PART I INTRODUCTION AND PROBLEM IDENTIFICATION
CHAPTER 2 INVESTIGATION OF THE CAUSES OF POOR EMPLOYEE
II. DETAIL ANALYSIS OF EMPLOYEE POOR PERFORMANCE ROOT
1. Assessment of current EPM system
The first, most important and direct factor impacting the employee performance is the “so-called” EPM system. Frankly speaking, this is presently just a Form or Template to calculate KPI incentives for the employees every month or every quarter, not really a system.
When thinking about assessing an EPM, it is necessary to define what its purposes are in the organization, how it is designed and how it is implemented.
Firstly, AGM’s EPM system purposes are either only for calculating KPI incentives as a main role to reduce the staff costs (by putting more incentive into salary package and lowering the basic salary, helping to reduce much taxes and insurance cost) or appear to be not much meaningful in controlling, managing and improving employee performance even if that is what current EPM tries to accomplish. It is to see that the top management has not thought EPM is crucial or directly link and affect much on whether or not the company can achieve its objectives. And so, KPI in this company acts more as an incentive-counting tool and as a “stick” to scare employees and put them into a frame that the management wants.
Or, they understood that it is not a good system, but there is not strong will to change
or improve it as it is supposed to be. The current EPM system therefore serves only administrative purpose – producing information to use for HR compensations and benefits system. I believe definitely this way of thinking has been never showed a right meaning and value of an EPM. It should be much more than that. A true and real EPM system should serve as many purposes including:
Strategic purpose – most important purpose: to link employee activities with the company’s mission and goals, to achieve strategic business objectives. It identifies results and behaviors needed to carry out the strategy and create the type of organization with the culture they want to cultivate;
Information purpose: valid information for decision-making, including HR decision making like selection criteria, compensation and reward, retention, promotion, demotion, training needs,
Communication purpose: serve as important communication device, informing employees what the company considers to be most important, what they need to achieve, how they are doing, what they need to improve
Improvement/development purpose: important component of a well- communicated EPM system, providing employees with feedbacks, to define their strengths and weaknesses, key improvement areas, and causes for performance deficiencies. This is not only used for organization development but also for employees’ career development path;
Assessment purpose: assess performance both individual and organizational level, the effectiveness of investment, resources allocation, HR intervention, etc.
Secondly, because the intentional purposes of AGM EPM system have been improperly defined, its design is surely just to meet these improper purpose, not what it is supposed to become.
The design of AGM EPM system, actually it just consists a KPI Form (attached in the Appendix) was done by Operations Dept, not even HR Dept. It is therefore mainly serving operational purpose rather including people management elements.
Description of AGM EPM system:
Employees are divided into 7 levels and with the percentage of KPI incentives as showed in below table.
No. Location Level Position/
Description
% Base salary/
month
% KPI/
month
Frequency paid
1 Store 1
Cleaner, kitchen helper, security,
delivery
60% 40%
Every month
2 Store 2 Seller, cashier,
Store admin 50% 50%
Every 2 months
3 Store 3 – 4 Supervisor 60% 40%
Every 4 months
4 Store 5 - 7 Store Manager 70% 30%
Every 4 months
5 Office 1 Trainee 92% 8%
Every 4 months
6 Office 2 Executive/ Officer 92% 8%
Every 4 months
7 Office 3 - 4 Supervisor 90% 10%
Every 4 months
8 Office 5-7 Junior – Senior
Manager 85% 15%
Every 4 months
9 Office 7 Director - - -
80% of the employees are store staffs, paid in the structure of: 50 – 70% % is base salary and 30 - 50% is KPI incentives. The percentage depends on the positions, the lower position is, the higher the percentage of KPI incentives.
The calculation is done manually by excel, and have to open about 15 reports to finish KPI of 1 employee. A Store manager has to do KPI calculation for about 30 – 100 staffs depending on the store size. The reports are only enough information and available after 7th – 10th of the month from Operations Dept, but the salary calculation is closed at 25th, so Store manager will have normally 10 days to finish the calculation manually for most of the store employees. It makes the calculation become so tiring, time-consuming, and inaccurate. There is almost no performance meeting between managers and employees, only some special case. Therefore, employees do not really consider the meaning of the KPI as anything else but incentives of sales.
For office employees, the assessment should be done every 4 months, but it actually never happens. Because there is no willingness to do it, more importantly no data to do it. The KPI Form for Office employees are filled by Line manager, and in most cases, they do not know what to put in. Therefore, employees have no target at the beginning, then no data or comparison enough to calculate their KPI. In plus, because the staff turnover is so high that no line manager remembers about it and no one seems to care. Employees who remain working are already tired of keeping asking about the KPI incentive. It ended up that the company always owe this money to the employees, and the KPI there exists for the sake of nothing.
There is no link between one month/ period to the next month/ period of the performance evaluation.
After the line manager complete the KPI Form, it takes almost nearly the same time or even more for HR to check and for the Director to validate the figures.
Appraisal: appraisal & meeting happen only once a year. (Please see attached the Annual Appraisal in the Appendix). This is considered to be so important to employees because its results will relate to whether or not they can get pay
increase and/or promotion. However, clearly, the appraisal assessment is based on feeling and judgement of line managers without any proof, data, or evidence to prove. Anh then why it is also not linked at all to the KPI evaluated during the year. This appraisal really acts as a formality only, no value behind.
Failing to serve most of the purpose an EPM system is supposed to, AGM’s EPM system is lacking many needed features. Following are all features that AGM EPM system lack when being benchmarked and compared to a good EPM system:
Strategic congruence: EPM system should be congruent with the organizational strategies. In other words, individual goals must be aligned with departmental and organizational goals and objectives while KPI criteria were not set based on the strategies, but the sales and some other financial figures only;
Thoroughness: the system should be thorough regarding four dimensions.
+ All employees should be evaluated including all managers;
+ All major job responsibilities should be evaluated including both results and behaviors;
+ the evaluation should include performance spanning over the entire review period, not just a few weeks or months before review;
+ Feedbacks should be given on positive performance aspects as well as improvement- needed areas and on on-going basis;
AGM employees are not evaluated in such above way, making it really inconsistent, broken and clumsy.
Practicality: the system need to be good, fast and easy to use, not too expensive, while AGM’s is too much time and effort consuming, complicated to understand and finish;
Meaningfulness: the system should be meaningful in several ways, the standards and evaluations conducted for each job function must be considered important and relevant. The performance assessment
must emphasize only those functions that are under control of the employees. However, AGM KPI criteria are really irrelevant, especially for some position (for example, why does a cleaner have to bear the deduction of KPI incentives if there is a high percentage of damage or shrinkage because of expiry!!!). The evaluation must be at regular intervals and at appropriate moments. AGM does only one formal evaluation at the annual appraisal, it is not at all sufficient.
The results should be used for improvement and HR decision purpose, not taking results for fun. People will not pay attention to a system that has no consequences in terms of outcome they value.
Inclusiveness: good system includes input from multiple sources on an on-going basis. Evaluation process must represent the concerns of all people who will be affected by the outcome. Consequently, employees must participate in the process of creating the system by providing input regarding what behaviors or results will be measured and how (very important because people having different views). All participants must be given a voice in the process of designing and implementing the system. This will help minimize employee resistance while at AGM, only Operations or sometimes HR and Director will take the job of creating the system.
Specificity: a right system should provide concrete guidance to the employees about what is expected of them and how they can meet these expectations. Yet, AGM provides too many either relevant or not criteria to understand clearly and to remember what to do. This KPI has never ever acted as guidelines for employees.
Reliability: measures of performance of AGM system cannot provide valid, relevant, consistent and free of error data as it is really wrongly designed and implemented.
Fairness: at AGM, and with this KPI Form, many criteria are not fact-based but feeling-based, and there is no standard behaviors specified to benchmark and evaluate, so it is easy to be biased by
personal interests. It should minimize subjective aspects, training of raters of appraisal needed. Besides, the appraisal consists of two-way communication during which information is exchanged, not top down flow only like AGM now; And, unlike AGM system, standards should be clear so that performance is evaluated consistently across people and time.
Improvement: performance management should be a continuous process with improvement loop, not isolated like AGM system. It should be able to identify problems. Feedback meeting with discussion allow us to diagnose the causes and explore possible remedies, such as job redesign, training or counselling in order to make improvement for the next period.