Chapter One
Introduction
Human resources in the global Competitive Game has many strategic enablers that aim to support the organization in achieving its vision and mission and strategic goals. One of the HR strategic focus is the advancement of the performance management practices in the organization. Since the key purpose of Performance Management in the global competitive advantage is that employees competencies and productivity and their potentiality are driven towards achieving the Strategic goals of the organization. This makes Performance Management more critical due to the increased pressures of globalization that requires solid competencies and skills and talents in order to sail in the competitive environment and maintain sustainability.
Background about the cultural context in KSA and at Al-Rajhi Bank.
Al Rajhi Bank is a fully Islamic Sharia compliant bank operating in kingdom of Saudi Arabia. 89.56% of its customers deal with the bank as it fulfils their Islamic banking requirements. They believe that none of Al Rajhi Bank banking products contradicts with the religious believes. They consider interests/profits should not come based on financial lending but based on trading and investments. So, profits are derived from trading through using their deposits like exporting , importing or buying metals and selling it to others. These transactions lead to gain profit and not by crediting interests to their accounts based on the interests gained from borrowers.
This is to show the pure Islamic culture of the Saudi Arabia from banking perspective so it becomes clear how customers deal with Al-Rajhi Bank.
High school graduates constitute the majority of the employees who have been recruited in Branch Banking since 1997 within Retail Banking Group at Al-Rajhi Bank. Due to the cultural, social and religious factors that recognize the relation between the bank and customers, the management of the bank accepted to hire high school graduates based on the fact that customers will come and deal with the bank regardless who is going to serve them. So, whether a high school graduate or higher there is will be no difference and this will save high costs. The bank maintained less operating costs like salaries because the majority of the workforce were paid less due to their low qualifications and profiles and helped the bank to make more profits. This approach succeeded for couple of years until other competitors come to the picture and some other commercial banks introduced Islamic banking products.
People during that period were rewarded and incentivized and bonus payouts were given to employees but it was not based on professional framework and that process included several biases. The standard Performance management process was not implemented at that time and instead a bonus ranking process was deployed by giving performance ratings without understanding real employees achievements and potentiality and what are the development needs required. People continued to operate at the same level and recruitment continued to hire high school graduates and turnover increased to 18%.
Another issue is that 60% to 70% of mangers and mid-management progressed to reach managerial levels by time as promotion process used to happen every year and many got promoted to managerial roles without having a proper knowledge in people management and eventually in performance management. This used to happen to retain these people from resigning as they are working in the bank since long time and they know how the bank operates and the Saudization initiative to decrease unemployment governed by the center bank always push banks to increase Saudization ratios. This has supported the long-serving employees to be promoted , otherwise they will be attracted by other banks or organizations.
Later in 2008 till 2015, the bank started to shift from personnel management to real Human Resources Management but struggling to deploy a proper performance management process. Talent Management , Performance Management and Training and Development were introduced and a lot of improvements were achieved.
But, since several mangers did not have the required deep knowledge in people management, it was so difficult to deploy employees performance management process and they were highly consistent in following their own perceptions about people rather than proper performance communications, feedback and evaluations. The current process deals with Employees Performance Management process based on the standard cycle that includes Objective Setting, Mid-Year Review and Year-End Review.
However, the inherited practice in the bank based on the social context as well as the cultural background of mangers and knowledge still against the implementation of a high performance culture in the bank.
In addition, to the above factors, there are other factors which influence the performance of employees such as compensations, rewards , work-life balance, working environment, policies and procedures and so on.
Performance Management at the Retail Banking Group in Al-Rajhi Bank
However, it is clear that managers should be continuously trained and specific leadership development programs should be held to increase their commitment, meritocracy, accountability and living the real values of the bank. Employees expects managers to meet them, recognize their efforts, provide feedback on their performance real achievements and help them to improve by understanding the development needs. The emphasized points constitute the key factors that need extensive focus at Al-Rajhi Bank and specifically within Retail Banking Group because the Al-Rajhi bank is a retail banking institution. Thus, the perception of employees performance system under study will be an illustration of employees perception of the effectiveness of performance management system in the whole bank and not only Retail.
Moreover, there might be a need for continuous awareness for employees as it is also required to train them on understanding the performance process and how they are evaluated. As well as leaders and managers should be guided through leaders capability assessments and awareness in order to boost the process and standardize the implementation of meritocracy which is one of the bank values. Thus, the bank values have to be enforced in order to live them and to have them acknowledged by management in order to get a great reflection on employees performance process.
Performance has usually been an important factor to identify high performers and develop the skills and competencies of under performers in an organization. Some researchers have different views and notions as to how an organization can pull out the best performance on an employee to keep the organizational objectives sustained and achieve desired performance and fulfill the organization\’s mission((Aguinis, 2013; Atwater & Waldman, 2008). However, the majority of these researchers focused on the performance appraisal process to emphasize on the effectiveness of employees performance. In addition, the responsibility to achieve an effective performance is still nobodies responsibility. This is because employees always have a set of justifications and excuses of dependencies on the resources and managers find themselves stuck with the organizational complications. Similarly in Al-Rajhi Bank, employees are not equipped with the minimum requirements to perform the extra-mile job and achieve differentiation which cause a lot misunderstanding about the current performance process. Also the business model in the bank is built based on walk-in customers who will be served randomly the first employee they meet in an branch which means the customer will be served regardless what competencies an employee has. This has an impact on customer retention as competition increased in the market and well treated customers are more loyal to the bank than others. Thus, employees performance should not only focus on what they achieve but also on How they achieve .
Statement Of Problem
However these practices require certain factors in order to be successful. The critical factor among these is communication. Because of the integrated nature of Performance Management with other Human Resources elements such as Rewards and Talent Management, Training and Development, this makes the process more demanding to have clear communication what is required to the success of the Performance Management cycle and the achievement of the Strategic objectives of the organization.
Since employees and managers are the two critical players in achieving the desired performance this means both parties they have to increase the amount of communication in order to make things more clear for both. In other words employees need to understand what is required from them and how they will be contributing to the overall strategic objectives of the organization as well as managers need the efforts of employees to achieve the assigned objectives and targets that have been cascaded from the organizational objectives. This means both efforts of employees and managers need to be synergized in achieving the required performance and productivity.
The importance and significance of performance management system is on aim constantly to sustain, improve and develop organizational performance which is achieved via an effective and improved employees performance
Thus, to achieve a competitive performance on organizational level, there is need to continuously improve employees performance.
Moreover, communication is one of the important factors in this improvement process. Employees expectations are communicated by their direct superiors and this leads to spot the light on the role of managers in this process and how often they communicate with their subordinates and particularly on performance matters.
In order to improve employees performance, this means employee have to be aware of what improvement actions they are expected to encounter and this has to be clarified through the ongoing communication with the direct superior to connect and engage them.
Objectives and Questions
The research aims to measure the perception of the performance management system effectiveness, fairness and if leads to improved feedback at Retail Banking Group at Al-Rajhi Bank , KSA. In addition, the results of the participants in the questionnaire were analyzed aspiring to answer the following questions:
Research Questions:
What types of barriers that hamper effective employee performance?
What are the factors that enhance employee performance?
What is the impact of communication on employees job performance?
In response to the questions , the study aims to:
Research Objectives:
To identify types of barriers that hamper effective employee performance.
To identify factors that enhance employee performance.
To analyze the impact of communication on employee job performance.
These objectives are actually studied and analyzed carefully based on a set of hypothesis. These hypothesis are tested based on the results generated from questionnaire.
The hypothesis of this research are:
Utilization of the performance management system is perceived to be effective.
Utilization of the performance management leads to improved feedback .
Utilization of the performance management is perceived to be fair.
There is a relationship between higher than average turnover and the perception of effectiveness of performance management system.
These hypothesis are set to test if the performance management system at Retail Banking Group at Al-Rajhi Bank is effective. Regardless of the nature of the current process deployed in the bank, generally the performance management approach in the region is till new, so the current deployed process of the breed versions in performance management. According to Trosten-Bloom et al. (2014), latest approaches of employees performance management lacks clarity and needs further analysis in order to report the employees perception regarding the effectiveness of such process. Trosten-Bloom et al. (2014) suggested that employees should be in the steering mode of the process to reflect the overall effectiveness of the process.
Employees performance management effectiveness recognizes the extent a PMS achieve its planned objectives; thus, it is hard to quantify (Boland and Fowler, 2000). Lawler (2003) indicated that Employees performance management effectiveness is recognized when the ability to differentiate between high and low perfumers and the ability to influence employees performance as an effective Employees performance management should reduce the breach between expected and actual performance.
Terms and Definitions
Effective Internal Communication: this can be a barrier or a booster for an effective performance process depending on the level of effectiveness of internal communication channels. The lack of communication will be considered as barrier. However, an effective communication, one to one regular meetings between managers and employees, regular awareness on performance process and how the process should be carried out in the organization.
Organizational Support(POS): it focuses on employees general beliefs concerning how much the organization values their contributions and cares about their well-being. This perceived organizational support leads to employees feel more responsible, dedicated and it boosts their performance to help the organization achieving strategic goals.
Internal Barriers: are those elements that avoid performance management practices from taking place within the organizations. These are internal factors which results from the internal practices, behaviors and policies as well as effective internal communication which dismiss performance as strategic process for development, improvement and a systematic approach to achieve individual objectives and organizational goals. Such barriers could be lack of feedback , lack of an effective communication, lack of recognition and appreciation, internal cultural environment factors, managerial skills and competencies.
Chapter Two
Literature Review
Performance management process is a continuous process that aims to examine, assess and improve every employee\’s performance(Aguinis, 2013; Atwater & Waldman, 2008) and to drive sustainable business growth. In this context , it is expected that every employee has a set of expectations or objectives agreed with manager to be achieved in a year. These objectives are cascaded to each employee based on the objectives of his department that he/she works for. Those departmental objectives are derived from the overall strategic objectives of the organization(Chaddha, 2005 ; Raza, 2014 ; Sinha et. Al. ,2010). Therefore, an employee\’s performance and the extent he/she achieves his objectives will have an impact on the strategic objectives. So, it becomes crucial for a manger to meet, communicate, educate the employee and monitor employee\’s performance and provide constructive feedback to ensure the agreed objectives are ongoing as per the agreed standard.
Therefore, performance management helps both the manager and the employee to work hand-in-hand to plan, execute, monitor and review the contribution of an employee towards the organizational objectives.
According to(Chaddha, 2005 ; Hofstede, 1984; Raza, 2014 ; Sinha et. Al. ,2010) every organization has it is own culture and systems and every organization has a set of structured work environment. The management set such work system and it is executed by the middle-management who have the line of sight with employees. The gap in performance management arises when middle-management fail to achieve the objectives set by management and when these objectives remain underachieved by employees.
However, researchers reveal from a Qualitative evaluation the importance of the performance management process despite the approach been used. In other words, for some it is the effectiveness of the performance management process. According to Aguinis (2013) , it is important to set a structured plan for an effective deployment of the process in order to get the buy-in of the process stakeholders and mainly managers and their employees. As well as other authors debated around the importance of having an effective ongoing feedback and recognition by a proper measurement of employees contribution in order to value employees Perceived Organizational Support(POS) and the sharpen the extent an organization cares for employees well being including recognition, appreciation, involvement and delegation of authority (Eisenberger et al. , 1986; Eisenberger & Stinglhamber, 2011; Rhoades & Eisenberger, 2002; Shore & Shore, 1995).
Moreover, according Chaddha( 2005) there are several perspectives of performance management process in order to make it effective. An effective process can be achieved when a manager plays a coach role because this will facilitate the process of close observation of the activities and tasks under taken by employees and this will support him to provide ongoing feedback that aims to position employees efforts in the desired direction. Second, through the performance management methodology and particularly the performance appraisal process , the manager can assess the effectiveness of employees performances and identify the discrepancies between actual achievements compared with the expected performance.
Therefore, managers are considered a key stakeholders in the performance management process to ensure its success and effectiveness because they are the appraisers. Thus, there is a need to highlight on the importance of leadership standards and what skills and competencies managers should have in order to drive the success of performance management process additionally to the structured manner of the process itself. This makes it a evident that managers have to be living this process without being reminded.
Empirical Debate
Some researchers have also indicated certain measures that reveal the effectiveness of employees performance management system as to some of them it has not been deeply conceptualized in management literature and it requires further study (Biron et al., 2011; Thurston and McNall, 2010). Current initiated literature have mainly reflected on the “performance management” in preference to the evaluation or \”appraisal process\” (DeNisi and Smith, 2014). Employees performance management system require several activities and with appraisal to be one of these activities that is mainly conducted to provide a score one or twice a year (DeNisi, 2000). Generally, the majority of research has examined the effectiveness of performance management systems based on two factors, the quality of the system and the perception of appraisers. And lately, there was a move in this measurement from focusing on appraiser(manager) to appraisee (employee) based on performance management perspective ( Jawahar, 2007).
Different researches were conducted that exposed different views such as: the focus on performance appraisal process were considered a good practice but ended with a big gap of \’halo effect\’ caused by appraisers(managers)( DeNisi, 2000). Others considered managing out bad apples is a correction that need time but it may end up with misjudgment of talent and potentiality of certain employees. Also others emphasized on the importance of setting measurable objectives which helps to be specific and more focused but productivity becomes difficult as it is stuck with organizational complications and cultural complexity(Jawahar, 2007).
Those points were viewed from different angles in order to understand the gaps in current performance management practice at Al-Rajhi Bank to end up with an efficient method that ensures well-organized employees performance management process
The, approaches to performance management are changing, and senior managers must be attentive to the performance management systems in their organizations. Further various angle of view were revealed as different scholars fashioned varied approaches towards managing the performance in an organization, such as; Many managers resort to performance appraisal as a tool for checking or controlling performances. Appraisals typically occur once or twice a year, but are affected by prejudices, Halo effect, and controlled evaluation system. Biron et al.(2011) revealed that appraisals are usually done with a motive to judge an employee for a raise in the salary or position. On the other hand performance management is an ongoing process of intervention.
From a cultural perspective, according to Hofstede (1991) culture is a “collective programming of the mind and distinguishes the member of one group or category from another” , also it is evident through many researches that organizations operate within a particular culture where it is more broadly recognized in modern consideration of organizational performance that managers and other organizational members have to improve their understanding of their cultural context for the organizations to perform and compete and this applies on employees who are the main factor of fulfilling organizational strategic objectives (Blunt & Jones,1992; George & Jones ,1996; Zakaria ,1997) .
According to Towers Watson’s performance management survey (2015) pertaining the traditional approaches to performance management that are still dominant within organizations in the Middle East region.
Although the latest focus on performance management, the survey has shown that only 45% of the organizations in the Middle East revealed that their deployed performance management process are effective. As well as , only 37% of managers and 34% of employees acknowledged they are satisfied with their performance management process. 13% of the respondent employees acknowledged that they have an ongoing feedback process in place. Moreover, 81% of the respondents expressed their current approach deals with the performance management process as a rating process to indicate monetary compensations and rewards.
The traditional approach of performance management in the region as well as in KSA makes evident to the need of a structured performance approach and mangers commitment to the process.
The gap in performance management in Al-Rajhi bank arises from the middle management, as these people who got promoted by time and not by competencies and by depth of experience and who are supposed to get work done and well executed to contribute the overall bank objectives. As mentioned in chapter 1, the bank is fully Islamic sharia compliant and customers deal with the bank from their religious faith. Thus, employees who used to be considered high achievers in the past are under achievers after the increase in the competitive game in the market after several banks introduced Islamic banking products. Also, the middle-management is expected to work closely with employees to ensure the objectives are done and not only to set targets and keep employees unaided.
In the competitive market place , performance management is not only about setting the objectives but also to ensure there an ongoing communication between the parties who decided these objectives to ensure they are well executed (Cross and Cummings,2004; Mehra et al.,2001; Sparrowe et al. 2001).