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The major driver of change in IDLink Systems is identified to be Internal Drivers (high turnover rate and low morale of employees). Internal driving forces refers to those kinds of things, situations, or events that require changes or modification which is undertaking within the business, and are usually under the company's directives. Examples of internal drivers are: People or employees' behavior, attitude and culture, Organization Structure (leadership and department), Technological Changes and/or advancement, Systems and/or process implementation and/or modification, Made changes to improve or enhance employee morale.
The major factor that contributed to high turnover rate was inequity of performance appraisal system which results in low morale of employees (Refer to Appendix III for the interview with the Managing Director of the IDLink Systems).
Human Resources team discovered through exit interview that the main factor which had caused an employee to resign was inequity with current Performance Appraisal System (PAS). They felt that they were not fairly graded by their immediate superior. Majority of them felt that as long as they were on good terms with the supervisor, it does not matter even if they did not perform up to scratch in their work. Instead, the subordinates would almost be certain that they would still do well in the appraisal. On the other hand, if the superior does not like anyone on a personal level, the grade that they would be getting would be an average grade, even if they have excelled in their job. This, has in return, caused a lot of unhappiness, disagreement and grievances amongst all. Therefore, the organization was not able to retain staffs that are well equipped with the necessary skills and those with positive work attitude.
Other factors such as less opportunity for advance, poor motivation, poor relationship with management and dissatisfied with job had also contributed to company's high turnover rate (Soler C. H. 1998). And these factors were in fact interrelated to inequity PAS. As managers or direct superior do not grade or assess employees fairly, it creates poor morale and low levels of motivation within the workforce. Employees believed that they would not gain rewards and career advancement they deserve. They felt there was no clear path for them. Thus, there was no enthusiasm and pride of ownership being developed in their jobs.
3.0 Change Perspectives
Due to inequity PAS, the manager was, to certain extends, and alienates staff by promoting someone who short of training and / or possesses the essential experience to lead/supervise. This had result in employees feeling that the management shows favoritism and may question why do a good job? Thus, straining the relationship between employees and management and create dissatisfaction of the job which encourage the employees to leave the organization (Soler C. H. 1998).
With the given facts above, the company identified and categorized the defunct performance appraisal process as both the 'System Perspective' and 'Rational Perspective' as the driving force for essential initiation of the change intervention.
Thinking systemically entails a number of shifts in perception, which leads to different results and views. Draper L. Kauffman Jr. says that "system is a collection of parts which interact with each other to function as a whole." Therefore, any 'parts' within a system should function as a whole. In this case, the appraisals are deemed to be unfairly conducted with various gaps and loop holes, resulting in the high turnover rate in IDLink Systems. Individual supervisor being the living 'system' and complex organism which is capable of evolving on its own, so it is essential to have a standard system with well defined appraisal assessment criteria and process in place.
On the other hand, the rational perspective is based on strategic planning and logical process that aligns the company's structure and competencies to match its environment. This alignment relies on the managers as they are empowered with resources available to achieve the organizational objectives (Bernard Burnes 2009). However, the objectives have to be decided upon. Thus, the key is to decide on the objectives as organizational change will be achieved through sound planning and execution. In relation to IDLink System, it was the high turnover rate that projected its failure to retain the talents that it painstakingly hired through countless short listings and interviews of potential candidates. Of course, these do not include the time, training and other essential cost invested in each individual employee that was hired. Logically, it only makes business and money sense that the company cut these incidental costs, by retaining its employees in order to maximize profit. In the long term, the company is not only able to function seamlessly with lower turnover and cost, the company could also pass down part of the savings to its employees, which results in a win-win situation. Therefore, planning of the system has to be done carefully before implementing the system. This will achieve the desired objectives and reduce the high employee turnover rate.
4.0 Change Strategy
Strategies are plans or directions to address issues and problems within any organization. A strategic plan is a road map for an organization as it provides a company purpose and direction. Planning is a process of analysis, transforming a set of goals or objectives into specific actionable steps, formalizing these steps so that they can be implemented and measured against the results. (Henry Mintzberg, 1994). Without strategic planning, businesses would be reactive, without clear directions and spending time and effort reacting to the demand of the environment. Companies that have strategic plans will have higher chance to remain competitive in the market than those who do not plan proactively.
Thus, to prevent more employees from leaving the company, a systematic and fair performance management system had to be set up and planned to achieve lower turnover by recognizing employees' contribution and effort they put in.
One of the options was by implementing Performance Appraisal (PA). PA is a process involving various steps of obtaining, analyzing and recording relevant information concerning the relative worth or performance of an employee (David J.Cherrington 1995). It is a confidential document that includes the evaluation of job performance of an employee, a summary of the employee's actual performance relative to the expectations, and overall rating of the employee's performance, personal strengths and weaknesses and the supervisor's and employee's signatures.
The 360 degree performance appraisal was the other available option which is relatively new and offers organizations an alternative method to gain useful performance information and about employees. 360 Degree Feedback is the most comprehensive appraisal where the feedback about the employees' performance comes from all the sources (multiple sources) that come in contact with the employee on his job them. This group of individual is made up of both internal customers (i.e supervisors, subordinates, and coworkers) and external customer (i.e clients, suppliers and community officials).
After selecting the change strategy, we need to identify an approach for change strategy development and implementation. According to Henry Mintzberg (1998), there are Ten Schools of Thought about Strategy Formation. Each individual school of thoughts has different approach and characteristics.
The Planning School approach was identified as the most appropriate, therefore it was adopted for IDLink System's change strategy development and implementation. It emphasizes on a set of specific steps to be implemented, beginning with situational analysis and follow through to the strategy execution. The change was based on Business Level of Strategy which relates to individual business and operations of the company (Bernard Burnes 2009). For example: change in process system and procedures.
5.0 Critique of the change
Although the planning school strategy gives clear direction which enables resource allocation and offers optimal control, there were also implications to this approach. Often, introducing the change is not accepted by many in the organization, especially the managers. Lacking of understanding and communicating of the change could be another reasons for resistant to change. People often think that management never got the message through to the employees at large before implementing. However, Lawrence G. Hrebiniak (2005) suggest that overcoming resistant to change is vital as it may kill or injure change efforts and execution in a big way if it is not dealt with.
6.0 Suggestions / Recommendations
An appraisal system between manager and subordinate performance was selected over 360-degree appraisal to provide a fairer assessment which will address one of the major concerns that caused high turnover rate. This is because 360-degree has few limitations such as time consuming and more administratively complex. Providing feedback may be troublesome for some raters (i.e. customers and supplier) because it is hard to give constructive feedback. Mary Carson 2006, pointed out it also requires training and significant change effort for 360-degree to work effectively. On top of that, it was empathized that without proper planning, execution and evaluation, the 360-degree plan could easily be redundant. PAS on the other hand, it could be tracked and managed internally without involving third party which could in return generate unnecessary attention. Furthermore, it would be more desirable to train, and update any additional information, the assessors internally. PAS was highly recommended to be integrated into the organization to achieve the objective of reduce turnover.
Communication is one of the key to successful execution. In order to reduce the obstacle of resistant to change, areas such as training and counseling should be planned and arranged as it is an answer to the question of uncertainty, such as what will things turn out if I am no longer able to cope (David Hussey 2002). Two way communications should be practiced in order to achieve effective communication. To facilitate effective communication, both parties should have a clear idea of what is the strategy deployed, the reason for using that strategy and how to carry out and also the tactics used to support it.
It is almost common sense and easy for corporations to invest in a comprehensive strategic plan. However for the organization to reap the strategic plan's full benefit, the top management must communicate all the details effectively throughout the whole organization. Strategies do not change on time, they may remain stable for years, even decades, before any changes. To add, the process can be complex even when they do change (Henry Mintzberg and James A. Waters 1982). Therefore, a progressive review was conducted with close monitoring. By conducting progressive reviews with employees, their performance can be compared to the predetermined elements and standards. The ongoing monitoring benefits the organization in making changes such as correcting any unrealistic and problematic standards. Thus, allowing the undesirable performance to be identified at any time of the performance appraisal period.
6.1 Progressive plan of Implementing Performance Appraisal System (PAS)
Announcement - HR department is responsible for the official announcement to all employees regarding the implementation of PAS. A handout will be given to employees beforehand. Information include: date, objectives and action plan of implementation. Thereafter, Question and Answer session can be arranged to further address their concerns.
Designing of Performance Appraisal (PA) form - The appraisal form is designed to be completed by both the appraiser and appraise (Please refer to Appendix II). The annual performance appraisal is designed using 5-level rating scale. As the form includes self assessment section which allows employees to challenge the appraisal if he or she feels that it is inaccurate or unfair, HR will be ensured that the appraisee will receive the form some time ahead of the scheduled appraisal session and with appropriate guidance.
Training for evaluators / managers - Training programme will be provided for evaluators / managers to avoid inflated or deflated evaluation. Inflated is the situation where manager tend to give higher and higher rating as they do not know whether their ratings are 'too hard', 'too easy', or 'too concentrated in the middle'. Deflated evaluation occurs in manager who has very high expectation of employees. An in-house training will be conducted by HR. Managers would be trained on how to evaluate the employee's performance the administrative procedures to follow.
Establishing Performance Goals with employees - Work has to be planned in advance for an effective functioning of the organization. At the beginning of the year, manager would meet with their employees to establish expectations regarding the employees' performance and set goals/targets for individuals and groups to direct their effort towards achieving organization objective.
Continuous observation and feedback - A monitoring process which stressing on observing the behavior of employees and providing ongoing feedbacks to employees when necessary during the course of the work cycle. It gives the employee the opportunity to better understand expectation, standards, procedures, rules and regulation.
Conducting performance appraisal - ensuring the few steps have to be present. (Refer to Appendix III)
Rewarding performance - The company will be adopting a system whereby pay increases are based on performance. Performances are being divided into different categories, and points are being awarded according to them. See Appendix IV.
For an organization to survive, change is inevitable. And change, is ever occurring at an unpredictable pace. Business owners or stakeholders must plan ahead, anticipate changes and develop a strategy that helps them to prepare and react to challenges created by change. A defined strategy ought to follow specific tactics. A well planned PAS had help to ensure equitable and fair treatment of employees because appraisal is based on results and performance. Due to the implementation of PAS, IDLink had successfully reduced the turnover rate by about 40% for the past half a year as compared previously. Therefore, for effective people management PAS is definitely one of the most effective systems to implement.