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Success and failures of an organisation can be approximated by the effectiveness and high-performing abilities of their human resources. The human factor has been achieving a more significant role in the organisational success as compared to the integrated technology or heavy investments, as the human workforce is the reflection of organisational core values, beliefs and culture (Sparrow 2009, p. 518). It was only service sector where particular emphasis was given to human resource management as workers are the primary source of contact with the end customers. However, the contemporary business world has tremendously evolved the trends of manufacturing organisations where human resources have increasingly become a critical component in the production process to maintain maximum quality and reliability, as human workforce has the discretionary ability to improve products and services (Fleetwood and Hesketh 2009, p. 268). Both the efficiency and success of an organisation are heavily reliant upon its outstandingly performing workforce. Managers are required to undertake several prudent initiatives in order to enhance the performance of their teams to gain maximum productivity. The most frequent performance management initiatives are providing formal performance appraisals to the employees, recognition of their efforts and rewarding them for high performance in given tasks (Wegge and Haslam 2005, p. 402). Efficient managers also ensure careful evaluation of performance deficiencies within an organisation and take all the necessary remedial actions to address the underlying issues. The contemporary globalised work environment embraces companies and enterprises that require highly skilled, knowledgeable and efficient workforce in order to surface as the most competent organisation in the market. It has been observed that organization's performance and productivity is directly influenced by the commitment and loyalty of its employees (Latham 2004, p. 127). Today's competitive professional atmosphere has compelled the attention of the organisations to apprehend the significance of employee retention and thereby constrained them to develop strategies tailored to fulfil employee satisfaction. The sustainability of an organisation is subjected to the overall periphery and circumstances which affect its growth and development (Wegge and Haslam 2005, p. 405). The exemplary employee oriented culture represents positive work environment, challenging job roles, individual development opportunities, a sense of recognition and constant motivation (Baum and Locke 2004, p. 587). Instituting effective leadership and reliable workforce combined with positive attitudes and correct mind set accounts for higher productivity of an organisation (Drach-Zahavy and Erez 2002, p. 669). The incorporation of traditional periodic performance appraisal initiatives supplemented by consistent performance coaching (London, 2003, p. 4) tends to facilitate adaptableness of employees and continually improve their performance level in rapidly changing contemporary organisational structure. Managers are required to set clear-cut and achievable objectives for effectively coaching employees as the goal setting theories indicate that pre-set targets often lead to higher performing workforce as employees strive to get best out of their efforts (Locke and Latham, 2002, p. 709) which ultimately improves the performance abilities of an individual, a team and the overall organisational environment (Baum and Locke 2004, p. 589). The main objective of this study is to explore the performance management paradigm by evaluating a linkage between effective human resource management and organizational performance through the case study of Sainsbury and also reflect the theoretical underpinnings of the subject area.
SAINSBURY: COMPANY PROFILE
Established in 1869, J Sainsbury Plc. is amongst the finest and leading retail supermarket in UK and US that has extended its operation beyond retailing and has entered into property business and financial services. The company maintains a profound network by its prominently positioned branches across the country and is successfully selling a wide range of consumer products. Apart from retailing food and non-food products, the company has diversified into retailing electronic products, banking and financial service (Sainsbury 2010a). The company operates about 872 functional stores comprising 537 supermarkets and about 335 convenience stores; and serve over 19 million customers a week by employing 150,000 personnel with a market share of over 16 per cent alone in UK (Sainsbury 2010).
HUMAN RESOURCE MANAGEMENT AT SAINSBURY
The main purpose of establishing a human resource department is to evaluate the individual's competencies as per the job specification and recruit adequately well-informed, skilful and motivated personnel so that the firm remains competitive and successful in the market place (Latham 2004, p. 129). A centralised human resource policy is governed by Sainsbury, where senior management has a discretionary power in decision making that is dispersed on to personal managers positioned in local stores. The human resource department primarily stipulates a correct set of policies devised through human resource planning procedure and ensures the prompt filling of vacant positions by meeting Sainsbury's labour requirements with ample supply of workforce followed by a prudently designed selection criterion. Moreover, human resource department of Sainsbury also evaluates and address the training and skill needs of the personnel to enable them bringing the best out of their services. Performance management is the most crucial aspect of human resource department that is responsible for developing effectual strategies to motivate the employees in order to enhance the rate of organisational productivity (Fleetwood and Hesketh 2009, p. 270). In addition to this, Sainsbury's human resource department has extensive responsibilities due to its profound market presence that deals with several issues pertaining to wage and salary system, health and safety issues, employee welfare, employment legislative framework and disciplinary and grievance procedures.
PERFORMANCE MANAGEMENT PROCESS
Sainsbury's management comprehends the significance of performance management and has integrated effective strategies to obtain maximum competitive advantage in the market through high-performing individuals and teams. The company has a practically devised agreed framework of planned goals, standards and competence requirements (Sainsbury 2010a) followed by which the human resource department recruits suitable personnel. Several tools and techniques are employed by the managers to monitor and evaluate the performance efficiency of their team members. The process of performance management requires the managers to propose training and promotion opportunities for the workforce by identifying the key areas for improvement that are deemed essential to overcome their inefficiencies if any. The management of Sainsbury has recapitulated the performance management process with the help of following effectual strategies to develop a high-performing workforce:
Setting Organisational Objectives
The comprehensive performance management strategies are diffused at local stores, where managers are required to set clear-cut organisational objectives and every individual in a team is assigned a definite and achievable goal. The managers are required to make every team member to believe in the significance of their job position and to deem their work to be recognisable and contributing enough to make a difference (Renn 2003, p. 578). Every task having some sense of worth motivates the employees to achieve their pre-set targets that contribute towards organisational productivity. Pre-set goals enhance the performance efficiency by making the employees believe in becoming a vital part of a significant accomplishment (Baum and Locke 2004, p. 590).
Establishing Performance Standards
Predetermined rules and standards are necessary for developing employees focus, receptivity and commitment towards their specified goals (Balain and Sparrow 2009, p. 227). Management at Sainsbury illuminate and stipulate the required performance standards pertaining to attendance, behavioural aspects, maintaining organisational privacy and effective contributions for enhanced productivity; which are also included as the fundamental elements of organisational codes of conduct.
It is the responsibility of the mangers to keep track of their team's performance efficiency and take necessary steps to overcome their deficiencies in terms of providing them suitable opportunities of advanced learning and trainings to improve their skills. At Sainsbury, manager not only monitors the performance levels of their team members but also encourage them by appreciation and rewards (Sainsbury 2010a).
Comparison between Performance & Targets
It is not indispensable that the organisational goals are met at all times however, it is extremely important to make the employees realise about the expected performance levels (Renn 2003, p. 580). The company has established a framework of enabling their people understand the organisational expectations. Managers effectively illustrate the comparisons between performance and targets and allow their teams to exhibit best out of their existing abilities.
Rectification & Moving Forward
Managers have the responsibility to evaluate, identify and rectify the gaps between performance efficiencies and pre-set targets (Heslin and Klehe 2006, p. 705). The employees can peacefully move forward and enhance their performance efficiencies only if the issues and inaccuracies of their performance have been instantaneously identified and effectively addressed.
CRITICAL REVIEW OF LITERATURE
Performance management involves all the initiatives managers undertake to guide and motivate high performance in order to attain maximum benefits and competitive advantage to their organisation. The foundation of performance management theory has been structured on the grounds of human resource management (Knight, Durham and Locke 2001, p. 327). Individual's behaviour towards their employment is characterised by their internal satisfaction. The organisational environment plays an integral role in shaping up the employee's sensitivities towards its objectives Fleetwood and Hesketh 2009, p. 265). Less appreciative and stringent regulations may produce negative employee behaviours and therefore, organisations today are now focussing on developing positive work environment along with employee motivational strategies so that their behaviour towards achieving the organisational objectives may also become productive and consequently the organisation can benefit by high-performing workforce (Knight, Durham and Locke 2001, p. 327). The inception of organisational behaviour theories, organisational environment theories and employee motivational paradigms has enabled the organisations to understand the significance of human psychology in effective performance management.
Behavioural Management Theories
The positivity and negativity in employee's engagement with its organization is heavily reliant upon the organisational work environment. Employees are motivated to work when given appropriate work environment combined by adequate equipment (Heslin, VandeWalle and Latham 2006, p. 885). The employee's behaviour at work is directly affected by a number of contributing factors including atmosphere, the relationship with co-workers, job conditions and requirements, the remuneration package and professional stability (Latham, 2003, p. 309). The organisational management necessitate evaluating and addressing the needs and demands of its employees to gain satisfactory and productive employee behaviour. Behaviour analysis is the study of individual interaction with the environment and management of such behaviour is an essential element characterised to produce direct effect on the profitability of an organization (Latham 2003, p. 312). The frustrating behaviour of an employee is a clear indication of the system failure as the general worker's behaviour is the reflection of the management policies (Knight, Durham and Locke 2001, p. 328). Sound policies addressing employee's needs including job security, peaceful atmosphere, stipulated necessary equipment, equality and professional progression is more likely to produce the breed of workforce essential for an ongoing productive organization (Balain and Sparrow 2009, p. 229). Mary Parker's behavioural management theory focuses on the fact that influential leadership is the key to motivate employees and for that assessment of their job improvement capacity will benefit. The Hawthorne theory highlights the importance of observing the frequency of behaviours and their outputs. An immediate feedback on performance with sufficient information for self correction is necessary to improve organisational performance and its functioning (Heslin, VandeWalle and Latham 2006, p. 879). Employees of today's contemporary organisational structure have sufficient access to information and are willing to participate, share and discuss their own views and creative ideas for enhanced organisational performance.
Organisational Environment Theories
Workforce of an organization is essentially compelled to work within groups where employee's individual behaviour may vary depending upon the relevant circumstances, work conditions physical or mental state subsequently benefits the organisation in terms of developing high-performing workforce (Renn 2003, p. 572). Provided the situation organisational environment is an integral factor that is deeply rooted in the behavioural transformation of its employees (Knight, Durham and Locke 2001, p. 332). Friendly, supportive and constructive organisational environment which provides the opportunity for the employees to interact with the management and exchange their views is the most progressive work setting (Heslin and Klehe 2006, p. 705). Progressive organizations are inclined towards building excellent work status and valued atmosphere for their workforce in order to attain enhanced performance of their employees to obtain the desired results (Sparrow 2009, p. 520). An organization is comprised of a group of people and resources brought together essentially for interaction and conscious coordination to acquire a common purpose or an objective (Fleetwood and Hesketh 2009, p. 270) and it has been studied that the survival of an exemplary work environment is subjected to the equilibrium contained in its surroundings (Brewster, Sparrow and Vernon 2007, p. 323). The organizational environment theories underline the internal and external relationships; external resources serve as inputs which are further processed into goods and services resulting in finished outputs in the environment (Drach-Zahavy and Erez 2002, p. 667). An open system is usually hyper-interactive while the closed system is self centred and usually fails to maintain its longer subsistence (Hesketh and Fleetwood 2006, p. 677). The organisations are required to develop a culture of excellence where freedom of speech and positive interaction can be entrenched throughout the system. The contingency theory emphasizes that the management must be flexible to react to environmental changes. Modern and technological organizations have likelihood to alter the conventional procedures rapidly, so the management must adapt to change with positive attitudes (Balain and Sparrow 2009, p. 229). There can be mechanistic structured organization where management is centralized at the top to monitor its employees and is financially stable but less performing on the other hand, elastic organisational structure is decentralized and prefers reaching out to employees with a flexible approach has a high-performing employee base that eventually enhances the organisational productivity (Drach-Zahavy and Erez 2002, p. 669). Sound environment guarantees the motivated and efficient employees and leads to maximise the organisational outputs.
Theories of Motivation
There could be a single or a set of reasons for a specific human behaviour, engaged in certain activity for the desired outcomes and the ground for such activity is referred as motivation (Hesketh and Fleetwood 2006, p. 688). Every individual has needs and specific goals and human life is engaged in satisfying those needs and to acquire the desired goals. To attain the sense of fulfilment and feeling of achievement can be the prime motivating factors subsequently benefits the organisation in terms of developing high-performing workforce (Renn 2003, p. 572). Human nature can be simple yet too complex at the same time (Knight, Durham and Locke 2001, p. 335). Understanding of human nature is a pre-requisite for effective employee motivation which accounts for higher organisational productivity. Regimentation of aims, purpose and values amongst the staff is the most fundamental aspect of motivation. Motivation enables the employees to develop personal association their organizational aims and objectives (Heslin and Klehe 2006, p. 708). Organisations that offer their employees financial support, social engagements and self development opportunities successfully develop a sense of belonging in them that subsequently benefits the organisation in terms of developing high-performing workforce (Renn 2003, p. 572). It has been observed that the overall productivity of an organization is increased with highly motivated employees in comparison to the organization with poorly motivated workers (Brewster, Sparrow and Vernon 2007, p. 323). Motivation theories are based on individual needs supported by employer's encouragement through verbal appreciation and fiscal support. Need hierarchy theory was put forth by Abraham Maslow which is one of the most highly acclaimed and widely mentioned theories of motivation. Maslow envisioned human needs according to a hierarchical structure of importance, from the lowest to highest, highlighting the five basic physiological needs, sense of security, social drives, self esteem and need of self actualization (Hesketh and Fleetwood 2006, p. 680). Human needs considerably vary and in accordance with Maslow's theory, the successful organisations invest in evaluating and identifying their employee's needs and develop resourceful system to address them in an effective manner. Herzberg's two factor theories in accordance with Maslow's theory, proposed an idea that certain factors such as challenging work, responsible position and sense of recognition may contribute as prime motivators but on the other hand certain factors including desired salary, fringe benefits and appropriate environment, if absent, may result as de-motivators (Knight, Durham and Locke 2001, p. 329). Herzberg's theory emphasises on multiple goals and benefits that serve as precursor of motivation and explicate further that the probability of de-motivation arises when perks and privileges do not exist (Brewster, Sparrow and Vernon 2007, p. 325). Hawthorne experiments of Elton Mayo focused on incentives, pay-cheques and financial satisfaction to be the primary motivation factors as people are highly motivated by monetary incentives couples with positive work conditions. Furthermore, the theory also indicates that attitude of people at work are highly influenced by the groups and work environment concluding that human relations and the social needs of workers are crucial aspects of performance management paradigm (Knight, Durham and Locke 2001, p. 329). Mc Roger's theory heavily emphasized on two basic kinds of management practices categorised as Theory X and Theory Y. The management which falls under Theory X is believed to have a negative approach towards the employees considering them untrustworthy and incapable and thereby, lose the opportunity to gain competitive advantage by enhancing their performance abilities. Theory Y addresses the kind of management having faith in their employees and thereby recognising their needs positively as a result of which the employees feel secured and perform better that subsequently benefits the organisation in terms of high performing workforce. Numerous theories has been put forth to encompass and address the benefits and organisational values of adopting an altruistic approach towards dealing with workforce (Latham 2003, p. 316). The extensive literature review encompassing diverse behavioural, organisational and motivational theories indicate that employee's performance can be substantially improved by offering deferential treatment through verbal persuasion, appropriate work environment and motivation by means of numerous tactical tools and techniques (Heslin, VandeWalle and Latham 2006, p. 885). . The critical review of literature constitutes that, when an obvious linkage is established between management and employees, the probability of instituting better performing workforce can be achieved.
The theoretical underpinnings followed by evaluation of Sainsbury's case study constitutes that the performance management paradigm can be well-understood by comprehending the human psychology pertaining to organisational environment, organisational behaviours and the key motivating factors that enables the employees to gain a sense of self-worth (Balain and Sparrow 2009, p. 226). Human beings can perform increasingly well if provided with a sound organisational environment in which their contributions are equally respected and acknowledged (Nelson and Cooper 2007, p. 37). Sainsbury's profound organisation has been maintaining a positive work environment by providing their employees the opportunities to discover their potential skills and educate themselves in accordance to their specific job roles. The management of Sainsbury has ample realisation of human induced errors and dynamics that cause performance inefficiencies (Sainsbury 2010a). In order to minimise the risk of reduced performance levels entrenched throughout the organisation, the management of Sainsbury has integrated a strategic approach of motivating, appreciating and rewarding their workforce. The idea is to establish a positive work environment of increased systematic planning, performance monitoring and persuasive learning to preserve a progressive organisational structure followed by high-performing individuals (Renn 2003, p. 567). The managerial attitude towards under-performing employees has been drastically evolved due to the inception of environmental, behavioural and motivational theories pertaining to organisational performance (Nelson and Cooper 2007, p. 47). Employers are now emphasising on retaining their slightly under-performing but loyal employees with intent to invest on their education and training in order to enhance their performance efficiencies (London 2003, p. 3) as a result of which the employees not only achieve job-security but also strive to perform well in order to get access to enhanced growth opportunities within their existing organisations (Latham 2003, p. 318). Despite of numerous factors affecting the performance level of most employees, it has been observed that mentors are exceedingly helpful at raising self-efficacy amongst the employees especially those having similar attributes to the observing employees (Hesketh and Fleetwood 2006, p. 678). Therefore, the management of Sainsbury has been focussed on developing true leaders within their existing workforce so that others may also improve their performance for self-growth (Sainsbury 2010a). Moreover, praise and appreciation is a natural urge and therefore, smart organisations like Sainsbury develop effectual strategies to reward their staff on the successful completion of their tasks which subsequently encourages them to perform well in future.
Organisations investing in their employees have been observed to gain high-performing workforce and competitive advantages in the market. The contemporary organisations have realised the significance of empowering their employees and ensure that they are adequately contented by entrenching effectual employee welfare schemes (Heslin, VandeWalle and Latham 2006, p. 890). It has been studied that the satisfied employees contribute their best abilities to enhance the performance efficiency of their organisation. Consistent motivation has been considered as the most reliable process for enabling people to contribute effectively in the continuous improvement and ongoing success of the organisation (Sparrow 2009, p. 518). Positive and correct working environment complemented by smart motivational strategies are the compulsion of contemporary organisations in which employees are now completely responsive towards their rights and comprehend the significance of their performance in the productivity and profitability of an organisation. The organisational growth and performance intensifies when its foundation is concrete and is based upon optimistic environment where employees are empowered and actively participating in the progression of the company (Latham and Locke 2006, p. 338). Employers are required to understand the significance of skilful and high-performing employees and to need to employ prudent strategies and adequate investments to enhance their performance levels by offering monetary and verbal appreciation, growth opportunities and sufficient incentives coupled with dynamic work environment (Nelson and Cooper 2007, p. 75). Sainsbury has successfully managed to develop a progressive atmosphere and their human resource management has sound realisation of investing in retaining employees' loyalty and commitment to enhance performance efficiencies (Sainsbury 2010a). The efforts and strategies of the human resource department towards maintaining a positive internal environment of the organisation is tailored with excellence and absolutely remarkable however, it is significant to note that Sainsbury is functioning within a saturated market where competition is fierce. The workforce has variety of options to choose from potential opportunities and therefore, it becomes extremely tricky to retain committed and high-performing workforce. To conclude, the organisational efficacy and productivity is highly reliant upon its high-performing employees and therefore, investing in people's welfare is mutually benefiting to both the individuals as well as the organisations, to enhance performance efficiencies.
PART - B (500 Words)
SAINSBURY: FINANCIAL ANALYSIS
In accordance with profitability and performance analysis, it can be constituted that Sainsbury is operating within a highly saturated market place. The sales revenue obtained by the cost of goods sold incurs a gross profit ratio of about 5-7% and approximately 90% of the sales revenue is consumed by this outlay (Sainsbury 2010b). After observing the rest of trivial expenditures by the company and the financial statements for the past three years, it has been indicated that the company is generating approximately 1.5-1.9% of the net profit ratio which is evidently insignificant (see appendix I). In accordance with the horizontal analysis of the fiscal statement it can be observed that the overall market has a reduced growth rate. The sales growth is equivalent to the average rate of inflation and it has been observed that the company has been striving hard to generate some noticeable growth in sales but the all the efforts for improving sales have been futile so far. The profit ratio has been a little consistent in some previous years till 2007 but the company has experienced a decline in profit rate during 2008-2009. Although there has been some nominal improvement in sales however, the gross profitability has been turned down which was estimated to be 6.83% in 2007 that declined to 5.62% in 2008 (Sainsbury 2010b). Moreover, the gross profit ratio of the company further declined to 5.48% in 2009 which indicates a lower trend in productivity. The operating profit margin also experienced a decline during 2007-2008 from 3.03%-2.97% however; there was shift in trend followed by increasing operating profits from 2.97% to 3.56% during the 2008-2009 fiscal years (Sainsbury 2010b). Furthermore, the company also experienced a declining return on capital employed which was 10.97% in 2007 that reduced to 9.71% in 2008 (see appendix I). On the other hand, an increase in operating profit trend was observed during 2008-2009, which rose from 9.71% to 10.65% respectively (Sainsbury 2010b). As per the current analysis of last three fiscal years, it can be stated that Sainsbury has been experiencing a declining trend in its overall profitability due to the suffocated market conditions. The chances for a rise in growth rate require a prudent control over its operating costs to increase the general profitability. The fiscal analysis of Sainsbury through the balance statements over the last three years indicate both increase and decrease in different account balances. The current and quick ratio analysis of the company shows an upsetting credit conditions as the required current ratio of 1 has not been sustained and also fell below the threshold in the last three fiscal years. The current situation indicates that the company's debts are on a rise however, the good solvency indicators also constitute that the situation is under control. The inventory turnover ratio has been successfully maintained by the company during 2007-2008 14.07, 14.76 but it slightly declined to 13.48 during 2008-2009 (Sainsbury 2010b). In general the inventory turnover ratio is satisfactory and it can be concluded that Sainsbury's maintains a dynamic and optimum inventory. Moreover, the receivable turnover ratio has been estimated to be in between 3-5 for several years which indicates that the company needs to improve its receivable turnover by fast recovery process.