Performance management is a strategic and linked process that supports sustainable positive business outcomes by enhancing personnel performance and developing knowledge, skills and competencies of individuals and teams (Armstrong, 2000). Individual performance management focuses on improving individual competencies and performance. Based on JJs practices, individual performance management is implied from its compensation and benefits scheme. The company practices salary reviews after 6 months, annual salary adjustments, year-end bonus, and performance bonus for the sales team.
The individual performance management is limited to the assessment of individual performance during these periods and the motivation of further improvements in performance through the expectation of these rewards. Apart from the performance bonus, which could be as high as 100 percent, the salary increase after 6 months with the company, the annual salary adjustment, and year-end bonus apply to every employee and the increases comply with basic legal standards. (Mathews, 2005) These practices evaluate relative individual performance but do not target skills and competency building.
Only the sales team become strongly motivated to improve competency for the performance bonus. JJs also practice flexible or even spontaneous and personal individual performance management practices. George and Trevor remove employees who do not meet the creative drive they expect from employees (Mathews, 2005). This serves as a signal for consistent and continuous creativity of employees. The company founders also offer salary increases for managers and employees they feel are de-motivated (Mathews, 2005).
George and Trevor are likely to interact with their managers and employees personally and their personal assessment of performance could be the basis of rewards or termination. The uncertainty of these rewards is not a strong motivator of competency improvement. Performance management as a process involves a number of activities. The initial activity is the determination of performance objectives (Luecke and Hall, 2006) or what the company want its employees to achieve. Based on JJs statement of business objectives, the performance objectives is the provision of creative products and services at prices affordable to everyone.
Personnel are expected to develop creative prowess as individual contributors. The performance bonus builds creativity on the part of the sales team in marketing the company’s products. There is fierce competition among the individual members of the sales team that places pressure on individual sales personnel to perform well in order to receive a bigger performance bonus. The design team seek to contribute creative products to keep their jobs and for perks such as trips to fashion shows in Milan, Paris and New York together with other fashion exposures.
(Mathews, 2005) The finance and production departments focus on controlling cost to bring down price and meet this objective. The problem is that performance management practices led to the pursuit of creativity and cost-effectiveness as separate objectives so that competency building of individual employees on the creative side could reflect negative performance of individual employees at the financial side and vice versa. In the long-term, this disjointed process would not secure sustainable performance. The next performance management activity is motivation of performance and competency building to achieve the objectives.
The basic means of motivating performance is a fair and competitive extrinsic reward system covering compensation, salary and benefits as well as promotion and career development opportunities. When these are met, the company can focus on intrinsic motivation such as making work interesting, providing challenges, and empowering employees to achieve job satisfaction. (Luecke and Hall, 2006) Based on the situation of JJs, its extrinsic reward system is deemed by employees as not entirely fair. The design team believes they deserve performance bonus (Mathews, 2005).
There is no succession plan and promotion is personal, which affects promotion and career development. Liam, the acting product development director, expects to be assigned to the post as director but George is discretely looking outside to fill the position (Mathews, 2005) without any indication of performance-related reason. Gaps in the performance motivation practices of JJs reflect the transfer of the product development director to a competitor company, walk out of two sales personnel without notice, quality and delivery problems, de-motivated managers, and complaints from retrenched employees (Mathews, 2005).
Another performance management activity covers diagnosis, monitoring and evaluation (Armstrong, 2000; Cardy, 2004) that should have an objective basis (Bicheno ; Elliott, 1997). Diagnosis uses observation to identify performance trends and issues. Monitoring involves tracking performance by using reports and records. Evaluation is the assessment of performance using measurement standards. (Armstrong, 2000; Fitzsimmons and Fitzsimmons, 2001) The flexible and personal individual performance management practices of JJs indicate no formal process of diagnosis, monitoring and evaluation.
The company has no records of employee turnover. There are no standards for the performance-based pay scheme. There is no redundancy policy that relies on performance evaluation. There are no rules on punctuality and absenteeism. There is no means of objectively assessing the skills of workers. The quality and delivery problems after product turnover decreased from seasonal to 4 weeks maximum are not understood. (Mathews, 2005) The last activity is performance improvement through job redesign and motivation (Armstrong, 2000; Cardy, 2004; Luecke and Hall, 2006).
The feedback process is also necessary in interpreting performance and understanding problems (Bicheno ; Elliott, 1997; Fitzsimmons and Fitzsimmons, 2001). In the case of JJs, this activity is not happening because the company is stuck in identifying and understanding performance problems. Solutions such as salary increases and travel opportunities are short-term responses to performance problems that are not likely to support sustained achievement of performance objectives in the long run.
The lack of feedback also reflects on the uncertainty of managers over their performance such as Lionel blaming himself for outsourcing decision and Dan uncertain about his commitment to the job. (Mathews, 2005) JJs performance management process is not sufficient to support its business objectives. The flaws in its performance management activities require resolution. Specific areas of improvement is the establishment of clear job functions, basic but complete rules covering performance targets and measures, extrinsic and intrinsic motivation, and transparent communication to ensure feedback sharing.
