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Analysis of the Performance Measurement System

Analysis of the Performance Measurement System

Introduction

Performance management systems are important tools for organizations that seek to establish their performance. Businesses develop and implement various strategies during their operations. These strategies are usually developed and implemented in order to realize the organization’s mission and goals. Performance management comes in handy for managing the implementation of strategies. Additionally, performance management enables organizations and their employees to continuously oversee and enhance their performance in order to realize organizational goals and mission. Performance standards must be developed and communicated to all employees. Feedback and appraisals are necessary for determining proper implementation and success of the performance plan. The aim of this report is to examine performance management in operation, since it will help understand the influence of performance management on the overall performance of such organization as ADCB.

Aims and Questions

This report presents an evaluation of performance management systems at ADCB. This bank has been a leading provider of banking services in Abu Dhabi and has continuously sought to improve its services and performance.

Aims/Objectives:
  1. Established what ADCB is trying to achieve;
  2. Established the roles of performance management tools in helping ADCB realize its goals and objectives;
  3. Establish the performance management systems that ADCB has put in place;
  4. Establish the challenges ADCB experience with respect to performance management systems and find out how to solve them.
In regard to the aims/objective, the research questions are:
  1. What are ADCB’s goals, objective, mission and vision?
  2. What is ADCB’s approach to performance management?
  3. What are ADCB’s performance management challenges?

Literature Review

Performance management is a continuous process designed to ensure that every employee’s performance constructively contributes to the realization of the organization’s goals and mission. Communication is critical for successful performance management. Performance standards must be communicated to every employee in the organization in order to ensure that they know the expectations and what is required of them. Effective performance management is characterized by efficacious knowledge within the organization. Every employee and manager must understand the organization’s mission and goals. They must know and understand their roles in ensuring that the organization realizes its objectives and goals. They must be aware of the performance standards required as well as the necessary skills and competences they need in order to follow the required standards.

Fredric Winslow Taylor suggested that jobs can be divided into small specific tasks, which can be allocated to employees for the specific duration of time (Taylor 2012). The employees can effectively work on these simpler tasks without deviating. This approach can improve performance and is a leading concept behind scientific management theory. However, the performance of employees in these tasks is influenced by motivation. Therefore, motivational theories are as important as the management theory in placing performance management into context. Moreover, goal-setting and expectancy theories support performance management concept well.

Developed by Edwin Locke in 1968, the goal-setting theory postulates that personal goals established by employees greatly influence their motivation levels (Salaman et al. 2005). If the goals are not achieved, the employees have to improve their performance. Such improvement of personal performance enhances the overall results of the organizations (Salaman et al. 2005).

Conversely, Victor Vroom’s 1964 expectancy theory hypothesizes that employees adjust their performance or output based on their anticipated value or set results (Aguinis 2009). They modify their behaviors in a way that would enable them to realize specific goals. Thus, performance can be shaped by anticipated future events (Aguinis 2009).

An employee must be in a position to establish performance challenges and take appropriate action. It is important to have employees engaged in their work, because engagement enables them to give their best to the organization. Thus, management should collaborate with the employees when developing performance standards. It should create a performance plan that will direct employees in achieving specific results while providing a framework that enables them realize personal growth.

Methodology

This report utilizes secondary data and performs an evaluation of the performance management at ADCB. The data includes data on the performance of ADCB, financial management, customer satisfaction, employee motivation and commitment levels, profitability, and growth, among others (ADCB 2014). There are various sources of secondary data that have been consulted for this report. The sources include the bank’s strategic plans and reports, financial performance reports, management and customer satisfaction reports, etc. These reports were sourced from ADCB’s library, website, news agencies, and other third parties such as consumer organizations, industry monitoring agencies and government agencies. A rigorous approach was used to assess the articles and determine which ones qualified to serve as sources of data for the analysis and reporting on ADCB. The process involved the search of articles online. Only recent articles were selected. Reading through the articles was also necessary to establish whether they contained the necessary information for studying and understanding performance management at ADCB. The information collected from the selected secondary sources was then compiled and analyzed, and a narrative of performance management at ADCB was developed.

Data Analysis

The choice of target articles was aimed at answering the research questions in order to realize the aim of the report. According to the bank’s website, its mission is to establish a partnership with its customer throughout their lifetimes through handling every customer as a distinct individual, offering innovative products and unparalleled service and taking into account that its customers are entitled to choice (ADCB n. d.).  The bank’s vision is to be the bank everyone in UAE wants to do business with. It embraces constant innovation, high integrity, as well as seeks to earn respect of competitors and customers. The bank’s employees understand the objective and are consistently involved in the planning and shaping of the bank’s initiatives (ADCB 2011).

The bank seems to embrace a mix of two performance management models. They include the use of a balanced scorecard approach and performance prism. The bank has a strategic decision that has been created by the board of directors. The current strategy is a group of four-year strategic objectives running from 2012 to 2016 (ADCB 2012). The strategy seeks to deliver unique management and strategic objective across the banking industry. It also aims at growth of the franchise while ensuring a steady growth in returns for its shareholders. This strategy is tracked internally using the balanced scorecard approach and aims to improve a number of quantifiable variables, such are the return on investment.

On the other hand, ADCB has a strong regard for its stakeholders. Such people include the bank’s employees, customers, shareholders, and the governmental officials, among others (ADCB 2015). The bank exhibits great concern in its strategic objective. It takes into account the shareholders’ desire to ensure continuous improvement in profitability, care for costumers, consideration for their feedback and an overall customer-oriented service. Moreover, it considers employee career development needs and enables them to grow. These are features of the performance prism model.

The bank seeks to continually improve alongside its key performance indicators, which are both financial and non-financial. The performance management ensures that it realizes its objectives. The greatest challenge the bank experiences is balancing the needs of all stakeholders alongside with financial and continuous developmental needs.

Discussion and Conclusion

ADCB prioritizes performance management as an important tool for improving the bank’s performance across different departments. The presence of balance scorecard elements and prism elements indicate that the band uses a mix of the models in its approach to performance management. By using the balanced scorecard approach, the banks is able to organize and measure performance around specific functions and tasks. The key performance indicators tracked by the balanced scorecard approach include return on equity (ROE), basic earnings per share (EPS), total shareholder return (TSR), profits and other financial indicators (ADCB 2012). Non-financial indicators include customer satisfaction, awards and accolades, sustainability and social responsibility (ADCB 2015; ADCB 2013; The Asian Banker 2009).

Performance of the organization also based heavily on the benefits of the prism system.  By taking shareholders’ values into account, the bank is continuously innovating the ways of efficiently doing business. Delivering values is also not limited to shareholders alone, but evenly distributed among all stakeholders. This system enables the integration of capabilities and strategies in order to create and deliver true value to all stakeholders.

A combination of the balanced scorecard approach and prism approach ensures that the organization incorporates the efficiency of both systems. Moreover, the firm is able to use the strengths of one system in order to counter the weaknesses of the other one (Striteska et al. 2012). Therefore, these systems are complimentary.

Recommendations

ADCB has an effective and functional performance management approach in place.

The following recommendations would help to further enhance the system and improve the outcomes:
  1. The organization should develop an appropriate benchmarking tool that would incorporate the measurement of progress and new targets, since neither prism nor balanced scorecard system provides an effective benchmarking approach;
  2. It is necessary for the organization to find accurate and attainable metrics for establishing financial objectives, and the extent to which stakeholder interests that can be accommodated for sustainably;
  3. Since neither systems is keen on continuous improvement, it is necessary for the bank to determine and adopt an appropriate mechanism that can be used to ensure continuous improvement.

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