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Performance Management in BMW
Introduction
Performance management refers to the organizational measures that enhance the management of individuals for the attainment of high organizational performance levels (Armstrong and Baron 2).Performance management is a fundamental organizational process. Thus, performance management entails identifying organizational objectives and the various ways to achieve them. Other definitions of the organizational performance management process highlight its organized nature. Performance management has several aims and objectives. The most significant goal of performance management is the attainment of higher levels of organizational performance. This comprises reaching the organizational targets in areas such as production, customer service, quality standards, profit maximization and shareholder value. In general, therefore, performance management aims at making things better, analyzing the forecasted goals of an organization, developing the skills and knowledge of the workers, assisting and supporting the people required to achieve the set goals. It therefore targets poor performers by ensuring access to techniques through which such people can improve their levels of performance.
An organization gains massively from an efficient performance management system. Human capital advantage is the most significant of the objectives of performance management (Armstrong and Baron 8). Performance management is a means of the organization to achieve competitive advantage through its human resources. Employees are the greatest sources of competitive advantage. By enhancing employee performance, the organization gains a strategic advantage over its competitors (Kandula 10). There are many benefits provided by performance management systems. In addition to its strategic benefits, this organizational strategy also has administrative, communication, organizational maintenance, developmental and communicational benefits. Upholding core organizational values regarding performance and employee relations are some of the important factors an organization has to consider when pursuing this strategy. These benefits however, are only achievable if the organization establishes an organized and structured performance management system.
Performance management has several objectives. The first objective is the on-going roles. These are the objectives structured into roles. Target objectives are measurable results such as sales levels. There are also task objectives that comprise goals for the completion of certain tasks or projects. Objectives might also include strategies to uphold the organization’s core values in areas such as teamwork and customer service. Another objective of performance management is eth behavioral objective. This objective covers employee behavior in areas that may include competency and core values. Lastly, performance improvement as an objective involves the actions that need to be taken to achieve greater results (Armstrong and Baron 27).
The Performance Gap
Performance gaps refer to those instances where there is a certain disparity between the actual performance and the preferred performance (Caldwell 46). Performance gaps are easily identifiable if the organization and the employee have carried out comprehensive planning and have set out measures to monitor employee performance. Identification of a performance gap is an important step in finding out its cause and ultimately providing solutions for the gap. Trouble shooting involves an entire process where there is an analysis of the gap and probable factors identified. This whole process requires an involvement of the employees affected and the management as well. The performance gap costs the organization a lot in terms of productivity, sales, profits and the cost of repairing the gap. Eliminating the performance gap ensures an improvement in performance, increased customer motivation and increased employee alignment to the organization’s goals (Caldwell 49).
Company Background
BMW is an automobile manufacturing company officially founded in Germany in 1916. The company manufactures high-end cars and motorcycles. Among the company’s brands include the Rolls-Royce and the MINI. The company has branches in at least 150 countries and is headquartered in Munich, Germany (BMW 2012). The company established its first branch in the USA in 1994. Since then, it has continued to open branches in many other parts of the world. The company has built competitive brands over the years with soaring sales all over the world. Its employees enjoy a wide range of incentives and programs meant to boost their performance and motivate them to gain skills that would improve their performance. The company offers staff development initiatives through such programs as the BMW Academy UK that trains staff in some of the key areas (BMW 2012). In BMW, staff appraisal is a technique that helps review performance and ensures alignment of staffs’ efforts to the company’s objectives.
Performance Management
BMW has an elaborate performance appraisal plan that encourages managers to interact with their employees. Their portfolio performance management system allows both employees and managers to analyze their performance every year according to several guidelines (BMW 2012). The review of employee performance is done in relation to the company’s objectives. The employees and managers then establish objectives for the next year. The performance management method also involves identifying methods of training and the knowledge and skill gaps requiring development. The system generally focuses on developing strategies to address weaknesses, develop strengths and enhance career development. BMW’s corporate strategy (Number ONE), states that their employees are their most valuable assets and their most important strategic decisions are those concerning their human resources (BMW 2012). This strategy entails the company’s objective of being profitable and creating lasting value in their products. The four pillars guiding this strategy are profitability, growth, shaping its future, and accessing customers and technology. The last performance gap is the inability of the company to train sufficient replacements for its aging workforce. The company has an aging workforce that might require replacement in the future hence the need to train and develop new talent. The company’s training program has however not managed to reach the target made with a very large number of the workforce still ageing.
Performance Gaps in BMW
Recent company results show a performance gap with performance deviating from the expected. The company is facing several performance gaps that have a great effect on its functions and ability to carry put business. One of the performance gaps the company faces is the reduced capability to compete despite the growing competition in the automobile industry (Murray, Poole and Ones 385). The company registered a decreased profit margin in 2012 despite its impressive performance the previous year. Another performance gap that the company faced in the same was its inability to reach a 50% carbon emission from the vehicles manufactured. BMW posted a 32% reduction in carbon emission in the cars manufactured during the year (BMW 2012). Although this was a major achievement on the company’s part, it fell short of the desired performance objectives set. Thirdly, in line with its objectives to achieve zero waste in it plants, BMW only achieved part of this objective. Only one plant achieved zero wastage (BMW 2012). The inability to transform the rest of the plants is a performance gap.
The first performance gap that BMW faces as an automobile company is its capacity to overcome the fierce competition from rivals such as Audi and Honda (Murray, Poole and Ones 385). The automobile industry has different challenges everyday with rivals trying to outdo each other in technology and innovativeness. The lack of a strategic advantage over one’s competitors gives the company a strategic disadvantage in the market place. Usually, this kind of performance gap is caused by the workers incompetence and the lack of sufficient skills to produce competitive goods. In BMW’s case, there is clearly some skills shortage in staff or a lack of motivation to do their best in the production and innovation. Thus, the company’s fall in profits by 28% in 2012 were partly explained by the company’s inability to efficiently produce competitive products given the changing customer preferences (Rauwald para 1).
Another key performance gap is the company’s inability to reduce carbon dioxide emission by 50% in the vehicles they produce. BMW has only achieved a 32% reduction of carbon dioxide emissions in the recent past (BMW 2012). This gap in performance has significant impacts on the organization. In fact, it considerably affects the sales revenue the company will gain during the year and the environment concerns the company pledges to protect. Customers for example are increasingly aware of the damage carbon emissions have on the environment. Automobile buyers who are aware of these risks find it difficult to purchase vehicles with high emissions. The company intends to increase this reduction of emissions in automobiles by a significant amount in the future. This can only be done with the adoption of motor vehicle manufacturing technology and skills that can reduce the emissions from the vehicles. The company hopes it can achieve the 50% reduction in emissions in the coming five years (BMW 2012).
Another performance gap is the group’s intentions to ensure there is no waste in its plants. BMW recently embarked on a program to reduce the damage to the environment caused by the company’s plants. The automobile company had intended to introduce practices that would reduce the plants’ reliance on landfills and instead encourage recycling. Only one plant has achieved this feat. The Sandburg, South Carolina plant managed to manufacture automobiles with zero waste (BMW 2012). This performance gap is the result of the inadequate technology, training and ideas for the development of methods that will reduce waste production in the plants. This gap has several effects on the performance of the company. The first effect of the inability of the company to roll the zero waste programs to other plants is that it increasingly harms the environment by relying on landfills. Secondly, it damages significantly the ethical and moral values behind the company’s corporate social responsibility. BMW aspires to reduce the waste dumped into the environment by ensuring an increase recycling of waste in their plants (BMW 2012).
Another performance gap in the BMW that poses a definite risk on the company’s productivity is the threat of its aging population of workers (Pieper 2006). The population of workers in BMW is roughly between the fifties. This poses a threat to the quality of automobiles delivered in the market and the sustainability of production standards. As the aging workers approach their retirement ages, the company is faced with the task of replacing these workers with others that are equally skilled and who will maintain the standards set by the previous workers. Due to this, BMW has organized training for graduates who will replace the aging population when they retire. The performance gap caused by this occurrence is that there is increased potential for low quality production. If the company’s strategy to offer training to new recruits does not reach the forecasted threshold then the company will have to deal with an incompetent and unskilled workforce in the future.
Recommendations and Conclusions
To counter the negative effects of the performance
gap several measures have to be taken. The first strategy to address the
performance gap is talent management. Talent management is an organized and
structured way of identifying and developing talented individuals (Armstrong
26). In BMW’s case, there is a need to improve their talent management
strategies to deal with the aging worker problem. Talent management will also
provide the necessary skill for innovative techniques to solve the waste issues
cited above and produce automobiles that give the company a competitive edge in
the market. Another tactic that BMW can employ to improve skills development
and develop a competitive presence is employee segmentation. This strategy
allows the company to group employees according to their performance and
remunerates them according to their work.
Works Cited
Armstrong, Michael, and Angela Baron. Managing Performance: Performance Management in Action. London: Institute of Personnel and Development, 2005. Print.
Armstrong, Michael. Armstrong’s Handbook of Performance Management: An Evidence-Based Guide to Delivering High Performance. London: Kogan Page, 2009. Internet resource.
BMW. “Annual Report 2012”. 2012. Web. 15 March 2013.
Caldwell, Charles M. Performance Management. New York: American Management Association, 2000. Print.
Kandula, Srinivas R. Performance Management: Strategies, Interventions, Drivers. New Delhi: PHI Learning, 2006. Print.
Murray, Peter, David Poole, and Grant Jones. Contemporary Issues in Management and Organisational Behaviour. South Melbourne, Vic: Thomson Learning, 2006. Print.