to be aware of relevant legislation which affects pay, leave and working hours. These include provisions of the Social Chapter introduced by the European Union in the Maastricht Treaty 1996, affecting:
* Working hours- the Work Time Directive- A copy of IKEA's Working Time Regulation is in the Appendix section
* The minimum wage
* Maternity/paternity leave- Fathers with one year's service will be entitled to take up to one week's paid paternity leave. Fathers with less than one year's service will be entitled to take up one week's unpaid paternity leave. To see a summary of maternity rights, go to the Appendix section
The Human Resources Department of IKEA measures the performance of both managers and co-workers within the organisation, by carrying out performance reviews. According to IKEA, the purpose of the performance review is for the Manager and co-worker to discuss the co-workers job performance, future objectives, and development needs.
Managers within IKEA will constantly monitor the performance of each co-worker, for three times a year. The managers will record co-worker's performance on review forms, for the first four weeks, then next eight weeks followed by three months. This type of appraisal technique is called the downward appraisal. I have included a copy of the four week review form, the eight week review form and the three month review form, in the Appendix section.
Managers, who monitor the performance of each co-worker, will also be reviewed by their superiors (senior managers). This type of appraisal technique is called the downward appraisal. The senior managers will monitor and record their middle manager's performance (subordinates) onto the performance review form (see Appendix), for once a year.
If a co-worker achieves his/her set objectives, his/her line manager will appraise him/her for his/her good performance, and may reward him/her performance-related pay (PRP). This type of pay is given to individuals who have successfully achieved certain business objectives and helped the business increase its profitability.
Advantages of performance-related pay include:
* improves employee commitment
* better focus on business objectives and performance
* improve communications
* identifies achievement rather than potential
Disadvantages of performance-related pay include:
* performance is difficult to measure- particularly in service industries such as IKEA
* may be divisive (e.g. encourage individuals and teams to work against each other)
* may not get trade union approval or support
* employees may focus on short-term performance rather than quality and innovation
According to Maslow's theory, pay such as performance-related pay can satisfy employee's needs, e.g.:
* Physiological- pay for shelter, warmth, food, etc
* Security- financial security
* Self-esteem- pay can be seen as a mark of status
* Self-actualisation- pay provides a way of employees pursuing activities outside of the work environment
However, Herzberg considers that pay is more of a hygiene factor than a motivator factor. For the reason is that, pay can be taken for granted and disputes may arise, if an employee is given less amount of money for a fair day's work.
Motivational Theories
Frederick Taylor- The Principles of Scientific Management
Frederick Taylor was the first American psychologist, who developed 'The Principles of Scientific Management'. While Taylor was a Chief Engineer in the Bethlehem Steel Company, he became fascinated in job design and his theory recommended a product on-line approach.
Taylor thought that difficult tasks could be carried out efficiently if; they were broken down into small operations so that little errors would be made. Each operation would be controlled by a member of staff. The whole task could then be completed in a set of stages by all employees working together.
There would be number of benefits for this production on-line approach:
* Each task would be easy that it would require little training
* Since employees required small skill they could be simply replaced if necessary
* If job are standardised output could be easily measured, predicted and controlled
However, there would be drawbacks for this approach:
* Low motivation as a result of low satisfaction- much of the job is outside of the employees' control, for instance the speed of the production-line may be set from outside
* Monotony resulting from stress and boredom- this may guide to mistakes and accidents
* A breakdown in co-operation between employees and managers as an 'us' and 'them' attitude develops
Taylor observed different employees carrying out their tasks, using the process of Time and Motion studies. This involves timing each employee for how long he takes for completing his task.
From his research, Taylor recognised that employees go to work to earn money, to survive. Without money, employees would not able to afford food, clothes, shelter and heating essentials to satisfy their basic human needs.
He felt that only men can able to fulfil this need because, they are the head of household and it's their responsibility to obtain essential needs for their family. (At that time, there were only men who go to work and women had to stay at home).
Taylor wants employees to be paid fairly for their fair day's work, and that pay should therefore be related to the amount of items being produced. This is known as piece rates, which Taylor himself designed, to encourage employees to produce more items. Employees who did not complete their work would be paid less. Employee who did more than fair day's work would be paid more (e.g. incentives bonuses).
Taylor felt that employees needed to be closely supervised and told what to do. This was because; employees tend to do a little as possible and would not work in the most efficient way. Also, he found out that employees do not want to accept responsibility such as organising an event.
The suggestions for Taylor's theory for managing human conduct at work were:
* The main form of motivation is high wages, linked to output
* A manager's job is to tell employees what to do
* Employees' job is to follow their manager's institutions and get paid for that reason
Frederick Taylor's theory became very popular within management because, it leads to the development of the work-study analysis and work appraisal.
Unfortunately, it became unpopular to the union and the workforce because, employees were treated as 'inefficient' machine, and production on-line approach makes the make more monotonous and repetitive. Another most obvious weakness in employees, it isn't for everybody. This was because; Taylor discovered that employees work for other reasons rather than financial reward.
Abraham Maslow- Hierarchy of Needs
In 1943, Abraham Maslow was the founder of the 'Hierarchy of Needs' He ranked each level of human needs in order of importance, starting with the most basic at the bottom, and more advanced at the top of the pyramid:
The hierarchy (pyramid) works by two ways:
. an employee starts at the bottom of the hierarchy and needs to satisfy a lower level of need (e.g. basic needs) before moving onto a higher need (e.g. self-actualisation)
2. more employees complete that level as it goes downwards
Physiological Needs
Physiological needs are the basic human needs. Every employee must have the following basic needs, to survive and maintain in life:
*
* Food
* Clothing
* Shelter
* Heating essentials
This basic level of need can be net by the following business implications:
*
* Pay levels, such as wages and salaries
* Working conditions
Without these needs, individuals will become seriously ill and eventually die; and would not be able to meet other higher desires such as, social needs and self-esteem needs
Safety Needs
Once physiological needs are met, employees will then want safety and security so, they can be protected from danger, such as threats of physical and emotional harm.
This safety level of needs can be met by the following business implications:
*
* Living in a secure area
* Medical insurance
* Job security
* Financial reserves
* Private pensions
Social Needs
Social needs involve communicating with other people in groups, e.g.:
* Need for friends such as gangs and colleagues at work
* Need for belonging such as religious community and family
* Need to give and receive such as husbands, wives, boyfriends and girlfriends
Social needs are important because, we want to feel a sense of "belonging". If an employee have not met this need, he or she will become more lonely and social anxious.
Self-esteem Needs
Maslow identified two kinds of self-esteem needs: internal and external. Internal self-esteem needs are for respect of others, such as recognition, attention, etc. External self-esteem needs are for self-esteem, such as freedom, independence, etc. some of self-esteem needs include:
*
* Status
* Fame
* Glory
* Reputation
* Feeling of confidence
* Competence
* Mastery
* Dignity
Self-actualisation Needs
Self-actualisation is about how employees think about themselves. Self-actualisation was split into:
. Self-actualisation- recognise their own potential
2. Transcendence- help others to reach their potential
Self-actualised individuals tend to have these needs, in order of importance, e.g.:
*
* Truth
* Goodness
* Beauty
* Unity, wholeness and transcendence of opposites
* Aliveness
* Uniqueness
* Perfection and necessity
* Completion
* Justice and order
* Simplicity
Maslow suggests that employees would not be happy a t work, unless basic needs are net. Also, he suggested that employees can only be motivated if they are self-fulfilled.
However, there are numerous of drawbacks with Maslow's theory when, it comes to putting into practice which, briefly includes:
* Employees behaviour seem to respond to more than one need
* The same need may cause quite different behaviour in various employees
* The model (pyramid) ignores often-observed behaviour, who tolerate low pay for promise of future benefits
* There is not enough evidence to support the model. Some critics reckon that, Maslow's models is only reflects middle-class values in American and English Society
Douglas McGregor- Theory X and Theory Y
In 1960's, Douglas McGregor wrote a book called, The Human Side of Enterprise. In his book, McGregor explained that he researched on individual's behaviour at work, and he developed two theories: Theory X and Theory Y. He discovered these two theories when, he interviewed several managers and asked them, what their opinions are on employees' behaviour at work.
Theory X
Theory X managers believe that employees:
*
* are only motivated by pay
* are lazy
* has lack of ambition
* do not accept responsibility
* are self-centred
* do not like changes
Theory X employees need to be controlled, directed and threatened with punishment, if necessary to make them work. However, this can cause stress on employees.
As a result, Theory X communication style is quick and orderly. However, if employees do not respond or deliver the items, they can be responsible for inattention lack of interest and unreliability.
Theory Y
Theory Y managers believe that employees:
*
* are energetic
* are ambitious
* seek responsibility
* can be selfless
* want to contribute to business growth and changes
* are intelligent
* finds natural as play or rest
As a result, Theory Y managers are cable and willing to organise, control and direct themselves, and to accept authority and responsibility.
However, Theory Y managers need to be more sensitive, they have to do the following:
* take the time out to explain
* understand and the needs of the individual
* engage in join-problem solving and interpersonal exchange with each member of staff
McGregor's work was slightly similar to Maslow's theory and Herzberg's theory but, he looked at management styles as well as motivation.
McGregor's analysis shows that employers (managers) should treat their employees as individuals. He believes that the organisation will become more successful if managers subscribe to Theory Y than Theory X.
McGregor suggested that Theory X workers can only become motivated if, they achieve their business' objectives. He suggested that managers should offer challenges such as complex tasks so; they can show and develop their creativity.
He reckons that, employees will contribute more to the organisation if, managers use some of his theories.
Frederick Herzberg- The Two Factor Theory
In 1960's, Frederick Herzberg interviewed two hundred accountants and engineers. He asked them what they liked and disliked about their jobs and the reason why. Herzberg set the results into two categories and called them, "motivations factors" and hygiene factors". This became known as the 'two factor theory'.
Motivation Factors
Motivation factors develop positive job satisfaction and psychological growth. It can encourage employees to achieve above-average performance and effect. Motivation factors include:
*
* Status
* Opportunity of advancement (e.g. promotion)
* Gaining recognition
* Responsibility
* Meaningful and interesting work
* Challenging/stimulating work
* Personal achievement and personal growth in a job
Hygiene Factors
Hygiene factors create job dissatisfaction and de-motivation. Hygiene factors include:
*
* Company policy and administration
* Wages, salaries and other financial rewards
* Quality of supervision
* Quality of interpersonal relations
* Working conditions
* Feeling job security
The evidence of de-motivated employees at work is:
* Low productivity
* Poor production
* Strikes/industrial disputes/breakdown in employees communication and relationships
* Complaints about pay and working conditions
Motivation factors and hygiene factors can be arranged into four circumstances:
. High motivation as a result of hygiene- employees are highly motivated and have few complaints
2. Low motivation as a result of high hygiene- employees have few complaints but are not highly motivated
3. High motivation as a result of low hygiene- employees are motivated but have a lot of complaints
4. Low motivation as result of low hygiene- unmotivated employees with a lot of complaints
Herzberg felt that management should concentrate on reorganising work conditions so, that employees can be motivated. He believes that there are three ways to do this:
. Job enlargement
2. Job rotation
3. Job enrichment
Job enlargement
Job enlargement is where employees are provided more jobs/tasks to do. The benefit of job enlargement to an employee is that, extras tasks are given therefore greater variety. However, the drawback of job enlargement is that, more work is given to them which can be de-motivating.
Job rotation
Job rotation is where employees move from one job to another. The benefits of job rotation are, work becomes less monotonous and boring; employees can learn a variety of jobs; and employees can cover absent colleagues. However the drawback of job rotation is that, it does not help job satisfaction.
Job enrichment
Job enrichment involves giving employees better things to do. The benefits of job enrichment are: better job satisfaction; self-actualisation of the individual; better employee performance for the organisation; organisation gets motivated employees; and less absenteeism, turnover, and grievances for the organisation. The drawbacks of job enrichment are: the high costs of installing such systems in terms of equipment, machinery and training; increasing salary costs; and conflicts between participants and non-participants.
Herzberg suggested that job enrichment is a better method, to encourage employees to work better. Job enrichment takes place when the job holds:
* a completed unit of work, rather than leftovers
* instant feedback about the quality of the work
* direct communication (not via a supervisor)
The work of Herzberg led many successful companies, such as Volvo and IKEA, to rearrange their working conditions to provide employees with finished unit of work.
Comparison between Maslow model with Herzberg model
The following illustration shows how Maslow's model is related to Herzberg's model:
Motivators: Achievements,
Work itself, etc
Hygiene: Interpersonal relations,
Work conditions,
Salary, etc
The link between performance reviews and evaluations to training and development
There is a strong link between performance reviews and evaluation to training and development. For example, if IKEA is to achieve its objectives, it is important to train and develop its co-workers, so they are best able to support the organisation, in working towards the objectives. At the same time, the individual needs to have the opportunity to be able to communicate his or her own personal development needs to the organisation through appraisal or personal development planning schemes.
The link between performance reviews, training and development and motivation
There is a strong link between the performance review, training and development and motivation. For example, a line manager is having one-to-one meeting with his co-worker. As the line manager monitors the co-worker's performance, he identifies an area of weakness. The line manager then provides the co-worker a suitable training to deal with this weakness (e.g. coaching). In order for the co-worker to improve his weakness, he need to be motivated in the training programme, so that he can improve his skills and develop new ones, effectively. With his improved skills and new skills, the co-worker can able to perform his job, successfully and possibly achieve some of the business objectives.
The relationship between the training and development function and the performance management function
There is a strong relationship between the training and development function and the performance management function. The purpose of training and development is to maximise employee's performance and the need for training and development is identified through performance management. The purpose of employees' development is to release the potential within employees and this potential is identified through performance review systems (e.g. performance appraisals).
Without one of the two functions, every function within IKEA will not be as effective. Both functions are designed to maximise the effectiveness of each other.
The following diagram demonstrates how the training and development function and performance management function are connected:
Influences on the training and development function
There are a number of motivational theorists that influence IKEA's training and development function. The main ones are as follows:
Frederick Taylor- The Principles of Scientific Management
Frederick Taylor's motivational theory state that:
* Managers should be properly trained to run organisations
* Employees must be trained in skills to do specific jobs through- 'scientific management'
Taylor's motivational theory also shows the need for appropriate training of managers so the business can run efficiently and the training of employees will improve their performance.
Frederick Herzberg's- The Two Factor Theory
Frederick Herzberg states that, "Achievement, recognition, responsibility, advancement, and personal growth...and the work itself", are the factors that influence employees to work harder.
Herzberg's motivational theory influences the development programme. IKEA development programme provides employees a sense of 'advancement and personal growth'. The job enlargement and job enrichment programmes provides IKEA's co-workers a sense of 'responsibility'.
Influences on the performance management function
There are number of motivational theorists that influence IKEA's performance management function. The main ones are as follows:
Frederick Taylor- The Principles of Scientific Management
Frederick Taylor states that:
* The only way to motivate employees to work harder is by money, and they should be paid on a piecework system
* Employees will work without question if motivated by good pay.
Abraham Maslow- Hierarchy of Needs
Abraham Maslow states that, "what motivates employees to work harder once satisfied by a lower need is the need for the new highest level".
From a performance management point of view, Maslow's theory claims that:
* Employees need to be paid adequately so they can provide themselves with their physiological and safety needs. For example, IKEA's co-workers earn between eleven thousand and twenty-one thousand per annum, providing enough money for co-workers to live on
* Employees need social contact through friendships with colleagues. For example, teamwork training and development programmes assist in employees relationships
* Self-esteem is provided through prospects of promotion and offering higher managers a better overall deal. For example, development programmes provide employees prospect of promotion. Performance appraisals provide employees the chance to demonstrate that they have potential for promotion
It is very important that IKEA monitors the training and development function and the recruitment and selection function, at all times. The organisation needs to make that all co-workers are trained to the highest possible standard. IKEA need to be aware that an effective training can improve customer service and therefore increase customer satisfaction. When customers receive high quality service from IKEA, they will likely to return back. (In fact 3.9 visits a year are made by the average European customer to an IKEA store). This will maximise Ikea's sales and add the future success of the organisation. Evidence shows that IKEA is constantly making more sales each year. In 2005, the IKEA Group have made a total of 14.8 billion euros which is two billion euros more than the previous year (12.8 billion euros). This tells me that, IKEA already have an effective training and development function and performance management function.
Unit 4: Human Resources
E6/C3
Created by Baljinder Duhra - 77 -
