Performance Management and Business Success at UK Environment Agency- A Case Study

Transcription

1 1 Performance Management and Business Success at UK Environment Agency- A Case Study What is this essay about and what do you learn? This 4000 words case study examines and critically reviews the Strategic Human Resource Management processes within organisations. The paper is written in two parts; a critical analysis and review of the theoretical aspects of employee performance management practices and a review and analysis of the UK Environment Agency s re-designing and deployment of the corporate performance management system. For the analysis of the second part, 5 P model of strategic management has been implied. The paper concludes with the presentation of the findings with identifying the further prospects of the research. academicottage.com KEY WORDS Performance management practices, business strategic intent, HR 1

2 2 Introduction The paper aims to identify and analyse the links between individual performance management and organisational business strategy. Upon establishing the link between the two, the relevance of the individual performance management will be assessed in accordance to the success of the organisational business strategy. To further narrow down the presentations of the findings the following hypothesis has been made; examination of the individual performance management through the performance management systems employed by the organisations and examination of the organisational business strategy in particular context to its competitive nature. The hypothesis has been made so that the identified links and the relevance between the business strategy and the individual performance management can be further applied on an organisation while hiring the 5 P model of strategic management as a management tool. The paper has been organised in to two parts and the following aims have been accomplished: Part 1: Understand the concept of performance management. Establish an apprehension of the business strategy and why organisations need business strategy. Identification and relevance of individual performance management in the success of organisational business strategy. A critical analysis of links between the individual performance management in the success of organisational business strategy. Part 2 A critical analyses of organisational strategic practices in the context of findings presented in Part 1 Presentation of the findings Conclusions 2

3 3 What is individual performance? In context to the Human Resource Management (HRM), individual performance means how an individual performs at his job. In an attempt to find the relevance between individual performance and organisational business strategy, it is pivotal to understand the performance management process or the systems deployed in the organisations. This paper looks into the performance management issues as managed and practiced by the organisations so as to apprehend the individual performance management practices. The examination will create a basis to attain the aim of this paper i.e. creating an apprehension of the links and relevancy of individual performance management and organisational business strategy. What is Performance management? Performance management is the management process of the individual and group / team performances. It encompasses performance measurement as the fundamental element of the performance management system. Other important elements are performance improvement, employee development and managing employee behaviour. Performance management system should be strategic i.e. addressing broader managerial issues, establishing long term business and HR objectives that are integrated well with other business functions. Business / organisations are run by the people therefore peoples performance is the crucial element while evaluating the organisational performance. Successful businesses foster team culture, where individuals work together. However, individual performance and development ensures that the team objectives are met, that subsequently delivers the accomplishment of functional and organisational objectives. Performance management systems are defined as..the formal, information-based routines and procedures managers use to maintain or alter patterns in organisational activities (Simons, 2000; cited by Waal 2003, p. 688). Performance management shouldn t be seen as the management process designed for managing people performance only, but other aspects such as finance, processes, customer relationship etc. could also be managed under the same umbrella. A performance management system can hire the following tools to manage and evaluate the employees' performances (Toni and Tonchia 2001). The following 3

4 4 identified tools are not a complete list of tools / frameworks hired by an organisation, however they are the most quoted and recommended management tools by the researchers as identified through the research of this paper. Balance score card Bench marking Business process reengineering Continuous improvement Knowledge management Learning organisation Management by objective(mbo) Total Quality Management (TQM) Drawing from the above discussion, it can be established now, that the organisational performance is an outcome of peoples performance and at more individual level; organisational performance is an outcome of individual performance. Therefore management of individual performance will ensure strategically intended business success. What is organisational business strategy? Organisational business strategy forms a foundation for a business that aims to be successful. It provides a guideline for business conduct that embraces all business functions with a long term and short term planning towards achieving business objectives. Hiring a competitive business strategy provides the organisation with a competitive advantage, which ultimately results in business success. A competitive organisational business strategy will particularly look into the long term business objectives and addresses the rapidly changing external environment. It is defined as the process of determining the organisation s long-term goals and objectives, of adopting a course of action and allocating sufficient resources (Chandler 1962; cited by Burke and Jarrat 2004). A business strategy is dominantly driven by the external factors (political, environmental, social, technological, economical and legal) and needs to acknowledge the external shifts in business and environmental trends so that the business processes, strategic intent, business functions, management etc. all work 4

5 5 together towards inevitably adapting to the changing environment. Porter classified business strategies as cost leadership, differentiation and focus. Drawing from the Porter s proposition, Miles and Snow (1984) also classified the business strategy into three types namely; defender, prospector, and analyser with corresponding strategic human resource systems (Huang 1999). Hence a business strategy will ensure that the business objectives are met and all the functions are well-integrated, aligned and work together towards accomplishing the common business objectives where HRM plays its major role. The concept of organisational business strategy has also been illustrated by Kerin et al. Business strategy is a fundamental pattern of present and planned objectives, resource deployments, and interactions of an organisation with markets, competitors, and other environmental forces (Kerin et al, 1990; cited by Burke and Jarrat 2004, p. 127). Why an organisation needs business strategy? An organisation needs business strategy so that the business objectives could be accomplished. However, this statement is broad and ambiguous. In order to understand the importance of the need of a business strategy, the following analysis has been presented. A business strategy will align the organisational capabilities to accomplish the business objectives. A business strategy will ensure the optimisation of organisational resources and that the resource allocation is ensured across the organisation i.e. prioritised, justified and encourages the business to create its competitive advantage. A business strategy works as a foundation for other business functions. The functions achieve their respective objectives in an attempt to meet the business objectives as outlined by the business strategy. Mintzberg argues strategy is not just a notion of how to deal with an enemy or a set of competitors or a market, as it is treated in so much of the literature and in its popular usage. It also draws us into some of the most fundamental issues about 5

6 6 organisations as instruments for collective perception and action (Mintzberg 1978; cited by Burke and Jarrat 2004, p.127). What is the relevance of the individual performance management in the success of organisational business strategy? A business strategy is derived from business objectives. Therefore, individual performance management must meet the business objective so that the business strategy is evaluated to be successful. Organisations need strategic navigation to stay ahead of the competition through devising their competitive advantage. People and processes are the crucial factor for any organisation, where an organisation is heavily reliant on the performances of both. Therefore their performance needs to be managed. Throughout the research made while writing this paper, it was persistently observed that the performance of the people and the business processes adds up to produce an outcome for the organisational performance. As an example, an organisation where peoples' performances are managed, evaluated and improved ensures that the organisational business objectives are met. On the other hand an organisation, where people's performances aren't managed, evaluated and improved will subsequently result in failing to meet the organisational business objectives hence the organisational performance will be evaluated as a poor performance. In real world scenarios, people must be managed so that they perform in a manner that supports the accomplishment of the organisational business objectives. Performance management falls under the discipline of Human Resource Management (HRM) however, it is stressed at this point that performance management system must be well-integrated across the organisation to achieve the expected results. This means that various functions such as finance, marketing, procurement, Information Technology (IT) etc. all contribute towards managing their people at their respective functional levels and also supports the Human Resource (HR) function in managing the employee performance at organisational level. While managing individual and team performances, Human Resource role is of a facilitator. In the same context the best practice will be deriving the Human Resource objectives and policies from business objectives and policies. Human Resource policies will further facilitate the performance management issues. Conclusively, performance management is a 6

7 7 strategic Human Resource management practice that systematically coordinates all individual HRM measures and implements them so as to directly influence employee attitude and behavior in a way that helps a business to achieve its competitive strategy (Huang 1999, p,134). An analysis of links between individual performance management in the success of organisational business strategy and building a line of argument As it has been extensively discussed by now that the individual performance will ensure that the team, functional and business objectives are met in different developmental stages. Meeting the organisational business objectives mean that the business strategy has been successful. Another significant link between individual performance and business strategy is that the strategic management intent requires individuals to posses appropriate set of skills, knowledge and abilities (commonly known as SKA) to perform as expected. These set of SKA are derived from the business strategy. For example, a bank is a service provider organisation and requires that its employees must possess good customer service skills and numeracy skills, a competent knowledge of finance and mathematics and ability working under extreme pressure for extended hours. These set of SKA are derived from the bank s business strategy. On the other hand a fashion retailer will require that its employee must have excellent customer service skills, but numeracy skills may not be mandatory. A wining business strategy and good individual performance will ensure business success. Strengths and weaknesses of the theory Human Resource role is pivotal in managing employee performance and further needs management's support. The performance management facilitates the staff to achieve the functional and subsequently organisational objectives. It evaluates employee performances so that the organisational business objectives are met. Performance management establishes a strong communication channel between the managers and the employees over the performance management issues and identifies and provides 7

8 8 opportunities for the staff development. The identified needs of training and development ensure that the individual / employees are competent through possessing the required and or desired set of skills, knowledge and abilities. Various studies presented the findings that have been expressed above. However the most important aspects that most research papers didn t mention regarding the performance management are time lags, (Miles and Snow, 1984); inconsistent effects of environment and business strategy on HRM strategy (Bamberger and Phillips, 1991); the internal politics of business organisations (Kramar, 1990) (cited by Huang 1999); and a complete discontinuation of hierarchical organisational structure and not practicing the previous business policies (this refers to the practices where new policies are designed and documented to facilitate the performance management system, however they may not be practiced and stay on the shelves replaced by underlying organisational values and assumptions that is the most difficult to change Edgar Schein 2004). Part 2 A critical analyses of organisational strategic practice in the context of findings as presented in Part 1 The 2 nd part of this paper critically reviews and analyses the organisational strategic practices at the UK Environment Agency. A case study titled Corporate performance management system in a devolved UK governmental organisation was chosen for this purpose as it elaborates extensively, the performance management system that was re-designed by the agency. To examine the performance management system at the organisation, 5 P s model of Strategic Human Resource Management is applied to the observed re-designing process of performance management at the UK Environment Agency. As mentioned earlier, there are various tools / frameworks to imply performance management system in an organisation, however the UK Environment Agency hired Balanced Score Card by Kaplan and Norton (1992, 1993 and 1996). A balanced score card (BSC) is a management tool that monitors organisational performance against the business strategic objectives. Organisational performance is a result of people s 8

9 9 performance. A BSC will measure four perspectives of an organisation s performance, namely; financial, internal business processes, learning and growth, customer. The tool postulates that these four perspectives of the organisation come from the vision and strategy of the organisation. The BSC was re-designed to measure organisational performance through financial and non-financial measures so that the managers would be provided with relevant and an in-depth information about the organisational performance, specifically in context to key business strategic objectives (Lawrie and Cobbold 2004). The UK Environment Agency The organisation re-designed its corporate performance management (CPM) system as a requirement, in order to reform the public sector over the last 20 years in the UK. The requirement was realised so that the public sector in the UK could be made more accountable for achieving best value performance (Collier et al., 2000; cited by Lawrie and Cobbold 2004). The UK Environment Agency previously had a centralised organisational structure that added layers to the managerial level. This further created a bureaucratic culture that was loosing the employees support due to the bureaucracy. Moreover, the shifts in the external environment and the public sector had been under strict scrutiny for its performance. The re-designing of the corporate performance management was time-framed for nine months and was successfully accomplished. For the redesigning and the implementation process of the corporate performance management, an external consultant agency; 2GC was hired. The implementation of the corporate performance management was remarkable because the facilitators were trained within the organisation by the 2CG. These facilitators had no prior experience of designing and implementation of BSCs, however Human Resource ensured the appropriate personnel training and development for this purpose. 43 management units were also established with in the agency so that each unit operates locally (individually) aligned with the operational and business objectives of the agency. Each of the management unit designed its own BSC aligned with the business strategy. 9

10 10 The organisational objectives The strategic business organisational objectives were to manage the key environmental issues. In order to do so, the internal processes and peoples performances needed to be managed so that the external issues could be addressed. Managing the peoples performances was the key challenge so that the organisational objectives permeate through the organisation in an attempt to gain the agreement and understanding of the employees. Employee performance management would then direct the organisation towards accomplishing its organisational business objectives. With an ambition of understanding the relevance of individual performance management in the success of organisational business strategy, the 5 P s model of Strategic Human Resource Management has been implied to the re-designing process of corporate performance management. The 5 P s in this model are philosophy, policies, programs, practices and processes. (See appendix 1) Philosophy The philosophy of the UK Environment Agency in re-designing of the corporate performance management was to hire the BSC. This was done with an aim to devolve the management units with local authority (authority at each unit level) so that the re-designing of the corporate performance management could be facilitated. Job delegation and liberating (Craig McGarvey, Dales area manager, Environment Agency, February 2002; cited by Lawrie and Cobbold 2004) the management units were the core philosophy of the agency in order to facilitate the HR management practices to adapt to the change i.e. re-designing of the corporate performance management. Policies The policy hired for the implementation of corporate performance management through hiring BSC as a performance management tool was managing the peoples performance. The employee performance management was practiced through a less 10

11 11 aggressive managerial style in contrast to the prevailing trend of the operational performance management s (OPM). The previous managerial style was disliked by the employees due to its directive and excessive managerial style where the control was exercised at the operations directorate level. With the implementation of the corporate performance management, employee performances would be managed at the management unit level and the performance would be evaluated based on the outcomes of the BSC. Programmes The corporate performance management identified 43 management units to be formed along with the main board. The formation of these units was identified to be necessary for the organisation to support the flat matrix-based organisational structure. These units were strategically designed on the following structure Each unit defines their local strategy to describe ways so that each unit contributes towards accomplishing the agency s five year (long-termed) objectives and strategies. The UK Environment Agency s approach towards hiring autonomous and devolved (Lawrie and Cobbold 2004, p. 361) strategy at the local (management units) level. The objectives to be attained by the formation of 43 management units were: The local management will be kept informed through a strategic mechanism about their performance and further actions needed to address the local strategic business issues. However the devolved approach was maintained while providing them with the instructions for better performance at local levels. To closely monitor the performance of each unit, a provision of short yet clear summary of the individual unit s performance was presented to the units that were reviewed against their objectives and strategies. The summary will be helpful to other interested units/ functional directors (Lawrie and Cobbold 11

12 , p. 361) - an approach that also cultivated a knowledge sharing culture with in the agency. Practices Leadership The leadership aspect of the Human Resource practices was addressed by developing the people through training them by the 2GC (the external consultant team). The agency developed its people in a way so that the trained employees could further on train their successors. Through this practice the knowledge transfer process was enabled in the organisation. Managerial Individual management teams were managed for their performances against the strategic business objectives of the agency by the higher management of individual units. The knowledge transfer process was further facilitated through creating a pool of 50 facilitators who were trained to train rest of the team members as appropriate. This could further be related to training the trainers HR practices. The creation of pool of facilitators assisted the unit management teams to develop their own BSCs. Operational The operational aspect of the HR practices was addressed by the director of operations who reviewed the performance of unit management teams on a quarterly basis. The unit management teams however had been delegated with the responsibility of choosing their own agendas towards meeting the common organisational objectives. Processes In order to practice a devolved strategic intent, the employee involvement during every step of the re-designing process of the corporate performance management was ensured. The agency adapted a matrix- based organisational structure to create 43 12

13 13 management units. These management units operated with a reasonable degree of freedom to design their own objectives that stay aligned with the organisational and business objectives. Liberating these units also meant that the employees working for these individual units would be valued for their opinions and performances. The employees contribution further facilitated the development of realistic targets that were achieved within the given time frame. Team culture was fostered and cultivated with in the agency. This was the cornerstone of the achievement of designing 43 balanced score cards with in individual units. These balance score cards went through extensive internal auditing to ensure that their design and quality had been consistent throughout the process. The designing of BSCs was an invaluable experience that facilitated the strategic ownership and developed a thorough understanding by the team members of how to actually manage performances. The experience was phenomenal as there is a difference between receiving a balance score card from the operations head to be followed than designing the BSC at managerial level and employing it as a tool to manage the peoples performance. The 5 P model used here, critically presents an analysis of the hired business strategy at the corporate and unit managerial level of the organisation. The successful redesigning of the corporate performance management was a challenge since 43 units were to be treated at individual levels. These units were delegated an empowered that pose a threat of misuse and misallocation or resources, favouritism, resistance to change and so forth. The model can be applied to small or big organisations therefore with an aim of carrying this research forward the 43 business units could be further examined. This model can also work with other models such as Force Field analysis to examine the change management taken place at the agency. The model can also accommodate changing theories such as modern day businesses support decentralised organisational structure over the previous centralised organisational structures. Conclusions 13

14 14 Drawing upon the above review and analysis of the case study presented on the UK Environment Agency and the theoretical aspects of performance management presented in part 1 of this paper, it was identified that efforts made by an organisation in order to manage individual performance was initiated by the identification of the business strategic intent of the management i.e. de-centralising the organisational structure in order to comply with the reformation of public sector in the UK. This further required the re-designing of the corporate performance management system in the organisation. Businesses are run by the people therefore performance management is pivotal for accomplishing the business strategy. Business strategy is driven by business objectives hence performance management at individual level ensures a successful organisational business strategy. Another crucial aspect of the individual performance in correlation to the organisational business strategy is the employee participation in devising the business strategy. As employee is the end user who gets influenced by the strategy, therefore his contribution holds equal importance as of a manager s / decision maker. As an example, an organisation s business strategy states that the business aims to expand globally in next 5 years through product diversification and market expansion. An employee s (marketing manager) contribution in devising this strategy will be presentation of his experiential views on the strategy, that whether or not the strategy is workable, what types of risks the strategy involve, is the allocated time frame realistic, does the resource allocation aligns with the strategic intent and so forth. Referring back to the examined organisation, the employee s performance was seen as the fundamental element of re-designing and implementation of the corporate performance management. The employee performance was managed through job delegation, empowerment, training and development and creating job accountabilities. The 43 management units were seen as individual entities that worked as a team. The case study presents a very significant link between the individual performance management and a successful business strategy. The devolving business strategy was adapted so that the corporate performance management could be redesigned and implemented. For this purpose, performance was managed at individual (unit) levels that further incorporated the employees with in each unit. 14

15 15 Further probabilities of the research The researches support the managerial tools as proposed by the experts in their respective fields through writing case studies on different organisations across the globe. However the secondary research carried while writing this paper didn t find a case study that surfaces the post-implementation period of the application of managerial tools such as business process reengineering, total quality management and so forth. An extensive research process therefore is required to be made on the post-implementation of the managerial tools that aim to improve and manage business and or peoples performances. As a usual practice, organisation hires external consultants to help the organisation in making the desired development. Once the consultants depart, the organisation have most probable chances for getting back to prevailing trends, as bringing in change is an extremely difficult procedure. Appendix Appendix 1: Philosophy; organisational values, mission, vision, objectives, how organisation treats its employees; culture of the organization. Policies; expressions of shared values & guidelines for action on employeerelated business issues. Programs; coordinated & strategised approaches to initiate, disseminate, & sustain strategic organisational change efforts necessitated by strategic business needs. Practices; HR practices motivate employees behaviors that allow individuals to assume roles consistent with organisation s strategic objectives. The three categories of roles are leadership, managerial and operational. Processes; continuum of participation by all employees in specific activities to facilitate formulation & implementation of other activities 15

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