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Human resource strategy revolves around the process of bringing together the people plans and formulating an array of activity within the overall framework, designed to deliver the organisational objective. In the words of Miller (1987) HR strategy compromises 'those decisions and actions which concern the management of employees at all levels in the business and which are related to the implementation of the strategies directed towards creating and sustaining competitive advantage'. The elemental priority of human resource strategy in an organisation is to secure and maintain the kind of human resources that are necessary for the organisation's viability. Day by day human resource issues are becoming essential to all strategic level decision making in organisations. Human resource strategy seeks to meet both business and human needs in the organisation. (Armstrong, 2009) One of the key aspects of human resource strategy is performance management.
1.1 Introduction to Performance Management:
Performance management of business organisations has been for a long time the concern and point of interest to managers because overall an organisation is judged on the basis of its performance. There are various internal and external factors that affect the performance of an organisation. It is widely believed that more than the external factors, it is the internal factors i.e. the labour force at various levels, of the organisation that affect the performance of the firm. A group well trained & motivated employees will always overcome the problems or difficulty faced by the organisation due to the external factors.
But what is performance management? Performance management as defined by Michael Armstrong is a process which has been formulated to enhance the performance of an individual, a team and the organisation as a whole and it is driven by the line managers. The main objective of performance management is to work collectively as a team and achieve the organisation goal. An effective performance management involves sharing and understanding of what needs to be attained and managing and building up people in a way that the shared goals are achieved. Performance management is concerned with looking into the future, making improvements and taking on various challenges and opportunities which are faced by employees of the organisation and in turn by the organisation.
1.2 Purpose of Performance Management
There are two main purposes of performance management namely operational reasons and cultural reasons. (Stredwick, 2001)
Operational reasons cater to lead and control. In an increasingly competitive environment it becomes more and more vital for employees to have an articulate guidance and direction towards the organisations goals and objectives. Performance management is a key tool to bridge the gap between an organisation's goals and strategic direction and the required employee performance to attain the same. Performance management can also be used a tool to exercise control over the employees. It also acts as a medium through which the effectiveness or the efficiency of the employees can be measured. This will help the organisation to identify the weakest and the strongest performers where after the weaker employee can be guided by the stronger employee to change and improve his performance.
The cultural reason of performance management is to build a more open relationship with the employees of the organisation. The objectives and the plans of an organisation can be discussed with an employee so as to make the employee aware of the wants of the organisation. Subsequently a frank appraisal discussion can be done with the employees to gauge their performance and suggestions can be given as how or where an improvement is required so as to maximise the employee's performance. The performance management system also provides a platform for the employees to have a say in the process via individual performance plan.
1.3 Performance management in Royal Bank of Scotland:
The Royal Bank of Scotland (RBS) is one of the largest financial institutions in the world. It has its presence not only in the United Kingdom (UK) but also in Europe, North America and Asia Pacific. It is one of the world's leading financial services companies providing a range of retail and corporate banking, financial markets, consumer finance, insurance, and wealth management services.
For RBS to provide world class financial services it is most crucial that it invites the most talented individuals to be a part of the organisation. At this stage when there is a fierce competition for recruiting talented individuals, RBS positions itself as a world class employer with best employment opportunities not only in the UK but across the globe.
At RBS every job role is set in terms of specific targets. This method of performance management allows managers to asses each individual's performance in a specific way and rewards them accordingly.
In this paper we will assess the various ways RBS implements performance management, what are the shortcomings of its current performance management plan and how an improvement can be bought about.
2. FORMULATION OF HUMAN RESOURCE STRTEGY
2.1 Performance Management
Performance management in every organisation is generally formulated by the HR and is carried out by the line mangers. Over the years it has become the most important tool for the mangers to determine that the people management side of their job is taken care of. In other words performance management ensures that managers do their job efficiently and also take stock of other employees as to whether the organisational goals set are being met.
Performance can be defined simply in the output terms-the achievement of quantified objective. (Armstrong, 2006) High performance is attained from, appropriate behaviour, especially discretionary behaviour and the effective use of the required knowledge, skills and competencies. Through performance management various results which are obtained can be rechecked and necessary action can be taken to improve those results.
The key essentials of performance management are agreement, measurement, feedback, optimistic fortification and discussion. Performance management focuses on targets, standards and performance indicators. It not only provides the setting for ongoing dialogues about performance which involves continuous review of achievements against the set objectives, requirements and plans but is also concerned with inputs and values.
Performance management is a continuous and flexible process that involves managers and the people they manage. Co-operating with each other they set out as to how they can best work together to attain the required results. Performance management is based on the principal of management by contract and agreement rather than management by command. (Armstrong, 2009)
Performance management is more concerned about future performance planning and ways to improve the performance rather than traditional performance appraisals. In performance management the focus is always on the development even though it is an important part of reward system and the identification of growth prospects for employees. Performance management may also be linked to performance related pay.
The general objective of performance management is to develop the capacity of people to meet and surpass the expectations and to realize their full potential to benefit the organisation and themselves. (Armstrong, 2009)
2.2 Approaches of Performance Management:
There are two separate approaches for considering the management of performance issues in the organization. These frames are associated with different uses of the term performance management. (Taylor, 2008)
The first framework begins with the idea that it is necessary or desirable for the managers to set clearly defined standards with which the staff are obliged to comply. These may immerge as a set of rules which are formal and usually written down in the company policy. Alternatively they may be generally accepted but informal types of rules that have become established workplace norms.
The alternative perspective sets no defined rules, but instead focuses on continuous improvement of performance. There is no specific definition of a satisfactory level of performance. Instead all are expected to work hard for improvements round the clock, aiming for excellence and the highest possible level of customer satisfaction. In this perspective performance management primarily deals with optimizing levels of commitment, motivation and job satisfaction amongst the staff.
The two approaches of performance management: (Taylor, 2008)
Focus on curing poor performance
Focus on enhancing strong performance
Measured at individual level
Measured at organisation level
Concerned with slippage below defined expectations
Concerned with continuous improvement of expectations
Use of disciplinary procedures, incentive based payments and formal appraisal system
Use of coaching techniques, improving conditions, enhancing job satisfaction and raising levels of commitment
It can be argued that these two approaches are fully compatible, if different and they can co-exist quite easily in one workplace.
2.3 Process of Performance Management:
Performance management is a continuous process of the management. It consists of four basic activities - Plan, Act, Monitor and Review. (Armstrong, 2006) These are explained as:
Plan - A proper plan has to be laid out as to what to do and how to do it.
Act - To carry out the work required to implement the plan.
Monitor - To continuously check on what is being done and gauge the outcomes in order to assess the progress in implementing the plan.
Review - To take stock of the achievement and see what more needs to be done so as to improve the results and to check if any corrections are required to be done in the plan.
Managing Performance throughout the year
Performance Review and assessment
Performance and development agreement
The Performance Management Cycle (Armstrong, 2009)
Performance and development agreements form the basis of for the assessment development and feedback in the performance management process. The organisation's expectations are in the agreement in the form of a role profile which sets out role needs in terms of key result areas and the competency required for effective performance. The role profile presents the basis of assenting purposes and methods of evaluating performance and assessing the level of competency attained. The performance agreement includes any performance improvement plans that may be required and a personal growth plan. It not only indicates what individuals are expected to do but also indicates the support they will get from their manager to achieve the best outcomes. Performance agreements materialize from the analysis of role requirements and the performance review. An evaluation of the past performance leads to an scrutiny of the future requirements and the both the processes can take place at the same meeting.
Managing performance throughout the year is one of the most important concepts of performance management. As stated earlier performance management is a continuous process which reveals normal good management practices of setting objectives, monitoring and calculating performance and taking the required actions accordingly. Managers should not have the understanding that performance management is something out of the way that they have to do it should instead be taken up as a natural function that all good managers carry out.
To ensure that a performance management culture is built and preserved, performance management has to have the ongoing support and encouragement from the top management who must make it evident that it is looked upon as a vital means of achieving sustained organisational success.
A formal review of an individual's work is another important part of performance management framework. This review may be carried out once or twice a year as is suitable to the specific organisation. This provides crucial point for the consideration of important performance and development issues. A performance review meeting is an important mode through which the five primary performance management elements of agreement, measurement, feedback, positive reinforcement and dialog can be put to good use. (Armstrong, 2009) It completes the performance management circle by informing performance and development of agreements. The performance review should be balanced between achievements in regards to objectives, the level of know-how and skills possessed and put to practice, behaviour in the job as it influences performance, the extent to which behaviour supports the core values of the organisation and the day to day effectiveness.
Generally to assess the performance of employees they are given some form of rating which is usually carried out during or after the performance review meeting. The rating denotes the quality of performance or competence attained or displayed by denoting the level on a scale that most strongly matches with the view of the evaluator on how well the employee has been performing. A rating scale helps the evaluator to pass a judgement and the judgement is subsequently categorised to inform performance or contribution pay decisions.
Managing the under performers is a positive process base on the feedback throughout the year. This helps in formulating ideas to help individuals to overcome performances hindrances and problems. It also helps to assess how the manager can help an individual to overcome his shortcomings.
2.4 Role of Line Managers and HR
Line managers are crucial to the success of performance management. But there may rise problems with their skills and commitment. It is also necessary to involve line managers in developing the process, provide training and guidance, to gain top management support, to keep the process simple, emphasise on performance reviews and provide quality time with their staff. |The line managers are responsible for the growth of the employee, who in turn will help in the growth of the line managers. The line managers should not be biased and should impart as much knowledge and help he can to improve the performance of his subordinates.
The HR on the other hand is the one who formulates the performance feedback form, the basis on which the employee is rated. The HR decides what exactly will be the benefit that a individual receives in lieu of his performance in the organisation or what actions has to be taken against a underperformer. The HR together with the line managers decides about the performance of an individual who might be considered for a promotion, transfer or disciplinary action. The HR also sends recommendations on training to asses any common training needs.
2.5 The Benefits and Concerns of Performance Management:
Performance management has various benefits. Below mentioned are the four key benefits:
Performance management focuses on results rather than behaviours or activities. A common mistaken belief among managers is that behaviour and activities are the same as results. An employee may appear very busy but not be contributing at all towards the organisational goals. But it is the performance review that tells this apart as that is more focused on results.
It brings into line the organisational activities and processes to the goals of the organisation. Performance management classifies the organisational goals, measures of competence towards the goal and the means to accomplish that goal. This chain of measurement is scrutinized to ensure alignment with overall results of the organisation.
Performance management helps to cultivate a system-wide, long term view of the firm.
It produces meaningful measurements which have a broad variety of useful applications. They are helpful in benchmarking and setting standards for comparison with the paramount practices in other organisations. They provide constant basis for comparison during internal change effort. They also specify results during improvement efforts, such as employee training, management development etc. Performance management help ensure unbiased and fair treatment of employees on the basis of performance.
The disadvantages of performance management are:
Performance management is very difficult and often undependable to measure multifaceted phenomena as performance.
It is very time consuming on the manager's as he spends too much time supervising the employees about their job functions and thus may not be able to satisfy his other job requirements. It becomes tough and challenging to decide value and performance indicators for measurement.
Managers tend to rely on one employee than the other thus an issue of favouritism arises.
Performance management may give rise to internal competition and employee may compete with each other for job status, position and better pay. This could cause failure for employees to perform as a team and work towards common organisational goals.
As organisations change rapidly the measures used to gauge an employee performance becomes old and obsolete.
There is a feeling of inequality which sets in the employee when the reward for performance is based on monitory as not all employees will get the same amount.
At the RBS, an annual performance review is conducted of the employees after which they get a monitory benefit. Some jobs are paid according to the achievement of targeted results. This means that a bonus is paid if the employee achieves agreed targets for the job.
3. IMPLIMENTATION OF PERFORMANCE MANAGEMENT
A performance management framework will make it possible for RBS to address:
Required outcomes and objectives
The performance sculpt
Institutionalize performance measures
Setting performance targets
Performance assessment and evaluation
3.1Features of a Performance Management Framework:
Performance management frame work identifies a number of key objectives for operational and managerial responsibility within the organisation. The performance management frame work has the following characteristic:
The measurement, evaluation and reporting of performance starts at the base level.
Every employee is involved in the performance management assessment.
All planning performance is assessed and reported.
An organisation's performance focus is on the improvement strategies.
3.2 Performance Measures
Performance measures are tools developed by the organisation to estimate work performed and the results obtained vis-a-vis the targets given. Performance measures should focus on the performance of the employees and be able to measure their efforts in the organisation. The performance measure should:
Identify the efficiency and shortcomings of an employee.
Be in sync with the basic objectives of effectiveness, efficiency and compliance.
Be able to assess whether objectives are achieved and monitored.
Be reviewed as part of the planning process to ensure relevance and practicality.
There are various tools which help in measuring the performance of the employee and the organisation as a whole. Some of the most widely used tools are:
Management by Objectives- This collaborative method defines the goals and future targets by consultation. Future tasks, behaviour and productivity are discussed and a SMART plan is formulated so that both the manager and the employee are aware of the requirements of the organisation. It is best used in a business environment where people are results driven, where the organisation uses formal process to manage performance and where performance can be measured precisely.
360-Degree Appraisal- This method is used for managers and supervisors and it gathers feedback from all employees to give an overall picture of the performance. It can give a valuable review into how a individuals work and behaviour is seen by other people in the organisation. This method is best suited for an organisation where time, effort and funding is available or where it is important to get several views of a individuals performance. For example the customer service roles where the individual is required to work across teams.
Competency Based Assessments- In this method basically the components of competency (skills and abilities) are assessed. Competency can be tough to define in jobs with high level of uncertainty. This method is apt for organisations where skills and abilities can be readily determined and quantified.
In RBS, the performance measurement starts with the task of setting the objectives for the financial year. The objectives are set by the line manager after which the employee has to sit with the line manager and agree to it. This is one of the main advantages of the performance management system in RBS, because not all the organisations allow the employees to interfere in the process of setting objectives. The manager measures the performance against the set objective once in a year. The employee's performance in RBS is related with the pay. The employees are rewarded purely based on their performance in RBS. Employees who achieve challenging targets will be rewarded specially.
In RBS, performance management is directly linked with learning and development. The annual performance review is followed by the development of a personal development plan. This plan is developed by the line manager who appraises the performance of the employees. The main advantage of developing this plan is to motivate employees towards high performance by helping them to improve their skills.
4. EVALUATION OF PERFORMANCE MANAGEMENT:
The last step in performance management is evaluating the general methods of performance management which is the final test of analyzing the organisational performance. This will help in understanding the areas in which improvement is required to enhance the performance of the organisation. Evaluation of the performance can be done in a better way if there are one to one interviews conducted with the mangers and understanding how they are finding the experience of performance management and where they need support to carry out this essential activity.
Evaluation can also be done by conducting employee attitude surveys and focused discussions. To maintain high standard organisations should impart time to time various training programmes to enhance the understanding of performance management to all employees of an organisation. They should also implement one to one coaching whenever is required by the employees or is deemed necessary. Conducting workshops for managers is a good way to know their experiences.
In context to RBS, the financial giant has an advantage that its employees are recognized in lieu of their good performance via graded progression. This means RBS encourages their employees to grow and to develop their skills and abilities. This in turn helps RBS to grow as an organisation. Employees recognize development needs with their line manager at their yearly performance review. These are documented in a personal development plan.
RBS should inculcate a mid- year performance review in their organisation. This should be done so that managers understand where the employee is heading in comparison to the already laid down targets and objectives. This would help the employees to get back on the right track and thus achieve what is expected out of them. The managers will be able to asses if any immediate training needs to be imparted to any employee so that he has a better understanding of the objectives set for him and the organisational objective.
Depending on the mid-year performance review the managers at RBS can evaluate the employee at the end of the year. This would certainly create a difference in the performance of the employee as they would not want to be behind anybody in this competitive age. Plus every employee likes to be recognized for the contribution he has done in order to attin the desired personal and organisational goal.