AN EVALUATION OF PERFORMANCE MANAGEMENT PRACTICES IN MANUFACTURING ORGANIZATIONS IN SOUTHERN NIGERIA
ABSTRACT:
This research is an evaluation of performance management practices in Manufacturing Organizations in Southern Nigeria. The study sought to achieve six main objectives, including how performance relates to productivity level leading to improved result; the extent performance management is inhibited by inadequate training; comparison of performance management system with results as well as best practices; performance management challenges amongst others. In carrying out this study, the theoretical framework used was the process theories which focused on a person’s desire or readiness to perform a given task or responsibility. The research design used was survey design, with questionnaire developed and data collected represented with the aid of frequency tables, percentages and charts. Two hundred and eighty-five (285) manufacturing firms from southern Nigeria was studied. Utilizing the rest instruments of Friedman’s chi-square test, and one sample Kolmogorov-Smirnov test of normal distribution, six major hypotheses formulated for the study were tested accordingly. At 95% confidence interval and 4 degrees of freedom, at a critical χ2t of 9.488 against a computed χ 2c of 251.333, the study found that there is significant relationship between performance management and productivity level as perceived by staff of manufacturing firms in Southern Nigeria. Similarly, the chi-square again confirmed at critical χ 2t of 9.488 and against computed χ 2c of 264.246 that there is an association between quantitative performance appraisal and performance management effectiveness. Further, result from the chi-square test which showed computed chi-square (χ 2c) of 63.754 against tabulated chi-square (χ 2t) of 9.488 confirmed that performance management system is significantly inhibited by inadequate training. Another chi-square result: χ 2c = 47.825 > χ 2t = 2.765 confirmed that current performance management practice in Nigeria significantly deliver effective result. The ks-z of 4.872 compared to one (1) and a mean response of 1.7920 justified that performance management practice in Nigeria manufacturing firms do not conform to best practice. Lastly, the ks-z of 5.347 and a mean response of 3.8491 results in the conclusion that there is a relationship between performance management challenges and organizational success. The study showed that proper performance management practices is vital in the growth of manufacturing organisations in southern Nigeria, as well as its productivity and survival. The results of this study provide basis for better appreciation of performance management practices among manufacturing firms in southern Nigeria. Among other things, the results enhance our understanding of the roles performance management plays in area of growth and productivity of manufacturing firms. The application of performance management evaluation model (PMEM) used in some organizations benefited them as there was an increase in productivity level thereby achieving reduction in production cost. With proper implementation of the designed model, vis-à-vis employee commitment and wellbeing, it will ensure the availability of competitive high quality products, improved schedule compliance. This would lead to customers satisfaction as a result of adequate service delivery. It is highly recommended that adequate training programmes for staff of manufacturing organizations in southern Nigeria should focus on managerial skills to the employees especially those at strategic management level.
TABLE OF CONTENTS
Title Page i
Approval Page ii
Certification iii
Dedication iv
Acknowledgements v
Abstract vii
Table of Contents viii
List of Tables xii
List of Figures xiii
Abbreviations xiv
CHAPTER ONE - INTRODUCTION
⦁ Background of the Study 1
⦁ Statement of the Problem 4
⦁ Objectives of the Study 4
⦁ Research Questions 5
⦁ Hypotheses 5
⦁ Significance of the Study 6
⦁ Scope of the Study 7
⦁ Limitations of the Study 7
⦁ Definitions of Terms 9
References 12
CHAPTER TWO - REVIEW OF THE RELATED LITERATURE
⦁ Introduction 13
⦁ Theoretical Framework 13
2.2.1 Performance Management Theory 13
2.2.2 Reinforcement Theory 14
⦁ The Concept of Performance Management 17
2.3.1 The Impact of Performance Management and Best Practices for Better Results 20
⦁ Constructing A Model 21
2.4.1 A Way an Organization Handles Performance Management System to Ensure that it Adds Value to the Business: A Case Study Example of the AFROX Performance Management System 23
⦁ Elements of Performance Management 26
2.5.1 Nigerian Organizations and Performance Management 28
⦁ Key Performance Indicators 30
⦁ Impacts of Business Environments on Performance Management 33
⦁ Standards Set for Performance Management 36
⦁ Incentive Scheme as a Technique for Productivity/Performance Enhancement in Manufacturing Organizations 39
2.9.1 Impact of Incentive on Performance/Productivity 44
⦁ Performance Appraisal 45
⦁ Employee Performance Appraisal 46
⦁ Strategic Purposes and Importance of Performance Appraisal 48
⦁ Responsibility for Performance Appraisal 52
⦁ Performance Appraisal Approaches 54
⦁ Organizational Performance Appraisal 57
⦁ Systems 58
⦁ Process 59
⦁ Structures 59
⦁ Culture 62
⦁ Summary of Review of the Related Literature 64
Reference 66
CHAPTER THREE - RESEARCH METHODOLOGY
⦁ Introduction 73
⦁ Research Design 73
⦁ Setting/Area of the Study 73
⦁ Sources of Data 74
⦁ Primary Sources 74
⦁ Secondary Sources 74
⦁ Population of the Study 74
⦁ Sample Size Determination 75
⦁ Instrument for Data Collection 76
⦁ Establishing the Validity of the Instrument 77
⦁ Reliability of the Instrument 77
⦁ Data Collection Procedure 78
⦁ Method of Data Analysis 79
References 81
CHAPTER FOUR - DATA PRESENTATION AND ANALYSIS
⦁ Introduction 83
⦁ Data Presentation 83
⦁ Analysis of Data 84
⦁ Test of Hypotheses 104
⦁ Conclusion 114
CHAPTER FIVE - DISCUSSION OF RESULTS
⦁ Introduction 116
⦁ Performance Management and Productivity Level 117
⦁ Performance Management System and Staff Training 118
⦁ Quantitative Performance Appraisal & Performance Management Effectiveness 119
⦁ Performance Management Practice and Effective Results 119
⦁ Performance Management Conformity with Best Practice 120
⦁ Performance Management Challenges and organizational success 121
5.2 Conclusion 121
Reference 122
CHAPTER SIX - SUMMARY OF MAJOR FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
⦁ Introduction 124
⦁ Summary of Research Findings 124
⦁ Findings on Objective one 125
⦁ Findings on Objective Two 125
⦁ Findings on Objective Three 125
⦁ Findings on Objective Four 125
⦁ Findings on Objective Five 125
⦁ Findings on Objective six 126
⦁ Policy Implication of the Findings 127
⦁ Conclusion 128
⦁ Recommendations 129
⦁ Contribution to Knowledge 129
⦁ Suggestions for Further Studies 132
Bibliography 134
Appendix I: Questionnaire 142
Appendix II 147
Appendix III 148
Appendix IV 169
CHAPTER ONE
INTRODUCTION
⦁ BACKGROUND OF THE STUDY
Organizations exist to fill the felt needs of the society. Individuals are engaged by organizations with the hope that they will contribute in fulfilling these felt needs. There is, therefore, the need for an established mechanism for ascertaining whether the organization and individuals are doing well in their own part of the bargain. In this way evaluation of individual and corporate performance has become imperative and assumed heightened significance in the scheme of things. Thus, a holistic approach to performance evaluation is now rapidly becoming the norm as contrasted to the practice in the past when it used to be relegated to the background. A change in perspective-from employment to performance-has been recorded (Torrington et al, 2005:224). Contract for performance is emphasized because both parties have a stake in performance, thus calling for the need to develop integrative schemes.
Performance connotes how well or badly a work is done, how well or badly something works (Hornby, 2006:1080). Thus, performance cannot be effectively divorced from the twin words of efficiency and effectiveness or from the three concepts of economy, efficiency and effectiveness, both at the macro and micro levels; performance is a critically important factor. Ewurum (2006:1) states that performance occupies a strategic place in the organizational scheme of things, positing that both sides of the internal environment have a stake in performance for obvious reasons. The employer expects the employees to deliver effective performance so that the organization would meet its short term and long term commitments to stakeholders, also grow and remain viable. The employees, on their own part, have their personal needs, desires and aspirations. Thus joining the organization and helping it to achieve its own goals and objectives is the best way to fulfill their own needs. In the same way, the external publics of the organization have an interest in performance, just as the organization does. Effective performance benefits the individuals, organization and the economy through increased efficiency, effectiveness and productive aggregates in terms of quality goods and services. Of course, performance has to be managed in order to attain these goals.
Performance management is an umbrella term that incorporates the configuration and measurement of distinct output areas. Performance indicators provide the mechanism by which an organization measures critical success factors (Cisco, 2007:1). It is a critical business tool, particularly in translating a strategy into results. Performance management, therefore, is expected to grow and develop into an integrated business practice, with strong links to business strategy, compensation, employee development, and other systems. The focus is on how organizations use performance management to achieve multiple goals. Thus, in the manufacturing sector, performance management significantly drives individual performance, career planning, succession planning, training, transfer and business strategy. Organizations increasingly use their performance management system to communicate organizational objectives. By establishing and incorporating core organizational competencies and competencies for individual jobs into their performance management system, organizations will translate their overall strategies into individual expectations, behaviors and activities.
Ewurum (2006:1) amplifies this when he states that in performance management, effort is made to capture and coordinate all the issues that will make for the delivery of effective performance by organization members. These include standards, targets, training, performance appraisal, leadership, motivation among others. Poor quality performance at organizational, societal, economic, individual and governmental levels has been the bane of the Nigerian nation. Manufacturing concerns are not performing optimally in Nigeria thereby prompting Ifedi (1994:12) to observe: that, there is little doubt that manufacturers in Nigeria have since the early 1980s been endangered. After the glorious 1970s of popular vision of Nigeria as an industrial power, a vision envisaged to be realized by realistic and sincere execution, manufacturing in Nigeria became a victim of its very potentials. Ingredients necessary for the attainment of the vision, ranging from infrastructure to hygienic economic policies and their implementation either failed to materialize or gradually disappeared.
Production has almost ground to a halt because of non-availability or costliness of foreign exchange with snow balling effects on machinery, spare parts and some raw materials. The public sector which traditionally provides most of the jobs has contracted, creating in the process a large and growing unemployment situation. The social services sector has equally nose-dived. Aside from the regular frustrations with power outages, bad roads, water supplies etc, not to mention our hospitals that lack disastrously in essential facilities (both human and materials) such as drugs, personnel, equipment etc, pot holes have taken over most streets and major roads as has garbage. Families, industries, groups and individuals are growing from the impact of economic degeneration in Nigeria sequel to non-performance at macro and micro levels. Now efforts are geared towards repositioning manufacturing and the entire Nigerian economy for delivery of high performance.
These issues are not limited to the Nigerian economy alone. The global economic meltdown which is the burning issue in most countries of the world, for instance, many manufacturing organizations in Europe and America are either closing down or whittling operations. Here in Nigeria, we all are witnesses of this global financial meltdown because many manufacturing organizations, construction companies, oil servicing firms, insurance companies even banks are closing down. They are cutting jobs and dismissing their workers. Some said that they are downsizing, rightsizing, streamlining, weight shedding or business review strategy as Cadbury tagged theirs. Thus to stay afloat, effective and efficient performance management becomes a sine qua non.
It is against this background that the research is conducted on the performance management practices in selected Nigerian manufacturing organizations.
⦁ STATEMENT OF THE PROBLEM
In the past, whenever the issue of performance was raised in management circles, the reference, more often than not, has been to individual performance of the organizational members. Managers were usually preoccupied with how to get the most from the employee in the pursuit of productivity and growth. A holistic treatment or examination of performance usually occupied the back burner (Ewurum, 2006:2). Today, macro and micro performance management have become very important in the organizational scheme of things. The problem of how to measure performance and the indices to use, have cropped up. Data collection presents a very great challenge in seeking to measure performance management in manufacturing firms.
Again there are the issues of measuring the performance of the organization using defined criteria and that of the individual workers in the organizations. Lack of a single universally accepted appraisal system applied by every firm is a problem in itself. Accentuated global competition, increasing demands from customers, shareholders, and regulatory agencies make seeking ways to improve manufacturing performance a continuum with its plethora of problems. There is extreme pressure to acquire cutting edge technologies and to optimize benefits at low costs of products within the shortest possible time. The question now is how can we evaluate performance management practices in manufacturing organizations in Southern Nigeria?
⦁ OBJECTIVES OF THE STUDY
The study sought out to achieve the following objectives:
⦁ To find out how performance management relates to productivity level of manufacturing organization leading to improved results.
⦁ To examine the extent performance management system is inhibited by inadequate training.
⦁ To find out the extent to which quantitative performance appraisal relates with performance management for organizational effectiveness.
⦁ To ascertain whether current performance management practices in Nigerian manufacturing organizations produce effective results.
⦁ To assess the performance management practices in Nigerian manufacturing organizations against best practice.
⦁ To determine the extent to which performance management challenges relates with organizational success.
⦁ RESEARCH QUESTIONS
Arising from the statement of problem and the objectives of the study, the researcher raised the following research questions:
⦁ What is the relationship between performance management and productivity level in manufacturing organizations in southern Nigeria?
⦁ To what extent does inadequate training affect performance management in manufacturing organizations in southern Nigeria?
⦁ To what extent does quantitative performance appraisal relate with performance management for organizational effectiveness in southern Nigeria.
⦁ To what extent do current performance management practices in Nigerian manufacturing organizations deliver effective results in southern Nigeria?
⦁ To what extent do performance management practices in Nigerian manufacturing organizations conform to best practices in southern Nigeria?
⦁ To what extent do performance management challenges relates with organization success in southern Nigeria?
1.5 HYPOTHESES
Consistent with the above research questions the following hypotheses where formulated to guide the study:
⦁ Ho: There is no relationship between performance management and productivity level of manufacturing organizations that could lead to improved results.
H1: There is a relationship between performance management and productivity level of manufacturing organizations that could lead to improved results.
⦁ Ho: There is no relationship between performance management system and inadequate training.
H1: There is a relationship between performance management system and inadequate training.
⦁ Ho: There is no relationship between quantitative performance appraisal and performance management for organization’s effectiveness.
H1: There is a relationship between quantitative performance appraisal and performance management for organization’s effectiveness.
⦁ Ho: Current performance management practices in Nigerian manufacturing organizations do not deliver effective results.
H1: Current performance management practices in Nigeria manufacturing organizations deliver effective results.
⦁ Ho: Performance management practices in Nigerian manufacturing organizations do not conform with best practice.
H1: Performance management practices in Nigerian manufacturing organizations conform with best practice.
⦁ Ho: There is no relationship between performance management challenges and organizational success.
H1: There is a relationship between performance management challenges and organizational success.
1.6 SIGNIFICANCE OF THE STUDY
The study will be of great importance to the manufacturing organizations, government, regulatory agencies, young graduates and students at large. This is because it will enable them to understand those essential problems as it is geared towards evaluating current practices of performance management in manufacturing organizations. Effective performance management will elicit higher productivity, profitability, growth and sustainability of the organization as well as customer and employee satisfaction.
Regarding the underperformance of Nigerian economy, inspite of abundance of both human and material resources, the significance of this study cannot be over emphasized. In as much as effective performance management is without question crucial in moving the Nigerian economy forward. However, organizations will increasingly use their performance management system to communicate organizational objectives by establishing and incorporating core organizational competencies and competencies for individual jobs into their performance management system by translating their overall strategies into individual expectations, behaviours and activities.
Finally, the findings and recommendations of this study will be of immense benefit to the economy mostly the employer and employee in this era that every opportunity is geared towards revamping manufacturing in Nigeria. And lastly, the adoption of Performance Management Evaluation Model will help this study go a long way in bridging the gap not filled by numerous authors in the existing literature on performance management practices in manufacturing organizations.
1.7 SCOPE OF THE STUDY
The Scope of this study covers the evaluation of performance management practices in manufacturing organization in Southern Nigeria. However, the evaluation was based on the registered manufacturing firms in Southern Nigeria comprising of the three geopolitical zones: South-south; South-east and South-west. It is an uphill task to attempt to cover all the firms in a study due to the fact that manufacturing firms are scattered all over the Country. A study of the entire manufacturing firms in Nigeria, though appreciable, was not feasible due to numerous constraints ranging from time, source materials and funding. Thus, the focus of this study is on performance management and productivity level, adequate training and performance management, quantitative performance appraisal and performance management effectiveness, current performance management practiced and effective results, performance management conformity with best practice and performance management challenges with organizational success. The adoption of the model (PMEM), its implementation and influence shows adherence to best practice.
⦁ LIMITATIONS OF THE STUDY
In carrying out a study of this nature and magnitude in an unstable political, economic quagmire and polluted environment, the researcher encountered a lot of difficulties (Constraints). The major constraints of this study include:
⦁ The Uncooperative Attitude of the Respondents: Dearth of data and unwillingness (uncooperative attitude) of those who are in charge to release the available ones constituted limitations to the study. Besides, a great amount of data that could have been made available to the researcher were considered confidential by the management of the organizations concerned. Most of them (i.e. organizations) were averse to all forms of labour unionism, industrial actions and publicity especially research studies by external bodies that are likely to expose their inadequacies. It is not unusual for managers to perceive the failure of their organizations as a direct indictment of their capacity and capability to manage any organization, in spite of their towering academic qualifications and exposures. Certainly, it will be difficult to extract absolute realistic information from such mindsets.
⦁ Finance: The researcher could not cover all manufacturing organizations in Nigeria but selected a few using registered organizations in southern Nigeria. Thus, financial constraints limited the study to some extent in terms of cost of materials, unreliable electricity supply, scope and further deepening of the parameters. Also, exhorbitant transportation cost and associated risk of travelling from one geopolitical zone to the other in order to collect data substantially impacted the study.
⦁ Time: As the innovator of constraints was imposingly inadequate. However, the researcher has numerous things competing for her limited time. She tried within this constraint to create ample time for this study.
These limitations were not as fundamental and pervasive as to render this research worth less or immaterial; rather it addressed all the things it supposed to address.
1.9 DEFINITION OF TERMS
The following are the operational definition of terms used in this study:
Organization: Refers to the process of organizing people and equipment to carry out tasks efficiently and effectively.
Effectiveness: Refers to fitness for purpose, the measure of whether a thing, person, product or programme fulfils its stated purpose and meets the needs of those affected by it.
Efficiency: Refers to the maximization of utility; the achievement of the best possible result from the lowest possible input.
Manufacturing: Refers to the process of converting raw materials into components and or components into finished goods.
Model: This refers to representation of an object at less than actual size, in management theory, a diagram or other representation of how a system or process works.
Performance Improvement: This refers to the improvement of outputs from a process or system.
Productivity: Refers to total production compared with inputs or consumption over the same period of time, which serves as a measure of whether the firm’s production processes are working efficiently.
Performance Criteria: This refers to factors against which performance is measured.
Organizational Behaviour: Is the study of the attributes, behaviour and activities not only of individuals within organizations, but of organization themselves as independent entities.
System: Socio-economic life is seen or viewed as a system of behavior. Hence evaluating performance management of manufacturing organizations is seen as a system of behavior, because system refers to process by which things are being done.
Environment: This refers to the background or circumstances in which an organization operates, including local culture, economic conditions and so on.
Response: Variations in the structures and processes within a system may usually be interpreted as constructive or positive alternative of efforts by members of a system to regulate or cope with stress flowing from environmental as well as internal sources.
Feedback: This refers to using learning gained from past experience to improve future performance.
Performance Management: This refers to the practice of optimizing production and service delivery at best values for its various stakeholders. It also entails managing the consistency and quality of individual and overall firm service and product delivery.
Effective Performance: This refers to the performance that leads to realization of the organizational goals/objectives.
Performance appraisal: This refers to the judgment of an individual’s performance to date, with a view to seeing whether and how that performance can be improved.
Quality: This refers to the extent to which a product or service meets customers expectations and needs.
Quality Control: This refers to the operational techniques and activities or procedures for ensuring quality standards during production.
Performance Indicators: These provide the mechanisms by which an organization can measure critical success factors.
Process: This refers to the series of tasks which are required to be completed in order to reach a specific goal, thereby transforming inputs into outputs.
Performance Measurement: It refers to a process of defining actual levels of performance achieved against a previously defined standard.
Custom Production: This satisfies unique needs and executes design changes at no cost penalty and at the same time adds value to the products.
Volume Flexibility: This refers to adjusting capacity at no extra cost in the process of coping with large, expected and unexpected fluctuations in demand.
Performance Objectives: This refers to goals which have been set for performance, and which the person or organization is expected to achieve. REFERENCES
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