Reward Management, Monitoring Performance and Exit Rights & Procedures

• Policies that provide guidelines on approaches to managing rewards.
• Practices that provide financial and non-financial rewards.
• Processes concerned with evaluating the relative size of jobs (job evaluation) and assessing individual performance (performance management).
• Procedures operated in order to maintain the system and to ensure that it operates efficiently and flexibly and provides value for money.

Reward strategy

‘Reward strategy sets out what the organisation intends to do in the longer term to develop and implement reward policies, practices and processes that will further the achievement of its business goals.

Reward policies

Reward policies address the following broad issues:

• the level of rewards, taking into account ‘market stance’, i.e. how internal rates of pay should compare with market rates, for example aligned to the median or the upper quartile rate;
• achieving equal pay;
• the relative importance attached to external competitiveness and internal equity; the approach to total reward;
• the scope for the use of contingent rewards related to performance, competence, contribution or skill;
• the role of line managers;
• transparency- the publication of information on reward structures and processes to employees.

Total reward

The concept of total reward has emerged quite recently and is exerting considerable influence on reward management. Total reward is the combination of financial and non-financial rewards available to employees. As defined by Manus and Graham (2003), total reward ‘includes all types of rewards – indirect as well as direct, and intrinsic as well as extrinsic’. Each aspect of reward, namely base pay, contingent pay, employee benefits and non-financial rewards, which include intrinsic rewards from work itself, are linked together and treated as an integrated coherent whole. Total reward combines the impact of two major categories of reward as defined below and illustrated below:

1. Transactional rewards- tangible rewards arising from transactions between the employer and employees concerning pay and benefits.
2. Relational rewards- intangible rewards concerned with learning and development and the work experience.

The benefits of total reward are:

• Greater impact- the combined effect of the different types of rewards will make a deeper and longer-lasting impact on the motivation and commitment of people.
• Enhancing the employment relationship- the employment relationship created by a total reward approach makes the maximum use of relational as well as transactional rewards and will therefore appeal more to individuals.
• Flexibility to meet individual needs- as pointed out by Bloom and Milkovitch (1998): ‘Relational rewards may bind individuals more strongly to the organisation because they can answer those special individual needs.’
• Talent management- relational rewards help to deliver a positive psychological contract and this can serve as a differentiator in the recruitment market that is much more difficult to replicate than individual pay practices. The organisation can become an ‘employer of choice’ and a ‘great place to work’, thus attracting and retaining the talented people it needs.

Model of total reward:

The upper two quadrants – pay benefits – represent transactional rewards. These are financial in nature and are essential to recruit and retain staff but can be easily copied by competitors. By contrast, the relational (non financial) rewards produced by the lower two quadrants are essential to enhancing the value of the upper two quadrants. The real power, as Thompson (2002) states, comes when organizations combine relational and transactional rewards.

Total remuneration

Total remuneration is the value of all cash payments (total earnings) and benefits received by employees.

Direct or base pay

The base rate is the amount of pay (the fixed salary or wage) that constitutes the rate for the job. It may be varied according to the grade of the job or, for manual workers, the level of skill required.

Base pay will be influenced by internal and external relativities. The internal relativities may be measured by some form of job evaluation. External relativities are assessed by tracking market rates. Alternatively, levels of pay may be agreed through collective bargaining with trade unions or by reaching individual agreements.

Base pay may be expressed as an annual, weekly or hourly rate. For manual workers this may be called a ‘time-rate’ system of payment. Allowances for overtime, shift working, unsocial hours or increased cost of living in London or elsewhere may be added to base pay. The base rate may be adjusted to reflect increases in the cost of living or market rates by the organisation, unilaterally or by agreement with a trade union.

Job evaluation

Job evaluation is a systematic process for defining the relative worth or size of jobs within an organisation in order to establish internal relativities and provide the basis for designing an equitable grade structure, grading jobs in the structure and managing relativities. It does not determine the level of pay directly. Job evaluation can be analytical or non-analytical. It is based on the analysis of jobs or roles, which leads to the production of job descriptions or role profiles.

Market rate analysis

Market rate analysis is the process of identifying the rates of pay in the labour market for comparable jobs to inform decisions on levels of pay within the organisation. A policy decision may be made on how internal rates of pay should compare with external rates – an organisation’s market stance.

Grade and pay structures

Jobs may be placed in a graded structure according to their relative size. Pay levels in the structure are influenced by market rates. The pay structure may consist of pay ranges attached to grades, which provide scope for pay progression based on performance, competence, contribution or service. Alternatively, a ‘spot rate’ structure may be used for all or some jobs in which no provision is made for pay progression in a job.

Contingent pay

Additional financial rewards may be provided that are related to performance, competence, contribution, skill or experience. These are referred to as ‘contingent pay’. Contingent payments may be added to base pay, i.e. ‘consolidated’. If such payments are not consolidated (i.e. paid as cash bonuses) they are described as ‘variable pay’.

Employee benefits

Employee benefits include pensions, sick pay, insurance cover, company cars and a number of other ‘perks’. They compromise elements of remuneration additional to the various forms of cash pay and also include provisions for employees that are not strictly remuneration, such as annual holidays.

Performance management

Performance management processes define individual performance, and contribution expectations, assess performance against those expectations, provide for regular constructive feedback and result in agreed plans for performance improvement, learning and personal development. They are a means of providing non-financial motivation and may also inform contingent pay decisions.

Non- financial rewards

These are rewards that do not involve any direct payments and often arise from the work itself, for example, achievement, autonomy, recognition, scope to use and develop skills, training, career development opportunities and high quality leadership.

Reward management for sales staff

There are no hard-and-fast rules governing how sales representatives should be paid. It depends on the type of company, the products or services it offers its customers and the nature of sales process – how sales are organised and made. The different methods are:

Paying manual workers

The pay of manual workers takes the form of time rates, also known as day rates, day work, flat rates or hourly rates. Incentive payments by means of payment-by-result schemes may be on top of a base rate.

Time rates

These provide workers with a predetermined rate for the actual hours they work. Time rates on their own are most commonly used when it is thought that it is impossible or undesirable to use a payment-by-result system, for example in maintenance work. From the view point of employees, the advantage of time rates is that their earnings are predictable and steady and they do not have to engage in endless arguments with rate-fixers and supervisors about piece rate or time allowances. The argument against them is that they do not provide a direct incentive relating the reward to the effort or the results. Two ways of modifying the basic time rate approach are to adopt high day rates, as described below, or measure day work.

Time rates may take the form of what are often called high day rates. These are higher than the minimum time rate and may contain a consolidated bonus rate element. The underlying assumption is that higher base rates will encourage greater effort without the problems created when operating an incentive scheme. High day rates are usually above the local market rates, to attract and retain workers.

Payment-by-result schemes

Payment-by-result (PBR) schemes provide incentives to workers by relating their pay or, more usually, part of their pay to the number of items they produce or the time taken to do a certain amount of work. The main types of PBR or incentive schemes for individuals are piece work, work measured schemes, measured day work and performance-related pay. Team bonus schemes are an alternative to individual PBR and plant-wide schemes can produce bonuses that are paid instead of individual or team bonuses, or in addition to them. Each of these methods is described in the table below together with an assessment of their advantages and disadvantages to employers and employees, and when they are appropriate.

[4]

Explaining the link between motivational theory and reward

“What is motive? A motive is a reason for doing something. Motivation is concerned with the factors that influence people to behave in certain ways.” (M Armstrong 2006, pg: 252)

M Armstrong (2006) in agreement with Arnold et al (1991) suggests the components of the process of motivation as follows:

• direction- what a person is trying to do;
• effort- how hard a person is trying;
• persistence- how long a person keeps on trying.

Types of motivation

‘Motivation at work can take place in two ways. First, people can motivate themselves by seeking, finding and carrying out work (or being given work) that satisfies their needs or at least leads them to expect that their goals will be achieved. Secondly people can be motivated by management through such methods as pay, promotion, praise, etc.

There are two types of motivation as originally identified by Herzberg et al (1957):

• Intrinsic motivation- the self-generated factors that influence people to behave in a particular way or to move in a particular direction. These factors include responsibility (feeling that the work is important and having control over one’s own resources), autonomy (freedom to act), scope to use and develop skills and abilities, interesting and challenging work and opportunities for advancement.
• Extrinsic motivation- what is done to or for people to motivate them. This includes rewards, such as increased pay, praise, or promotion, and punishments, such as disciplinary action, withholding pay, or criticism.

Extrinsic motivation can have an immediate and powerful effect, but it will not necessarily last long. The intrinsic motivators, which are concerned with the ‘quality of working life’ (a phrase and movement that emerged from this concept), are likely to have a deeper and longer-term effect because they are inherent in individuals and not imposed from outside.’ (M Armstrong 2006, pp: 253-254)

Theories of motivation

‘Theories of motivation to work have passed through many stages, influencing and being influenced by the prevailing management ideologies and philosophies of each era. Although we can trace a sequence to this development, it does not mean that the old theories have died. There are employers and managers and employees today adhering vigorously to one or other of them, basing their belief not on research or empirical evidence but on an almost ideological framework of values and assumptions. These help them understand their own role and those of others around them. The poor quality of comprehension about how reward systems affect behaviour can be blamed partly on the confusion generated by so many conflicting theories of motivation and conflicting case examples.

During the early part of this century the predominant theory about management was the classical or "scientific" management approach. This theory portrayed working people as making rational economic calculations and following a consequent logical pattern of behaviour at work (see Taylor, 1947). Employers, who accepted this theory, believed that their workforces were driven by the desire to earn the most money possible. Elaborate financial incentive schemes were developed based on work measurement using stop-watches to determine how long each element of each task should take. The assumption was that people being motivated primarily by money, would maximise their work output if they were offered the incentive of extra money for each increment of work.

Fortunately for us, there have always been researchers putting theories to the test. When they found that behaviour at work could not be explained by reference to the pure desire to earn as much money as possible, the first reaction was not to abandon belief in the primacy of money, but to look for intervening variables. A new theory was put forward proposing that the reason why some workers slowed down their effort towards the end of their day must result from some factor which was preventing these workers from keeping up their effort. The most likely factor was fatigue; workers were not strong enough or not sufficiently well nourished to keep their effort up all day.

This led to research studies by Elton Mayo and his team from Harvard University. Their initial work in the 1920's found that workers (in a Philadelphia textile mill) who were given extra breaks and subsidized meals at work did improve their productivity; and when these extra rewards were taken away their effort fell back (see Mayo 1949). The research team then set up a major series of studies at the Hawthorne Works of the Western Electric Company which continued for ten years. Their aim was to study the effects of a range of fatigue-inducing factors such as levels of lighting, temperature, frequency of breaks, etc. in combination with an incentive payment by results system (see Roethlisberger and Dixon, 1939; or Landsberger 1959).

If this research had produced the results expected at the outset, we would have had a prescription for high productivity based on lighting levels, temperature, frequency of meal breaks, health levels, etc. In some of their experiments the working environment was changed drastically to assess how this influenced productivity, but the results were a surprise at the time. There was a steady improvement in productivity throughout all the changes, even for instance when the lighting intensity was raised in imperceptible stages over a long period to a very bright intensity and then gradually reduced to that of a moonlit night. In their attempts to ensure that no other variables intervened in their experiments, the researchers had unwittingly changed one of the most important variables of all. They had increased the level of interest shown by the company in its employees, by regularly asking questions about their health, morale, personal lives, etc. These questions, intended to assess any effects which these personal issues might have on the experiment, had completely changed the quality of their relationships at work and this had a consequent effect on morale and productivity.

This unintentional effect of observing people at work became known as "The Hawthorne Effect", and the results of the research, when they were published late in the 1930's, had an almost revolutionary effect on prevailing theories of motivation to work. Instead of focusing on money as the motivator, attention turned to the importance of "human relations" as a means of motivating employees. One over-simplistic view of human motivation was replaced by another equally simplistic theory. Thousands of managers were sent on training courses to learn the skills of "relating" to their employees, understanding employee problems and showing concern.

Motivation theories were developed which under-pinned or built upon the "human relations" findings. The new focus for motivation theory was on the search for satisfaction of human needs. This new approach swept through management thinking in the 1950's.

Maslow (1954) offered his "needs hierarchy" according to which human beings have their needs arranged in a hierarchy such that they are motivated to seek satisfaction of the lower levels of need first. Once that level of need is satisfied it is no longer a motivator, and the person is motivated by the next level up the hierarchy. Basic needs such as shelter, food and warmth are in the bottom level of Maslow's hierarchy, which then progresses through physical well being, social acceptance, self esteem, to "Self-actualization" (realizing one's own potential).

Another writer from this period, Herzberg (1959; also 1968 and 1987) theorised that human beings needed their "hygiene factors" dealt with adequately, before they would work at all. However, he argued that they were only motivated to work productively by "motivator factors", primarily by enriched jobs.

McGregor (1960) warned us against Theory X (the view that people are reluctant to work) and offered us Theory Y, with its emphasis on people's need for achievement and satisfaction from a job done well.

McClelland (1967), following the work of Murray in the 1930's, emphasized the importance of needs for achievement, power and affiliation

These people were the glamorous management guru's of the 1960's. Their theories were simple, their remedies straightforward. If you followed Maslow then you accepted his assurance that most Western working people had their basic needs satisfied, so were not to be motivated by money (which can buy basic necessities but cannot buy relationships, affection, self esteem etc.). Managers following this theory turned their attention to providing more satisfactory relationships, more interesting work, and more opportunities for self-fulfilment.

Employers who followed Herzberg also rejected money as a motivator, and focused their efforts on providing more enriched jobs. McGregor led them to abandon the view of working people as lazy and reluctant to work without threats and incentives (Theory X). Instead he proposed Theory Y, which told them that people basically wanted to do a good job and they should provide opportunities for satisfaction from a job well done. McClelland focused attention on giving people the opportunity to satisfy their needs for achievement, power, and affiliation.

In the 1970's we read about the case studies of organisations which had followed these exhortations. Unlike the first rash of converts, whose massive efforts and successful results had contributed to the popularity of the "needs" approach in the 60's, these second generation studies showed an array of mixed results. There were job enrichment programmes which had resulted in most of the staff leaving; human relations programmes which had reduced conflict but at the expense of causing output to fall; and companies which removed incentive payment systems and found they could not manage the resulting need for more directive supervision. At the same time there were other companies achieving the good results promised of the programmes they introduced.

The response to these results was also mixed. Some people adhered to their favourite theory and blamed ineptness of implementation or management or the workforce for failure. Some turned back to earlier theories, influenced by researchers such as Donald Roy (1952). Others looked for more sophisticated theories, turning away from over-simplification and general solutions.

Contingency Theory had been developed in response to research findings that the same management practice could be a resounding success in one organisation and a miserable failure in another. Joan Woodward (1958) advocated adapting the structure of an organisation to its technology; Burns and Stalker (1961) showed that different styles of management fitted firms facing different rates of change; and Tom Lupton and his research team at Manchester Business School developed the "best fit" approach to designing remuneration systems (1968 and 1974). This approach involved identifying the most suitable payment system for each organisation, and even for different sections within an organisation.

There is a growing body of research findings that show motivation varies between individuals, between groups, and between cultures, and that this can affect the operation of a remuneration system. Karen Legge and Neil Millward (in Millward 1968) reported an interesting example when they were asked to study a television components factory in the north-west of England. The objective of the study was to help management understand why some staff responded well and were highly motivated by the incentive bonus scheme in operation, whilst others showed no interest in it at all. The explanation lay in the family situation of the employees. Those who were recent school-leavers were expected, in that community, to give their unopened pay packet to their mother, and receive "spending money" out of it. Those who were a little older kept their own pay packet and gave their mother an allowance for their lodgings at home. Consequently the younger staff had no interest in any extra money which might make its way into their pay packet, as their mother would keep this. The situation changed, and they become more highly motivated by the incentive bonus scheme, when they started to keep their own pay packet.

Other researchers have reported variations in motivation. Michael White (1973) found UK managers in a sample of 2246 showed six distinctive patterns of motivation (material rewards, status and prestige, security and social issues, job interest, variety and challenge, and leadership). Blackburn and Mann (1979) found in a sample of 1000 low skilled workers a wide range of "orientations", or motivations to work. These included such things as pay, hours of work, promotion opportunities, autonomy, working indoors, intrinsic features of the work, how worthwhile the work was relationships with colleagues, and working conditions.

These kinds of studies certainly support the "contingency theory" approach, which says that management strategies (including payment systems) should be designed specifically to suit the host organisation and its employees and managers.

However the picture is very much complicated by the fact that there is also a body of research which indicates that needs are neither instinctive nor fixed for individuals. They vary with changes in personal circumstance, and can be modified by making desired rewards more available or less available. White's study showed that the managers who were most likely to be motivated by security and social needs were those who had reached a peak in their careers, and for whom some of the other motivators were no longer available. Job interest was a motivator for people who had interesting jobs, variety and challenge were motivators for people with challenging jobs, and so on. In many cases it is impossible to ascertain which came first, the motivation or the choice of career. But this is not so with those people whose careers had peaked. If it is true that people often adapt their needs to match the rewards which are available to them, then this would explain why Goldthorpe (1968) had found so many Coventry car assembly workers motivated by the high wages they could earn in their boring, repetitive jobs rather than choosing more interesting work for lower pay which they could have found.

What should we conclude about "Needs Theories" and "Contingency Theory"? Firstly it has become very clear that we cannot accept any simple model which seeks to explain human motivation as deriving from generally applicable needs, such as the need for money, or the need for achievement, or for interesting work, or for relationships at work. People have differing needs, both between and within organisations.

This could lead to a "contingency" approach with reward systems tailored to each individual's needs. That would be a managers' nightmare and has never been seriously advocated except for fringe benefits (the Cafeteria Plan, see Thierry, 1978). There is another major consideration that should influence our thinking here. It appears to be possible to encourage people to seek the rewards employers are able or willing to offer. Employees do not expect individually tailored rewards, and there is ample evidence that SOME organisations have motivated their employees with money, some have motivated them with enriched jobs, some with growth opportunities, some with improved relationships, and so on.

Research at Strathclyde University in the 1980's investigated this possibility (Bowey, Thorpe and Hellier, 1986). 63 organisations were studied in depth to identify the factors which had contributed to the relative success of one third of them from introducing a new performance-related payment system, whilst the other two thirds had no improvements to show for their efforts. The work took three years, and the results showed that companies could succeed or fail with the same kind of payment system. Even very similar companies in similar circumstances could succeed or fail with the same kind of scheme. Similarly, the age distribution, sex, degree of skill, of the workforce, the region, the economic sector or the size of the organisation offered no explanation of the variations in results. In other words there was no support for Contingency Theory from this study, the largest and most detailed of its kind (most studies of payment systems are case studies of a very small number of sites, often only one).

The only factor which correlated well (statistically) with the results of the changed payment systems in the Strathclyde study was "involvement/consultation" -the amount of time and effort the management had spent discussing the proposed new scheme with their employees and with other managers before its introduction. The implications of this for motivation theory seem to support what some have called "Reactance Theory". People need to feel they have some control and freedom in their work situation, they are not passive receivers of motivational stimuli, but act in ways to secure control, freedom, and improved chances of obtaining rewards.

Another major development in motivation theory in the 1970's was based on Vroom's Expectancy Theory (1964). This emphasised the importance of employees believing that they COULD improve their effort, believing that this WOULD lead to improved performance, and believing that this improvement would be recognised and WOULD lead to a reward which they did DESIRE. Expectancy Theory is really a model of the process of being motivated by an incentive reward system, and it emphasises the importance of certain requirements for that process to operate. Research has shown that where employers have ensured that their workers understand what rewards will result from higher effort, where the employer has made sure that these rewards are desired by the workers, where supervisors and managers have made sure that employees know what effort is required from them and where the employees have confidence that they will have the facilities, the resources and the ability to achieve the effort and produce the results, THEN they will be motivated by the incentives offered by the payment system. And where these constituents of the process are missing, the attempt to motivate has a high probability of failing. This seems on the surface to support Expectancy Theory.

On the other hand, there is evidence from research (see Wannus, Keon and Latack, 1983) that workers do not usually go through the process of information processing and rational decision-making when they are deciding how hard to work. Rather they base their actions on habit, on expectations derived from previous experience, and on advice from respected co-workers.

There can be little doubt that an employer, who spends the time necessary to ensure all the requirements of Expectancy Theory, will have spent a considerable amount of time involving and consulting managers, supervisors and employees. The good results from this approach are quite consistent with the findings of the Strathclyde Study. The remuneration schemes that succeeded were the ones where the most time and effort was spent in consultation and involving workers and their managers.

Theories of goals and targets have become popular in recent decades, for instance Locke's argument that people are motivated by relatively difficult goals that they have agreed to seek (Latham and Locke, 1979). This puts the source of motivation not on some "need" of the employee, but on the achievement of a goal with which he/she has been involved (in setting). MBO (Management by Objectives) was an approach to management based on motivation to achieve goals first proposed by Drucker in 1964, but its overly bureaucratic application often produced poor results. Similar to goal theory are those theories of behaviour modification which suggest identifying the behaviour to be changed and what is required, applying influences such as guidance, prompting, feedback and reinforcement to bring about the desired changes (for a summary see Guest, 1984).

Link between motivation and reward

Much of the literature on motivation which was discussed above links directly to reward and remuneration systems theory, but some of it has only indirect implications for reward systems. Taking the various stages in motivation theory and linking them to their remuneration system implications, we have:

Principles of Motivation

None of the above theories is entirely satisfactory, but most of the recent ones have elements that support one another and are consistent with empirical research findings. If we take an eclectic approach, the following key principles, which have held up in the face of research, are worthy of incorporation into reward systems strategies:

1: INVOLVEMENT: Employees should be involved in the development of any new remuneration system and consulted about problems they may foresee with it. They should be encouraged to develop a commitment to its success and a sense of ownership which will carry the system through its teething difficulties (from: Reactance Theory: also Goal Theory; also Expectancy Theory)

2: DEMOTIVATORS: Remove all the difficulties which frustrate employees from achieving high levels of performance. It is no use trying to motivate high performance if employees' efforts to perform well are frustrated by not having the right quality and amounts of equipment, tools, space, materials, spare parts, instructions, support systems, co-operation form others, or other resources which they need. (from: Expectancy Theory; Behaviour Modification Theory; Reactance Theory)

3: EQUITY: Any performance standards which are to be applied to goals, targets, or behaviour changes for remuneration calculations, should be fair and comparable for all employees doing the same job in the same organisation (from: Equity Theory, referred to in a later chapter)

4: REINFORCEMENT: Procedures should be put in place with care to give employees reinforcement; encouragement, guidance, and feedback so that they are aware of their employers' interest in their performance and they can quickly learn how to earn the desired reward (Expectancy Theory; also Behaviour Modification Theory; also Reactance Theory)

5: RELEVANCE OF REWARD: Time should be spent making sure employees are interested in earning the proposed rewards (from: Expectancy Theory; also Contingency Theory)

6: GOALS: Employees should be consulted about the goals, targets, or behaviour changes which will earn the reward and these should be made as specific and clear as possible (from: Goal Theory; also Expectancy Theory; also Reactance Theory)

It will be noticed that many of the above principles require as much if not more effort from supervisors and managers as from the workers they are managing. Too often in the past poor performance has been blamed entirely on workers, and only recently have writers recognised that poor employee performance is often related to poor management. Seeking to motivate employees is a red herring that has sometimes used to turn attention on others, rather than face up to one's own responsibilities and faults in this area.’ [5]

Exploring organisational approaches to monitoring performance

“In their definitive text upon which this factsheet is based, Armstrong and Baron define performance management as 'a process which contributes to the effective management of individuals and teams in order to achieve high levels of organisational performance.”

-source: (http://www.cipd.co.uk/subjects/perfmangmt/general/perfman.htm)

 Wikipedia in agreement with Bourne, M., Franco, M. and Wilkes, J. (2003) define performance management as “Performance measurement is the process of assessing progress toward achieving predetermined goals. Performance management is building on that process, adding the relevant communication and action on the progress achieved against these predetermined goals.”

-source: (http://en.wikipedia.org/wiki/Performance_management#cite_note-0)

M Armstrong (2006) defines performance management as “a systematic process for improving organisational performance by developing the performance of individuals and teams.”

The Factors Affecting Performance

 

Ability

‘Character traits, skills and knowledge which are used in the performance

It is always present and will not vary widely over short periods of time.

 

Effort

The amount of manual or mental energy that a person is prepared to expend on a job to reach a certain level of performance. Can vary according to incentive and motivation.

 

Motivation

Many people who are not motivated keep their performance to an acceptable level by expending only 20-30% of their ability

Managers who know how to motivate their employees can achieve 80-90% ability levels and consequently higher levels of performance.

There are other more detailed notes on motivation elsewhere in this site, but remember Maslow?

• Basic needs - food clothing
• Safety needs - security, avoidance of risk/harm
• Social needs - friendship, acceptance, group
• Esteem needs - responsibility, recognition
• Self realisation - independence, creativity

 

Equity & Expectation

Again, detailed notes elsewhere. Basically, people expect to be treated equally, within the company and as others are in similar companies; they expect to get a certain reward for a certain effort; and they expect to get promoted if they undergo training. All these factors are inter-related and affect the amount of effort people are prepared to put in.

 

Task, or role, perception

The direction in which the person wishes to channel his or her effort and ability.

It varies according to such factors as

• whether or not the job is seen to be important or of value

• in itself,
• to the organisation,
• to workmates,
• to the individual

• whether or not there is an end in sight

• is what I do simply lost in the larger organisation?
• can I see it as a finished entity in its own right, no matter how small?

Standards & job descriptions must be known and understood 

 

Environmental factors

Those factors, over which an individual has no control, e.g.:

• the job may have been completed under severe time constraints, with a lack of adequate resources, or by using obsolete equipment;
• there may have been conflicting priorities or information overload, such that the individual was confused and under stress;
• other staff and departments may have been less than cooperative;
• the restrictive policies of the organisation may have prevented the individual from using her initiative and imagination to the extent that she wished;
• the quality of the supervision exercised may have been defective - some people need encouragement and support, whereas others like to be left to get on with the job.

Cannot be used as excuses for poor performance, but they do have a modifying effect.

 

 

 

The Performance - Appraisal Cycle

[6]

Performance management

‘Like many management terms, the words “performance management” have been interpreted, and the concept implemented, in many different ways. But the major goal in any good performance management system is to ensure that employees’ activities – what they do and how well they do them – are in sync with the goals of the organization, while maintaining a motivated and happy workforce.

A significant proportion of organizations in the cultural sector have not managed employee performance in a systematic way for a variety of reasons including:

• not knowing how to do it effectively
• cultural managers’ lack of comfort with evaluating or judging employee performance        
• misunderstanding the fundamental requirements of the manager’s role
• the belief that cultural organizations are unique and that some human resources practices normally accepted in other sectors (e.g. corporate) cannot be readily applied to them
• frustration with the complexity of performance management systems, which can lead to a rejection of the whole concept.

How does it work?

Because performance management is (or should be) so all-pervasive, it needs structures to support it. These should provide a framework to help people operate, and to help them to help others to operate. But it should not be a rigid system; there needs to be a reasonable degree of flexibility to allow people freedom to operate.

Performance management is a process, not an event. It operates as a continuous cycle.

Corporate strategic goals provide the starting point for business and departmental goals, followed by agreement on performance and development, leading to the drawing up of plans between individuals and managers, with continuous monitoring and feedback supported by formal reviews.’ [7]

Tools of performance management

An outline of the tools used by performance management:

Performance and development reviews

‘Many organisations without performance management systems operate 'appraisals' in which an individual's manager regularly (usually annually) records performance, potential and development needs in a top-down process - see our factsheet on performance appraisal for more information on this topic.

It can be argued that the perceived defects of appraisal systems (that line managers regarded them as irrelevant, involving form-filling to keep the personnel department happy, and not as a normal process of management) led to the development of more rounded concepts of performance management. Nevertheless, organisations with performance management systems need to provide those involved with the opportunity to reflect on past performance as a basis for making development and improvement plans, and the performance and development review meeting (note the terminology; it is not appraisal) provides this chance. The meeting must be constructive, and various techniques can be used to conduct the sort of open, free-flowing and honest meeting needed, with the reviewee doing most of the talking.

Learning and development

Employee development is the main route followed by most organisations to improved organisational performance, which in turn requires an understanding of the processes and techniques of organisational, team and individual learning. Performance reviews can be regarded as learning events, in which individuals can be encouraged to think about how and in which ways they want to develop. This can lead to the drawing up of a personal development plan (PDP) setting out the actions they propose to take (with the help of others, not least their managers) to develop themselves. To keep development separate from performance and salary discussions, development reviews may be held at other times, for example, on the anniversary of joining an organisation.

Increasing emphasis on talent management also means that many organisations are re-defining performance management to align it to the need to identify, nurture and retain talent. Development programmes are reflecting the needs of succession plans and seeking to foster leadership skills. However, too much of an emphasis on talent management may be damaging to overall development needs and every effort needs to be made to ensure that development is inclusive, accessible and focused on developing organisational capability.

Coaching

Coaching is an important tool in learning and development. Coaching is developing a person's skills and knowledge so that their job performance improves, leading to the achievement of organisational objectives. Coaching is increasingly recognised as a significant responsibility of line managers, and can play an important part in a PDP. They will take place during the review meetings, but also and more importantly should be carried out throughout the year. For some managers coaching comes naturally, but for many they may not and training may be needed to improve their skills.

Objectives and performance standards

Objectives (some organisations prefer to use 'goals') describe something to be accomplished by individuals, departments and organisations over a period of time. They can be expressed as targets to be met (such as sales) and tasks to be completed by specified dates. They can be work-related, referring to the results to be attained, or personal, taking the form of developmental objectives for individuals. Objectives need to be defined and agreed. They will relate to the overall purpose of the job and define performance areas - all the aspects of the job that contribute to achieving its overall purpose. Targets then need to be set for each performance area, for example, increase 'sales by x per cent', 'reduce wastage by y per cent' …

Alongside objectives are performance standards. They are used when it is not possible to set time-based targets, or when there is a continuing objective which does not change significantly from one review period to the next and is a standing feature of the job. These should be spelled out in quantitative terms if possible, for example, speed of response to requests or meeting defined standards of accuracy.

Competences and competencies

Some organisations, but by no means all, use competences and competencies as components of performance management. Competences describe what people need to be able to do to perform a job well (the descriptions in National Vocational Qualifications are examples of competences). Competencies (more helpfully, 'behavioural competencies') are defined as the dimensions of behaviour that lie behind competent performance. Though the language used does not help in making the distinction, to perform well it is necessary both to be able to do a job at a technically competent level and to have behaviours that reinforce those technical skills; an obvious example of behaviour is the surgeon who needs a good bedside manner and to be able to communicate with colleagues, in addition to surgical skills. There are various techniques for measuring competence (some organisations prefer to use 'capability') and once an analysis has been made, it provides a tool for measuring performance and, of course, for providing development activities to help people meet the required standards.

Measurement

To improve performance, you need to know what current performance is. Measurement provides the basis for providing and generating feedback, and thus can build the platform for further success or identify where things are going less well so that corrective action can be taken. But what gets measured? Measure the wrong things, perhaps simply because they are easy to measure, and an entire performance management system can fall into disrepute. Use too many measures and you can't see the wood for the trees. For measuring performance, the achievement of objectives, levels of competency, standards of performance, and work outputs are used but the emphasis varies according to categories of staff - for example, a senior manager would be mainly measured by meeting objectives, but a production worker mainly by achieving outputs. Increasingly organisations are using more sophisticated measuring techniques such as balanced scorecards or ROI (return on investment).

Individual and team performance needs to be capable of being linked in an understandable manner to organisational performance, and there are various approaches to this. They include the 'balanced scorecard', a set of measures that looks at the business from customer, internal, learning and financial perspectives; the European Foundation for Quality Management, which indicates that customer satisfaction, employee satisfaction, and impact on society are achieved through leadership; and other economic measures, including traditional financial measures. Measures used will depend on the organisation; for example, public service organisations are likely to use different measures from private companies.

Pay

Performance management is often linked with performance-related pay (PRP), although by no means all organisations claiming to use performance management have PRP. Nevertheless, PRP is an important element in many performance management schemes because it is believed to motivate; it is said to deliver the message that performance and competence are important, and it is thought to be fair to reward people according to their performance, contribution or competence. Others, though, believe that other factors are more important than PRP in motivation; that it is usually based on subjective assessments of performance, that it inhibits teamwork because of its individualistic nature, and that it leads to 'short-termism'. See our factsheet for more information on performance pay.

An alternative to PRP is competence-related pay, which provides for pay progression to be linked to levels of competence that people have achieved, using a competence profile or framework. The difficulty here is measuring competence, and some organisations use a mix of PRP and competence-related pay. Further possible pay systems are team-based pay, a kind of PRP for teams; and contribution-related pay which means paying for results plus competence, and for past performance and future success.

Performance may be used to determine all or some aspects of pay. In many instances only non-consolidated bonus payments are linked to performance which tend to reflect organisational, team and individual performance whilst salary progression is linked to service, market rates and pay scales.

Many organisations believe that when performance management is linked to pay the quality of performance discussions will inevitably deteriorate.

Teams

Team working has become an important part of life in many organisations, and where teams are permanent or for longstanding projects, measures can be based on team performance. They will mainly be concerned with output, activity levels (eg speed of servicing), customer service and satisfaction, and financial results. Indeed, team measures are not very different from those for individuals, and of course team members need to agree their objectives and receive feedback in the same way as if they were not part of a team. Other team members can contribute towards this, in a process of peer review.

360 degree feedback

360 degree feedback became increasingly talked about in the 1990s, if not widely used. It consists of performance data generated from a number of sources, who can include the person to whom the individual being assessed reports, people who report to them, peers (team colleagues or others in the organisation), and internal and external customers. It can also include self-assessment. 360 degree feedback is used mainly as part of a self-development or management development programme, and is felt to provide a more rounded view of people, with less bias than if an assessment is conducted by one individual.

Performance problem solving

Performance management is a positive process, and good systems will create a culture in which success is applauded. Nevertheless, poor performance will exist. It may be a result of inadequate leadership, bad management or defective systems of work, and if so, remedies (often involving learning and development) can be put in place. But individuals may under-perform and improvements can be achieved through continuing feedback and joint discussion between them and their managers, involving analysing and identifying the problem, establishing the reasons for the shortfall, and deciding and agreeing the action to be taken. If all this fails, disciplinary action may need to be taken, as in any organisation.

CIPD viewpoint

Performance management is difficult to implement. It is about ownership by everyone in the organisation, and especially line managers - it is emphatically not about guardianship by personnel departments. Surveys suggest that individuals and managers in organisations with performance management systems quite like it, and especially its emphasis on personal development, although performance-rating (often linked to PRP) often provokes hostility. Schemes can be over-detailed and require too much form-filling, and there can be a lack of definition in terms of what is meant by performance and how to achieve it. Schemes can be less successful than they might be because of lack of training, especially at the beginning.

The keys to the successful introduction and application of performance management are:

• being clear about what is meant by performance
• understanding what the organisation is and needs to be in its performance culture
• being very focused on how individual employees will benefit and play their part in the process
• understanding that it is a tool for line managers and its success will depend on their ability to use it effectively.’ [8]

Performance Appraisals

“Performance appraisal, also known as employee appraisal, is a method by which the job performance of an employee is evaluated (generally in terms of quality, quantity, cost and time). Performance appraisal is a part of career development”

-source: (http://en.wikipedia.org/wiki/Performance_appraisal)

‘Performance appraisals are a regular review of employee performance within organizations.

Generally, the aims of a scheme are:

• Give feedback on performance to employees.
• Identify employee training needs.
• Document criteria used to allocate organizational rewards.
• Form a basis for personnel decisions: salary increases, promotions, disciplinary actions, etc.
• Provide the opportunity for organizational diagnosis and development.
• Facilitate communication between employee and administrator.
• Validate selection techniques and human resource policies to meet federal Equal Employment Opportunity requirements.

A common approach to assessing performance is to use a numerical or scalar rating system whereby managers are asked to score an individual against a number of objectives/attributes. In some companies, employees receive assessments from their manager, peers, subordinates and customers while also performing a self assessment. This is known as 360° appraisal.

The most popular methods that are being used as performance appraisal process are:

• Management by objectives (MBO)
• 360 degree appraisal
• Behavioural Observation Scale (BOS)
• Behaviourally Anchored Rating Scale (BARS)

Trait based systems, which rely on factors such as integrity and conscientiousness, are also commonly used by businesses. The scientific literature on the subject provides evidence that assessing employees on factors such as these should be avoided. The reasons for this are two-fold:

1. Because trait based systems are by definition based on personality traits, they make it difficult for a manager to provide feedback that can cause positive change in employee performance. This is caused by the fact that personality dimensions are for the most part static, and while an employee can change a specific behaviour they cannot change their personality. For example, a person who lacks integrity may stop lying to a manager because they have been caught, but they still have low integrity and are likely to lie again when the threat of being caught is gone.
2. Trait based systems, because they are vague, are more easily influenced by office politics, causing them to be less reliable as a source of information on an employee's true performance. The vagueness of these instruments allows managers to fill them out based on who they want to/feel should get a raise, rather than basing scores on specific behaviours employees should/should not be engaging in. These systems are also more likely to leave a company open to discrimination claims because a manager can make biased decisions without having to back them up with specific behavioural information.’ [9]

Also:

(See Appendix 3) For Sample Performance Review Form

(See Appendix 4) For Sample Performance Review Form

(See Appendix 5) For Sample Performance Review Form

(See Appendix 6) For Sample Action Plan

(See Appendix 7) For Sample Performance Appraisal Form

Tesco’s Approach to performance management

 

To be a competitive, Tesco need to select and recruit the right people. To remain competitive Tesco needs to monitor and manage employee performance. By monitoring employee performance, their business will be able to identify any problems that arise and can then plan to address those problems; one way to address these problems will be through the training and development of employees.

Tesco needs to ensure that its employees are performing effectively. They will need to:

• identify which areas are unsatisfactory
• it may want to find areas where employees need to be trained and developed
• it will need to encourage and reward good performance – perhaps with performance- related pay in the form of bonus or pay increases.

Performance reviews

Tesco use a formal appraisal system to assess employee performance. A formal appraisal system will:

• measure employee performance against set targets
• provide feedback on performance to the employee and their manager
• identify training and development needs of the employee identify a future career path for the employee.

Employees at Tesco can then be improved by meeting training and development needs. A formal appraisal system involves setting clear objectives for individual employees and monitoring their performance against these objectives. Employee objective should be clearly linked to the strategic objectives of the business. To be most effective, objectives are set by the employees themselves with guidance from their manager to mentor. Employees will be more motivated by objectives where they have taken some responsibility for setting them.

A number of methods are used to check performance in Tesco.

Appraisals performance

‘An increasingly important way of getting feedback on employee performance is through appraisal. The appraisals usually looks at what an employee’s job is in Tesco, how well it is being performed, and at what action should be taken for the future.

At Tesco, performance management applies to everyone. Their aim is to make sure that all employees:

·        are aware of what the company is trying to achieve in its strategic plan

·        make plans to focus on their own part in making the company successful

·        have an on-going review of their progress.

There is an emphasis on continual improvement and staff are encouraged to develop themselves to do their jobs better.

In Tesco an employee would be interviewed to discuss his or her performance since the last appraisal, to identify strengths and weaknesses, and to formulate an action plan about how weaknesses, can be improved and how strengths can be developed.

Appraisals in Tesco can be carried out by different personnel

The steering wheel is a central idea in Tesco’s planning. It is simply the company’s way of illustrating the four main areas of concern that the business has: customers, operations, finance and people (its employees).

Responsible managers in Tesco must ensure that:

• everyone has objectives for the next 3-6 months. Objectives for employees at different levels might be set up a departmental filling system or to make Tesco Club card the best loyalty card in the UK;
• one aim might be to improve the team working skills. The plan may also show when an employee feels that there is little more room for further development and that they are ready to move to another job within the organisation;
• everyone has a formal performance review each year which help them to do their job.
• Managers spend 30 minutes with each employee each quarter discussing performance and personal development. This will celebrate success, ‘find solutions to your problems’, it may also revise plans and agree action.  
• The Tesco performance management handbook explains how to write objectives and Personal Development Plans and how to plan for performance reviews.

Measuring Performance management in Tesco

In Tesco people are employed in order to help the organisation to produce its goods and service. The efforts of Human Resources managers are directed towards improving the performance of employees and thereby enabling Tesco to achieve its objectives.

One measure of the performance of Tesco is to compare profits for different years. This will give an indication of whether Tesco is performing adequately.’ [10]

Evaluating exit procedures used by two organisations and comparing these to the best practice

Organisation 1:

 

(See Appendix 8) For exit procedures documentation of the organisation

 

Organisation 2:

 

(See Appendix 9) For exit procedures documentation of the organisation

Evaluating the exit procedures used by the TWO organisations

‘Basically, there are three main tasks to be undertaken prior to an employee leaving East Lothian Council employment.

1. Completion of Leavers Form by the Line Manager and employee.
2. Issue of an Exit Questionnaire to employee.
3. The return of all Council property prior to the employees last working day of employment.

Whereas Hampshire County Council is committed to the application of best practice in all its dealings with its employees. Their procedure is designed to provide a forum for the exchange of information in order to provide continuous improvement in working relations and the working environment.

NB: Exit interviews are only carried out for voluntary leavers i.e. not in cases of redundancy, dismissal or retirement at normal leaving age.

When a resignation is received at Hampshire County Council every effort is made by the Line Manager to discuss the reasons for the resignation with the employee, before it is accepted. In this discussion the Line Manager is believed to consider whether it may be possible to retain the employee through simple changes to employment conditions, e.g. flexible working options etc. Further, if the employee still wishes to resign, the Manager notifies Personnel that the employee is leaving and confirms the leaving date. Then, the Personnel sends the Exit Interview Form to employee.

The Personnel also telephones the employee to confirm receipt of the form and asks if there are any issues that the employee would like to discuss in an interview. If the employee declines an interview, he/she is asked to return the questionnaire. If the employee wishes to have an interview, Personnel notifies Manager of this and asks the Manager to arrange with the employee. Consideration is given to circumstances where, the employee may request that the interview is held with a member of the Personnel team, and this is accommodated wherever practicable. If discrimination on

grounds of race, gender or disability is a reason for leaving this is recorded as ‘Dissatisfaction – Other’, with further details recorded under section 6. The Council has a statutory duty to monitor and report reasons for leaving.

Then, Manager/Personnel arranges meeting as appropriate.

If the interview is conducted by Personnel, the interviewer asks the employee at what point he/she would be willing to have the information shared with their manager (i.e. before or after they have left).

The Line Manager then advises Personnel if the employee has any items of County Council property (e.g. lease car, computer equipment etc) and begins discussions regarding employee’s replacement or alternative arrangements.

Personnel also collects leaver information (including the results of exit interviews) and reports on trends plus the number of exit interview forms returned.

In the end, the Exit Interview Form is put on the Employee’s file.’ [11]

Exit Rights and Procedures (The best practice)

Termination of Employment

‘Employees leave their organisations in a variety of ways, a number of circumstances and for a variety of reasons. The reasons why employees leave their current job can be split into two categories; voluntary and involuntary.

Voluntary reasons include: -

• To take up another post
• Retirement or voluntary early retirement
• Voluntary non-employment, which could be due to a change in circumstances for example, parenting or studying.

People taking up another post may be doing so for a number of reasons such as: -

• Personal reasons for moving to another geographical area.
• Because they have been offered better terms to do the same work with another employer.
• Opportunities for promotion.
• To escape from uncongenial managers or colleagues.
• A desire for a change in career.

It is very important for employers to understand why employees leave their organisations so that recruitment and retention plans can be devised to maintain the workforce necessary for them to achieve their goals. Therefore many employers gather information from staffs that are leaving for voluntary reasons by conducting an exit interview with them.

Resignation

“Resignation is the formal act of giving up or quitting one's office or position”

-source: (http://en.wikipedia.org/wiki/Resignation)

“Resignation is the process by which an employee gives notice of his or her intention to terminate the employment contract.”

Arrangements for when an employee decides to leave:

• If attempts to make the employee stay have been unsuccessful, the exit interview needs to be arranged.
• The period of notice required needs to be set out.
• Details of departure have to be notified to the wages clerk, pensions fund officer, etc.
• The departmental head and/or supervisor should complete a leaving report.

Exit Interviews

It is important to gather data on any problems connected with aspects of the employment relationship so that employers can take action to remedy any arrangement that might potentially cause more valuable employees to leave.

The areas usually covered in an exit interview include: -

• The reason for leaving, particularly if the person is going to another job. Is it for pay? Better career opportunities? Etc.
• Relationships with supervisors and co-workers.
• Working conditions in general and ones that might be problematic, such as shift work.

Exit interviews are usually conducted by someone from the human resource management department, as even when leaving, employees may be more willing to discuss work problems with someone they didn’t work directly with. Furthermore, the interviewer should ensure confidentiality and explain that information gained is for trends only and not personal information.

Notice of Termination of Employment

Employers may have their own policies on notice, but the statutory rights of employees as stated in the Employment Rights Act are: -

• 1 weeks notice after 1month and up to 2 years service.
• 2 weeks notice after 2 years and up to 3 years service, continuing to increase by one week for every year completed to a maximum of 12 weeks notice.

The contract of employment must give details of notice entitlements, although employers are not required to give notice in cases of gross misconduct.

On the other hand if an employee resigns they must give the proper notice stated in their contract. Or if they do not have a contract or a notice period is not set out in the contract the employee can give the minimum of 1 weeks' notice.

However, an employee is entitled to resign without giving any notice if the employer commits a serious breach of the employment contract. Also, where an employee is forced to resign, because the alternative would be dismissal by the employer, the employee can still claim Unfair or Wrongful Dismissal.

Employee Rights to Time off Work

Employers are required by law to allow employees reasonable time off work for various circumstances, which include: -

• Union officials to complete certain duties with a recognised trade union.
• Public duties such as acting as a justice of the peace.
• Employees selected for redundancy to look for or make arrangements for training.
• Antenatal care.
• Under new rights which cam into force in December 1999 employees are entitled to take time off to deal with an emergency involving a dependant.
• Employees aged 16 or 17, who have few or no qualifications to study or train for approved qualifications which will help them achieve a reasonable standard.

This is not a comprehensive list, but gives you some idea of existing entitlements to time off.

Retirement

Focusing on older workers:

Age discrimination is not confined to any one age group. It can affect people of all ages and at every stage of their working life. However, there are three very good reasons why employers need to focus on the issue of older people at work:

1. The working population is getting older - employers will have more older workers to recruit and manage and fewer younger workers. There are currently 20 million people aged 50 and over in the UK. By 2030 this figure is expected to reach 27 million - an increase of 37 per cent
2. People are working longer - increased life expectancy combined with shortfalls in pension provision mean employees are retiring later
3. The Employment Equality (Age) Regulations 2006 - these regulations give employees protection against discrimination on the grounds of age. The regulations also introduce a default national retirement age of 65. Employees have the right to request to work beyond that age.

This does not mean you should discriminate in favour of older workers. However, being fair to all your workers, regardless of age, may help you to tackle the issue of skills shortages. When an older worker retires you will no longer have the same conveyor belt of younger workers to replace them.

 

“Retirement is a major change and should be prepared for. Retirement policies need to specify:

• when people are due to retire;
• the circumstance, if any, in which they can work on beyond their normal retirement date;
• the provision of pre-retirement training;
• the provision of advice to people about to retire.

Pre-retirement training can cover such matters as finance, insurance, State pension rights, health, working either for money or in a voluntary organisation during retirement and sources of advice and help. The latter can be supplied by such charities as Help the Aged and Age Concern.” (M Armstrong (2006), pp: 490-1)

In addition to this employers can consider programmes for keeping in touch with employees who have retired, in order to arrange social gatherings etc. This could lead to greater morale from current employees as they will see evidence of the organisations concern for employee welfare.

So how do you make the most of your older workers? Older people are no different from young people at work. They want to:

• start work on a sound footing
• be developed and trained throughout their career
• have flexibility in the hours they work and the kind of work they do

Human Resource Planning and career planning can help you to manage an ageing workforce effectively. This means reviewing the way you treat people at keys stages such as recruitment, promotion, training, redundancy and retirement.

Challenging stereotypes:

Challenge the stereotypes about older people at work. For example, many people assume that older people are more likely to be off sick. In fact, research has shown that the opposite is the case.

Another common assumption is that older people start 'winding down' as they approach normal retirement age. However, older people are often ambitious but need to use their skills in different ways. For example, older workers can make good mentors for junior colleagues or use their experience working on special projects.

Stereotypes are damaging to the way we perceive age. Be positive about age and value the contribution every individual can make.

Moving from working life to retirement requires a big adjustment in terms of a changed financial situation and increased leisure time. Employers can offer preparation for retirement through some kind of pre-retirement programme.

In addition to this employers can consider programmes for keeping in touch with employees who have retired, in order to arrange social gatherings etc. This could lead to greater morale from current employees as they will see evidence of the organisations concern for employee welfare.

Also:

(See Appendix 10) For ACAS: Age and the workplace – Putting the Employment Equality (Age Regulations) 2006 into practice

(See Appendix 11) For ACAS: Fair retirement flow chart

(See Appendix 12) For CIPD: Age, pensions and retirement - attitudes and expectations, survey March 2003

Dismissal

At some stage, many businesses will face the difficult task of having to dismiss an employee or a group of employees.

Dismissal is serious and you need to be sure it's handled correctly. Effective recruitment, training and management from the start of employment will help you minimise the risk of poor performance, and therefore dismissal.

There are statutory procedures in force which apply to many dismissals.

When dismissals do become necessary there are steps you should take to avoid unfair, wrongful and constructive dismissal claims.

Types of dismissal and qualifying periods for tribunal claims

Dismissals occur where:

• the employer terminates the contract
• a limited term contract ends and isn't renewed
• the employee resigns in circumstances where they're entitled to do so because of the employer's actions

An employer may lay off employees without pay for a temporary period, eg because of a downturn in orders. This is not dismissal. However, whether or not an employer has the right to lay an employee off or put an employee on to short-time working is a contractual matter - in other words, it depends on the terms of the contract agreed between them, whether written, oral or implied.

Fair and unfair dismissal

A dismissal is fair or unfair depending on your reason for dismissal and whether you act reasonably. Employment tribunals follow previous legal decisions in deciding what is reasonable.

Fair

To dismiss an employee fairly, you must first have a fair reason for doing so. The potentially fair reasons include:

• conduct
• retirement
• capability
• redundancy
• a statutory requirement which could prevent the employment continuing - for example, a driver losing his licence

In general, you must also act reasonably in how you decide to dismiss and how you carry out the dismissal. However, where the reason for dismissal is retirement, whether it is fair will depend on whether you complied with the duty to consider working beyond retirement.

Reasonableness is undefined. However, for alleged misconduct, tribunals will probably consider whether the employer:

• genuinely believed the employee committed the offence
• had reasonable grounds for that belief
• carried out proper and reasonable investigations
• followed procedures
• informed the employee of the allegations and listened to their views
• allowed the employee to be accompanied at the disciplinary hearing
• gave the employee the chance to appeal against the decision
• acted within the "band of reasonable responses" available in the circumstances

Reasonableness may also depend on whether the employee could be expected to understand the consequences of their behaviour.

Unfair

It is now automatically unfair if you fail to follow statutory dismissals procedures in certain types of dismissal.

Also:

(See Appendix 13) For BERR: a full list of reasons for dismissal which are automatically unfair on the Department for Business, Enterprise and Regulatory Reform

Constructive dismissal

Constructive dismissal occurs where the employee resigns because you have fundamentally broken their contractual terms, e.g. if you cut an employee's wages without agreement.

Consequently the individual may claim constructive, unfair dismissal at an employment tribunal. A constructive dismissal is not necessarily an unfair one but it's hard for an employer to show that an action in breach of the contract was, in fact, reasonable.

Wrongful dismissal

Wrongful dismissal is where a contractual term is broken in the dismissal process, e.g. dismissal without giving proper notice.

However, in special situations you may lawfully dismiss without giving proper notice.

Also:

(See Appendix 14) For handling discipline and grievance issues guide

Eligibility to complain to a tribunal

Employees can usually claim unfair dismissal only if they have worked for you for at least one year. Until October 2006 they usually also had to be below your normal retirement age (NRA), or 65 if you don't have an NRA. However, since that date there had been no age limit on claims for unfair dismissal.

The right to complain to a tribunal about unfair dismissal is unavailable to:

• self-employed people
• independent contractors
• other special groups, generally the police

Wrongful dismissal has no qualifying period or age limit.

Statutory procedures

All employers must set out their dismissal and disciplinary rules and the minimum statutory procedures in writing. There are potential penalties for failing to issue these to employees, but more importantly, if you are contemplating dismissing an employee you must follow these procedures, otherwise you will automatically be found to have unfairly dismissed the employee.

The new statutory procedures must be followed when contemplating dismissing an employee for one of the following reasons:

• capability
• conduct
• redundancy - as long as there's no obligation to consult collectively
• non-renewal of a fixed-term contract
• compulsory retirement

Employers must follow the statutory procedures in these cases, regardless of their size or any other factors. In other cases, tribunals will continue to take into account other factors such as the size of the employer and whether the Acas Code of Practice on disciplinary and grievance procedures was followed.’ [12]

Also:

(See Appendix 15) For ACAS: discipline and grievances at work

Analysing the selection criteria for redundancy

Salaman (1998) outlines redundancy as “In any given situation where a change in an organisation’s economic, operational or technological position result in a reduced work force.  That is irrespective of whether the reduction is achieved through compulsory dismissal, voluntary severance, natural wastage or employee transfers.  It also applied whether it involves the loss of one job or a significant reduction in part or all of the workforce.”

Legal definition

‘"Redundancy" has two different meanings for the purposes of UK employment law. One derives from the 1965 Redundancy Payments Act and the other from European law, specifically the Collective Redundancies Directive 98/59/EC (which repealed and consolidated the Collective Redundancies Directives, 75/129/EEC as amended by Directive 92/56/EEC).

The first meaning is for the purposes of statutory redundancy pay and the law relating to dismissal. It is now in ERA 1996 s.139. The second meaning concerns the obligation to consult and inform employees about impending redundancies. For this purpose "redundancy" is simply termination of employment for a reason "not related to the individual concerned" (TULRCA 1992, s.195).

ERA 1996 s.139(1) provides that:

"For the purposes of this Act, an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is attributable wholly or mainly to-

(a) the fact that his employer has ceased, or intends to cease -

(i) to carry on the business for the purposes of which the employee was employed by him, or
(ii) to carry on that business in the place where the employee was so employed, or

(b) the fact that the requirements of that business -

(i) for employees to carry out work of a particular kind, or
(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer

have ceased or diminished or are expected to cease or diminish".

Business includes business of an associated employer (ERA 1996 s.139 (2). "Cease" and "diminish" can each be either permanent or temporary for the above definition (ERA 1996 s.139 (6)).

One of the most important practical implications of  “redundancy” is that a dismissal by reason of redundancy is prima facie fair. Whether such a dismissal is in fact fair or unfair will then turn on whether the Tribunal considers that the employer acted reasonably in treating the redundancy "as a sufficient reason for dismissing the employee" (see ERA 1996 s.98(2)(c)) and notes at Unfair dismissal/reasons making dismissal prima facie fair/redundancy ).

As noted above, there is a special euro-meaning of "redundancy" for the rules requiring consultation and information about impending redundancies. For the purposes of those rules any dismissal is a redundancy dismissal if it is for a reason which is "not related to the individual concerned" (TULRCA 1992, s.195(1) and see REDUNDANCY/consultation/trade unions ).
It has been held that when construing an English contract dealing with termination of employment, the meaning to be given to the word ‘redundant’ should be the meaning given by ERA 1996 s.139 (above) - see Mallone v BPB Industries plc, 2nd March 2001 in the High Court, QBD, unreported (see also the ICR head note of the subsequent Court of Appeal ruling of 19th February 2002, on a different point in that case).

Causes of Redundancy

• Adverse trading conditions, especially in recessionary phases of the economy.
• Increased global competition across business sectors- delayering or downsizing.
• The introduction of technology has reduced shop floor labour in unskilled and semi-skilled jobs and permitted increased outsourcing (use of e-business and e-commerce via the internet).
• the job which the employee is hired for no longer exists
• the need to cut costs means staff numbers must be reduced
• the business is closing down or moving

HR Responsibilities in regard to redundancy

Downsizing is one of the most demanding areas of people management with which HR professionals can become involved. Their responsibilities, as discussed below, are to:

• plan ahead to achieve downsizing without involuntary redundancy;
• advise on and implement other methods of reducing numbers or avoiding redundancy;
• encourage voluntary redundancy if other methods fail;
• develop and apply proper redundancy procedure;
• deal with payments arrangements for releasing employees;
• advise on methods of handling redundancies and take part as necessary to ensure that they are well managed. (M Armstrong (2006), pg: 482)

Minimising redundancies

Redundancies can be either voluntary or involuntary. Employees take voluntary redundancy when they agree to leave a post that is being removed from the workforce. In contrast, involuntary redundancy is when the job loss is forced upon an employee. Both types of redundancy may include some form of payment or time off in lieu as compensation. ‘The other methods that can be used that can be used to avoid or at least minimise redundancy include, in order or severity:

• calling in outside work;
• withdrawing all subcontracted labour;
• reducing or preferably eliminating overtime;
• developing work sharing: two people doing one job on alternate days or splitting the day between them;
• reducing the number of part-timers, remembering that they also have employment rights;
• temporary lay-offs.

Keeping employees informed

If you are proposing to make 20 or more employees redundant within 90 days, you must consult the employees' trade union or other elected representatives and consult with the employees as individuals. If you propose making fewer than 20 employees redundant, you must still consult the individual employees and its good practice to consult their representatives if they have any.

If you have an information and consultation (I&C) agreement in place, you have a duty to inform and consult employees or their representatives on - among other things - changes to the workforce. This means that you may have to inform and consult on any proposed redundancies.

However, you do not have to inform and consult at the same time under both the redundancy and the I&C legislation - you can choose instead to "opt out" of your I&C agreement and consult under the redundancy legislation only.

Also:

(See Appendix 16) For the information and consultation legislation on the Department for Business, Enterprise and Regulatory Reform (BERR)

Selection for compulsory redundancy

Staff selection - compulsory

The selection criteria your business adopts should be set out in your written procedures. They must be objective and applied consistently so that employees are not unfairly selected. You must be careful to avoid any discrimination.

Among the variety of criteria that can be used to select employees for redundancy are:

• Skills, qualifications and aptitude - these can help keep a balanced workforce.
• Standard of work performance - with this method, you need to provide supporting objective evidence, for example from the business' appraisal system.
• Adaptability - it may be important for your business that employees accept different types of work as needs change - but ensure that your basis for assessment does not discriminate.
• Attendance/disciplinary record - you must apply this method consistently, and be sure your records are accurate and that you understand the reasons for absences. For example, you must not include absences for maternity, paternity or adoption leave.

Automatic unfair selection criteria

Certain selection criteria are automatically unfair including:

• trade union membership, non-membership or activity
• legal industrial action lasting up to eight weeks, or longer
• certain employee representative reasons
• actions taken on specified health and safety grounds
• reasons associated with pregnancy, maternity, paternity, adoption and parental leave
• reasons relating to regulations on part-time workers

You should analyse your proposed criteria to guard against accidentally discriminating against employees. For example, if you operate a "last in, first out" policy, you may contravene age discrimination laws in relation to younger employees who may be considered to be at an automatic disadvantage.

It is up to your employer which reasons they use, as long as they can show that they are fair. The most commonly used reasons are:

• 'Last in first out' (LIFO) – LIFO or Last In First Out, is a traditional selection method that has often been applied as a means of selecting employees for redundancy; however, following the introduction of The Equality of Employment (Age) Regulations in October 2006, it would be unwise to continue to use this as it is likely to be seen as discriminatory on the grounds of age. Even though staff have often seen LIFO as a fair criterion, you can be sure that the tribunals won't, so it would not be advisable to use it again!  It can also amount to unlawful indirect discrimination against women returning to work after child care.
• Skill and knowledge – this must be clearly defined and assessed objectively
• Attendance records – this can amount to unlawful discrimination against disabled employees and therefore care should be taken as to whether 'one-off' illnesses, long-term absences or work-related injury absences are to be included or excluded
• Sickness absence – this overlaps with attendance records and care should be taken to avoid any discriminatory effect
• Age – at present age discrimination is not unlawful, although it may be unfair, i.e. as the Code of Practice on Age Discrimination may be taken into consideration by tribunals – it may also amount to indirect discrimination on the grounds of sex
• Adaptability/flexibility – this is difficult to measure objectively and an unwillingness to relocate may indirectly discriminate against women who tend to be primary carers
• Performance – the scoring should be measured as objectively as possible
• Disciplinary record
• Qualifications/experience.

A tribunal will usually accept some subjective criteria, such as communication skills or attitude, provided they are balanced with objective ones.

The application of certain criteria, such as pregnancy, part-time working, fixed-term working or indeed length of service, may be directly or indirectly discriminatory.’ [13]

Also:

(See Appendix 17) For Prevent discrimination and value diversity Guide

(See Appendix 18) For BERR- Redundancy Guide

Appendices

Self Reflection & Evaluation

Completing this assignment necessitated my researching in depth in order to be able to establish the effectiveness of principles and procedures for monitoring and rewarding the employee, and also to explore the rights and procedures on exit from an organisation.   The resources I use included that which I had been taught in the classroom, the course textbooks (both those purchased personally and those borrowed from the college library), course work Materials, the internet and discussion with the lecturer.

All of the aforementioned helped me to consider the process of job evaluation, the main factors determining pay, to identify a range of reward systems and their benefits and limitations; explain the link between motivational theory and reward, and explore organisational approaches to monitoring performance, whilst evaluating exit procedures used by two organisations, comparing these to best practice; and analyse selection criteria for redundancy.

I began the assignment by reading the course notes, then the relevant course text books.

I used the internet, guidance from the course lecturer, the textbook and a range of articles for further resources.

 

I found “A Handbook of HRM” by Armstrong and a useful guide to the completion of this assignment along with the BTEC HNC/HND BPP Publishing course textbook.

Internet sites I personally found most useful in carrying out the research were:-

• www.google.com
• www.ask.com
• www.yahoosearch.com
• www.ucu.org.uk
• www.cipd.co.uk
• www.amicustheunion.org
• www.businesshr.net
• consulting.about.com
• www.arts.ac.uk
• www.nhsemployers.org
• howtogetacareerinmedicalsales.com
• www.coursework.info
• userwebs.cth.com.au
• www.workinculture.on.ca
• en.wikipedia.org
• www.freewebs.com
• www.eastlothian.gov.uk
• www.chesterfield.gov.uk
• www.compactlaw.co.uk
• www.businesslink.gov.uk
• www.personneltoday.com
• www.emplaw.co.uk
• www.jaluch.com

In retrospect I think I made use of used a sufficiently wide range of research sources.  I made use of all material provided by the college and all that was reasonably available to me.

It was very difficult to keep within the word count while trying to cover all of the criteria to a good standard, given the wide area that this assignment encompassed.

I have met with the completion time, and have endeavoured to produce work of a standard which is above average.  I very much enjoyed this assignment.

Timetable

Bibliography/References

Books:

• Armstrong M – A Handbook of Human Resource Practice (Kogan Page, 2006)

10th Ed; United Kingdom; ISBN-10: 0749446315; ISBN-13: 9780749446314

• BPP – Business Basics: Human Resource Management 2nd Edition (BPP Publishing, London, 1997) ISBN: 0751720763
• Classroom Notes and Handouts; Marion Fieldstead; 2007/08; Wirral Metropolitan College; Conway Park Campus; United Kingdom.

Websites:

www.google.com

www.ask.com

www.yahoosearch.com

www.ucu.org.uk

www.cipd.co.uk

www.amicustheunion.org

www.businesshr.net

consulting.about.com

www.arts.ac.uk

www.nhsemployers.org

howtogetacareerinmedicalsales.com

www.coursework.info

userwebs.cth.com.au

www.workinculture.on.ca

en.wikipedia.org

www.freewebs.com

www.eastlothian.gov.uk

www.chesterfield.gov.uk

www.compactlaw.co.uk

www.businesslink.gov.uk

www.personneltoday.com

www.emplaw.co.uk

www.jaluch.com

References:

1. Collectively from:

(http://64.233.183.104/search?q=cache:RDf57eHaziUJ:www.ucu.org.uk/media/docs/j/7/fejagjobev_1.doc+job+evaluation&hl=en&ct=clnk&cd=12&gl=the United Kingdom)

(http://www.cipd.co.uk/subjects/pay/general/jobeval.htm)

(www.amicustheunion.org/Default.aspx?page=8111)

(M Armstrong 2006)

2. Collectively from:

(http://www.businesshr.net/intro/reward/pay_influences.html)

(http://consulting.about.com/od/gettingstarted/tp/CFsetrate0507.htm)

(http://www.arts.ac.uk/student/careers/16225.htm)

3. Collectively from:

(www.nhsemployers.org/pay-conditions/pay-conditions-781.cfm)

(http://www.nhsemployers.org/pay-conditions/pay-conditions-2576.cfm#NHS-38551-6)

-Image source: (http://howtogetacareerinmedicalsales.com/images/nhs_logo.jpg)

4. (M Armstrong 2006, pp: 625-641)

5. (http://www.coursework.info/GCSE/Business_Studies/People_in_Business/Motivation_at_work__a_key_issue_in_remun_L73468.html)

6. (http://userwebs.cth.com.au/~gcutts/Management/19a_factors.htm)

7. Collectively from: (http://www.cipd.co.uk/subjects/perfmangmt/general/perfman.htm)

(http://www.workinculture.on.ca/media/en/toolsManagingEmployeePerformance.pdf)

8. (http://www.cipd.co.uk/subjects/perfmangmt/general/perfman.htm)

9. (http://en.wikipedia.org/wiki/Performance_appraisal)

10. Collectively from: (http://www.coursework.info/GCSE/Business_Studies/People_in_Business/Performance_management_L33545.html)

- Image source: (http://www.freewebs.com/claytoncc/FWThumbnails/Tesco-every-little-helps-lo.jpg)

11. Collectively from: (http://www.eastlothian.gov.uk/documents/contentmanage/Exit%20Procedures%20ZTnov07-19335.DOC)

(www.chesterfield.gov.uk/site/showpicture.asp?CID=4398&type=DOCUMENT&section=SUMMARY)

12. Collectively from:

(http://www.compactlaw.co.uk/monster/empf18.html)

(http://www.acas.org.uk/index.aspx?articleid=801)

(http://www.coursework.info/GCSE/Business_Studies/People_in_Business/Termination_of_Employment_L63113.html)

(http://www.businesslink.gov.uk/bdotg/action/layer?r.l1=1073858787&r.l3=1074200615&topicId=1074200615&r.t=RESOURCES&r.i=1073793717&r.l2=1073876974&r.s=m)

13. Collectively from:

(http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1074003268&r.l1=1073858787&r.l3=1074019927&r.t=RESOURCES&r.i=1073792400&r.l2=1073876974&r.s=e)

(http://www.businesslink.gov.uk/bdotg/action/detail?r.l1=1073858787&r.l3=1074019927&type=RESOURCES&itemId=1073792400&r.l2=1073876974&r.s=sc)

(http://www.personneltoday.com/articles/2005/09/21/31685/redundancy-selection-process.html)

(http://www.coursework.info/University/Business_and_Administrative_studies/Human_Resource_Management/This_report_provides_an_insight_into_the_L87870.html)

(http://www.emplaw.co.uk/researchfree-redirector.aspx?StartPage=data%2f076020.htm)

(http://www.direct.gov.uk/en/Employment/Employees/RedundancyAndLeavingYourJob/DG_10029832)

(http://www.businesslink.gov.uk/bdotg/action/detail?r.l1=1073858787&r.l3=1074019927&r.t=RESOURCES&type=RESOURCES&itemId=1073792400&r.i=1073792398&r.l2=1073876974&r.s=sc)

(http://www.jaluch.com/HR_jargon/last_in_first_out.html)

(http://www.businesslink.gov.uk/bdotg/action/detail?r.l1=1073858787&r.l3=1074019927&type=RESOURCES&itemId=1073792397&r.l2=1073876974&r.s=sc)

References for Appendices:

1. (http://www.dh.gov.uk/en/Publicationsandstatistics/Publications/PublicationsPolicyAndGuidance/DH_4090845)
2. (M Armstrong (2006), pp: 669-70)
3. (http://www.workinculture.on.ca/media/en/toolsManagingEmployeePerformance.pdf)
4. (http://www.workinculture.on.ca/media/en/toolsManagingEmployeePerformance.pdf)
5. (http://www.workinculture.on.ca/media/en/toolsManagingEmployeePerformance.pdf)
6. (http://www.workinculture.on.ca/media/en/toolsManagingEmployeePerformance.pdf)
7. (http://www.businessballs.com/performanceappraisalform.pdf)
8. (http://www.eastlothian.gov.uk/documents/contentmanage/Exit%20Procedures%20ZTnov07-19335.DOC)
9. -Image source: (http://www.fotw.net/images/g/gb)hants.jpg)

(www.chesterfield.gov.uk/site/showpicture.asp?CID=4398&type=DOCUMENT&section=SUMMARY)

10. (http://www.acas.org.uk/CHttpHandler.ashx?id=588&p=0)
11. (http://www.law-now.com/cmck/pdfs/nonsecured/acasfairretireflowchart.pdf)
12. (http://www.cipd.co.uk/NR/rdonlyres/AF4B7A3F-6B3A-47ED-9D7E-C1AC1E2985E4/0/age_complete_210303.pdf)
13. (http://www.berr.gov.uk/employment/employment-legislation/employment-guidance/page30887.html)
14. (http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1074207501&r.l1=1073858787&r.l3=1074200615&r.t=RESOURCES&r.i=1073793715&r.l2=1073876974&r.s=e)
15. (http://www.acas.org.uk/CHttpHandler.ashx?id=272&p=0)
16. (http://www.berr.gov.uk/employment/employment-legislation/ice/index.html)
17. (http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1074003268&r.l1=1073858787&r.l3=1074019927&r.t=RESOURCES&r.i=1073792400&r.l2=1073876974&r.s=e)
18. (http://www.businesslink.gov.uk/bdotg/action/layer?r.l1=1073858787&r.l3=1074019927&topicId=1074019927&r.t=RESOURCES&r.i=1073792399&r.l2=1073876974&r.s=sc)