Performance management is a vital function for an organization because it aids management to measure and evaluate the efficacy of employee performance and through this, they can also be rewarded with various monetary and non-monetary benefits. In the contemporary scenario, performance management is considered as a source of motivating and encouraging the employees so that they can produce appropriate results for the business entity. The present research study has been made on Attock Group of Companies which is a vertically integrated oil conglomerate in Pakistan. The company explores oil, performs the function of refining, manufacturers petroleum products and also deals in trading of cement and other products.
ARL is a subsidiary entity of Attock Groups and company secured its strategic importance by refining 70% of the local crude oil in Pakistan. Thus, in such context, the present research study has been describing the need of implementing changes in performance management systems and along with this discussion, researcher has also stated all the primary objectives of the management appraisal system at Attock Groups. Furthermore, in the present research report, suggestions have also been given to Mr. Khattak regarding the ways through which performance appraisal system can be more effectively aligned to organizational strategy.
ARL has been adopting different methods and techniques so that performance of business can be improved as all the processes focus on personnel development. The most important tool used by ARL to improve the performance of its HR capital was its rigorous appraisal system which was based on two basic categories such as performance targets and performance dimensions. The rate of percentage agreed for appraisals was ranged from 1 to 5 and as per the rating scale, employees get increments and promotions. In addition to this, appraisal system of the company has been improved because most of the employees were getting disappointed as they get fewer increment in the salary. Earlier, the appraisal system was subjective and contributed little to differentiating good and poor performance because it did not have quantifiable objectives. That was a five stage process in which employee performance used to be reviewed on the basis of given targets. That was called a formal appraisal process which was followed with structured forms; however, it had issues related to objectivity and differentiation aspects. The method had a remote link between promotion and performance.
Hence, after a certain period of time, Mr. Khattak felt the need to incorporate a performance oriented culture so as to appraise the performance of employees. In terms of changes, performance appraisal system was divided into three parts in which Form A was known as the Management Personnel Targets Appraisals where in performance of employee is measured and evaluated as per the accomplishment of given targets and responsibilities. Further, Form A-1 consisted of basic demographics such as attendance, discipline, targets achieved and mid – term reviews. Form B outlined the performance dimensions that were assigned different weights as per the different management grade levels. The scale measures the value of appraisal by multiplying the performance ratings with the weights. Form A had 30% weightage; whereas Form B had 70% weightage.
Changes made in the performance appraisal system depict marginal difference in the increment rate of various categories of performers. Those people also faced an aura of frustration because the system did not motivate them. Rewards and recognition were not a part of the performance appraisal system as management used to follow simple procedure of measuring and evaluating performance aspects. The minimum rate of increment is 5% and the maximum goes to 8.5% and the average increment rate is around 7 to 7.5%. Hence, because of this percentage, employees of ARL were not interested to see what they are getting in terms of appraisals. Apart from this, employees whose promotions are due expect to get 15% increment level as promotions. HR department had made salary adjustment as well for anomalies at the lower end for less than 10% in a few cases. Hence, because of such reasons, people at ARL are frustrated and they were also not happy with the low increments. As per their viewpoints, increment should be according to the rate of inflation. Employees were not happy because everyone was getting the same kind of increment; therefore, there was no point of difference in Performance Management System.
Some of them wanted performance based appraisal and they also wanted different ratings and increments. There were disparate opinions about the weightings of Form A as well as Form B and a majority of employees were satisfied with the current weightings of target setting and competencies. Thus, looking towards the same, few employees suggested to increase the weightage of target setting for the purpose of moving towards a stronger performance culture. Manager of ARL suggested that there should be 70% weighting assigned to performance objectives setting because it reflects direct contribution of employees in goal accomplishment along with actual performance. However, remaining 30% weightage should be given to behavioral aspects because that also matters a lot in measuring the overall performance of employee.
The most important tool used by ARL to improve the performance of HR capital is to make changes in the appraisal system. In order to implement different changes in the same procedure, management decided to segregate the process in two categories such as Performance Targets and Performance Dimensions. The appraisal system ought to be conducted on annual basis; however, management also decided to conduct mid-term appraisal where in performance was only discussed without written documentation. The weightage for performance targets is 40%; whereas for performance dimensions is 60% and increment percentages are also decided as per the final aggregate rating which ranges from 1 to 5. Afterwards, by having complete appraisal review, a tabular form of the appraisals was reviewed which consists of some personal administration details and records about the last promotion as well as increments. It was decided that the list will be forwarded to the CEO of company for the final review and approval and on that basis, employee appraisals will be given.
Further, this appraisal system has been segregated into two periods such as pre- 1999 and post-1999. The annual appraisal process includes several stages where in performance of the employee is measured as per the contribution given by them in goal accomplishment process. Consideration has also been made on the personal qualities and effectiveness of job. These categories are further expanded into 32 sub categories where in different aspects and parameters are defined to access employee's capacity. By considering the changing business dynamics and organizational goals of ARL, manager decided to incorporate a performance oriented culture associated with appropriate appraisal system. Thus, certain adjustments have been made in the appraisal system. Later on, company added performance objective setting in an attempt to create a performance oriented culture; hence, along with that, major alterations have been made to the performance evaluation process.
Performance Dimensions are given 60% weightage where in different attributes and competencies are included. Since, the appraisal system has been categorized into two forms (Form A and Form B); thus several new things have been added in the process so as to increase the amount of weightage. After multiplying performance ratings with the weights, final rating points were calculated for Form B. Nonetheless, percentage of increment was decided based on the aggregate rating. Performance dimensions are the parameters on which performance of the employee is evaluated and these includes several things like intelligence, determination, ability, competency and goal accomplishment ability. At ARL, quality of work has been measured and this also aids management to identify the caliber of employees as how much employees are able to meet the accepted standards. Appraisals should be categorized on the basis of monetary and non-monetary aspects and this can also reduce the cost of objectives.
From the case approach, it has been identified that ARL measures the performance of employees on the basis of different factors such as punctuality, behavior, performance capability and so on. Management also ascertains that employees are able to develop proper relationships with the colleagues because it is the most vital factor that determines environment of the business entity. Employee must have the capability to motivate and encourage other employees so that over business functions of ARL can be managed properly. However, in the performance dimensions, there is no provision for rewards and recognition; thus, this could be one of the major issues in performance management system. Dimensions are based on company's core values and this also depicts the ability of individual to achieve targets by exhibiting certain behavioral patterns. Issues of employees may generate here because they may oppose for new parameters as well.
In order to improve performance management process, changes have been made to the weightage of target setting and it has been increased to 40%. Few changes have been made in the format which was incorporated; however it excludes appraiser's promotion recommendation section. Target setting is useful in providing direction to the employees and it is beneficial in facilitating planning of the activities by channelizing the frequency of efforts. From the viewpoints of employees, major benefit of target setting is that it aids workforce to keep track records of the progress. Employees of ARL can maintain proper sheet of their performance and along with the same, ability to achieve targets can be identified. Employees get benefits from this approach since it directs them to consider deadlines and as a result, it aids in enhancing potential of employee performance.
Changes made in the target setting can raise the standard of competencies and it can also develop strong performance culture at the workplace. Hence, as pet the weightage, changes are required to make in organizational culture so that employees can build their competency level. This shows that employees of ARL were not ready to implement current changes in the business entity and afterwards, knowing about the importance of change, employees got ready to cope with the organizational changes. It shows that employees of ARL were not satisfied earlier but due to certain changes made in the procedure, most of them felt satisfied respectively. Business aims to reduce the complex work processes through emphasizing chiefly on SMART objectives. Further, ARL wishes to develop performance oriented culture; hence clarity should be brought regarding target setting and competencies and this can be done without changing the weightage. Target setting is also useful in enhancing the success and growth aspects of the company.
Management Appraisal System is vital at Attock Refinery so that performance of people can be managed in an adequate way and through this, they can be rewarded with monetary and other benefits. Since, performance management system of Attock considers several factors and skills of employees; therefore it can aid in managing employee encouragement level. Employees of Attock refinery wish to have systematic format for getting benefits related to performance appraisals and they are even satisfied with the existing procedure as well. Hence, it can be said that performance management system is vital because it aids employees to identify their own competency and caliber. Getting benefits on performance helps employees to produce more efforts in making job roles more effective and this is also vital in terms of increasing their personal strengths and caliber. Furthermore, managerial appraisal systems are also significant that helps management to direct employees towards organizational aims and objectives. Hence, from the entire discussion, it is clear that performance management systems are vital for both the managers and employees because it aids in improving the overall processes of entity. Additionally, organizational objectives and functions can be promoted from different aspects.
It is an apparent aspect that every process of ARL must be integrated and aligned to organizational strategy so that it can produce the exact results which are expected for more productivity. Since, the process of performance management was viewed positively by almost all the employees of ARL; however, several changes could be made to the existing appraisal system and those changes should be integrated with organizational aims and targets. Hence, in such respect, the CEO of ARL (Adil Khattak) can adopt practical approach for this aspect wherein he should specify corporate objectives clearly so that core business functions can be administered properly. Mr. Khattak should chiefly focus on target setting approach and on that basis, employee's appraisals should be determined. This is also one of the major aspects of retaining employees for the longer span and at the same time, quality of work can be improved. Certain percentage should be determined so that issues related to employee demotivation can be solved.
The appraisal system should be conducted fairly so that all the employees can raise their motivation level and this will also direct employees to contribute more in goal achievement process. At the same time, to make appraisal system more effective and valuable, Mr Khattak should emphasize on new and innovative things where in multiple parameters can be added to measure the performance of employees. Employee efficacy should be measured as per the skills and capabilities and also according to the desired targets. Further, internal and external expert training sessions should be conducted on the basis of target setting. Such training should include aspects of SMART objectives so that management can create a link between targets and company's performance. There should be adequate way of evaluating the performance of employees so that they can become competent and productive resources of ARL. Hence, these changes should be implemented in the existing performance appraisal system for enhancing more clarity in managerial processes.