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Employees are a company's important asset. They are the one who plan, manage, organize and control business activities on behalf of the organization to compete with competitors. In an organization, the success of the business not only lies on its financial stability and its resources management, but also lies on its employees. Employees play a very important role in helping organization to achieve goals.
In the past decade, increasing numbers of organisations have been measuring employee's performance that they believe ultimately affect profitability as well as able to offer several benefits. Thus, there is currently a great interest in performance measurement with many companies attempting to implement the system such as the Balance Scorecard in order to measure their individual employee efficiently. However, there is also evidence that many of these implementations are not successful.
The main objectives of this study were to examine whether measuring the performance of an employee is an essential tool within management control and analyze on various approaches to motivate employees to work towards the company's strategic aims by giving several examples of companies. The study found that there are several benefits and drawbacks for companies conducting performance measurements on their employees. Thus, it becomes more important in understanding of how the companies to ensure their employees to achieve the organization's vision, goals and objectives.
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PERFORMANCE MEASUREMENT OF AN EMPLOYEE
The main objective of performance measurement is to provide comprehensive and timely information on the performance of an employee. This information can be used to communicate goals and current performance of an employee directly to the company's goals and objectives, to give early warning signals, to make a diagnosis of the weaknesses of an employee, to decide whether corrective actions are needed and to assess the impact of actions taken.
It has further defined by Platts and Sobotka (2010) that "individual performance measurement is the process that supports the organizational control system by linking the work of each individual employee or manager to the overall mission of the work unit." Platts and Sobotka (2010) has also identified that "there are three roles attributed to individual performance measurement which are accountability, incentives and inspiration."
With performance measurement, a company can monitor the implementation of its plans and determine when plans are unsuccessful and how to improve them. In short, the performance measurement system is the heart of the control system that provides for organizational learning.
In 1992, Kaplan and Norton argued that the problems of the traditional performance measurement systems could be overcome if a firm adopts a Balanced Scorecard which is a set of measures that give top managers a fast but comprehensive view of the business. The strength lies in the way the Balance Scorecard integrates different classes of organisational performance which are financial and non-financial, internal and external. The Balanced Scorecard explicitly links the different dimensions of business performance measurement to organisational strategy and integrates four ways of looking at performance, it is also a tool for focusing the organisation, improving communication, setting organisational objectives and providing feedback on strategy, it also measures how employees performed in relation to corporate strategy.
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Performance measurement on employee is a tool used by the management to evaluate employee. Evaluation requires a comparison. To evaluate the performance of an employee, its managers have to compare that performance with some standard. Such a standard can come from past performance, from the performance of similar employees, from a professional or industry standard. But without such a basis for comparison, it is impossible to determine whether the employee is performing well or poorly. And to compare actual performance against the performance criterion requires a variety of outcome measures, combined with some input (plus environmental, process, and output) measures.
Performance measurement on employee is also a tool to control the behavior of employees. To do this, management needs to measure the corresponding behavior of individual employee and then compare this performance with the requirements to check who has and has not complied. These guidelines are really requirements, and these requirements are designed to control. The measurement of compliance with these requirements is the mechanism of control.
Performance measurement on individual employee is also a powerful vehicle for reinforcing positive behaviour whereby documenting an employee's strength is a positive motivator, and tends to fulfill one's need for self actualization. The employees want to know what they are doing with their own future while contributing to the organization. It is important in a successful program to show the relationship of employee goals, job satisfaction, and motivation. It is also important that employees know what your goals are.
According to Smith (1993 cited Platts and Sobotka, 2010), "forcing individuals to deliver on set measures may tunnel their vision, reduce their urge to experiment, and cause them to sub-optimise." "Over measurement at the individual level may lead to gaming, creative accounting, or fraud and endanger the effective business operation." (Kohn, 1997 cited Platts and Sobotka, 2010)
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Some of the problems with performance measurement are that involved lack of standards and clear direction whereby without knowledge of the standards and a proper measurement programme, employee is likely to perceive unfairness, subjectivity and bias in the evaluation. The feeling here is that bias would affect the pay of employees and if a particular supervisor holds a grudge against an individual, the employee could be harmed.
In addition, some supervisors may gloss over the process because they feel that it would be too difficult to decide to take away or deny an employee additional pays. The fact that most programme fail is usually due to two problems which are the lack of training in rating employees and inappropriate criteria and methods for evaluating have been implemented. Supervisors should be trained in performance management, then prepare their employees for the process.
There is the lack of supervision by company officers whereby managers that do not make the time to observe their subordinates in the work environment are forced to choose between giving their employees inflated ratings or lower ratings based upon insufficient information or casual observation. Another significant drawback for performance measurement can be in the area of goal setting whereby if unrealistic goals are developed and the employee fails to obtain the inflated goal, his faith in obtaining the next period's goals will be diminished.
According to Karen A. at al. (2004), the performance measurement system such as Balance Socrecard shows a lack of consideration to the measurement of human resources, employee satisfaction, supplier performance, product/service quality, environmental/community perspective.
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ALTERNATIVE APPROACHES TO MOTIVATE EMPLOYEES TO WORK TOWARDS THE COMPANY'S STRATEGIC AIMS
Maslow's hierarchy of needs stress on two fundamental basic premises. (1) People are seen as being motivated by a desire to satisfy several different types of needs. (2) People's needs are arranged in a hierarchy of importance. Once one need is satisfied, another need emerges and demands satisfaction. Maslow formulated five types of needs in a hierarchy of importance ranked from the lowest levels of needs to the highest level of needs.
Maslow's Hierarchy of Needs
Herzberg's research on motivation led to the development of his motivation-hygiene theory, which considers both job satisfaction and job dissatisfaction. The factors associated with positive feelings about the job were known as motivator factors. Motivator factors included the intrinsic factor of a job when present, should create high levels of motivation, such as challenge of work, responsibility, recognition, achievement, and advancement and growth. On the other hand, dissatisfied employees were found among the hygiene factors. Hygiene factors are the extrinsic factors of a job that, when positive in nature, maintain a reasonable level of job motivation but do not necessarily increase it, including working conditions, company policies, supervision, co-workers, and salary and job security.
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Alternative Approach 1
Platts and Sobotka (2010) have revealed that: "in certain circumstances, managers can delegate responsibility to their employees and have confidence that the decision-making of these employees will be in the best interests of the project and the company without formally defining and monitoring the expected performance."
Job design refers to the way that a set of tasks or an entire job is organized. Job design involves the structuring of various aspects of the job content, for example, job design might involve increasing job responsibilities, the variety of tasks, or employee autonomy.
Job design is important to the organizing function for two major reasons. Firstly, task activities need to be grouped in reasonably logical ways. Secondly, the way that jobs are configured, or designed, has an important influence on employees' motivation to perform well. Thus, management needs to consider both efficiency and motivational issues in designing jobs that will facilitate effective performance.
Herzberg's two-factor theory indicates that employee motivation can be increased through basic changes in the nature of employee's job (job enrichment). Hence, jobs should be redesigned to allow for increased challenge and responsibility, opportunities for advancement and personal growth, and recognition. Job enrichment as seeks to improve both efficiency and human satisfaction by means of building into people's jobs, a greater scope for personal achievement and recognition, more challenging and responsible work, and more opportunity for individual advancement and growth. Approaches to job design include:
Job enlargement: This involves enlarging a job by horizontally increasing the number of tasks or activities required. Theoretically, job enlargement will motivate employees to increase productivity. The motivation will occur from the relief of boredom, since the diversity of change is stimulation in and of itself.
Job rotation: It moves employees from one task to another. Job rotation distributes the group tasks among a number of employees.
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Job enrichment: It allows employees to assume more responsibility, accountability, and independence when learning new tasks or to allow greater participation and new opportunities. It entails more self-monitoring and more planning and controlling decision.
Job engineering: It allows employees to see how the work methods, layout and handling procedures are linked together as well as the interaction between people and machines.
There are several examples of successful manufacturing companies in Malaysia with a flat organizational structure and rapid and direct communication channels to enable managing their employees via direct contact, without the need for extensive individual measures, by increasing job responsibilities, the variety of tasks, and employee autonomy in order to motivate them to work towards the companies' strategic goals.
Alternative Approach 2
Platts and Sobotka (2010) have revealed that: "the role that individual performance measurement can play in incentivizing workers can also be replaced by alternative mechanisms, in some environments whereby the effective stimulation and motivation of individual employees to deliver required standards may not necessitate a formal link between performance and reward. Satisfying working conditions and the inherent value of 'heroic action' may instead substitute for performance-related-rewards."
Fortunately, some recent studies have shown that employees' motivation is not solely affected by money. Money alone is not a great motivational tool to achieve high performance and optimum productivity. In fact, some researchers have suggested that money is actually a dismotivator that its presence does not necessarily guarantee job satisfaction.
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The environment in which individual performs can affect his or her performance. Work environment can be divided into two major categories, which are (1) physical environment, which includes comfortable and safe workplace with ample of supporting resources and equipments; (2) social environment, which includes the relationship in organizations with other people (such as supervisors, peer-group, and subordinates) and social systems (such as laws, rules, policies, and incentive programs).
By knowing that work environment had significant effect on employees' level of motivation, managers must create the work environment that supports their employees towards higher performance. Physical environment can affect the motivation of employees to perform their jobs. A comfortable and safety workplace with ample support resources and equipment may have a positive effect on employees work performance. Besides that, employees' social environment determines their attitude toward work, their expectation about supervision, their response to incentives, and most of their other job responses.
Supervisory can also influence employees' effort and performance under certain circumstances. Thus, the relationship between supervisor and employee is essential point because the immediate supervisors have the considerable influence over the ability of employees in pursuing their personal goals on the job.
In Malaysia, the majority of public listed companies such as Texchem, Sime Darby and etc. are providing good working environment as well as good benefits for all employees instead of running the individual employee performance measurement in incentivizing employees with performance-related-rewards. They are still able to motivate their employees to perform better and focus on the real goals of the companies.
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Alternative Approach 3
Platts and Sobotka (2010) have revealed that "employees gain inspiration from feeling that they contribute to overall projects or to the organisation's performance." Their research has proven that "companies which inspire their staff to achieve extraordinary results for the organisation may not rely on individual performance measurement to achieve these outcomes; they may instead accomplish this in other ways."
Managers must get in the habit of complimenting employees sincerely for a job well done. A personal thank-you offered face-to-face is all it may take to make an employee hustle; a note of congratulation on the completion of a special project is positive encouragement for the employee to give his or her best. Some managers explained to subordinates why their jobs are important and how their work fits into the total operation. They bring employees into confidence and recognize them as important people in the organization.
Another form of recognition is listening to what employees have to say. When the manager gives an employee a sincere attention, he or she recognizes that employee as an important person, a person whose ideas and opinions interest the managers. Furthermore, most managers find that a genuine word of praise for work well done can be much more effective than criticizing an employee's shortcomings.
According to Nelson (1994), the number one from of recognition desired by employees is verbal appreciation or praise from their immediate boss. This is followed by written appreciation or praise by their immediate boss. People have a desire to feel needed and appreciated at work; people who receive this reinforcement are happier and more productive at work.
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In Malaysia, all banks as well as other public listed companies are continuously and effectively communicating their vision to employees and recognising the work done by employees of which may encourage such identification on individual employee as well as may foster a sense of self-worth among their employees. This is an approach at least equivalent to inspiration through individual performance measurement.
The finding of this study concluded that companies do not require formalized individual performance measurement systems in order to achieve high performance standards. This study explored that alternative approaches can substitute for the roles of performance measurement by motivating employees to work towards higher performance and increased productivity.
Overall, employees are the assets of any company in any industry, therefore, companies should be carefully consider the introducing individual performance measurement as it cannot affords to face such problem which later in turn affecting the company itself. The invaluable information gained from this study can provide insights to what extend the effect are on job performance. Moreover, when companies effectively manage needs of their employees, this will improve the relationship between both parties.
The job characteristics model (skill variety, task identity, task significance, autonomy and feedback) is one of the most popular approaches to job design. The job characteristics model focus on what makes jobs intrinsically motivated for job enrichment as well as job enlargement. When employees are intrinsically motivated by their job, good performance makes them feel good and motivates them to perform at a high level.
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Besides that, recognition and praise could help organization to retain best employees and motivate them into higher performance. It is important to provide employees with non-financial rewards such as recognition and attention. This type of reward can be very effective and efficient because it doesn't cost anything. As organizations and managers continue to look for ways to meet the productivity and motivation of today's organizations, the increased recognition of their human resources must be on primary importance.
Companies create work environment that motivate people in the organization. Part of creating a good environment is having clear understandable organization directions and goals, as well as expectations of how individual performance contributes to those goals. Second part to creating a good work environment is providing training, knowledge, and the tolls to accomplish the organization goals.
By knowing the factors that actually motivates employees in performing their jobs, this will help organizations to identify, recruit, employ, train, and retain a productive workforce. This will result an increased employees' motivation and productivity, lower turnover and absenteeism rates, and a greater overall synergy in increasing the organization effectiveness and efficiency. Thus, it requires both managers and employees working together towards meeting and exceeding the organizational objectives and goals.