Performance Appraisal System in SGS Company

Executive Summary

This proposal entails an illustration of the fundamental issues that the consultancy firm will take into account in offering consultancy services to SGS (HK) Limited. The proposal identifies the strategic objectives that the company should take into account to revitalize its competitiveness. Additionally, the proposal identifies the issues that SGS (HK) Limited is currently experiencing. Moreover, the proposal outlines the consultancy firm’s working approach, the timeframe within which the project is expected to be completed, the costs, key personnel, and the problems that might be encountered in the provision of consultancy services.

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Objectives

To achieve the project goal, several objectives will be taken into consideration.

  1. To scrutinize the causal factors affecting the decline in performance at SGS (HK) Limited Incorporation.
  2. To evaluate the situation that the rank and file employees at SGS (HK) Limited are encountering
  3. To examine human resource management practices at SGS (HK) Limited.
  4. To discuss with the senior management team at SGS (HK) Limited the implication of high turnover to the organization’s long-term performance.
  5. To determine the fundamental process, strategies, and techniques that the organization should employ in its performance appraisal
  6. To examine how SGS (HK) Limited can use performance appraisal in achieving the desired outcome, which includes the establishment of a win-win situation, reduces the rate of employee turnover, improve the workload of employees in the HR department, and reward employees based on their performance.

Client requirements

Nature of business

SGS (HK) Limited has been in operation for over five decades since 1959. The firm’s operations entail certifying, inspecting, auditing, validating, and training other firms on how to improve their operational efficiency by navigating through the changing supply chains. SGS (HK) Limited is focused on attaining a high competitive edge in the quality industry by improving its performance testing capabilities. The firm’s operations are facilitated by a workforce of 300 employees and are organized into different departments. The firm offers product inspection, testing, verification, and safety certification services to customers belonging to different industries. SGS (HK) Limited is committed to offering clients specialized business solutions to minimize risk.

Background statement

The company has experienced several challenges over the past few years. Some of the notable challenges entail a decline in the level of its profitability, an increase in the level of employee and customer dissatisfaction. For example, some of the employees at the managerial level are underpaid. Furthermore, the firm has been characterized by ineffective human resource management systems and strategies.

These aspects might negatively influence the firm’s competitiveness and hence its sustainability. The existence of employee dissatisfaction might trigger voluntary turnover intention amongst its workforce. Alternatively, the level of productivity and commitment amongst employees who remain in the organization might be negatively affected. Conversely, customer dissatisfaction might lead to a decline in the firm’s capacity to generate revenue. Therefore, the firm might not be able to sustain its operations.

However, the challenges faced are within the company’s management team capacity to adjust to achieve the desired outcome. Subsequently, the company’s management intends to undertake the requisite adjustments in its HR management. To achieve this goal, the firm needs to balance employee and organizational development issues. The firm has recognized the integration of an effective performance appraisal system as one of the strategic aspects in sustaining its competitiveness.

Our approach

As a consultancy firm, we are focused on delivering a high level of satisfaction amongst our clients. Subsequently, we will improve the capacity of the management team at SGS (HK) Limited to formulate and implement effective human resource management practices specifically the performance appraisal system. To achieve this goal, the firm has integrated a comprehensive approach that entails providing clients with diverse strategic options on the implementation of the performance appraisal system.

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The provision of consultancy services on performance appraisal at UL will be achieved in three main stages. Stage 1 will entail gathering data on performance at SGS (HK) Limited. This goal will be attained by employing an effective methodology that entails gathering relevant data on the various performance management issues facing the company. Stage 2 will comprise of a comprehensive analysis of the findings that will be undertaken by a team of consultants. The findings and analysis will form the basis upon which recommendations on how to improve the performance appraisal system at SGS (HK) Limited will be undertaken. Stage 3 will entail the provision of specific recommendations by a joint team of consultants. This goal will be achieved by identifying the specific aspects that the organization should incorporate in its new performance appraisal system.

Time plan

The firm is focused on ensuring that the consultancy service is provided within a reasonable timeframe as requested by the client. Compliance with the timeframe will be ensured by allocating responsibilities to the team of consultants. This will ensure that the client does not incur additional consultancy costs. The firm intends to complete the project successfully within one and a half months as illustrated herein.

Activity Estimated Project Timeframe [Weeks]
1 2 3 4 5 6
Initial briefing meeting with the client X
Commencing the consultancy X
Identify the necessary improvement procedure and process X
Production and submission of consultancy report to the client X
Termination of consultancy X

Key personnel

A well-experienced and skilled team of two consultants facilitates the provision of consultancy services. Consultant A will be the project leader. His role will ensure that all the project activities are undertaken. He has developed adequate expertise in human resource management aspects having worked for over 15 years as an HR Consultant. Consultant B will include a Business Analyst, who will be charged with the responsibility of providing insight on industry standards. Subsequently, it will be possible to evaluate the company’s performance based on the prevailing industry standards.

Costing

The process of providing consultancy services is not free from challenges. One of the notable challenges entails difficulty in obtaining data on human resource management issues that might be considered confidential. Some of these aspects relate to the pay scale that the company has adopted. Additionally, the project might be hindered in determining the specific HR procedures and practices that the firm has adopted.

To deal with this problem, it will be ensured that the data will be collected from credible sources. Moreover, a practical consultancy fee of $ 500,000 will be charged to the organization. The rationale for setting this fee is based on the clients’ scale of operation and profitability potential. The table illustrates a breakdown of the lump sum amount.

Profession Cost [Amount in $]
Consultant A; Project Leader 280,000
Consultant B: Business Analyst 220,000
Total 500,000

Ethical Approval Form

Business School Application for Ethical Approval for Taught Degrees

This form should be completed for any research involving primary data collection conducted by students on taught degrees of the Business School. This procedure particularly aims to minimize ethical issues where the primary data involves human data and includes human beings and their records (such as medical, genetic, financial, personnel, criminal, and test results including scholastic achievements). Please note that no research may be conducted in the Business School where participants are children.

The School will retain a copy of this application for up to 6 years. The Business School will provide summary information to the University’s Research Ethics Committee (UREC) and will provide further information to UREC as requested.

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  1. Title of project:

Consultancy Project on improving performance appraisal in SGS (HK) Limited

  1. This Project is:
  • UG Research linked to Taught Course*
  • UG Dissertation*
  • PG Research linked to a Taught Course*
  • PG Dissertation*

*May require University UREC approval – if this is the case, then a new application using the UREC form will be required.

  1. Principal Investigator(s):
Family Name: Given Name: Banner ID: Program:
  1. Details of the Project
Proposed start date: 9th November 2015 Probable duration: 6 Weeks
A brief outline of a project
Research objectives
  1. To scrutinize the factors affecting the decline in performance at SGS (HK) Limited Incorporation
  2. To evaluate the perception of SGS (HK) Limited employees on the performance management approach adopted by the firm.
  3. To examine human resource management practices at SGS (HK) Limited.
  4. To discuss with the senior management team at SGS (HK) Limited on the implication of high turnover to the organization’s performance.
  5. To determine the process, strategies, and techniques that the organization should employ in its performance appraisal
  6. To examine how SGS (HK) Limited can use performance appraisal in achieving the desired outcome, which includes the establishment of a win-win situation, reduces the rate of employee turnover, improve the workload of employees in the HR department, and reward employees based on their performance.
  • Methodology;The project will be based on a case study methodology that will focus on performance management at SGS (HK) Limited. Data will be collected from secondary sources and analyzed using descriptive statistics.
  1. Will the research involve primary data collection?
  • Yes
  • No

Will the research involve human participants?

  • Yes
  • No
  1. Could the participants be considered to
    1. Be vulnerable? (e.g. mentally ill?)
  • Yes
  • No
    1. Feel obliged to take part. (e.g. employees in organisationally sponsored projects)
  • Yes
  • No
If the answer to either of these is ‘yes’, please explain how ethical considerations will be minimized
  1. If the research generates data relating to individuals (e.g. interview quotes or unique questionnaire responses), describe the arrangements for maintaining anonymity and confidentiality
Not applicable
  1. Describe the arrangements for storing data and maintaining its security as part of the project.
The data collected from the secondary sources will be stored in secure online storage drives for ease of accessibility.

It is a requirement of the Data Protection Act 1998 that individuals are aware of how information about them is managed. Tick to confirm participants will be informed of data access and security arrangements.

  1. Describe how will participants be informed of the research project’s objectives, purpose, and Data Protection Act compliance (per question 8) Please attach a participant information sheet.________________________________________________
Academic Supervisor
  1. If the research is going to be conducted within the University or its subsidiaries or partners, which Manager or Officer of the institution has granted access?
  2. If other relevant issues have not been mentioned in this form please note them below:
It is assumed that there will be no constraints affecting the completion of the project. Subsequently, the project will be completed within the stipulated timeframe.
  1. Declaration of Principal Investigator:
    1. The information contained in this application, is, to the best of my knowledge, complete and correct. I/we have read the University of Greenwich’s Research Ethics Policy and I/we accept responsibility for the conduct of the procedures set out in this application by it. I/we have attempted to identify all risks related to the research that may arise in conducting this research and acknowledge my/our obligations and the rights of the participants.
    2. I have discussed the project with my proposed academic supervisor or course leader, and she/he indicates they have approves the planned research.

Signature(s):…………………………………………………………………(please insert an image of your signature)

Greenwich email address:

Date: …….……………………

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Consultancy project of improving performance appraisal in SGS (HK) Limited

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(24, 10, 2015)

Executive Summary

Findings

  • Employee issue; the organization is characterized by an ineffective reward system.
  • Lack of effective adequate compensation: – The employees are not compensated fairly and equitably.
  • Poor work design – the work design is ineffective hence limiting its effectiveness in contributing to employee career development. Moreover, employees encounter a high workload and are not equitably compensated
  • High workload- customers experience delays in having their product safety tested and certified by the company, which most manufacturers consider to be a hindrance in their manufacturing process.
  • The high workload coupled with lack of adequate compensation might increase the employees’ level of stress hence limiting their productivity.
  • System issue; the firm’s performance appraisal system is characterized by gaps in evaluating performance issues within the different departments.
  • Process limitations – the firm’s employees are not adequately trained on how to undertake performance appraisal.

Idea

  • The reward system should be comprised of both monetary and non-monetary components.
  • The organization can reverse the situation by integrating the job rotation, job enrichment, and job enlargement approach in its work design process.
  • Ensuring that the performance appraisal system is fully integrated
  • The firm should identify the environmental and people factors necessary for the successful enhancement of the system.
  • Employee involvement in designing the performance appraisal system – the performance appraisal process should be improved by ensuring that the possible bottlenecks in its performance appraisal process are identified.

Recommendations

  • Integrating an effective rating approach and technique
  • Implementation of a performance appraisal form
  • Incorporation of the 360-degree performance appraisal process
  • Integrating a balanced scorecard
  • Adoption of performance-based pay
  • Fostering optimal performance feedback
  • Implementation of an extensive training program
  • Employee participation

Introduction

Attaining a high competitive edge is one of the critical aspects that organizations are focusing on in contemporary times. Businesses must ensure that their operation contributes to satisfaction amongst the internal and external stakeholders such as customers, employees, and shareholders. Thus, organizations must continuously evaluate their efficiency in promoting competitiveness based on the three areas. The performance appraisal system can aid organizations in evaluating and improving their competitiveness.

SGS (HK) Limited operates as a service company that was established in 1959. The company’s headquarters are based at Kwai Chung, Hong Kong. The firm operates as a subsidiary of SGS Group. SGS (HK) Limited has identified a market niche concerning the provision of safety services to clients. The company specializes in the provision of safety solutions such as certification and safety consulting services to clients around the world. Through its operation, SGS (HK) Limited provides clients quality and safety solutions, which allow clients to navigate through the increasing complexity of the supply chain. The firm has a workforce of over 1,200 employees characterized by diverse professional capabilities.

Context of the project

The firm’s operations are affected by internal factors, external factors, and situation problems. One of the notable external factors relates to an increase in the rate of globalization, which has led to a remarkable increment in the intensity of competition in the business environment. Moreover, the firm’s performance is increasingly being affected by political, legal, social, technological, and economic changes. Business organizations are progressively being pressured to adhere to different regulatory requirements such as international labor laws and environmental protection. Moreover, organizations are encountering relates to the increase in the level of consumer knowledge on the role of an organization towards them.

One of the major internal factors that businesses are encountering relates to a shift in employee knowledge. For example, employees are focusing on attaining personal and career development goals. Thus, organization managers must focus on meeting customers’ and employees’ needs and expectations. Additionally, organizational investors and shareholders are pressuring organizational managers to ensure that the strategies adopted to contribute to the attainment of the desired level of wealth. Despite the market changes, business entities must ensure that their performance is optimal. Consequently, organizational managers are obliged to adopt practical strategic business management practices.

One of the strategic areas that the management team at SGS (HK) Limited should take into account relates to human capital. SGS (HK) Limited intends to undertake a strategic expansion by collaborating with Futuremark. However, the organization might experience a challenge in its quest to undertake strategic expansion. One of the identifiable problems that are likely to affect an organization’s performance entails an increase in the level of dissatisfaction. Dissatisfaction amongst the various rank and file employees is likely to affect their productivity and commitment to the organization. Over the past few years, SGS (HK) Limited has been criticized for its poor employee salary and benefits schemes. The firm’s compensation package is below the prevailing market average.

Although the firm’s ability to enact pay rise might have been triggered by economic changes, the situation might also arise from the decline in employee productivity. Therefore, the company’s approach to strengthening its competitiveness through acquisition might not be effective if it does not assess the effectiveness of the implemented human resource management.

One of the most fundamental issues that the organization should focus on relates to performance management. SGS (HK) Limited should integrate a comprehensive performance appraisal system. Integration of the performance management system will play a fundamental role in developing a win-win situation.

Aims and objectives

  1. To scrutinize the causal factors affecting the decline in performance at SGS (HK) Limited Incorporation.
  2. To evaluate the situation that the rank and file employees at SGS (HK) Limited are encountering.
  3. To examine human resource management practices at SGS (HK) Limited.
  4. To discuss with the senior management team at SGS (HK) Limited the implication of high turnover to the organization’s long-term performance.
  5. To determine the fundamental process, strategies, and techniques that the organization should employ in its performance appraisal
  6. To examine how SGS (HK) Limited can use performance appraisal in achieving the desired outcome, which includes the establishment of a win-win situation, reduces the rate of employee turnover, improve the workload of employees in the HR department, and reward employees based on their performance.

Outcomes

  1. Identification and evaluation of the critical performance issues affecting SGS (HK) Limited
  2. Understanding the critical components, models, and techniques that SGS (HK) Limited should integrate into its performance appraisal system.
  3. Appreciation of how the performance appraisal system contributes to personal employee development, employee retention, and organizational commitment.
  4. Identification of the major barriers that SGS should avoid in the implementation of the performance appraisal system

Body of the report

The report has used the case study method. Rao (2008) observes that the case study methodology aids in undertaking a thorough investigation of the prevailing situations, happenings, and events within a specific organization. Some issues affecting SGS (HK) Limited operations have been identified from the different secondary data sources. The consultant ensured that the data was obtained from credible sources. One of the issues relates to the firm’s financial performance. Over the past three years, SGS (HK) Limited has experienced a significant reduction in its revenue. Table 1 shows that the company’s total revenue for the 1st half of 2014 and 2015 has declined from $ 2,805,000 to $2,752,000 (SGS, 2015). This represents a reduction in the company’s total revenue by 1.9% during the first half of the company’s financial year (SGS, 2014). Despite the company’s effort to reduce total functional expense, the firm has continued to experience a reduction in its profitability. For example, the company’s net income for the first half of 2014 and 2015 declined by a margin of 16.1% margin (SGS Group, 2015). This aspect has contributed to fluctuation in employee salaries, wages, and other compensations and benefits.

In addition to the decline in its financial performance, the firm is characterized by gaps in its human resource management practices. An extensive analysis of human resource management practices at SGS (HK) has led to the identification of gaps in three main areas that include the employees, system, and process. This section entails an extensive evaluation of the identified human resource management issues. The issues identified forms the basis on which ideas on performance management is generated. The three categories of issues are evaluated in detail herein.

Employee issue

Ineffective reward system

SGS (HK) Limited is characterized by an ineffective reward system. The firm has not integrated a fair and equitable reward system. Subsequently, the firm’s effectiveness in attracting and retaining productive employees within the firm is limited significantly. This might affect the firm’s capacity to remain competitive in a business environment that is increasingly being characterized by rapid changes. One of the factors that highlight the ineffectiveness of the firm’s reward system entails a lack of fairness.

The concept of fairness in the performance appraisal system is comprised of different dimensions that include procedural, interactional, and distributional fairness. The distributional fairness dimension is concerned with the extent to which the reward system adopted by a firm is aligned with the performance inputs. Distributional fairness is one of the most effective predictors of job performance. Conversely, procedural fairness refers to how efficient the implemented performance appraisal system has integrated realistic and practical policies and procedures in determining the appraisal score hence influencing the chances of employees developing the perception of the score being fair.

Developing the perception of fairness increases the chances of employees accepting the performance appraisal rating, either positive or negative. Bhattacharyya (2011) further emphasizes that the incorporation of procedural fairness is the fundament in determining the likelihood of pay and job satisfaction. The concept of interactional fairness involves how the parties charged with the responsibility of conducting performance appraisal employ fair treatment approaches in interacting with the employees. Interactional fairness is critical because it influences the degree to which the employees are determined to achieve the predetermined organizational goals.

Employee motivation is critical in promoting an organization’s competitiveness. Lussier (2012) argues that a motivated workforce is more effective and efficient in executing the assigned roles and responsibilities. Amongst the issues that contribute to improvement in the level of the employees’ motivation entails an effective reward system. A review of the company’s financial statements shows a considerable reduction in the company’s salaries, wages, and employee compensation. The company paid handsomely compensated its employees in 2013 compared to 2014 (SGS, 2014). The reduction in the company’s total compensation might have been triggered by the decline in SGS (HK) Limited financial performance.

The decline in the company’s profitability might have affected the company’s capacity to enact its salary and benefits policy such as pay rise. Therefore, SGS (HK) is experiencing instability in its ability to reward employee contributions. In addition to the above issues, a further examination of the company’s operations shows that the firm has been underpaying employees in managerial capacities. The set pay scale might affect the morale of the employees in managerial positions.

Considering the rank and file employees’ prior knowledge on the company’s negative financial performance over the past two years, the level of uncertainty on the organisation’s capacity to improve its pay scale might increase considerably after the acquisition. This aspect might negatively affect the employees’ morale and commitment to the organization. The low level of compensation amongst the Project Managers might increase their level of job dissatisfaction hence increasing the chances of the organization encountering increase in cases of voluntary turnover.

How to fix the problem

To deal with this problem, the firm’s management team should consider implementing a balanced reward system. This method will contribute to significant improvement in the employees’ perception regarding the firm’s commitment to ensuring equity and fairness.

Responsibility of implementing the reward system

The HR manager should undertake the responsibility of adjusting the reward system in collaboration with other top-level managers. The rationale of including the top-level managers is to ensure that the managers’ contribution on how to adjust the reward system is taken into account. Through the incorporation of the different managers, the organization’s capacity to determine the most appropriate level of employee compensation will be incorporated. For example, the top-level managers will determine the firm’s capacity to sustain the proposed compensation package depending on the firm’s financial performance. The analysis shows that SGS (HK) Limited has experienced a considerable reduction in the level of its profitability over the past few years. Subsequently, the importance of including other managers such as the Chief Finance Manager is critical.

Implementation of this strategy should be undertaken across the entire organization’s department. The rationale for inclusion is that the new compensation system should be deployed fairly and equitably across the organization’s department. Subsequently, the firm will succeed in entrenching a fair reward system.

Recommendation

The firm should consider improving its reward system by incorporating different methods of compensation. The employee compensation package should be comprised of monetary and non-monetary benefits. The monetary benefits may be comprised of bonuses and salary and wage increments. On the other hand, the non-monetary benefits should include employee job promotion, provision of paid work leaves, and medical allowances. Alternatively, the firm should ensure that employees who depict exemplary performance are adequately recognized. For example, the firm should consider developing an annual event aimed at recognizing employees who have performed exemplary within a particular year.

Outcome

By implementing a balanced performance system, the firm will be able to entrench the level of employee commitment and identification with the firm. Subsequently, the likelihood of employees contemplating leaving the firm because of an ineffective work environment will be reduced substantially. The overall effect is that the firm will incur a significant reduction in the cost of employee development. Organizations usually incur high human resource costs in the event of high employee turnover. The high cost is associated with several factors. For example, finding a perfect replacement for a vacant job position is costly.

Poor work design

SGS (HK) Limited has not appreciated the importance of effective work design in promoting the employee’s commitment. Subsequently, most of the jobs assigned to the rank and file employees are not valuable to the employees’ career and personal development objectives. Thus, due to a lack of career development structure, employees do not perceive the chances of progressing through their desired career path. The lack of a clear career development path might trigger a high rate of employee turnover. Lussier (2012) affirms that job rotation enables employees to develop an all-around experience hence increasing the chances of personal and career development.

How to fix the poor work design issue

SGS (HK) Limited may successfully improve the employees’ perception of the value of the assigned job roles to their personal and career development goals by investing in work redesign. In the process of redesigning job tasks, the firm should consider adopting the employee-centric approach. Integration of an employee-centered work redesign approach will improve the efficiency with which the firm takes cognizance of the employee’s needs.

In its work-redesign process, the firm should consider integrating effective techniques to ensure that employees feel adequately involved. Some of the essential approaches that the firm should consider entail job enlargement, job enrichment, and job rotation. Job enrichment will provide employees sufficient autonomy in planning and executing the different tasks outlined in their job responsibilities. This concept will make employees feel valued. Job enrichment ensures that employees undertake highly demanding activities hence increasing their level of motivation and satisfaction.

Job enrichment can be entrenched by integrating the concepts of delegation. This will provide employees an opportunity to experience a challenging and valuable task. Thus, employees will perceive the firm as a conscious entity to their career progression goals. Job rotation will contribute to the enhancement of an all-rounded experience through the provision of cross-training programs. Furthermore, the concept of job rotation will further contribute to the development of a positive organizational culture because of extensive cross-departmental employee interaction. Therefore, the firm should consider leveraging on the performance appraisal results in generating value for both the employee and the organization. Subsequently, the firm will be in a position to designing job roles that are valuable to the desired employee and organizational development. The firm should appreciate the importance of nurturing meaningful consultation with lower-level employees.

Responsibility for fixing the problem

The responsibility of dealing with this problem should be a collaborative undertaking between the various departmental and line managers. The involvement of the line managers will play a critical role in ensuring that the process of job rotation, enrichment, and enlargement is optimally undertaken. The line managers and supervisors have an extensive understanding of the employees’ capabilities and competencies because of their direct interaction with the employees. The line managers will be in a position to determine the most appropriate department to which the employees should be transferred. Therefore, the chance of the organization designing effective need-based training will be increased.

Level of employees to be affected

The concept of job rotation, enlargement, and enrichment should not be limited to the specific level of employees. On the contrary, the implementation of these concepts should be undertaken on all the employees.

Recommendation of the method and outcome

In the process of undertaking work redesign, the firm should ensure that the employees are adequately informed of the intended move and the rationale of undertaking such job restructuring. This approach will aid in minimizing resistance. Furthermore, communication will ensure that the employees understand how the strategy will contribute to career development.

Outcome

This move will enhance the firm’s capacity to implement need-based training is critical in ensuring that employees are equipped with the requisite knowledge and skills. Thus, the organization will succeed in developing a strong organizational culture. For example, job rotation will provide employees belonging to different departments to interact hence improving their ability to share information. Thus, the firm is likely to develop an environment conducive to work (Bhattacharyya, 2011).

High workload

SGS (HK) Limited has implemented a very extensive and stringent internal product review process, which increases the employees’ workload. The high workload coupled with the lack of clear understanding of the organization’s commitment towards promoting employee development might adversely affect their commitment and productivity. Due to the high workload, customers experience delays in having their product safety tested and certified by the company, which most manufacturers consider to be a hindrance in their manufacturing process.

How to fix the problem

The firm should consider fixing the problem by redesigning its job structure. This will ensure that the employees are not overworked. Alternatively, the firm should consider recruiting an additional workforce to cope with the high workload arising from job tasks that cannot be automated.

Responsibility for fixing the problem

The organization’s HR Managers should undertake the responsibility of adjusting the high workload problem. Moreover, it should involve all the employees.

Recommendation

The organization should consider automating some of its activities such as the customer service system. This aspect will culminate in significant improvement in employees’ effectiveness in responding to non-technical issues raised by customers. Additionally, the firm should ensure that the job roles are optimally assigned.

Outcome

Effective task allocation will aid in minimizing job-related stress hence minimizing the employees’ level of stress and improvement in the level of productivity (Latham, 2013).

System enhancement

Ineffective performance appraisal system

The firm’s performance appraisal system is characterized by gaps in evaluating performance issues within the different departments. Performance appraisal constitutes a critical aspect that every organization should consider in its quest to develop competitiveness. However, the analysis shows that the company is experiencing performance challenges. The current appraisal system lacks the requisite cross-functionality characteristic. Therefore, the system’s application by different departments is minimal. The system should be applicable in all the departments.

How to fix the problem

To revitalize its competitiveness, SGS (HK) Limited should focus on improving its performance appraisal system by ensuring that the system is fully integrated. This will ensure that all the critical components in the attainment of the overall organization’s mission and vision are taken into account. Therefore, the firm should focus on the resources, processes, and organization. In its pursuit to improve the performance appraisal system, the organization should focus on two main categories of performance appraisal factors.

First, the firm should identify the environmental and people factors necessary for the successful enhancement of the system. The workplace environment constitutes a major source of performance problems in most organizations. The people factor should entail appreciating the factors associated with the employees’ intelligence, prerequisite abilities, level of intelligence, and stress tolerance. Additionally, the performance appraisal system should also appreciate the employees’ motives and values. Subsequently, it should integrate aspects related to the employees’ goals, values, and rewards. This underscores the relevance of adequate employee involvement in designing the performance appraisal system. Ensuring adequate employee involvement is essential in obtaining feedback from employees hence promoting effective identification of the areas of improvement. Therefore, the organization must adopt a holistic approach to design an effective performance appraisal system.

Armstrong (2009) postulates that performance appraisals are aimed at achieving three core purposes that include, employee development, administrative, and program assessment. Concerning the administrative purpose, performance appraisal is critical in enhancing the effectiveness with which an organization makes rational personnel decisions on different issues such as promotions, labor terminations, transfers, and demotions (Gilmore and Williams, 2012). Thus, performance appraisal will be a critical element in the organization’s quest to establish a strong workforce.

In undertaking performance appraisal, the organization’s management team must ensure that they gather valid performance appraisal data (Lyster and Arthur, 2007). The relevance of the appraisal data influences the extent to which the human resource management decisions made are based on work-related performance criteria. The implementation of the performance appraisal for employee development purposes should be intended at gathering data that an organization could use and provide feedback to employees regarding their development.

The firm can use the appraisal data in identifying the specific employee training needs. Thus, organizations should implement effective internal communication systems. According to Kirkpatrick (2006), communication facilitates the level of employee understanding of the expectations of the performance appraisal system. Moreover, effective communication on the performance appraisal system increases the chances of employees developing a feeling of being adequately involved in the job evaluation process (Armstrong, 2009). Thus, performance appraisal systems should incorporate a 360-degree feedback mechanism.

In addition to the above aspects, the firm should ensure that the improvement of the performance appraisal system is based on an effectively designed policy. The objective of the policy is to ensure that the requisite roles, competencies, and expectations are taken into account in designing the performance appraisal system. Moreover, the policy acts as the benchmark upon which the employees’ performance is evaluated.

The effectiveness of the performance appraisal system in promoting employee commitment is influenced by the nature of employee perception (Farndale and Kelliher, 2013). Thus, the organization’s management team must ensure that the implemented performance appraisal system is honest. An honest performance appraisal system is essential in promoting employee job satisfaction, which entails the level of employee contentment with the assigned job roles and responsibilities. A study conducted in India showed the existence of a strong correlation between the justice system in the workplace and the level of employee engagement. The organization’s management team should ensure that the performance appraisal data is not negatively utilized. Some managers might use performance appraisal data to victimize their subordinates (Agbola and Abena, 2011).

Alternatively, some organizational managers might use the performance appraisal data to dismiss and coerce certain categories of employees such as union members and their sympathizers. In the implementation of performance appraisal systems, organizations should ensure that all political motives are avoided. Additionally, the findings of the performance appraisal should not be manipulated. Employees are likely to avoid involvement in the performance appraisal process if they perceive that it is characterized by personal bias and intended to punish them. Such practices are a clear indication of an ineffective performance appraisal system and hence they are likely to quit their jobs.

Method explanation

First, the company should ensure that the performance appraisal system is based on an effective rating approach. The main rating approaches that the firm should consider include relates to the examination of cost-related variables, observation, and record behavior and judgment on the employees’ attitudes and traits. The observation and recording of employees’ behavior approach are very effective in ensuring that employees understand how their actions affect the firm’s performance. Employing this technique will increase SGS (HK) Limited employees’ appreciation of how their behavior affects the firm’s overall performance.

The firm should further consider improving its performance appraisal process by implementing a performance appraisal form. The firm should be used as a critical tool for evaluating the employees’ performance and level of competence. To improve the level of employee commitment, the firm should ensure that the performance appraisal system adopts a 360-degree approach. The implementation of the 360-degree approach should be aimed at providing employees insight into how their actions affect their counterparts in the workplace. Therefore, the 360-degree performance appraisal process will culminate in the development of a high level of self-awareness amongst the employees. Moreover, the implementation of the 360-degree approach should be holistic. Thus, it should culminate in the creation of a high level of synergy is established between the various departments.

SGS (HK) Limited should further consider designing and implementing a balanced scorecard. The scorecard should be used in evaluating individual employee and organizational performance. The promotion of employee performance, productivity, and retention should further be achieved by ensuring that the employee’s pay is linked to their performance. Thus, employees will be able to cope with the high workload at the workplace.

The employees should be provided with the performance appraisal results. This will provide employees an opportunity to gauge their performance. Thus, an effective internal communication process is critical. The firm should adopt an effective communication approach. The method used to communicate the performance feedback might influence the employees’ behavior negatively or positively.

HR Managers should focus on nurturing a high degree of acceptance of performance feedback. The provider of performance feedback should be qualified and credible to minimize the chances of venting of emotions and denial of the performance appraisal system. The provision of performance feedback should further be specific and timely to be valuable to both the employee and the organization. Timely provision of feedback information increases the likelihood of employees making behavioral changes hence increasing the chances of improvement in their performance.

Based on the results of the performance appraisal, employees who depict exemplary performance should be rewarded and recognized accordingly. Some of the rewards that the firm should consider offering employees who depict positive performance entail job promotion. Alternatively, such employees should be rewarded by offering them fully sponsored recreation trips to selected destinations. This will contribute to the improvement in employee motivation and commitment.

On the other hand, employees whose performance is below expectations should be considered for inclusion in the employee-training program. Moreover, the firm may also consider punishing the employees who depict below-average performance by demoting them from their current job position. The demotion should further be accompanied by a decline in their compensation benefits. Therefore, the performance appraisal results will enable SGS (HK) Limited to succeed in implementing effective need-based training. Therefore, the firm will ensure that employees are equipped with the requisite knowledge and skills. Employing this approach will make the firm attractive to highly productive employees in the labor market hence improving its capacity to develop a strong workforce. By continuously ensuring that pay is linked to performance, the organization will succeed in implementing involuntary employee turnover on workers whose performance does not change despite the implementation of the employee-training program. Therefore, the firm will succeed in developing a competent workforce.

SGS (HK) Limited should be committed to ensuring that the employed performance appraisal system contributes to improvement in the organization’s long-term sustainability. Therefore, the organization’s management team should not ignore the importance of promoting a high level of employee participation. Employee participation minimizes the chances of the organization implementing a dysfunctional performance appraisal system. Additionally, employee participation in the performance appraisal system is vital in entrenching a strong and effective HRM decision-making process. Employee participation improves the likelihood of formulating reliable, fair, and valid performance appraisal standards. This arises from the fact that the top management understands the fundamental issues that employees appreciate in the workplace.

One of the issues identified in the analysis of the issues facing SGS (HK) Limited entails a decline in employee satisfaction. Employee participation is identified as one of the most effective strategies that organizations can use in improving the level of employee satisfaction and hence their productivity. This assertion arises from the fact that participation constitutes a priceless intrinsic employee motivation strategy. By incorporating this aspect into the appraisal system, SGS (HK) Limited will increase the probability of employees developing a positive perception of the likelihood of attaining their career and personal development goals. This assertion arises from the view that the employees share with the management team on their desired career and personal development goals. Thus, SGS (HK) Limited management team should desist from the unilateral implementation of the appraisal system. In addition to the identified aspects, employee participation translates into reduced turnover intention and absenteeism amongst an organization’s workforce. In consequence, the productivity of the organization is improved considerably.

Responsibility of implementing the performance appraisal system

The firm’s HR managers from different departments should undertake the process of adjusting the performance appraisal system. The rationale of such a collaborative approach is to promote information sharing on the most appropriate aspects to integrate and avoid in designing the performance appraisal system. For example, the involvement of the top and middle-level managers will contribute to improvement in the efficiency with which different instruments such as job analysis are integrated into the performance appraisal system. A job analysis will improve the effectiveness with which the firm gathers information on job content.

Furthermore, the rationale for the extensive involvement of the top management is to ensure that the employees develop the optimal understanding of the linkage between their performance and attainment of the overall organizational goals. Failure to establish such a linkage makes the implemented performance appraisal system less effective.

Levels of employees who will be affected by the implementation

The process of implementing an enhanced performance appraisal system will affect all employees in different departments. This arises from the fact that the application of the system will be enacted on all the employees in the quest to establish a strong and committed workforce.

Recommendations

In the process of enhancing the performance appraisal system, the organization should focus on ensuring that the performance appraisal system contributes to the attainment of a win-win situation in an organization. This aspect will play a critical role in improving the application of the performance appraisal system across different departments. Most organizations experience problems in implementing performance appraisal systems. Selvarajan and Cloniger (2012) identify three main sources of problems in an organization’s performance appraisal systems. These problems originate from the evaluator’s role, the performance appraisal process, and the format adopted by the firm in undertaking the appraisal. Thus, the organization should ensure that the performance appraisal system is aligned with employee development and performance needs.

The performance appraisal system will form the foundation upon which the organization assesses its workforces’ strengths and weaknesses. Subsequently, it is a critical component in identifying gaps for employee and organizational development. Bhattacharyya (2011) identifies improvement in employee productivity as one of the intended outcomes of performance appraisal. Subsequently, the organization’s management team should evaluate whether the implemented performance appraisal system culminates in the attainment of this objective. Failure to enhance the attainment of this objective forms the basis of undertaking an extensive re-evaluation of the implemented appraisal system to identify gaps.

Outcome

Integration of performance appraisal system is critical in promoting organizational commitment, which entails the degree to which employees are involved in the assigned roles and responsibilities. The outcome of improved employee commitment is high organizational and employee productivity. According to Selvarajan and Cloniger (2012), the degree of objectivity amongst employees is likely to be high if they feel satisfied with their work. One of the approaches through which a firm can achieve this goal is by ensuring that they are highly motivated, for example through the integration of financial and non-financial aspects.

The performance appraisal system is also essential in the development of a new organizational culture that the employees appreciate. Thus, the degree of organizational identification and commitment increased significantly. Employees who are committed to an organization portray a high degree of loyalty (Gilmore and Williams, 2012).

The incorporation of effective HR practices in organizations’ performance appraisal systems tends to promote the employees’ level of satisfaction with the system. The available literature further shows that management practitioners and scholars are not satisfied with how organizations are using performance appraisal systems in promoting job satisfaction. This aspect underscores the importance of improvement of the organization’s approach to performance appraisal systems (Gilmore and Williams, 2012). Performance appraisal systems are also essential in promoting a high level of employee engagement. Engaged employees take pride, value, and enjoy their work. They are also likely to assist their workmates hence promoting a culture of teamwork in the workplace. Bhattacharyya (2011) affirms that engaged employees take up additional responsibilities. Thus, the rate of turnover among engaged employees is very low.

Process re-engineering

Lack of adequate knowledge on how to conduct performance appraisal

In addition to the limited functionality of the performance appraisal system across the different departments, the organization is characterized by limited knowledge on how to undertake the performance appraisal process. The firm has not adequately trained employees on how to undertake the performance appraisal process. This has led to a significant reduction in the relevance of the results of the performance appraisal process. This means that the credibility of the performance appraisal results in promoting overall organizational performance is low.

How to fix the problem

To improve its effectiveness in undertaking the performance appraisal process, the firm should consider investing in an extensive training program. The training program should focus on improving the level of skills, knowledge, and expertise amongst the organizational managers on how to undertake the process. First, the training program should focus on improving the managers’ skills on how to assess and measure the effectiveness of the performance appraisal system in promoting overall employee and organisational development. Some of the aspects that the organisation should consider in evaluating the possible bottlenecks in its performance appraisal system with reference to reducing the rate of employee retention, improving job satisfaction, employees’ effectiveness in serving customers, and the perception of the employees on the efficacy of the appraisal system in promoting employee development.

Moreover, the firm should ensure that the processes used in evaluating employee performance could be used in examining performance at the different functional areas. The organization should consider comparing the projected performance outcomes with the actual outcome. The comparison should be based on clearly stipulated standards. Therefore, the performance appraisal system should be characterized by a high degree of cross-functionality. The process re-engineering process should be based on failure mode analysis and flow charts. Moreover, the firm should consider developing well-documented procedures to be used in controlling the business processes.

Method explanation

The concept of training the judges should be aimed at improving their effectiveness in undertaking the process. First, the judges should be trained on how to establish rapport with the employees. One of the issues that should be considered entails promoting the level of trust with the employees. This will contribute to improvement in the judges’ capacity to gather adequate and relevant work-related aspects. In the process of improving the performance appraisal process, the firm should be conscious of the possible errors that are likely to hinder the results of the performance appraisal process. To leverage the performance appraisal system as a tool for organizational and employee development, the firm must ensure that possible errors and gaps in the system are eliminated. Moreover, the organization should ensure that the performance appraisal system successfully addresses the performance issues that it might be encountering.

Some of the errors that an organization’s management team should avoid in the performance appraisal system include leniency or constant error. This error arises from the performance of the appraiser’s value system. Thus, appraisers might rate some employees leniently or strictly. The appraisal process might be affected by the existence of the spillover effect whereby the employees’ present performance appraisal results are influenced by his or her past performance. Alternatively, the performance appraisal system might be hindered by the halo effect, which refers to overreliance on a single trait in evaluating the employees’ performance. Conversely, some appraisers might use one negative trait identified in the employees’ performance hence negatively affecting the performance appraisal results.

To leverage the performance appraisal system as a tool for organizational and employee development, the firm must ensure that possible errors and gaps in the system are eliminated. Moreover, the organization should ensure that the performance appraisal system successfully addresses the performance issues that it might be encountering. Therefore, SGS (HK) Limited should seek at understanding the specific performance gaps in its operation.

Responsibility for improving the performance appraisal process

The human resource management department should undertake the improvement of the performance process. The department should however seek the input of employees. This move will significantly improve the chance of the employees accepting and participating in the process. Thus, the firm will succeed in utilizing the performance appraisal process as a tool for promoting employee and organizational development.

Level of employees to be affected

Improvement of the performance appraisal process will affect all organizational employees. This arises from the fact that the employees will be required to contribute their input on the best aspects to integrate with the performance appraisal process.

Recommendation

To improve the effectiveness of the performance appraisal process, SGS (HK) Limited should appreciate the importance of undertaking extensive training on the parties charged with the responsibility of undertaking the appraisal. The purpose of training arises from the fact that the ‘rater’ must possess adequate knowledge of how to gather, observe, and process different behavioral aspects amongst the employees. In designing the training program, SGS (HK) Limited should focus on different aspects as expounded herein. First, it should focus on creating a high level of understanding of the critical aspects that the ‘rater’ should measure in the performance appraisal process. Secondly, the training process should be aimed at creating a sufficient understanding of the sequence of activities that the judges should follow in undertaking the appraisal. The third motive of the training should entail equipping the judges with adequate knowledge of how to interpret the performance appraisal data collected. Therefore, appreciating the value of training in the performance appraisal system will be critical in minimizing the occurrence of errors that limit the usefulness of the appraisal results.

In its quest to improve the manager’s capacity to implement the performance appraisal process, SGS (HK) Limited should take into account different training methods such as the Frame-Of-Reference [FOR] and Rater Error Training [RET]. The FOR training technique has been identified as one of the most effective methods of training because of its efficacy in generating accurate performance ratings. On the other hand, the RET approach is effective in determining rating errors commonly committed by the ‘rater’ and how to avoid such errors. The training program should ensure that the judges understand how to establish a high degree of trust with the followers. The level of trust constitutes a critical element in enhancing the effectiveness and value of the performance appraisal system.

Outcome

Implementation of the training program will contribute to remarkable improvement in the efficiency with which the firm undertakes the performance appraisal process internally. Thus, the firm will avoid outsourcing the services of consultancy firms to undertake performance appraisals on its behalf. Moreover, improving the ‘judges’ skills in implementing the performance appraisal process will contribute to significant improvement on the extent to which the firm can rely on the performance results in implementing different organizational and employee development activities such as employee training.

Summary and Recommendations on how SGS (HK) Limited should design its performance appraisal system

The above findings illustrate the existence of gaps in SGS (HK) Limited approach to performance management as summarised herein.

  1. Ineffective reward system: – the findings show that the firm has failed in entrenching a reward system that can contribute to remarkable improvement in the level of job satisfaction amongst employees. The firm’s reward system has not appreciated the importance of fair and equitable employee remuneration.
  2. Employees at SGS (HK) Limited encounter cases of high workload, which is likely to increase job-related, and thus their productivity.
  3. The gaps in the organization’s human resource practices are further highlighted by the existence of poor work design. Employees at the SGS [HK] Limited are assigned job roles that are not valuable to their personal and career progression goals.
  4. The findings further highlight the existence of limitations in the current performance appraisal system at SGS (HK) Limited. The system lacks cross-functionality, which limits its applicability across different departments.
  5. The limitation of the performance appraisal system is further indicated by the ineffective application of the performance appraisal process. The firm’s management team lacks knowledge, skills, and expertise on how to conduct a performance appraisal process effectively.

SGS (HK) Limited can resolve the negative effects identified by taking into account the following recommendations.

Integrating an effective rating approach and technique

The firm should ensure that the assessment of employees is based on a rating approach. This will aid in categorizing employees based on their performance. The firm’s rating approach and technique should consider the following aspects.

Rating approach and technique
  1. Different rating techniques such as the Graphic Rating Scale [GRS] and behaviourally anchored rating scale [BARS] should be employed.
  2. The Graphic Rating Scale [GRS] will enable the firm to construct a continuum hence identifying employees within the high and low levels of performance concerning a specific performance measurement dimension.
  3. Alternatively, the behaviourally anchored rating scale [BARS] will aid in identifying the specific behavior that culminates in positive job performance.

Implementation of a performance appraisal form

In its quest to improve performance appraisal, the firm should design an effective performance appraisal form by taking into account the following aspects.

Area Recommendation
Implementation of a performance appraisal form
  1. General information; the firm should assess the employee’s suitability to the organization by assessing issues such as the employees’ technical job knowledge, customer service approach, decision-making capability, attendance and punctuality, commitment to the organization, and performance integrity (Klenke, 2008).
  2. Professional and supervisory skills; the firm should assess the employee’s competence level, team working and team building capability, level of accuracy in executing assigned job roles, and readiness to accept assigned job responsibilities.
  3. Setting targets – the performance appraisal form should outline the specific targets that employees should achieve in line with their job description. The targets should be based on the concept of benchmarking. Some of the targets that the firm should take into account include the outcome, quality of service, and timeliness.
  4. Performance category; this aspect involves setting the rating scale to be used in assessing the different categories of employee performance. Thus, the firm will determine the employee’s training needs.

Adoption of performance-based pay

One of the most effective aspects that SGS (HK) Limited should consider in its performance appraisal system entails tying employee pay to performance.

Area Recommendation
Adoption of performance-based pay
  1. Employees should be rewarded based on their contribution to the organization.
  2. The performance reward system should be linked to monetary and non-monetary.

Fostering optimal performance feedback

SGS (HK) Limited should ensure that the appraisal system culminates in employee and organizational development. However, the attainment of this goal depends on whether an effective feedback mechanism is integrated.

Area Recommendation
Performance feedback mechanism
  1. The organization should ensure that the provision of performance appraisal results is confidential.
  2. The feedback provision process should be more frequent and less formal, and more interactive between the employee and the supervisors.
  3. The feedback provision process should be based on the concept of goal setting. This will ensure that employees develop a comprehensive understanding of the overall organizational goals.

Implementation of an extensive training program

In the process of implementing the training program, the firm should consider the following.

Area Recommendation
Training program
  1. The firm should continuously train employees by focusing on improving the effectiveness and efficiency with which the ‘rater’ integrates aspects such as optimal personal interaction skills, monitoring performance, and goal setting.

Employee participation

Employee participation should be achieved by taking into consideration the following aspects.

Area Recommendation
Promoting employee participation
  1. The firm should ensure that employees are adequately involved in making decisions related to the components of the performance appraisal process.
  2. Employees should further be involved in the process of designing rating format and performance measurement scales.

Reference List

Agbola, R. and Sumalia, A. (2011) ‘The effectiveness of performance appraisal as a tool for enhancing employee performance in the public health sector’, Global Management Journal, vol.3, no. 4, pp. 81-92.

Armstrong, M. (2009) Armstrong’s handbook of performance management; an evidence-based guide, New York: Kogan Page.

Bhattacharyya, K. (2011) Performance management systems and strategies, Pearson, New Delhi.

Farndale, E. and Kelliher, C. (2013) ‘Implementing performance appraisal: exploring the employee experience’, Human Resource Management, vol. 52, no. 6, pp. 879-897.

Gilmore, S. and Williams, S. (2012) Human resource management, Oxford: Oxford University Press.

Kirkpatrick, D. (2006) Improving employee performance through appraisal and coaching, New York: American Management Association.

Klenke, K. (2008) Qualitative research in the study of leadership, Bingley: Emerald.

Latham, G. (2013) New developments in goal setting and task performance, New York: Routledge.

Lussier, R. (2012) Management fundamentals; concepts, applications, skill development, Mason, Ohio: South-Western.

Lyster, S. and Arthur, A. (2007) 199 pre-written employee performance appraisals: the complete guide to successful employee evaluations and documentation, Ocala: Atlantic Publishers.

Rao, A. (2008) Research methodology for management and social sciences, London: Excel Books.

Selvarajan, T. and Cloniger, P. (2012) ‘Can performance appraisal motivate employees to improve performance? A Mexican study’, The International Journal of Human Resource Management, vol. 23, no. 15, pp. 3063-3084.

SGS (2014), Annual report, [Online], Web.

SGS (2015), Investor relations, [Online], Web.

SGS Group (2015), When you need to be sure, [Online], Web.

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