Description: After carefully reading Case #7 “A Performance Appraisal Snafu” (Snell, 2013, p.750-753), students will be required to review the case and develop an alternative Appraisal Form (and an entirely new evaluation system if they choose). Cases will be broken into several parts, all which will revolve around the “What, Why and How?” of the case (e.g. the paper will develop the what (position statement), why (the argument) and how (the student’s action plan and proposed Appraisal Form/System).
Embedded within the “what, why and how?” aspects of the paper will be:
A detailed overview of the “role of human capital” in the case, specifically addressing the shortfalls of the current system;
A detailed overview of the role of “compensation” (e.g. current policies and procedures) and details on why the current system does not motivate employees;
A proposed NEW performance appraisal form (or a completely new form and accompanying motivational system); and
A professional and articulate tone throughout
Case Review – Creating an Alternative & Motivating Performance Appraisal
The role of human capital
The main driver of economic development in advanced and developing countries is human capital. Modern economists think of natural resources as playing the most important role in economic development. Availability of natural resources places a country in a better economic position than those countries without. However, this is not sufficient for economic development. The combination of natural and human resources is what steers economic growth higher. For every organization, human capital is instrumental in achieving the set goals. Until artificial intelligence is built, human capital remains to be the key in achieving anything in the world. A company’s employees have the information, knowledge and skills that are paramount for success. Human employees have good judgment and can make tough decision when required, things that robots cannot achieve. It is therefore important that organizations, value and motivate their employees given they are the cornerstone of economic growth not just for the company but also for the country (Marimuthu, Arokiasamy, & Ismail, 2009).
Mr. Marcus Singh, an American citizen by nature has been working as a research economist in the office of research and evaluation in the city of Newport, Oregon. His ten years experience makes him good at his job which is why his supervisors think of him as an above average employee. One challenge is that there is not much activity owing to the small size of the department and the close relationships between employees and the management. It is quite hard to carry out formal evaluation of employees due to their close relationships with their senior. Every organization should have a formal employee evaluation in order to find out every employee’s performance and how their combined performance help the organization achieve their goals and fulfill their objectives. The department’s heads had adopted an informal way of running business due to their closeness with their juniors. Failing to evaluate employee performance is likely to make it hard to determine how the raises, bonuses and promotions would be determined. This would clearly take a toll on the company’s finances. The major fuel behind any company’s growth and success is the human capital. It is however challenging to manage human capital. In the case of this company for example, introducing performance appraisals after the concept was abandoned some time back has clearly brought tension.
In today’s global market, companies are dealing with competition in every industry. it is best to develop a competitive advantage is by making human capital their competitive weapon and leverage it on other companies. It is important to focus on strategies that raise the productivity of employees. In order to achieve long term sustainability and survival, and achieve the company’s goals, companies are supposed to optimize their workforce by designing and implementing comprehensive human capital revitalization programs. The best way to achieve this is by investing their resources to make sure that employees attain skills, knowledge and competencies required in order to be effective in their line of work. The current global markets are dynamic and it is important to ensure that employees are conversant with the complex and rapidly changing environments. The management in Singh’s company should capitalize on their employees. This means that they require regular training programs in order to be up to date with the changes in their industry. Carrying out employee evaluation cannot be entirely fruitful if their skills are not refined on a regular basis. After executing training programs, it is possible to have a reliable performance appraisal that covers all the necessary areas.
Marcus Singh and his fellow employees have been working in the same department for over a decade. The small size of the office of Research and Evaluation does not encourage growth. There are minimal experiences that expose and challenge an employee to do and be better. Such an environment can be discouraging and probably make an employee content with the small size affairs of the office. Mr. Singh’s supervisors have always rated him as an above average employee. This could be the case given that his routine in the office is the same and does not open his mind to challenging and complex possibilities in the future. From the information provided, Singh does not have a performance target and this has probably not earned him a promotion in the last 10 years. Singh represents the employees in the company. Despite their close relationships with their superiors, they seem to have little motivation.
Many companies have responded to the numerous changes in the global market by embracing the notion that human capital gives the competitive advantage and enables the company to grow. This is what Victoria Popelmill should enforce in the department. Developing human capital is part of the overall efforts of achieving high and cost effective performance. Hence, it is important for companies to invest in employee satisfaction as a way of ensuring improved performance. Human capital is therefore a key element in improving a firm’s employees and assets so as to increase productivity and gain a competitive advantage. The major aspects of human capital include education, training and other professional initiatives that enhance skills, abilities, knowledge and social assets of employees. The rapidly changing business environment requires companies to strive towards gaining competitive advantage by using dynamic business plans that utilize innovativeness and creativity. This is very essential for long term sustainability. There is no doubt that human resource is vital in helping a firm stand against its competitors.
The two major components that human capital focuses on are individuals and organizations. Furthermore, there are four key elements of human capital. These are flexibility and adaptability, development of organization’s competencies, enhancement of individual abilities and individual employability. These attributes determine individual and organizational outcome. From the individual level, the importance of human capital is tied to the ability to increase performance and productivity. From the economic perspective, human capital focuses on reducing transaction costs and giving a firm competitive advantage especially when a firm has its own specific resources that rivals cannot copy. Having a unique human capital gives firms incentives to invest their resources in management and focus on reducing risks and capitalizing on productive potentials. For competitive advantage to be achieved, the skills and competencies of employees should be enhanced (Grimsley, 2017).
By reintroducing performance appraisals in the company, Victoria Popelmill has taken the right steps towards giving the company competitive advantage. This step started by transferring Singh from the unit of Industrial Development to the newly created office of Research and Evaluation. Other employees in the company were also reshuffled to work in different units. This would challenge their skills and ensure that they can work in any given unit whenever they were required. Popelmill has a responsibility to steer the department towards economic growth. As a result, she has the authority to make any changes that she deems fit for the department and the company in general. The employees had stayed in their former units for some time and therefore they were never challenged enough. In the case of Mr. Singh, Mr. Garth Fryer rated him below outstanding probably because he had minimal training in the skills required in the new unit. This represents the whole company considering that all unit heads received a note saying that their initial employee evaluation methods were not acceptable.
The employee evaluation exercise probably left so many employees feeling unappreciated and unmotivated. This move created tension in the units since the employees were not satisfied. This means that Victoria Popelmill has a lot to do in order to achieve maximum productivity from the employees. Training and performance enhancing initiatives should be developed to ensure that all employees are motivated. This will surely increase their productivity and enable the company to achieve its goals without exceeding transaction costs. Refining their skills will also enable the employees to set personal targets so that they receive bonuses, raises and promotions when they deserve (Russell Reynolds Associates, 2017).
Overview of the role of compensation
The company should be able to manage compensation so that it can influence the employees positively. It is important to realize the various elements of compensation that inspire and influence employees and direct their attitudes towards achieving the goals of the organization. Compensation plays a vital role in aligning employees work with the objectives of the company. For the longest time, the four Ms namely, man, machine, material and money have been major contributing factors to success in business. Man is the most important of them all contributing to efficiency and effectiveness of the organization. Issues such as lateness, laziness, unsafe actions, poor training, absenteeism, alcoholism, incompetence and substance abuse can have adverse effects on organizational objectives. Efficient employment practices are vital towards achieving the goals and objectives of the company by ensuring that the workforce is on the path of productivity. Effective business management requires employing the right kind of employee for the right job. The company should adopt a fair compensation system in order to makes sure that maximum productivity is achieved (Coker, 2015).
Compensation includes all forms of rewards and pay that are given to employees for their good performance. It also includes perks benefits, cash rewards, and services. It is important to ensure that employees are aware of the total compensation. The significance of this is to make sure the intentions of putting forth the compensation are clear and ensure that talent is attracted and retained. The company should apply the Maslow’s hierarchy of needs in order to know what would be a source of motivation to the employees so that they can have better performance. The theory requires the management of an organization to consider the level of needs of its personnel in developing a compensation strategy that ensures that they perform better.
In the process of managing its operations, the company can influence the structural design of compensation within the organization. The company has its policies deeply rooted into the appraisal strategy which is critical towards appreciating the performance of the employees and achieving the goals and objectives of the company. The company utilized peer appraisals at one point. The hallmark of maintaining competitive advantage in the industry is embedded on the evaluation of the workforce. This also validates the compensation process. The company’s workforce appreciates and gains faith in the company’s compensation strategies. The company uses performance appraisals to determine the remuneration and compensation rates for the employees. When designing a compensation strategy, the most important factor to consider is uniformity. This is the foundation upon which the strengths of all employees are maximized. Before a better performance evaluation strategy was adopted, the company was overcompensating employees because they were evaluated unfairly. This was taking a toll on the company considering the limited resources that everyone in the industry is looking forward to grab.
It would be so easy to manage the problems facing the organization by a reliable compensation strategy that is mainly based on performance appraisal. The company was using a compensation strategy that was stinking with bias. By eliminating the evaluation strategy, effectiveness in decision making will be achieved. As noted from the case, performance evaluation was enforced in order to determine the level of employee performance. This performance is what would in turn determine if they get bonuses or not. The limitation of this procedure is that performance evaluation strategies were not efficient. Mr. Singh was initially rated as having outstanding performance and his supervisors also thought he was an above average employee. When the second evaluation was conducted, he went a step lower and was rated below outstanding by the same head. This happened while his other colleagues maintained their outstanding performance. It is clear that the evaluation strategies applied were not satisfactory.
When the evaluation is the key of getting compensation, it is important that the company adopt a reliable and solid performance appraisal. This ensures that everyone is confident in the process and it eliminates the chances of having biased results. It is very important that a company motivates and appreciates all employees. As for Mr. Singh who had worked for the company for at least a decade, it would be important that the company to recognize and appreciate his efforts. His fellow colleagues Jason Taft was rated outstanding even though he was younger that him and he had little experience. While it is not ideal to have a compensation strategy that pays attention on experience and age, a company should find a way to encourage, motivate and appreciate its most loyal employees. The company management should therefore build a performance appraisal strategy that is unquestionable. It is very important to have the most valuable asset of the organization, the human capital to have faith in the system.
The company can involve the employees in making of such a strategy in order to ensure that the needs of the organization and those of the employees are featured in the evaluation strategy. When the employees are satisfied and compensated fairly, the goals and objectives of the company will be achieved with much ease. By the end of the day, the implications that an evaluation strategy has on employee satisfaction and company financial success should be addressed. The management of the company should consider redoing the evaluation process and use the resources available to address the contentions within the organization.
The basis of performance appraisal is the criteria that determine performance at all levels and Fryer and his fellow unit heads should have been given the opportunity to present their ideas rather than repeating the whole assessment process. It is important to make sure that the available options are evaluated to determine whether they can be improved or not. The whole purpose of the evaluation process should have been communicated and understood by all. This would have ensured that everyone was content with the process and aware of what the company was seeking to achieve. If the process was done positively, Mr. Singh would have probably been content with the results and work harder towards ensuring that he does better in future. It is important to make sure that employees draw encouragement and feel challenged by situations that do not work how they anticipated. It would have been a source of motivation for Mr. Singh and his fellow employees if they fully understood and supported the process. As such, the management should be concerned about improving the appraisal strategy and the level of performance of the organization in order to achieve a unique compensation strategy.
It is important to note that the peer performance appraisal strategy has economic advantage in that employers are provided with multiple ways of meeting the needs of their employees. In some instances, some employees can see themselves as having additional attributes than their peers can see. However, the peer performance appraisal has one major disadvantage. The process can be marred by personal conflicts and therefore fail to reflect the genuine employee performance. In addition to this, employees and their supervisors could differ in opinions and this might end up ruining the process. Employees might be misguided and give false information that might negatively impact the performance appraisal method employed. It is therefore important for the company to design and implement a performance appraisal strategy that reflects the productivity of the workforce without leaving loopholes for bias. This will ensure that the compensation method applied is efficient so as to ensure that the company does not lose any money. Employees should be trained and taught the essence of having performance appraisals determine their compensation. If they can have positive attitude towards the process, it is unlikely to have tension in the organization. This is so essential in ensuring that the company retains competitive advantage and achieves growth.
Proposed new performance appraisal
Like many other organizations, the office of Research and Evaluation seeks to succeed even in the current environment that is dominated by competition. This means that it is time that the management ditched the old unproductive techniques and adopts new unique methods. It is misleading to think that the old methods can change and produce better results. For many years, employees and managers have been concentrating on the same thing; the appraisal process. This means that there is no room for reflecting on new ventures and taking risks. The main focus should be on improving employee performance in real time rather than just going through the same repetitive appraisal processes that do not yield much. In order to make tangible changes, the management should understand that the world of performance evaluation is also evolving and new methods and needs that ought to be fulfilled are coming up.
As noted from the case, the company’s management is fixated on following the old evaluation strategies that are not operational anymore. Some of these strategies do not challenge employees to be more productive. In order to achieve employee satisfaction, the management should consider paying attention to the needs of their employees rather than relying on the information they obtain from annual or semiannual meetings. They should pay more attention on their attitudes, behavior and other unspoken attributes that can be more informing instead of waiting for them to say their needs out loud. Some of the information that can be obtained from unspoken acts can be so informative. They should delve into research and come up with new appraisal strategies that enable them surpass their competitors.
It is already challenging to do business. Internal and external operating environment are the major factors that challenge revenue growth and corporate performance. In order to achieve profitability in the competitive global market economy, everything about employees should be managed impressively. Human resource is one of the main factors of production since it calls for professional handling of people’s thoughts, emotions and feelings to maintain high productivity levels. High productivity is as a result of long term employee motivation. A motivated employee is a huge asset for an organization that maintains and strengthens revenues and business growth (Accel-team, 2017).
There are several measures that the company can take in order to ensure that employees are fully motivated.
- Clear communication about goals and expectations. It is important to make sure that all employees are a part of the compelling future. They should be informed of what is expected of them and the goals that should be achieved. Targets are effective and meaningful in motivating employees but they should be intertwined with larger organizational ambitions (Rick, 2011).
- Encourage open communication- employees should be encouraged to present their thoughts and opinions openly. They can do so through team meetings, surveys and suggestion boxes. They should be encouraged to express their perspectives ideas without fearing criticism. In order for the organization to grow, employees and their superiors should be open-minded. This means that everything about effective listening should be put into practice and employees’ concerns are addressed in the best way possible.
- Creating a positive working environment- this is achieved by encouraging employees to share their ideas and work as teams. This will also be done by ensuring that the tools required to achieve the organization’s goals are available. Leaders should always be available whenever they are required to solve problems at the work place.
- Setting goals- leaders should help their employees set and follow through their professional ambitions. This does not only benefit the employee but also raises their productivity. When all employees are performing their best, the company achieves growth and the revenue generated also increases.
- Provision of incentives- other than just giving employees salary increments, team and individual incentives should be given to individuals and teams that perform well. Financial incentives include cash rewards, shopping vouchers, and gift cards among others. Non financial incentives include vacation days, parking space or compressed working weeks.
- Provide constant feedback on positive things- when employees are aware that they are performing well, they will keep doing it or even be better at their job. A little recognition can boost an employee’s morale and steer them to do better. While it is important to impart a sense of accountability to employees, it does not mean that they should be negatively criticized and blamed. When they are wrong they should be corrected but better still when they improve their performance they should know that someone is watching and is appreciative of their progress.
- Sharing information and numbers- employees should be informed about the company’s progress and achievements so that they can see how their efforts contribute to the big picture. When employees are informed about major activities and issues in the company, they get a sense of belonging and they feel worthy of their positions. Hope and trust should be observed during communication. A manager should always be strategic while delivering any bad news. Employees’ sense of ownership is established through transparency.
- Profit sharing- a profit sharing program where an employee or a team gets compensation for helping a company achieve a certain milestone should be established. This encourages team work and goal setting. This ensures that employees are always giving their best performance at all times.
Performance appraisal form
In order to solve the current problems, employees should be informed about the essence of having a performance appraisal. A positive reinforcement should be put in place to ensure that employee satisfaction in the dynamic sector is attained. The recommended performance appraisal is shown below.
Rick, T. (2011). 20 tips to improve employee engagement and performance. Torben Rick. Retrieved 24 February 2017, from https://www.torbenrick.eu/blog/performance-management/20-tips-to-improve-employee-engagement-and-performance/
Coker, D. (2015). The Importance of Compensation Plan in an Organization. The HR Digest. Retrieved 24 February 2017, from https://www.thehrdigest.com/the-importance-of-compensation-plan-in-an-organization/
Accel-team,. (2017). Employee motivation. Motivation in the workplace- theory and practice. Accel-team.com. Retrieved 24 February 2017, from http://www.accel-team.com/motivation/
MARIMUTHU, M., AROKIASAMY, L., & ISMAIL, M. (2009). HUMAN CAPITAL DEVELOPMENT AND ITS IMPACT ON FIRM PERFORMANCE: EVIDENCE FROM DEVELOPMENTAL ECONOMICS. The Journal Of International Social Research, 2(8), 1-8. Retrieved from http://www.sosyalarastirmalar.com/cilt2/sayi8pdf/marimuthu_arokiasamy_ismail.pdf
Grimsley, S. (2017). What Is Human Capital? – Importance to An Organization – Video & Lesson Transcript | Study.com. Study.com. Retrieved 24 February 2017, from http://study.com/academy/lesson/what-is-human-capital-importance-to-an-organization.html
Russell Reynolds Associates,. (2017). Human Capital: Leveraging Your Company’s Greatest Asset | Russell Reynolds Associates. Russell Reynolds Associates. Retrieved 24 February 2017, from http://www.russellreynolds.com/newsroom/human-capital-leveraging-your-company%E2%80%99s-greatest-asset