Discuss about the Human Resource Management of O’Meara Electronics.
Case Background
O’Meara Electronics is an Australian company that has been operating in the general electronics sector since the last 20 years. The company started its overseas expansion about 10 years ago and now has its work operations running in certain foreign locations. O’Meara electronics has a workforce of around 1,000 employees, 250 out of which are employed at the Melbourne subsidiary alone. The company has semi-automated factors and a skilled workforce to handle various operations, such as research and development, human resource management, etc. and is now aiming to expand its operations in European countries.
In a meeting held at O’Meara Electronics, the president of the company – David O’Meara, brought it into the notice of the staff members that the market position of the company had been declining along with a fall in their profitability. The president recognized the need to bring about changes in a number of operations and processes but clarified that performance management and remuneration systems were the two areas that required an urgent change. The new systems would be implemented in the Melbourne facility first and to other subsidiaries later on.
Sarah Jones, Human resource management director at the company, pointed out to the staff that it was time for them to make a shift from position based remuneration system to a person based remuneration system. The management also decided to hire a human resource consultant on an ad-hoc basis and develop new performance management and remuneration systems.
This report is aimed at gaining a deeper insight into the prevailing conditions at the company and analyse its performance management and remuneration systems. The report also discusses position based and person based remunerations systems in detail and suggests a new performance management and remuneration system for O’Meara Electronics.
Performance management is one of the most important core functions under human resource management that allows business organisations to optimise the performance levels of their workforce (Cardy & Leonard, 2014). Performance management system is a planned approach that allows managers and employees to collectively plan, monitor and review the work objectives of employees at different hierarchical level in an organisation and measure their overall contribution towards the achievement of organisational goals and objectives (Buckingham & Goodall, 2015).
The president of the company made it clear in the very beginning that the profitability and the market position of the company had been suffering because of their performance management system and the remunerations system, which was clearly evident from the points put forward by the staff in the next meetings.
At O’Meara electronics, performance management was more about customer contracts and numbers while performance of employees was never stressed upon. The tendency of the management to skip performance measurement of its employees needed a change, which would also be a difficult task because most of the employees at O’Meara Electronics had been working with them since the beginning of the company and will not welcome the change easily. Another important issue at O’Meara Electronics was that the work teams were not managed properly. The company employed temporary staff during seasons of high demand and the temporary staff had to work in teams along with the permanent staff. The performance of these teams was not adequate because of lack of self-management.
The staff working at O’Meara Electronics is not change ready and has negative feelings with respect to the change program. When Kurt mentioned that there was an urgent need to link individual performance with organisation performance, an employee commented that they had no idea about what performance goals were so Kurt should explain the meaning to them. All these issues are enough to communicate the urgency for a change to be introduced in the performance management as well as the remuneration system of the company. Let us now discuss certain strategies that can be helpful for the company to deal with its human resource management issues.
Performance management systems, if correctly developed, can pave the way for a company towards achieving a huge success in the market. There are a number of performance management systems that can be used in case of O’Meara electronics but the systems discussed below will prove to be highly advantageous for the company:
Management by Objectives à Management by objectives, also known as MBO, is one of the most widely used performance management systems, which was developed by Peter Drucker in 1954. In this system of performance management, an organisation aims at improving the performance of its employees by collectively establishing objectives that are agreed upon by the managers as well as the employees (Carmen, 2014).
Management by Objectives can have a number of benefits for a business organisation. The process is divided into four steps, with the first step being the revision and establishment of clear organisational objectives for the entire company by considering the mission and vision statements (P., Rinkoo, & G., 2007). The second step in MBO involves setting up of SMART goals, which translates to Specific, Measurable, Acceptable, Realistic, Time-bound. The goals established in this process are the ones that are achievable for the employees and can be measured in a specific period of time, which increases the efficiency of the system. The third step is to involve the entire organisation in setting up of goals for all individuals (Murphy, Cleveland, & Hanscom., 2018). This helps in engaging and motivating the employees in the performance management system. The last step in this system is to evaluate and reward the performance levels demonstrated by the employees.
Management by Objectives is widely used in the business world because of a number of reasons. First of all, it lays stress upon creating of performance goals that are achievable and realistic (SOCIETY FOR HUMAN RESOURCE MANAGEMENT , 2014). The process also stresses upon the need of rewarding the employees for their performance levels rather than punishing them for not achieving the desired performance objectives. Therefore, management by objectives is one of the simplest and cost effective system of managing performance of employees in an organisation.
360 degree appraisal à this method of performance management was first used in 1940s. the method analogous to the multiple points on a compass and provides each employee with an opportunity to receive performance feedback from his or her co-workers, peers, customers, seniors, juniors, etc. (Cascio, 2018)
This system of performance management involves gathering feedback from all levels of an organisation, to review the performance of each and every employee, over a fixed period of time (Taylor, 2011). The fact that performance feedback for each employees comes from a number of sources makes the information more reliable and accurate, while it can be eye opening for the employees when they get to know what others have to say about the contribution that they have made towards the achievement of organisational goals and objectives (Campion, Campion, & Campion, 2015). Some managers also believe that getting feedback from customers is also valuable. Therefore, 360-degree appraisal strengthens an organisation’s system of performance management because of its reliability and accuracy.
The two systems for managing employee performance differ from each other in a number of ways. 360-degree appraisal is more about employee development whereas MBO is more about measuring the performance of the employees with respect to their performance objectives. The performance feedback obtained from 360 degree appraisal is more accurate and reliable as it is obtained from multiple sources and because of anonymous feedbacks as well (Majumdar, 2016). Management by Objectives is an approach where the performance levels of individuals are measured against objectives that have been decided by the employees as well as the employers in the very beginning whereas in 360-degree appraisal, there are no performance objectives formulated.
In simple words, remuneration is defined as the compensation that is paid to an employee for his or her services in an organisation while remuneration systems are a set of guidelines or a framework, according to which, all employees working in an organisation are paid according to their position or the skills that they possess (Vermeulen, 2011). The remuneration system used in the business world can vary from one company to another and a company can establish its own remuneration system as long as it complies with the laws of the country in which it operates (Bosînceanu, 2008). In general, there are two basic remuneration systems that are used by business organisation:
Position based remuneration system à in this type remuneration system, the position that an employee holds in the hierarchical level of an organisation forms the basis of his or pay structure (Shields, et al., 2015). Apart from the position, the roles and responsibilities that a person plays in an organisation is also considered while deciding his or her pay scale.
Person based remuneration system à in this type of remuneration system, the skills or the knowledge possessed by an employee is given a greater importance in deciding his or her pay scale. This is a modern approach of deciding the salaries of employees because companies have started looking for those employees who can add value to their business because of their exceptional skills and knowledge.
O’Meara electronics is a multinational company and is operating in a tough environment where the competition between rival firms is high. The company had never experienced workplace changes since its foundation, which will definitely make it difficult for the management to bring changes to their remuneration and performance management systems.
One of the best strategy that the management at O’Meara electronics can use is to combine its remuneration system with its performance management system and use a mix of person based and position based system (SFA, 2016). The management of the company can fix the salaries of its employees on the basis of their positions and offer them a compensation that is in accordance with the market trends. Further, the benefits or the rewards given to an employee should be dependent on the performance that they demonstrate over a period of time. Linking rewards with performance will prove to be one of the best ways to motivate the employees to use their skills and knowledge and contribute best of their efforts towards the achievement of organisational goals and objectives. For measuring the performance of the employees, the company can use management by objectives approach because it can be directly linked with the present goals of the organisation and will also help in keeping the employees engaged and motivated, which will further help the management in minimising the resistance that the employees might offer to the change program.
Conclusion
The modern day business world has become very tough for companies like O’Meara electronics that are operating on a multinational scale. In such a scenario, failure of a performance management and remuneration system can be a blow to the market position of a company. As a result, it is important for the management of the company to create an urgency and bring about changes in its performance management system and remuneration system. To achieve the organisational goals and objectives described by the president of the company in the very first meeting, it becomes imperative for the management of the company to link its performance management system and remuneration system together, so that the employees can be motivated to perform better and contribute more towards the achievement of organisational goals and objectives.
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