Performance and compensation system is a significant area of concern for most of the companies. The human resource department of the companies is undergoing functional changes in the implementation of corporate strategies (Bridges and Bridges 2017). The companies are facing problems regarding performance and compensation management systems. Performance management is a broader function of human resources. Compensation management systems are designed based on the performances of the employees in the organization (Shields et al. 2015). Performance management is a significant process to assess the performance of the employees and give them the rewards on the basis of the performance (Pulakos et al. 2015). The report describes the issues of performance and compensation management system of Harvey Norman, an Australian Retail company in New South Wales and some recommendations are needed for the company to succeed in the future. The issue of the performance management is the lack of leadership commitment and the issue of compensation management is about the rewards and recognition of the employees that have been discussed in the report.
Harvey Norman is a popular company in Australia which is having its headquarter in New South Wales (Begg 2016). The company was founded in the year 1982 and named after two people, Garry Harvey and Ian Norman. It is a large multi-national retail company of furniture, computers, consumer electrical products, communications and bedding. Garry Harvey is the chairman of Harvey Norman. The company first opened its store in 1961. It was first specialized in electrical appliances. The company was having 673 franchises in Australia until June 2016. Each department of Harvey Norman is operated by different entities of the management. Each superstore of the retail company has a combination of separate businesses that are independently managed by Harvey Norman Holdings Ltd. The stores of Harvey Norman are directly owned by the ASX-listed parent company, Harvey Norman Holdings Limited. The company is the flagship brand of Harvey Norman Holdings Pvt. Ltd. New South Wales is having the largest number of stores of Harvey Norman followed by Victoria and Queensland.
Performance management system is a part of the human resource functions that helps in encompassing activities like setting the goals, continuous review of the progress and communication on a frequent basis. Feedback for the improvement of performance of the employees, proper implementation of the employee development programs and giving rewards to them based on their performance is important in performance management (Dewettinck and Van Dijk 2013). The process of performance management system initiates when a new employee joins a company and ends when he leaves the organization. It is a system where the performance of the organization is improved through the improvement of performance of the individuals. This system helps in effective communication of the expectations of the organization, defining the roles within a framework and setting up the benchmarks
Performance Management Issue
There are various types of issues regarding the performance management system. Harvey Norman is also facing the issues of performance management system, one of which is the lack of leadership commitment. The company is facing the problem regarding leadership from a considerable time. Commitment from the leadership and support are required for the better implementation of the performance management system. The leaders are responsible for making the system effective and monitoring the performances of the employees. This has impacts on the human resource and other activities of the organization. The objectives of the strategy, core competencies and performance indicators are not properly met in Harvey Norman because of the lack of leadership in the organization. This is because of the lack in the recruitment process of the company in the position of leaders. The commitment of the line managers is very significant for the overall performance of the organization. They are believed to portray the relations-oriented behavior of leadership that helps the employees to show greater commitment towards the organization.
The lack of commitment on the part of the line managers of Harvey Norman sometimes lead to dysfunctional teams. It leads to absence of trust and conflicts in the teams working in the organization. The leaders are not able to convey the goals and objectives of the company properly to the employees. This creates confusion among the employees in Harvey Norman. A good culture is not created that affects the different activities of the organization and guidelines are not properly followed. Some employees think of being ignored in the workplace. They get de-motivated and it becomes difficult for the companies to accomplish the goals. The companies having good leadership system are able to infuse confidence within the employees. Successful leaders are able to solicit valuable opinions and ideas for competitive advantage of the company in the market.
Compensation Management System
Compensation management is the process of distribution of some monetary value to the employees in return of their work according to the policy of the company (Epstein and Buhovac 2014). It takes into account the monetary benefits apart from the basic pay. The objective of compensation management system is find out the qualified people who are able to deliver the best and compensate them in an attempt to retain them in the organization (Schleyer and Moore Weaver 2016). The various types of compensation are salary, commission, benefit packages, overtime pay and bonuses that may include health insurance, retirement savings and vacation time (Klonoski 2016).
Compensation Management Issues
The leadership issue of performance management in Harvey Norman has given rise to an issue in the compensation management of the organization. The company is facing problems regarding the problem of recognizing and rewarding the employees due to the absence of a strong leader or line manager in the management. The employees are not compensated according to their performance. The company is facing the challenges of arranging the Employee Reward Programs though reward has become an integral part of the talent management activities. There have been several reasons for the persistence of this issue in Harvey Norman. The employees of the retail company are not fully aware about the full process regarding the planning, design and execution of the reward and compensation programs. This is also not properly communicated to the staffs and employees of Harvey Norman in the different segments.
The lack of commitment and engagement of the line managers has aggravated this issue in the company. The human resource department is also facing problems in arranging the programs and giving the employees adequate compensation since they are not having proper coordination with the line managers. The managers are not able to analyze the performances of the employees due to their lack of commitment and not providing any direction to the human resources personnel. The department is not able to articulate the value of such programs. The employees have experienced earlier that the reward programs arranged were not in link with the business of the company. The human resource department used to work with only a few stakeholders and segments and not aligning the overall goals and strategies of the company. This had resulted in a matter of de-motivation and dissatisfaction on the part of the employees in other segments of the company.
The company is facing issues regarding the reward management system due to several other reasons. It is unable to introduce sophisticated performance management system that has resulted in the reward management issues. The management of the company was unable to put the focus on rewarding the employees for their performance and increase the standards of quality. The line managers in Harvey Norman did not follow the corporate policies regarding the reward system. The issue in the compensation management of the company is mainly because of the lack of skills on the part of the leaders. Many leaders in Harvey Norman are not able to conduct the job evaluation schemes, which is allocating as well as controlling the grading in the hierarchy of the company.
Other problems regarding the compensation issues are the external competitiveness, executive compensation and internal equity. The human resource professionals are facing problems regarding the legal considerations in paying the compensation to the employees (Lussier and Hendon 2014). The company failed to understand that other companies are much ahead in terms of providing the compensation system. Most of the companies reward the employees having good performance by paying more money and create differences between them and the low performers. Harvey Norman was not able to create this difference and the high performers were not given proper recognition in terms of monetary benefits. The leaders were not able to get the proper feedback from the employees as they did not give much importance to the employees. There are other kinds of tangible benefits and rewards, bonuses and gifts, which Harvey Norman would have provided to the employees to motivate them to perform better.
The two issues are having a link with each other. The lack of leadership commitment has led to the coordination problems among the different departments including the human resource. The leaders of the company were not able to make proper analysis of the data and evaluation of the performances. This made the role of the human resource department very tough in making the reward and compensation system for the employees. The employees were not rewarded on the basis of performance because of the lack of proper leadership in the company.
Leaders have a major role to play for the enhancement of performance management of the organization (Zhang et al. 2014). First, competent leaders need to be recruited at the management positions of Harvey Norman who will be able to show commitment towards improvement of the performance management of the company. The leaders must focus on the teamwork and review the performances of each employee (Northouse 2015). It is possible only by taking the responsibility by the leaders about motivating, coaching and mentoring through effective communication and recognition of their performances. The leaders are responsible for formulating the overall strategies of the company to improve the performance of the employees and the company as a whole (Hill, Jones and Schilling 2014). A good leader is able to analyze the performances of the employees in an effective manner. Employee alignment and goal coordination are suffered due to lack of integration of performance management. When the leaders are having active roles in performance management and strategies are created for the entire system, there is an enhanced chance of the employees to be on track regarding performance.
Competent leaders are able to make a detailed data analysis about the performance of the employees. The commitment of the leaders helps in creating a good culture in the workplace and strengthens the bonds among the employees. A leader is able to integrate the different departments of an organization including the human resource department. This can help in reduction of conflicts and making the pay scale appropriate for the employees. The problems of the compensation management are greatly reduced through this process. The employees who are not performing up to the mark need proper training arranged by the leaders. Maintaining high performance management with the existing workforce is a significant part of any type of business. The leaders need to identify the employees with good performance beyond expectations and reward them accordingly. They must also create plans for enhancement of the skill sets of the employees. Communication with the workforce on a continual basis is very important aspect of any business and an onus of the leaders.
Effectiveness of leadership can be enhanced in some other ways. The leader needs to be have a clear vision about what actions need to be taken. Leaders can be more committed and effective in the workplace by six ways mentioned below.
Finding Great Mentors
The employees must take into consideration the fact that there is a difference between a leader and a manager. The leaders are able to motivate the employees to accomplish the goals so that the performance of the company is enhanced. The leaders must arrange for programs to motivate the employees.
The leaders need to value the employees as integral and significant part of the organization. They should devote considerable amount of time for the employees, interact with them and try to solve the problems they are facing. This eases the path to meet the objectives of the company very fast. The leaders must possess good sense of humor. The vision needs to be clarified properly.
Harvey Norman can be recommended to improve the compensation management system. The company can enhance the quality of this system through various ways. The recruitment of competent leaders in the management of the company can solve many issues. Ensuring an effective compensation system is very much imperative. One of the biggest motivators of the employees in an organization is the regular paycheck (Gupta and Shaw 2014). The company must give importance to the compensation management system as it is related to the productivity of the employees. It can also help the organization in meeting the objectives of the company. The company must make assessment and then plan for investment in the different policies (Eccles, Ioannou and Serafeim 2014). It must replace the outdated technology in order to increase the efficiency. Use of spreadsheets is very useful for any type of organizations for evaluation of data (Albert and Tullis 2013). Harvey Norman will be able to make proper analysis of the performances of the employees. More and more companies are taking the advantages of advanced technologies for acquisition and retention of talent through appropriate reward system (Garrido-Moreno, Lockett and García-Morales 2014). Another way to make improvement in the system is the appropriate sources and systems. It can consider the deployment of stand-alone systems for compensation. Since, Harvey Norman is having various segments in its business, stand-alone compensation systems are designed to provide support to the individual departments and segments in terms of sales and contact centers. The leaders need to be more calculative and take proper training about the usage of various technologies needed for the analysis of data.
It should plan the programs for the compensation management system. The company has the option of adding the variable pay components to the compensation. It must look into the various pay packages and formulate the compensation packages accordingly.
The report takes into consideration the importance of performance and compensation management for enhancement of the overall performances of an organization. There has been a relation between the performance and compensation management as discussed in the report. The motivation of the employees and recognizing their performance are important aspects of any company for increasing the productivity of the employees. The report takes into account the case of Harvey Norman where the company is facing issues regarding the commitment of leadership in the company and there has been a lack of coordination among the different departments. The human resource department is found to have problems regarding the assessment of performances of the employees due to lack of proper leadership. The issue of compensation management is identified as the lack of rewarding and recognizing the performances of the employees. The final part of the report discusses about the recommendations to mitigate the two issues so that the company is benefitted out of it. The report will be helpful for most of the companies dealing with these types of issues.
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