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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 to Performance Management:
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.