Performance Management in the Industrial Relations context

8/13/2019 Performance Management in the Industrial Relations context

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[Type text]

A Conceptual Paper on

Industrial Relations and

Performance Management

Submitted By :

Sudarshan BoseH13054

Sumit KumarH13055

Susheela SH13056

SeetharamH13057

Sourik SyedH13053


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Industrial Relations and Performance Management 1

Table of Contents

Abstract ......................................................................................................................................................... 2

History .......................................................................................................................................................... 2

Literature review ........................................................................................................................................... 2

Challenges associated with the implementation ........................................................................................... 3

Role of Trade Union in PMA implementation.............................................................................................. 4

Impact of trade unions on PMA systems in place......................................................................................... 5

Conclusion .................................................................................................................................................... 6

References ..................................................................................................................................................... 7


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Abstract

A group of individuals make an organization and it is incumbent on the management that the

individuals are motivated to perform and sustain the performance in the organization. In the

given setting, performance management becomes of prime importance, which is the topic of

analysis in the paper. Given the fact that there are different stakeholders in the industry striking a

balance between the needs and requirement of one without offsetting the requirements of the

other becomes of prime importance. Through this paper we have found that the workers would

prefer having a not-so-rigid performance evaluation and the management wants it otherwise. The

times are changing and the performance is given the prime importance. The trade union is

another stake holder which tries to bring in parity and social equity. How the stakeholders try to

maintain a balance is the main point of analysis in the paper.

History

There has been a great realization that it is more important to focus on defining, planning and

managing performance than merely appraising performance (Pareek and Rao, 2006).

According to the IOSR Journal Of Business Management paper,From Performance Appraisal to

Performance Management(LeenaToppo and TwinklePrusty , 2012), The New York City CivilService in USA introduced a formal appraisal program before First World War in 1800s.

However, full formal appraisal of employees performance is believed to have been started for

the first time during the First World War, when US Army adopted Man to man system forevaluating military personnel. During 1920s, industrial units adopted relational wage structures

for hourly-paid workers and each worker was rated in comparison to others for determining wage

rates.

In the 1960s development of self-appraisal by discussion led to specific time and opportunity forthe worker to evaluate their performance in the discussion. In the 1990s, 360-degree appraisal

developed, where information was sought from a wider range of sources and the feedback

included groups appraising the performance of line managers. Therefore,the philosophy ofperformance appraisal and management has undergone tremendous changes

Literature review

Gwendolyn M. Combs, Rachel Clapp-Smith and SuchetaNadkarni (2010) states that there

is a significant positive relationship between levels of hope and performance of Indian serviceworkers in the BPO.This highlights the importance of measuring and managing employee hope

to maximize employee productivity and performance.

MossamadParveen (2013) in another study about textile workers from Dhaka talks about

performance management of workers talks about job satisfaction. A person with high level of jobsatisfaction holds positive attitude toward his job while a person who is dissatisfied with his job

holds negative attitude towards his job. This is how an organization gets satisfaction from their

workers in order to get their commitment to perform well.

Kuppusamy, S., E. Deepa, and M. Stella (2012)Studies in another textile industry showed that


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workers performance must be appraised using the appropriate appraisal methods and the

productivity can be maximized by providing incentives, training program and a quality of work

life balance.

Jed DeVaro (2006)One other paper studied about promotion schemes as human resource

management strategies by which the firm can realize strategic goals by motivating workers to

higher levels of effort and performance speaking about structural model of promotiontournaments that simultaneously accounts for worker and firm behavior and how the interactionof these behaviors gives rise to promotions. The results are consistent with the prediction of

tournament theory that workers are motivated by larger spreads.

A performance management and appraisal system can be defined as a system used to improve

the organizational performance by ensuring that the individuals and teams goals are aligned

with the organizations goals. The reasons why a PMA system should be there are:

1. Determining eligibility of employees for promotion, discharge, transfers and salary increase.

2. Measure and evaluate employees/teams contribution to the company over a period of time.In a performance appraisal, the individuals accomplishments and behavior in particular time

period is assessed.

3. Increasing the employees effectiveness through adequate feedback and improving

performance through training and development programs.4. Help employees make decisions regarding career path and set direction for their time and

effort.

Challenges associated with the implementation

In an industrial setting, the management and the union is at loggerheads due to conflicting

interests. The management is interested in making profit while the workers want to maximize thebenefits that they receive by putting in minimal effort possible. In todays scenario, performance

management becomes even more difficult given that temporary workers are employed to battlethe constraints of revenue management and cost cutting. The management generally has no

appraisal system for the workers cadre of temporary workers. They tend to extract the most work

out of them for a period of year or two and moves on with the next set of employees.

Secondly, it is also a challenge to appraise the workers when the workers input is does notdirectly result in revenue generation. Because there are different kinds of businesses, every

business requires a different standard of measurement and cannot be employed across all

departments and locations. The primary problem that the management encounters is considering

output alone as the performance metric to judge employees while they might have been

constrained by several other factors such as location, season, business cycle, unforeseen factorsetc. Hence appraisal brings with it a whole lot of other issues which need to be considered.

We generally categorise workers in terms of their skill levels as skilled, semi skilled andunskilled and pay them according to their potential. The outputs are considered as a factor but it

is the duty of the manager to get the work out of the employee was told by the production

manager in a leading car manufacturing unit in Uttarakhand. Hence only taking outputs as ameasure is a wrongful measure of performance in any industry. Finally, the management claims

that unions are another hindrance to creating a robust performance management system. The


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unions garner the support by claiming welfare of the employees. Equitable distribution is the

most preferred form of appraisal in the worker cadre.

Role of Trade Union in PMA implementation

One of the primary functions of a trade union is to secure fair wages for workers and try toenlarge opportunities for promotion and training. In a research carried out by Madheswaran and

Shanmugam (2003), they estimated that workers within the union sector earn 19% more than the

workers in the non-union sector. A trade union can influence policy making with regard to PMAby entering into collective bargaining with the management. The union primarily engages in two

discussions with regard to pay, the first one being the pay hike based on performance and the

second one being the number of promotions.

In large industries where trade union activities are mostly funded by political parties, tradeunions generally influence PMA systems by leveraging their political connections outside the

organization. However, more often trade unions, if recognized by the management, take the legal

route of collective bargaining to pursue the interests of the workers with regard to pay.

To do so, the union must have control over the total labour supply in the industry. In the presentday, we may see unions getting into bilateral negotiations with employers for increasing the real

wages ahead of inflation. Though employers insist on increment in wages to be performance-

related, trade unions try to negotiate for increasing the base salary of the workers since all othercomponents of pay shall increase proportionately.

The trade union leader of AIBA says The rate of unemployment in the labour market is an

important determinant of negotiations. Whenever there is a shortage of skilled workforce, thebalance of power in a bilateral negotiation shifts towards the union.

For firms that enjoy a monopoly position or firms that are enjoying exorbitant profits due to

inelastic demand for their products, the unions tend to draw in a larger share from the financial

resources of the employer thereby boosting the total earnings of the workers. However, with the

demand for almost all products becoming elastic in todays global world, the ability of unions todrive real wages has declined.

Negotiations are generally initiated by trade unions at the end of a financial year. Themanagement, after taking into consideration the rate of inflation, the firms profit and the labour

market conditions takes a final call, shared Ms. Ankita Bagchi, an IR manager at Tata Steel,

Jamshedpur.


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Impact of trade unions on PMA systems in place

A study of the impact of trade unionism on performance management systems should begin with

a study of the performance management cycle, which in turn will help identify the stages wherethe trade union may make possible interventions. The performance cycle (Taylor, 2013) has been

depicted below:

The purpose of the first stage is to establish clear goals and expectations. The second stage

involves identifying information sources and providing constructive feedback. The third stage

mainly comprises the performance appraisal process. It must be noted that the purpose behind

such evaluation is to drive continuous performance improvement. Armstrong & Baron (2005)

emphasise that the aim should be the positive one of maximising high performance although he

conceded that this does involve taking steps to deal with under-performance although they

should be constructive in nature.

However using forced ranking measures like the bell-curve to generate appraisal scores defeats

the purpose by targeting under-performers.

Trade unions frequently make an intervention post the performance review stage of the

performance cycle, often in the form of strikes. Discontent arises when employees are hitting

their targets or believe they are doing so, but are categorised as underperformers at their

appraisal (Taylor, 2013).An example of the aforementioned would be the protest by the NTPC

Planning Performance

Reviewing

Performance

Supporting

Performance

The performance cycle


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Executives Federation of India (NEFI) sparked by the introduction of a similar performance-

linked-reward mechanism which deprived the bottom 10% of any performance-linked pay. There

were examples of new recruit engineers whose performance was more than 90% on an absolute

scale but in the overall average, it figured in the bottom 10%. (The Hindu Business Line,

October 8, 2013).

Interventions may also be made at the planning stage. There is scope for union representatives to

raise objections to what may be considered excessive or unachievable targets (Taylor, 2013).An

example of the same would be the national one-day strike staged by the staff at British Telecom

and organised by the CWU at their call centres.The union was highly critical of what it saw as

insufficient staffing and rigid performance targets, including the imposition of unreasonable call-

handing times (Hall, 1999).The strike was successful in coercing British Telecom into

developing a model of best practices for the call-centre industry besides adopting a stress

management programme and relaxing performance criteria, thus addressing issues in the second

stage.

Thus, evidence suggests that trade unions have managed to organize effective collective response

in instances of performance management systems synonymous with top-down target-driven

work.

Conclusion

One of the main challenges faced in implementation of PMA is that the goal of the management

and the union are conflicting. Appraisal is difficult when performance of workers isnt directly

related to the revenue generation of the organization. Trade unions influence the PMA system

either by leveraging their political connections or through legal proceedings such as collective

bargaining (if recognized). TUs objective is always for the welfare of the employees of the

organization and in case, the PMA system is designed in a way which exploits them, the trade

union needs to ensure that the necessary steps are taken in favor of the workers.


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Performance Management in the Industrial Relations context