the reward system they should be equity.

Equity in the sense that though my salary as an accounts clerk is

not equivalent to that of the financial controller, but it befits my duties and I am satisfied. In an
organisation where equity is not of great importance it will greatly affect the behavior and eventually the
performance of employees. The techniques should support external Bacc 406

Performance management

Assignment 1

P1493090N

Question3

Profit/loss product chosen

scenario A B C
1 20 80 10
II 40 70 100
III 50 (10) 40

I) Using the maximax decision rule, it means that Mashwede company will select the product
that maximises the maximum payoff that is achievable among the three products, let’s do the
ranking

product A B C
Highest payoff achievable ($) 50 80 100

Comparing the three products, here the investor is an optimist. They are considered to be risk seeking
wishing to achieve the best results, if the best happens. Hence product C will be selected with a profit
of $100 compared to product A and b that have $50 and $80 respectively.

ii) Using the maximin rule- this is a decision criterion that involves selecting the alternative that
maximises the minimum payoff achievable. The investor considers the worst possible outcome at
each supply level and selects the highest one, hence the investor seeks to minimise his losses. The
outcome is chosen based on the hope that it will guarantee to minimise his/her losses. An opportunity
to make big profits is lost when this decision is made. This is an approach for a risk averse
person/investor or in accounting language is a pessimist.

Using the maximin rule, Mashwede Company will choose the following products.

product A B C
Minimum payoff achievable($) 20 (10) 10
Product A will be selected since it has the highest minimum pay off achievable compared to product
B with a loss of ($10) and B with a minimum payoff $10.
Question 1

With the aid of a diagram, discuss the five facets of the performance prism.(25)

Performance management has been defined by Acca as “a continuous process of identifying,

measuring and developing the performance of individuals and teams. It involves aligning
performance with strategic goals of the organisation.

The performance prism according Acca 2018 it is said to be of the approaches used in viewing
business performance it has five facets and these are evaluating order to assess business performance.
These facets are

i) Stakeholder satisfaction
ii) Strategies
iii) Processes
iv) Capabilities
v) Stakeholder contribution
This is the diagram of the performance prism adopted from ACCA Kaplan 2018.

Now we shall consider each facet in depth starting with

i) Stakeholder satisfaction- every entity has internal, connected and external stakeholders.
These stakeholders have different needs and level of power, thus influence within the the
business and business environment. It is important to map their power and understand the
needs of these different stakeholders. An entity that wants to see repeat business needs to
satisfy their connected stakeholders-these are customers,. It is important issue in the
performance evaluation of how a business is satisfying its customers, revenue is the lifeblood
of any business.

Every business has shareholders, these are external and at times in small entities they might
be internal managing the company. Shareholders give the entity capital (investment) hence on
evaluating business performance it is important to identify these as key stakeholders who
should be kept satisfied and informed as they would have power to influence decisions within
the entity.it is important to keep these key stakeholders satisfied and informed, their level of
power is high. They are other stakeholders like the government and pressure groups though
their levels of power are different, the latter having little or less significant influence on the
entity, but they can organize industrial action against a company. The government has
significant power as it is the one making policies that can affect businesses. A good example
is the increase of the interest rate in Zimbabwe on loans. Pressure groups in Europe some few
years organized an industrial action against a certain company, Monsanto to remove its
genetically modified food products off the market, the action was a success as the business
did remove its products.

In simple terms those doing business performance evaluation need to map their stakeholders,
understand their needs and make sure the business is being driven towards the expectations of
the shareholders, though at times there is a clash between different stakeholders needs. This is
where stakeholder mapping comes in.

ii) Strategies-after the identification of key stakeholders, the entity needs to come with plans of
action that will drive the company towards achieving a long term aim or objective. Strategic
planning usually covers a period of 2-5 years plans. Strategies involve plans that seek to
answer questions like a) how do we increase or take ownership of the firm’s suppliers. c)
How do we take ownership or control over the firm’s competitors? How do we penetrate a
market to increase our market share for present products or services? d) is there need for the
company to engage in defensive strategies that involve liquidation, divestiture or
retrenchment?.

These are all strategies that are developed by top management which will later be broken into
small manageable objectives cascaded down to senior, middle and shop floor workers. All
stakeholders have a role to play. Those responsible with evaluating business performance
should make sure that the strategies that have been put to place are able to achieve
stakeholder sastification and above all the company’s objectives. A company put in place that
 it will only take a minute to attend to customer’s phone calls, this led to the workers attending
the calls hanging the telephone before the customer gets all answers and it led to highly
dissatisfied customers.it is important that strategies that are adopted by the business do not
affect the business in a negative way while trying to pursue another goal.

Performance measures are needed to ensure the implementation of these strategies, all players
involved should be encouraged to implement the strategies.

iii) Processes-these are steps or procedures that are carried out by a company to reach a certain
end product or service. Processes may involve how to maximise the limited resources in
maximizing output? What should be involved in the supply chain management? What is
needed in the business to gain competitive advantage? Processes are need for both tangible
and non-tangible products. How to utilize fixed assets in acquiring revenue and profits. How
to minimise costs in all departments across the entity? Inappropriate processes led to the
entity’s failure to achieve its strategic goals. If a company wants to provide, quick, Cheap
quality standard products this should start from the supply chain management to customer
relationship management. If any of the processes are wrong then that will never be achieved.
Questions concerning to buy or make decisions should be answered be answered by the
processes facet. E.g. a company can reduce its costs by outsourcing its call centre but great
care should be taken and weigh the costs versus the benefits to the overall wellbeing of the
company.

iv) Capabilities-capabilities refer to the entity’s resources and ability to operate the processes.
Capabilities involve the combination of many factors, human capital, policies, procedures,
technology and physical infrastructure that will create value for the business. Capabilities can
be constrained by external and internal factors. External factors include government policies
that can affect the entity’s capability to operate or enhance its capabilities. External factors
can include favorable or unfavorable government legislation, bad economic conditions, a
good example will be Zimbabwe , in this hyperinflationary economy it is very difficult to
operate companies trading in ZWL are finding it difficult to store their money as it will
massively depreciate against other currencies wiping out capital values. Internal factors are
the availability of funds, qualified staff or trained staff that will be able to handle the
processes. These are questions that should be answered by this facet. Can the entity pay its
suppliers, does the entity have enough capabilities of sourcing raw materials needed as input
and can it produce enough output to constantly meet demand?

v) Stakeholder contribution-this is what the entity expects from its stakeholders; all stakeholders
play a different role in achieving the desired level of business performance. Let’s examine
just a few stakeholders.

a)- shareholders- we need shareholders to contribute capital in order to re-finance certain

activities in the business.do we need them to re-invest their profits back into the business
their share of profits.
 b) customers- are the customers profitable, do we want to keep these customers. An entity
expects its customers to be loyal and profitable which is a different aspect from stakeholder
sastification.

C-suppliers-an entity expects from its suppliers prompt and reliable deliveries at low cost but
standard goods or services.

Question 2
Discuss the five elements to Bratton’s model of reward management. (25)

Muza and Magadi defines reward “as both monetary, non-monetary inclusive of
psychological payments that an organisation provides to employees in exchange of the labour
they provide for an organisation”

Rewards emanate from the contractual relationship that an employee has with the employer.
Rewards are said to be both intrinsic and extrinsic. Extrinsic are those that emanate from the
job itself, thus pay and benefits. Intrinsic come from job content and satisfy higher level
needs.
Bratton’s model of reward management includes these five elements:

i) Strategic perspective
ii) Reward objectives
iii) Reward options
iv) Reward techniques
v) Reward competitiveness

a) Strategic perspective- the reward model that the company chooses to adopt should sync with the
overall strategy of the business, it should be linked to the strategies that have been broken down
to the employees. It is known that the company’s strategy and objectives take precedency over the
objectives of the employees, but the reward system should be drafted in a way that it promotes a
striking balance between the two. E.g. a hotel wants to sell 20 000 beds every month and as a
strategy to achieve it gives 10% commission to the sales and marketing team if they achieve the
targeted sales and extra bonuses if costs are maintained at the budgeted levels to all the
departments.

b) Reward objectives-this element seeks to address the followings objectives;

-it should promote recruitment and retention of quality staff that the company needs in order to
achieve its objectives
-human capital is part of the capabilities that an entity needs in order to achieve its goals, the
labour that the employees provide comes at a reward.
- The reward model should be competitive even to the external world so that the entity would be
able to fish and retain the quality of staff needed. If an entity adopts a policy that is less lucrative
than that of its competitors it can suffer from labour turnover and eventually loosing key staff or
having a disgruntled team.
 - The reward system should also try to compensate for the poor working conditions if they are
any.
- the reward system should be used as a tool to motivate staff to higher levels though one should
bear in mind that it is argued that monetary benefits are not the solemn motivator of human
beings , they are other factors as well.

An example of a company trying to achieve loyalty from its employees, adopted a reward system
of giving its employees a bonus when they reach a certain time in service .employees that have
served for 10, 15, 25 years are given a full bonus equivalent to their month’s salary thus for 10
years, those who have served for 15 years are awarded a bonus equivalent to a month and a half
salary, 25 years its double and a half the month’s salary. This was done to promote loyalty and
the reward seems to be effective, as the entity experiences low labour turnover though there a
number of players in the industry.

c) Reward options-one of the elements of Bratton’s model in reward management is material

reward. It has different categories, it is inclusive of basic pay, bonuses, performance pay. This
element stipulates what the organisation will put as its reward. What comprises the basic pay,
how is it calculated? What is given to good or better performance or experience? Reward options
to both directors and employees at middle, senior and lower levels can promote team work,
everyone will work driving all their efforts towards achieving the goals of the entity as they all
know there is an incentive attached to it. Reward options also stipulate all the benefits that are
attributed to an individual. e.g. a hotel gives its middle and senior staff including directors
entertainment accounts, school fees allowances. Entertainment accounts allow staff to enjoy the
services that the hotel provides at a discount of 65%.e,g a single Boma dinner is sold at $45, so
this means a staff member who has an entertainment account is only paying $15.75 for the dinner.
School fees are paid fully at any school within Zimbabwe and for directors, the company covers
even international institutions.
d) Reward techniques- every employee is rewarded according to the job they undertake, though in
competitiveness. There are three techniques that contribute to equity and these are
i) Job analysis-this involves the process of collecting and evaluating information about
tasks, responsibilities and the context of a specific job.
ii) Job evaluation- this involves collecting data which is used by an organisation to
understand the worth of various jobs and as a result create a pay structure. Job evaluation
considers skills, knowledge and abilities that are required for each job. Evaluating the
importance of the job to the company and how much pay should be allocated to the job.
e) Reward competitiveness- an organisation should adopt a competitive reward strategy, that is to
say what they are offering should match what other players in the industry or market are offering
or more to retain staff.in reality, pay levels will be subjective to external factors that include the
government legislation, what the labour market offers and also every entity wants to minimise its
cost.

References

Cuthbert Muza & Itumeleng Magadi-2014 performance management ZOU Module

Acca 2020 F5 performance management Kaplan publishers
Acca 2020 P5 Advanced performance management Kaplan
Cima 2020 performance management Kaplan publishers