Performance Management

Introduction:

In modern business world, any organization can strategically use; pay, compensation, benefits and other rewards as effective performance management instruments to increase operational efficiency and enhance performance. It is very important for the organisation to attract, motivate and retain the best people who will be a key influence on its future success. Furthermore, in recent times, most members of the community believe that skilled people are an essential part of sustaining an organization’s long-term competitive advantage. So, successful pay, rewards, compensation and benefits strategies are the main components that can ensure people are paid equitably, recognise and reward excellent performance, and aid the attraction and retention of top-quality staff. For this strategy, an organisation’s performance management system should be designed to link employee performance outcomes and expectations to its goals, improve productivity, emphasize the employee’s role in the process, recognise employee development needs, require meaningful communication between a supervisor and employee and recognise accomplishments.

In fact, people also vary in their expectations of what contributions they deem important. Much loyalty is expected of some groups, little of others. Although most people in organisations work in similar conditions, some work in such different circumstances that these are seen as an important part of the employment exchange. When these differences in jobs and their serving become great enough, organisations respond by specialising the concept of pay, compensation, and reward decisions for the group involved.

In Airbus UK, the principle of performance pay had long been argued over, and resisted by the unions. But a partnership approach to the issue, whereby unions and management work together to resolve organizational problems, and the work of a joint management-union project team has breached the principle, and resulted in new arrangements for the 2,500 unionized white-collar staff. (Airbus Online 2006)

Advantages and Disadvantages of the new reward structure implemented at Airbus UK:

Reward strategy is very important for any organisation. It is one of the major tools that can reinforce the employees to work. An ideal reward strategy should be included with the organisation’s philosophy, values, objectives and employee performance. Implementing a well organised reward strategy is a big challenge to the HR manager. Regarding this issue we can mention a beautiful thought of a HR expert named A. R. Nankervis-

Establishing an organised reward strategy is a key challenge for the human resources professionals which shift the organisation from an entitlement mentality (‘paid just for coming to work’) to a contribution mentality (‘paid for the contribution we make at work’). This shift can represent a significant cultural change within an organisation. But to do this the most important thing is the joint effort of human resources professionals and managers, as well as the total commitment of senior management over a sustained period. (Nankervis, A. R., Compton, R. L. & McCarthy, T E. 1999)

Conflicts with current reward strategies in organization seem to support and reinforce hierarchies rather than lateral co-operation. The new reward structure of Airbus UK would support recruitment and retention as it aims to review pay bands taking into account external market. This structure would reintroduce performance-related pay using a process that rewards employees fairly and by introducing processes that, supported by training; it can ensure results are thought to be fair, equitable and transparent.

In addition, the management tends to reward the job rather than the individual. Usually, career progression and bonus payments depend on patronage rather than merit and there is a tendency to pay higher salary to some new entrants than existing employees in the same band performing the same duties. A potential major disadvantage is that employees lower in any band will be more likely to receive a salary increase for a given level of performance than an employee higher in the band does