Effectiveness of Reward and Appraisal System

The project report summarises about information regards to reward system of company of case study. The purpose of report is to demonstrate understanding about role of effective reward system. In the Mcdonald's company, their reward system has some positives and some negatives. It is essential for company that they should overcome from shortage of ineffective reward system.

INTRODUCTION TO
BUSINESS (TASK 3)

Table of Contents
MAIN BODY...................................................................................................................................3
1. Calculation of ratios................................................................................................................3
2. Extend to which shareholders of above company should be satisfied in accordance of
financial performance of year 2013 and 2014. ...........................................................................5
3. Different types of options which can be beneficial for above company in order to increase
profitability..................................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES.................................................................................................................................9

INTRODUCTION
It is essential for companies to do proper financial analysis in order to take corrective
actions (Vogel, 2016). There are different types of techniques to do so. The project report is
based on British Sky Broadcasting company which supplies telephone and broadband services.
In the report financial performance of this company has been analyzed in terms of different ratios
and profitability. As well as some operations are suggested which may enhance the profitability.
MAIN BODY
1. Calculation of ratios.
(A). Gross profit- This can be defined as a type of profit which is earned by companies after
subtracting cost that is associated in manufacturing of products (Cucchiella, F., D’Adamo and
Gastaldi, 2015). The value of gross profit is presented in income statement. In the aspect of
above company, gross profit is mentioned below:
Particulars 2014 £M 2013 £M
Revenue 7632 7235
Less- Cost of sales 4616 4329
Gross profit 3016 2906
(I) Gross profit margin= Gross profit / Net sales x 100
2014 £M 2013 £M
Gross profit 3016 2906
Net sales 7632 7235
Calculation 3016/7632*100 2906/7235*100
Gross profit margin 39.52% 40.17%

(B) Operating profit- This can be defined as a type of profit which is earned from business
operations and activities before deducting amount of interest and tax. Below operating profit and
ratio is calculated of British Sky Broadcasting company in such manner:
Particulars 2014 £M 2013 £M
Gross profit 3016 2906
Less- Expenses 1741 1576
Operating profit 1275 1330
(ii) Operating profit margin= Operating profit / net sales * 100
2014 £M 2013 £M
Operating profit 1275 1330
Net sales 7632 7235
Calculation 1275/7632*100 1330/7235*100
Operating profit margin 16.70% 18.38%
(C) Profit for the year- The term profit is also known as financial gain. It can be defined as
difference between amount earned and spent in operating any activity in corporations (Bellos and
Tzivanidis, 2017). In regards to above company, herein underneath value of profit for year is
being calculated in such manner:
Particulars 2014 £M 2013 £M
Operating profit 1275 1330
Less- Tax 410 351

Profit 865 979
(iii) Net profit margin = Net profit / Net sales * 100
2014 £M 2013 £M
Profit 865 979
Net sales 7632 7235
Calculation 865/7632*100 979/7235*100
Net profit margin 11.33% 13.53%
2. Extend to which shareholders of above company should be satisfied in accordance of
financial performance of year 2013 and 2014.
Descriptive analysis- In this task of report, descriptive analysis of financial performance of above
mentioned company is done below in such manner:
 Gross profit margin-

2013 2014
39
39.2
39.4
39.6
39.8
40
40.2
40.4
40.17
39.52
Gross profit margin
Analysis- On the basis of above calculated gross profit margin of company, it can be find out that
in year 2013, their GP ratio was of 40.17% which reduced by short margin and became of
39.52%. This is so because their gross profit increased by just £ 110 million while sales raised by
huge margin.
 Operating profit margin-
2013 2014
15.5
16
16.5
17
17.5
18
18.5
19
18.38
16.7 Operating profit margin

Analysis- On the basis of above prepared line chart, this can be find out that company's operating
margin is also decreasing similar as above ratio. Such as in year 2013, it was of 18.38% that
decreased and became of 16.7%. This is so bacause of higher expenses in year 2014 as compare
to year 2013.
 Net profit margin
2013 2014
10
10.5
11
11.5
12
12.5
13
13.5
14
13.53
11.33 Net profit margin
Analysis- In accordance of above presented line chart, this can be find out that company's net
profit has been decreased in year 2014. Like in year 2013, their net profit was of 13.53% that
decreased and became of 11.33% in 2014.
These above analysed ratios shows that company's current performance is quite weaker as
compare to last year. Though, there is not higher difference in financial condition in both years.
Their stakeholders should be satisfied with their performance because net profitability of
company is sufficient to pay dividend to them.

3. Different types of options which can be beneficial for above company in order to increase
profitability.
On the basis of above analysis of profitability of company, this can be stated that they
need to apply some alternatives to increase level of profit. Herein, underneath some options are
mentioned that can increase profitability such as:
 Management of cost- Sky Broadcasting company should try to minimise cost so that
their profits can be increase. The above analysed data shows that their expenditures are
increasing significantly in year 2014. If they will focus on control their cost then it will
be beneficial for them to increase their profitability. Though, this option can be fail if
they do not focus on their sales revenues.
 Boost productivity- It is also an important way to increase level of profitability for above
company (Hasibuan and Syahrial, 2019). If they will focus on increasing level of
productivity then this will help them in enhancing capability of satisfying demand of
customers. As a result their net revenue will also increase. This option may not be work
in the case when cost of production goes higher.
So, these are the key options which can be beneficial for above company in order to increase
level of profitability.
CONCLUSION
On the basis of above project report, this can be concluded that financial analysis is
useful for internal and external stakeholders. In the report, different types of ratios such as gross
margin, operating margin etc. are calculated and interpreted of Sky Broadcasting company. In
accordance of mentioned ratios, this has been concluded that company's overall performance is
average but enough for stakeholders. In the end part of report, some recommendations are given
to company which may lead to increased profitability of company.

REFERENCES
Books and journal:
Vogel, H. L., 2016. Travel industry economics: A guide for financial analysis. Springer.
Cucchiella, F., D’Adamo, I. and Gastaldi, M., 2015. Financial analysis for investment and policy
decisions in the renewable energy sector. Clean Technologies and Environmental
Policy. 17(4). pp.887-904.
Bellos, E. and Tzivanidis, C., 2017. Energetic and financial analysis of solar cooling systems
with single effect absorption chiller in various climates. Applied Thermal Engineering.
126. pp.809-821.
Hasibuan, R .P. S. and Syahrial, H., 2019, August. Analysis Of The Implementation Effects Of
Accrual-Based Governmental Accounting Standards On The Financial Statement
Qualities. In Proceeding ICOPOID 2019 The 2nd International Conference on Politic
of Islamic Development (Vol. 1, No. 1, pp. 18-29).

EFFECTIVENESS OF
REWARD AND
APPRAISAL SYSTEM

EXECUTIVE SUMMARY
The project report summarise about information regards to reward system of company of
case study. The purpose of report is to demonstrate understanding about role of effective reward
system. In the Mcdonald's company, their reward system has some positives and some negatives.
It is essential for company that they should overcome from shortage of ineffective reward
system.

INTRODUCTION
This is important for companies to implement an equal reward and appraisal system so
that employees can be motivated. Main objective of this project report is to demonstrate
understanding about role of effective reward system in order to retain employees. This project
report is based on case study of Mcdonald's in which they face challenges in applying reward
system due to lack of monetary resources. In the project report, detailed information about
reward system is mentioned as well as issues of ineffective reward system are also mentioned of
chosen company of case study.
MAIN BODY
1. Definition of reward, appraisal system.
Reward system- This can be defined as a type of incentive program which influence employee
retention and productivity by providing suitable bonus, raised pay and many more. Under this
system, those employees are identified whose performance is excellent (Hankins, 2016).
Appraisal system- It is a type of process in which management department analyse the
performance of employees and gives feeback to them. On the basis of this, employees are
promoted for higher posts.
Employee retention- This can be defined as an capability of a business entity to retain their
employees. It is crucial for companies because if employee retention rate will be lower then this
is being considered better.
Productivity- It can be defined as an effective usage of available resources such as labour,
capital, land etc. in the manufacturing of different products and services (Li and Abumuhfouz,
2015). Higher productivity indicates that company is using their resources in most effective
manner.
2. Reward and appraisal system available in the organisation.
In accordance of policy of Mcdonald's company, this can be find out that company's
reward system is based on the performance of their employees. It indicates that if their

employees will perform well then they will be able to get higher pay. In addition, this company
also provide quick term financial incentive to their employees in which they get fixed amount of
cash on an annual base. While in the terms of long term benefit, company offers shares to
employees to purchase which can raise rights of employees in organisation.
Apart from it, in the company there is system which is known as “car program”. As per
this program employees can use car of company at free of cost. As well as there are some
common financial and non financial incentives such as flexibility in working hours, opportunities
for personal development etc. In addition, company hired Professor Adrian to analyse perception
of their employees towards their reward system. The result showed that 85% of their employees
were satisfied with their system of reward and appraisal.
3. Identification of reward or appraisal problem.
In the above part of report, reward system of Mcdonald's company are mentioned which
shows that their policies are effective. Though, there are some problems in their reward system.
Such as they are paying lower incentive to their employees as well as some of their employees
are not satisfied with their program of paying incentives. In accordance of comperative analysis
of reward system of company with industry's other companies, it can be find out that their reward
policies are less effective.
4. Identification of causes of problem.
The main reason of problem in reward system of above company is that their poor
financial performance. As a result, they do not have enough amount of monetary resources in
order to make payment of financial incentives to their employees. As well as their employees are
not so satisfied with their reward system and due to which they are not contributing 100% in
companies activities that overall leads to poor financial performance.

5. Effect which are outcome of having mentioned cause of problem.
Due to the issues in the reward system in above company, there are some effects on their
performance which are as follows:
 Demotivated staff members- Due to issues in the reward system of above company, their
employees' motivation level is lower and they are not working with full of their
efficiency.
 Lack of productivity- In a company, level of productivity depends on performance of
their employees. In the above company, the productivity is decreasing because of
unsatisfied employees. They are not working with full of skills and capabilities.
6. Benefits of reward system.
If companies' reward system will be effective then it will easier for managers to motivate
their employees. Herein, below some advantages of reward system are mentioned which are as
follows:
 Enhancement of team work – It is one of they main benefit of an effective reward system
which states that if employees will be satisfied with incentive program then there will be
a positive environment in company (Zatorre, 2015). Such as in the above company, their
employees will be motivated to do work as a team if company will improve their reward
system.
 Increase satisfaction level of employees- Another benefit of reward system is that it leads
to increasing level of satisfaction of employees. This is so because every employee works
to get higher financial and non financial benefit and if employees get it their satisfaction
level raise. Like in the Mcdonald's company, their employees satisfaction level can be
increased if they will make higher pay to them.

7. Possible solutions for above mentioned problems.
Herein, underneath some possible alternatives are mentioned which can be beneficial to
overcome issues such as:
 Providing incentives on performance of daily basis can be helpful for above company. If
they will do so then their employees will be motivated and will do work with full of
effectiveness.
Advantages- This alternative can lead to increase employees retention as well as employees will
work with a motivation of getting higher incentives on daily base.
Disadvantage- The drawback of this alternative is that company may face issue of higher cost if
they will pay daily incentives.
 Providing compulsory non financial benefits such as free house facility, medical benefit
can also help to above company to senior employees.
Advantages- It will surely help to company in order to boost moral of employees as well this can
help in enhancement of producitivity.
Disadvantage- This alternative can lead to discrimination between employees because it can
benefit to senior employees.
CONCLUSION
On the basis of above project report, this can be find out that reward system of companies
should be effective. It is so because this is an only way which can motivate to employees. As per
the further part of report it has been concluded that company of case study needed to apply
suitable alternatives such as incentives on daily basis. These alternatives can help in overcoming
issues due to ineffective reward system.

REFERENCES
Books and journal:
Zatorre, R. J., 2015. Musical pleasure and reward: mechanisms and dysfunction. Annals of the
New York Academy of Sciences. 1337(1). pp.202-211.
Hankins, T .L., 2016. Biography and the reward system in science. In The History and Poetics of
Scientific Biography(pp. 109-120). Routledge.
Lim, K. and Abumuhfouz, I.M., 2015, April. Stors: secure token reward system for vehicular
clouds. In SoutheastCon 2015(pp. 1-2). IEEE.