Strategic_Hr

Executive Summary In this report, an analysis on comparative Performance Management System (PMS) strategy study was performed on two organistion that are General Electrics (GE) and British High Commissions (BHC). As described in the introduction of this report, Performance Management System systems is a strategic and organizational approach, that defines, evaluates, executes, and improves organizational performance continuously. It is seen as an integrated process in which manager work with their employees to set expectations, measure and review results, and reward performance, in order to improve employee performance, with the ultimate aim of affecting organizational success positively (Mondy et al., 2002). GE has long been using the forced ranking as its former CEO, Jack Welch is often associated to this method. It’s explained in detail on how this method was carried out and the success ripped from using it though it is a very challenging methodology. This been said because it is costly to eliminate the lower 10 percent annually and the adaptation time taken by the new recruits. Whereas BHC has adapted the MBO method with SMART incorporated. An evaluation on the challenges and potential problem leading to the usage of the current methodology was highlighted. Finally, a recommendation of the best used measurement for both organization was elaborated. The recommendation was to adopt the Balance Scorecard (BSC) as it will best suit especially with the complex and growing number of units such as strategic business units, subsidiaries and the extended venture which are tough to scrutinize directly.   Table of Contents 1.0 Introduction 1 2.0 Introduction of General Electrics (GE) & British high commission 2 3.0 Similarities of pms in both organization 5 4.0 Differences of pms in both organisation 6 5.0 Evaluation of method used (adv) 7 8.0 Challenges (weaknesses) 9 9.0 Potential problem (biasness….) 11 analysis of organisation productivity 12 recommendation 14 conclusion 16 10.0 Appendices 17 1.0 INTRODUCTION Performance Management System (PMS) (Figure 1) is defined by Armstrong and Baron (1989) as a strategic and integrated approach of conveying continued success to institutions by developing the people in a way that improves group and personal performance’ (cited in Qureshi, J. et al. 2010). Schultz, Bagraim, Potgieter, Viedge and Werner (2003:74), described the objective of performance management is to improve results at the individual, team and organisational level. They also stated that “performance management is a process that directs the energy of people in an organization towards achieving strategic goals”. Contrasting from the conventional methods of management by command, performance management is based on the theory of management by agreement (Armstrong, 2001:465). The term PMS is also traditionally known as appraisal system. The goal of PMS is mainly targeted to achieve the company mission and vision. In order to achieve this objective, an organization should outline a clear and well defined guidance to what is expected and flexibility for an employee nurture the strength to understand what the organization aspires to achieve. Performance management incorporates multiple contact points between managers and subordinates (Budworth and Mann, 2011). Performance management should provide an enabling framework to integrate performance improvement activities” (Philpott & Sheppard: 1992:98). Figure 1: Performance management cycle   2.0 INTRODUCTION OF GENERAL ELECTRICS (GE) & BRITISH HIGH COMMISSION GE, a global business based in Fairfield, Connecticut, United States. Having earned a global recognition, it has also been ranked at 6th in the Fortune 500 in 2011. GE owns much diversified business as a result of acquisitions, divestitures and reorganisation. The current chairman and the chief executive officer is Jeffery Immelt who replaced the legendary Jack Welch. GE operates in over 100 countries with a large number of employees which totals about 315,000 worldwide. GE Way is the company’s general management style. A continued appraisal and evaluations aids to evaluate performance and maintain the standards that GE leaders aspire to personify. Effective appraisal systems should address clarity, openness, and fairness; recognize productivity through rewards; and be cognizant of appraiser leadership qualities (Winston & Creamer, 1997). The annual ‘Session C’ management and organizational talent reviews are premeditated to recognize persons appropriate for higher roles or potential individuals to be promoted to senior positions. Jack Welch believes in giving profit and loss accountability in advance as that will groom a superior promising blue-collar talent. Jack Welch practiced forced ranking method during his term at GE to remove the bottom ten percent of performers each year. Forced ranking (FR) is a performance intervention, which can be defined as an evaluation method of forced distribution, where managers are required to distribute ratings for those being evaluated, into a pre-specified performance distribution ranking (Cooper & Argyris, 1998). The performance ranking is then applied in a bell curve. He believes in rewarding the top performers, develop the middle category and dismiss lowest ranked. This is also referred to as “rank and yank” whereby rank subsequently yanks out the worst ones. Figure 2: Type of Forced Ranking and How It Works In forced distribution performance appraisal, achievement of staff is judged. An A performer is compensated munificently and groomed for management roles (Grote, 2005) The B performer is put into performance improvement plan or a modified “management by objective” (MBO) is drawn out and coached by the manager. Finally, C is the lowest ranked performer, identified as not meeting the performance criterion (Figure 2). This technique of forcing managers to delineate performance has been called brutal and Darwinian (Morrison & Keefe, 2003). In Welch’s article, "The Case For 20-70-10," Welch admits, "More typically, when a person has been in the bottom 10% for a sustained period of time, the manager starts a conversation about moving on." GE described as a performance-driven organisation, Welch encourages GE managers to work to their competence limits thus develop ability to outperform its peers. Foreign and Commonwealth Office (FCO), is a government department that takes care of all British concern abroad around the world. These offices are led by a senior diplomat with the designation of Ambassadors, High Commissioners, Consuls, Governors and Heads of Delegation. These are representatives of UK Government and the British people. In capital cities, it is headed by an Ambassador whereas Commonwealth countries, it is identified as High Commission and led by a High Commissioner (BHC). In Malaysia, BHC has about 126 employees both local and British origin handling various tasks having an attrition rate of about 12 percent. They work toward achieving the established goals and objectives. BHC on Competency Based Performance Management. This is an important element as it is a Government Organization and there are certain principles that they would want to uphold in order to ensure that the Objectives are achieved in the proper way (Subramaniam, 2012). The activities of BHC are guided by a comprehensive system of management by objective. Management by Objectives (MBO) is a theory of management proposed by Drucker (1956). Greenwood (2001) defined MBO as a broader term that encompasses managerial decisions and actions that help to ensure that an organization formulates and maintains a beneficial fit with its’ environment consistent with its objectives and goals. BHC is closely linked to the yearly Country Business Plan (CBP) from the Government of London (Her Royal Majesty) which is constituted in the overall mission and vision of the organisation and is the accountability and responsibility of each department and their Heads. For example, The Public, Economic and Political Division (PEPD) have a few objectives one of which is to ensure Malaysia is in support of Britain’s go green Environment Policy. This is then further cascaded down as part of an objective to the Department Head who will then cascade it further down to the Line Manager/ Job Holder in the Department and will be ascertained as part of staff’s Key Performance Indicators (KPI). BHC incorporates SMART (specific, measurable, achievable, realistic, and time-based) mnemonic to summarize the desirable characteristics of an objective. Once the objective has been established by each of the Department Heads the means to reach this objective will be established through Key Performance Indicators (Figure 3) (Subramaniam, 2012). Line Managers will notify their employees on starting the goal setting process for performance year and indicate the time frame in which they intend to have the process completed. The degree of the goal attained becomes the individual’s performance appraisal (Sims 2002a). Dobby, Anscombe, Tuffin (2004) found that objective setting and employee empowerment as implied in the MBO are relevant to leadership. The goals are quantifiable, objective and written. During this time frame, both the Line Manager and employee meet intermittently to review. At the final stage, where the objectives are agreed on, the execution commences and employees ‘sign off’. BHC also conducts a midterm review which is done every 6 months. This is practised to ensure that the job holder and the Line Managers are on track with the objectives. Feedback is given to develop area that needs improvement. BHC also practices a 360 degree feedback for Performance Management. Hence feedback attained is not only from the Line Manager but it is also crucial that feedback is attained from all parties who deal with the Job Holder on a daily, weekly, monthly or yearly basis (Subramaniam, 2012). Figure 3: Model of the MBO Process Source: http://mgt201.tripod.com/notes/planning.html   3.0 SIMILARITIES OF PMS IN BOTH ORGANIZATION The performance appraisal is an integral part of a human resource management system. In addition to allocating rewards, organizations use appraisals to provide developmental advice to employees, as well as obtain their perspectives and justice perceptions about their jobs, departments, managers and organizations (Erdogan, 2002; Holbrook, 2002; Longenecker, 1997). It is obvious that both GE and BHC are using PMS to provide feedback on strength and weaknesses to management, to apportion rewards, reduce turnover and to create paper trail of documentation (Milkovich and Boudreau, 1994) even though the method used to identify them is different. 4.0 DIFFERENCES OF PMS IN BOTH ORGANISATION MBO (BHC) Forced Ranking (GE) Result focused Predetermined percentage of rates Manager delegation by negotiation No whatsoever discussion between manager and employee Broken down to specific goals achieved Employee judged of his own achievement Impact on productivity Impact on staff force Goals and objectives are written down Reward based on individual achievement over teamwork and team based goals Individuals given specific aims and targets Dictating goals and objectives 5.0 EVALUATION OF METHOD USED Companies adopt forced distribution method is because of their compensation system that relies on pay off for performance rated as the merit of distributing increase. Manager rate everyone high in order to maximize the reward to every member of the team. It also forces company to articulate the criteria required for success in the organization. GE identified their four Es that is used to rank its managers and executives. The four Es are high energy level, the ability to energize others around common goals, the edge to make tough yes/no decisions, and the ability to consistently execute and deliver on promises (Figure 4).