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As we’ve seen, job design influences performance by improving satisfaction. Workers who have some authority and control, and who see the value of their work as it impacts the organization, tend to have intrinsic motivation and take more pride in and responsibility for their work. There is also research on how these aspects of job design are implemented at an organizational level. We’ve also seen that skill variety, task variety, significance of work, autonomy, feedback, and empowerment are all critical factors to designing jobs. We also learned how organizations align recruitment, job security, organizational culture, training, and reward systems to create a high-performance work system.
All performance goals are driven by measurement—deciding what to measure and how to measure it, collecting and evaluating data, setting benchmarks and goals, etc. Data collection usually includes both objective quantitative data (like items produced or dollars earned) and qualitative data (like customer satisfaction or employee engagement).
IN CONTEXT
The utility company Arizona Public Service used a performance measurement system to rebound from dismal financial results. The company developed 17 “critical success indicators,” which it measures regularly and benchmarks against the best companies in each category. Of the 17, nine were identified as “major critical success indicators.” They are:Each department sets measurable goals in line with these indicators, and a gainsharing plan rewards employees for meeting the indicators.
- Cost to produce kilowatt hour
- Customer satisfaction
- Fossil plants availability
- Operations and maintenance expenditures
- Construction expenditures
- Ranking as corporate citizen in Arizona
- Safety all-injury incident rate
- Nuclear performance
- Shareholder value return on assets
High performance relies on a high-level of buy-in from all employees. Companies can use various incentives to improve performance. These are given in addition to base compensation and benefits. High-performing firms tend to invest in more sophisticated reward practices to keep employees engaged and motivated. Currently, about 20% of firms link employee compensation to the firm’s earnings. They use incentives such as employee stock ownership plans, where employees receive shares of the company as a reward. A similar practice is profit sharing, where employees receive a bonus that scales to company performance. This is distinct from shares in that it is a one-time lump sum, rather than giving employees a share of the company. Another measure is gainsharing, in which employees receive a bonus for cost-saving measures.
EXAMPLE
A large corporation offers a retirement plan and makes additional contributions of company shares to all employees who exceed their performance goals. They may offer additional financial incentives to operations employees who implement cost-saving measures.By giving every employee a vested interest in the fate of the company, they feel more motivated to perform at a high level. A profit sharing plan also leads to more mutual encouragement and coaching among workers, since improved performance by any one worker leads to more rewards for everyone. Moreover, profit sharing should lead to greater information sharing, which increases the productivity and flexibility of the firm.
How the rewards are distributed affects performance. One study compared firms that gave employees a bonus at the end of the year to those that received a bonus contribution to their retirement plans. The firms that had the year-end bonus had better performance. Thus, employees who receive rewards sooner are more motivated. The improved performance was also better when employee contributions had a quick, predictable effect on firm performance, such as generating new sales or controlling costs.
Succession planning is a process whereby an organization ensures that employees are recruited and developed to fill each key role within the company. Succession planning plays two key roles in organizational performance. The first is having continuity of leadership by having future leaders in place. The second is motivating employees by showing a clear path forward in their careers within the company, which helps to reduce turnover.
Executives report succession planning as one of their top challenges, yet less than half of companies have a succession plan, and even fewer have succession plans for nonmanagerial positions.
Looking across organizations, succession planning takes a number of forms (including no form at all). An absence of succession planning should be a red flag, since the competitive advantage of a growing percentage of firms is predicated on their stock of human capital and ability to manage such capital in the future. One of the overarching themes of becoming better at succession is that effective organizations become much better at developing and promoting talent from within. The figure “Levels of Succession Planning” summarizes the different levels that firms can work toward.
| Level | Description |
|---|---|
| Level 1 | No planning at all. |
| Level 2 | Simple replacement plan. Typically, the organization has only considered what it will do if key individuals retire, leave, or have an extended absence. |
| Level 3 | The company extends the replacement plan approach to consider lower-level positions, even including middle managers. |
| Level 4 | The company goes beyond the replacement plan approach to identify the competencies it will need in the future. Most often, this approach is managed along with a promote-from-within initiative. |
| Level 5 | In addition to promoting from within, the organization develops the capability to identify and recruit top talent externally. However, the primary source of successors should be from within, unless there are key gaps where the organization does not have key capabilities. |
IN CONTEXT
Dow Chemical exemplifies some best practices for succession planning:
- Dow has a comprehensive plan that addresses all levels within the organization, not just executive levels.
- The CEO reviews the plan, signaling its importance.
- Managers regularly identify critical roles in the company and the competencies needed for success in those roles.
- Dow uses a nine-box grid for succession planning, plotting employees along the two dimensions of potential and performance.
- High-potential employees are recommended for training and development, such as Dow Academy or an MBA.
It’s important to have conversations with all employees about their plans and goals. As Timothy Sompolski, CEO at Interpublic, said:
When it comes to succession planning, nonprofits face a particularly difficult challenge of attracting workers to a field known for low pay and long hours, such as nonprofit work. Often, the people attracted to a nonprofit are drawn by the cause rather than by their own aspirations for promotion. Thus, identifying and training employees for leadership positions is even more important.
At for-profit organizations, attracting low-wage workers can be a challenge, but succession planning can help. By showing workers the potential for upward movement, greater attraction to the company may take place.
IN CONTEXT
McDonald's has a robust succession plan, not just for CEO’s but for lower-wage workers too. They do this by providing crew training, shift leader and management training, and a clear path for career progression within the company. They also use mentorship and coaching to prepare low-wage workers for promotions and utilize technology for succession planning tools. In addition, they offer the Archways to Opportunity Program, which provides educational benefits, skills training, and career planning. Hamburger University is also part of their training programs and provides leadership courses to ready employees for management positions.
Employee engagement is the emotional commitment and involvement employees have in their jobs and with the company. Higher employee engagement results in better organizational performance. Engaged employees contribute to the company’s success, but first, job designs must be optimized, and a high-performance work system in place. The elements of employee engagement include emotional commitment by the employee, employee motivation, job satisfaction, high productivity, and loyalty to the company (which improves retention).
Some of the strategies used for employee engagement include clear, transparent communication about organizational goals, changes, and expectations. This communication must be a two-way street, where employees are also listened to about challenges. Recognition and rewards also contribute to engagement. Empowerment and autonomy (an element of job design) should also be practices. Inclusive environments where everyone takes part and is respected and that promote a work-life balance are all measures that can enhance employee engagement.
In addition, ensuring supportive, positive leaders that lead by example, encouragement of collaboration and teamwork, and comfortable and safe workspaces can all contribute to employee engagement efforts.
Employee engagement can be measured through surveys, interviews, focus groups, performance matrices, and feedback mechanisms such as suggestion boxes (digital or otherwise). Most companies will leverage technology to better synthesize employee engagement data.
In this tutorial, we described some elements necessary for high organizational performance, particularly employee engagement through performance measurement, rewards systems, and succession planning. These are all interconnected concepts that both depend on and inform job design. In the next tutorial, we’ll take a deeper look at measuring performance.
Source: This tutorial has been adapted from Saylor Academy and NSCC “Operations Management”. Access for free at https://pressbooks.nscc.ca/operationsmanagement2/. License: Creative Commons Attribution 4.0 International.
REFERENCES
Marquez, J. (2007, September 10). On the front line; A quintet of 2006’s highest-paid HR leaders discuss how they are confronting myriad talent management challenges as well as obstacles to being viewed by their organizations as strategic business partners. Workforce Management, 86(5), 22.
