This report will analyse current organisational situation of Heidelberg Insurance Services Company what is a subsidiary company of a German insurance organisation. The company is a specialist in the provision of insurance against future legal fees. The main focus is at private bodies and corporate organisation which do not qualify for a state funded legal aid. They offer cover products for private detectives or spies against trespassing allegations, policy for a journalist against claims of libel and for tutors against negligence.
The company’s main objective is to develop new high quality products which will cover employers in a case of being sued. Company’s research clearly shows that this kind of product will be highly attractive for customers what could lead to doubling of the business levels in the UK. However UK branch encounters several issues with management performance and reward system. The report examines mentioned issues, describes a theoretical side of problematic systems and part of organisation’s productivity and finally potential solutions are suggested. Performance management is a system which supports and measures company’s and employee’s performance.
The main concern of PM is employees as they are regarded as the most valuable asset of the company possessing skills, abilities and knowledge required by company to perform in a profitable manner. In order to achieve the highest possible level of PM, employees’ performance should be monitored and reviewed on a regular basis. People management framework was created to manage staff’ performance and be proactive towards required changes. A link between PM and HR activities was discovered by John Purcell who called the link ‘’opening the black box’’. However, some theorists do not believe in the link and strongly dismiss this possibility.
HIS Company does not facilitate performance management system. It will be highly effective to design and adopt one in order to resolve performance issue of the company. However, company has to be able to measure the efficiency of PMS and to manage the system. Balanced Score Cards are framework which measures and supports the management of PMS. They are divided into sections concerned by different fields. HIS company should design balanced score cards to suit its issues as the cards show what should be addressed and how. It is the most flexible way how to manage PMS. Important part of performance management is an appraisal process.
This is a discussion between line managers and employees about employee’s performance, future training and general feedback. As HIS’s employees feel de-motivated and are not satisfied by their work, the appraisal process could increase their motivation and commitment. The line manager plays a crucial role in this process as hi/her behaviour and attitude towards the system and employees reflects on their performance. The research paper Impact of People Management Practices on Business Performance clearly shows that the most important are to emphasis, in order to improve performance, is people management by line managers.
1. Introduction 1. Aim The aim of the report is to propose Heidelberg Insurance Services (HIS) company’s new performance and reward system which supports its business strategy and increases motivation of current employees. The system should improve company’s capability to maintain current and attract the most appropriate future employees. It will include proposal of a reward system for all individual division within the company. 1. 2 Objectives Various theorists’ books will be researched and compared. Company’s present reward system will be analysed and evaluated.
Finally, recommendations will be made which will benefit company’s business strategy the most. 1. 3 Scope/Limitations Limitations such as access to research materials, time limit and word count will be encountered. 1. Introduction to the Section Following section will discuss performance management as a part of company’s strategy. Various theories about performance management will be considered and the best will be recommended. Balanced score cards framework will be explained as a measurement performance management framework.
Performance appraisal system will be explained possible design will be suggested considering all measures to make it as successful as possible. Present job design of HIS Company will be assed and new approaches suggested. The report covers pay structures, different types of pay structure and potentially the most effective pay structure for HIS Company. 2. 3 Introducing a Performance Management System Armstrong and Baron (2004) defined performance management as “a process which contributes to the effective management of individuals and teams in order to achieve high levels of organisational performance. ”
They also stated that performance management is, “a strategy which relates to every activity of the organisation set in the context of its human resource policies, culture, and style and communications systems and varies from organisation to organisation. ‘ The overall purpose of performance management is to contribute and increase company’s and its individual employees’ attributes and capability to perform effectively, People factor. According to Kamoche(2002), employee are “the accumulated stock of knowledge, skills and abilities. “ To achieve this maximal performance, performance management process has to be linked with HR policies.
HR department and link managers should closely co-operate to deliver desired results and increase performance percentage of employees. Line managers play a crucial role in engagement, motivation and overall performance of employees. They reinforce and deliver HR activities such as recruitment, appraisals, training, reward, absenteeism and career management. According to Harney and Jordan (2008), the people management models is a framework based on two basic assumptions in order “to unlock the black box”, and to solve the link between HR policies and employees performance.
First assumption is based on the fact that discretionary behaviour stating that all employees are able to engage in discretionary behaviour.  Purcell also noted (2003, 52), that “The experience of successful outcome reinforces positive attitude. ’’ Second assumptions states that line managers play a critical role as they are able of discretionary behaviour via application of HR and the way of behaviour towards employees. However, according to Purcell (2003) and CIPD research, HR practices, the “black box”, directly affects employees performance.
 The “black box „has been also referred to as “gap“(Lytras, Ordonez de Pablos, 2008 or “remaining void“(Harney, Jordan, 2008) as the processes by which the HRM-Performance impacts employees.  As a result of this research a People Performance Management was created. See Appendix 1 According to Wright and Gardner (2000), opening the black box can be very complex process, as company has to determine the number of black boxes and their content. In our case, HIS Company, each department represents one box, as each of them deals with different issues, which has to be paid a differentiated approach to.
As Becker et all stated (1997), the content of boxes should be in a harmony with company’s strategy, “firm’s performance”. People Performance management would be an appropriate solution for HIS performance issues as the model covers all areas company struggles with. The Product Development Division will need to work on a team work including involvement and job challenge. This would give the department opportunity to develop their skills and motivation level will increase. Job no-satisfaction issue in the Clerical department is covered as well by training and development. This leads to job challenge, opportunities and development of skills.
Monotonous work routine will be broken; employees will react to change in a positive way. Purcell et al. (2003) stated that employees are motivated by challenges, opportunities and training. The Members of sale division could feel no included, not motivated and lack commitment. They are in contact with the line manager via phone. PPM covers training, carrier opportunities and performance appraisal. Employees’ skills and abilities will improve what will increase their commitment. Regular face-to-face contact with line manager and appraisals will make them feel more included and as a part of the HIS company.
The Board of Directors lack commitment and dynamism. PPM clearly shows link between mentioned issues with a pay satisfaction. Resolving all above mentioned issues within HIS Company will result in high performing working employees; who are motivated and often given an opportunity to develop and perform on a higher level. According to Purcell et all (2003), companies which does not adopt proper HR practices tend to have 90% lower level of commitment in comparison with other companies. Purcell states, that ‘big ideas’ appear more likely in motivating and directing employees.
However, on contrary, it is stated that HPW practices are too universal, specifications and measurements are elementary, studies relies on management cooperation.  Total Reward is a sum of all rewards offering company to its employees. However, this model is not suitable as it does not solve all HIS Company’s issues regarding training, lack of commitment and low performance. This framework is more suitable for reward system, rather than performance management system. For more information Appendix 2 2. 4 Measuring Performance Management To be able to improve company’s performance, company has to know its present performance.
It is impossible to measure anything, if it impossible to manage it. See appendix According to William Deming, performance management process plan-do-check-act model. See appendix 3 The PRC/P is a framework does not fit requirements of HIS Company. As it does not directly cover customer issues. Company’s performance is one of the most important objectives; however customers’ satisfaction is ultimately the main objective. Further, Objectives within the framework support a shared understand solving approach rather than ‘’how’’. Employees would not be able to control their output.
This would de-motivate them as they would get a ‘’false feeling of empowerment’’. Ultimately, the company’s issues such as lack of commitment and low performance would not be resolved. Additionally, the situation could worsen. Additionally, according to VectorStudy. com, Deming’s cycle does not identify the main cause of the problem, mainly when more adaptive, deeper research and collection of data is required.  To avoid these mistakes, Dr. Robert Kaplan and David Norton developed performance management measuring system which demonstrates a more “balanced” overview of the company. It is called balanced score board.