What performance / reward management ‘issues’ are there in the company or regional office?

HR Assessment Case Study

Reward management at National Office Supplies

You have recently been appointed as HR advisor for National Office Supplies, a provider of stationery and office furniture for businesses throughout the UK. Whilst based at their headquarters in Hertfordshire, part of your role is to visit the regional sales offices and to audit their HR processes and practices. The company has experienced sound levels of growth in recent years and has experienced growth in turnover of one-third in the last three years. Prior to your appointment, the HR manager worked alone, aside from an administrative assistant, involved primarily in advising regional managers on recruitment and selection, conducting induction and ensuring that the company’s policies (such as health and safety and equal opportunities) comply with legislation. Typically, she would only visit regional offices to attend disciplinary or grievance meetings. Whilst the company has broad guidelines on how each department is managed, the general attitude among senior management at HQ has been that as long as each office is performing adequately, they are happy not to intervene or get too involved at regional level unless directly asked to do so. However, following the recent growth of the firm from a relatively small, tight-knit organisation to a larger, more bureaucratic company, the senior managers are keen to introduce a ‘performance culture’ into the firm and to formalise and standardise its key HR processes.

As part of an ongoing process of reviewing HR policies and practices at the regional sales offices, you have been asked to compile details of the way in which reward and performance management is handled in each office with a view to standardising practices across the firm. Currently, performance management is treated as an informal add-on activity which is not linked to any other HR practices. Also, all basic pay is determined according to what senior management feel is the ‘going rate’ for sales representatives nationally through a rudimentary benchmarking exercise conducted every two years by the incumbent HR manager. Pay for the regional manager is established simply by adding a notional sum (currently £5000) to the basic pay for the sales reps. Pay for administrative staff in the regional offices is set by the regional manager on the basis of the market hourly rate for the area in which the office is based. In terms of performance-related pay, each year regional managers are given a sum of money to distribute to their teams in recognition of performance but how managers do this is left to their discretion. Given the sound financial performance of the firm in the previous year, each manager has been given £3000 this year to pay as bonuses, although this can rise or fall depending on how well the company as a whole has done over the previous year. It is at the discretion of managers how they distribute this money among their sales team. No rating criterion is used by the firm to determine the distribution of this bonus payment. Currently, National offers no performance-related pay for regional managers but, at its annual company get-together, it has become customary to award one manager with an all-expenses paid weekend away in recognition of performance. For the last two years, this has been awarded to Jeff Mangum of the London office, this decision is not linked to his performance.

The London Office

The London office is the largest in the country, employing 10 sales people, one receptionist, an office administrator and a regional manager, Jeff Mangum. It is also the company’s most profitable office. Jeff was brought into the London office three years ago to improve performance. He is viewed as a rising star in the company, having increased sales significantly in his previous role as regional manager for the Midlands office and as having senior management potential. He is also viewed as having ‘worked his magic’ in the London office. His managerial style is assertive and demanding and he has instilled among his sales team a high level of competition between each representative. In lieu of HQ providing a London allowance for those working in the London office, as many organisations do, Jeff has managed to negotiate an additional pot of money with which he has created a further performance-related pay scheme. Each month, Jeff gives £250 to the sales person who has generated the greatest volume of sales. On occasion, however, Jeff has felt that all of the team have under-performed and subsequently kept the money back to include in the next month’s ‘rollover’ bonus of £500. This, he tells you, is to ‘keep the reps on their toes’ and ‘stops them getting complacent’. He feels that this system has been instrumental in lifting the performance of the office. Jeff takes a similar approach to distributing the annual company-wide bonus pot, regularly giving a substantial proportion to the representative with the highest sales figures, although he also suggests that performance appraisals can sway his decision about distributing the bonus ‘if a rep can convince me that they’re worth it’, however there has not been an appraisal in the last two years.

During the course of your visit, you take the opportunity to speak to some members of staff. The office administrator has been at the company for five years but openly admits to be looking for another job, partly due to the lack of formal performance management system and recognition she feels she receives for ‘running this whole place’. She also grumbles about having to take complaints from prospective customers about ‘hard selling’ by certain members of the sales team. A member of the sales team that you speak to mentions that Jeff is ‘a great motivator if all you care about is money’. The same representative tells you that whilst the pay offered by National is pretty good, the package as a whole doesn’t compare well to competitors.

The Scotland Office

The Scotland sales office employs eight sales people, an office administrator and a regional manager, Nicola Case. The office is located in Edinburgh and serves the largest geographical area of all the sales offices. This means that sales representatives are rarely in the office and communicate remotely. In recognition of this, Nicola arranges regular get-togethers for the team, including social events and an annual ‘away day’ paid for by the company. Due to the remote working of the sales representatives, the office administrator role is crucial as the main point of contact in the office. Unofficially, for the last three years, Nicola has used some of the regular company-wide bonus to reward the administrator for his efforts. The remainder of the bonus she divides equally between the sales team because, in her opinion, they all ‘work really hard’. In comparison to the other regional offices, the Scotland office is neither the best nor worst performing. One of the sales team reports that Nicola is a ‘great boss’ and this is reflected by his desire to deliver good sales figures, and he is pleased when she takes the trouble to phone him to recognise his efforts. Nicola regularly goes out on the road with her sales representatives to catch up and to provide any advice and guidance which she feels might be needed. She holds regular monthly meeting with her team which she uses to provide feedback on individual and group performance.

Your Task

Having visited two regional offices, you have been asked to report back to the HR manager at National HQ. Using relevant reward & performance management theories and concepts to support your answer, you are required to identify instances of what you consider to be good and bad reward practices at National Office Supplies. On the basis of this assessment, the HR manager has asked you to compile a short management report, outlining your recommendations about how reward and performance management practices should be standardised at National, highlighting any potential difficulties that you foresee in their implementation.

The following questions should be addressed in your report:

1. What performance / reward management ‘issues’ are there in the company or regional office?
2. How will performance be defined and ‘measured’? what type of reward would be suitable in the organisation / region? How could performance be incentivised?
3. What potential problems might be caused by the relationship between the two regional offices due to differences in their HR practices?
4. What do you think is significant about how these employees are managed that might influence your recommendation of performance management / reward management?
5. How might variable pay be an effective way of ‘improving performance in relation to individual performance?