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PG Procter Gamble has obtained a tremendous success in a wide variety of consumer goods since 1837 when William Procter once established his first line of producing and selling soaps and candles in Ohio. Although there were some recessions really happening to P&G in different periods, P&G were always being able to utilise its marketing and employees' morale to cope with the temporary meltdowns (Radiou etc. 2012). Some parts of which can ascribe to the successful use of employee motivation programmes. Thereby, this is why motivating employees plays an important role for P&G. This study is going to be the elaborations of the reward system of P&G and the recommendations for improvements.
2.0 Reviews of P&G's Reward Strategy and Performance Management System
2.1 Reward Strategy
Rewards in the workplace can refer to both monetary and non-monetary rewards being known as total reward (Torrington et al, 2011; Manus & Graham, 2003). These two types of rewards in P&G can refer to stock options and training programmes respectively, which aim to motivate their employees and, at the same time, enhance the values for the firm. The following section is going to discuss these strategies.
Fig.2.0 The components of total reward
Retrieved from: Manus, T.M and Graham, M.D, 2003, Creating a Total Rewards Strategy, American Management Association, New York.
2.1.1 Endowing stock options
It has been found that P&G has authorised the Committee to reward the certain extent of stock options to employees who comply with all codes and conditions governing the award (Sec.gov, 2009). This policy refers to the call option that allows the employees to exchange the common stock of a company at an agreed-upon price within a certain period of time (Investopedia US, 2013).
Indeed, with performing desirable results, the satisfying employees in P&G are granted the stock option to conduct stock exchange with privileged price. Thus, when P&G issues new share within the stock market, the existing stockholders have the priority to buy relative new share in light of the proportion of held share in issued share. Therefore, it has been seen as a part of the remuneration package in P&G to ensure sufficient motivations within workforce.
2.1.2 Training programmes
Training programmes are considered as an effective non-monetary reward (Armstrong & Brown, 2009), having been used by P&G in worldwide divisions (Griffin, 2012). As people are seen as the most valuable possession of P&G (Ruch & Nazemetz, 2012), the opportunities are given by P&G to those who perform well according to the agreed terms.
The reason why employees treat training programmes as a precious reward is the quality of the programmes designed by P&G. For example, those who perform at a considerable level will obtain the chance to leverage their leadership skills by leadership development programmes so as to be prepared for the promotions (P&G, 2012). These are the key to determine the motivations of employees and the attractiveness of the organisation to outside talents.
2.2 Performance management
Performance management refers to the managerial methods and approaches that organisation, teams and individuals co-design to drive the enterprise towards desirable performance via leveraging proper objectives, orientation, and standards (Armstrong & Baron, 1998). This section aims to provide the review of the performance management strategies used by P&G to improve the enterprise's performance.
2.2.1 Co-setting targets
Griffin (2012b) argues that there is a tight cooperation between individuals and the team leaders towards setting achievable and reciprocal goals to improve performance of the teams in accordance with the initial established standards. Drucker (1955) suggests that setting objective concerning the understanding of employees will bring about efficiently achieving results. This is related to the theory of expectancy, which, in this respect, represents that the achievable and anticipated goals can trigger off the motivation of employees geared towards organisational objective (Robbins, 1998).
Let us take P&G China as an example. There are many divisions in Chinese market for P&G. Each team is in compliance with the incentive method, which is to make employees and team leaders to set mutually beneficial goals to generate certain level of motivation. Hence by using co-setting organisational goals accompanying with giving rewards according to the performance, P&G has succeeded in China's market.
2.2.2 Cause-and-effect model
Cause-and-effect model means to make employees understand and apply the three key determinants of performance management, which will determine the effectiveness of the organisation and individuals (Ruch & Nazemetz, 2012). This model consists of three causes, which are shown by figure XXX and elaborated by the following paragraph.
Fig.2.1 Cause-and-Effect model developed by P&G
Retrieved from: Ruch. W and Nazemetz. P, 2012, HR and Marketing: POWER PARTNERS: the competitive advantage that will transform your business and establish a culture of performance, Versant, USA.
Firstly, clear direction allows employees to comply with the prior objectives, focusing on the main targets rather than wasting time on secondary items. The second one P&G applies is the long-term orientation, which make employees believe that the organisation is striving towards a long-term objective so as to accommodate themselves to the commensurate efforts. Thirdly, P&G makes its employees believe in brand equity and see it as the basis of regular actions. This act enables the employees to escalate the brand equity in everyday life, gradually becoming a market edge at a large extent. All of these mindsets can lead to the generation of better market performance for the organisation.
3.1 Evaluation of Reward Strategy used by P&G
3.1.1 Endowing stock options
The stock options are aroused by the firm which can make extra profits, thus being able to sustain the extra payment for exceptional employees. The profits reflected on the stock market are far more likely to contrarily encourage employees to work harder in order to create more value so as to boost the share price.
The strategy to award stock options in P&G is very successful, because the conditions meet the expectation of employees concerning share price fluctuation. NASDAQ (2013) has shown that the stock price of P&G rises from the lowest $45.59 (2009) to $75.16 (2013) up to now. Thus, the privilege given by P&G to preferentially buy the proportional share can more likely motivate its outstanding employees instead of demotivating them.
Fig.3.0 The stock price from 2009 to 2013
Retrieved from: http://www.nasdaq.com/symbol/pg/interactive-chart#.UQzFb-QtrQ8 [Accessed 2 Feb 2013]
In my opinion, the intangible intrinsic reward has given P&G with a great possibility to enhance employees' motivation and job engagement. The contingent reward strategy allows the aggressive employees to work hard to get to the established target as well as enhancing the organisational values. Sooner or later, the ownership structure of the company will be redistributed and improved.
3.1.2 Training programmes
Dr. Deming (1982) once concluded that keeping improving is at the first priority for both individual and organisation, which means continuous training programmes are very essential in delivering excellent values and knowledge. With proper training programmes, not only has the effectiveness and efficiency of an organisation been improved, but it will enable aggressive employees to accelerate the progress of achieving their career aspirations as well.
The leadership development programmes applied by P&G are likely to benefit to both individuals and organisations. First of all, ambitious individuals are more likely to take advantage of the programme to leverage their leadership skills in order to be prepared for the future managerial positions. As for P&G, it can stimulate its employees to strive to accomplish acknowledged performance. Besides, leadership leveraging programmes will also help the enterprise to find potential managers to sustain its future operations, who are considered as the invaluable assets for success of P&G (Lawler, 2010).
In a nutshell, the rewards strategy, as being leadership development, benefits to both management of P&G and the individuals' motivations.
3.2 Evaluation of Performance Management System used by P&G
3.2.1 Co-setting targets
According to Drucker (1955), the highly efficient and effective management entails the collaboration of employees and team leaders. One of most important elements in the collaboration is the co-seting of targets, which allows the employees to have the opportunities to design their desired outcomes. Consequently, the motivation of employees will be amended so that they are likely to strive to the objective. Secondly, after they have finished the missions, it is more likely to generate psychological contract between the rewarded employees and their management teams. Circularly, the psychological contract will ultimately re-affect the aspiration to accomplish more projects afterwards.
As for P&G, in reality, they have combined co-setting targets and rewards into their operations. Indeed, the missions assigned to the front-line employees are useful to trigger off the motivation. And individuals feel part of the organisation because they are treated as the partners and rewarded appropriately. In the process, employees are more likely to mobilise their enthusiasm to come up with some new ideas. This marks the prelude to a series of innovation. For instance, the collaboration to set desired targets has made P&G able to motivate its creative employees to fulfil the potential in lots of divisions such as fabric and household care (Brown & Anthony, 2011). These adoptions infact have endowed employees with the sense of belonging.
In my opinion, the act of co-setting targets is worth conducting in P&G, because it leads the enterprise to generate a more innovative and harmonious surrounding through fully stimulating employees' incentive.
3.2.2 Cause-and-effect model
The cause-and-effect model is considered to generate efficiency in both performance planning and performance appraisal. Since performance planning is structured approach to the achievement of the desired level of performance for both individuals and teams (Flexible Learning, 2013), cause-and-effect model can be able to underpin it by enabling the individuals know the core competencies of the organisation. And then the right direction will be identified by the team leaders, influencing the performance of individuals. Besides, performance appraisal is also supported by cause-and-effect model. For example, when a team leader wants to appraise the performance of an individual, the measurements he will consider are the impacts on team, organisation, and individuals' skills improvement orderly. The cause-andeffect model gives employers the opportunities to judge the efficiency of employees in general.
According to Crockett (2009), personnel management has been putting a vital effect on separating P&G from the pack. Thus, with introducing the cause-and-effect model, improvement on the competencies possessed by employees will lead up to a better competitive advantage. As a result, the teams belonging to the different divisions will also be able to have a right orientation, which truly drive the organisation to obtain a enlarged market share, an exceptional profitability, and a higher level of customer loyalty.
Objectively, the emphasis on the understanding of cause-and-effect model within the personnel will eventually help P&G generate a new culture which will always make the firm improve consistently.
4.1 Video Conferencing
Eriksen (2005) has drawn much public attention from his book about Glocal, in which he emphasized the importance of the development of the glocal communication for the success of globalised organisations. He concluded that the globalised organisation must be prepared to become localised as a result of the increasingly intricate business setting, which entails the development of the communication system. With accelerating the speed of exchanging information within the organisation, the entire firm will be able to enjoy the high efficiency. Thus, the benefits have been shown in the following table.
The implementation of video conferencing enables employees from different offices in the world to exchange ideas and come up with new things together.
This programme allows recruitments to be trained with ease and convenience.
Saving time of traveling to the workplace, it enables you to put efforts on other projects.
The video conferencing contributes to the reduction of the cost spent on traveling around, and leads to customer satisfaction and personal liaison compared to talking through phone
Video conferencing software is capable of creating better collaborative environment by shortening the distance between international employees.
Table 4.0 The five benefits of video conferencing in business
Retrieved from: http://blogginggateway.blogspot.com/2012/03/5-advantages-of-video-conferencing-you.html [Accessed 6 Jan 2013]
Since P&G is considered as a major player in the market of consumer goods, it needs a highly effective communication tool to connect the worldwide internal workforces. In reality, making full use of the internet can be seen as a good pathway to resolve the problem caused by the distances, such as cost of travelling (Nefsis, 2013). Thus, video conferencing can be seen as an appropriate method to accomplish this, which is also a good way to know the instant information related to the employees' performance which can be assessed by managers.
4.2 Learning Organisation
According to Senge (1990), earning organisation has been defined as the term that 'where people continually expand their capacity to create the desired results, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where folks are constantly learning how to learn from each other'. In short, the meaning of setting up learning organisation is to share the proven experience in dealing with a wide range of problems. It contains the valuable cases and keeping past lessons for teaching the ones whom are encountering the similar problems how to resolve those problems. When the learning network has been formed, P&G will be able to offer wide variety of solutions so as to cope with various challenges.
4.3 Applications of Video Conferencing and Learning Organisation
Video conferencing and learning organisation have both been found to be used in some organisations. The application of video conferencing is currently used by BBC (Nefsis, 2013), which enables the correspondents of BBC in all over the world to instant couple back what is urgent. And it is also crucial for worldwide editors to combine the news together so as to compose critical texts. On the other aspect, the monitors from headquarter will be able to get the feedback as soon as the instant meeting established.
In this case, video conferencing is capable to help BBC to create more efficient knowledge sharing, which has been found as an indispensable infrastructure to shape a learning organisation for BBC (Semple, 2006). Consequently, it allows BBC to form its critical human resource strategy. Since P&G has lots of knowledge about customers, suppliers, and competitors, it is more reasonable for them to conduct these two concepts in a bid to cat up with the escalation of information during operating.
In fact, all of the reward strategy and performance management system are all the the basic tools to trigger of the motivation of the employees, eventually forming tools aiming to enhance the performance and increase the profitability. Actually, these incentive and effective strategies can now be profound by knowing the more creative concepts. Putting importance on the the new creations such as instant communication and knowledge management, every decision related to rewards and performance planning will be transmitted faster than ever before.