IKEA: Performance Management - Special Academic Support

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Performance management encompasses the many things done in organizations to manage and shape the performance of employees. It attempts to align effort and performance with standards and types of performance needed for organizational success. The organization selected for analysis and evaluation is IKEA. IKEA is a leader in home products retailing In less than forty years, IKEA has become a globally successful, multi-billion dollar business, with stores on six continents and a very large customer following (IKEA Home Page, 2008). Competitors constantly strive to imitate IKEA, but this companys secret to success is not easily duplicated.

For IKEA, performance management is an important part of organizational behavior. From the organizations viewpoint, a performance management problem arises because of natural clashes between the orientations of professional scientists and engineers and the business needs of the firm (Bacal, 1996). The knowledge workers concern for creative freedom, the furtherance of the technology, and their position in a professional community can conflict with the business concern for targeted investment in strategic areas, planning, and control, and cost and budget. Interest in elegant solutions and autonomy clash with the business needs for a planned way to manage complex projects with many interrelated parts in a cost-effective manner that enhances competitiveness, and promptly brings the product to market before that of the competition (Bacal,1996). Performance management practices include reward and appraisal practices that are established to ensure that performance is reviewed and leads to valued outcomes. Processes are the interpersonal processes that manage performance on a day-to-day basis. Performance facilitators are conditions that exist in the job, the workgroup, or the person that enable people to know what is expected of them in their job and to do it (Armstrong, 2000).

Performance management occurs at all three levels: the organization, its teams and groups, and the individual. The two-way arrow from each organizational performance management step to the comparable group step indicates that group and individual performance management must consciously and openly be linked to organizational performance needs, and vice-versa (Daniels and Daniels, 2005). Processes and practices should be designed to raise the level of awareness of teams and individuals of how they fit into this overall picture and to involve them as much as possible in organizational goals and effectiveness (Bacal, 1996).

In IKEA, traditional performance management mechanisms are based on the assumption that jobs and the organizational situation are relatively constant and stable, allowing for the formalization of practices such as job definitions, job evaluations, written goals and standards, and other relatively permanent mechanisms of performance management. The characteristics of high technology settings dilute the effectiveness of these static mechanisms that violate the systemic nature of the work (Daniels and Daniels 2005). Constant change coupled with the need to innovate and high interdependence means that specifications and goals are quickly eroded. Static job evaluation systems as the basis for compensation practices can work against the need for employees to continually update skills, perform new tasks, and be flexible in their contributions. In rapidly changing conditions, job definitions and goals have to be frequently updated. Organization A, for example, was spending thousands of hours updating job descriptions that the managers said would be obsolete within two years. Employees in all three organizations reported spending time on tasks that were of lower priorities than emerging workflow needs because they were locked into objectives. More insidiously, they often reported working on low-priority issues because their managers yearly objectives and bonuses were at stake (Armstrong, 2000; IKEA Home Page, 2008).

In IKEA, the success of the organizational performance is based on an effective appraisal system and compensation. Employee performance appraisal is a natural and necessary part of organizational life and forms the cornerstone to many basic human resources management practices. Despite its central role in the HR drama, the reviews of performance appraisals have been mixed, at best. In particular, problems in rater accuracy and consistency, negative impacts on employee commitment and motivation, poor administrative choices for system design and operation, and faulty rating scales all work to compromise the potential value that appraisals can provide (Daniels and Daniels 2005). The common assumption about performance management and appraisal systems is that the system should help a supervisor manage employee performance more effectively. The ways by which this is accomplished include specifying desired performances, monitoring performance, coaching and performance feedback, and linking rewards to performance. However, this goal may not always be achieved in practice. For this research project, you are to interview a manager or supervisor who participates in employee evaluations appraisal to learn of his or her experiences in using performance appraisals (Bacal, 1996)

A large amount of research in this area does point the way to how appraisals can be improved. Such practices as job analysis, aligning purpose with the process, and more frequent feedback are all essential steps forward. In particular, rater training is yet another piece of the improvement puzzle. Training raters on how to observe and evaluate behaviors reliably can be done by presenting vignettes of performance for common evaluation and discussion in a training set. An emerging step in this same direction is self-assessment training. Here, employees learn how to rate themselves more accurately and adjust their expectations accordingly. Performance evaluations are not a perfect process that produces only positive outcomes. Because appraisals are so critical to many of the other HR functions, finding and instituting ways to make the process work as effectively as possible is a major concern of the human resources management function (Daniels and Daniels, 2005).

From the perspective of career development, the emphasis is on recognizing and responding to the changing interests and needs of employees as they grow and mature within the organization. Career management, on the other hand, takes the organizations point of view in putting together job ladders, career paths, rotation programs, and planned to learn activities to improve the supply of talent among current employees. As such, career management can play a vital role in supporting the business and human resources planning process. Employees will learn on the job. Without a well-planned and managed training function, however, the learning that takes place can easily be incorrect, inefficient, and, in the long run, demoralizing and counterproductive (Daniels and Daniels 2005). For that reason, employee training and development is an essential tool for effective human resources management. Indeed, the view is increasingly voiced that strong training (or human resources development) can provide an essential basis for achieving and sustaining a competitive advantage in the marketplace. To be done effectively, the training function should be well planned. This means applying the appropriate instructional methodologies to identified learning needs. Further, the transfer of skills learned during training back onto the job should not be assumed but rather managed and encouraged. The program should be evaluated and actions are taken accordingly. Career management and self-directed learning can also be promoted (Armstrong, 2000).

IKEAs management underlines that without a properly managed training process in place, several undesirable outcomes may occur. First, the instruction that is done may be uneven in quality and effectiveness. This means that the wrong skills may be taught and/or that employees are inadequately prepared for all their job duties. Second, without adequate training, employees are more easily flustered and stressed in trying to do their work. This can lead to increased errors and customer ill will (Daniels and Daniels 2005). Consider the case of a bank teller who is uncertain what to do while the customer being served is watching her every move. Uncertainty leads to delays and mistakes, irking the customer and generating frustration all around. Such stressful working conditions can demotivate the employee and even create pressure on the employee to quit. Third, errors made in doing a task mean that the work must be corrected. Corrections take time and cost money. Career management and development is a specialized application within the context of employee training. As in training, career development deals with systematic employee learning. The framework for career management and development, though, is broader: The span of an employees career within the organization is marked by the persons progression and movement through different jobs

Because of these potential clashes between the professional and individualistic orientation of many workers and the business and technological demands, the challenge of performance management is significant. It is not sufficient to simply hire employees with the requisite professional background and set them loose to use their talents, although this is frequently done (Bacal, 1996). Our interviews suggested that such an approach was quite common in these organizations, where little attention was paid to clearly defining needed performance, or to providing feedback and development plans. It is not uncommon to find managers who believe it unnecessary to help employees define their roles; in fact, they look upon such a need as a sign of lack of capability in the employee. Many scientists and engineers, in particular, reported that they knew what they were supposed to do and how they were to go about it by experience, modeling of others, and using their training and education. As a result, they were frequently unsure of how their activities fit into a larger set of business priorities (Daniels and Daniels 2005).

To improve its practices, IKEA should introduce 360-degree feedback. This approach is based on the overall feedback made by peer employees, managers, and supervisors. The interdependencies are generally lateral, between employees and internal customers or between employees and peers who are working on other components of the technological system. Managers frequently get involved in working out such interdependencies, especially within a traditional bureaucratic framework (Bacal, 1996). In addition, many technical employees perform work that is not easily measurable and for which the behaviors are not readily observable. Often the supervisor does not have the kind of currency of technical knowledge of employees. This feedback will help IKEA management to plan career development and introduce new training initiatives (Daniels and Daniels, 2005).

It is important to note that the belief that managers are the appropriate managers of performance stems directly from our beliefs about the role of hierarchy and leads to the corollary that supervisors should manage subordinates performance. Performance counseling will help managers to direct and control the performance of the organization. The high interdependence among employees in high technology firms creates conditions in which this assumption must be questioned. Consequently, it is difficult for the supervisor to adequately evaluate the work of subordinates (Daniels and Daniels, 2005). Alternatively, many supervisors had been promoted into management ranks but remain, in many senses, technical contributors themselves. They spend long hours in meetings addressing technical issues and do not spend enough time with their employees to have a good sense of each persons contribution or to adequately manage performance. Other indications making performance management practices the responsibility of supervisors is a failing strategy. On the surveys, fewer than half of employees reported receiving direction or goals from their supervisor (Hanlan, 2004).

Performance is very strongly facilitated by the employees skill level and by the employees understanding of his or her role in the group. These facilitators strongly result from workgroup structuring and goal-setting and workgroup feedback. Thus, both skill and understanding of how ones work fits into the larger context are the results of group processes to a significant extent (Hanlan, 2004). Workgroup performance norms have a direct path to individual performance. Thus, individual performance is both directly and indirectly related to all three group-oriented processes. They in turn are strongly related to the practice of group self-assessment. It is important to note that individuals respond favorably to teamwork and to pay for individual performance. Thus, the dual pressures on high technology are captured: the orientation of employees to individual creativity and autonomy, and the fact that they are engaged in a highly interdependent work (Bacal, 1996)

In sum, the case of IKEA shows that effective performance management depends upon human resources management and planning of all activities related to performance. Ongoing monitoring of performance at all three levels should be able to trigger a review of performance and redefinition of goals, performance strategies, and work plans at any time. Outstanding accomplishments that need reinforcement can occur at any time, which argues against relying on the yearly merit increase or bonus as the sole reward system. On the other hand, projects can have natural life spans longer than one year. The ultimate success of endeavors may not be known for quite some time. Performance management needs to reflect this reality also. Most professional employees expect individual self-management of technical task performance based on standards and accepted practices that were learned in school. It is essential, however, that processes be in place to link individual task performance directly to needed team objectives or goals. This requires that much attention be given to the team as a performing unit; to team development of its ongoing processes of goal-setting, reviewing, and improving itself; and to rewards and recognition of team accomplishments. It also requires team input into the management of individuals: their tasks and goals, determining how individuals fit together into the team, their skill improvement, and the review and reward of their performance.

Bibliography

Armstrong, M. 2000, Human Resource Management. 8^th edn. Kogan Page.
Armstrong M., Baron A. (eds.). 1995, The job evaluation handbook. Eds. Institute of Personnel and Development.
Bacal, R. 1996, Performance Management. McGraw-Hill; 1 edition.
Daniels, A. C., Daniels, J. E. 2005, Performance Management: Changing Behavior that Drives Organizational Effectiveness. Performance Management Publications.
Hanlan, M. 2004, High-Performance Teams: How to Make Them Work. Praeger Publishers.
IKEA Home Page. 2008.

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