Scholarly article Introduction The aim of the below scholarly article is to aid us in understanding and solving some of the problems that we have observed in the performance management system of the company that we have visited and studied( Argus Metal castings limited). Our company is a medium scale enterprise catering to the requirements of its sister concern by providing it with pre machined parts in accordance with customer specification. Some of the key success factors of our company are low cost, higher quality and on-time delivery.

Some of the problems that we have observed guarding the performance management system are usage of metrics for the performance appraisal of the workers that are not In alignment with the strategy of the company and are not derived from Its critical success factors measured by the relevant key performance Indicators and translated Into key result areas for process owners, lack of a system for top management, lack of succession planning and over dependence on a few key employees.

The following article aims to provide insights into the development of a relevant and effective performance management system for medium size enterprise such as Argus Metals and also study the effect of industrial relations/trade unions if they come into the picture. The main aim of any performance management system is to effectively and efficiently measure the performance of individuals, departments, divisions and the entire organization in general and also to help In rectifying errors that the company might be making in the short run so that a feedback system can also be incorporated to avoid future errors.

Another Important function of the performance management system is to allocate the profits of the company to the individuals and also to determine the Increase In the various components of their pay levels. In general, a good performance management system [1] must cover two aspects one being the characteristics by which performance is measured and the other should cover design requirements for an effective system [ 2].

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Some of the salient characteristics of measuring performance are that it should be derived from strategy, it should be easy to measure, it should provide quick and reliable feedback, all the relevant stakeholders must be considered, and the short term operational goals should be linked to strategic goals[3]. Also some of the important considerations while evaluating a MS sign are the support from top management support, evaluation/audit of the existing MS, employee buy in, relationship among the metrics and infrastructure support.

Along with these two parameters we also need to see the development of the organization I. E. What stage of Its life cycle It Is In; either entrepreneurial, collectivity, formalization or elaboration of structure[4]. It could also be possible that the firm Is In a transition phase in either of these stages. While we consider the or small firm we have to be careful in not adapting the systems and processes used or a similar firm in a different stage of its lifestyle as this might create problems [5].

The medium/small firm needs to be analyzed with respect to its specific needs and an appropriate framework needs to be developed accordingly. In general we can look at a small or medium enterprise from two perspectives one being the external environment and the other the internal environment [ 6]. The external environment refers to the market in which the firm is competing, the labor and industrial environment in the vicinity of the firm and its customers.

Typically small and medium industries operate in turbulent markets [7] where they adopt a more reactive approach because their influence on other competitors and their customers is limited because of their size. Their client base is also generally limited and they have to manage their quality and on time delivery to ensure repeat business that stems from customer loyalty. If we look at the internal environment one of the major constraints facing them is the scarcity of resources [8].

This scarcity is not only in terms of financial strength but also lack of managerial skill at all levels. In small firms it so happens that one of the principal internal stakeholders is the owner/manager/ CEO because it is highly likely that he owns a majority of the firm. His style of management is generally personalized whose only downside is the resultant myopic vision that results when the firm starts to grow and the link between strategy, systems, structure and the MS system as a whole starts to widen.

Hence in order to develop an effective MS system we need to keep in mind the strengths and weaknesses of the medium and small firms discussed above. Since the market in which the firm operates is highly dynamic the MS system too should be flexible and adaptable to change. Since they also suffer from lack of resources the performance metrics should be very simple to understand for all the stakeholders that would be affected by it, also the data collection techniques should not be too cumbersome because then the costs associated with it will outweigh the benefits.

We also need to be aware of the shortcomings of the existing frameworks before we directly apply them to firms. For example although the balanced score card [9] covers the key reference dimensions it fails to provide the relevance of these metrics over time and also fails to establish a clear link between the goals of the strategic apex, the middle management and the operating core. The results determinants framework [10] fails to include customers and human resources in performance measures.

Considering the strengths, constraints and needs of small and medium sized enterprises it is prudent if they follow a two-step approach in designing their MS. In the first stage they need to look at the development process; how will the system be signed (brainstorming by all levels, interviews of key people from the relevant stakeholder pool), who will design it (CEO/top management, HER department if it has evolved at all) and the issues that might crop up (trade union oppositions, blame games).

In the second stage they need to focus on the eight components of the system oriented approach [1 1] to performance appraisal(purpose, performance parameters for each function, focus of appraisal for each function or sub-group, source of performance information, frequency of appraisal, nature of appraisal information, individual/relative assessment, communication of appraisal). These eight of the system components must be as simple as possible.

The relations between the management and the trade union can often make or break the planning and execution of a suitable performance management scheme in an industry. A supportive trade union is seen to have several positive effects on productivity. Some of these positive effects can be seen as lower quit rates, agreement on meritocracy or seniority-based rewards, better Job production standards (better accountability in general), and more employer-employee communications.

A landmark study by Slighter, Healy and Liverish (1960) gives several other examples to prove that unions do not always have a positive impact on employee relations and productivity [12]. The management has to strike a fine balance between achieving its objectives while making the new performance management system agreeable to the trade union and the workers on the whole. The impact of a union would depend on the support and control it enjoys in the industry.

Unions represent the workers and are eager to seize each and every opportunity to question changes made by the management that could have an impact on the workers. Changes in the performance management system have a direct impact on every worker involved in the industry. Often, the work measurement standards are outdated which allow the workers to earn higher bonuses and easier wages as the standards are not revised in accordance with the technological changes. The management would face resistance in such a case while revising these standards.

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