Performance & Reward System - Ericsson Company - Case Study Example

Running Head: PERFORMANCE & REWARD SYSTEM Topic: Performance & Reward System- Case Study “Ericsson Company" Lecturer: presented: Introduction Performance management is an important aspect of organizations, which is concerned with the issues regarding employees. It focuses on the relationship between the employer and the employees (Brown and Perkins 2007). The system of performance management starts when employees have clearly defined duties in the workplace and ends upon termination, resignation, retirement or any other time that an employee becomes detached from the organization. It is the process in which appraisals are conducted in regard to how employees accomplish their tasks. On the other hand, reward management is concerned with identifying the motivating aspects of employees which leads to the classification of the amount of pay, compensation and other incentives (Chiang and Birtch 2005). The purpose of the literature review is to help in understanding performance management. The paper presents a case study of past experience attained from the Ericsson Company, Saudi Arabia Branch. The paper is a critique of the performance and reward system in the organization, which highlights the strengths and weaknesses of performance and reward system in the company. It also offers brief information about the company and its branch in the Kingdom of Saudi Arabia, the positive and negative aspects of the company’s performance and reward system, their positive and negative impacts on employee satisfaction, and finally an analysis of the effectiveness of system as well as recommendations regarding how the organization’s performance and reward system can be changed in order for it to allow the accomplishment of organizational goals. However, the report has a limitation in the sense that the experience in this company was acquired 2 years ago, and its performance and reward system might have changed with time. The paper was prepared from information obtained through observations while working in the company, and interactions with employees, as well as the company magazine as well as journals on performance and reward management. Brief Information about the Ericsson Company and its Branch in the Kingdom of Saudi Arabia Ericsson is a Swedish multinational company that operates through foreign subsidiaries globally. It offers communication systems and services, which include a variety of technologies such as mobile networks and equipments. It also provides fixed network services world wide. These are mainly provided through foreign subsidiaries. Its subsidiary in Saudi Arabia was established in 1980. It operates in through three branches of the Saudi Ericsson, with 360 employees who are professionals in communication technology and other fields of management. It mainly targets the Saudi Arabia market, as well as the enormous market in the Middle East. The market is continuously expanding as the demand for communication solutions increase with the increased awareness and need for communication that is being facilitated by globalization of communication technology. The organization seeks to remain committed to the provision of modern communication equipment and services. Its mission is to combine systems and services and developing them in to viable commercial ventures for the clients (Darrat 1984). It has established useful partnership with local companies such as Tyco, Softex, and Commtech Wireless amongst others. The Performance and Reward System of Ericsson Company While working as a Human Resource Management supervisor in the organization for 2 years, I acquired substantial experience in the performance and reward management. I realized that the system had a number of strengths and weaknesses, which had an impact on employee productivity. The company used to apply performance management principles that generated enthusiasm among the employees, which were major determinants of performance, and realization of company goals. Diversity of human resources and promotion of team work by the management allowed employees to share ideas and participate effectively in finding solutions to issues affecting their productivity. Career development was one of the issues that were held in high regard in the organization, with employees being offered regular training in the workplace, and development programs to upgrade their skills. In essence, this enables the employees to remain informed regarding the changes occurring in the global market place (Gollan and Perkins 2007). To ensure that employees are exposed to information, the organization maintained an online education program. This was a significant strategy for performance improvement. In regard to the organizations reward management, the employees’ remuneration was based on performance. They received incentives and benefits through the same criteria of performance based reward system. The company operated under believes that the reward system served as the connection between the employees’ performance and the accomplishment of organizational goals, and that it enhanced employee satisfaction which is critical to their performance and retention. The rewards consisted of salary and bonuses, a pension system and an offer for investing with the company’s stock, personal development schemes such as healthcare insurance, occupational health plan, and facilitation to accomplish a work-life balance as well as paid holidays amongst other reward schemes. Employee Satisfaction Waldman (1994) observes that employees are likely to have different views in regard to an organization’s performance and reward systems. Some viewed the Erickson as one of the best organizations to work in. Continuous learning and provision of e-learning by the organization positively impacted on the employees’ satisfaction. Many felt empowered by the attainment of skills through learning in the workplace. In regard to maintenance of work-life balance amongst the employees, the organization was known to be family focused, and employees were usually satisfied with the paid holidays and the support that the organization offered for the employee’s families, such as health cover. Many of the employees were contented with the organization’s social responsibility both in the workplace as well as in the community, which made it a prestigious organization to seek employment. It presented a working environment that many employees desired. Team work in an organization is usually highly appreciated by employees (Perkins and Hendry 2005). The management promoted group work, which helped in sharing ideas and finding solutions as a team. Managers would request the contribution employees while setting departmental goals. They also invited them for recommendations concerning the procedures for achieving these goals. Involvement of employees in such activities served as an indicator of the management’s appreciation regarding the employees’ contribution. This practice promotes satisfaction and high commitment amongst employees (Hendry et al 2000). Many felt that they were part of the organization and they worked hard towards the accomplishment of the organizational goals. The departments worked in cooperation, which made the employees to feel as part of the whole organization and not as a single department in the system. The management solved the problems of the employees considerately even during the hard economic times. The employees were assured of job security, which according to Feldman (1996) is an important determinant of performance. However, even with the many factors that were encouraging and promoting satisfaction amongst the workers, there were a number of factors that hampered employee satisfaction. Sometime the employees felt that appraisals were not tied to performance. Rather, many people were promoted on the basis of the period they had worked for the organization. This is one of the factors that contribute to discontent amongst employees (Allen et al 2003). It demoralizes them due to the fact that they find no reason to work hard for even if they do, they have to work over a certain period in order to qualify for promotion. In this sense, the newly employed in Ericson were non enthusiastic in matters regarding promotion. More over, the parameters for performance measurement were not satisfactory to the employees. They were gauged according to the number of hours worked in a day regardless of the amount of work done. This is also another reason why employees get dissatisfied with organizations. Focusing on the number of hours worked may encourage reluctance amongst the employees since the output does not matter. It is the reason why employees claim that they are overworked in many organizations (Bartol and Srivastava 2002). More over, the management did not show signs of concern regarding the employees’ sentiments regarding the number of hours worked per day, which lowered the worker’s morale. There was also a major drawback regarding the organization’s Information Technology support tools. This means that the employees were required to be competitive in issues that required the use of the IT systems, which were not available for them. In performance management, the employees are supposed to be judged on the basis of the existing organization’s apparatus that are available for use. On the other hand, employees were also dissatisfied by the fact that performance measurement was not applied to the employees as individuals. Rather, they were always assessed as a group, which meant that a person could be judged on the basis of other people’s failures, regardless of their efforts in accomplishing the tasks allocated to them. Reflection Performance management is a critical component of an organization, which determines its capacity to accomplish its goals. It is a major determinant of the accomplishment of organizational goals. In order for an organization to be effective in managing the performance of employees, it is important to focus on a broader view of all the aspects affecting employee performance. From a reflective perspective, Ericsson Company disregarded some of the critical aspects of performance measurement, although it was able to maintain good performance through a number of positive approaches towards dealing with issues regarding facilitating the performance of employees. If a balance is not accomplished there will arise situations whereby employees will be dissatisfied with their work, a factor that may contribute to ineffective performance. The Ericsson Company had a strong performance and reward management system, but there were some drawbacks that led to dissatisfaction amongst the employees. Satisfaction is usually achieved when every employee feels that he/she has been treated fairly. The Company was unable to establish this balance due to failure in the provision of Information Technology equipment, and inappropriate performance appraisals as well as promotions. Conclusion and Recommendations There is need for change, while maintaining the desirable practices in the performance and reward management system. Failure in performance and reward management leads to discontent amongst employees of an organization. It is highly recommended that a review of the equipments available for work as well as the criteria for appraisal and promotion be conducted in order to ensure that satisfaction is maintained among the employees. It is also recommendable that the organization ascertains that organizational learning and career development as well as teamwork are maintained. These are strong strategies for performance management that are important in the maintenance of the organization’s productivity. It is important for the management to establish a strong rapport with the employees in order to build confidence in them and understand the issues affecting their performance. It is also imperative to be analytical through making a comparison between the organization’s performance and reward system with that of similar organizations. For example, it is recommendable for the organization to maintain the reward management scheme, but from an analytical point of view, the organization’s performance management is does not match with the reward system. It is highly recommendable that congruence is maintained between the two aspects of the organization. References 1. Allen, D.G., Shore, L.M., and Griffeth, R.W. (2003). The roles of perceived organizational support and supportive human resource practices in the turnover process", Journal of Management, Vol. 9 (1) pp. 99-120 2. Bartol, K.M., and Srivastava, A. (2002). Encouraging knowledge sharing: The Role of Organizational Reward Systems, Journal of Leadership and Organization Studies, Vol. 9 (1) pp.64-76 3. Bock, G.W., Kim, Y.G. (2002). Breaking the Myths of Rewards: An Exploratory Study of Attitudes about Knowledge Sharing, Information Resource Management Journal, Vol. 15 (2) pp.14-21. 4. Brown, D. and Perkins, S. J. (2007). Reward Strategy: Making it Happen, World at Work Journal, Vol. 16(2) pp. 82-93 5. Chiang F. T. and Birtch T. A. (2005). A Taxonomy of Reward Preference: Examining Country Differences. Journal Of International Management, Vol. 11(3) pp. 357-375 6. Darrat, A.F. (1984). The money demand relationship in Saudi Arabia: an empirical investigation, Journal of Economic Studies, Vol. 11 (3) pp.43-50 7. Feldman, L.P. (1996). The role of salary and incentives in the new product function, Journal of Product Innovation Management, Vol. 13 (3) pp.216-28 8. Gollan P. J. and Perkins, S. J. (2007). Conference Review: Voice and value: dilemmas of workforce "incorporation"?, Human Resource Management Journal, Vol. 17(1) pp.94-96 9. Hendry, C., Woodward, S., Bradley, P and Perkins, S.J. (2000). Performance and Rewards: Cleaning out the stables, Human Resource Management Journal, Vol. 10(3) pp. 46-60 10. Perkins, S. J. and Hendry, C. (2005). Ordering Top Pay: Interpreting the Signals, Journal of Management Studies, Vol. 42(7) pp. 1443-1468 11. Waldman, D.A. (1994). Designing performance management systems for Total Quality implementation. Journal of Organizational Change Management, 7(2) pp. 31-44 Read More