Case study on Performance Management and Rewards - Essay Example

Case study on performance management and rewards 1. What are the key human resources and rewards issues to be considered in this case? What will be the biggest challenges for the management of the newly formed MFG? Why do you believe this to be so? Human resource is a crucial part of an organization, since the employees are the key factors in achieving the goal of a business, hence it is essential to retain these employees within a business for a certain length of time, depending on the industry and the general turnover rate, in order to ensure the long term health and success of an organization. The employees would not only remain in an organization for remuneration purposes, the reward system hence must be highly stressed upon (Nancy K. Napier, 2007). The reward management is about the designing, implementation, the continued maintenance and upgrading of the packages, communication with the workforce, and changes and amendments in the reward process, in order to help the business to improve their performance. There are certain key issues which need consideration, and in this case, the type of issues varies considerably with regards to the different type of organizations operating in the same sector. FSC faces an employee turnover rate of 16%, which is roughly equal to the general turnover rate in the industry, this portrays room for improvement, and if the human resource management is properly handled, this rate could be reduced, like BSFC. A major issue for FSC is employee recruitment procedure, it focuses more on external recruitment which has significant consequences attached to it, though new and fresh minds entering the organization would mean more ideas, it would also simultaneously have negative impact on the existing workforce, who have been in the business for long and shown their loyalty, while at the same time, an outsider would be recruited from outside to fill a higher vacant position. With regards to BSFC, employee turnover is not a major issue since it is relatively lower than the industry level, and hence depicts their competitive strength in attracting employees, in addition they recruit workers internally, which proposes greater promotional opportunities for existing employees, however they should focus on retaining employees who enter the business anew, and the reward system should also take into account their preferences to ensure that they remain loyal to the firm. The discrimination at effect in BSFC would have a negative impact on the lower levels, where the women and foreign nationals mostly clustered, leaving no promotional room for them, it should hence develop a more cultural diversity conducive approach, instead of the white male dominance in the organization, it is a Britain based organization, where they have non-discriminatory clause in Employment Relations Regulations sine 1997 (Dickens and Hall, 2005). In addition, the greater hierarchical structure under effect in FSC would reduce motivation of employees as their sense of belonging to the organization deteriorates, however this is effectively countered by the informal setup. The flexible menu approach exercised by FSC for the employees to design their own remuneration package is very considerate of the employees, and an effective motivation factor, and it also maintains the company’s overall informal and diversity incorporating image. While BSFC’s approach of advancing remuneration according to fixed packages at certain levels depicts its formal and authoritative approach towards employees. Both companies lack a proper reward system at initial levels, and focus more on the retention of existing employees rather than attracting new ones. When the two companies merge, the major issues pertain to the different approaches in incorporating cultural diversity, wherein FSC is considerate while BSFC does not acknowledge this important factor. Another issue is the method of recruitment in effect; conflicts would tend to arise when employing new staff for the MFG, wherein BSFC would stress upon internal hiring while FSC would support external hiring. Their reward packages is also an important issue, for FSC focuses on having a flexible and democratically set up employee remuneration plan, whereas BSFC has an extensible developed fixed plan in action, leaving no room for flexibility, the organizational culture is bureaucratic, and hence in stark contrast with FSC. Furthermore, BSFC focuses on less documentation process, which would become an issue when the two companies merge, as the employees taken from FSC might not rely on undocumented procedure of reward systems. 2. What differences are there in the’ psychological’ reward contract that employees have in the two (former) organizations? Psychological contracts, or sometimes referred to as relational contracts, define the employee relationship with the organization. This contract is less defined, or at time might not even be visible, it exists in the background, and they are regulated under abstract terms, and refer to a more open-ended approach towards the performance requirements. It is about the unexpressed beliefs of the employer and the employee with regards to their expectations from each other (Cross et al., 2008). There are significant differences which emerge to the top when comparing the psychological reward contract system of the two organizations. The employee usually looks for an unwritten code of fairness and equality within the firm, which is evident in FSC, due to their employment of female and foreign staff at equal posts, and earning similar remuneration as compared to white males, however the WASPM approach of BSFC is very degrading and unfair towards employees other then white Anglo-Saxon protestant males, hence this discrimination at work has a negative impact on the overall reward contract of the organization with its employees. Furthermore, under the psychological contract, employees look for employment security, which is not granted to them by FSC in large, since they do not employ internally, and hence leave less room for promotions; however BSFC has an internal recruitment approach, which would give its employees security regarding their tenure with the firm. With regards to demonstrating competence, FSC has a more extensive approach, since they focus on performance related awards, such as additional performance related pays and a proper performance based reward system, however BSFC did not hold to its performance related system, this is also linked to its bureaucratic setup of the organization, since it focuses on giving a base wage, and then small increments based that everyone gets, which does not give boost to competence, and only gives minute performance related increments, in addition the BSFC does not have a documented reward or consultation system, however it is part of the effective psychological contract it shares with its employees that they are aware of the undocumented procedure and yet trust the human resource department’s capability to manage their problems. While FSC focuses on training and development approach and a documented system, strengthening its psychological contract with the employees due to the provision of the opportunity to develop their skills and become more competent and productive, and hence giving them the feeling that they are being managed competitively as well (Armstrong and Murlis, 2007, 50-53). 3. Should the remuneration practices of BFSC be simply implemented across FSC or should some changes be made to both? Give reasons for/support your answer. The implementation of the remuneration practices varies according to the business nature, the complexity of its structure and the organizational activities. They cover all aspects pertaining to wages, bonuses, incentive plans, recruitment etc. Hence, the effective planning of remuneration practices is extremely important for a business in order to keep its workforce motivated and satisfied, as well as serving its own goals. Since remuneration is usually the greatest cost that a business incurs, apart from funding the business, thus the risks that a firm faces from the way employees are hired and managed (FSA, 2009, 2-3). The remuneration practices of BSFC depict a very strong bureaucratic control over its employees, in terms of the fixed basic wages they are paid and the very small incremental performance related payment raise they get, however this would be unacceptable for the workforce of FSC who are accustomed to receiving performance related pays, and also have the authority to design their own remuneration package whereas in BSFC the remuneration package has a fixed code pertaining to the different benefits that the employees would receive at different levels of authority and designations. In addition, BSFC does not support cultural diversification hence they would be geared towards not remunerating the female and foreign employees properly as compare to the white Anglo-Saxon protestant males, this would be widely criticized by the employees of FSC who are used to a rich multicultural and non gender biased organizational culture. Furthermore, BSFC does not have a documentation procedure of the rewards given to the employees and performance related standards, they also do not document the consultation services given to the employees. With regards to the superannuation fund, both the companies would differ on their stance, since FSC has converted from a defined superannuation fund to a defined contribution fund. The Australian investors have been allotted the authority to decide where their superannuation fund is allocated, with regards to the employees, they do not have the right to decide upon this matter, the employers decide for them, and hence it is incumbent upon the organization’s human resource department to efficiently and considerately a lot the superannuation fund (Fry et al., 2009, 267-283). Hence, due to the major differences in the organization culture of both the organizations and the type of control they exercise on their employees, plus the training of the employees in accordance with their organization’s employment and cultural views, it would not be efficient to simply implement the remuneration practices of BSFC throughout the MFG, but they should be manipulated in order to make them congenial for the employees of FSC as well, otherwise major conflicts would arise within the newly formed merged company, and could lead to an unhealthy and unsatisfied workforce. 4. What changes should be made at the time of the takeover? And, what changes should be planned for some time later, once the initial changes are bedded down? Why would you plan it this way? When BSFC takes over FSC, and as a result MFG is created, it could not sun simply according to the lines of actions of just one organization, hence there is a dire need to mould their practices in order to make them congenial for the workforce as well as the managerial office bearers, for any arising conflicts would result in loss of productivity, and lack of trust towards the organization, which would reflect into the future in terms of less healthy organization and a internally uncoordinated workforce (Westen et al., 2009). However, all changes can not be implemented at the same instance, there needs to be effective planning and procedural implementation of the devised actions. Thus certain changes should be made at the time of take over while other changes should be left for later development. Since the organizational cultures differ significantly, it is difficult to analyze that which practice would be more effective, thus the best practices of both units should be retained while the failed practices should be discarded. Thus as it is obvious that the employee turnover rate for BSFC is lower that is 12% as compared to that of the industry and FSC that is 16%, hence the practices of BSFC that trigger a mutual level of trust within the organization should be retained, such as proper consultation services, however these should be documented from the start since the size of the workforce would tend to increase following the merger. At the initial level, the basic wage system should be implemented, and small performance increments could be given, and at later stages these could be extended in order to comply with the performance wage standards of FSC which would lead to a more democratic control, and give the employees a competitive spirit. In addition, the allotment of bonuses such as motor vehicles etc. should be according to fixed standards in the infant stages, and later on modified to be in line with the flexible remuneration packages of FSC, this would result in effective control over the workforce in initial stages, however they could not be retained for long due to the necessity of motivating the employees. The superannuation fund should also be in line with BSFC’s standards, because it would be difficult to maintain a large defined contribution fund. The hierarchical structure of 12 stages should be adapted at the initial level, since it would incorporate all level of employees in the merged organization, and there would not be the hassle of fitting employees of 12 stages into 7 stages of BSFC’s structure. However, later on these could be changed to 7 stages in order to reduce the level of hierarchy, and hence would motivate the employees. Furthermore, the internal recruitment system should be maintained at start, because it would be difficult to recruit employees from outside while the companies are going through major changes, and being amalgamated into one, it would also be important in order to maintain loyalty of workforce, for if they are not retained following the merger, it would produce a negative and unreliable image of the organization, and reduce the level of security associated with their jobs, this would naturally de-motivate the employees. However, later on when new positions and vacancies emerge, external recruitment could also be opened, but MFG should not entirely rely upon external recruitment but mix the two methods in order to ensure that fresh blood enters the firm as well as existing employees are given the opportunity of promotion. The culturally diverse workforce should be kept at the initial stages, this would lead to conflicts from the white males of BSFC, however these can be overcome by provision of security to them, however if the females and foreign employees are turned out due to the WASPM theory of BSFC, then the company would be labeled as being discriminatory, and could gain negative publicity. 5. Changes to the current reward system in each of the organizations will ultimately interfere with the culture as it has been – will result in cultural changes. What are the likely reactions of staff to even a small change to the reward system as they knew it in their former organization? It is almost inevitable in this case to implement changes without attracting dispute from some part of the merged organization. The current reward systems of both companies reflect their own respective organizational culture, bureaucratic culture for BSFC while a more democratic or Laissez-Faire culture for FSC, thus leading to disputes. If the reward system of FSC is maintained, thus adapting a flexible approach towards employees, who have the authority to draft their own remuneration packages, then the employees of BSFC would find it extremely difficult to adapt to this package, they have been accustomed to the fixed reward system, they might appreciate this change later on, but initially it would be difficult to adapt. In addition, the white Anglo-Saxon protestant males would resist any changes made to their superiority in the existing system, and would get the feeling of degradation of they are brought at the same level with women and foreign employees, hence they would demand a pay differential, which if entertained would lead to major discriminatory issues which would be resented by the FSC workforce and result in bad publicity for MFG. Hence in order to incorporate the differences and compensate for the loss in authority for both level of employees, increase in wages is bound to follow, and this is the outcome of almost every merger (Conyon et al., 2008). It is necessary to meet the needs of the workforce following the merger, or else the previously successful organizations can face doom after they have merged, due to lack of proper human resource management, the employee morale, productivity, and motivation level could reduce, this is a natural reaction to changes in the existing system, and loss of authority would result in major downfall in motivation level, which would reflect in the failure of the merger itself (Chambers. K and Honeycutt. A, 2009, 43). If the staff becomes extremely aggressive, as might be the case for BSFC’s white male staff, then they could go on strike, or even reduce productivity, any forms of industrial actions would be dealt by the Employee Relations manager in MFG, however it would be negative publicity as well as a hassle directly following the merger, when the senior levels would be busy in adapting to structural changes, employee disputes and non-cooperation would result in major disruptions. 6. Using the reward system as the principal lever of change, what are the major changes you believe need to be made and why? The reward system of both companies are in stark contrast, hence they need modification before they can be implemented in the merged organization. The basic wage should be increased for all the employees in order to compensate for the disruptions caused by the merger, they should then be given increments on the basis of their performance, and not general increments for everybody, and this would instigate them to work hard instead of reaping benefits effortlessly. In addition, they should be allowed to make their own reward package, based on the cafeteria style fringe benefit program (Terry, 2007), similar to that adapted by FSC, which would give the employees credits on the basis of their performance, which they can utilize to select benefits from a menu of rewards offered to them, they can save the credits for a larger reward, or expend smaller amounts on a regular basis for smaller rewards, hence it would give them a sense of ownership over their reward system, they would feel more motivated, and in order to attain a certain amount of credits to attain a particular reward, they would strive hard to perform well. Furthermore, the option regarding the superannuation should be in the hands of the employees, since they come from culturally diverse backgrounds and different cultured organizations, their interests and preferences would differ, hence instead of the organization making the decision for the employees, it would be best to let them decide for themselves. The seniority related benefits of both organizations are similar, and should be celebrated as they are, however the BSFC’s approach of differing cake value according to post etc. are very de-motivating, and this hierarchical approach could result in alienated feeling for the employee, they might feel inferior and lose self esteem despite the intention being a reward, hence the celebration should be equal and non-discriminatory. References Armstrong. M and Murlis. H (2007) Reward Management 5th Edition. Kogan Page Publishers. Chambers. K and Honeycutt. A (2009) Journal of Business and Economics Research Volume 7, Number 2. Retrieved May 27th 2010 from http://www.cluteinstitute-onlinejournals.com/PDFs/1728.pdf Conyon. J, Girma. S, Thompson. S and Wright. P (2008) Do Wages rise or fall following merger- Revised Edition. Retrieved May 27th from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=546962 Cross. C, Barry. G and Garavan. Thomas N (2008) The Psychological Contract in Call Centres: An Employee Perspective. Retrieved May 27th 2010 from http://jir.sagepub.com/cgi/content/short/50/2/229 Dickens. L and Hall. M (2005) Employment Relations and Research series no. 45. Department of Trade and Industry. Retrieved May 27th from http://www.bis.gov.uk/files/file11342.pdf Fred Weston. J, Mitchel. Mark L and Harold Mulherin. J (2009) Takeovers, Restructuring and Corporate Governance- 7th edition. Pearson Education. Fry. T, Richard Heaney. A and McKeown. W (2007) Will investors change their superannuation fund Given the Choice. Retrieved May 27th 2010 from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=991967 FSA (2009) FSA Draft Code on Remuneration Practices. Retrieved May 27th 2010 from http://www.fide.org.my/publications/articles/0009_FSA_draft.pdf Nancy K. Napier (2007) Mergers and Acquisitions, Human Resource Issues and Outcomes: A Review and Suggested Typology. Retrieved May 27th 2010 from http://www3.interscience.wiley.com/journal/119432677/abstract?CRETRY=1&SRETRY=0 Terry. Paul (2007) Rethinking Rewards: Using Incentives to Improve wellness programs result. Retrieved May 27th 2010 from http://www.hrmreport.com/article/Rethinking-Rewards--Using-Incentives-to-Improve-Wellness-Program-Results/ Read More