Improving Organizational Performance of GE and Toyota Motors - Essay Example

? Improving organisational performance Contents Introduction 3 Conceptual Frameworks 4 Performance Management System Comparison: Multiple Case study Approach 8 Challenges Faced by the organizations 10 Balanced Proposal 11 Role of Line Mangers in Performance Management 12 Conclusion 13 References 14 Bibliography 14 Introduction Today performance managements have become very much important due to the various social and economic pressures. Globalization has increased competition and hence the organizations are faced with fast paced competitive environments. As a result the companies are looking at the human resources to provide the much required differentiation. As a result, this has lead to a lot of interest in the assessment of the performance of the employees and more importantly how to get the best out of the human resource to gain competitive advantage (Aguinis, 2009, p. 451) Although there is no universal definition of performance management, but still conceptually performance management can be defined as the process which is used by the supervisors or organizational managers to gain a fair understanding of the goals, work expectations and feedbacks. This also helps the mangers to recognize the training and development opportunities and evaluate performance results. In simple terms performance management is all about improving the individual and organizational performance. It is a process that links people and jobs; provides fair understanding of what is to achieved by one and how and performance management is also a process to ensure that people are doing the required things in the most effective way possible as per the individual ability. Performance management process is a medium through which the managers and the employees join forces to improve the level of work satisfaction and results. However, the performance management system is likely to be most effective when the managers and the employees work a cohesive unit and both play an active role. Today in the middle of a highly competitive business environment one of the most critical success factors for some of the major global firms happen to be the high performance management system. Today most of the organizations are looking to make a shift from the traditional to effective high performance business models. High performance work systems or HPWS happen to be companies that tend to opt for a different approach in case of organizational management rather than going for the traditional hierarchical approach. Some prominent industrial psychologists and organizational behaviour experts suggest that the High performance work systems have the ability to provide long term sustained competitive advantages. Later in the paper through a multiple case study approach, it would discuss how two of the major multinational companies implemented the High performance work system to great effect. The organizations in focus would be GE and Toyota Motors (Armstrong and Baron, 2005, p. 301) Conceptual Frameworks Performance management is actually a process as well as a framework that companies use to communicate some important messages to the employees. The performance management process framework includes four different stages (Beardwell and Holden, 2010, p. 291) The performance planning includes the plan for the upcoming years in areas such as the standards and expectations for the job; performance and development goals. During the next step i.e. the day to day coaching and feedback the managers and employees discuss about performance on regular basis. Here it needs to say that the regular discussions go beyond the formal reviews and meetings. They share feedbacks about the success of the employees as well as the areas where the employees may need certain improvement. During the process the mangers also seek the inputs of the employees regarding results and the work process. The reviewing and the review and appraisal phase usually happen on a quarterly basis. (Holbeche, 2005, p. 299). This should ideally occur at least once in every quarter. The main focus of review could be in areas such as the meeting of performance standard, achieving performance and development goals. The last stage i.e. the formal performance review is the annual review. This is done to analyze the performance of the employees from the previous years. During this phase the panned performance outcomes and the actual performance outcomes are analyzed. Also performance plan for the next year is fixed (Boxall and Purcell, 2007, p. 131). The main characteristics of ideal performance management systems are Identification of effective, Practicality; strategic correspondence; Meaningfulness; and ineffective performance; Reliability; Thoroughness; Standardization, Acceptability and fairness; Specificity; Inclusiveness; Openness; Correctability (Murray, Belanger, Giles and Lapointe, 2006, p. 451). An ideal performance management system provides various advantages such as: the motivation to perform among the workers increases; increase in self esteem due to the incorporation of self esteem; mangers tend to get better insights about the performance of the employees; the definition and the criteria for evaluations clarified properly; organizational objectives are a lot more well defined; result in a lot more competent employees; timely and proper differentiation between poor and good performers; facilitation of organizational change. Although there are no such disadvantages of performance management system, but poorly laid performance management system can be extremely hazardous. Some of the effects of a poorly laid performance management system can be tagged as increase in attrition rates due to faulty outcomes; lowered self esteem; waste of time and money; de-motivated employees; friction in the relationships between employees and managers; increase in the level of job satisfaction; boost in the risk of litigation; biasness may creep into performance standards; and overall drop in the organizational performance. Hence it is important for an organization not only to plan but also to implement the performance management system very carefully keeping all the adverse effects in mind (Purcell, kinnie, hutchinson, rayton, and swart, 2003, p. 301). Despite of the fact that there are no formal definitions of performance managements system, but still there have been quite a HR models that have tried to explain how the performance management have an impact on the overall improvement of the performance of an organization. One of such conceptual framework happens to be the people process framework which links the organizational and individual performances together (Boselie, 2010, p. 299). Process 1 of the framework is the surging of goals down the organization the top management level to the lower management level through a top down approach. This process involves the transition of organizational objective into individual and groups objectives and provides a strong relationship between the company and the most valued assets i.e. the human resources of the company. Process 2 of this framework mainly focuses on the measurement and the appraisal. Once the objective has been set, it is very important for the managers to keep a close watch and periodically review the actual performance against the planned objectives. This actually comes under the job responsibility of the line managers. Process three to four focuses on framing a relationship between the business goals and reward strategies of a company. This is done to encourage the performance on the part of the employees to meet the objectives (both short and long term). However it is to be added that reward should just not be confined to financial rewards but also to the non-financial scheme of things too as they also tend to play a major role in motivating the employees just like the financial rewards. The non-financial rewards may include awards, career opportunities, flexibility in working hours, training and development opportunities etc. Process five to eight focuses on the development of a learning organization. The focus is on creating the right organizational structure and culture and to ensure that the human resource is perceived as strategic role. The concentration is also on the future paramount. Performance Management System Comparison: Multiple Case study Approach In the world of management Toyota is mostly famous for the lean production system better known as the Toyota production systems which basically reflect the high performance business model of Toyota. Although Toyota happens to be the benchmark in case of lean manufacturing system and application of Kaizen concepts i.e. continuous improvements; the main reason for the successful model of Toyota happens to be strong corporate culture which is incorporated by the strong performance management system. In the offices and factories across various countries, the company uses every possible opportunity during the daily operations in developing the employees to ensure successful achievement of organizational objectives. A part from the usual formal class room training the company focuses on job training also. Overall the performance management system of Toyota can be analyzed by using the people process frame work. Once an individual joins the company the management team of Toyota uses a top down approach where the managers communicate the organizational goals to the employees. Also the overall organizational objective is broken down into individual and groups objectives and provides a strong relationship between the company and the most valued assets i.e. the human resources of the company. During the course of the process each and every individual and teams or groups are communicated about the likely contributions expected i.e. the job roles and responsibilities are made clear by the mangers to avoid ambiguity. Once the employees have been briefed about the roles and responsibilities the mangers keep a close watch about the performances of the employees against the predefined organizational goals. After a certain period of time mainly on quarterly basis the managers evaluate the performance of the employees. The final evaluation of the employees happens on annual yearly basis though. Based on the evaluation of the employees the successes are rewarded by both monetary as well as non-monetary rewards. Also the areas in which the employees require improvements are pointed. Employees who have had problems in attaining the desired objective are provided special attention. Such efficient performance management system helps the company to understand the employees and subsequently get the best out of the employees. Here another important factor that needs to be mentioned is the employee engagement factors. As mentioned before the main objective performance management system is not just to evaluate but to get the best out of the employees. Toyota believes that one of the best ways to enhance the performance of the employees is through employee engagement. At Toyota rewards are based on the performance of the team performance. According to a Gallup engagement study; the compensation structure of the company encourages the employees to develop strong bonding and become friends at work. Overall the high work performance management system can have great resemblance with the Pan, Do, Check, Act or PDCA cycle. Just like Toyota General Electric also puts great emphasis on the people factor. Jack Welch, the former CEO of GE who has acquired almost legendary status once said that it was the vision of his to become one of the most competitive companies in the world. Mr. Jack Welch had a vision of having a company where the employees would have the same vision just as the managers to dream big and mind set to innovate. Mr. Jack Welch also believed that the only the company can become one the most competitive firms is only by having the best possible manpower. The human resource harnessing process as it is often called by the experts can be related to two bro dares. One of them happens to be the training and development process of the company; usually GE attracts the brightest of the candidates. But here it needs to be mentioned that GE very rarely looks to hire from outside when it comes to the appointment of the senior executives; most of the times the appointment happen from inside. This speaks a lot about the training and development program of the company. GE believes in developing sustained relationship with the employees. The other happens to be the performance management system of the company. The performance management system of GE contains a unique system called the forced ranking system of the employees to the groupings of 20:70:10. The ranking system can be further explained as the “Bottom 10”, “Vital 70” and “Top 20”. Vitality curve or the Vital 70 happen to be the competent performers as it was often called by Jack Welch. These employees continue to operate at eh required level. The top 20 happen to be the top performing employees who are groomed and nurtured as they are perceived upon as the next leader of the businesses. The bottom ten are the poor performers and are usually shown the door. Toyota mainly focused on the collaborative performance rather than individual glory. There is very little reward for individual performance. On the contrary in case of GE there is a lot more importance is provided to the best performers on an individual basis. Also unlike GE has strict weeding out policy for the non performers. Challenges Faced by the organizations There is very little doubt that both Toyota and GE has a well planned performance management system which happens to be one of the main reasons for the success of the companies. However, there have been certain challenges that have been faced by both the companies. For example in case of GE the individual performance management system unhealthy competition may creep in among the employees of the company. Also distrust may be created among the employees due to the individual ranking system. On the other hand incise of Toyota which believes in collaborative PMS, an individual may feel left out. There may be instances where an employee may have done very well but the team performance may not have been good due to the fact that the performance by other team members may not have been up to the mark. Balanced Proposal One of the ways to deal with the challenges could be to develop a strong learning culture. This would mean that all the employees irrespective of the ranks will have an opportunity to teach, learn and grow. This could include formal learning programs as well other events. This will also give a chance to the employees to get to know each other. Employees should be given a fair opportunity to prove themselves (Redman and Wilkinson, 2006, p. 131). By simply wedding out the employees GE may create an atmosphere of distrust. However, only repeated poor performance has to be dealt with strictly. In case of Toyota there should be category of rewards. In Toyota the team performance is rewarded greatly but the same cannot be said individual performance. Hence there should be reward for teams that have done exceedingly well. There also should also be rewards for individuals to ensure that the top performing individuals do not get left out. This will motivate the employees and also ensure that the company would be able to track the best performers. This will also motivate the other team members belonging to the tam and hence in this way the overall organization would be benefited. Role of Line Mangers in Performance Management The line managers happen to be the front line managers who are often tagged as the ‘doers’. The line managers have a very crucial role to play in PMS process as the implementation of the PMS falls in the hands of the line mangers. Many human resource experts have mentioned the importance of the line mangers in the overall performance management system. It has been mentioned several times that the skill and the style of the line mangers tends to have a significant effect on the motivation and commitment of the staffs. However, researches have suggested that the line managers often treat the PMS as a bureaucratic task and often as a waste of time also. Some of the line mangers even lack the required skills required to implement the performance management system (Purcell, Kinnie, Hutchinson, Rayton, and Swart, 2009, p. 451). Such limitation can be overcome by the following ways: Leadership guidance from the top management; communicating with the line managers regarding the importance of the performance management and the important role played by the mangers; Maintaining simplicity in the overall performance management process; The top managers should make sure that the amount of pressure reduces from the shoulders of line managers by making the performance management a continuous process rather than a simple annual review; involvement of the mangers in the design and development phase rather than only in the implementation phase can also be a way to increase the level of involvement. Conclusion Performance managements have become very much important, as the companies are looking at the human resources to provide the much required differentiation. Performance management can be defined as the process which is used by the supervisors or organizational managers to gain a fair understanding of the goals, work expectations and feedbacks. The main objective of PMS is not only to evaluate but also to get the best out of the employees. Both GE and Toyota has a well chalked out PMS. But, Toyota mainly focused on the collaborative performance rather than individual glory. There is very little reward for individual performance. On the contrary in case of GE there is a lot more importance is provided to the best performers on an individual basis. The line managers have a very crucial role to play in the implementation of PMS. Sometimes line managers often treat the PMS as a bureaucratic task and often as a waste of time also. However these can be changed by leadership involvement of the mangers in the design and development phase, etc. References 1. Aguinis, H. 2009. Performance management. 2nd ed. London: Prentice Hall. 2. Armstrong, M. and Baron, A. 2005. Managing performance. 2nd ed. London: Chartered Institute of Personnel and Development. 3. Beardwell, I. and Holden, L. (eds.) 2010. Human Resource Management: A Contemporary Approach. London: Prentice Hall. 4. Holbeche, L. 2005. The high performance organisation: creating dynamic stability and sustainable success. Oxford: Elsevier Butterworth Heinemann. 5. Murray, G., Belanger, J., Giles, G. and Lapointe, P. 2006. Work and Employment Relations in the High-Performance Workplace. London: Continuum. 6. Purcell, J., kinnie, N., hutchinson, S., rayton, B. and swart, J. 2003. Understanding the people and performance link: unlocking the black box. London: Chartered Institute of Personnel and Development. 7. Purcell, J., kinnie, N., hutchinson, S., rayton, B. and swart, J. 2009. People Management and Performance. Oxford: Routledge. 8. Redman, T and Wilkinson, A. 2006. 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