Performance Management Strategies for Steel Co. Case Study

This case study examines Steel Co., a small manufacturing company facing performance management challenges due to increased competition and financial difficulties. The company, employing semi-skilled and unskilled male workers, has two main sections: Sales and Manufacturing. The case study identifies issues such as ineffective individual performance structuring, the impact of a pay freeze, and the need for a robust performance management system (PMS). It highlights the importance of planning, monitoring, recognition, and employee development within the PMS. The analysis emphasizes linking employee performance with financial rewards, suggesting the implementation of a pay-for-performance approach to improve employee motivation, productivity, and overall organizational performance. The study references various academic sources to support its findings and recommendations.

Case Study
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Company Background
Steel Co. Is a small manufacturing company that basically employs around 65 people that
mainly consists of male employees those are semi-skilled or unskilled. The male employees
render services full time as well as part time within the premises. The company has been
established for 30 long years. Moreover, the organization is mainly bifurcated into two different
sections i.e. “Sales” that consists of eight employees and the other section is of manufacturing
operation “The Works” which consists of remaining employees. In order to improve individual
performance as well as organizational performance there are several initiatives taken by the Steel
Co. Which is basically organizing the team and establishing forum etc. that support in improving
their performance.
Issues of the case
Through considering the case study of Steel Co. it has been identified that with the
increasing competition and globalized economy, company is facing difficulty related with the
trading conditions. Thus, it results in attaining poor financial performance that impacts their
performance management (Wirtz, Mattila and Lwin, 2007). The steel Co. also face issues
regarding structuring the individual performance in an effective manner so that it can directly
maximize performance of the organization. Another issue which has been identified is related
with assessing that how performance management system within the Steel Co. supports in
improving employee development and enhancing the communication. In addition to this, owner-
manager of Steel Co. Focuses on the pay freeze method from the last 3 years which results in
impacting the performance of worker within the manufacturing company.
Performance management is defined as a process that supports the employees and worker
in understanding what is expected from them and how manager guides them to improve and
amend their performance so that they can meet the expectations (Vartiainen, Antoni and Thierry,
2008). With the help of performance management tool, employers and employees collaboratively
monitors and review the performance of employees to review their contrition towards attaining
objectives. Through considering the scenario of employees working in the Steel Co. have stated
that they are dissatisfied with the approach used by owner-manager that is pay freeze as the
company is experiencing high financial difficulties. Therefore, in order to improve the
performance of employees as well as organization they must focus on performance management
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systems (PMS) within the company. However, the system is mainly used within the organization
to enhance morale of employees that overall result in increasing their productivity and also retain
their competent personnel (Armstrong and Stephens, 2005). While implementing the PMS within
the Steel Co. Divisional Director focuses on different component so that they can directly result
in employee development. The different component are-
1. Planning: The foremost step in performance management process is planning that is
Divisional Director of Steel Co. must plan the employee’s responsibilities as well as
individual performance indicator so that they can easily attain goals of organization
(Brown and Purcell, 2007). The planned standards are then communicated to the
employees and workers so that they can perform according to the key performance
indicators.
2. Monitoring and evaluating the employee performance: Another component of PMS
within the Steel Co. is to monitor and evaluate performance of workers and employees
within the company. The Divisional Director must also focus on providing regular
feedback related with reviewing performance of employees. With discussing or providing
feedback to human resource they will also support in improving any gap or inadequacy in
employee performance.
3. Recognition: Another component within PMS is that Divisional Director of Steel Co.
must recognize and acknowledge the performance of employees by providing them with
rewards (Münstermann, 2010). If the employee enhances their performance then owner-
manager of the company must emphasize on providing incentives that mainly include
cash rewards or non-monetary rewards such as certificate of appreciation as well as gift
or awards to employees. In addition to this, recognition system within the Steel Co.
decreases or reduces employee turnover rate and further results in increasing the
possession of competent and qualified employees through enabling higher job
satisfaction.
4. Employee Development: Last component of PMS within the Steel Co. is assessing
employee development. It is an ongoing process for improving and training workers
which support the overall performance of the organization (Ghosh, 2012).
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The key scope of performance management system within Steel Co. is that it helps in
setting the performance standards within manufacturing section and sales section so that
employees can easily meet set standard. Furthermore, PMS also plays significant role in
identifying skills and competencies as well as skill gaps among employees which results in
enhance their performance. By implementing performance management system in the Steel Co
result in improving skills of employees which results in overall development of human resource
(Gabris, 2010).
In addition to this, for improving performance systems within the manufacturing
organization it is required by Divisional Director to integrate PMS with other human resource
processes to recruit and select competent candidate. PMS plays vital role as it will easily
determine what is required by the organization from its employees. Furthermore, in order to
overcome the performance management issues from the Steel Co. it is essential for Divisional
Director to link employee’s performance with the financial rewards. However, according to the
case study owner-manager has focused on pay freeze from last three years due to financial
difficulties (Armstrong, 2009). Through emphasizing on pay freeze the manager temporarily
stops providing bonus or incentives to their employees and staff due to increasing financial
difficulties. However, the company terms and condition are also so poor that hampers
performance of their employees. Therefore, it is required to enhance performance of employee
and link with the financial reward so that it can enhance overall performance of the
manufacturing company.
According to Liu, Combs and Ireland (2007) it has been stated that performance of
individual is directly linked with reward system which is provided within the company. But
according to the case scenario they have imposed pay freeze which impact the activities of
employees that further results in affecting operational activities of Steel Co. In addition to this,
Divisional Director must focus on providing proper pay and bonus to their staff and workers
rendering services within sales and manufacturing operation section. However, Director may
also provide various forms of rewards that are monetary rewards or non-monetary rewards. With
the help of monetary or financial rewards it will result in improving the overall performance of
worker within the Steel Co. This will further increase profitability of the company (Kuvaas,
2006). On the other hand, director may also focus on non-monetary rewards to improve and
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develop performance of employee and worker within Steel Co. these are non-monetary rewards
for instance, providing gifts to the employees those who perform well within the company,
provide certificate for rendering quality services etc. all these are considered as non-monetary
rewards that results in providing sense of accomplishment towards job and organization
(Bernardin and Wiatrowski, 2013).
In order to link performance with the reward system they must focus on pay for
performance approach within the Steel Co. so that Divisional Director can easily provide pay on
the basis of performance rendered by the staff and workers. Performance related pay is
considered as an effective approach which supports employees and staff in improving their
performance as they are aware that there performance is linked with the reward systems.
However, the compensation approach is related with organization performance appraisal
practices. In order to promote organizational performance, it is essential for the Divisional
Director to focus on employee reward system as through proper reward system they can highly
motivate their employees and workers towards rendering proper services within the business
(What is employee performance management, 2013). Furthermore, with the help of pay for
performance they can easily benefit employees in rendering quality services as it inspires them to
perform services to accomplish the goals.
Moreover, the effectiveness of linking performance to financial reward can be measured
through assessing overall performance of organization as with the effective management of
performance within the organization they can easily render quality services within the
organization. However, it will also result in enabling financial gain for the organization which
results in providing proper incentives and bonuses to the employees. In addition to this, the
effectiveness of linking performance with the reward system is that it also assists the employees
and staff in improving their skills and abilities so that they can easily improve their activities
within the organization (Performance Management & Employee Development, 2012).
Furthermore, the effectiveness of linking performance to financial reward system is that it also
results in developing employees and workers those who are rendering services within the Steel
Co. As, with the effective reward system provided by the Divisional Director they can easily
meet their requirement and results in devising proper training and development schedule so that
they can improve their skills which further enhances their performance.
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REFERENCES
Books and Journals
Armstrong, M. and Stephens, T., 2005. A handbook of employee reward management and
practice. Kogan Page Publishers.
Armstrong, M., 2009. Performance management. Human resource management. pp. 69-84.
Bernardin, H. J. and Wiatrowski, M., 2013. Performance appraisal. Psychology and
Policing, 257.
Brown, D. and Purcell, J., 2007. Reward management: On the line.Compensation & Benefits
Review. 39(3). pp. 28.
Gabris, G. T., 2010. Improving Employee Acceptance Toward Performance Appraisal and Merit
Pay Systems The Role of Leadership Credibility. Review of Public Personnel
Administration. 20(1). pp. 41-53.
Ghosh, P., 2012. Towards more effective training programmes: a study of trainer attributes.
Industrial and Commercial Training. 44(4). pp.194 – 202.
Kuvaas, B., 2006. Performance appraisal satisfaction and employee outcomes: mediating and
moderating roles of work motivation. The International Journal of Human Resource
Management. 17(3). pp.504-522.
Liu, Y., Combs, J. G. and Ireland, R. D., 2007. The value of human resource management for
organizational performance. Business horizons. 50(6). pp. 503-511.
Münstermann, B., 2010. The performance impact of business process standardization: An
empirical evaluation of the recruitment process. Business Process Management Journal.
16 (1). pp.29 – 56.
Vartiainen, M., Antoni, C. and Thierry, H., 2008. Reward Management: Facts and Trends in
Europe. Pabst Science Publishers.
Wirtz, J., Mattila, A. S. and Lwin, M. O., 2007. How effective are loyalty reward programs in
driving share of wallet?. Journal of Service Research, 9(4), 327-334.
Online
Performance Management & Employee Development. 2012. [Online]. Available through:
<http://www.scontrino-powell.com/services/performance-management/>. [Accessed on 2nd
April 2016].
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What is employee performance management?. 2013. [Online]. Available through:
<http://www.peoplestreme.com/what-is-performance-management.shtml>. [Accessed on 2nd
April 2016].
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