Strategies for Employee Performance Management at MS

Strategies for Employee Performance Management at MS Study on how MS improve employee performance management through motivation and training? 1. Introduction One of the major issues for competitive advantage, therefore, is the successful motivation and training of staff. Despite a plethora of theories (Locke and Latham, 1990a; 288) which have analyzed work based motivation and satisfaction, however, theories remain commoner than the evidence to support them. In the increasing competitive environment, organizations have to focus on value of investments in human resources especially performance management as a major source of competitive advantage. Although, business strategy means of competition is common conversation in the executive suite, taking a strategic approach can be especially beneficial for staff functions within companies, as they often are required to justify their need for resources and their contribution to the company. The following study presents the analysis of performance management issues on Marks and Spencers (MS) employee motivation and training. Performance improvement provides MS with needed information on their employees. The information helps MS develop the skills of the employees based on the information collected at the appraisal, it helps recognize when training is needed. Performance improvement helps MS by improving their service by having able workers that work to their full ability and by improving the relationship between workers and the company. Here is Marks and Spencers definition of performance management: Performance management is a joint process that involves both the supervisor and the employee, who identify common goals, which are linked to the goals of the organization. This process results with the establishment of written performance exceptions later used as measures for feed back and performance evaluation. (MS Annual report and financial statements 2008) Marks and Spencer is a multinational company have grown from a penny bazaar in the late 1880’s. UK based company to become one of the largest and most well known organisations of British culture. As a leading retailer, with a customer base of 10 million per week in over 300 UK stores, also trades in 30 countries worldwide, producing a Group turnover in excess of 8 billion. (MS Annual report and financial statements, 2008) MS have to be able to manage its resources to meet the customer’s needs and those of the market. Following three years of declining profits due to economic recession, the company has attempted to rejuvenate itself. Though the company is regaining market share and profits are beginning to raise they are still suffering some problems which have resulted in the company selling some of their foreign subsidiaries and axing jobs to concentrate on their core business. Such a turn around exemplifies well the need for strategy in this type of organisation. Strategic issues will revolve around the long-term and concentrate on the direction and scope of the organisation. Furthermore they will concern resources, competition, meeting needs of stakeholders and markets. All of this will be in a constantly changing and dynamic environment and so organisations must concentrate their human recourse management especially employee’s performance management each level and use right strategy on HR policy. This paper is trying to find out that employee performance improvement by motivating and training. 2. Literature Review 2.1 Techniques of Performance Management A key issue in understanding and applying techniques of performance management is defining exactly what is meant by ‘performance’ and ‘performance management’. The paper hereafter discusses and evaluates the competing definitions as they are understood in organizational and human resources practice. Performance is a multi-level, multi-dimensional construct. It is important to understand what level of performance is considered important when an organization talks about performance management. At each level- organizational, work unit or individual; there are a combination of factors that influence performance: direct, indirect, individual and situational. Any human resource intervention designed to assist, enhance, encourage ‘performance management’ has to be effectively targeted at the right combination of factors (Study Guide 2004, pp.2-8). 2.2 Performance, a Definition Contemporary organizations consider performance to fall into two major areas: performance at the individual level and performance at the organizational level (Williams 2002). At the individual level there are differing views on what performance is. Some research regards it as simply the record of outcomes achieved (Bernadin 1995). Performance has also been defined as behavior, that is, the way in which teams and individuals get work done (Campbell 1990). At the individual level performance can be thought of as either ‘what’ is achieved, that is as output and results, or as ‘how’ it is achieved, that is demonstrated behaviors, competencies, adherence to process (Study Guide 2004, pp.2-6). Williams (2002, cited in Study Guide 2004, pp.2-7) starts with the proposition that individual performance is behavior, which is determined by factors of declarative knowledge, procedural knowledge and motivation. Declarative knowledge is the ‘what’ of performance; procedural knowledge is the ‘how’ to do’ whereas motivation refers to the exercise of choice over whether or not to perform; what level of effort to expend; and, whether or not to maintain a consistent level of effort on the specified tasks over an extended period. The three factors above are direct determinants of performance. There are also indirect determinants which might be termed ‘situational’ factors, first are those inherent in the individual employee, the second are those inherent in the work context, which might be termed ‘situational’ factors (Study Guide 2004). However, the most comprehensive view of performance is achieved if it is defined as embracing both behavior and outcomes (Armstrong Baron 1999). Performance at the individual level cannot be seen as merely a function of ‘ability’ and ‘motivation’. Issues such as individual differences, the context in which performance is expected, and the interactions between system and individuals should also be considered. Performance at the individual level is even more ‘multi-dimensional’ than performance at the organizational level (Study Guide 2004). The concept of performance as embracing productivity or efficiency as well as effectiveness, adaptability and responsiveness. It is clear, then, that organizational performance is far from being a simple concept (Williams 2002, p. 68). Somehow, at the organizational level we are concerned with issues of efficiency, effectiveness and productivity. To address the aforementioned multi-dimensions, we need meaningful performance measures. An increasingly popular approach to measure organizational performance has been through the use of the ‘Balanced Scorecard’ developed by Kaplan and Norton in 1996, which attempts to capture some of the contradictory nature of organizational performance (Williams 2002). It aims to measure performance in terms of four sets of indictors namely financial, customer, internal business process and learning and growth. The aforementioned four sets of indicators have each taking a different perspective. To succeed financially, how should we appear to our shareholders; to achieve our vision, how should we appear to our customers; to satisfy our shareholders and customers what internal business processes must we excel at and to achieve our vision, how will we sustain our ability to change and improve. It is important to remember that when studying performance management, we must consider both inputs – the behavior aspects and outputs the results aspects. Hartle (1995) calls this the ‘mixed model’ of performance management, reflecting the importance of both the ‘how and what’ of performance. This is when we consider that performance is about how things are done as well as what is done. Efficiency is defined by Robbins, Bergman, Stagg Coulter (2000, p. 8) as the relationship between inputs and outputs, the goal of which is to minimize resource costs whereas effectiveness is defined as the goal attainment. Efficiency is often as ‘doing things right’ – that is not wasting resources; effectiveness is often described as ‘doing the right thing’ – that is, those work activities that will help the organization reach its goals. Whereas efficiency is concerned with the means of getting things done, effectiveness is concerned with the ends. Performance and its relationship to productivity are of a vital importance in understanding and applying techniques of performance management. Guzzo (1988, p. 63 cited in Williams 2002, p. 52) claims that productivity may mean different things to different people, Pritchard (1995, p. 448 cited in Williams 2002, p. 52) has recently noted the wide range of meanings attaching to the term productivity: the term has been used to refer to individuals, groups, organizational units entire organizations, industries, and nations. It has been used as a synonym for output, efficiency, motivation, individual performance, organizational effectiveness, production, profitability, cost/effectiveness, competitiveness, and work quality. Productivity is the ratio of outputs to inputs, a ratio that reflects the efficiency with which resources are transformed into outputs (Guzzo 1988, cited in Williams 2002). And Williams 2002 refers productivity as a systems concept and that inputs are subject to some conversion processes which lead to the production of outputs; in seeking to measure productivity a basic question that is concerned is how well or how efficiently available inputs are converted into outputs. In a general sense, by inputs, it is meant all the resources, employees, raw materials, energy, buildings, equipment etc, that are required to manufacture a product or deliver a service. Output is typically taken to mean what an organization produces. Output has traditionally been measured in quantitative terms, however, there is also a quality aspect of output (Williams 2002). Viewing productivity as a system concept tells that inputs are converted into outputs via some transformation processes. Similarly, an organization, as a system, comprises many subsystems and it is these which are concerned directly or indirectly, with the transformation processes that convert inputs to outputs (Williams 2002, p. 57) 2.3 Performance Management, an Overview Performance management is defined by De Cieri Kramar (2002, p. 286) as the means through which managers ensure that employees’ activities and outputs are congruent with the organization’s goals. Performance management evolved out of a long history or managerial attempts to improve productivity, efficiency and effectiveness at all levels in an organization. Study Guide 2004 outlined that one of the difficulties with the concept performance management is that the term means different things to different people. One main interpretation that has come to dominate in practice is that performance management is a system for managing organizational performance; a system for managing employee performance and a system for integrating the management of organizational and individual performance (Williams 2002, p. 10). Walter (1995, p.10) states that performance management is about directing and supporting employees to work as effectively and efficiently as possible in line with the needs of the organization. Armstrong 1994 defined performance management as a process designed to improve organizational, team and individual performance whereas Armstrong Baron 1999 describes performance management as a strategic and integrated approach to deliver sustained success to organizations by improving the performance of the people who work in term and by developing the capabilities of teams and individual contributors. Performance management is far more than its precursor ‘performance appraisal’, it goes beyond the annual appraisals, ratings and interviews to incorporate employees’ goals, training, rewards and individual development. Thus, a performance management system focuses on an ongoing process of performance improvement, at the individual and organizational level, rather than emphasizing an annual performance review (DeSimone, Werner Harris 2002, cited in Study Guide 2004, p.1-3). There is no one right way of managing performance. The approach will depend on the context of the organization. That is, its culture, structure, technology and the type of people involved. Thus, recognizing the importance of managing within the context of the business. Organizational structure is defined as the degree of complexity, formalization and centralization crated to facilitate the coordination of activities and to control the actions of organizational members (Robbins, Waters-Marsh, Caccioppe Millett 2001, cited in Study Guide 2004, pp.1-12). Organizational culture is a more intangible aspect, based on the shared values, customs, rituals and norms of the organization. Culture, is long-lasting and can often take decades to change, it is very enigmatic and complex. Culture can assist performance management – they can also act as a major impediment. Conversely, performance management can be used as a tool to change culture (Study Guide 2004, pp.1-14). Williams 2002 raised, from one point of view technology is part of performance management, one of the tools, that is, for managing performance. And, indeed, technology, especially information technology, has been in many cases a solution to a performance problem which has led to that business gaining competitive advantage. 2.4 The Role of a Performance Management within an Organization From a human resource perspective it is very much a systemic process bringing together issues of: organizational performance; managerial effectiveness; individual performance; skill development; and reward management. These five aspects must be integrated through human resource personnel and managers working together with staff to achieve the organization’s desired outcomes (Williams 2002). The processes that are applied to reward and remunerate employee motivation are aligned with performance management. In the industrial era, performance and productivity came primarily from physical effort coupled with capital invested in technology. As enter the new era of information technology, the performance and productivity of employees comes not from physical effort but from within employees – their knowledge, insights information, skills, abilities, innovativeness and creativity (Smith 1998, p. 153 cited in Williams 2002, pp.1-16) For managerial effectiveness, on the one hand, the manager would know about the policy, objectives, mission and goal of organization. On the other hand, the product or service delivered has to meet customer needs for achieving its goal, having good relationship and trust between the company and customer, thus, be more competitive in the marketplace. Research is needed to best fulfill customers’ needs. A plan or strategy has to be implemented to improve the company and its stuff’s performance to be more successful. Performance should in line with the company’s business plan. Employees’ performance should cope with the company’s strategies and should also keep on improving. The focus of training and development programs and approaches in organizations is to achieve long-lasting behavioral changes which increase productivity at the individual, group and organizational level. As such, training and development comes under the ambit of performance management. As with other performance related aspects of the organization and its human resources, training and development is concerned with the identification of training needs. Based on a comparison of expected with actual performance, training interventions are designed, implemented and assessed to ascertain whether performance has been improved as a consequence of the training. Two of the significant performance management processes which assist the training and development cycle are job analysis and performance assessment. Job analysis provides valuable information on the tasks, job and role of the job and performance assessment assists in identifying where deficiencies in performance exist (Smith 1998, cite d in Study Guide 2004, pp.1-17) To unlock the intrinsic qualities of individual employees, not only does performance management address situational factors surrounding the employees, but it also seeks to address the motivational factors of employees. One approach to unlock these aptitudes and abilities is to consider compensation management as part and parcel of a performance management approach. Compensation management looks not only at extrinsic rewards, such as pay and bonuses, but also at those artifices, symbols, rewards and benefits which improve the motivation of employees to perform at higher levels. Suffice to point out that organizations which manage compensation and rewards poorly will fail to maximize their most important strategic resource – their human capital (DeSimone et al, 2002, p. 43, cited in Study Guide 2004 pp.1-17). It is because employees who achieve want to be recognized and rewarded for their efforts. And to motivate performance, outstanding performers must be identified and rewarde d accordingly (Stone 2002). 2.5. Employee Motivation theory and Performance According to Mitchell (1982) motivation is psychological process that cause encouragement, direction and insistence of voluntary actions that are goal oriented. Employee motivation is one of the key drivers of high performance as it encourages individuals to work hard, and desire to achieve a higher goal and a better performance. Robbins (1993) shares the same view, that motivation is the willingness to exercise high levels of effort towards organization goals and to satisfy individual needs. McKenna (2002, p.8) explains motivation as an emotion, ‘which is personal in nature, and comes from within the individual’. Robbins (1993) also describes that it is the individual needs that make the outcomes to be attractive and unsatisfied needs will create tension to stimulate drives within the individual and this is called motivation process. Please refer to Appendix 1 to see the phases of the motivational process. This study has been aimed to discuss different motivation theori es and how it effectively increases employee performance. There have been numerous motivation theories developed by many famous authors such as Chester Barnard, Max Webber, Joan Woodard, Bennis and Slater etc. According to Reis and Pena (2001), there was an evolution in the development of the motivation theories. Chester Barnard (1938) introduced the idea of traditional/classical form of motivation as â€Å"be tough† or â€Å"stick† and â€Å"be good† or â€Å"carrot† then followed with bureaucracy and human relation approach by Max Weber (1947) and Joan Woodard (1965) respectively. Then the turning point of the motivation history is in 1980s to 1990s was the â€Å"Total Quality Management† and â€Å"Reengineering† approach. Reis and Pena (2001) believe that today employee motivation is about satisfying your employees with empathy, understanding, friendship and respect at workplace. Please refer to Appendix 2 to view the evolution of motivation theories. According to McKenna (1999) the evolution of motivation theories have been breaking down and classifying generally into three categories. Ramlall (2004) also agrees that motivation should have three aspects of reinforcement, content and process theories. The reinforcement theory is based on the concept that reinforcement conditions behavior. Reinforcement is the attempt to develop or strengthen desirable behavior by either giving positive consequences or withholding negative consequences (Nelson Quick 1994). The theorists see behavior as environmentally caused. The reinforcement theory does not concentrate on the personal feelings of the individual, but rather what happens when the individual takes some action. What directs behaviors are reinforcements, when instantly followed by a response, increases the likelihood that the behavior will be repeated (Luthans Stajkovic, 1999). In the workplace, Nemerov (1993) emphasized that it is important for managers to recognize and reward employees. Such recognition also helps individuals to fulfill the higher needs in Maslow and Alderfers hierarchies, providing workers with self-esteem and a sense of accomplishment. According to Miner and Dachler (1973), content theories are primary emphasis on the particular motives or the types of motives. Berl and Williamson (1987) also describe content theories as understanding the key and driver which arouse or start behavior. Dainty (2002) and McKenna (1999) share a same concept of content theories; the two authors believe it is surrounding by four famous theories of Maslow’s hierarchy of needs, Herzberg’s Motivational-Hygiene, Alderfer’s existence relatedness and growth and McClelland’ needs theory. Maslow’s hierarchy of needs describes people have five classifications of needs which act as motivators; those are physiological needs, safety, social and belongingness, self esteem and self-actualization needs. According to Berl and Williamson (1987) the critical aspect of this theory is individual needs to satisfy lower level of need before moving upward. However, there have been many criticisms as Grigaliunas and Weiner (1974) argues that Maslow has been oversimplified and misrepresented. Wahba and Bridwell (1973) conducted a study which show that needs cannot be arranged in a hierarchy in every circumstance and hence feel that Maslow’s model is inappropriate. Herzberg theory has two factors called hygiene (physiological) and motivational (egocentric) also receive considerable criticism by Wahba and Bridwell (1976). Maslow and Herzberg share very similar concepts that individual must achieve basic needs in order to move upward. This theory was also never tested fairly and lack of supporting evidence that job satisfaction leads to high job performance (House and Wigdor 1976). The argument is that job satisfaction may lead people to their comfort zone and not actively look to risk their current rewards (House and Wigdor, 1976). Although there are criticisms, these theories are easily and widely used in practice by considering motivation as a systematic theory. Alderfer’s existence, relatedness and growth (ERG) theory assumes that if an individual can not satisfy the specific needs, then he/she can satisfy needs at a lower level, if the individual is frustrated at a given need level (Berl and Williamson, 1987). Maslow’s theory states that only one level of need can be motivational at a time while with Alderfer more than one level of need can influence a person to act at a given time. Berl, Williamson and Powell (1985), found through a survey that those who have satisfaction with growth needs have greater more desire for growth and individuals dissatisfied with existence needs had a greater desire for existence and related needs. Hence, this theory is useful for management to recognize a right person for the right task with realistic goal to motivate high performance. The relationship between these three theories is demonstrated in Appendix 3. McClelland argues that motivation could be learnt from life experiences and the needs are developed through life such as need for achievement, need for affiliation and the need for power. Acquired needs theory is also influenced by society and culture changing overtime (McKenna, 1999). Hence employees would be more motivated and perform better if managers know their goals and touch correctly to their needs. The process theories, according to Berl Williamson (1987) provide an explanation of procedures which enable people to choose among different courses of action, the degree of effort expended and persistence over time. The process theories include Equity theory, intrinsic motivation theory, and Expectancy theory. Process theories contrast sharply with the earlier content theories, which focused on identifying factors associated with motivation in a relatively static environment. Process theorists view work motivation from a dynamic perspective and look for causal relationships across time and events as they relate to human behavior in the workplace (Steers, Mowday and Shapiro 2004). The equity theory points towards the situations when individuals compare outcome-input ratio of their job to that of others (Robbins 2003). The people to whom individuals may compare themselves may belong inside or outside to the same organization as well as their own experiences in a different position within the same or another organization. This theory is strong when predicting absence and turnover behaviors and weak while predicting employee productivity. Equity theory points out that rewards significantly affect the level of motivation. McKenna (2005) argues that money and other rewards do not have a significant effect on motivation and it is other factors like better job satisfaction, positive feedbacks that do so. Locke and Latham (1990, p.241) state that expectancy theory developed by Vroom emphasizes that ‘performance is a multiplicative function of expectancy, instrumentality and valence’. It suggests that the factors that motivate a person to act in a certain way depend on ‘the strength of an expectation that the act will be followed by a given outcome and on the attractiveness of the outcome to the individual’ (Robbins 2003, p.173). This theory is strong to explain employee productivity, absenteeism and turnover. Quick (1988) further explains a five step process towards the practical application of the expectancy theory – define the expectations, make the work valuable, make the work doable, give regular feedback, and reward employees when they meet expectations. The various motivational factors can be broadly grouped into intrinsic and extrinsic. The intrinsic factors include those are directly related to the work itself, like the enjoyment, responsibility and satisfaction of completing a task while extrinsic factors refer to those external factors like the recognition and rewards associated with the work (Amabile 1993). A study by Nowlin (1982) indicated that majority of the managers in both the private and public sectors were motivated by intrinsic factors like the work itself and the job responsibility. Based on a survey by Mullins, in which workers were induced to perform better in their jobs either by verbal recognition of good work or by a pay increase, it was found that performance was improved more significantly by the intrinsic reward of verbal recognition than by the extrinsic reward of additional money (Mullins 1996). Cully et al (1999) support this by evidence that regular performance appraisals and monitoring of individual quali ty do help to boost morale and improve workplace well-being. It is also seen that it is possible to achieve synergy between these two types of motivational factors by creating a synergy between the person and his work environment (Amabile 1993). Smith (2005) adds to this argument by stating that it is important for leaders to understand the reason behind the employee’s motivation, otherwise they may offer things that are not really valued. Di Cesare Sadri (2003) explains the dimensions of cultural impact on employee motivation, stating ‘while the principle of leadership, motivation, and decision making may be applicable almost everywhere, their success or failure depends heavily on ways in which managers adapt to the local culture and work situation’ (cited in Di Cesare Sadri 2003, p.30). Motivation is culture-bound, and managers must be careful not to impose their value system when drawing conclusions about what motivates people in different countries. Motivational differences are best understood by exploring countries individually, first by gaining an understanding of the culture and then by drawing implications from that culture about motivation. 2.6 Highlights of ways in which managers can motivate employee to improve productivity Understanding what motivated employees and how they were motivated was the focus of many research which have been undertaken in this field by Frederic Herzberg, Douglas McGregor, David McClelland, Abraham Maslow and Elton Mayo. Each of them has a different theory about employee motivation. Frederic Herzberg’s developed this motivation theory during investigation of 2000 accountant and engineers in the USA. Two Factor Theory. He beloved that people are influenced by two factors- motivation and hygiene. Satisfaction and psychological growth was a factor of motivation factors. The result of hygiene factor was dissatisfaction. Hygiene factors are needed to ensure an employee does not become dissatisfied. They not lead to higher levels of motivation, but without them there is dissatisfaction. The typical factors are working conditions, salary, Security Company, job. Motivation factors are needed to motivate an employee into higher performance. He suggests that offer work should be arranged in the following ways: job enlargement, job nation and enrichment. 2.6.1 Douglas McGregors theories called X and Y. McGregor said that there are two fundamental approaches to managing people. Many managers prefer theory x, and generally get poor results. Enlightened managers use theory y, which produces better performance and results, and allows people to develop and growth. â€Å"Authoritarian management† style Theory X The average person prefers to be directed. This person wants to avoid responsibility, is unambitious and wants security above all else. The average person does not like work and will avoid it. That is why most people must be forced with the threat of punishment to work towards organizational objectives. â€Å"Participative management† style -Theory Y People usually accept and often seek responsibility Effort in work is a natural People have self-control and self-direction in the pursuit of organizational objectives, without external control or the threat of punishment. Commitment to objectives is a function of rewards associated with their achievement. The capability to use a high degree of imagination and creativity in solving organizational problems is widely distributed in the population. McClelland based on the Murrays (1938) theory of personality. proposed a content theory of motivation. In his book (1961) The achieving society, McClelland said that human motivation comprises three dominant needs: the need for achievement , the need for power and the need for affiliation. Achievement People with a high need for achievement are trying to avoid both low-risk and high-risk situations. They avoid low-risk situations because the easily attained success is not a genuine achievement. In high-risk they can see the outcome as one of chance rather than ones own effort. High individuals prefer work that has ideally a 50% chance of success. Those people need regular feedback in order to monitor the progress of their achievements. They prefer either to work alone or with other people. Affiliation People with a high need for affiliation need to feel accepted by others and be in harmonious relationships with other people. Power Person who need for power can be personal or institutional. People who need personal power want to direct others, and this need is perceived as undesirable. Those who need institutional power –social power- want to organize the efforts of others to further the goals of the organization. 2.6.2 Elton Mayo Elton Mayo is known from his research including Hawthorne Studies and his books. He started his experiment on the effect light in produ