In many organizations especially medium to large size organizations, it is important to implement an effective performance appraisal management system so that the management is able to reward appropriately the employees according to their performance. Besides being able to reward the employees accordingly, the performance appraisal system can also be used as a mean to identify employee's strengths and weaknesses. In view of these, this project aims at developing an effective performance appraisal system for St. Vinnepen. With such engagement, it is hope that the final deliverables of this project can be used as a practical approach to complement the existing performance appraisal system in St. Vinnepen.Background
St. Vinnepen, founded in 2000, is a leading software company providing leading-edge IT software security solutions for global financial institutions and high security sensitive environments. The company's own unique brand of security products, intellectual properties and patents are designed to exceed global financial services regulatory requirements. It helps organizations of all sizes across the world to securely and cost-effectively manage, control and protect access to their information assets. Its client list includes leading global and regional financial institutions, MNCs and government agencies.
St. Vinnepen's vision is to be the leading provider of Identity and Access Management software security products to global financial institutions. Its mission is to deliver a suite of bank-grade, integrated enterprise class application security solutions. Its core values are to deliver a suite of integrated enterprise application security solutions to meet the high security standards in financial services and security sensitive environments, to facilitate an incremental, evolutionary and strategic approach to address application security requirements based on a common security infrastructure, and to enable a safe, simple and secure environment to conduct business transactions.Business Case
For 10 years in the software industry as a leader providing leading-edge software solutions, St. Vinnepen has always been striving for success in order to survive and to gain competitive advantage in this highly competitive environment. Being a software company, St. Vinnepen recognizes that People are the most important resources that contribute to the successful operations of the company for the past 10 years. Thus, after having a short chat with the Director of Operations of the company, there is a need to implement an effective performance appraisal system comparing to existing one for few reasons as discussed in following sub-sections.Sustainable Growth and Profits
For any organization, growth is the key factor that determines whether the company is able to remain profitable in order to survive. It is one of the biggest challenges for a company to achieve a sustainable growth. For the case of St. Vinnepen, the direct factor that contributes to the company's growth is an increase in sales revenue over every quarter while maintaining if not reducing the costs of sales. St. Vinnepen recognizes that although cost is a factor that they cannot control, revenue is one thing that they can control. Thus, it is of utmost important that the sales team is kept motivated at all times in order to bring in more sales, while the most significant motivation factor for them would be a satisfactory monetary reward such as sales commissions that they deserved. Meanwhile, another factor the management has identified that affects directly company's profitability is to eliminate inefficient or ineffective employees as human resource seems to constitute the biggest proportion of costs to company.Increment in Productivity
In this fast moving IT industry, company must remain highly productive so as to shorten the time to market. For St. Vinnepen, this would mean introducing a software product or solution to the market within shortest period of time ahead of its competitors. In addition to that, the management must also ensure that the product solution is being delivered to customers within agreeable period and budget. Nevertheless, management has always been trying to achieve higher level of productivity so as to deliver the product solution to the customers earlier than the expected deadline for delivery in order to increase confidence level of the customers. It has also come to management knowledge that higher reward to the employees always lead to higher productivity of the employees in one way or another.High Level of Competency Among Employees
In order to increase productivity of existing work force, St. Vinnepen has been trying to ensure the employees are highly skilled or at least of a satisfactory level of competency with the tasks assigned to them. They believe that an effective performance appraisal system helps greatly in finding out the strengths and weaknesses of the employees in order to determine their competency level at work.Appreciation for Employees' Contribution
St. Vinnepen recognizes that since employees are the main asset to the company, it is crucial for the management to be able to recognize and to appreciate the employees' contribution to the successful operation in the company. It is through an effective performance appraisal system that the employees can be properly and fairly appraised, in order to be able to show appreciation and to reward them accordingly.Reduction in Staff Turn-Over
St. Vinnepen also knows that the staff turn-over rate for IT professionals is quite high in most if not all IT companies. This may not do any good to the company but would rather incur higher costs to the company in terms of operational costs. Therefore, for the IT industry in particular, the management has identified the several reasons that lead to the high turn-over rate in the company. One significant reason is due to better remuneration package given by the employer in hunting for the highly skilled IT professionals amongst the employers. Other less significant reasons could be due to unsatisfactory remuneration, low morale in workplace due to pressure at work, conflicts and political issues amongst the employees, and no sense of ownership to the company. Therefore, in order to deal with such problem, i.e. to reduce the staff turn-over, it is important for the management to be able to give at least a commensurate remuneration to the employees based on their performance, as well as to promote organizational harmony in its workplace atmosphere.Procedures
Having addressed the reasons for the need to develop and implement an effective performance appraisal system for St. Vinnepen, it is now time to determine the procedures or methods to be used to collect relevant data and information pertaining to the objective of this project. These procedures are described in details in the following sub-sections.Interview Appointments
"Interviewing is a popular way of gathering qualitative research data" (Dale T. Griffee. 2005). Thus, interview appointments have been conducted with the Director of Operations and Human Resource Manager of St. Vinnepen at respective office. The objectives of the interviews are to obtain information such as when and how is the existing performance appraisal system conducted, as well as what will be appraised on the employees.Questionnaire Survey
"Questionnaire is helpful in maintaining participants' privacy since responses can be anonymous or confidential and is especially important when it involves gathering sensitive information" (ERT. 2008). Thus, questionnaire survey has been used by forwarding several relevant and important questions to 10 employees, i.e. 7 software engineers and 3 technical support engineers. These questions are related to individual employee's job satisfaction and opinion on current performance appraisal system.Historical/Past Data Review
Historical or past data review refers to reviewing those data or records filed by Human Resources department such as number of employees who were employed on permanent- or contract-basis and temporary staff, the average salary increment rate across all departments over the past 10 years as well as at present year.Findings
Based on the procedures conducted as described in previous section and analysis on the data collected, followings are information in terms of findings derived from the analysis.
- Currently, there are a total of about 50 employees in 3 offices across Asia region where about 80% of the total resides in Singapore HQ and all are permanent staff.
- Current employees' performance appraisal is conducted on a yearly basis at the end of the fiscal year ended on 31st of March where the appraisal form will be handed out to each individual employee for self appraisal. Thereafter, the completed form will be submitted to the immediate superior for final appraisal by the superior. Once finalized, the appraisal will be rated accordingly for overall performance.
- The main objective of the performance appraisal is to measure each individual employee's responsibilities and accountabilities in order to help them understand their job knowledge, facilitate skills, build their own strengths and improve team performance.
- Year-end performance appraisal is the only time the immediate supervisor or head of department carry out to assess the subordinates' performance to see if each individual subordinate is meeting the objectives set forth in the beginning of the fiscal year.
- Based on the survey conducted where 80% are males, followings are the findings:
- Following diagram shows the comparison between annual staff turn-over rate and average annual salary increment rate against year period:
q 80% enjoy working at current workplace although 70% are currently working under pressure and still able to cope with the workload;
q 90% felt harmony working at current workplace while only 50% felt being motivated with current work condition;
q 60% thought that current performance appraisal is effective and are satisfied with the outcome of the appraisal;
q 60% are satisfied with current salary remuneration package as well as the annual salary increment.
The findings derived from the analysis are important information based on which recommendations can be made. These recommendations are crucial especially for management review to see if there are rooms for improvement towards developing an effective performance appraisal system in comparison to existing one. These recommendations are presented in details as follows.
- Since the total number of employees is considerably a small and yet current performance appraisal period that coincides with the company's fiscal year from February 1 to January 31, it may be a wise move to conduct an interim performance appraisal on a quarterly or half-yearly basis as and when required. This is especially useful and effective for a small-sized company like St. Vinnepen that is in a fast-moving industry. The interim appraisal can be simply a 30-minute informal meeting with the employee where during which the employee's progress is being reviewed against the goals set during last appraisal. So that any performance issues can be identified earlier and to make necessary adjustments deemed fit for the employeewhich are relative to the issues and goals set at the beginning of the appraisal period.
- Most of the employees are feeling harmony and enjoy working at current workplace and are able to cope with the workload but only 50% felt being motivated with current work condition. Thus, would recommend the management to put in place some measures that can promote motivation among the employees. One of the measures that can be taken would be to identify the training need for the employees. It is important to provide opportunity for personal development through professional training or short courses to ensure they are always competent at work.
- Although the objective of the performance appraisal is clearly defined, the current rating system that uses a 4-point performance rating scale may not be well reflecting the actual result the employee deserves. Despites using a 4-point system that may seems easier for the supervisor to rate the subordinates based on the subordinates' performance, a 6-point rating scale would rather be recommended, i.e. 1/6 - 'Poor', 2/6 - 'Average', 3/6 - 'Satisfactory', 4/6 - 'Good', 5/6 - 'Excellent', and 6/6 - 'Outstanding'. Such 6-point rating scale can help to overcome any feelings of being unfairness or bias.
- It can be seen that about 40%, i.e. 20 out of 50 employees are not satisfied with the outcome of current performance appraisal system as well as the current salary remuneration package and annual salary increment. This figure may not be significant but it may affect other employees' work performance in terms of total productivity level, and total quality assurance of the product solutions in one way or another. Furthermore, this may be a sign to the management that the current remuneration system does not really commensurate with the effort the employees injected into their work that results in a low motivation level among them. Thus, although it is quite impossible to have a perfect appraisal and remuneration system, it is recommended that the management to review the current remuneration system to identify if there are significant discrepancies comparing with the current remuneration package being offered in the market in terms of salary rate.
- Meantime, based on the diagram, it seems that the annual staff turn-over rate hit the highest whenever the average annual salary increment rate hit the lowest. Thus, it is recommended that besides reviewing the current performance appraisal system to identify rooms for improvement, there may be a need to review the current human resource policies in the area of employee's reward so as to ensure fair and equal employment reward to the employees.
Having proposed the recommendations described in previous section, implementation is the next step to be performed to ensure what have been recommended are being put into action accordingly. There are many approaches such as Peer Appraisal, Assessment Center, Management-by-Objectives, etc. to implement a performance appraisal system. As for St. Vinnepen, regardless of whichever approach to use, it should be objective-driven, job-related, practical and with measurable standards to ensure effectiveness (Dr. Fathi El-Nadi. 2010). Thus, a combination of the approaches mentioned above will be appropriate for St. Vinnepen's implementation and it will be a systematic process containing 5 phases as shown in following diagram and these 5 phases will be discussed in details in following sub-sections.Planning
There is this popular phrase "You do not plan to fail but you would have probably failed to plan". Planning is the first step where a well-defined work plan is developed towards achieving the objectives set forth. As stated in Section 1.2 that St. Vinnepen has a clear vision as well as well-defined mission statement together with the core values of the company. Nevertheless, there is a need for the management to review the current appraisal system to plan strategically ensuring that the appraisal system supports the company goals and values and aligns employee performance with company mission. Planning incorporates setting performance expectations for employees, what needs to be done, so that they are working towards accomplishing goals. Firstly, the management should begin at the company level by determining the company goals, and by ensuring that all managers and subordinates understand clearly the company goals and strategies. Secondly, managers must identify the desired departmental performance expectations or results needed to meet the company goals and values. Thirdly, management should determine the critical success factors for each job position ensuring that they support the afore-mentioned desired departmental results. Having developed the desired work plan for the upcoming next year, measures for assessing progress must also be determined as they will be used in the next phase.Monitoring
As mentioned earlier in previous phase of Planning, measures must be determined in order to assess the progress of the employee performance. In this phase of Monitoring, progress towards the company's goals set at corporate, departmental and individual job position levels stated in the work plan is monitored. As described in Section 5 - point 1, one of the monitoring measures is to conduct an interim performance appraisal on a quarterly or half-yearly basis as and when required as this is especially useful and effective for St. Vinnepen. Should there be any adjustment required due to deficiencies in performance, corrective actions that deemed fit should be taken if necessary. These corrective actions would be discussed in the next phase. Another monitoring measure is by means of timely feedback obtained via observation by managers, peers, and perhaps customers. Timely feedback helps in addressing employee performance and in finding out how well they have been performing at work, and to determine if there are rooms for improvement.Developing
Developing employees covers all efforts to foster learning, to promote motivation as well as to increase morale so that employees are able to adapt quickly to fast changing and challenging situations. In this phase of Developing, management must be able to determine the necessary adjustment or corrective actions to be taken. These corrective actions must be relevant towards helping the employees raising their competencies or motivation at work if they are facing with low morale due to pressure or frustration at work. As recommended in Section 5 - point 2, one of these corrective actions would be to identify the training need for the employees. Providing opportunity for personal development through professional training or short courses can help ensuring the employees are equipped with the necessary knowledge to finish their job on hand so as to stay competent at work. This in return would result in increasing motivation and morale among them.Rating and Rewarding
Thus, although it is quite impossible to have a perfect appraisal and remuneration system, it is recommended that the management to review the current remuneration system to identify if there are significant discrepancies comparing with the current remuneration package being offered in the market in terms of salary rate.
Thus, it is recommended that besides reviewing the current performance appraisal system to identify rooms for improvement, there may be a need to review the current human resource policies in the area of employee's reward so as to ensure fair and equal employment reward to the employees.
Despites using a 4-point system that may seems easier for the supervisor to rate the subordinates based on the subordinates' performance, a 6-point rating scale would rather be recommended, i.e. 1/6 - 'Poor', 2/6 - 'Average', 3/6 - 'Satisfactory', 4/6 - 'Good', 5/6 - 'Excellent', and 6/6 - 'Outstanding'. Such 6-point rating scale can help to overcome any feelings of unfairness or bias...Reviewing
At the end of the performance management cycly eht emanger and employee meet to document the work of the past year. Accomplishments and shotfalls relative to the worik plan are summariezed using a performance management form, a new performance management cycle begins.Conclusions
- q U.S. Department of the Interior. 2004, 'Performance Appraisal Handbook: A Guide for Managers/Supervisors and Employees', pp 5-19. Journal Articles:
- q Dale T. Griffee. 2005, 'Research Tips: Interview Data Collection', Journal of Developmental Education, Vol. 28, No. 3, pp 1-2.
- q Evaluation Research Team (ERT). 2008, 'Evaluation Briefs: Data Collection Methods for Program Evaluation: Questionnaires', Journal of CDC, No. 14, pp 1-2. Electronic Information:
- q Dale Mask. 2006, 'Performance Appraisals that Work', Online, p 1, 27 Mar 2010. Available at: http://www.alliancetac.com/?PAGE_ID=138
- q Dr. Fathi El-Nadi. 2010, 'Designing A Performance Management System', Online, p 1, 31 Mar 2010. Available at: http://www.evancarmichael.com/Human-Resources/840/Designing-A-Performance-Management-System.html