Abstract Human resourcing has become one of the most important parts in organizations in the world of knowledge economy, since whether an organization could success depends on that how its employees performed. Therefore, performance management is drawing more and more attention. Because performance management is not just the appraisal of performance, it also provides incentives to improve the performance of employees. DHL is the world’s biggest company in the express delivery area. It has its own successful performance system, and became to use the balance scorecard as an important part of the performance system in recent years.
DHL China, the subsidiary company of DHL, was established in 1986 in China. It developed its own performance system to fit the specific environment of China, and accepted the balanced scorecard system as well. The performance management system of DHL China is analysed in this assignment, mainly from the above phase: whether the system well achieved the goal of performance management system; evaluate the balanced scorecard model of DHL China; and the perceived strengths and problems of it. Introduction of Performance Management
In order to analysis the performance management practice of a company, a clear understanding of the aims and approaches of performance management is necessary. Therefore, it is important to be clear about what is meant by performance management to understand it more fully. Hendry et al. (1997) define performance management as: A systematic approach to improving individual and team performance in order to achieve organisational goals … the approach you take should depend on your organisation: its culture, its relationship with employees and the types of job that they do. Armstrong and Baron (2000) defined it as:
A strategic and integrated approach to increasing the effectiveness of organizations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors. From both of the definitions, three points could be concluded: firstly, the performance management is a strategic approach, which means that performance management serves for the company strategy; Secondly, it relates with the organization, it means that performance management system need to be developed within the context of the organisational structure and culture (Corbridge, M. t al. , 1998); Lastly, the performance management system shows the requiring to employees to be responsible to the quality of their work and their development needs. Therefore, it is an appropriate way to evaluate a performance system with comparing the outcomes of the system and the key elements being concluded above. Understanding the definition of performance is not enough to analysis a performance management system. To analysis the system, understanding the contents of it is also important. Corbridge, M. t al. , (1998) noted that performance management consists of the following stages: defining organisational goals; setting objectives; agreement of training and development plans; performance appraisal; regular feedback, reward allocation; and development of individual career plans. This is the system approach that divides the objectives into functional areas, departments and teams to individuals. It provides a clear arrangement of analysing a performance management system as well. The Balanced Scorecard
The BSC (balance scorecard) was firstly introduced by Kaplan and Norton in 1992, and has become one of the most popular models which are being used in the world. The Harvard Business Review called it one of the most important and influential management ideas of the past 75 years. Kaplan and Norton (1996) suggested that the BSC view the organization from four perspectives, and analyse the performance relative to each of these perspectives: the financial perspective; the customer perspective; the business processes perspective; and the learning and developmental perspective. They could influence other parts regularly, and all of them erve the vision and strategy of the company. The traditional financial perspective is the base of a company to survive and grow, therefore the balanced scorecard kept it as an important part of appraisal system. However, it only tells the past events, but not including the way for a company to develop. And analysis it only could lead the company just focus on the short-term goals, and lost its long-term capabilities. The three other perspectives show a strong relationship with the business development, and they could also push the further financial performance of the company up.
Comparing to the lagging elements, these leading elements could better suggest managers how to achieve the goals. A BSC system not only links the short-term goals and long-term goals of a company. The managers could also divide the vision and strategy of company into particular goals in the four perspectives. Improve the level of management skills. It also makes the employees understand the goals more easily. Therefore, it is also good for individual employees’ development. A valid balanced scorecard system could improvement the level of a company’s management. The BSC system has its own limited too.
Because the BSC system is relating with the business environment, it needs to be regularly modified. Because all the data should be measurable, it would cost a lot of time to set up a new system, and more time to carry out. The background of DHL China DHL was established in 1969, named with the last names of the three founders: Adrian Dalsey, Larry Hillblom and Robert Lynn. It substantially developed from then. In recent years; DHL has grown into the global umbrella brand and become the No. 1 in the industry. It has a global network composed of more than 220 counties and territories, and over 300,000 employees.
In 2009, the group generated revenue of more than 46 billion euros. (DHL website, 2010) DHL China was found in 1986, and becomes the first express company active in China. With the rapidly increase of Chinese market, DHL China has grew fast as well. DHL China has its own performance management system to fit the specific environment of china. And it started to introduce the balanced scorecard system in 2002, when it has 2800 employees in 39 areas around China working for it. The DHL China set up a vision of “market leader” firstly, and providing the best services to customers seeking international express as company strategy.
In order to achieve it, DHL China set their own BSC system with three perspectives: the financial perspective, the customer perspective, and the business processes perspective. The weights of them in the system were 40%, 30% and 30%. They also redesigned some of the elements, for example, customer maintenance, new customer growth, customer satisfaction in the customer perspective. They were known as KPI (key performance index) in DHL. Carrying out the BSC system led a great effort on DHL China’s growth.
The company continues to grow with 40% per year, and it has become the market leader in China, holding 37% of the market share. The evaluation of the DHL performance system This essay has introduced the evaluate standard of a performance system, and the stages of performance management system in the “introduction of performance management” part above. The following part will analysis the performance management system of DHL China with the order of the performance management system stages and evaluates them. Organisational goals Setting a vision is the first step of the performance management.
It is an important way to inform the employees the company strategy and mission. However, it is not enough. Effective communication and enactment of the vision is also important because the employee acceptance of the vision decide the involvement and commitment (Corbridge, M. et al. , 1998). Setting the organization strategy and HRM strategy are also needed for an organization. How to achieve organization strategy should take into consider of the HRM strategy, and a good strategy should be easy recognized with the key factors for success, including how the performance management parts plays in it.
DHL China set the vision as “market leader” and the strategy of “providing the best services to customers”. The company designed lessons of them, and trained the trainers who are training the employees over the whole country. Through this, the employees of DHL China could well understand what the vision and strategy was. Moreover, their involvements were improved by involving into the training plan. Setting objectives Performance management translates organisation goals into departmental, team and individual goals, and they were the different level of objectives.
It transfers the strategy and the vision of the company into measureable indexes. In order to ensure the setting of objectives leads the best result, the objectives should be SMART. That means Specific, Measurable, Agreed, Realistic and Time-related. If the objectives are SMART, the employees could be committed. The SMART objectives are not the only standard of objectives, another structure of objectives known as CASE defined the objectives should including Condition, Action, Standards and Evaluation. That is a more flexible theory because it focuses on the change of environment and evaluation.
The DHL China divided the company vision into three specific parts as the financial perspective, the customer perspective, and the business processes perspective. And more specific indexes were set as well, such as the KPI (key performance index). The BSC system was measureable and realistic, and it was modified to fit in the environment of China, it can be called SMART and CASE. Agreement of training and development plans Training and development should play an important role in performance management system, since lack of skills is a major impediment to effective performance.
Performance management makes the training both fit the organization growth and the individual employees. For instance, DHL China trained the employees the skills to provide the best serves to customers, and they are the company strategy as well. However, it has not been included in the BSC system of DHL China. Appraisal system and frequency of appraisal Performance appraisal is a critical element in the performance management system. It is the measurement about what the employees have done. Frequently appraisal leads more commitment and development of employee performance. The annual appraisals are usually not enough.
The DHL uses a top down schemes in appraisals. Though it is the most common way being used, it was criticised of the lack of impartiality. The solution of it is incorporating the self-appraisal with the top down schemes. Reward allocation The linkage of the reward and employee performance is considered to be necessary in a performance management system. Though it was criticised that it make the appraisal less believable, the pay could not disconnect with the employee performance. The employees could be motivated not only by higher pay, but also by promote or positive feedback from the manager.
The DHL has well combined the BSC system and the reward system, and the employees were satisfied with it. Individual Development Plans Another outcome of the performance management is the sustained plan of further development of the individual employees. The employees could understand their own strength and weakness through the appraisal, and the performance management system should help them to achieve it. It helps the employees more confident with the company strategy, and makes good efforts to the further development of the company.
Perceived Strengths and Problems The strengths of DHL China performance system could be concluded as four points: firstly, the use of balanced scorecard system. It made the performance system easier to fit the company strategy, and improved the level of the management of DHL. Secondly, it modified the indexes for the specific environment in China. The BSC system of DHL China has its own standard. Thirdly, they set up a good communication between the company and employees, so that the employees could understand the company strategy better.
It made the employees committed and developed better in working skills. Lastly, the pay system and the BSC system was well organized, influenced each other with a good effort. It has its problems as well. Firstly, the perspectives of the BSC system is not including the training and development plans, though trainings were taken place in the company. Secondly the frequency of appraisals should be raised. Taking appraisal more frequently could lead more develop opportunities to both the employees and the company.