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Introducing Performance Management

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This report is an attempt to analyse the existing Performance Management System for Large Financial Service Organisation (LFSO) and from this information, recommend, and implement an appropriate new performance management system.

LFSO is an organisation, which traditionally has a paternalistic culture with low levels of unionisation. LFSO current Performance Management system was implemented two years ago changing the nature of the previous incremental salary scales described as Prerogatives by Lupton and Bowey and led to the abolition of the annual cost of living increment. This change by LFSO was an attempt to achieve a strategic, integrative and flexible approach to pay, in order to address its organisational objectives. Therefore it ЎҐreflected on a pluralist approach with the use of job evaluated grade structures regarding financial rewards and benefitsÐŽ¦. (Heery, 1996) despite the fact that with most paternalistic culture have a Unitarist approach to Performance Management systems.

Initial research conducted by the organisation indicated that objectives are not always established and reviews were spasmodic. There was a high degree of resentment between the different members of staff leading to unhealthy competitiveness and unwillingness to support others. (Kerr, 1995) describe this behaviour as ЎҐesprit de corpsÐŽ¦. This resulted in an increase in general grievances. The BFU have been aware of this anxiety and have started a strong recruitment drive amongst employees but no figures on existing membership were available.ÐŽ¦

In general, both employees and management did not fully understand the scheme at its inception and saw it simply as a cost cutting exercise. The reward levels introduced were seen to be too small to act as a ЎҐmotivatorÐŽ¦. There was also debate about the role of the annual appraisal interview as there was no consensus view on the purpose of these, which were regarded as an ЎҐinconvenienceÐŽ¦.

Now two years into the scheme, LSFO is facing the threat of a ЎҐBargaining UnitÐŽ¦ or possible Unionisation. Alongside high levels of dissatisfaction from employees and some line managers who have also expressed serious concerns about their role in the process. The system itself is under severe criticism with large numbers of appeals although only a very few of these have been upheld. Performance results currently could be described as ЎҐPoorÐŽ¦ due to the new system and negative behaviour has resulted from the low monetary reward system.

Therefore the psychological contract defined as ЎҐ the set of expectations held by the individual employee the specify what the individual and the organisation expect to give to and receive from each other in the course of the working relationshipÐŽ¦ has deteriorated.

A summary of this research is shown using Winfield, Bishop and Porter SWOT analysis (Please see Appendix A), which evaluates LFSO organisational ЎҐfitÐŽ¦ between the Performance Management system and its organisational objectives.

Within this SWOT analysis we have noted the following factors:

Strengths: Mutual Understanding of Results/Expectations

Organisational Objectives and goals reflected in PMS

Appraisal system

Weaknesses: Possible Unionisation amongst employee base

(Third party Pressure)

Competencies not clearly defined

Amount of Reward

Opportunities: Transparency of Scheme

Employee contribution to PRP Structure

ЎҐImportance of FairnessÐŽ¦

To learn and grow

Employee Involvement in System

ЎҐQuality TimeÐŽ¦ for Managers with employees

Threats: ЎҐEsprit de CorpsÐŽ¦

Financial Restraints may increase salary bill without improvements in organisational performance.

Resistance to Change factors

Therefore additional research will need to be conducted. This will include the following:

„h Defining Performance Management and its key elements

„h Compare and evaluate LFSOsÐŽ¦ Performance Management system against Company X


So what is Performance Management and its key elements?

Performance Management can be defined as, ЎҐa strategic and integrated approach to increase the effectiveness of organisations by improving the performance of the people who work in the team and by developing the capabilities of teams and individual contributorsÐŽ¦, and also can be seen as a ЎҐcontinuous process involving reviews that focus on the future rather that the pastÐŽKÐŽ¦ (Baron and Armstrong, 1998; 38-39)

It is also described as not simply the appraisal of individual performance:ÐŽ¦ it is an integrated and continuous process that helps develops, communicates and enables the future direction, core competencies and values of the organisation, and helps create an horizon of understandingÐŽKit identifies who or what delivers the critical performance with respect to business strategy and objectivesÐŽ¦. (Hendry et al, 1997)

Performance Management regarding LFSO is simply defined by (Swabe, 1989:17) ЎҐ as system in which an individuals increase in salary is solely or mainly dependent on his/her appraisal or merit ratingÐŽ¦.

Therefore, Performance management is ЎҐthe process of creating a work environment or setting in which people are enabled to perform to the best of their abilitiesÐŽ¦.

Key elements in a Performance management system are listed below

„h Setting of corporate, department, team and individual objectives.

„h Performance Appraisal Systems

„h Reward Strategies and schemes

„h Communication, coaching and feedback.

„h Training & Development Strategies and plans




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