Analyzing IBM’s Performance Management System Using the Fourteen Characteristics of an Ideal Performance Management

Introduction

IBM is a multinational company headquartered in Armonk, New York, USA. The company deals with, and manufactures computer software and hardware. The company also offers consulting and hosting services to nanotechnology and mainframe computers. The company has presence worldwide and has more than 431,000 employees. In 2013, the company recorded revenue of $99.751 billion, operating income of $19.524 billion and a net income of $16.483 billion. The company also has more than 431,000 employees. In 2012, IBM was ranked number 2 by Fortune in terms of the number of employees and position 4 in terms of market capitalization. One of the greatest strengths of the company is innovation. 6% of IBM’s revenue amounting to $ 6.3 million is committed to research and development. IBM invented the Automated Teller Machine (ATM), Floppy disk, hard disk drive, and magnetic stripe card among other inventions.

My position in the company is sales representative, working as a team member in the sales and marketing team. Management of employees in the company has a long history of effectiveness, starting from 1914 when the company’s CEO Thomas Watson created a team spirit in the workforce by starting employees’ sports team and organizing family outings. IBM was also among the first to provide group insurance to its employees in 1934. IBM provides paid vacation, survivor benefits, equal opportunity employment and grants program to its employees. Being a multinational company with operations in more than 170 countries, the company assesses its resource needs every year in order to ensure that it develops the right workforce to improve its global reach and competitive advantage. Employees are hired on the basis of part-time, temporary, and full-time employment arrangements.

Critical Issue

In order to identify the critical issue of the company, it is important to understand the fourteen characteristics of an ideal performance management. A critical issue is one that does not have any of the fourteen characteristics. As shown in the appendix, the characteristics that are not present in the current system of IBM are: Acceptability and Fairness, Reliability, Inclusiveness, Correctability and standardization. The implication of the absence of reliability is that the errors in the performance system may lead to poor rewarding system and demotivation of employees rather than motivation. On the other hand, lack of acceptability and fairness leads to poor performance because employees may lack the morale to work wholeheartedly for the company.

Due to the high human resource needs and large number of employees, the critical issue of the company is to maintain an effective flow of human capital supply with low turnover and high performance (Grossman, 2005). IBM’s core business is HR and talent management because there are many employees which makes it difficult for the company to monitor each one of them and measure their performance. The challenge in this case is to maintain an effective supply chain of talent that will propel the company’s global reach and competitiveness. An effective supply chain flow ensures that the company hires the right people at the right time (Boudreau, 2010). Supply chain of talent also affects the innovativeness, marketing and branding of the organisation.

Supply chain of talent affects various areas of human resource management including compensation, rewards and recognition, performance management, employee engagement, and training and development. Since the employees of the company are many and are located in many countries, it becomes difficult to maintain an effective compensation system that will be uniform and fair across all departments and all locations in the world. This reflects the absence of acceptability and fairness, which is one of the fourteen characteristics of an ideal system. Unfairness in performance measure leads to unacceptability, which causes poor image for the company.

Another problem related to talent supply chain is monitoring and development skills for employees. While employees may become obsolete due to the changing and dynamic IT industry, it becomes difficult to monitor the skills of employees and determine their contributions to the company. With about 4,000 skill sets, the HR department of IBM faces the challenge of assessing each skill set and precisely determine the performance of each employee and their contribution towards the overall organisational performance. This reflects lack of standardization as one of the fourteen characteristics of an ideal system. There is no consistency in employee management within the company. For the organisation to achieve greater results and performance, it should be able to measure the performance of employees in each of the skill sets in a standardized manner.

Assembling and managing teams in IBM is also difficult because the large number of employees come from different geographical and cultural backgrounds. The attitudes and interests of each employee are different, making it difficult to coordinate and accomplish team goals and objectives. According to the Seven Point Plan developed by Roger, special interests, attitudes, circumstances and dispositions are part of the seven aspects personnel specifications required in hiring and selection. These specifications differ from one person to another depending on their countries and cultural backgrounds. Therefore, the recruitment and selection process is difficult due to these differences. This can also be analysed in terms of Jung’s personality theory in organisational behaviour. Jung provided different types of personality including sensation thinking, intuition thinking, sensation feeling, and intuition feeling. Sensation thinking involves practical down-to-earth thinking that is fact-oriented. Intuition thinking is based on concepts and generates new ideas. These different types of personality differ in different countries where IBM operates its business; hence leading to absence of consistency and standardization of performance measurement within the organisation.

Individual differences in terms of values and traits also pose a significant challenge to the talent supply chain of the organisation. Many employees make it difficult for the organisation to coordinate activities between different teams from different departments within the organisation. To achieve effective performance, it is important to integrate operational and strategic activities of various departments globally. This may become difficult if the human resource supply chain is not effectively managed in consideration with the varying individual differences among employees across various countries globally. Managing human resources effectively across all business units globally is difficult under ineffective talent supply chain management.

Stahl et al (2011) suggest that one of the biggest challenges facing multinational companies operating global businesses is building and sustaining an effective talent supply chain. A key aspect in maintaining an effective talent supply chain is to sort and manage employees based on their potential and performance. This requires a heavy investment on human resource management in terms of time and resources. Furthermore, retaining employees requires good compensation and rewarding scheme. IBM faces the challenge of retaining top talent in order to sustain a good talent supply chain in the competitive IT industry.

There is an insufficient language of work in the organisation – the language of describing work in different countries differs significantly. As a result, the company’s HR fails to manage human resource activities effectively; hence the talent supply chain fails to achieve the organisational objectives of the company. Assessing work tasks, key success factors, and employee qualifications is difficult because the language used to describe these issues is different from one country to another. This poses a significant challenge to the company’s future talent needs and supply chain.

The Human Resource system of IBM also experiences difficulties that challenge the talent supply chain of the organisation because the making the system to work in many countries is difficult (Grossman, 2005). There are different privacy standards in different countries; hence dissemination of information about employees across different countries is difficult. This causes a big challenge to learning and development in multicultural context. Distributed learning is one of the key learning principles in Human Resource Management. It involves breaking of learning experience into manageable pieces for the learner. The practice is difficult when managing thousands of employees worldwide like in the case of IBM.

Recommendation and Outline Plan to Address the Issue

In order to enhance an effective talent supply chain with little turnover and high performance, IBM’s HR managers should develop appropriate plan in terms of effective recruitment and selection, training and development, team building, rewarding and performance management. All these areas need to be addressed in line with the overall organisational objectives of the company.

The first recommendation for the HR department of IBM is to align its talent management with the corporate strategy. Based on the organisational strategy, the company should develop the right talent to achieve organisational objectives. For example, IBM’s strategy is based on its business model of continuous transformation whereby the company focuses on innovation, reinvention and push for a higher value (IBM, 2012). Higher value is attained through organic growth in research and development as well as divestitures and acquisitions. The company should align its talent management with this corporate strategy. IBM may do that by hiring employees who knowledge, skills and experience in research and development, innovation and reinvention.

In human resource management, it is important to include a person specification and job during recruitment and selection. A person specification consists of the qualities and features of the person to be hired (Walters, 2001). On the other hand, job description contains the responsibilities and duties that will be performed by the person who will take the job so that the person knows what he/she is supposed to do even before applying for the job. On the person specification, the company should include knowledge and skills in research and development and IT, creativity, and commitment as the main attributes of employees. This will ensure that the selected employees are able to meet the requirements of the company’s corporate strategy.

Training and development of employees which is the work of Human Resource department should also involve imparting skills on research and development across all business units of the organisation worldwide. Training involves planned activities undertaken by the human resource management in order to increase knowledge and modify social behaviour in order to achieve strategic objectives of the company related to each job (Jung & Sosik, 2006). When training employees in IBM, the company should emphasize on the development of key skills related to innovation and research and development.

Performance management should also be integrated with the corporate strategy of the organisation. Performance management involves the comparison between employee performances with the performance standards of the organisation (Walters, 2001). The performance standards of the organisation should be determined in line with the major corporate strategies of the organisation – organic research and development, and high level of innovation and reinvention capabilities (Walters, 2001). If an employee does not meet the required performance standards, he/she should be re-trained. Performance appraisal of employees should also be flexible in order to adapt to changing business conditions.

Another recommendation for IBM to improve its talent supply chain is enhancing consistency within Human Resource Management. There should be consistency in the HRM in terms of training and development, employee retention, career development, and rewarding. All employees should be given an equal opportunity to learn, train and develop their careers. They should also be motivated equally through compensation, rewarding and recognition in order to enhance employee retention, low rates of employee turnover, and high performance. According to the general principles of motivation, perceived equity and fairness enhance the effectiveness of motivation and promote consistency in motivation and human resource management in general (Walters, 2001). Furthermore, performance appraisal mechanisms need to be consistent in order to achieve higher performance among employees and enhance effective talent supply chain. Internal consistency is specifically necessary for IBM which has a lot of subsidiaries in many parts of the world. To deal with the challenges of a large workforce across many countries, IBM should maintain consistency of talent management in all its subsidiaries.

To enhance internal consistency and standardization as characteristic of effective performance measurement system in HR management, IBM has already taken a few steps. First, the company uses both quantitative and qualitative data which are collected quarterly to introduce and implement its practices consistently (Stahl et al, 2011). It also conducts customer survey semiannually to determine their level of satisfaction and identify areas in which its employees show laxity and areas in which they are responding appropriately to customer needs. This is a major step towards achieving consistency within the HR department, but the company may enhance internal consistency further by using equal and fair approaches to motivation and performance management.

Effective talent supply chain can also be enhanced by incorporating talent management processes into the company’s corporate culture. Since the company operates globally, it needs to develop a corporate culture that embeds culture into its human resource management. In this case, the company should integrate its core values and business model to the talent management processes including training and development, performance management, recruitment and selection, compensation and reward systems, and leadership development (Stahl et al, 2011). Applicants to various positions in the organisation need to be selected on the basis of corporate values and cultural fit. Instead of selecting employees based on their job-related skills, the company should expand their selection process to include cultural criteria. In this case, the company may assess the values and personalities of applicants in the selection process to determine whether they can fit into the company’s corporate culture.

Currently, IBM uses a value-based approach to HR management. However, there are still a lot that need to be done to promote corporate culture consistently within the organisation. Interview questionnaire should be revised to decrease its reliance on skills, knowledge and experience; and focus more on beliefs and values that are consistent with the organisation’s corporate culture (Walters, 2001). Values and beliefs of employees should also be monitored during performance management process to ensure that employee values remain consistent throughout the organisation. Attitude and ability to learn are also necessary in enhancing consistent corporate culture across all subsidiaries of IBM worldwide.

Another method of promoting corporate culture is through training and socialization (Dileep, 2010). Standardized induction programs need to be implemented consistently, equally and fairly across all subsidiaries and departments. Consistent coaching and mentoring are also essential. IBM uses an appropriate engagement and training practices but consistency needs to be enhanced in order to develop and maintain an effective corporate culture. Training and development is also very essential tool in IBM’s HRM. This is mainly targeted on developing employee skills in order to implement its corporate strategy of innovation and reinvention successfully. However, effective talent supply chain can be enhanced by using training and development programs to reinforce culture throughout the organization. The culture of innovation and reinvention in IBM can be enhanced through learning and development. Values-based performance management practices may also be adopted to assess employees not only on the basis of achievement and performance but also on the basis of how they adopt shared values. One section of the performance management system should assess individual performance of employees while the other section should assess their values and behaviours in relation to the company’s corporate culture.

An effective talent supply chain and high employee performance is enhanced by attracting and retaining high-potential employees. This can be achieved through effective motivation and adapting talent management practices to meet employees’ needs. For instance, the company should implement a work-life balance that enhances flexibility for employees at the workplace. This reduces turnover rates among employees and improves their performance.

Lastly, the organisation needs to create a sense of ownership across all business units by encouraging and implementing management involvement. In this case, business unit leaders should be involved in talent management process (Laurie, 2010). Business unit leaders should be involved in recruitment, leadership development and employee retention practices because they understand the human resource needs of their departments. In this case, human resource management practices need to be integrated with the company’s corporate culture. Effective communication channels should also be developed between Human Resource Department and other departments so that collaboration can be enhanced throughout the organisation. This will enhance employee retention and high performance.

Benefits to be achieved from the Recommendations

The main benefit of the above recommendations to the organisation is higher employee performance which leads to greater overall performance and profitability within the organisation. If all the recommendations are implemented appropriately within the organisation, there will be higher retention and development of employees. This will improve their potential and performance.

First, an alignment of talent management practices with corporate strategy enables the organisation to meet its technological leadership and innovation in the IT industry. Aligning talent management with the corporate strategy of innovation and reinvention enables the organisation to achieve its strategic objectives as well as overall primary organisational objectives such as growth and profitability. For instance, hiring and training employees based on the corporate strategy of the organisation leads to high performance in the strategic areas of the organisation; hence achieving competitive advantage and organic growth (Tyson & Tyson, 2006). IBM is able to select employees with relevant knowledge and skills to enhance global leadership in the IT industry.

Consistency within the HR department is also beneficial, especially in the achievement of organisational goals and objectives because it ensures that the company’s HR managers maintain a good flow of talent with minimum turnover and high performance. If employees are treated equally in terms of motivation, training, and compensation; they will become highly motivated to meet the organisation’s goals and objectives. Retention through consistency of talent management practices ensures that the company maintains long term relationship with its employees; hence making profits long into the future.

The main advantage of maintaining corporate culture in talent management process is that it enables the company to meet its objectives and retain top quality employees (Laurie, 2010). This is because corporate culture within the company’s HRM enables the company to implement its business model successfully and obtain a competitive edge in the highly competitive IT industry. It ensures that employs develop the right attitude and value needed to accomplish the corporate strategy of the organisation.

Management involvement in talent management practices is also beneficial for the company because it ensures that effective communication is enhanced throughout the organisation – bottom up and top down. The management will learn the needs of employees and develop appropriate strategies to develop them so that they can achieve high potential and performance within the organisation. This has a positive impact in corporate strategy and achievement of corporate objectives. Management involvement also enhances strong relationship between the management and employees; and gives business unit leaders some sense of ownership (Mumford et al., 2007). As a result, they engage in talent management activities to promote collaboration and effective talent supply chain.

Risk of the Recommendation

One of the risks involved in the recommendation is financial risk. The company may lack enough funds to implement the recommendations given that it is already engaged in organic growth and innovation which requires a lot of financial resources. Lack of finances for the project may hinder selection and retaining of employees because money available for compensation and motivation will also be limited.

Another risk is cultural differences which may cause disagreements and lack of cooperation from the members involved in the implementation. Disagreements may arise due to differences in attitudes, interests and beliefs of employees within the organisation. Conflicts may also arise which may hinder the teamwork needed to enhance success of the project.

 

References list

Boudreau, J.W. (2010). IBM’s Global Talent Management Strategy: The Vision of the Globally Integrated Enterprise. Alexandria: Society for Human Resource Management.

Dileep, K. M. (2010). Organisational behaviour, human resource management & management. New Delhi, India: Serials Publications.

Grossman, R.J. (2005). IBM’s HR Takes a Risk. Alexandria: Society for Human Resource Management.

IBM (2012). Annual Report. New York: IBM.

Jung, D. & Sosik, J. (2006). Who are the spellbinders? Identifying personal attributes of charismatic leaders. Journal of Leadership & Organizational Studies, 12, 12–27.

Laurie J. M. (2010). Management and Organisational Behaviour. Pearson Education UK.

Mumford, T. et al. (2007). The leadership skills Strataplex: Leadership skill requirements across             organizational levels.  Leadership Quarterly, 18, 154–166.

Stahl, G.K., Björkman, I., Farndale, E., Morris, S.S., Paauwe, J., Stiles, P., Trevor, J. and Wright, P. (2011). Six Principles of Effective Global Talent Management. Accessed August 15,           2014 from http://sloanreview.mit.edu/article/six-principles-of-effective-global-talent-   management/.

Tyson, S., & Tyson, S. (2006). Essentials of human resource management. Oxford: Butterworth-Heinemann.

Walters, E.G. (2001). The Essential Guide to Computing: The Story of Information Technology. Prentice Hall.

 

Appendix: Performance Management System

Characteristics	Y/N	Definition	Comments
Strategic congruence	Y	Individual goals are aligned with organisational goals	Y
Thoroughness	Y	All Employees are evaluated All major job responsibilities are evaluated Feedback given for both negative and positive performance	Y
Practicality	Y	Readily available for use Easy to use Acceptable to those who use it for decisions Benefits of the system outweigh benefits	Y
Meaningfulness	Y	Standards and evaluations for each job function are important and relevant Only the functions that are under the control of the employee are measured Evaluations take place at regular intervals and at appropriate moments.	Y
Specificity	N	Detailed guidance is provided to employees about what is expected of them and how they can meet these expectations	The employees are too many to be monitored
Identification of effective and ineffective performance	Y	Effective and Ineffective behaviours and results are distinguished	Y
Reliability	N	Measures of performance are consistent Measures of performance are free of error	Measures of performance have errors
Validity	Y	Measures include all critical performance facets Measures do not leave out any important performance facets	Y
Acceptability and Fairness	N	Employees perceive the performance evaluation and rewards received relative to the work performed as fair	Employees think the performance measures are not fair
Inclusiveness	N	Employee input about their performance is gathered from the employees before the appraisal meeting	Employee input is not taken seriously
Openness	Y	Performance is evaluated frequently and feedback is provided on an ongoing process Appraisal meeting is a two-way communication process and not on-way communication	Y
Correctability	N	There is an appeals process, through which employees can challenge unjust and/or incorrect decisions	There are some unjust decisions
Standardization	N	Performance is evaluated consistently across people and time	Performance is not evaluated consistently across cultures
Ethicality	Y	Supervisors suppress their personal self-interest in providing evaluations Supervisors evaluate performance dimensions for which they have sufficient information only Employee privacy is respected	Y