Accelerating the Performance Momentum at Sisson Systems - Assignment Example

Accelerating the performance momentum at Sisson Systems Part A Executive Summary Sisson Systems, a diversified company conducting multiple business activities including retailing, information technology, facilities management, and financial services, has achieved an impressive record of growth and profitability, with an average growth rate of 20% over the last 15 years. The company has also gained an excellent reputation for quality and customer satisfaction. However, Michael Smith, recently appointed as Sisson's CEO, does not feel that the company can be content with its past achievements. He worries that Sisson's various divisional managers are too focused on their own idiosyncratic ways of doing business and do not share sufficiently in his company-wide vision. While each division of the company may be successful and profitable in its own right, Smith fears that Sisson Systems is failing to maximize the value of its overall corporate brand. He is also concerned that many of Sisson's senior employees are already happy and prosperous enough that it is very difficult to motivate them to make further efforts. Smith believes that a new company-wide set of human-resource management policies and procedures will aid him in achieving his vision of sustaining and improving the company's growth while establishing Sisson Systems as a benchmark for quality, customer satisfaction, innovation, and employee commitment. An effective performance evaluation system—specifically, the 360-degree performance evaluation method—is recommended as a fundamental element of Sisson's new HRM regime. A brief summary of the company’s current situation Sisson Systems is a conglomerate which operates businesses including retailing, information technology, facilities management, and financial services. Over the years, the company has gained an excellent reputation for its professionally and successfully managed enterprises. The company has grown, on average, 20% per year for the last 15 years; and while much of this growth has been due to Sisson’s acquisitions, organic growth has been significant as well. Customer-satisfaction surveys and other measures consistently show that Sisson, in all its operations, is doing an excellent job of serving its customers. Six months ago, Michael Smith was appointed as Sisson’s Chief Executive by the company’s Board of Directors. He wishes to extend the company’s success and improve its reputation still further, while avoiding the pitfalls that can come with success. Smith wants Sisson Systems to become a “benchmark” for innovation, employee commitment, quality, service, and customer satisfaction in all its operations, and also to sustain and even improve upon its impressive growth rate. Up to now, Sisson Systems’ divisions have been run with considerable independence by the company’s divisional managing directors. Smith is concerned that allowing this trend to continue may be dangerous for the company as a whole, and can ultimately result in Sisson Systems’ overall corporate identity and reputation becoming meaningless. He would like to create and enforce a consistent company-wide corporate culture; “one culture, one organization” is his motto. In support of this philosophy, Smith wants to identify the best human-resources management practices and impose them company-wide. One of Smith’s particular concerns is that many of Sisson Systems’ senior employees are happy and contented, and that they may thus lose their drive to excel and merely coast along until retirement. His concern is that these employees have already benefited from Sisson’s incentive schemes (including stock option plan) to the extent that it will be very difficult to motivate them further. In short, Michael Smith feels that Sisson Systems needs to implement improved human-resource management practices in order to help create and enforce a company-wide corporate culture, to motivate senior employees who are already well compensated and happy in their careers, to permit and encourage further growth for the company, and to improve the company’s already excellent reputation. Answers: (1) What strategies can Sisson Systems introduce to inspire and stimulate higher levels of performance from its senior managers and executives? Sisson Systems has been achieving excellent results for at least the past fifteen years. Now the company is operating in an increasingly globalized world, and is facing challenges from not only from external competitors but also from the consequences of its own past success. Such internal and external challenges have significant implications for Sisson’s human-resource functions. One of the company’s key challenges is to motivate its senior managers to achieve even higher levels of performance. There are human-resource strategies which Sisson Systems can apply in order to accomplish this, while maintaining a balance between global corporate culture and local autonomy. According to Razi (2006), human-resource practices must be consistent with Sisson’s business strategies. One of the most powerful tools Sisson Systems can use to maximize the performance of its senior employees is an effective performance evaluation system. Performance is defined by Harun (2007) as achievement or effectiveness as a function of human resources. Performance evaluation includes measuring an employee’s efficiency by thoroughly examining his or her work achievements, activities, weaknesses, strengths, competencies, and deficiencies, and comparing these measurements against predetermined standards (Palmer, 1993 and Robertson, 2004). In Sisson Systems, many employees have been with the company for many years, and are well along in their careers. Senior managers have had a long time in which to develop their own individual sub-culture, and in many cases they believe that their own culture, personality, systems, and practices are responsible for the success of their part of the company. When a performance evaluation system is established in Sisson Systems, these senior managers and executives will become more aware of their efficiency at individual level and group levels; in cases where performance evaluation shows that these managers are not as effective and efficient as they had thought, they will be forced to rethink the relationship between their own practices and the company’s results. A good performance-evaluation system will create several benefits for Sisson Systems’ senior managers: (1) the evaluation system can strengthen the relationship between senior managers and their subordinates; (2) the system will help senior managers in coaching and mentoring their subordinates more effectively than they were able to in the past; (3) the performance evaluation system will provide guidance to senior executives in considering which aspects of their subordinates require urgent improvement; (4) performance evaluations will provide opportunities for executives to evaluate themselves; (5) performance evaluations will facilitate delegation of authority to subordinates; (6) with performance evaluation, the executives can develop their managerial skills; and (7) the evaluation system can facilitate teamwork effectiveness (Gliddon, 2004; London and Souther, 2002; and Holmes, 2004). According to Harun (2007), not only supervisors, but also ordinary employees can obtain benefits from a performance-evaluation system. These are (1) the employees will realize what the organization expects from them; (2) with the results of performance evaluation, employees will be more aware of their weaknesses and strengths; (3) performance evaluation can help to meet employees’ needs for recognition and praise; (4) individuals can learn how they are evaluated; (5) employees’ job satisfaction, self-confidence, and corporate loyalty can be encouraged; and (6) career planning for individual employees becomes more consistent. There are also important benefits for the organization as a whole: (1) With a performance evaluation system in place, the company must clearly define corporate targets and purposes, and can monitor the achievements of individuals, working teams, and departments; (2) there is a positive impact on organizational efficiency, profitability, productivity, and performance; (3) the evaluation system allows employees to make strong determinations and set their direction in work; and (4) the results from performance evaluation are useful for human-resource-management functions, including planning, recruiting, career development, and designing training programs. When Sisson Systems implements a performance-evaluation system, it is important for senior management to remember that the system will work effectively only if the company’s employees trust it to be fair, thorough, and effective (Harun, 2007). Therefore, Sisson Systems must establish employees’ trust in the new system despite their natural suspicion of a change that many will see as a threat. This may not be easy. In order to gain their trust in the new regime, employees should be encouraged to participate in developing Sisson System’s performance-evaluation system. Further, the evaluation system must be transparent: management must inform employees of their evaluation results. When employees know their evaluation results, they can judge for themselves whether they are performing above or below the company’s expectations. This kind of feedback can motivate employees to work harder in order to keep their performance above expectations. When employees are not informed of their evaluation results, they are vague about their performance—they do not know if they need to improve, and they do not feel appreciated for their accomplishments. In order to avoid problems in evaluating performance, an evaluation method known as “360-degree performance evaluation” is advisable (Dresller, 1999). The 360-degree performance evaluation examines weaknesses and strengths with an open and honest feedback system. In this evaluation system, the employees to be evaluated are placed at the center; then they are evaluated by their superiors, co-workers, customers, and subordinates. Each employee receives feedback and evaluations from multiple evaluators with different perspectives. This enables employees to develop their professionalism, skills, and strengths, and to work to reduce their weaknesses. When employees are made aware of their skills, strengths, and weaknesses, the performance evaluation system can be supplemented by a performance management system. In short, Sisson Systems should implement a company-wide performance evaluation system. While implementing such a system poses some difficulties for management and employees, a well-designed performance-evaluation system can work effectively when it gains the trust of the company’s employees. This trust can be encouraged by inviting employee participation in designing, developing, and implementing the performance-evaluation system, and by operating the system transparently. Employees must be informed of their evaluation results so that they can use them to improve their strengths and minimize their weaknesses, and thus work effectively to meet the organization’s expectations. It is suggested that an effective performance-evaluation system for Sisson Systems would be “360-degree performance evaluation”. This system allows employees to benefit from feedback received from the various people inside and outside the organization with whom they interact, and thus helps them to develop their professionalism, skills, and strengths. (2) How can the company identify and release employees at all levels who are no longer making a worthwhile contribution? Sisson Systems' past success is an indication that the managers of its various divisions generally performed their tasks well. On the other hand, new CEO Michael Smith believes that some of these managers may be “losing their edge” as a result of having been in their positions too long and having been compensated too well. Further, he believes that many of these managers have developed an individualistic personal style that is inconsistent with his desire to develop and foster system's company-wide corporate culture. All other things being equal, Smith will prefer that improved human resources management policies will induce current employees to change their attitudes and practices to conform to his goals. However, inevitably some employees will be unwilling or unable to change their habits; and, as Smith has noted, senior managers who are already well off and maybe near retirement age anyway will not be easily motivated to change their attitudes and practices. Accordingly, any new human resources management scheme that is put in place must include carrots as well as sticks. Managers and ordinary employees who are not doing their jobs efficiently and cannot or will not improve when confronted with feedback from the new performance evaluation system must be identified and released. At the same time, there is a major risk to the company if too many executives and other employees are fired—particularly if remaining staff believe that those fired were let go because of politics rather than below-par performance. If Smith inadvertently creates the perception of a “reign of terror” at Sisson Systems, many senior employees might leave the company, with potentially disastrous effects. In order to avoid this scenario, it is important that the institution of new personnel policies not be seen as an excuse to get rid of managers perceived as a threat to Smith, or as a means to settle scores within the company. As mentioned above, it is crucial that performance evaluation and performance management systems be seen as fair, objective, and transparent. Further, it must be made clear that the new human-resources policies are not meant to be punitive, but are designed to help individual employees, groups from team to division level, and Sisson Systems as a whole to perform at their best—and to be recognized, valued, and rewarded for their achievements. Minimum standards must be clearly set out in advance, so that there is no ambiguity regarding failure to meet them; and a maximum level of staff “buy-in” to the new systems should be encouraged in advance. One of the advantages of the 360-degree performance evaluation system in this regard is that since elements other than company management—and in particular, fellow employees—are a significant component of the evaluation process, negative evaluations will not be seen as emanating purely from Sisson Systems’ management. Part of the goal of the new systems will be to build a consensus among fellow employees that anyone who is fired really needed to be fired. When these systems are properly designed and implemented, those firings that cannot be avoided will serve an instructional purpose to other employees rather than causing discontent and lowering morale. (3) Discuss ways in which HRM policies and systems could be used to ensure a balance between centralized corporate control and empowered divisional freedom. Human-resource management policies must conform to and promote the company's overall objectives, strategies, and policies (Corporate Leadership Council, 2005). In the case of Sisson Systems, a new company-wide HRM scheme must promote and enforce a unified corporate culture; but at the same time, Sisson's top managers must realize that the company's various divisions are engaged in significantly different businesses and thus face different challenges and opportunities. Accordingly, management should determine in advance which elements of corporate culture should be centralized and which elements are best allowed to remain local. As an obvious starting point, Sisson's management should establish and communicate a set of broad values for the company: product quality and innovation, excellent service, customer satisfaction, employee empowerment and accountability, and so on. While these values may seem non-specific, they nonetheless serve a real purpose: management wants employees to feel a sense of pride and commitment to Sisson Systems as a whole, and not only to their own business unit and its management. Promoting awareness of these corporate values will enhance both the internal cohesion of the organization and also its reputation in the outside world. In this context, a well-designed, fair, and uniformly-implemented set of human-resource policies can be very useful. Because employees at all levels are evaluated in the same systematic manner, and are held accountable for the quality of their work based upon company-wide standards rather than relying upon the personal preferences of their managers, they will come to understand that they work for Sisson Systems and not for their immediate and divisional supervisors. Another benefit of company-wide human resource policies and procedures is that managers and other employees can be more easily shifted from one business unit to another, since management will have a much better idea of their capabilities, attitudes, and work habits. This increased flexibility will benefit both Sisson Systems and individual employees: the company will be able to allocate human resources where they are needed, and employees will more easily be able to accumulate a broad range of experience within the company. This can help inspire them to do their best work and motivate them to stay with Sisson Systems and maximize their potential. Paid equitably and competitively, Sisson Systems will be encouraged to develop their skills and grow with the company. Part B Recommendations As detailed above, an appropriate set of company-wide human-resource policies and practices can significantly help Michael Smith achieve his goals for Sisson Systems. As a first step, the company should design, socialize, and implement a fair and uniform system of personnel evaluation. Specifically, it is suggested that the 360-degree performance evaluation method be adopted. This method evaluates each employee in his or her appropriate context: that is, it solicits the opinions of peers, customers, suppliers, managers, and subordinates. Because it relies upon such a broad set of inputs, the 360-degree performance evaluation method achieves both the reality and perception of fairness and objectivity, and produces useful feedback for employees and for their managers. While in an ideal universe human-resource management would need to concern itself only with enhancing the performance of employees, in reality there are always some employees who are not performing effectively and cannot or will not improve. Part of the function of any performance evaluation system is to identify these employees so that they can be released from employment. In order to avoid potential negative effects on morale, minimum performance standards must be clearly and specifically set out in advance; such standards, in combination with a thorough and objective evaluation system as detailed above, will minimize the negative consequences of employee terminations. A system of performance management will serve as an adjunct to the system of performance evaluation, using the information gathered in the evaluation process to help employees improve their performance and develop their abilities. In addition to its obvious practical value in improving the overall efficiency of Sisson's workforce, a performance management system makes it completely clear to all employees that performance evaluations are designed to benefit them as well as Sisson Systems; otherwise a performance evaluation system could very easily be seen as punitive. Any major shift in human-resource policy and practice can easily be seen as a threat to a company's employees; and of course, this perception can seriously reduce the benefits of even the best-intentioned policies. In order to reduce or eliminate employee resistance to new HRM practices, it is strongly advised that employees at all levels be involved in the design and implementation of new systems, rather than being forced to accept them passively. Further, it is crucial that performance evaluation be implemented transparently, objectively, and fairly. Both reward and punishment must be seen as going to those who are genuinely deserving of them. Human-resource management scheme, Sisson's top management must strike a balance between the benefits of centralizing Sisson's corporate culture and the legitimately different challenges faced by Sisson's broad range of business units. Policy centralization should never be carried out in a matter that interferes with a division's ability to satisfy its customers and earn profits. This means that centralization of policy and culture should focus on those broad themes that are applicable across all business activities: quality, innovation, accountability, service, dedication, and pride in belonging to an organization that embodies these values. References: Corporate Leadership Council. (February 2005). Structuring HR to optimally serve clients in a globally dispersed organization. Washington, D.C.: Corporate Executive Board Demirkaya, Harun. 2007. Do Employees Trust 360-Degree Performance Evaluations? (A research on the Turkish Banking Sector). Journal of American Academy of Business, Cambridge. Hollywood: Sep 2007. 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