Performance Management at Colbran Medical Institute - Essay Example

?Human Resources Management Cast study on performance management at Colbran Medical Institute Task Introduction and background: Performance management involves management of teams and individuals with the aim of achieving organisational goals by establishing a common understanding about the organisational objectives through a systematic approach and with the use of systems, management practices and leadership. At Colbran Medical Institute, this objective of performance management is being achieved in a very simple manner that does not guarantee sustainability of performance or employee motivation associated with performance. In reality, performance management is meant to enhance the performance of people performing below expectations as well as sustain high performance through appropriate recognition. In a holistic picture, performance management strives to improve overall processes; achieve continually improving results; and continuously develop resources and effective leadership; it also aims at sustaining employee motivation and commitment. As Cooper (2004) explains, performance measurement can help organisations to demonstrate their value to many types of stakeholders, including the clients and customers, employees and shareholders. The results from performance measurement can help in improving performance further, thereby meeting and even exceeding customer expectations, generating more revenue and profit for the organisation, improving employee satisfaction and morale. However, Colbran Medical Institute does not seem to emphasize customer satisfaction or employee motivation in the real sense. A few effective performance management practices based on theory have been evaluated with respect to situation at Colbran Medical Institute. Benchmarking: Performance measurement is a recurring activity, and an essential aspect of performance management. Effective performance measurement is possible by benchmarking performance targets as per requirements from customers. However, performance management is more comprehensive and requires attention to be shifting from one dimension of a program to another according to the changing circumstances. Thus, performance measurement should be incorporated as the first part of performance management, and this approach will give room for other factors also to be considered (Halachmi, 2005). The performance appraisal forms at Colbran do not give much evidence of work on benchmarking performance metrics, which further rules out possibilities of effective performance measurement. If performance measurement is only internally focused, then such measurement cannot produce competitive position for the organisation irrespective of its level of performance. Therefore, benchmarking ensures that performance establishes competitiveness and best practice through doing the right things, right first time in the eyes of the end customer (Zaiiri & Leonard, 1994; 81). Performance indicators: At Colbran Medical Institute, performance seems to be measured based on number of goods produced. This is a very generalized approach and tends to ignore many issues that could have occurred during the production process. This process needs to be streamlined in order to provide accurate performance measurement as well as address the issues so that overall productivity can also be improvised. All goals that have been benchmarked need to be measurable. For this, the goals need to be converted to measurable indicators. Hatry (2006) asserts that measurement and improvement can be gauged based on specific indicators, and not based on the outcomes. Production units cannot wait until the output is achieved in order to assess performance; in doing so, significant time, effort and money will be lost. Moreover, performance measurement based on outcomes will not consider the gaps or issues that had risen during the production. Therefore, to address these issues, specific outcome indicators or performance indicators need to be assigned to every intended outcome or goal. Performance appraisal system: Performance appraisal system is meant to enhance performance and to create record of performance that is fair and consistent across employee groups. Besides this, performance appraisals can be of great help to assess training and developmental needs of employees. Performance appraisals are also used to assess level of pay increase, opportunities for promotion, movement, recognition, feedback and termination (Breckon, 2005). Performance appraisals are regarded as the most critical element of performance management in any organisation. Even at Colbran, performance appraisals are linked to pay increment. However, the process of performance appraisal followed at Colbran is more generalized and inappropriate because accuracy of assessment and appraisal is not reliable. Assigning an ‘excellent’ rating or an ‘average’ rating to an employee is not sufficient in performance management because of possibility of bias errors. A generalized rating system is highly prone to rating errors such as bias errors, contrast errors, errors of central tendency or errors of leniency or strictness (Martocchio, 2004). Rater errors are detrimental to the performance as well as employee motivation. These occur when the performance measurement and appraisal systems are ineffective. Bias errors happen when the employees are evaluated based on supervisor’s opinion and not on facts or numbers. Contrast errors happen when supervisors compare one employee with another rather than specific performance outcomes. In such cases, gaps in performance also become causative factors. These gaps may include inappropriate training, low competencies, inappropriate training etc. If an employee is capable of performing much better, but is unable to perform due to lack of resources, then he/she gets rated in comparison with other employees and this leads to contrast errors. Errors of central tendency occur when all or most of the employees are rated average or close to average despite their performance, contribution and efforts. Employees that have contributed maximum efforts and those that have put in least efforts get rated on the same scale; this could cause significant demotivation for the hard working employees and inappropriate direction to the non-performers. Errors of leniency or strictness happen when employees are rated too low or too high irrespective of their actual performance. This rating also causes major injustice to employees. All these rating errors can cause significant injustice to employees’ pay rise; hence it becomes extremely important to adopt appraisal systems that can avoid or minimize such rating errors. Training and development: At Colbran, team members help each other to achieve the required targets. This is a good indication for team work; however, it depicts issues with training and know-how as well as efficiency of production. Issues with efficiency of production also indicate inappropriate benchmarking or targets. Because other team members achieved the targets, this cannot be an issue with benchmarking. Training and knowledge sharing are essential for achieving desired goals. Training and development of employees are essential elements in performance management. Keeping in view training issues, a generalized performance appraisal becomes even more undesired. Motivation and remuneration: Performance appraisals are evaluated before giving a pay rise. Many theorists believe that individuals are motivated to perform only if he/she believes that the effort extended to perform will yield desired reward or outcome. In such situations, individuals tend to value the tasks they are meant to perform. Wright (2004) links this motivation to Vroom’s Expectancy theory, which is similar to the case of pay rise based on performance. The expectancy theory attributes motivational level of employees to their effort to perform a task that will produce a specific outcome and also the way the individual values this outcome. These attributes are explained as expectancy, instrumentality and valence by Vroom (1964) in this theory. Condly, Clark and Stolovitch’s (2003) meta-analytic review on effect of pay on performance indicated that performance directly improved with higher pay; and that this pattern was more evident in manual work than cognitive work. Therefore, linking performance appraisals with pay rise is the right thing to do only when the performance appraisal system is fair and accurate. At Colbran, most of the employees seemed happy with their job; however, ineffective performance management and inappropriate performance appraisal can eventually lower their motivation, which will have a direct impact on production and quality of goods produced. Moreover, assigning common ratings to most of the team members cannot be an effective motivational approach. Individuals that put in extra efforts to achieve higher productivity will be demotivated if their remuneration is same as those that achieved lower productivity. Task 2 Application of effective performance management practices at Colbran Medical Institute: Emphasizing the importance of performance management, Halachmi (2005) explains that in order to advance performance there is a need to manage performance rather than simply measure any given aspect of it across the board. Management of performance can mean in some cases measurement of effectiveness and efficiency, in others it may mean management of important stakeholders or the organisational relations with them. In other cases, management of organisational culture and motivation may be the key to improve performance. A holistic consideration of performance management would include all of these aspects. While extensive research in the sphere of performance management reveals its importance, methods of performance measurement are extremely important to obtain the correct picture of performance at all levels of organisational setup. Adopting appropriate methodology in productivity measurement will help in assessing the strategies adopted to achieve the objectives, motivating the staff for better performance, identifying the gaps or low performing areas, and thereby, designing fitting approaches to improve upon the developmental areas. Benchmarking: For designing a fair and appropriate performance measurement system, the targets have to be realistic and justifiable. For this, benchmarking becomes important and the most useful method to arrive at appropriate targets. Colbran Medicals will have to decide appropriate targets after benchmarking. These targets should be for productivity, quality and timeliness of production. Benchmarking activity for productivity should consider past production data, which can be analyzed and compared with competitor’s production capacity and output. Based on this information, optimum achievable production figures for daily, monthly, and yearly bases have to be decided. These figures have to be divided between individual, team and departmental levels. To benchmark expected quality standards, customer satisfaction survey would be of great help. Based on this survey, required quality standards need to be decided. Quality of goods produced is extremely important for customer satisfaction as well as achieving maximum productivity and profitability. Erroneous or faulty production leads to increased costs, wastage of resources and decreased profitability. Benchmarking the turn-around-time is also significant because it will help in avoiding wastage of time and therefore improve productivity. As explained by Halachmi (2002a), every activity related to performance should be measured and controlled in order to achieve improvement. Hence, assigning specific timelines to production will make employees move faster and more accountable. Management by Objectives (MBO): Benchmarking helps in assigning specific targets to every activity being performed; however, making people work and achieve these targets requires greater responsibility and accountability. This can be achieved by linking their performance output to performance appraisals. Translation of the targets to performance appraisal rating would require effective and accurate performance measurement. Accurate performance measurement can happen when the individual outcomes are assessed against the set targets. Assessment against objective targets is easily achievable. However, activities performed by individuals in producing the desired outcomes require many subjective factors such as hard work, learning, team work, continuous improvement, adherence/punctuality etc. If performance appraisal is conducted only on targets and ignoring these subjective factors, it would again result in distorted appraisal and cause significant demotivation as well as lack of direction for the employees. Tracking, measuring or recognizing these factors would require translation of these aspects to measurable objectives. At Colbran Medical Institute, Management by Objectives (MBO) can be a very effective performance appraisal system to enhance organisational productivity at all levels (Paladino, 2007). Management by Objectives was first developed by Peter Drucker (Greenwood, 1981). Counting on Halachmi’s (2002a) suggestion, ’if they know you intend to measure it, they will get it done’ (Halachmi, 2005). Management by Objectives can help the organisational goals to be effectively translated to individual measurable objectives at each level based on the responsibility. Creating objective accountability also helps in setting clear goals. Moreover, the MBO system also provides opportunity to include desired employee behaviour that can be translated to measurable outcomes. The main driving force of measurement as a part of improvement is to provide clear objectives to the staff, on which decisions for revising existing processes to further improve the quality and productivity of service provided are based (Baxter & MacLeod, 2007). Performance or outcome indicators: According to Vallabhaneni (2008; p.7), selection of the type of performance indicators should be credible, meaningful, and significant to the business and should involve only a few numbers, for better management of the measurement process. These indicators can be in the form of scorecards, metrics, cycle times and standards. However, staffs at different levels need to be measured on different parameters for productivity. For instance, the front-line production agent is measured based on total output produced for certain input (period of time). The supervisor is measured based upon the aggregate output of the team to the target output. The manager’s productivity is measured based upon achieved results compared to that of the target results. The components of measurement also differ at every level. Agents’ productivity measurement includes actual output for certain input of time and the total number of errors committed. For a supervisor, in addition to these it may include absenteeism factor, i.e. loss of production-hours due to absenteeism. For a manager, factors such as loss of productive hours due to technological fault or other emergencies, absenteeism, employee turnover and other parameters are included. However, it should be noted that productivity measurements per input also varies according to the choice of the organisation. For front-line production executives, in addition to productivity, quality and timelines, other aspects such as individuals’ regularity to work, contribution to improvements, initiatives etc can be included as a part of objectives because these are a part of deliverables of the group as well. However, all the indicators should be credible, meaningful and significant to business, and most importantly ‘measurable.’ Individuals of a department cannot be held accountable for all objectives of a department/group. However, key objectives like operational efficiency, quality, attendance, innovative initiatives etc can be measured. Non-measurable aspects like team work, demonstrating organisational values, positive attitude, commitment, self confidence etc can also be included in their objectives. Specific instances demonstrating or deviating from these behaviours need to be recorded in the performance appraisals. Other objective deliverables like management of employee turnover, motivational programs, feedback sessions etc, can be included in the accountabilities of managers or the group leaders. Goal-setting with every individual will help in assigning specific targets to every objective. Quite evidently, goals setting for core performance indicators like productivity, quality and timeliness can be accomplished post benchmarking. Goal setting for other objectives can include instances of the behaviour demonstrated and its outcome. While rating the individuals based on these instances and outcomes, there can be possibility of rating errors. To address this, an open and transparent discussion should be conducted with the individual; in case of any dispute managers can be involved in the rating process. These disputes will not have major impact on the overall rating because major part of the evaluation involves measurable outcome indicators. Reduce variation: Another perspective of performance measurement and effecting productivity improvement is through reduction of variation. In statistical terms, variation, is defined as ‘any quantifiable difference between individual measurements’ (Brue, 2002; 38). Measurement of process performance and improvement plays a significant role in meeting customer expectations. Hence, reduction in variation of performance, either in productivity of individuals or as a team over a period of time, aids in anticipating the outcome and producing better results. Variation can be measured using various methods, mean, median, mode, range and standard deviation. Of all these, standard deviation method is considered to be more accurate in measuring the variation in the performance of a process. At Colbran Medical Institute, there is huge variation in performance between individuals; this means there could be variation in production between teams as well as on different days. Reducing this variation can help improvement of performance to significant extent. Benchmarking will also help in reducing variation. Training and development: Fitzgerald (1992) had elaborated that a comprehensive performance management process includes goal-setting, performance measurement, learning activities to achieve the desired performance, and a short-term monitoring. Any gaps in the knowledge, skills and abilities because of which individuals are unable to achieve their goals are indicative of training needs. Although these gaps can be covered by other individuals that possess the required skills, training and coaching are must for the individuals that lack these abilities. This is necessary to sustain higher performance standards at individual, group and also organisational levels. At Colbran, individuals that were unable to meet the productivity requirements require additional training and/or coaching. For this, experienced team members can be aligned with these individuals for coaching or training. Best practice sharing is also an effective method to bridge training gaps. These needs should be identified in the performance appraisals so that appropriate training plan can be put in place; but if all team members are rated on a generalized graph, then opportunity for identification of such gaps will be lost. This will affect overall performance of the teams and the organisation. Motivation and remuneration: Motivation is an important aspect of performance management because motivated employees tend to deliver higher performance and have greater commitment. Although employees at Colbran are motivated and produce good results, these levels of motivation will not be permanent. Almost every theory related to motivation prophecies that motivational needs of individuals keep changing; and it is very difficult for managers to assess these needs from time to time. However, Vroom’s (1964) Expectancy theory of motivation provides sufficient based to understand how motivation keeps changing. In their article, Isaac, Zerbe and Pitt (2001) have argued that leaders have the challenge to identify all factors associated with these three elements for each and every individual, which is extremely challenging. Management by Objectives includes all potential motivational factors that individuals can associate with their work and outcomes; moreover, this system also provides clarity of the outcomes for the efforts put in by individuals. Remuneration given based on individual achievements against their objectives will produce better satisfaction because of the clarity in their objectives as well as appropriateness in performance measurement. In addition, this system also provides clarity and direction to the individuals towards right behaviour and appropriate goals. To decide appropriate remuneration, individuals need to be rated for every objective. The overall rating after summing up all the ratings can be used as the final rating. Based on the organisations budget system, specific percentages of pay hike can be allotted to top performers, average performers and bottom performers. The limitation of any performance appraisal systems is that individual and distinct pay hikes cannot be given, especially if it is a larger organisation. However, top most performers can be rewarded by other incentives like rewards and recognition, bonuses etc. Summary and conclusions: In summation, a comprehensive approach to performance management can be achieved by employing an effective performance management system that leverages performance measurement, training and development, motivation and remuneration that is congruent with individual’s performance appraisal. To arrive at appropriate and fair performance measurement system, benchmarking is an effective tool. By benchmarking, specific measurable targets can be assigned to every objective. Therefore, Colbran should first benchmark its objectives in line with organisational goals. Secondly, performance measurement needs to be decided based on the numbers decided from benchmarking. This can be done by assigning specific outcome indicators to each of the objectives. Based on these outcome indicators individuals need to be evaluated during the performance appraisal system. At Colbran Medical Institute, the best suitable performance appraisal system for front-line production executives is Management by Objectives (MBO). Management by objectives will work best because it provides objectivity to non-measurable contributions. This system addresses issues related to performance measurement; it facilitates identification of training and developmental needs; it provides sufficient opportunity for feedback; and also ensures sufficient time is spent on evaluation and feedback. Moreover, it provides enough opportunities for employee motivation as it considers most of the potential motivational factors related to work, pay, and recognition. References Baxter, L.F and MacLeod, A.M. 2007. Managing performance improvement. NY, USA: Routledge. Breckon, D.J. 2005. Managing health promotion programs: leadership skills for the 21st century. 2nd Ed. Massachusetts: Jones & Bartlett Publishers. (pp: 141-160). Available from, http://books.google.co.in/books?id=cjUDf2PeE_IC&pg=PA142&dq=purpose+of+performance+appraisal+enhance&hl=en&ei=WvZ5TfCQG8HZrQfvldHPBQ&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDUQ6AEwAA#v=onepage&q=purpose%20of%20performance%20appraisal%20enhance&f=false. (Accessed 11 March, 2011). Brue, G. (2002). Six Sigma for managers. U.S.A: McGraw-Hill Professional Condly, S.J, Clark, R.E and Stolovitch, H.D. 2003. The Effects of Incentives on Workplace Performance: A Meta-analytic Review of Research Studies. 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Available from, http://books.google.co.in/books?id=PC5ehniHdeMC&pg=PA81&dq=performance+measurement+benchmarking&hl=en&ei=cOh5TYkqx6ysB_z-wL0F&sa=X&oi=book_result&ct=result&resnum=7&ved=0CFkQ6AEwBg#v=onepage&q=performance%20measurement%20benchmarking&f=false (Accessed 11 March 2011). Read More