Performance Measurement In CERA: Limitations And Recommendations

Consider the story of CERA as it relates to individual performance measurement in Topic 4 (note that this does not include the operation of the bonus scheme). Then, answer these two questions, using the information in Topic 4 and at least 10 additional sources. At least five of the additional sources must be academic journals or books/book chapters published in the last ten years.

1. What limitations are evident in CERA’s individual performance measurement, taking into account its organisational strategy and recent developments in this HRM practice as reported in professional literature?

2. Recommend two alternative measurement approaches and indicative methods within each approach that you believe could work in CERA to address the limitations.

Measurement of performance

CERA is Civil engineering and research associates. It is a Sydney based company established in the year 2007. It is a civil construction and consultancy company. It has its research and development unit which works for a smart engineered structure design. It aims to provide high performance designs which can help the builder to build an engineered work. A team in CERA is used for the planning of policies so that company can progress. Strategies are made according to market status and are implemented so that competitive advantage can be gained against the competitors. Also, recruitment of various staff is done according to their technical skills so that the work performance of the company can be enhanced.

Work performance can be analyzed by measuring the performance. Therefore, performance measurement of an individual is defined as the criteria with which the work performance of an individual can be analyzed by collecting different information regarding to the work and behavior of an individual. It helps in the analysis of the work performance of an individual and helps in the improvement of the performance by providing training and learning. The work perforce of an organization, whereas is related to the measurement of  performance done by the whole organization. The organization’s performance can be related to the growth or can be related to the financial benefits to the organization. With the help performance measurement the organization can focus on the continuous improvement. The competitive world has lead to the evolution of the measurement process and is helping the organization with determining the need of improvement.

The concept of improvement from performance measurement comes into existence in 1991. But, initially it was in terms of finances only. Later it expanded in terms of growth and profit earning. It helps in the analysis of the organization regarding the position in the market and informs the company for the improvement if the score is less. MBO is basically based on the concept that the involvement of managers as well as the members leads to the commitment, and if team members participate in the goal setting and measurement of standards towards the goals, them all the employees or members are motivated to give the best performance and it contributes to achieving the goals of the organization. 

Performance measurement has two main components that are effectiveness and efficiency. These two are the tool to measure the performance metrics. To measure the performance of a company the strategies, the goals and the achievement of the company should be defined so as to measure the performance. Performance measurement is done for the successful implementation of the organizational strategies and policies. The results and the aims of the organization is compared so that the performance of the organization can be measured (ECA State Government, 2012). Therefore, performance measurement is a system that provides a tool to clarify how well a company is doing, in terms of actions, strategies and processes in order to achieve its aims. This helps in guiding the company towards the successful goals and objectives on the terms of improvement. After the performance measurement the plans are made to achieve the goals by setting up new strategies and improvement in the organization is made according to it (Kim, Park, & Lee, 2007).

A model representing performance measurement

The performance measurement of an individual depends on the organizational strategy, individual skills, situational constraints and results and the objectives of an organization. It firstly depends on the skills that are used during the work performance and the strategies which are used during achieving the results. The work performance depends on the organizational strategies as the work is of long term or short term irrespective of the individual skills. Therefore, there are different criteria that are accompanied during the work performance measurement of an individual.

CERA follow an MBO approach for the performance measurement. MBO is basically management by objectives. The MBO approach is based on setting the objectives of a project and after that the strategies are made to achieve the particular set of objectives. These sets of objectives are then informed to the members of the team who are doing the work. According to the researcher of the approach the manager should focus on the result not on the activity. The approach focuses on the goals and set small goals to achieve the target (Singh, 2012). The advantage of the MBO approach is that the objective is known to the members of the team and to the manager.

The MBO approach model is based on organizational goals, employee objective, feedback and performance evaluation. The appraisal is given to the employees on the basis of the feedback given by the managers. The main drawback of this model is that employee feel pressurized as the goals are set by the company managers. If high goals are set the pressure on the employees is built. Also, during the appraisal feedback, the feedback is taken from the single source information. This is also a major drawback as it can involve a rater error and biasing towards any employee can be there (Gomes, 2017). 

With the MBO approach the managers are used to do the planning as objectives and goals are preset in this approach. Also, each one in the team knows its responsibilities, whether it is a manager or it is an employee. Therefore, no ambiguity regarding the role is there in case of this approach.It makes each employee aware of company goals. Even subordinates know about the company goals, whether in most of the company’s subordinates are only concerned about their own objectives. Therefore, it gives subordinates a feeling of involvement and it improves their commitment.Also, it highlights the area where the employees need further improvement and training.But, with these advantages, there are several limitations of the MBO approach. These limitations results in CERA’s to not work in a proper manner (Chand, 2016). Therefore, CERA should  work with these limitations so that the company can earn good profits and grow in the future.

CERA’s individual performance measurement tool

The major disadvantage of MBO approach is that it needed complete support from top management. It cannot succeed if top management support is not with the team.

The subordinates get with a lot of pressure during the work. As the high goals are set by the managers the subordinates have to do work, which is not possible in the given time frame. Therefore subordinates get resented by MBO approach. The high hopes makes a lot of pressure with which a worker cannot do effective work (Mayhew, 2017).

These are the limitations of MBO approach. The detailed study of the limitation is discussed as follow. 

In this approach the reward or the appraisal is given by the information given by the single source. The single source information can be biased or can form an error. Also, subordinates can contradict the information. The information from multiple sources should be collected so as that should be summed up to make a decision regarding the appraisal. This will help is the employee satisfaction. Therefore, for better measurement of performance more realistic approach should be followed. The measurement of performance in better way leads to the improvement in the performance of the company. This will help in the growth of the company. By using community to get the information the performance measurement can be done in a right way. 

MBO approach leads to the rater error. As due to single information source the politics penetrates in the company. Sometimes the individual is rated biased with this. This result is affecting the individual’s performance. The work performance of the individual gets affected by an error in rating. Also, report of performance is spoiled by the wrong measurement of the individual performance. This result in resentment to the employee as it is not getting the reward or appraisal that he/she deserves. CERA should concentrate on this element and proper work performance measurement should be implemented.

Due to the high level of the goals in small time, subordinates feel a lot of pressure on them. This results in the lowering of work performance of the individual. The individual will pressurized as goals that are set can be achieved only by working maximum time. This makes an individual feel resented and cannot work well. The manager cannot alter the work frame. Therefore, no flexibility is received by the subordinates.

There are other approaches for performance measurement which can be used by CERA to improve its performance. These approaches can improve the performance of CERA and can reduce the drawbacks of MBO approach. These approaches are comparative approach, attribute approach and behavioral approach. These approaches can overcome the limitations of MBO approach and can improve the work performance of CERA (Ginsberg & Sheridan, 2001).

MBO approach model

The comparative approach involves comparison of one individual work performance with others. This is done with the help of ranking method. The rank is given as top to the highest work performer and bottom to the lowest work performer. There are several techniques that are followed by comparative approach. These are ranking, forced distribution and paired comparison. The CERA should use a comparative approach as it will help overcome the limitations such as rater error and one source information. This will result in better analysis of individual work performance.

In ranking system the rank to each individual is given according to its performance compared with others performance. Best ranker is marked as the highest performer whereas the poorest performer is ranked as lowest performer. The ranking follows completely the comparison method. There are two types of ranking systems. These are simple ranking and alternative ranking.

Simple Ranking System: In this system employer ranks everyone from the best performer to the poorest performer (Alshaqsi, 2013).

Alternative ranking system: In alternative ranking system the rater firstly picks the best performer and then left were taught about their performance and the worst performer name will be cut out from the list.

In the paired comparison method each member is compared with every other member and then the ranking is given. The ranking is given in the same work group. The top performer is given the rank 1 according to the work performance every time. For example, various aspects are considered during the ranking like work performance, skills, work time, decision making etc. These all aspects are analyzed during the ranking system and scores are given according to them.

After getting all the scores the final summation is made according to the given scores. The ranking is allotted according to the final output (Ivanov, 2014). 

The comparison method benefits the employees as it helps effectively differentiating the employee performance. Therefore, employees will be satisfied with this performance measurement method. This will result in better work performance of the employee. It is also a good basis for appraisals and pay hike, which is suitable for the employee. This makes an employee satisfied which results in the work done by the employees with responsibility. The comparative approach is easy to develop and easy to use and is not difficult to implement. The CERA should follow this approach to overcome the limitation of pressure on the employees as this approach helps in the reduction of pressure from the employee and improve there work performance.

Advantages of MBO approach

This approach focuses on the characteristics and traits of the individuals. These traits help in gearing the success of the  company. The analysis is done with the help of a set of traits. These traits are initiative, competitiveness and leadership. These traits in each individual is analyzed and then the scorecard is prepared. The preparation of scorecard involves the summation of all the scores obtained in each trait. The techniques that are used in attribute approach are mixed rating scale and graphic rating scale (Niknafs, Pourmoradi, & Abdollahian, 2016). 

Mixed rating scale is the layered form of rating. The rating is done from low to high. The lowest one is rated low and highest performer is rated high, whereas the medium is given to the average performer. Each performer is rated to ‘+’ that is high, ‘-‘ that is low, and ‘0’ which is medium. The evaluator will then go to each statement to analyze that whether the trait has scored high, low or medium. An already defined system in used to determine the final score of the approach. Then the quality statement is prepared according to the rating. This enables in determining the individual performance. The system key gives the actual rating and rater error is eliminated using this technique.

In this rating system the rating is done to each individual on the basis of their traits. These traits are skills, competitiveness and leadership. These all traits are given numbering from lowest to highest. For example, in some companies the rating is given from 1 to 5. The highest performer in a particular trait is numbered 1 and the lowest performer in that trait is numbered 5. Therefore the numbering can vary from company to company. Each company follows their own rating system. The evaluator checks the score of each trait and thus makes the final rating according to the summation of all the traits. Thus the top most performers are rated number 1 accordingly.

This approach has various advantages as it is a reliable method for rating and can eliminate CERA’s problem of rating. Biasing and rater error can be avoided with the help of this approach. It is also easy to develop and can be generalized easily in any company. As, the CERA does not have a large number of employees yet this performance measurement approach can fit best to the company.

References

Alshaqsi, M. (2013). A strategic approach to the implementation of management by objectives in the government sector in the sultanate of Oman. Retrieved from https://usir.salford.ac.uk/30658/1/Mahmood_MPhil_FINAL_COMPLETED_26-11-2013.pdf

Chand, S. (2016). 5 Major Limitations of Management by Objectives (MBO). Retrieved from https://www.yourarticlelibrary.com/management/5-major-limitations-of-management-by-objectives-mbo/25653/

ECA State Government. (2012). Performance measurement definitions. Retrieved from https://eca.state.gov/files/bureau/performance_measurement_definitions.pdf

Ginsberg, C., & Sheridan, S. (2001). Limitations of and Barriers to Using Performance Measurement: Purchasers' Perspectives. PMC Journal, 22(3), 49-57. Retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4194708/

Gomes, J. (2017). Advantages and Limitations of Performance Measurement Tools: the Balanced Scorecard. Academia. Retrieved from https://www.academia.edu/6284921/Advantages_and_Limitations_of_Performance_Measurement_Tools_the_Balanced_Scorecard

Ivanov, C. (2014). Performance Measurement Models: An Analysis for Measuring Innovation Processes Performance. Procedia - Social and Behavioral Sciences, 124, 397-40. Retrieved from https://www.sciencedirect.com/science/article/pii/S1877042814020497

Kim, N., Park, M., & Lee, N. (2007). Performance management method for construction companies. 

Mayhew, R. (2017). The Three Types of Methods Used to Measure Performance. Retrieved from https://smallbusiness.chron.com/three-types-methods-used-measure-performance-23612.html

Niknafs, J., Pourmoradi, R., & Abdollahian, F. (2016). Traditional performance measurement systems: limitations, criticisms. Advanced Social humanities and Mangemen, 3(3), 52-59.

Singh, K. (2012, August 29). What are the limitations of the process of MBO? Retrieved from https://www.mbaofficial.com/mba-courses/principles-of-management/what-are-the-limitations-of-the-process-of-mbo/