Remuneration and Performance - of Qantas - Case Study Example

Performance appraisal systems xxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxx Course xxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer xxxxxxxxxxxxxxxxxxxxxxxxxxx Date Table of Contents Table of Contents 2 1.0Qantas company details 3 2.0 Requirements of Qantas performance management system 4 2.1 Organizational and employee objectives 5 2.2 Training 5 2.3 Frequency of appraisal 6 2.4 Maintenance of records 6 2.5 Measurement systems 6 2.6 Conducting performance appraisal 6 3.0 Performance appraisal within Qantas 7 3.1 Review of board performance 7 3.2 Review of junior employee’s performance 7 4.0 Evaluation of Qantas performance management system 8 5.0 Recommendations 9 5.1 Type of appraisal 9 5.2 Objectives of Qantas performance appraisal system 10 5.3 Frequency of performance appraisal 10 5.4 Procedure for evaluating performance 10 5.5 Appraisal method 11 6.0 Contingency factors during implementation 11 6.1 Top management support 11 6.2 Effective communication 12 6.3 Monitoring and evaluation of the system 12 7.0 Performance rewards and compensation systems 12 8.0 Conclusion 14 References 15 1.0 Qantas company details The Qantas group is a major player in the Australian airline industry and specializes in passenger transportation using two complementary airlines Jetstar and Qantas which operates regional, domestic and international services. In addition, the group has a broad portfolio of investments and businesses including Qantas Freight Enterprises and Qantas Frequent Flyer. The company has a workforce of more than 36,000 people with 92% of them based in Australia. Qantas strategic initiatives are aimed are buinding sustainable returns for its shareholders. In this regard the company continuously focuses on premium product positioning and customer excellence. Besides that, it has recently confirmed intentions to invest in emergent and highly potential markets more so in Asian countries. As a strategic measure to growth from global markets, Qantas has restructured joint services with other major international airlines such as British Airways. Recently, the company has significantly reduced capital investment in non-performing international operations. To attain these business strategies and to deliver consistent excellence to customers, Qantas endeavors to create an enabling workforce. Qantas organizational structure comprises of an executive committee of twelve members led by the Chief Executive Officer and managing director Alan Joyce. The airline is divided into three related groups namely operations responsible operations planning and control, flight operations, catering, airports and engineering; customer and marketing which has the role of inflight services, marketing, cabin, crew and customer experience; and commercial which is in charge of alliances, QantasLink, sales and distribution. Besides that, Qantas a range of corporate groups which perform the role of performance monitoring of other groups, provides strategic direction, shape policy and provide guidance. Human factors have been identified as key driver to the success of the company has established training objectives so as to create a workforce that is not only competent in operations but also understand organizational goals that will propel the company to a competitive edge. These objectives include to identify key competencies of operational experts, develop a clear understanding of human performance issues, integrate human factors into existing business systems and to enhance business performance through humans factors (Qantas 2010). 2.0 Requirements of Qantas performance management system Operating in highly competitive and volatile environment, Qantas requires a comprehensive performance management system so as to create committed and motivated employees. To be effective, employee need maximum support from top management who will enable them to translate company objectives and emphasize on personalization of the objective to each employee. Armstrong and Baron (2007) state that developing a viable and sustainable performance management system that reflects the employee performance is a complicated task. Such systems are not generic and they cannot be emulated from other companies. They are unique since they are tailored based employee qualities and characteristics. Performance managements are in most cases undertaken to allow employees rate and compare their performances with management’s expectations and thus identify faulty areas that require improvement through training and development. Employees usually have a legitimate need to know how their performance affects the organization. Performance management enhances communication between employees and their supervisors and lack of it might lead to undesirable work habits. Qantas therefore, ought to formulate a framework for the implementation of a performance management systems which should comprise of the components described below: 2.1 Organizational and employee objectives The first step in developing a performance management system is to determine company objectives, For Qantas, key objective of doing business is to excel in customer relations, deepen and broaden alliance, reduce non-performing operations and to venture into new global markets. These should then be translated to departments and even to individual position objectives. This enables employees to be aware “up-front” the standards upon which performance are rated. In process furthermore involves clarification of job roles; what is expected within the current organizational plan. 2.2 Training Training is another crucial aspect that Qantas needs to consider when implementing a performance management system. Training should target raters who are essentially supervisors or line mangers. The training should first focus on providing the managers with effective knowledge about people management skills. Thereafter, it should train them on ways of motivating them as well as evaluating performance. Qantas should take note that performance management or appraisal is not just a “quick fix” solution but rather a part of the overall organizational process. Topics that can be discussed during the training include supervisory skills, coaching /mentoring skills, conflict resolution, feedback systems, how to link systems to pay and ways of setting performance standards. To maintain necessary skills in performance assessment, period refresher programs are also important. 2.3 Frequency of appraisal Evaluation of employee performance should be an ongoing process. Due to the need for high quality and efficiency, Qantas should conduct employee performance review bi-monthly or quarterly. Frequent reviews eliminate surprises at annual review and selective memory by employees or supervisors. Additionally, it makes it easy to undertake corrective measures against problems identified during the review. Bacal (2001) maintains that frequent reviews also enable revision and clarification of organizational objectives. 2.4 Maintenance of records Performance management systems cannot be effective without a formal way of recording employee performances. Qantas needs to establish a data base to maintain employee records of performance so as to establish patterns of employee behavior that would otherwise be difficult to establish. Such records will also be used as reference points if need arises to dismiss, demote or discipline employees. 2.5 Measurement systems Qantas also needs a grading system to rate employees. Many companies use numerical scales to rate employees but they are in most cases inefficient as they tend to rate most employees as average performers. This leads to creation of a mediocre workforce even from high performers who are falsely rated average. Even with a standard grading system, Qantas should have a clear definition of each level of performance to avoid instances where some employees are under rated yet there job positions are quite complicated. 2.6 Conducting performance appraisal Although front-line supervisors are often responsible for performance management, Qantas should consider integrating the multiple rater systems due its diversity in terms of job structure as well as a large number of employees. This system provides a form of triangulation thus reducing the number of employee rated by one supervisor. This is a characteristic of flatter organizations whereby several supervisors work with a single employee to ensure thorough performance review rather than having a single supervisor monitoring many employees (Becker et al 2001). 3.0 Performance appraisal within Qantas 3.1 Review of board performance The executive board undertakes an annual review of its performance as well as that of its committees. Furthermore, the board engages external consultants to facilitate formal board performance reviews. The more recent review was undertaken at the end of the 2011/2012 financial year in which the board conducted an internal performance review which included board discussions and interview. In addition, Qantas chairman discusses performance with each director on a regular basis. Qantas Remuneration Committee also conducts an annual review of performance of executive management. This is normally done against Key Performance Indicators (KPIs). 3.2 Review of junior employee’s performance Qantas has been under pressure for lack of a comprehensive performance appraisal systems. Until 2009, the company operated on an informal and casual system of managing performance as well as dismissal and demotion of employees. When a member of staff performed below standard, he was issued with an informal letter, counseled with diary note and an informal meeting with the respective supervisor to prepare a Development Action Plan. However, this system has since been reviewed and abolished following interventions form the Australian Services Union which demanded fair opportunity for all Qantas employees to improve on performance during instances of underperformance. The current system within Qantas is much fairer; employees feel confident with the system and they feel comfortable with evaluation and monitoring procedures by managers and appointed supervisors. It involves regular review of performance of each employee based on their work output. Employees who are below average in terms of performance are genuinely and effectively consulted. Communication and collaboration have become quite pronounced within the company and this has greatly boosted productivity. In 2004, the company conducted a negotiation with its staffs to revise the performance pay for its Senior Professional Group (SPG). During the negotiations, members of SPG demanded to know the kind of criteria used by managers and supervisors to assess performance of junior employees. Since then Qantas has changed several aspects of its performance appraisal system. For instance, grading/ranking system has changed and is now fair to a large number of employees. Due to the overwhelming concern that managers and supervisors conducting performance appraisals were not adequately trained with regard to assessment based on KPIs, the company has introduced a training course for all line managers and supervisors and it focus mainly on people management skills as well as performance management skills. 4.0 Evaluation of Qantas performance management system The performance management within Qantas is quite consistent with standard requirements. According to Cascio (2000) training of managers and supervisors should begin with top management who are then expected to administer training programs and provide training to lower level managers. According to the procedural justice theory, the perceived fairness during the process of performance appraisal contributes greatly to its success or failure. In Qantas, employees are clearly confident and satisfied with the current appraisal system. One factor that has contributed to this is due to the fact that senior managers undergo performance review in the same manner as subordinates. Besides that, they are adequately involved in the formulation and revision of the systems, that is, they have a voice in making decisions that affect them. The issue of how often and when appraisal should be conducted remains to be a contentious issue. Nevertheless, employee performance appraisal should be conducted as often as possible to increase the productive of the workforce. Qantas system of performance management clearly does not portray this argument. It performance appraisal for both board member and junior employees is mainly conducted annually. Objectives of the system might not be accomplished fully as problems in the work place pile up to an irreparable state by the end of the year. 5.0 Recommendations 5.1 Type of appraisal Qantas should use open appraisal systems. In this system, the supervisor explicitly reveals the strengths and weaknesses of the appraisee and how his/her performance has affected the company. Williams (2002) states that open appraisals create self awareness giving the individual insight into one’s own performance. Additionally, it helps an employee to be objective and reflective about the future which in turn helps in the formulation of an action plan for the coming year in terms of setting up responsibilities, activities and targets. According to Cascio (2000), open appraisals inform employees of their key performance areas and thus they are able to improve on these areas to increase their contribution to the company. 5.2 Objectives of Qantas performance appraisal system Qantas should consider re-evaluating objectives of its performance appraisal system. Essentially, the core objective of the system should be to improve efficiency of the company by mobilizing efforts of individual employees. Other objectives include guidelines during promotions, planning job rotation, planning for development and training of individuals and salary reviews. 5.3 Frequency of performance appraisal Performance appraisal within Qantas should be conducted more frequently. Conducting a formal appraisal however, would be impossible as this is quite expensive and time consuming. In this regard, Qantas should establish channels for conducting informal appraisals preferable in the form of counseling, mentoring or coaching. This way, managers and supervisors will have a rough idea about their employees before the formal process. 5.4 Procedure for evaluating performance The outcomes of a performance appraisal system should benefit the organization and not just the individual employee. As such, appraisal forms can be used to supplement interview and discussions. While preparing the appraisal forms, Qantas should ensure that that they are well understandable to the appraiser and the appraisee. Once the supervisor fills the form, he should return it to the employee to determine whether the rating is correct according to his perception and thereafter sign the form. The form should then move to the next higher level where the rating of the supervisor is challenged by a higher authority. Final results should be communicated to the appraisee through his immediate supervisor. 5.5 Appraisal method Qantas should adapt the 3600 appraisal method. In this method, it is not only supervisors and managers who appraise the performance of subordinates but subordinates also appraise the managers. In the same way, colleagues can appraise fellow colleagues and all appraisals are aggregated to come to a final result. The advantage of using this approach is that it gives employee an equal share in decision making and they feel empowered through the process of assessing their leaders. It also reduces defensiveness on the part of the appraisee as he under supervision of a variety of assessors. 6.0 Contingency factors during implementation 6.1 Top management support The support of management is vital to the success of the performance management system. To begin with, the systems must be approved by management so as to begin operations so as to ensure that it aligned to organization’s objective. To ensure that the system sail through, management needs to explicitly identify the system as priority so that they can locate resources during implementation. This involves appointing the competent and committed supervisors and managers to oversee implementation as well as apportioning them enough time to get the job done. Failure of support from management could be quite detrimental towards the survival of the system due to lack of financial support (Rollo 2001). 6.2 Effective communication Mujtaba (2008) asserts that communication is the lifeblood of successful performance appraisal systems. Expectations as well as system goals and missions should be sufficiently communicated at all levels of the organization. User of the system, who are basically the employees, should be consulted for their approval, comments, requirements or reactions. Communication includes formal and actual advertisement of the system. Managers and supervisors at different departments need to emphasize the importance of the system. Employees should aware of the objectives and scope of the process well in advance. Lack of proper, communication of the process might lead to resistance thus its ultimate failure. 6.3 Monitoring and evaluation of the system Monitoring and evaluation are the litmus paper or indicators of the effectiveness of the system. It helps to identify achievement of milestones as well as keeping track of progress. System achievements should be measured against initial goals. Monitoring and evaluation should include a feedback system where information is exchanged between system leaders and users. Progress of the system should be reported through formal reports as management needs such information to assess the implications of the system towards business performance. 7.0 Performance rewards and compensation systems Unlike traditional reward and compensation systems, that were basically strategy-based, organizations are gradually moving to performance-based pay systems. This system is aimed at encouraging performance improvement by sharing the benefits accrued from increased productivity (Van der Stede 2003). Performance-based strategy can be an excellent strategy if it focuses on the end results rather than the means. The rewards afforded due to performance should be perceived as fair by those receiving them. Fairness in rewards and pay are key motivators and make people believe that their actions are effective and superior. Evidently, it is the desire of all employees to reward their employees according to their productivity. Unfortunately, research reveals that most employees are dissatisfied by the rewards systems within their respective organizations as it is normally unequal to their efforts. In most scenarios, high performers working together with low performers are usually forced to compensate for the low productivity produced by low performer. In such as case, it is only fair to recognize, acknowledge and rewards appropriately the contribution of high performers. Essentially a reward and compensation system that would support a performance management system should have eight generic steps; goal setting, strategy mapping, developing measurement plans, budget planning, identifying target groups and awards, identifying ethical dimensions and criteria, identifying a marketing plan and implementation and improving the program. Due to many layers of management, organization should follow flexible and systematic approaches in reward and recognition programs. Manager and supervisors at all levels should be adequately trained on ways of rewarding and recognizing people responsibly and appropriately. While setting goals for the reward and recognition system, managers and supervisors should consider SMART (Specific, Meaningful, Achievable, Reliable and Timely) goal-setting strategies (Corcoran 2006). Training front-line managers and supervisors about rewards is imperative. Some managers fail to give untimely feedback to non-performers and that would be the main cause of poor performance. Reward systems should focus on individuals as well as teams in several ways (Mujtaba 2010). In addition, reward and recognition systems should be aligned to company values and missions as well as the culture of an organization. Long-term mission and purpose of the company should be communicated to all members of the organization so that they gauge performance on these goals. Managers should be in a continuous process of discovering new methods of rewarding and recognizing employees and not relying on the usual “employee of the month” strategy. 8.0 Conclusion Qantas is indeed an organization that has demonstrated prowess in performance appraisal. With a large number of employees and operating in a highly competitive and volatile environment, Qantas requires a performance management system that is guided by objectives, should involves sufficiently trained managers and supervisors, have proper monitoring and evaluation procedures and be conducted on a regular basis. Qantas board of executives is reviewed annually by external consultants as well as internal assessors. Qantas appraisal system for subordinates has undergone constant revision and has bared successful fruits. Its practice is consistent with theories that have been recorded in literature. To establish a sustainable performance appraisal system, Qantas should use an open appraisal system, engage in frequent performance appraisal, evaluate performance of the systems and focus the problem on stipulated objectives. Contingency factors that are critical to the implementation of performance management systems include support of top management, communication, monitoring and evaluation. In today’s world of business, performance is being used as a payment platform. This is to mean that employees are being rewarded based on the level of their performance. References Armstrong, M. & Baron, A 2007, Managing performance: Performance management in action. UK: CIPD. Bacal, R 2001, Performance management. Singapore: McGraw Hill. Becker, B. E., Huselid, M. A. & Ulrich, D 2001, HR scorecard: Linking people, strategy, and performance. Boston, MA: Harvard Business School Press. Cascio, W. F 2000, Costing human resources: The financial impact of behaviour in organizations, 4th. Canada: South-western College Publishing. Corcoran, C 2006, Performance Management: Conducting Appraisals. Accountancy Ireland, 38 (6), 42-45. Mujtaba, B 2008, Coaching and Performance Management: Developing and Inspiring Leaders. ILEAD Academy Publications; Davie, Florida, USA. Mujtaba, B 2010, An equitable total reward approach to pay performance management. Journal of management policy and practice, Vol. 11(4). Qantas 2010, The sum of us. Annual report 2010. Melbourne. Rollo, J 2001, Performance Management: A pocket guide for employee development. Competitive Advantage Consultants Inc. and Goal QPC Publications. Van der Stede, M 2003, The pitfalls of pay-for-performance. Finance and management. Vol. 1(1), p. 10-13. Williams, R. S 2002, Managing Employee Performance: Design and Implementation in Organizations. UK: Thomson Learning. Read More