Improving Organisational Performance - Case Study Example

Improving Organisational Performance Table of Contents Table of Contents 2 Introduction 3 Discussion Related To the Academic Definitions of PM/HPW 4 Conceptual Framework of Performance Management 7 Achieving Strategic Alignment 8 Comparison and Contrast of Tesco and Sainsbury 10 Performance Measures 10 Performance & Reward 11 Performance Management Process 12 Integrated HR Practices 12 Conclusion 13 References 15 Introduction Organizational performance is one of the most important aspects in contemporary business context that determine their market position along with its profitability. Organisational performance can be measured by analysing the there key areas of business performance, which includes the financial performance, market performance and the human resource performance, generating better shareholder returns. While all these three facets have a significant role to play in yielding better rewards to the organisation, human resource performances play the most crucial role in aligning the other two major determinants of organisational performance and several minors (Richard & et. al., n.d.). To gain a better understanding of the phenomenon, Tesco and Sainsbury, two of the leading retail chains in the UK, have been chosen to be compared and contrasted on the basis of their performance measurement practices towards alleviating the performance. Tesco is often acknowledged as the largest food retailer in the UK and is considered as the third largest retailer worldwide. The company introduced its first store in the year 1929 at London and within few years, it became popular in the UK. Tesco globalised its business in the year 1994 and gained its leadership position due to its innovation capabilities along with effective performance management approaches. Presently, it has been viewed that the company is the largest retailer of CD’s in the UK and has immensely innovated its business to provide the best service to its customers (Innovation Leaders, n.d.). On the other hand, Sainsbury’s is one of the largest rivals of Tesco in the UK supermarket chain sector, holding a total share of 16.3% following Tesco. At present, the company functions with more than 290 stores and 502 supermarkets in the UK. It has been viewed that the service provided by the company is availed by almost 90% of the customers in the nation currently, which further justifies its effective performance within the nation (Transport for London, 2014). Correspondingly, the rationale behind choosing Tesco and Sainsbury for this study is that both the companies have been performing quite well in the UK and their approach towards performance management is witnessed to be quite effective in nature. The paper primarily intends to compare and contrast the performance management approaches used by both the companies and present a critical discussion about their methods to achieve the strategic alignment, applying the notion of High Performance Work (HPW). Discussion Related To the Academic Definitions of PM/HPW According to Sung & Ashton (2002), High Performance Work (HPW) refers to the practices adopted in contemporary workplaces that induce performance growth within an organisation. Similarly, organisations that incorporate HPW in the business function are called as High Performance Work Organisation’s (HPWO’s). HPW is mainly concerned towards applying good working practices for the employees in an organisation, which involve evaluations, agile working practices and additional activities that help in achieving desired business results. Sung & Ashton (2002) further states that HPW primarily covers three aspects, which include high involvement in employee working practices, working practices within the human resource of an organisation along with reward and practices of commitment amid the workforce. HPW is an effective approach to provide flexible working schedules for the workers that increases their involvement towards their work and the organisation. HPW also includes job rotation practices through which, the employee’s knowledge can be enhanced along with their commitment towards the organisation for a longer term. According to the research conducted by Sung & Ashton (2002), it can be observed that HPW helps in improving the performance of an organisation and creates a better working environment that results to employee gratification and sense of individual accomplishment (Sung & Ashton, 2002). From an overall perspective, it can be affirmed that HPW is an effective approach to enhance the overall skills of the employees in the workplace, which in turn boosts the performance of the organisation ultimately. According to the University of South Florida (n.d.), performance management is also defined as a systematic process through which, the managers of an organisation share their expectations and objectives to the employees to enhance their moral, motivating them to contribute better productivity. Therefore, it acts as a tool for communicating performance feedback among employees that helps in identifying and creating opportunities in the work place for employees to enhance their performance capabilities. Performance management also provides an evaluation of the performance results achieved by the employees that creates a scope for further improvement within employees. According to the study conducted by University of South Florida, it is believed that performance management helps in creating a workplace culture, remaining focused towards continuous improvement and helps the employees to adapt themselves in the changing business environment. It is also believed that performance management induces creativity among the employees and helps in promoting learning interest that increases their overall involvement in the workplace. In general, performance management creates several benefits for both the employees and the organisation to alleviate employee productivity and induce growth within an organisation (University of South Florida, n.d.). Conceptual Framework of Performance Management Performance Management (PM) can be defined as a procedure for enhancing the performance of individuals and group of employees that eventually enhances organisational performance. The concept of performance management is focused towards achieving better results, determining the level of competency and standards required by employees to enhance their performances. In relation to this conceptual framework, three underpinning theories of PM can be viewed, which includes the goal theory, control theory and social cognitive theory (Armstrong, 2009; Armstrong, 20091). Goal Theory: This theory was created by Latham and Locke in the year 1979, which is based upon the assumption of four mechanisms of goals that have a direct linkage with the performance results in an organisation. According to the first mechanism, it is believed that goals are directed towards better consideration to the set of priorities. The second mechanism assumes that goals stimulate effort within the employees. The third mechanism assumes that goal induces challenge within the employees to assimilate their knowledge and abilities to increase their possibilities of success in the organisation. The last mechanism finally assumes that if the goals are more challenging, employees will continuously focus on enhancing their skills to meet the desired goals. It is thus considered that goal theory gives emphasis to performance management on setting certain objectives due to which, measurement and management of performance can be undertaken. It can therefore be revealed that goal theory aids the agreement of aims, feedbacks and the appraisal factors of performance management (Armstrong, 2009). Control Theory: This theory primarily focuses on feedbacks to shape the behaviour of employees in an organisation. Under this theory, it is considered that once employees receive the feedback on their individual behaviour, they tend to agree with the discrepancies concerning what they are actually doing and what are the actual expectations from them. This in turn ensures that the employees take certain remedial actions that would help them in overcoming the discrepancies in their behaviour and yield better productivity. As evident, this theory is based upon the assumption that providing feedback on the employee’s behaviour is an important part in the process of PM (Armstrong, 2009). Social cognitive theory: This theory was founded by Bandura in the year 1986, which is based upon the fundamental notion of self-efficacy. The theory assumes that the perception of the individuals regarding what they can actual do and what they cannot do plays a huge role in influencing their performance in the organisation. Thus, it is considered that enhancing and reinforcing positive attitude of self-belief within the individuals in an organisation is an important aspect to meet the aims of performance management (Armstrong, 2009). Achieving Strategic Alignment Strategic alignment is a tool through which, an organisation is able to envision the linkage between the business processes and the organisational strategies. This tool helps the management of an organisation to gather important insights depending upon the present business process (Morrison & et. al., 2011). In relation to the chosen companies, it has been viewed that Tesco has undertaken strategic alignment as inclusive to its performance goals, to provide a reasonable price of products to its customers that would meet their expectations effectively. For instance, Tesco, in its strategic alignment process, has been involved in price comparison of its competitors’ products to provide an assurity to the customers regarding its affordability. It can therefore be argued that Tesco has been able to achieve strategic alignment by initiating a customer centric approach in its business process. This in turn has helped the company to create value for its customers, which has made them more loyal to the company (Watibini, n.d.). Tesco in its strategic alignment process introduced Clubcards for its customers, which created a better customer relationship with the company. In addition, Tesco has undertaken multi-channel activities for strategic alignment wherein it had introduced online portals through which, the company was able to offer a broad array of products to its customers and create a good brand image in the eyes of the customers. Tesco has also integrated its physical channel with the online channel, which has helped in providing a better service to the customers and thus resulted in strategic alignment (Muller-Lankenau & et. al., 2005). It would be worth mentioning that Tesco has been able to achieve strategic alignment by aligning its digital marketing strategy with the strategy of retail growth. It can accordingly be revealed that Tesco, through its direct offering policy of strategic alignment, focuses on expanding its business in the UK market. Through strategic alignment, Tesco has become an exceptional retailer globally and has been able to offer a vivid range of products to its customers other than food items. Tesco has been socially responsible through strategic alignment and has become an extremely valued brand for the past few years (Hazan & Wagener, 2012). Sainsbury, on the other hand, has been able to achieve strategic alignment by strongly focusing on the four-tiered methodology created by the company from the past few years. This methodology includes integration of the management systems, employee relationship integration, integration through reviewing the standards for labour, integrating the supply chain activities and integration through capability building. It is thus considered that Sainsbury has been able to achieve strategic alignment by following the systematic methodology of integration process (Leigh & Waddock, 2006). Creating a relationship with the employees and the customers is also a part of strategic alignment used by the company to provide high quality services to the customers. Sainsbury has also emphasised creating a linkage between the motivational aspects and the overall performance of the employees that has helped the company in achieving its strategic alignment (IPA, n.d.). Overall, it can be asserted that both Tesco and Sainsbury have been able to achieve strategic alignment successfully, through different approaches. Comparison and Contrast of Tesco and Sainsbury Performance Measures Key performance Indicators (KPIs) provide an idea regarding the performance measurement tactics used by Tesco. As can be identified, there was a rise in the underlying Profit Before Tax (PBT) of Tesco wherein it increased to 14.5% in the year 2013. Likewise, the value of Earnings Per Share (EPS) rose to 14% in the year 2013. However, Return on Capital Employed (ROCE) decreased to 12.7% from 14.7% in the year 2013. On the other hand, it was witnessed that Total Shareholder Returns (TSR) of the company increased to 22.5% in the year 2013 as compared to 18.7% in the year 2012. In addition, the overall capital expenditure of the company reduced to 4.1% in the year 2013, which was 5.5% in the year 2012. Net indebtedness remained stable for the company, as the improvement of working capital was quite slower during this period (Tesco, 2014). Again, according to the financial statement of Sainsbury it was observed that there was a 6.25% rise in the underlying PBT as on 2013. Similarly, there was a 1.9% rise in the EPS of the company in the year 2013. Moreover, there was an 11.2% rise in the ROCE of the company due to its financial stability. In addition, the overall capital expenditure of the company also decreased to a huge extent that is £200 in the year 2013 from £1040 in the year 2012 (J Sainsbury Plc, 2013). Thus, it can be ascertained that both the companies performed quite well in the year 2013 due to which, there was an upsurge in the financial aspects of the company. However, the above study also revealed that Tesco’s ROCE decreased by 2% while Sainsbury’s ROCE increased by 11.2% in the year 2013. Performance & Reward Reward packages given to the employees of Tesco and Sainsbury are entirely based upon the underlying performances accomplished by the individual or group of employees. Tesco provides annual bonuses to the employees and executives based upon the business performance along with the overall success achieved by the entire group (Tesco, 2014). Likewise, Sainsbury also provides annual bonuses to its executives and employees by analysing the performance aspects, wherein it can be revealed that both Tesco and Sainsbury provides deferred share incentives to the good performers in a given year, which increases their involvement towards the organisation. Whereas, on one hand, Tesco has given huge opportunities to the employees to get indulged in the employment schemes, which has made it possible for the workforce to hold considerable proportion of shares in the company, making them more equitable towards organisational performances. On the other hand, Sainsbury focuses in value building within its workplace culture wherein it provides opportunity to the managers to get involved in the performance multiplier scheme that reflects their achievement in relation to performance for the past three years (J Sainsbury Plc, 2014). Performance Management Process In its strategic processes, Tesco uses different types of tools for performance management processes, which help it in effectively manage the overall performance of the organisation. The performance management process of Tesco includes setting certain targets for performance standards to meet the strategic goals, evaluate the team performance based upon the existing performance benchmarks, monitoring the activities performed by the employees in order to improve their performance and encouraging individual employees and group members to promote team dynamism (Scribd Inc., 2014). On the other hand, Sainsbury has a different performance management process, which includes setting the performance objective, reviewing how the objectives are being undertaken, rating the overall performance achieved by the group of employees, supporting the weak performers in the organisation and rewarding the best performers accordingly (Miah & Hossan, 2012). Integrated HR Practices In the present era, most of the successful companies integrate HR practices into their business functions to increase the overall performance being achieved by the human resources i.e. the employees. It is conceived that a company must be integrated into HR practices, as the employees play a significant role towards company’s success (Wright & et. al., 2005). In relation to Tesco, it has been revealed that large-scale employment is provided to individuals on a yearly basis, as it is one of the largest private companies in the UK with a responsibility to create employment opportunities. It has been witnessed that Tesco is highly integrated towards HR practices and its approach is entirely different from other companies. This is because Tesco believes that it has achieved huge success in the UK market by effectively managing the human resources, establishing certain HR practices and policies. The HR practices of Tesco involve providing equal opportunities to each and every individual in the organisation. Moreover, discrimination on the basis of caste, colour, gender and other aspects is strictly prohibited. Employees in Tesco are given privacy and the company does not tolerate any kind of violence in the workplace (Tesco Plc., 2009). In comparison with Tesco, the HR practices of Sainsbury can be observed as focused on a flexible working time management, to provide the employees with better opportunity to maintain a work-life balance. The company highly focuses on changing the working hours of the employees as per the performance requirement. The human resources practices followed in the company is much centralised in nature, wherein the top-level management makes the entire decision. These decisions include framing HR policies and practices in the organisation to meet the organisational objectives as determined (Harrington, 2009). Conclusion From the above study, it can be revealed that HPW and PM practices have been extensively adopted by contemporary organisations like Tesco and Sainsbury that has further helped in stimulating the overall performance of these organisations. It is considered that these practices are helpful to create a better workplace environment for the employees along with a flexible working schedule. HPW and PM practices have a direct linkage with the performance of the organisation, as these practices increase the employee’s involvement that results in achieving better performance. After comparing the performance measures used in both the company, it can be apparently revealed that Tesco had a better performance in the year 2013 as compared to Sainsbury. In the similar context, Tesco’s rewarding system is observed as better than Sainsbury, as it provides greater opportunity to the employees through employment schemes and annual bonuses sufficing both their short term and long term needs as well as demands. However, it can be witnessed that the performance management process of Sainsbury is much effective as compared to Tesco. This is because Tesco follows a systematised approach towards PM process, which in turn ignites the drawbacks of rigidity in its change adaptation process. Conversely, it can be observed that Tesco’s integration of HR practices is better than Sainsbury as Tesco provides more flexibility to its employees on the basis of the working schedule, rewarding the employees with better work-life balance and stress coping assistance. Moreover, the HR policies and practices are decentralised in Tesco, which provides it with better performance growth opportunities, as compared to the centralised policies of Sainsbury. 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