Assessment of Performance Management System of Woolworths Limited - Case Study Example

Assessment of Performance Management System of Woolworths Limited: A Professional Consultant Report Student’s Name Institution Executive Summary Smither and London (2009) maintain that every organisation requires an effective performance management system to carry out its business successfully. The most successful organisations in the world have been able to dominate the markets through well formulated performance management systems. Properly designed performance management systems also enable organisations to develop career paths for their employees and to continue dominating other businesses in the market. Some of the major performance management systems include performance review and development, individual reward system and goal setting (Varma, 2008, p. 18). One of the organisations that have succeeded through the use of these performance systems is Woolworths Limited. Woolworths has been in existence since 1924 and it currently dominates the Australian retail sector (Roth & Roth, 2011, p. 208). Table of Contents Introduction................................................................................................................................... 4 Overview of Woolworths Limited................................................................................................. 4 Review of Performance Management Systems at Woolworths Limited....................................... 6 a) Performance Review and Development............................................................................. 7 b) Individual Reward System................................................................................................. 8 c) Goal Setting...................................................................................................................... 9 Conclusion and Recommendations.............................................................................................. 10 Assessment of Performance Management System of Woolworths Limited Introduction The success of any business organisation mainly depends on its ability to attract retain its management personnel and junior employees who are talented and target oriented. The most successful businesses in the world obtain their competitive edge from well-formulated performance management systems. These businesses are able to speak out their objectives and goals through their effective performance management systems. The performance management systems also assist such successful organisations to develop career paths for their employees and to continue dominating other businesses in the market (Varma, 2008, p. 21). Every successful organization requires an efficient performance management system to carry out its business effectively. Woolworths Limited, the leading retailing organisation in Australia that has been in existence since 1924, understands the importance of relying on a properly designed performance management system. Woolworths Limited Company uses three major performance management systems that have seen it become one of the most successful brands in its line of business: performance review and development, individual reward system and goal setting. Overview of Woolworths Limited Woolworths Limited is one of the most renowned companies that trade their shares in the Australian Stock Exchange market. Woolworths was started in 1924 as a single shop that has now grown into large multiple outlets. The company is currently considered the largest retailer in Australia not only by sales capitalisation but also by market capitalisation. The recently conducted studies reveal that Woolworths is the largest retailer in food stuff in the entire country. The 2010 report compiled by Deloitte, one of the international accounting firms, ranked Woolworths Limited at position 19 among the largest retail companies in the world (Roth & Roth, 2011, p. 208). The company has about 190,000 employees, who help in the day-to-day running the company in the more than 3000 outlets it owns. The employees in the Sydney support office are more than 3000 since most of the company’s operations are conducted here. The company has also made sure that its operations run smoothly by employing close to 500 businesses in the entire country to carry out on site repair and maintenance on its behalf (Roth & Roth, 2011, p. 209). Woolworths has always maintained a good working relationship with its suppliers, since they account for the biggest portion of its business. It is through these suppliers that the company gets fresh farm produce to sell to its customers. The company’s leaders have devised ways of balancing the interests of the customers and those of the suppliers to boost the continuity of the business. Majority of the suppliers are also partners to the company and they play a great role in assisting it to come up with new products for different markets (Plunkett Research Limited, 2003). Woolworths’ business is basically driven by love for brands and this explains why more than 85% of the company’s grocery sales are purely taken from the national brands that the consumers are well conversant with. The business offers different varieties for its customers, and to make the customers excited, it constantly brings new products into the market. The company has been able to acquire and retain more customers through its numerous branded products, which are of great value and quality (Roth & Roth, 2011, p. 209). Woolworths, whose main goal is to become the leading retail business in the whole world, wants to be recognised as the top company in the line of sustainable retailing. As a result, the management system of Woolworths has integrated corporate responsibility and sustainability into the company’s operations. The 2007 establishment of “Doing the Right Thing: Sustainability Strategy 2007-2015,” came along with Woolworths’ targets, priorities and initiatives towards achieving the main goal (Roth & Roth, 2011, p. 210). The company also has a sustainability executive committee, which is constituted by the CEO and the general managers of the company’s trading and support divisions to see to the timely and cost-effective implementation of the company’s sustainability strategy. The committee carries out this task through reviews of legislative trends and public opinion, monitoring breakthroughs in achieving Woolworths’ goals, approval of business deals, and ensuring that the company complies with the relevant legislations (Roth & Roth, 2011, p. 210). Review of Performance Management Systems at Woolworths Limited The performance management systems at Woolworths Limited assist the company to set an effective basis for rewording good performance through comparing the accomplishments of individual employees to the company’s mission and goals (Williams, 2001, p. 31). The systems also assist both employees and the company to appreciate the need for a specific job in achieving the outcomes. This is mostly realised by erecting well-defined performance expectations, which mainly consist of actions, behaviours and results. The company is able to wipe out those operations that are of little use to it by setting proper standards and goals (Bourne & Bourne, 2011, p. 9). A good performance management system can be considered as a proactive way of managing employee accomplishments, which in turn drive the company and the workforce towards the company’s targets and goals (Cardy & Leonard, 2011, p. 28). To improve the suitability of the management system at Woolworths Limited, three major performance management systems of the company have been reviewed. The three include performance review and development, individual reward system and goal setting (Solomon, 2009, p. 9). Performance Review and Development The performance of every employee and all the personnel in the management team at Woolworths contributes to the overall accomplishments of the company. For that reason, all the workers should be encouraged to not only perform their duties in accordance to the highest standards but also to the best of their knowledge and abilities. Houldsworth and Jirasinghe (2006) argue that if the workers of an organisation are clear about its objectives, then they are able to perform better (p. 113). Use of the performance review and development system is one of the most effective ways of motivating Woolworths’ workers. It is done by recognising and rewarding individual achievements and setting of employee’s role within the context of the company’s business. It is also carried out by detecting and solving all the problems that may prevent the workers from exploiting their abilities fully. Performance review and development is done by combining two aspects: ratings and discussions (Fletcher, 2004, p. 31). In order to assess the performance management system of Woolworths, a review of the past performance was done to give employees a clear view of their contribution to the company. A review of the past performance was also important as the staff members were able to understand how their duties fit into the goals of their respective divisions and the importance of requesting for assistance when they need it. The review exercise encourages those who serve in the management team to accept responsibility for their own actions and development strategies towards achieving the company’s targets (Fletcher, 2004, p. 34). At Woolworths Limited, the annual meeting aimed at reviewing performance of the business is done twice a year. The first one is conducted in April where the employees and the general managers meet to discuss the employees’ accomplishments for the previous year. The team then agrees on the rating terms for the performance of employees and determines personal objectives for each one of them. The arrangement for such meetings is done at least one month earlier to avert any inconveniences that may arise (Houldsworth & Jirasinghe, 2006, p. 115). Another annual meeting whose main objective is to assess the performance against the company’s targets is done in October. This meeting assists the employees to comprehend their progress and establishes if the company’s targets are still worthwhile and achievable (Deb, 2006, p. 201). In order to ensure that both general managers and employees of the company get a clear understanding of their performance, the annual reviews are supplemented with regular 1-to-1 review meetings as is determined by the management (Waldt, 2004, p. 39). Individual Reward System The individual reward system is a performance management system that seems to be misunderstood in most of the organisations. Some managers argue that employee pay is the only way in which employees can be motivated to work harder. However, the employee reward system is one of the ways that the management can use to motivate the company’s employees. It is important that a company sets a proper individual reward system as employee remuneration directly impacts on his or her performance within his or her area of jurisdiction (Armstrong, 2002, p. 4). The management of Woolworths Limited uses a compensation system to determine the most appropriate amount of pay for each of its employees. The management uses a complex form, which contains various guidelines and rules that determine the salaries given to the workers at the company. The components of the individual reward system used at Woolworths include the ‘Pay Structure’, which determines the pay for various jobs, the ‘Pay Level’, which determines the salary paid according to the job market, and the ‘Pay Form’, which determines the makeup remuneration that the workers take home (Heneman, 2002, p. 16). At Woolworths Limited, the increment of employees’ salaries is based on a number of factors. These factors include cost of living, variations in job scope, employee performance, an increase in the employee’s qualifications in most cases academics, and variations in the labour market. The company has been able to attract and retain high-class performing employees by using an appropriate compensation system. The system has also helped the management of the Woolworths to motivate the company’s employees to carry out extra duties and do their roles adequately (Nelson & Quick, 2008, p. 161). There are great consequences that come as a result of reward satisfaction and reward dissatisfaction. Pay satisfaction has greatly assisted Woolworth to obtain a huge membership from its customers and the suppliers, who are also its partners. The fact that there are a big number of employees that are retained by Woolworths shows that the company’s workers are satisfied with their salaries. Although pay satisfaction cannot motivate an employee to exhibit the extra duty trait, it is the main motivator and advocate for the adequate role behaviour portrayed by Woolworths’ workers (Griffin & Moorehead, 2012, p. 159). Goal Setting Every business plan contains a mission statement that explains what the business intends to achieve in the future. Even though the statement is the main driving point behind goal setting, it may not necessarily explain how a company can achieve its goals. A business goal in the case of Woolworths Limited refers to the actions that the company is prepared to take so as achieve its objectives, which include becoming the leading retailer in the entire world by 2015 (Daft, 2010, p. 159). At Woolworth Limited, the goal setting process appears to have been based on the principle of SMART, which strongly argues that an effective business goal should be specific, measurable, attainable, realistic and timely. Woolworths’ main goal, which is to become the leading retailer in fresh farm produce in the world by 2015, is specific in nature. It is precise given that it offers a target that every Woolworths’ employee should strive to achieve (Koontz & Weihrich, 2010, p. 251). Woolworths’ main goal is also measurable; a goal that is specific becomes automatically measurable since it has been set against a target that is practical and achievable. The company will be able to measure its goal in 2015 if the company will have been ranked the leading retailer in the world. The fact that the company has been able to dominate the entire retailing market in Australia indicates that it can attain its goal of dominating the world’s retail market (Rouillard, 2003, p. 3). A good business goal should be realistic and timely; Woolworths’ goal is realistic and has a reasonable time frame for its attainability. It is possible for Woolworths to work towards becoming the leader in the retailing sector in the entire world. The time frame that the management of Woolworth has set is 8 years, which is also reasonable. During this time, the management and the employees will be able to level out the company’s weaknesses to enable it to achieve this goal (Wilson & Dobson, 2008, p. 57). Conclusion and Recommendations Although the management of Woolworths has done a lot to ensure the success of the company, there are other improvements that it needs to incorporate into the existing strategic plans for better performance of the company. Firstly, the managers need to ensure that each member of staff has a well-defined task to carry out to avoid overcrowding some personnel in one line of production leaving other lines without enough workers. Any changes to an individual’s job description should be authorised by a division manager in an official manner to avoid dispiriting the affected employee. Secondly, the managers of Woolworths Limited should revisit the time frame set for achieving the company’s goal. The time that is currently set appears to be slightly longer than is necessary, which could compel the employees to become reluctant to exploit their abilities fully. The management should reduce the time from 2015 to 2014. Business technology has been constantly improving and the company’s management can get every tool it needs to improve Woolworths’ operations and accelerate the realization of its goals. Lastly, the management of Woolworths should also link the individual reward system to the organisation’s objectives and strategies instead of associating it with the employee performance. To attain this, the management should identify the kind of achievement that the company’s employees need to accomplish so as to make the business achieve its goal. The system will also ensure that the team rewards the most effective individuals and the teams with the best performance. References Armstrong, M. (2002). Employee reward (3rd ed.). 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