Managers have to know about people. Of course they need to know about other things like strategy, finance and marketing as well, and they really do need to understand the technology underlying their businesses, but they must know about people. They have to understand HRM and be able to work with specialists in that field" (Henderson, 2008).
In this present world of globalisation, most, if not all the organisations are facing the ever changing challenges of keeping sustainable profitability to be able to survive, particularly in this current economic downturn situation.
In all the organisations, one of the major challenges is the need to manage its resources - Human resources which are considered as its "most valuable assets"- . This is where the Human Resource Management (HRM) has its place.
However, before HRM, Personnel Management (PM) saw its debut in the year 1970 and comprised of the activities like recruitment, selection, work conditions, welfare of employees and training and development and employee exit (retrenchment, retiring schemes) Henderson, (2008). It was the only process used by the large organisations in managing its people resources. PM is called the traditional method - also called the personnel administration - and it plays such role as intermediary between the employer and the employees.
Since 1980, HRM evolved from PM and is believed to be "new" versions of PM by some while others consider that it is a "new wine in an old wineskin". However HRM has added functions compared with the PM and is defined as the strategic, integrated and coherent approach to the employment, development and well-being of the people working in organisations.
Moreover, HRM is a management that deals with recruiting, selecting, training and developing human resources within an organization. When properly managed, the HRM can contribute a lot in achieving the organization's strategic objectives.
Many managers and management theorists believe that HRM is a vital element in the survival and success of the 21st century organisations. Peter Drucker, (1993) refers to the idea that people's skills, knowledge and creativity are the key resource for economic and organisational success which he called 'the knowledge-based economy' (Henderson, 2008).
Definition of Human Resource Management: The HRM is defined as a strategic, integrated and coherent approach to the employment, development and well-being of the people working in organisations (Armstrong and Baron, 2009).
The differences between Personnel management and Human Resource Management is that, PM considers people as economic persons who work for money or salary whereas HRM views people as having economic, social and psychological needs. A brief comparison between HRM and PM is given in the following table.
Functions of HRM
The functions of the HRM are split into two parts namely; the Managerial functions and the Operative functions.
The emphasis is on the strategic part of the management of people within the organisation.
Treating people as assets instead of cost.
Adopting the Unitarist approach rather than the pluralist approach (Employee and employer have same interests).
Encourage the line managers to apply the HR functions toward their subordinates.
The HR manager therefore, faces multiple challenges among which is to ensure, on one hand, that the right employee is recruited and employed for the right job, at the right time and on the other hand, to have a sustainable competitive advantage to ensure that the organisation achieves its strategic aims. Therefore, the HR manager has to set up within the HRM scope, a performance management system that will ensure that the organisation and its employees as well as the individual have the skills to perform and be motivated to contribute in the success of the company.
The Performance Management System (PMS)
The word Performance basically means "the accomplishment, execution, carrying out, working of anything ordered and undertaken (output/outcomes)". It is also "about the action of doing the work as well as the results achieved" (Oxford Online dictionary, 2012).
History: There is no full evidence on when formal performance management started but it is said that it began with the emperors of the Wei Dynasty (AD 221 - 265) where there was an "imperial rater" who evaluated the performance of the official family. Then it was recorded centuries later a system was established by Ignatius Loyola and the rating of the members of the Jesuit Society was formally done.
The Milestones on Performance management are briefly given as follows:
First monitoring system evolved from the work of F. Taylor before World War I.
Rating of military officers was done in the year 1920s.
Merit rating came to the USA & UK between 1950s and 1960s.
Management by Objective during the 1970s
Result oriented system was issued in 1970s as well.
The term "performance management" was first coined in 1970s by Beer and Ruh. However, the process was not accepted until during the latter half of 1980s. (Beer and Ruh, 1976).
(Armstrong and Baron, 2005).
Definition: According to Armstrong and Baron (1998), "Performance Management is both a strategic and an integrated approach to delivering successful results in organizations by improving the performance and developing the capabilities of teams and individuals".
PMS can also be defined as the "process of taking systematic action to improve organisation, team and individual's performance expectations to be defined and creates the basis for development of organisations and individual's capability" (Armstrong and Baron, 2010).
The purpose of a PMS is to:
Communicate an organisation's vision of its objectives to all employees.
Set performance targets in departmental and individual levels.
Conduct performance appraisal sessions once or twice a year to review the progress of the employees in relation to the targets set.
Identify gaps in the training, development as well as establish any reward wherever needed.
In this case, the organisation can benefit from the improved skills and competency of its employees because they would have become aware of what is expected from them while moving toward a sustainable profitability. The overall performance of the organisation will then improve and will manage to reach its strategic objectives and gain in competitive advantage.
Performance Appraisal (PA)
Definition: A performance appraisal or performance review is a review and discussion of an employee's performance of assigned duties and responsibilities. PA is sometimes used to refer to PM which is different as PA is only part of the PMS and is used to rate the employee within an organisation.
The appraisal is carried out once or twice a year which differs from organisation to organisation. It is based on an evaluation done by the manager with the employee and the results obtained on the employee's job performance; not on the employee's personality. The appraisal measures skills and accomplishments with reasonable accuracy and uniformity. It provides a way to help identify areas for performance enhancement and to help promote professional growth. It should not, however, be considered the supervisor's only communication tool. Open lines of communication throughout the year help to make effective working relationships; a progress review is done on a regular basis.
Each employee is entitled to a thoughtful and careful appraisal. The success of the process depends on the supervisor's willingness to complete a constructive and objective appraisal and on the employee's willingness to respond to constructive suggestions and to work with the supervisor to reach future goals. The aim is also to improve the organisation's performance.
Some History on PA
There was quite a lot of research being carried out in the past decades and the main purpose of the research is to minimise the rating errors. In the years 1950 to 1960, have seen the need to use the graphic rating skills which is related to a trait-based evaluation method and other discussions on changing the number of scale points (Peters & McCormick, 1966). Other researchers started discussions on behavioural rating during the years 1950s (Flanagan, 1949, 1954). Then the Behaviourally Anchored Rating Scales (BARS) and the Behaviourally Observation Scale (BOS) were developed at a later stage.
Many alternative models were proposed and tested until discussions were held on the need to move away from the focus on rating scale to consider the "rater" particularly, as argued by Landy and Farr (1980).
Three broad factors were identified which pertain to the performance rating namely;
Job performance of the "ratees".
Rater's biases on the performance.
And finally, the measurement error.
(Wherry and Bartlett, 1982). (Budworth and Mann, 2011).
Other issues with performance appraisal
The other issues that could be found may be attributed to one of the following reasons:
Appraisal is not done according to a standard or behaviour or even a benchmark.
Unreliable human judgement
Issue of validity and bias from the appraisers.
The difficulty in knowing the contribution of the employee because the appraiser does not know the appraisee well enough (Kinnie and Lowe, 1990:47) for the latter is constantly changing department (Howell and Cameron 1996: 28).
External factors like resources, processes, technology, corporate and HR strategy, working environment, external business context and management influencing directly on the employee's performance.
In order for an organisation to implement a PA system that is suitable for both the management and the employees, it is crucial to use a system which has some of the following features:
A system on which all the managers who will be using the system are well trained on and accustomed with.
The system which follows the S.M.A.R.T objectives - Specific, Measurable, Achievable Relevant and Time bound - clear, unambiguous, understandable and challenging to both the managers and the employees. This will prevent frustration, demotivation which may impact on the individual's performance.
The PA method used should be transparent, that is, the manager should inform on the contents of the appraisal types to be used before carrying out the appraisal itself. Also, both parties could sign the document after having completed the appraisal if they agree.
In the case where an appraiser deliberately alters the rating, this is considered as "unfair" and the PA system should cater for such injustice (Budford and Mann, 2011).
When the PA is completed, the management has to provide feedback to the employees informing them on their respective performance level and whether they have reached the objective set in the previous PA sessions. If any employee is under performing, management should identify the gap and provide for any enhancement program to help the employee to improve.
Therefore, the PA which is a continuous process will proceed on and the individual and also the team will benefit from a continuous performance improvement into the future. The organisation will also improve in its performance and will be able to better compete and excel in the business arena.
Analysis and Discussion
Armstrong and Baron (2005) argued that "performance appraisal systems should be seen as being transparent and equitable, providing reporting consistency and regular feedback on performance".
The two organisations that were selected are the CIM Global Business and AW Wong Trading Co Ltd. The former is a company which is considered as a large corporate with 320 employees and the latter company is â€¦â€¦â€¦â€¦â€¦â€¦.
All the following information were taken directly from the companies' website due to authenticity purposes.
Cim Global Business Companies Company Particulars
About the Company
Cim Global Business administers more than 2,000 vehicles engaged in cross border transactions. The founding company in Cim Global Business was the first to be licensed in Mauritius to provide such services. With a wide base of clients including Fortune 100 companies, Forbes listed high net worth individuals, top fund managers and institutions, start-ups and family businesses; Cim Global Business can assist you regardless of the size of your company or where you are located on the globe.
The Company's Values
At Cim Global Business, we have based the progress and development of our business on the three core values of Cim Group:Â
Passion that builds businesses enthuses clients and drives sustained performance.
Performance that measures success.
Integrity that is the cornerstone of any financial services organisation and is at the heart of everything we do.
The Company's Group
Capitalising on synergies to provide a breadth of services and convenience, Cim is one of the most significant financial services groups in Mauritius. It was formed in 2005 from within the wider Rogers Group in order to create a specific financial services brand based in Mauritius, servicing regional and global requirements. It is a wholly owned subsidiary of Rogers & Co. Ltd, a listed company established in Mauritius in 1899 that has played a leading role in the development and enhancement of the Mauritian economy over the past century.
Cim brings together a synthesis of 14 subsidiaries offering both local and international financial services and outsourcing capabilities. Cim's client base extends from the Mauritian mass-market to local corporates and a number of significant international blue chip organisations. It also has offices in Singapore, London, South AfricaÂ and Australia.
While the different business units that compose Cim each have their own structure and identity, they are complementary in service and competence. The Group strives hard to take advantage of natural synergies between sister companies to offer clients an increasingly broader selection of services, a more diversified knowledge base and a richer variety of products.
Cim Global BusinessÂ places much emphasis onÂ resourcesÂ and with our high calibre work force of more than 300 we are well equipped to face the on-going challenges and changes in the ever evolving financial environment.
Â More than 50% of our people are graduates and/or affiliated with UK professional bodies including the Association of Chartered Certified Accountants (ACCA), the Institute of Chartered Secretaries and Administrators (ICSA) and Society of Trust and Estate Practitioners (STEP).
The Cim Global Business is managed by a "Leadership Team" which consists of one Chief International and Investment Executive, six directors and one Head of Finance and one Head of Human Resources.
Head of Human Resources Profile
Mr. Clive Chung has been working in the fields of Human Resource, Training and Quality for the past 10 years.Â Clive's career to date has been in various industries including Travel and Tourism.Â Before joining Cim Global Business, he was the Head of Human Resource at Cim Insurance and Investment Cluster. Clive holds a Bachelor of Business Science degree in Management and an MBA with the University of Mauritius.
The Performance Appraisal System at Cim Global Business
The PA system is used by Cim Globalbuisness during 3 years is called Balanced Scorecard and the information was gathered in the following manner:
The PA procedure is part of the company's management plan which defines the objectives of the organisation.
The PA procedure starts with discussions on every department level for a period of 1 month. Each party - the appraiser and appraisee are trained on the procedure itself and the company's objectives and the expectations are clearly defined.
The employees are appraised based on an Individual Performance Plan (IPP) which is divided into 3 parts:
The Key Performance Objective (KPO) - this is linked to the management plan to establish the line of sight as it will have to comply with the objectives of the organisation.
The Soft Key Competency (SKC) - The Individual's competencies proficiencies is appraised at the customer level.
The Personal development Plan (PDP) - Evaluates the individual's future development plan.
Both the appraiser and appraisee have to sign the performance appraisal evaluation form before feeding the information into an HR information system.
The first review is carried out in the month of April; last six months is under consideration (October to March). A training which consists of a combination of coaching and the PA system is reviewed to ensure that all the people involved in the performance appraisal understands correctly the procedures to follow.
The second and last/final review is done in October to establish the Score levels of each employee.
The reward scheme is established at the end of each year after the profitability of the company is known and finalised. The reward criteria is based on two factors:
The organisation's performance and
The Individual's performance.
The individual should score a minimum of 3 to qualify for the reward to be applied. Performance bonus is awarded in December.
The PA system itself is made up of the scores from 1 to 5; 1 corresponding to "pre performer" and 5 is equivalent to "top performer", while 3 is regarded as an "effective performer". If an individual is rated at less than 3, a Performance Improvement plan is applied in order to help the individual to improve. KPO has a percentage proportion of 60% and KC, 40%. All employees - from the management level down - are appraised based on the same criteria in the system.
A consistency meeting is carried out to verify whether all the heads of departments have correctly applied the PA system procedures and scoring.
Transparency: The expectations for each individual are communicated to all employees at the beginning of each year.
Equity: The same PA performance evaluation system is used throughout the organisation.
Consistency: Addressed through consistency meetings.
Feedback: The appraiser and the appraisee will usually agree with the evaluation by signing the evaluation form. Also, the appraisee performs a self-appraisal and reviews any gap with the immediate head. The feedback is obtained from the results to determine the action plan for the Performance Improvement plan if required.
However, informal feedback from the line managers is given to the subordinates on a regular basis throughout the year.
The PA system has contributed positively in the organisation's performance since its application during the past years and the management is satisfied with the current Standard Scorecard system. However, the company has planned to transfer the whole system on to an online system called the Human Resource Information System (HRIS). The manual system will be performed on the computer screens.
A&W Group Particulars
About the Company
A&W Group is a major supplier of garments accessories and packaging materials to the manufacturing sector in Mauritius and in Madagascar.
A&W Group has also diversified more recently into real estate business, managing and renting out office and industrial space through A&W Property Ltd.
Built on a strong foundation of corporate values (see our mission statement), A&W is known for its service and professionalism in both the Mauritian and the Madagascar market.
Following the phasing out of the Multi-fiber Agreement under the World Trade Organisation (WTO), the textile and garments sector in our markets went through a difficult time. A&W is now looking forward to a new phase of growth pulled mainly by our restructured trading companies.
We are both present in the basic products where we stock competitive products delivered on the following day, if not on the same day, ordered. We also specialise and source value added fashion accessories for our customers.
A&W Wong Group Mission Statement
Vision - To be a Very Competitive Supplier of Garment Trimmings in the Global Market.
Mission - We Consistently Create Unbeatable Values for our Customers with Passion through Speed, Teamwork and Quality.
Our Core Values - We Firmly Believe in:
One Winning Team.
Innovation and Creativity.