Performance Management In Asda Management Essay
In critically reviewing past and present performance appraisal systems, a little perspective on the background of performance appraisals is in order. Performance management is not new. Researchers found a reference to performance management, an "Imperial Rater," in the Wei Dynasty in China which flourished during the third century A.D. Although performance management theory and practice in the United kingdom started with the Industrial Revolution in the late 18th century, the widespread use of performance appraisal techniques with blue-collar employees didn't start until after World War I. Appraisal systems for measuring managerial and professional employee performance weren't used extensively until about 1955. (Murphy and Cleveland, 1995)
The earliest performance appraisal programmes during the Industrial Revolution were relatively crude and simple. Workers were evaluated and paid primarily on the basis of quantity output-the number of "pieces" they satisfactorily turned out. Frequently, management provided for bonuses and other tangible rewards to recognise employee contributions to the company.
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It was not until later that managers recognised that in many jobs, the quality of work produced also affected an individual worker's impact on the organisation. Then, evaluation procedures and compensation plans were expanded to incorporate work quality, in addition to quantity. (Taylor, Fisher and Ilgen, 1984, 231-272)
Various appraisal systems used were based on standards set up to measure worker performance. In the simplest systems, those standards were established through direct observations by the boss, often with a stop watch in hand. In the more-elaborate systems, detailed standards were developed in advance for every small movement of the worker. For example, you could find in such standards, phrases like "reaches two inches," "grasps and pulls upward," or "releases the widget within five seconds," and so forth. Performance elements contained in the stop-watch approach, as well as the detailed worker standards, were then combined in approving time standards for each job on a production line (Murphy and Cleveland, 1995).
Work output gradually shifted from directly-measurable physical activity to more-complex tasks requiring the application of greater skill, knowledge, and ability. That's when more elaborate performance standards or yardsticks became necessary. At first, these yardsticks were very subjective in nature, and were typically based on the supervisor's assessment of the character and personality traits seen in subordinates. The character and personality assessment was then combined with the boss' overall evaluation of quality and quantity of work produced.
Among the personality and character traits assessed were such ambiguous elements as loyalty, honesty, attitude, initiative, cooperation, resourcefulness, and ambition. Many early appraisal systems also covered elements like attendance, promptness, compliance with job instructions, acceptance of responsibility, and adherence to tour-of-duty rules. (Peters & Oââ‚¬â„¢Connor, 1980, 391-397)
Thus, early performance measurement was often highly-subjective and allowed rating officials far too much personal latitude. When faced with worker complaints and appeals of their performance ratings, supervisors had a difficult time explaining their evaluation subjectivity. Management needed a better way to appraise employee performance that would emphasise more job-relatedness and easier-measured elements with the core factors being work quality and quantity. (Harris, Smith and Champagne, 1995, 151-160)
When the concept of management by objectives (MBO) became widely recognised in the 1950s, both managers and supervisors looked to MBO to provide a more-meaningful way to appraise the performance of professional and managerial employees. Two basic types of performance management systems for managers and professionals were developed.
The first was based on goals, where the subordinate would accept, or commit himself to achieve certain pre-approved goals, in line with those of his organisation. In the second type, key accountabilities (often called key job impact areas) were identified. Then, performance standards were set for major activities necessary for success in these key accountability areas.
Were these goals and accountabilities appraisal programmes effective? It soon became apparent that these two programmes had certain strengths. But despite them, the trendy programmes didn't prove as useful in appraising professional and supervisory performance, as expected. (Bretz, Milkovich and Walter, 1992, 321-352)
Since goals and objectives are primarily forecasts of what could be achieved, employees soon recognised that a variety of external influences might affect actual job achievement. Sometimes the boss made allowances for these external events, such as budget cutbacks, abrupt work rule changes, or impacting economic problems. At other times, subordinates were unfairly held responsible for matters beyond their control. Obviously, the latter situation was unacceptable.
Persons who achieve a higher proportion of their goals over time are likely to be more competent than those who do not. But an appraisal system that rewards luck and disregards real effort and competence is more capricious than fair and is not likely to be respected. Another problem with appraisal systems that rely primarily on setting goals and assessing their achievement is the process used in goal-setting itself. Soon, employees being evaluated on the basis of goal achievement, realise that setting lower goals is a much "safer" career strategy than to strive constantly for higher more difficult to attain ones. Rather than work hard to achieve tough goals, more likely they will negotiate with the boss to approve easier-to-achieve goals and objectives.
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In view of the difficulties with performance appraisal systems based primarily on goal achievement, combination systems have become increasingly popular throughout the UK today. The combination systems take advantage of the best features of various systems (goals and objectives, quantity and quality standards, and key accountability elements). Wider use is now being made of peer ratings and of appraisals or review by higher-level supervisors to try to avoid the usually heavy subjective influence of a single evaluator.
Innovative use is now being made in some organisations of a self-appraisal system, especially for managers and higher-level professionals. Advocates of the self-appraisal approach say it has these advantages: (1) It motivates the incumbent to take more responsibility for his own performance and growth; (2) Appraisal can be performed as often as believed necessary throughout the year because it can be initiated by the person being assessed; (3) It can be clearly focused on job behaviour, avoiding confusion with other issues such as compensation, promotion, lateral transfer, or training; and (4) Performance ambiguity is decreased, creating the potential for more timely and specifically-focused job behavioural changes. (Carroll and Schneier, 1982)
To be truly successful, a performance appraisal system should incorporate the following principles of effective performance management:
Employee Involvement. It is critical that managers and supervisors involve their employees in the design and later-required revisions of their performance appraisal system. By giving employees the opportunity to play a meaningful role in designing or revising their appraisal program, you build a greater understanding, commitment and support of the program from the start.
Workers should be asked to help bring their position descriptions up-to-date, assist in defining critical and non-critical job elements, make rough drafts of performance standards for supervisory-management review and approval, help design appraisal forms, review and comment on proposed appraisal procedures, and help develop training materials.
Supervisors and higher-level managers should retain their prerogatives and control over broader performance management issues, such as formulating and communicating organisational mission statements, approving annual goals and objectives, and enunciating bottom-line values. In many organisations top management is the final approver of performance standards for Chiefs of Division-level or higher work units.
Objectivity Emphasised. Effective performance management is not simple. Doing it well requires considerable empathy, strong emotions, and much care and concern. Appraising employee performance is a complex and confrontational undertaking for most supervisors and managers.
In the British culture, heavy emphasis and value is placed on work, what happens in the nation's workplaces, and the manner in which assigned tasks are accomplished. Within certain bounds in a democratic society, what really matters in our workaday world is results, not the personality and character employees display in getting the job done.
Therefore, it is important that a performance appraisal system emphasise the elements one can most "objectively" measure, such as work quality and quantity, accomplishment of goals and objectives, and completion of key accountabilities. The system should not deal with subjective factors such as worker personalities and character.
Linkage of Goals. Individual worker goals, as approved by the supervisor, must linkup with the overall mission and goals of the organisation. The bottom line of an effective performance appraisal system is to improve performance, in line with mission needs, not simply to measure how employees are completing tasks. (Carroll and Schneier, 1982)
Without this vital linkage of employee and organisational goals, a tug-of-war can occur. Employees may be working hard and giving their all, yet pulling in opposite directions. Occasionally, organisations find it necessary to redirect workers to get them to pull in the same direction, only unhappily to discover later that they are now all pulling the wrong way. To avoid such problems, goal setting should be done from the top down and each worker's goals tied to those of the overall organisation.
Hold Boss Accountable. A major part of the performance appraisal of managers and supervisors should be tied to how well they plan for, motivate, and assess the performance of their own employees. Persons who manage or supervise others have a joint obligation to their organisation and to their workforce. A firm depends on its managers and supervisors for the effective performance of the entire organisation. Employees trust these same managers and supervisors for a great deal of their career development, financial security, and future job success.
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One cannot overemphasise how much these managerial and supervisory activities contribute to a healthy organisational environment: articulating goals; approving fair performance standards; monitoring employee performance; appraising workers on a year-around basis; providing feedback and support; and skilfully coaching, counselling, and motivating subordinates. Effective managers and supervisors spend a great deal of their time on such critically important activities, but unfortunately their own performance appraisal is not sufficiently tied to how well such tasks are completed. (Waldman & Spangler, 1989, 29-59)
Form Isn't All. One or two forms do not a performance appraisal system make or break. Nevertheless, in many organisations the managers and supervisors get far too involved in trying to design or revise the "ideal" performance appraisal form.
Appraisal forms need to be attractively designed for employee understanding, clarity, adequacy, and completeness. Forms should be professional in appearance, and accompanied by carefully worded and properly spelled processing instructions. But it's the total care and concern of managers and supervisors, not the form itself that will ensure your appraisal program's success.
Continuous Process. Performance appraisal programmes often fail because the appraisal process isn't regarded as an on-going activity. There won't be any surprises at formal review time if performance is appraised, adequate feedback is provided, and necessary corrective action is taken on a daily, weekly, monthly, or quarterly basis.
Giving feedback, both positive and negative, often presents an awkward and difficult situation for managers and supervisors. To be fully effective, feedback must be:
Clear. Vague, poorly thought-out, or contradictory feedback can have unexpected, adverse results.
Descriptive. Offering descriptive work examples, instead of unsubstantiated, judgmental opinions will help prevent defensive employee reactions.
Objective. Telling both sides of the performance story-the positive and negative-makes feedback more credible, palatable, and useful.
Constructive. Suggesting ways to improve performance, rather than just listing what's been wrong, will make the performance review discussion more future-oriented, hopeful, and productive.
A lack of job-related feedback, both positive and negative, can produce undesirable results. First, the absence of recognition or positive reinforcement of a job well done can lead to an employee's deteriorating job performance. Workers thrive on deserved recognition and awards for good work and the manner in which it's accomplished. When appropriate recognition isn't given by the supervisor, many workers understandably slack off with a feeling their extra steps are not being appreciated.
Second, when an employee receives little or no performance feedback, he may develop poor work habits that have adverse impact on others. These habits might include tour-of-duty infractions, extended rest and lunch periods, unauthorised absences, habitual tardiness, non-compliance with work procedures, and repeated failure to meet deadlines.
Where the innovative self-appraisal system is being applied on managers, supervisors, and higher-level professionals, performance feedback is just as critical. Feedback on the ratee is obtained and analysed from trusted associates and peers, direct reports from clients and customers served, and the employee's superior. As the ratee receives the feedback data from these sources, he compares and contrasts it with data from the appraisal he has made of himself.
Areas of convergence will then likely emerge. There will be agreement, or near-agreement, regarding some job behaviours that are, for example, "outstanding," some that are "adequate," and some that are "not adequate." With the convergent information in hand, the person who has already assessed himself can hopefully determine which of his job behaviours, if any, need future improvements.
From Performance Appraisal To Performance Management
By definition, Performance Management generally includes performance planning, i.e. goal setting, ongoing coaching and development of subordinates, formally reviewing performance and rewarding performance. It was first introduced by Michael Beer as an innovative appraisal and development system that combines the developmental facet of performance appraisal with the goal-setting facet of MBO (Beer & Ruh, 1976; Beer, Ruh, Dawson, McCaa & Kavanagh, 1978). At the time it was considered to be an improvement on the performance appraisal system, which was generally considered as subjective and plagued by rater problems. See Table 1 for a comparison of performance appraisal with Performance Management.
In considering the value that could potentially be added by Performance Management, it is important to bear in mind that Performance Management as a process was developed because of the failure of performance appraisals. In essence, Performance Management represents a move from an isolated, mechanistic, HR-driven approach to performance appraisal towards a comprehensive, integrated business-driven system aiming at organisational and people development. It was believed that by participatively setting goals that are aligned with higher organisational goals, conducting performance reviews and coaching on an ongoing basis, and rewarding an individual's performance based on the outputs of the Performance Management system, desirable outcomes would follow. (Waldman, Bass & Einstein, 1987, 177-186)
Performance appraisal has widened as a concept and as a set of practices and in the form of performance management has become part of a more strategic approach to integrating HR activities and business policies. As a result of this, the research on the subject has moved beyond the limited confines of measurement issues and accuracy of performance ratings and has begun to focus more of social and motivational aspects of appraisal. This article identifies and discusses a number of themes and trends that together make up the developing research agenda for this field. It breaks these down in terms of the nature of appraisal and the context in which it operates. The former is considered in terms of contemporary thinking on the content of appraisal (contextual performance, goal orientation and self awareness) and the process of appraisal (appraiser-appraisee interaction, and multi-source feedback). The discussion of the context of appraisal concentrates on cultural differences and the impact of new technology. In reviewing these emerging areas of research, the article seeks to explore some of the implications for appraisal practice at both organisational and individual levels. (Waldman, Bass & Einstein, 1987, 177-186)
Performance appraisal (PA) was a term once associated with a rather basic process involving a line manager completing an annual report on a subordinate's performance and (usually, but not always) discussing it with him or her in an appraisal interview. Whilst this description still applies in a number of organisations, it does not in many others. PA has become a general heading for a variety of activities through which organisations seek to assess employees and develop their competence, enhance performance and distribute rewards. It sometimes becomes a part of a wider approach to integrating human resource management strategies known as performance management (PM). As Williams (1998) points out, there are at least three different models of performance management: performance management as a system for managing organisational performance; performance management as a system for managing employee performance; performance management as a system for integrating the management of organisational and employee performance. PA plays an important, if varying, role in all of them. The potentially relevant research for this expanded domain is very broad, including topics such as performance-related pay, assessment and development centres, job analysis and competencies, organisational communication strategies, and much more besides. Rather than try to skim over all these, this article will concentrate on reviewing a limited number of current research themes and trends, which together constitute the developing research agenda for PA and PM. In the course of this, it will examine some of the implications for practice in the field. (Waldman, Bass & Einstein, 1987, 177-186)
Effects of Performance Management Systems
Even though there is widespread use of performance management systems throughout the world, research focused on their effectiveness is sparse and is typically focused on the performance appraisal/merit pay component of the system (Roberts, 1992. 19-41). We review theoretical perspectives and empirical evidence for motivational and attitudinal effects of both the performance planning/goal-setting and appraisal/merit pay components of a PMS below.
Performance planning/goal-setting. Goal theory (Locke and Latham, 1990) has suggested that goals are motivational because they are arousal producing. In addition to increasing effort, there is theoretical support for the idea that the performance planning/goal-setting component of a PMS results in improved work-related attitudes.
Appraisal rating/merit pay. Expectancy and reinforcement theory (Locke et al, 1980: 363-388; Vroom, 1964), for example, are two theoretical models that can be employed to provide insight into a relationship between pay and performance. In addition, there is empirical evidence demonstrating a pay-performance relationship. For example, Gerhart and Milkovich, (1975: 481-569) in their longitudinal investigation of multiple organisations, found that there was a linkage between pay and subsequent organisational performance. Theoretically, expectancy theory would posit that to the extent that money is valued and the employee has strong expectancy perceptions, there should be a positive relationship between a pay-for-performance system and employee motivation (and subsequently, though a somewhat weaker relationship with performance). There does not appear to be a well-articulated theory of merit pay and its relationship to employee attitudes. But, we can draw upon social exchange theory and norms of reciprocity to provide insight into the relationship between pay-for-performance and employee attitudes. It might be reasoned that there is a greater opportunity to achieve an equitable exchange between employees' performance and the compensation they receive when there is a performance management system that attempts to objectively measure and reward performance at the individual level, as opposed to indiscriminately paying individuals across-the-board without consideration of their individual performance contributions. Despite the prevalence of merit pay systems used in organisations throughout the world, research into the effectiveness of merit pay programs in motivating employees has been surprisingly limited. Some of our insight into the motivational effects of merit pay need to be drawn from studies of merit pay and performance while treating motivation as a linking and hypothetical construct in this research (Roberts, 1992. 19-41).
Pearce, Stevenson, and Parry (1985, 261-278) studied the performance effects associated with the implementation of the Social Security Administration merit pay program. They concluded their study by noting that the "merit pay program had no effect on organisational performance" (p. 261), which implies that the program had no motivational effects. Similar observations stem from the work of Thierry (1987, 91-108), who examined the effects of a number of pay-for-performance plans operating in Western Europe and the old Soviet Union. Summarizing the results on the effectiveness of six major plans (i.e., piece-rate, individual bonus, group bonus, merit rating, and the Scanlon gain-sharing plan), Thierry observed that, in contrast to results for all other pay-for-performance plans, the vast majority of the merit pay studies showed either null or negative findings.
Pay level investigation, as well as performance ratings investigation, both serve as a communication directed from the organisation to the employee signalling to the employee the organisation's belief as to their value and importance to the organisation. Gardner et al's findings can possibly be interpreted as providing confirmation for the proposition that feedback about one's performance level (i.e., feedback expressed through performance ratings or pay levels) has an impact upon self-esteem, with a subsequent impact upon performance.
Case Study of ASDA
Process performance appraisal supports Scholtes' (1987) suggestion that managers help employees, especially in a team context, to identify customers. They should then maintain a dialogue with those customers to establish feedback mechanisms which the team can use for process improvement. ASDA provides an interesting case study in the evolution of appraisal methods towards such a team-based approach.
ASDA had a traditional appraisal and merit pay system for non-unionised employees. Then later on, they formed a taskforce chartered to design a performance management system consistent with the teachings of Deming (this description is based on Jenkins and Biondi (1991) and on interviews with people associated with ASDA). ASDA introduced a new system built around a personal development plan (PDP) developed jointly by the supervisor and employee. PDPs included more explicit linkage between the person's job and the business plan of the organisation, and incorporated input from a variety of sources including other supervisors, peers and subordinates.
ASDA surveyed employees regarding perceptions of the PDP. They found that people liked the developmental aspects, the use of multiple inputs and the explicit linkages between employee development and the business plan. However, the completion rate was dropping, as only 60% of the people actually did them. This was perhaps largely because of the continued individualistic focus of the PDP system. Since 1989, ASDA has grown to approximately 5000 employees through reorganisations within. The PDP has continued to fall into disuse awaiting the introduction of a new performance development system.
The new system will offer all employees a selection of several different approaches, at least one of which will feature team-based process performance management, largely as described in this paper. ASDA is assuming that (a) voluntary systems may be more effective than required systems for individuals and groups; and (b) teams will collect feedback, positive and negative, from their customers and then use that feedback to either build on their strengths or improve team weaknesses.
The new system has received positive reviews from focus groups of employees, including managers. It is too early to determine the precise nature of the system to be implemented and how it will affect organisational achievement.
Developmental organisations believe that their success is directly related to their employees' growth and development. They compensate and reward employees for performance achievements as well as growth and development. Simultaneously, performance improvement and employee development become equal partners in the organisation's success equation. Developmental organisations embrace the use of performance alignment processes that enable employees to become the organisation's greatest asset. They encourage managers to make the transition to performance coaches, allowing them to serve as trainers, confronters, mentors, and counsellors. Managers provide positive feedback and reinforcement to improve skills and competencies that ultimately improve employees' overall performance. (Latham and Wexley, 1981)
Developmental organisations assist managers in transforming traditional performance appraisal activities into developmental evaluations used to analyze, assess, and measure performance as well as to identify professional development needs. Developmental organisations encourage managers and employees to collaboratively design growth and development plans for performance enhancement. Finally, they link compensation and reward programmes to performance growth and development outcomes. (Bernardin and Beatty, 1984)
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