Performance Management System of the Australian Commonwealth Bank - Case Study Example

Reflection on Performance management system of commonwealth bank By, Name: Institution: Subject: Lecturer: Date: The Australian commonwealth bank was started in the early nineteenth century under the banking act of 1911. The laws allowed it to accept savings and conduct general banking services to its clients. In addition, the bank financed the local population, manufacturers, and other forms of businesses in order to create an aggressive and wealthy economy. This enhanced the performance of the economy since the profits made were ploughed back to enrich the economy further (Berger & Berger, 2010, p. 165). Since then, it has grown to be Australia’s biggest bank with a strong financial standing due to its ability to implement an efficient performance management system. According to Hansen & Alewell, (2013, p.2131), organizations prefer this system since it ensures consistency, efficiency, and effectiveness in achieving the business goals. This is because it aligns the available resources, systems, and labour with the strategic objectives outlined by the organisation, department, or an individual business process. Therefore, it is important to evaluate the performance management systems in the bank in order to maximise on the human capital as explained by Bacal (2009, p.86). The evaluation will be able to identify the areas of improvement so that the bank can maintain its competitiveness and good credit ratings in the financial arena. So, the document is aimed at identifying the critical areas in the system and ways of enhancing their performance in accordance with the bank’s strategy, culture, and key performance indicators. According to Aguinis (2008, p.76), team spirit and trust is among the bank’s top priorities in terms of business strategy. Aguinis further elaborates that the bank recognizes the value of sourcing, developing, and retaining quality employees with optimum performance levels. This is because quality work is part of ensuring that the bank is able to achieve its goals of becoming an organization with the finest financial services. Also, it makes the organization to excel in customer services due to the quality work offered. The strategy of attaining a culture filled with team spirit and trust is held by four major pillars that everyone is expected to follow. These pillars shape the way people interact and perform team activities as a way of creating a successful organisational culture. This translates to a workforce that is passionate, engaged, and valued as successful when it comes to handling shareholders, clients, and the whole community. In reference to Bacal (2009, p.54), this culture is supported by the ability to embrace diversity in the workplace where everyone’s ideas, perspectives, and working style is valued. In addition, the bank is a flexible employer so as to enable employees to have a good balance between their private and professional lives. It ensures that all the people who contribute to its business objectives access various benefits that enhance their safety, health, and wellbeing. Berger & Berger (2010, p. 165) further explain that the bank is keen on developing leadership capabilities within the workforce as a way of efficient and seamless succession management strategy. Due to the dynamic market needs, the bank’s major strategy is to implement a cost effective, sustainable, and sufficient funding system that meets the market liquidity needs. This strategy ensures that the bank is able to satisfy all the monetary requirements defined by the management and other monetary authorities (Spitzer, 2011, p.231). This approach is an effective way of maintaining the international profile of the bank and ensuring that all the interested parties understand its credit strength. Maintaining the credit rating is vital especially if the organization is to succeed and maintain it credit worthiness in the banking sector (Cheng, 2013, p.970). Therefore, a part of the strategy is ensuring that the rating agencies are well informed on the banks developments which influence the existing ratings. These banking developments influence the costs of wholesale funding which further affects the banks ratings and the performance of financial agencies that depend on its services. The bank’s credit rating is one of the key performance indicators that determine its financial position in the target markets. In his book, Parmenter (2010, p.10) elaborates that the domestic and international market is continuously becoming sophisticated; therefore, good performance indicators enhance the banks ease of access to its defined target markets. Also, the credit ratings reflect the ability of the bank to adapt to the changing market needs whose appetite for financial backing is increasing. In reference to Baroudi (2010, p.87), another performance indicator that shows the success of an organization is the employee turnover. He further explains that the higher the turnover the lower the chances of the organization’s success in the banking industry. Also, it indicates poor business culture and employee dissatisfaction which makes employees to leave the organization. Therefore, the ability to maintain a culture that retains workers is a good contributor to better performance indicators. In their article Asoka & Andries (2009, p.22), list one of the elements of the bank’s external environment since they affect its daily functions. According to them, some elements can be manipulated through marketing strategies while others require the bank to adjust to the external conditions. So, it is fundamental for the bank to monitor the external environment closely in order to warrant its market relevance. In addition, evaluation of the elements is essential for ensuring that the bank attains its main objectives and business functions. One of the external elements that influence the bank’s functionality is the local and international clients. These are the entities that the bank lends money with an interest rate in order to make profits. It means that clients are the elements that provide funds that ensure smooth operation of the bank through their deposits and interest charged on transactions. DeNisi & Budhwar (2008, p.54) state that customers are the ones that ensure survival of the bank and they can be successfully influenced through marketing and careful release of business information. The other external element is the government which makes the policies that regulate the banking industry. On the contrary, the bank cannot influence this element since it is a superior organ that determines its existence. Moreover, it is the one that creates the business environment which the bank operates depending on the formulated economic policies and development goals. This means that it is the government that creates laws and trading policies that the bank must follow (Spitzer, 2011, p.231). It is important for the organization to recognize the local and international perception about its services and credit worthiness. Analysis of these perceptions enables the bank to plan and react to particular market situations. This is because the public image of the bank influences customer confidence and profit margins. However, this element is can be manipulated using public relation strategies to the banks advantage by issuing strategic banking information. Also, monitoring public opinion is important for intercepting and defusing potentially damaging information before it spreads (Schmitt, 2013, p.825). In reference to Friedlob, Schleifer, & Plewa (2012), the economy is an external factor that the bank monitors so as to know how to react to it. It is important for the bank to adjust to the economic environment rather than manipulating the whole economy or some segments. The economy determines the lending rates, banking policies, financial standards, and the costs involved in running an efficient banking system. It is also the one that determines the market segments to pursue thus making it an influential external element. A key area for improvement within the performance management system is the implementation of integrated employee management software. Such integrated software tools are essential in maintaining employee efficiency which translates to improved morale and low employee turnover. Paladino (2008, p.34) defines that the management tools alleviate scheduling conflicts when handling a large number of people. This is because they ensure that employees get a fair share of employment benefits such as allocation of overtimes, leave, or bonuses. This is an important area to focus since it has the capacity to centralize the human resource operations which are essential for optimizing employee performance. The managers are able to track vacation and effective leave management so as to eliminate conflicting instances and low staff availability. Statistics indicate that the ability to track and manage employees improve operational efficiency by up to ten per cent depending on the size of the organization (Axson, 2010, p.76; Bacal, 2009, p.237). In addition, integrated solutions offer powerful reporting capabilities that indicate the performance of the business units. Due to the integrated nature of the system, the management is able to rate the performance of the workforce with respect to the other business units. It is from these comparisons that human capital can be transformed into strategic advantage to the business as a way of enhancing competitive advantage. Therefore, Cokins (2009, p.59) states that it is important for the bank to improve the management system in order to reap its maximum benefits. Hubbard (2011, p.123) argues that management software improves communication between the staff and the managers to their satisfaction. The application ensures effective messaging solutions between the parties which is a good way of increasing efficiency in the bank operations. Efficient communication channels ensure continuous flow of information thought the administrative matrix which increases operational efficiency by a large factor (Cameron & Green, 2012, p.320). The delivery of operational and strategic goals of the bank can be enhanced further through proper employee appraisal procedures (Harvard Business School, 2010, p.65). This is a critical area for consideration since well-coordinated procedures create motivation among employees. This is because they know that their hard work is rewarded in accordance with their effort. Therefore, the appraisal process is crucial for the organization since it estimates the employee capacities and their future potential. After conducting the process of employee appraisal, the bank is able to make well informed decisions such as transfers, termination, promotions, and salary hikes based on a given period of evaluation. Such mechanism encourages the employees to work hard since they know their contribution is duly appreciated. According to Cokins (2009, p.56), over fifty per cent of organizations that have effective systems have low employee turnover as compared to other companies without a defined system. Statistics indicate that organizations whose employee performance is measured and properly appraised contribute one third of the top industry performers (Delaney & Huselid, 2012, p.950). Therefore, it is important for the bank to connect its vision, values, and strategies with the performance of individual workers and teams. This business element increases the employee productivity and performance due to improved morale in the work environment. Another reason why this is a critical area for consideration is because it opens up efficient communication channels within the organizational matrix. Neely, Gregory, & Platts (2008, p.212) state that the channels promote continuous flow of information from the superiors to juniors and vice versa. Moreover, communication identifies areas of concern which need more training or attention so as to improve productivity and quality of products. Also, the superiors are able to gauge the professional progress of employees from the nature of information flow. In addition, the bank is able to identify star performers in order to prepare them for future duties that are higher in the hierarchy. This move ensures that the performers are properly motivated so as to achieve better results in the future as they take over higher responsibilities in the succession chain. On the other hand, the underperformers are given attention so as to improve their productivity or initiate the process of their replacement. In addition, they are made to realize that their future in the organization depends on their performance (Neely, Gregory, & Platts, 2008, p.213) The introduction of a highly integrated employee management system is one of the solutions for creating a better organizational culture, low employee turnover, and higher productivity within the banking units. Instead of using separate management systems, an integrated system will make it easier to manage employee affairs efficiently. In reference to Delaney & Huselid( 2012, p.951, the managers are able to optimize employee performance since they are able to gauge their progress with respect to the targets. Automation of performance management processes within the bank will ensure that data from different systems is centralized (Berger & Berger, 2010, p.98). It streamlines the process of financial planning, modelling, market forecasting, and management of employee productivity. The centralized information system promotes the availability of processed data to employees for easier analysis and decision making. Moreover, automation makes the process of employee training effective since they can access materials at their convenience. Automation also introduces real time monitoring of performance in order to establish trends and other statistical parameters relevant to the activity. According to Aguinis (2008, p.156), real time monitoring is a good way of identifying poor activity levels in order to make corrections for positive progress. He further explains that it creates historic patterns which enable better management of human capital and allocation of resources according to the business needs. According to Schmitt (2013, pp.825-826), the bank does not need to overhaul the whole appraisal system but tweak some aspects so as to make it a beneficial process for both the employees and the credit ratings of the bank. Therefore, the managers can make the appraisal system a tool for setting goals and targets for employees so as to ensure their productivity is maximized. So, the bank should engage the employees using a two way communication channel whenever performance appraisal is on focus. Although there is a periodic appraisal, continuous communication should be used as an extension of this process in order to tap the right talent. It also ensures that the right expertise and character is channelled into the succession process for the overall success of the bank (Berger & Berger, 2010, p.129). In addition, a consultative process develops trusts among employees and managers since it is open and fair. It improves the morale and productivity of employees since they know that their responsibilities are in accordance with their efforts. Therefore, communication is a critical factor that reinforces the ability of employees to plan, implement, and manage the steps required to attain the goals set by the bank. This makes it a critical area to take into consideration since the process introduces measurable, attainable, time bound, and relevant attributes. In reference to Cokins (2009, p.75), these factors define the criteria used to improve the performance management system in the bank as a means of improving performance indicators and credit rating of the bank. In conclusion, an improvement in the bank’s performance management system is an effective way for transforming the available human capital to strategic business advantage. The first tool is the adoption of an integrated system that centralizes the activities of the bank for ease of access and improved efficiency. In addition, Schmitt (2013, pp.824-826) adds that the management system can be further enhanced by using well trained, highly motivated, and innovative staff. This combination is vital for the purpose of creating a productive organisation culture, effective communication, automation of tasks, cost reduction, and succession management. These factors create a sustainable competitive advantage since the bank is able to operate within the set strategic parameters that maximise human capital. Bibliography Aguinis, H. (2008). Performance Management (2nd ed.). New Jersey: Prentice Hall. Asoka, G., & Andries, P. (2009). 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(2009). Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics. New Jersey: Wiley. Delaney, J., & Huselid, M. (2012). The Impact of Human Resource Management Practices on Perceptions of Organizational Performance. Academy of Management Journal, 949-969. DeNisi, A., & Budhwar, P. (2008). Performance Management Systems: A Global Perspective. London: Routledge. Friedlob, G., Schleifer, L., & Plewa , F. (2012). Essentials of Corporate Performance Measurement (5th ed.). New Jersey: Wiley. Hansen, K. N., & Alewell, D. (2013). Employment systems as governance mechanisms of human capital and capability development. The International Journal of Human Resource Management, XXIV(11), 2131-2153. Harvard Business School. (2010). Harvard Business Essentials: Performance Management: Measure and Improve the Effectiveness of Your Employees. Boston: Harvard Business Review Press . Hubbard, D. (2011). How to Measure Anything: Finding the Value of Intangibles in Business (2nd ed.). Boston: Wiley. Neely, A., Gregory, M., & Platts, K. (2008). Performance measurement system design: a literature review and research agenda. Journal of Operations Management, 210-215. Paladino, B. (2008). Five Key Principles of Corporate Performance Management. New Jersey: Prentice Hall. Parmenter, D. (2010). Key Performance Indicators (KPI): Developing, Implementing, and Using Winning KPIs. Boston: Wiley. Schmitt, W. (2013). Measurement invariance: Review of practice and implications. Human Resource Management Review, XXIII(1), 823-826. Spitzer, D. (2011). Transforming Performance Measurement: Rethinking the Way We Measure and Drive Organizational Success. New York: AMACOM. Read More