Study of financial and non-financial performance management systems

in service sector.

A Proposal submitted
By

Syed Muneeb Ali (36316)

Faraz Baig (31720)
Irshad Alam (34054)

To
Dr. Sania Usmani

In partial fulfilment of
The requirement for the

Research Techniques Analysis

Qualitative Article Project Report
 Introduction:

1.1 Background

Human Resource Management is essential for organizations and department

always focused on HR practices which should be implemented and affected towards

organization’s targets success factors. Moreover, in Pakistani industry almost majority

organizations have proper HR department which not only control HRM but also

evaluating and studying daily operational activites and its related concerns in order to

achieve employee and organization maximum output. Human Resource departments

managers tries to enhance employee performance by implementing performance

management systems through which they can measure employee performance and make

rewards systems accordingly.

HR also focuses on employees’ performance management system and tries to get

more valued work with minimum workforce in order to have more profit and low cost for

an organization and also motivate skilled full workforce by introducing different types of

benefits i.e provident funds, EOBI, Social Security & Health and Group Life Insurance

etc. and HR also evaluate employees performance and if there are any employees in an

organization whose performance are up to the mark so HR department launch additional

reward for them like issuance of employee of the month, employee of the year certificate

with some monetary reward etc.

Our motive of the study is to explore financial and non financial performance

management system in service sectors, financial performance management systems

refersto performance of overall organization whereas non financial performance

management system refers to the employee’s performance in an organization.

Financial performance management system includes performance in earnings, profit

margin, average order value and return on assets.

Non financial performance management system includes customer satisfaction, market

share and new product adoption rate.

Companies generally motivate employees though rewards or appraisal systems

but due to lack of measuring tools majotiy of hardworking employees being neglected

which cause high turnover of employees within the particular organization. On the basis

of this concept, managers have evaluated and suggested to make performance

management system and measure every individual employee performance with multiple

perspectives to make accurate results that would be helpful in making culture and office

environment more better and healthy for organizational growth (Azzone and Palermo,

2011).

Strategic Human resource management covers the overall strategies related to

employees and organizations adopted by HR departments in order to measure their

impacts on performance (Lengnick-Hall, Lengnick-Hall, Andrade and Drake, 2009). In

modern world business couldn’t be operate effectively without well equipped technology

similarly HR work force can not be operated without advanced tools to measure

employees and organizational performance (Hashim and Hameed, 2012).Moreover, in

 this era of competitive war among companies in service industry HR managers should

evaluate performance while considering financial performance management systems and

non financial performance management systems in service industry of Pakistan.

1.2 Problem Statement:

In current environment of industry, every organization has its HR department

which is always focusing on employee related issues like medical, gratuity, performance

evaluations and leaves. Moreover, HR has to face generic issue which is concerned with

employee retention and in order to retain employees for organizational effectiveness HR

needs to implement policies regarding employee performance in every aspect whether it

is internal or external. Mostly organizations facing issues related to biasness in reward

management which is created through performance management systems.

1.3 Research Question:

1. What financial and non-financial performance management system tools are used

to measure employees and organizations?

1.4Significance of Study:

This study shows the importance of performance management systems tools which

creates or add value to organizational efficiency improvement methods. HR managers

can evaluate employee’s performance and organizational performance by using such

tools and builds healthy growth that leads organization’s to success.

2.1 Literature Review:

Paul White (2015), demonstrates the human resource policies regarding employee appreciation

which can create motivated and dedicated workforce that leads organization towards success.

Moreover, author describes the value of appreciation given to employees or workforce in

organization in order to develop recognition system for staff which increase producticity of

employees and if HR managers don’t consider all employees equally and compensate whole

workforce in the same way then chances of inequality may occur and can cause high turnovers.

Futhermore, author describes five different languages of appreciation for workplace in which

appreciation should be awarded in the way employees want to receive whether compensation

would be in words or monitory terms. Employee performance always increases based on

managers or supervisors attitudes towards their team.

Michael Armstrong, Duncan Brown & Peter Reilly, (2011) explored that what is the reason

behind not to evaluate the usefulness of reward policies and practices in many organizations and

determines the process of those organizations which develops a model of evidence based

approached for reward management processes in organization, researcher stated in his research

that why evaluation of reward do and do not use in an organization, this study is all about

guidance which is provided to practioners that how they can measure reward policies and

practice’s effectiveness. This research demonstrate that there must be some kind of reward for

the employees when employee have proved themselves by fullfiling their targets specially in

sales department employees are given targets and company put a condition for the employees

that complete your target and get the suitable reward as as result of it so there should be evidence

and company will evaluate it accordingly.

Decramer, Smolders, Vanderstraeten, Christiaens and Desmidt, (2012) identified the relation

between employees performance and external pressure that comes through environment.

Employee performance management system is a continue process which consist on evaluation of

each employee through identifying, determining and emerging performance with respect to

strategic goals of their organization. Moreover, employee performance management system is a

kind of micro HRM approach which consist of different types performance practices. However,

author demonstrates that PMS is inter related with multiple practices like reward management,

planning and monitoring that affects employees performance either positive or negative and this

study is on basis of literature collected through interviews.

According to Paul white (2017), progress of organization varies on supervisors act of

appreciation towards their team members which motivates entire team for achieving

organizational goals commonly. Moreover, employees get valued by their supervisors or

managers which tends to create dedication and motivational factor in order to attain higher

customers satisfaction and organization grows in purposive sense. Author also explores the

employee engagement programs that shows employees attitude towards organization culture and

environment. Furthermore, job satisfaction level could be increased by apprecations given to

employees during their training period and both managers and employees feels satisfied with

their job while getting valued for their contributions. This study of author has showed proper

mechanism to teach employers for proper communication way of appreciation to one another.
According to Cohanier (2014), qualitative research can tell us about the performance

management system with more better understanding of employees performance and organization

performance. Moreover, author focused on north american retailer where financial and non

financial performance measures are very crucial to measure because of its operations intensity

and it would be relevant for its shareholders to review performance of organization. However,

non financial performance measures have played significant role in developing study to evaluate

the employees performance towards their retail customers in terms of employee attitude towards

its customer, transaction time at cashier, customer complaints responsiveness and customer

purchasing frequency counts. Furthermore, conclusion of this paper suggests that these financial

and non financial PMS can be helpful to evaluate the organization as well as employee

performance towards their companies targets.

Chapman and Kelliher (2011) describes the reward mix strategy in which relationship between

different level of rewards have been evaluated. One standard has led to development for rewards

mix program. Moreover, author determined both environmental and organizational factors such

as organization’s business and their HR strategy leads the reward system. Pay policies also

become part of reward strategy in terms of compensation against any particular activities that

leads organization to next level. Managers would consider many aspects while making policies

regarding reaward mix and decisions has to be made on basis of approved policies which

contains rewards mix appraisal systems.

Saks, Gruman, (2014),Demonstrate that Performance Management system is an HR practice,

Moreover PMS influence organization outcomes, such as Job satisfaction, organization

Commitment and reduce employee turnover. Authore Describe PMS facilitate newcomers

adjustment to achive organization outcomes, Through PMS organization successfully achieve

new hire affective, Performance Management system not only facilitate new hires but also

inspiration for newcomer long term achievement and career Growth. Furthermore Performance

Management system Demonstrate how to use multiple of HR practices which lead organization

outcomes.PMS also identifies the mechanisms through organization lead organization

outcomeslevels. PMS provide a open plateform for newcomers to enhance their capabilities and

interact openly.

Azzone and Palermo (2011), describes in this study of performance appraisal system of

organization and its reawards system that which factors should be considered in whole process.

Moreover, organizations have been faced very frequent change in its internal external

environment and managers have wanted to know the problem they have faced especially in

government organizations in Italy. Change management process would be apdopted while

transforming the policies regarding appraisal and reward systems. Different approaches have

been used to evaluate this study in government scenario and adopted multiple theories to fix

issues.
3.1 Methodology

This particular report will be a qualitative study and exploratory methodolgy approach would be

used to analyze the financial and non financial performance management system which are being

applied in organizations in order to evaluate their performance in certain departments. This

specicifc study is about the service sector organizations like HR service providers, courier

services, hospitals, education and information technology sectors. Primary data collection

technique will be used in order to get appropriate answers with releavancy of this study.

3.2 Sampling Technique

Researchers are about to use purposive sampling technique to get accurate results for proper

interpretation of results.

3.3 Data Collection

As this study is about performance management systems of employees and organizations and

primary data collection technique will be used to gather siginificant data thorugh qualitative

procedures. For this particular case we will prepare a well designed questionnaire consisted of

multiple open ended questions which cause effective output or results pertain to our study.

3.4 Primary Data Collection Method

This case will help us to describe the performance management systems to assess the overall

position of organization. For this purpose, data collection will be done through managers,

supervisors, and line managers of human resource departments of service sector organizations.
All the data collection will be done through interviews individualy with help of questionnaire

which consists of open ended questionaaire that covers overall information realted to this

particular case. (Saunders, Lewis, Thornhill, 2012). In this case , we will conduct structured

interview that would be taken to authenticate findings.

3.5 Participants

In this study of performance management systems, questionnaire has been designed to collect

data thourgh interviews and interviews will be conducted by mnultiple managers, line mangers

an supervisors of human resource department of service sector organizations. All participants are

from service sector organizations including schools, hospitals, human resource service providers

information technology and courier companies.

Our focus groups are HR managers and line managers of service industries in Pakistan; we

discussed performance management systems with them also talked about their financial and non-

financial performance management systems which are being used in their organization. In

following transcription of the interviews we used “Just the gist” and “conversation” and

“verbatim with dialect”.

Interview 1 – Catering service provider

One reputed organization’s HR Manager said that there is a Non-financial performance

management system in his organization that includes reviewing employees’ performance by

having feedback from line managers / Supervisors regarding the performance of those employees

who are working under their supervision, feedback is taken on quarterly basis as well as, there is

a reward system for best performers in each units / department. Moreover he also informed that

company is performing well financially and economic conditions are stable.

Interview 2–Airline Service

Manager one of the service company said that “Company’s growth is totally depend on the

performance of employees and it is the task of department heads that how they can get best result

from employees by giving them plans and procedures to achieve desired objectives that benefits

not only the organization but also improve employees personal and professional growth and

there should be a motivation for the employees for their good work by appreciating or by

different types of monetary and non-monetary rewards.

Interview 3 – HR service provider

Service industries manager said that “Money is the best motivator; hire talented people in an

organization invest on them and get maximum profit by the help of their talented work.

Interview 4 – Event Management Services

Yeah…In our org. we’ve these types of system so far an..bt not necessary we are following all

procedures. Infact, our superviors made some policies regarding performance management

systems….in order to evaluate performance of their teams an…eventually they also evaluate

organization performance as well. Yes, mostly we use non financial systems bcz it is more

intense for measuring performances of workforce that we use in our org.

Interview 5 – Audit Firms

Being HR manager , I would like to explain regarding FPMS, in which we have overall growth

factor of organization which consist of profitability, asset turnovers, debt payoffs and revenue

generation for each quarter and these all are enough to evaluate org performance and NFPMS

has some crucks that shows how good your team mates work and do they awarded by org

according to their performance. As we have seen recently in our org. like employees should get

subsidize food or penny less which cause in increase of their productivity as a result of economic

support by org.
Interview 6 - Hospital

Yes, I am HR and Admin director who works for betterment of nation and serving this nation

from several years. I know what is good and bad for our patients and our employees. As our staff

is highly motivated and we don’t have to measure their performance but hmmmm…somehow we

can measure lower staff performance bcz their attitude and behavior towards our patients –

customers makes our hospital progress. Moreover, FPMS doesn’t have any relation with

government hospitals because of sufficient budgets being provided by government.

Interview 7 - Hospital

Definitely, we have both systems for measuring performance of our employees which makes our

organization a better place to serve our country in a better way. Moreover, our staff is highly

qualified & motivated to serve the nation and our HR team conducts several workshops and

training seminars to enhance productivity and expertise of employees. Similarly, when our staff

performs good enough then financial stability of firm always grow significantly.

Interview 8 – HR Service provider

In order to make clients happy, we have pool of candidates for multiple positions and we supply

workforce to our client according to their need, our timely delivery to our client make us more

and more successful, for this we have qualified workforce that not only works for our clients in

efficient way but also gives us growth opportunity in terms of revenues. We have multiple

rewards systems for them in order to motivate them.

Interview 9 - Restaurants

Taste makes perfection in our quality and all this comes from our workforce and for this we have

multiple ways to make and measure performances of them. In order to enhance this factor we

have strategies like motivation, reward management, appraisals based on performance, bonuses

which makes them delightful and loyal to their company.

Conclusion

According to interviews conducted in service sector industry of Pakistan which includes multiple

services provider like HR service providers, Schools, hospitals, restaurants, event management

services and others. In every organization there is an HR department where HR concerns with

the performance of organizations for which they evaluate employee performance because when

employees performs it reflects organization’s performance as well and both are integrated with

each other. Every company have different rewards systems to enhance their employees

performance that ultimately results in improvement of organization performance.

Refrences:

Armstrong, M., Brown, D., & Reilly, P. (2011). Increasing the effectiveness of reward

management: an evidence-based approach. Employee Relations, 33(2), 106-120.

Azzone, G., & Palermo, T. (2011). Adopting performance appraisal and reward systems: A qualitative

analysis of public sector organisational change. Journal of Organizational Change Management,

24(1), 90-111.

Cohanier, B. (2014). What qualitative research can tell us about performance management systems.

Qualitative Research in Accounting & Management, 11(4), 380-415.

Chapman, J., &Kelliher, C. (2011). Influences on reward mix determination: reward consultants'

perspectives. Employee Relations, 33(2), 121-139.

Saks, A., & A. Gruman, J. (2014). Making organizations more effective through organizational

socialization. Journal of Organizational Effectiveness: People and Performance, 1(3), 261-280.

White, P. (2015). Authentic appreciation creates a winning workforce: Focus on the individual and watch

the transformation take place. Human Resource Management International Digest, 23(1), 25-27.

White, P. (2016). Appreciation at Work training and the Motivating by Appreciation Inventory:

development and validity. Strategic HR Review, 15(1), 20-24.

Questions

1. Do you have performance Management System?

2. Do you have Financial Performance Management System?

3. Which Financial Performance management system do you have in your organization?

4. Which Non Financial performance management system do you have in your

organization?

5. What is your opinion about financial and non financial performance management system

of an organization?

6. Describe in your words some financial and non financial performance measures which

are used in your organization?

7. Performance management system enhances the productivity of employees’ daily

activities, whats your view about this mechanism.

8. What are the factors which should be part of NFPM in your organization.

9. What are the factors which should be part of FPM in your organization.

10. Which is better Financial performance management system or non financial performance

management system?
Thank You!