Know how performance management systems helps organisations to work more efficiently.
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Research works abound in the existing literature on performance management. This huge amount of literature has made performance management one of the most appreciated, condemned and discussed human resource management practices. In spite of all the research works, innumerable articles, conference papers and management texts, performance management is still a source of aggravation for most managers (Bowen and Ostroff, 2004). Nonetheless, in a marketplace wherein companies are struggling to become best employers and hence aspiring to magnetize the brightest talent available, enterprises cannot afford a weak or flawed performance management system. In addition to this, there are many evidences which suggest that organizations that use performance management systems can strategically perform more effectually in financial terms as compared to those companies which invest less in this practice of human resource management (Chen and Huang, 2009). The current literature review aims at identifying how strategic human resource management influences the performance management system of Tesco, the relationship between the two, academic models of performance management and comparing it with that of Tesco.
Defining performance management
Performance management is described as an organized and methodological process of enhancing the performance of the organization by improving the performance of both teams and individuals. The most important role of performance management is the development of an environment wherein mental and psychological growth of employees is facilitated (Chien, 2004). Performance management can have the impact on the job satisfaction and employee loyalty by the following practices.
- The proper reviews to the employees on the performance on quarterly basis.
- The clear integrated system between the performance of the employees and the payment received in return for the performance (Chen and Huang, 2009).
- The development of the proper and cultured programs where the employees can develop the skills of leadership and team management.
- The build-up of the rewards system according to the performance of the employees on monthly basis (Chien, 2004).
Performance management process develops a mutual understanding of what all things are required to augment performance and the ways of achieving this. This is usually enabled by clarifying to the employees that what is expected of them and seeking their consensus on the same (Delery and Doty, 1996). One of the most defining features of performance management is the significance linked with the alignment or integration of organizational objectives and individual goals. It aims at directing people to focus on performing well so that a mutual understanding about performance requisites is obtained. Performance management shares high link with strategic human resource management. This is explained further in the following sections (Huselid, 1995).
Defining Strategic Human Resource Management
Strategic human resource management lays great deal of emphasis on the necessity of formulating the HR strategies and plans in accordance with the organizational objectives and strategies. In addition to this, it also emphasizes the requirement of being responsive to an organization’s dynamic external business environment. Development of long term HR strategies is one of the strongest implications of SHRM (Nankervis and et.al., 2011). It also states that all the policies and plans must be formulated taking into consideration technological and global issues, economic situations, changes in society and etc. Strategic Human Resource Management involves an assimilated set of strategies, policies and practices by which a company can manage its workforce. This new HR theory gives a pattern of highly structured human resource development activities which allows a company to attain its objectives (Huselid, 1995).
Relation between SHRM and performance management
The theory of SHRM is based on the presumption that if the human resource process of a company is effective, then it is capable of substantially contributing to the effectiveness of the firm in terms of profitability, competitiveness, return on investment and productivity. There have been a lot many studies that examined the linkage between firm’s performance and HR practices. However, this aspect also has a great deal of impact on the performance management systems of companies (Ngo, Lau and Foley, 2008). Both strategic human resource management and performance management are aimed at improving organizational performance through alignment of objectives. While SHRM is a broader term, performance management is a part of it. The integration of personal and company goals is frequently referred to as the procedure of cascading goals. SHRM asserts that such cascading must not be seen as a top to down approach (Ngo, Lau and Foley, 2008). There are going to be overarching business goals but individuals at all levels must be provided with necessary opportunities for making their contribution to the firm. Both performance management and SHRM thus support a bottom up approach to working and the views of the employees are given high regard in the two systems (Paul and Anantharaman, 2003). The traditional approach to human resource management was simply aimed at managing the performance of employees so that they work properly. It deployed conventional performance management strategies. Integration of objectives was taken into account. However, with SHRM, performance management has also experienced transformation (Paul and Anantharaman, 2003). Companies following this method of managing the human capital have incorporated this ownership approach in their work culture and see it as a necessity to improve overall performance of the firm. SHRM through the process of performance management necessitates the alignment by making sure that all employees are conscious of the business, departmental and team objectives and that the goals they have set for themselves are in consistency with the former objectives (Richard and Johnson, 2010).
The improvement and augmentation of performance is the core of both SHRM and performance management systems. The management very casually shifts the blame of poor performance on someone else. This blame game continues. However, SHRM asserts that bad performance is not essentially the fault of the workers (Wright, Dunford and Snell, 2001). It may also be due to defective work systems, bad performance management or incompetent leadership. There is a great probability that the failure is because of the senior management’s inadequacy to establish unequivocal and clearly defined expectations. The instrumental role of performance management steps in here as it provides a great means of conveying such expectations (Wright, Dunford and Snell, 2001).
Performance management at Tesco Express
Tesco Express outlets are the convenience stores of Tesco plc. These stores are easy to find in small villages, towns, busy city centers and residential areas. The performance management system of these stores is also in alignment with the bigger Tesco retail outlets. The company has established a high dedication model that provides training and development opportunities to the entire workforce. In addition to this, the Tesco Express stores have a culture of helping everyone, be it the customers or the employees. This model has gone on to become a highly recognized model throughout the world (Performance Management Standard, 2012).
The company has been incorporating SHRM as an agent of change and not for replacing an outmoded personnel division. Tesco provides augmented training facilities at all its stores so that the employees remain up to date with the current trends and technology. By introducing strategic human resource management in their business the company has witnessed immense growth (Marr, 2009). The strategic human resource management policies at Tesco Express are centered on challenging unwritten norms, work simplification, extracting key skills. In addition to this, the performance management system is associated with accomplishing the targets of the steering wheel. This brings to light that the business measures of the stores are directly connected with performance management (Marr, 2009). The HR managers at the organization make sure that all employees receive the chance of understanding their contribution to the core values and purpose of Tesco. For this purpose, it has a creative induction and orientation program which addresses the distinct learning styles, cultures and commitments to the workplace. The front line staff is regarded as the mirror of Tesco Express for the consumers (Chen and Huang, 2009). Nonetheless, the entire manpower plays a very instrumental role in making the core values a reality on a regular basis.
As part of the strategic human resource management practice and performance management system, employees are the central element of the strategies. The Steering Wheel of Tesco focuses on furnishing clear roles and responsibilities of all employees. It is guaranteed by this system that the staff members are informed, consulted, accountable and responsible. Several major managerial techniques are used for improving the skills of the manpower. This includes problem solving, situational leadership, mentoring for higher performance, root cause analysis and many more (Nankervis and et.al., 2011).
Books, Journals and articles
Bowen, D.E. and Ostroff, C., 2004. Understanding HRM–Firm Performance linkages: The Role Of The “Strength” Of The HRM System. Academy of Management Review. 29(2). pp.203-221.
Chen, C.J. and Huang, J.W., 2009. Strategic human resource practices and innovation performance — The mediating role of knowledge management capacity. Journal of Business Research. 62. pp.104-114.
Chien, M.H., 2004. A study to improve organizational performance: a view from SHRM. Journal of American academic of business. 4(1).
Delery, J.E. and Doty, D.H., 1996. Modes of Theorizing in Strategic Human Resource Management: Tests of Universalistic, Contingency, and Configurational Performance Predictions. The Academy of Management Journal. 39(4). pp.802-835.
Huselid, M.A., 1995. The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance. The Academy of Management Journal. 38(3). pp.635-672.
Nankervis, A. and et.al., 2011. Human Resource Management: Strategy and Practice. 7th ed. Australia: Cengage Learning.
Ngo, H.Y., Lau, C.M. and Foley, S., 2008. Strategic Human Resource management, Firm performance, And Employee relations Climate in China. Human Resource Management. 47(1). pp.73-90.
Paul, A.K. and Anantharaman, R.N., 2003. Impact of people management practices on organizational performance: analysis of a causal model. International Journal of Human Resource Management. 14(7). pp.1246-1266.
Richard, O.C. and Johnson, N.B., 2010. Strategic human resource management effectiveness and firm performance. The International Journal of Human Resource Management. 12(2). pp.299-310.
Wright, P.M., Dunford, B.B. and Snell, S.A., 2001. Human resources and the resource based view of the firm. Journal of Management. 22(6). pp.701-721.
Marr, B., 2009. Delivering Success: How Tesco is Managing, Measuring and maximizing its Performance. [pdf]. Available through: <http://www.cpdopportunity.com/resources/delivering%20success%20tesco.pdf>. [Accessed on 10 March 2013].
Performance Management Standard. 2012. [pdf]. Available through: <http://www.shrm.org/HRStandards/Documents/Performance%20Management%20ANS%20(2012).pdf >. [Accessed on 10 March 2013].