Performance and Compensation Management

Question: Discuss about the Performance and Compensation Management. Answer: Introduction It is vital for the organization to adopt different measurement methods for evaluating the performance and compensation of the employees in the organization. Employees are highly motivated to perform well if the organization brings transparency in the decision related to performance and compensation management in the organization. This is because, employees are provided with the compensation for the provision of performing different tasks in the organization for the purpose of fulfilling their individual needs. There is a requirement of engaging employees in the decision making process in order to increase their commitment towards the organization as they feel being valued by the organization (Chingos, 2002). Company Background Aldi is a retail supermarket chain established in the year 1913 in Germany. The company opened its first store in Australia in the year 2001. It helps in creating new employment opportunities by providing high quality products to its customers at low prices. The company has made strong and harmonious relationships with the suppliers in order to provide low cost products to customers in order to create value for them. The company provides opportunities to the farmers of the country which helps in reducing the competition in the market. The company has adopted simplified processes which help suppliers to provide more time for the investment made in the businesses (Aldi, 2017). In addition to this, the company provides large volume and consistent orders in a timely manner which helps in increasing the flow of their income. The company planned to expand its business operations in other parts of the Australia in order to increase the volume and provide opportunities to new and local suppliers. The company has approximately 8000 stores worldwide and continues to expand its business operations in North America, Europe and Australia. The company provides wide range of products to its customers. The company buys products in large volume from its suppliers in order to provide products at low cost to its customers (Aldi, 2017). Issue related to performance management and compensation management in Aldi Aldi has unfairly dismissed its various employees such as managers for alleged conduct towards fellow employees. After five months, the manager is terminated from the services of Aldi due to their conduct in the retail store. It is found that the employees in the organization bullying other employees which as an adverse impact on the performance of the employees in the organization (Carmody, 2015). The issues related to performance management occur due to the presence of lack of credibility among the supervisors. This happens in the organization due to the presence of inexperienced management, poor communication skills and general incompetence. The managers or supervisors provide or deliver inconsistent feedback to the employees that leads to the occurrence of poor performance management in the organization. This causes confusion, resentment among the employees which leads to the occurrence of distrust of different performance management reports (Armstrong, 2002). Besides this, employees do not get clear information related to the achievement of the task or goal in an effective manner if the managers or the owners of the company do not have a clear and established goal to be achieved by the organization. It is essential for the company to provide clear information related to different policies, procedures, programs, aim and goals of the organization to its employees. This helps in achieving the goals of the business in an effective manner. It is essential for the managers to provide safe working environment to its employees which also has a significant impact on the overall performance of the employees in the organization (Stiffler, 2006). Besides this, the compensation issue faced by Aldi includes that the company make less payment to new employees as compared to other employees in the organization. However, the company provides high salary benefits to the people at middle and top level management in the form of maternity leaves and superannuation benefits. The company make the payment of the salaries on the basis of the performance of the employees at the workplace. In addition to this, the performance of the employees is measured by receiving the feedback from the peer employees, customers, superiors and managers which helps in determining the pay of the employees (Gerhart and Rynes, 2003). Besides this, it also help employees to get the knowledge regarding the areas on which they have to work in order to improve their performance. In addition to this, the company experience low performance of its employees due to the reason that there is a lack of clear strategy for the purpose of achieving the clear goals of the company. Nowadays, company makes huge investment in research and development for the purpose of implementing automated processes in the organization that results in increasing the performance of the employees at the work place. There is a presence of huge work load on the employees of the organization which results in lowering the overall performance of the organization (Heneman and Greenberger, 2002). Analysis of performance management and compensation management issue in Aldi For the purpose of evaluating the performance of employees in the organization, the company adopts 360 degree feedback in which the views and opinions of different stakeholders of the company is considered. The company receives feedback from customers, subordinates, superiors and managers to evaluate the performance of the employees. Besides this, the employees are paid as per their performance in the organization. 360 degree feedback is a process by which employees receive feedback from the people around them that includes manager, peer group, customers and so on. In this process a form is filled by the people who provide feedback related to a particular employee which consists of different questions related to the performance of the employees. This method helps in assessing the performance of the employees and provides compensation to them based on their performance (Armstrong, 2007). In addition to this, this method also helps in providing information to the employees regarding their strengths and weaknesses that help them to receive training for improving their skills in an effective manner. This help managers to identify the need of providing training to its employees related to some of the skills which are required by them to perform the task. Besides this, the company evaluates the performance of the employees at the workplace by monitoring the availability of its products to the customer and if the level drops then training is provided to the employees related to order accuracy at the store. This is because, if there is unavailability of the product at the store, then the company loses its customers and thereby results in decline in the sale revenue and profits of the company. In addition to this, to prevent employee turnover and attract new talent in the organization the company provides industry leading salaries to them (Secord, 2003). In order to improve the performance of the employees in the organization, the company provides on the job training to employees in order to upgrade their skills in order to achieve high level of customer satisfaction. Besides this, in order to retain the employees in the organization there is a requirement to provide equal pay to the employees and does not discriminate them on the basis of race, gender, religion and so on. Provision of effective performance management framework and compensation packages help in increasing the commitment level and loyalty among employees in the organization (Hayes and Ninemeier, 2009). It is essential to improve the issues occurred in the organization as it leads to increase in the employee absenteeism and turnover in the organization. If the employees do not receive compensation as per the industry standards then they are not motivated to perform well in the organization and results in the occurrence of high level of employee dissatisfaction in the organization. Employees lose trust on their superiors and do not carry out different activities, tasks and responsibilities in a proper manner. If the employees do not receive adequate compensation for their performance in the organization then there is a decline in the commitment level of the employees and they try to switch their job to its competitors (Shields, et al. 2016). There is a requirement for the organization to understand the needs of the employees and try to fulfill them in order to increase the commitment level of the employees in the organization. In case of compensation management, the company uses agency theory for the purpose of making the payment to its stakeholders in a fair manner. As per this theory, the company needs to make the payment to its employees on the basis of their performance. In a similar way, management is paid for increasing the productivity of employees in the organization. They have also being paid on the basis of their expertise in the organization. Besides this, stockholders are paid or receive a part in the profit as they seek to increase the profits of the company by reducing the overall cost of the product. This theory aimed at improving the performance, productivity and profits of the company (Knox, 2015). The competitors of Aldi are keen to provide several benefits to its employees such as health and disability insurance, flexible working hours and so on which results in improving the overall performance of the organization. Employees are highly motivated to perform well in the organization. This also results in improving the productivity of the employees in the organization. the provision of flexible work hours facilitates employees to keep an optimum balance between their personal and professional life. For the purpose of providing incentives to the employees, the performance is measured at different levels in the organization on an 100 point scale in order to identify the high performers in the organization (Secord, 2003). Recommendations It is important for the organization to develop and establish a communication network that helps employees to share their views and opinions in an effective manner with other employees. This results in improving the skills of the employees in handling of the customer objections in an effective manner. Along with this, it is requisite for the managers to provide adequate and accurate information related to the goals and objectives of the business to its employees. This is because, the employees have a clear view regarding what is required from them to the organization to fulfill the aim of the business. It helps in directing the efforts of the employees towards the goal of the business. It is essential for the business to make an investment in research and development to bring or adopt new technologies which are aligned with the goal of the business as it facilitates in improving the overall performance of the organization (Armstrong, 2007). It is necessary for the managers to provide training to employees for the purpose of developing and upgrading new and existing skills for the purpose of improving their performance in the organization. Development of new skills helps them to perform the task in an effective manner and generate interests in them to perform it as they receive incentives for the increased performance in the organization. For improving the performance and productivity of the employees, it is essential to make managers accountable for the performance of the employees. These results in supervision of the activities carried out by the employees in an effective manner. The supervision of the activities results in bringing improvement in the performance of the employees. This is because, if the employees find difficulty in carrying out the activities then they can seek help from the managers or other employees at the same level to improve their efficiency to perform the task given to them. It is also essentia l for the managers to give adequate authority to the employees to make decisions as it results in improving the efficiency of the employees (Hayes and Ninemeier, 2009). It helps them to take decisions in a quick manner to provide high quality products and services to customers which results in improving the sales and profitability of the organization. Besides this, employees have a feeling of sense of belongingness with the company which results in achieving high level of employee satisfaction in the organization. The organization needs to bring transparency and honesty in carrying out different business operations as employees feel motivated and accept the changes brought in the organization in an easy manner. This results in improving their performance in the organization. For the retention of the employees in the organization, it is requisite to provide fair pay to the employees as per their level and complexity of the work. It is requisite that there is a presence of balanced ratio of pay for work throughout the organization (Knox, 2015). In order to attain this, the managers need to analyse the accountabilities and complexities present at each role for the purpose of calculation of the fair pay in the organization. The company is required to adopt succession planning in the organization which refers to transfer and promote employees to different levels within the organization which helps in career and professional development of the employees in the organization. This helps in improving the engagement and motivation of the employees in the organization. It is essential for the managers to engage employees in the decision making process by motivating and considering their views and opinions for bringing the required change in the organization. This helps in creating a sense in the employees that they are valued by the organization (Gerhart and Rynes, 2003). Conclusion It can be concluded that Aldi is a supermarket chain based in Germany and has opened its first store in Australia in the year 2001. The company uses 360 degree feedback and agency theory for the purpose of determing the performance and compensation of the employees in the organization. It is requisite for the company to implement effective performance management and compensation management in the organization in order to overcome or prevent the issues related to it in the organization. For the purpose of prevention of the issues associated with the performance and compensation in the organization there is a need to establish clear goal and objectives of the company and it needs to be communicated to the employees in a proper manner. Besides this, there is also a requirement of implementation of the succession planning in the organization as it provides different opportunities to develop their skills. Besides this, it also facilitates in increasing the level of motivation of the emplo yees in the organization. References Aldi. 2017. About Aldi. [Online]. Available at: https://www.aldi.com.au/en/about-aldi/ [Accessed on: 15 February 2017]. Armstrong, M. 2002. Employee Reward. CIPD Publishing. Armstrong, M. 2007. A Handbook of Employee Reward Management and Practice. Kogan Page Publishers. Carmody, B. 2015. Aldi ordered to pay former manager more than $37,000 following unfair dismissal case. [Online]. Available at: https://www.smartcompany.com.au/business-advice/legal/49128-aldi-ordered-to-pay-former-manager-more-than-37-000-following-unfair-dismissal-case/ [Accessed on: 15 February 2017]. Chingos, P.T. 2002. Paying for Performance: A Guide to Compensation Management. John Wiley Sons. Gerhart, B. and Rynes, S. 2003. Compensation: Theory, Evidence, and Strategic Implications. SAGE. Hayes, D.K. and Ninemeier, J.D. 2009. Human Resources Management in the Hospitality Industry. John Wiley Sons. Heneman, R.L. and Greenberger, D.B. 2002. Human Resource Management in Virtual Organizations. IAP. Knox, M. 2015. Supermarket Monsters: The Price of Coles and Woolworths' Dominance. Black Inc. Secord, H. 2003. Implementing Best Practices in Human Resources Management. CCH Canadian Limited. Shields, J. et al. 2016. Managing Employee Performance and Reward: Concepts, Practices, Strategies. Cambridge University Press. Stiffler, M.A. 2006. Performance: Creating the Performance-Driven Organization. John Wiley Sons.