Performance and Reward Management - Term Paper Example

Running Head: PERFORMANCE AND REWARD MANAGEMENT School: Topic: Performance and Reward Management Lecturer: Presentation: Table of Contents 1.0 Introduction 3 2.0 Theoretical Framework 4 2.1 Key Benefits of Performance Management 4 2.1.0 Focus on the Outcome, rather than Behaviors and Activities 4 2.1.1 Aligning Organizational Activities and Processes to the Goals of the Organization 4 2.1.2 Produces Meaningful Measurements 5 2.1.3 Other Advantages of Performance Management to Organizations 5 3.0 Scholarly Work 6 3.1 Competence 6 3.2 Organizational Capabilities 7 3.3 Performance Improvement 7 4.0 Conclusion 8 5.0 References 9 1.0 Introduction Performance management in an organization is the practice of ensuring effectiveness in the accomplishment of organizational goals in a consistent way. It seeks to maintain harmonious working in an organization. For example it is focused on ensuring that all its components, i.e. the various departments, operations, working groups and procedures are working consistently (Facteau and Bartholomew 2001). Each of the components has a significant impact on the productivity of the business. They also have an impact on the performance management, which may be focused on all or one of them independently (Johnson 2001). It keeps the management aware of the importance of focusing on results rather than concentrating on whether the management or employees in an organization are busy. More over, it serves as a reminder of the fact that employee training, motivation and enthusiasm in the workplace are not sufficient for the accomplishment of organizational goals. In other words, Latham et al (2005) observes that results go beyond employee capacity and the level of satisfaction. They can be enthusiastic about their work, and the management may offer attractive packages that enhance satisfaction, but their output may not be satisfactory. This means that the organization may not be able to achieve the desired results. In order for an organization to accomplish its goals, it is important for it to have several operations taking place, such as classifying and giving priority to results, establishing the performance standards and the manner through which results need to be realized. Evaluation of progress is important while focusing on the results and also reviewing the manner in which they were accomplished (Facteau and Bartholomew 2001). Organizations use results as a measure for evaluating the performance of the business. A literature review concerning performance management is important in generating a better understanding of the concept. This paper describes a personal experience of performance management and analysis using concepts drawn from performance management literature. 2.0 Theoretical Framework 2.1 Key Benefits of Performance Management 2.1.0 Focus on the Outcome, rather than Behaviors and Activities In many instances, organizational managers and overseers of organizational operations usually make a mistake of conceptualizing that the conduct of employees and the organizational operations are similar to the desired outcome. As Viswesvaran and Ones (2000) observe, employees within an organization may seem to be busy to a great extent, while in reality they do not add to the realization of organizational goals. Such cases are evident amongst employees who pay attention to the instructions issued to them by the management and ensure that they complete every task and physically evaluate them instead of supporting a computerized review. Generally, it is usually assumed that such a person is enthusiastic and committed in regard to the organization’s operations, which may form the basis of performance appraisal. However, in performance management, there are particular components of the organization’s operations that have been ignored, such as alternative procedures of evaluating results (Latham et al 2005). 2.1.1 Aligning Organizational Activities and Processes to the Goals of the Organization In order for organizational goals to be realized, it is usually important to ensure that all the business operations match with the organizational goals. This is usually achieved through performance management. The business goals as well as the activities necessary to accomplish them are identified, and the standards for measuring the appropriateness and competence together with the motivation towards accomplishment of the goals (Kozlowski 1998). 2.1.2 Produces Meaningful Measurements It is important for an organization to have significant performance measurements which serve as important benchmarks. The organization uses them for measuring the accomplishment of results while comparing them with those of competing organizations (Johnson 2001). This helps in making the necessary transformations in the organization’s operations for the purpose of improving performance. They serve as indicators of the improvement efforts for employees for example through organizational learning, development of managerial skills and other development programs. Employees are treated equitably and fairly depending on their performance in regard to the organization’s operations. 2.1.3 Other Advantages of Performance Management to Organizations It promotes accountability in the business, whereas the managers acquire the capability of reflecting on the desired results, disregarding the personality of employees. It also enhances the validation of organizational prospects (Najmi et al 2005). This is important in the contemporary marketplace which is characterized by high hopes, and organizations making every effort to get transformed and also bring the necessary changes in the society. It makes the outcome measurable, hence the organization is able to authenticate whether the organization’s expectations are realistic (Schrader and Lawless 2004). Focusing on results other than personality ensures that employees are treated equitably during performance appraisals. The close alignment of organizational goals and results is significant in the optimization of operations, thereby bringing the necessary transformation of the standpoint from actions to results. In order for organizations to be successful, performance management needs to be amongst the organizational strategies. Research therefore is important in order to establish the best way to integrate performance management in the business, and the benefits associated with it. Many scholars have done research regarding performance management. These are discussed in the following section, while focusing on past experience while working in Saudi Aramco Oil Company in Saudi Arabia. 3.0 Scholarly Work 3.1 Competence Companies are operating in competitive conditions in the contemporary marketplace. Najmi et al (2005) observes that performance management is one of the practices that can enhance organizational competitiveness. The Saudi Aramco oil company uses both internal and external performance measurements to enhance the well being of the organization as well as that of the stakeholders. Al-Saadoun (2006) argues that performance management is a not an easy task although it is what assists organizations to maintain organize assets and operations, as well as controlling costs. The performance of Saudi Aramco was always under pressure due to function economies, initiation of cutting expenditures and rising demand for oil. The manner in which the organization is distributed also contributed to the difficulties of ensuring that operations are consistent. However, performance management made it possible for the organization to control and judge its performance through the use of parameters of performance that are unique to the organization. It uses the exploration achievement rates, result and progress costs, spending on operation and maintenance, energy strength, losses, overall refining limits, spill outs and possessions owned for the purpose of exploration amongst others. This is a significant strategy and as Kauhanen and Piekkola (2006) state, a company is likely to be successful if it includes as many parameters as possible that are unique to its operations. They are significant indicators for performance measurements. 3.2 Organizational Capabilities As Najmi et al (2005), observes, when a company tends to increase their concentration on their primary capabilities and subcontracts a substantial amount of its tasks, their success tends to rely more on the level of performance of its planned suppliers. For this reason, Saudi Aramco uses systems and processes for the management of its suppliers. This is important in ensuring that the payback as well as the supplies discovered at sourcing and acquirement points are delivered for the whole period of the contract’s life. This allows the company to concentrate its resources on activities aimed at value addition rather than unnecessary spending to counter unforeseen drawbacks arising from the performance of the suppliers. The organization uses an improved approach that enables it to connect the day to day activities of the employees with the organizational objectives. This helps in ensuring that all the employees are aware of their expected contribution for the accomplishment of organizational goals. 3.3 Performance Improvement An accomplishment based process for development is used in the system to ensure that the organization effectively targets growth in order to establish a connection between the gaps that exist on the work. The accomplishment based process is facilitated through promoting vocational education and lifelong learning as well as personal development. This training helps in the improvement of organization’s performance (Whitfield and Poole 1997). Since then, the organization has ensured that there are flexible and continuous learning resources available for employees. This has promoted lifelong learning and improved performance. The main activity before engaging the employees in work based learning was to ensure that information regarding the innovative practices is obtained. The management keeps close contact with the employees to ensure that vocational education provides the desired information to build the capacity of learners. As Luthans and Stajkovic (1999) observe, employees become competitive and remain informed regarding the changes occurring internationally, which affect their work. They are informed on new inventions regarding the manufacture of communication equipment. The company uses a strong succession scheme that is necessary for the enhancement of career development amongst the employees. In the contemporary marketplace, organizations usually undergo rapid changes than in the conventional marketplace. The performance measures therefore raise concerns leading to profound reservations regarding performance management, especially due to the swiftness under which the performance measures turn out to be obsolete. Johnson (2001) argues that an organization needs to adopt a process that is capable of providing a reference frame that is reliable over a considerable period of time, rather than relying on performance measurements only, which may become obsolete in a short period of time. 4.0 Conclusion The benefits of performance management in an organization are wide-ranging. It helps an organization to focus on the outcome, rather than behaviors and activities. It is also important in aligning organizational activities and processes to the goals of the organization, cultivating a system-wide and long-term view of the organization as well as producing meaningful performance measurements. All these factors enhance the competitiveness of an organization, there by improving its profitability. Saudi Aramco Oil Company is one of the organizations that have integrated performance management in their organizational strategy. It has been useful in promoting career development amongst the employees, thereby improving their productivity. Businesses should not rely only on performance measures in performance management. Rather, they should adopt a process that demonstrates consistency in performance management. 5.0 References Al-Saadoun H. (2006). Saudi Aramco’s Experience in Preparing the Workforce for the Future. A Presentation at the Fourth HRD Forum, retrieved on 5th Sept. 2009 at < http://www.sma.org.sa/pdf/44/5.pdf.> Facteau, J.D., and Bartholomew, C.S. (2001), "Are Performance Appraisal Ratings From Different Ratings Sources Comparable?" Journal of Applied Psychology, Vol. 86 No.2, pp.215-27 Johnson, J.W. (2001), "The Relative Importance of Task and Contextual Performance Dimensions to Supervisor Judgments of Overall Performance", Journal of Applied Psychology, Vol. 86 No.5, pp.984-96. Kauhanen A. and Piekkola H. (2006). What makes Performance-Related Pay Schemes Work? Finnish evidence. Journal of Management Governance, 10, 149-177. Kozlowski, S. W. J., Chao, G. T., & Morrison, R. F. (1998). Games Raters Play: Politics, Strategies, and Impression Management in Performance Appraisal. in J.W. Smither (Ed.), Performance Appraisal: State of the Art in Practice, San Francisco: Jossey-Bass, pp. 163-208. Latham, G. P., Almost, J., Mann, S., & Moore, C. (2005). New Developments in Performance Management. Luthans, F., Stajkovic, A. D. (1999). Reinforce for Performance: The Need to go Beyond pay and even rewards. Academy of Management Executive 13(2), 49-57. Najmi, M., Rigas, J. and Ip-Shing Fan. (2005), “A Framework to Review Performance Measurement Systems”, Business Process Management Journal, Vol. 11 No. 2 pp109-122 Schrader, P. G., & Lawless, K. A. (2004). The Knowledge, Attitudes And Behaviors Approach: How to Evaluate Performance and Learning in Complex Environments. Performance Improvement, 43(9), 8-15. Viswesvaran, C., & Ones, D. S. (2000). Perspectives on models of Job Performance. International Journal of Selection and Assessment, 8(4), 216-226. Whitfield, K., & Poole, M. (1997). Organizing employment for high performance: Theories, evidence and policy. Organization Studies, 18(5), 745-764. Read More