CHAPTER ONE

                                                INTRODUCTION

1.1     Background of the Study

Performance Management – A Historical Perspective

Performance Management is a shared process between managers and individuals, based on the principles of an agreed contract rather than top down task directives. It involves agreement on objectives, knowledge, skills and competency requirements to do the work and supported by development plans to close agreed gaps. It involves a joint and continuing dialogue that constantly reviews and improves the contract between the individual and the manager. It is an integrating process linking corporate, functional, team and individual objectives in a partnership approach. It is not handed down or 'done' to people by superiors and neither is it an imposed human resources chore. Performance Management is a process and not a system. It is about the actions that people take to deliver day-to-day results and manage performance in themselves and others. It is about an understanding of what high performance and competence looks like and what those subjects are about in any given organisation. It is an approach to managing and developing people (a way of working day-to-day). Ultimately Performance Management is about the success of individuals in their jobs, making the best use of their abilities, realizing their full potentials and ensuring their alignment to the corporate agenda, therefore maximizing their contributions to the success of the organization.

Performance Management emerged in the late 1980's with the arrival of Strategic Human Resource Management (HRM) as an integrated approach to the management and development of people which saw the decentralization of this critical function to line management. HRM recognized that the management of performance was something to be carried out on a continuous basis, not a yearly event controlled centrally by HRM and could only be done by the line manager. It paralleled the 'new' thinking on corporate culture, driven by core values and the need for processes that would help to change behaviour and align employees to corporate values and goals. Recognition of the need for employees participation and engagement in any process regarding their performance, brought about by the expansion on motivational theory beyond Maslow (1943) and Herzberg (1959) to include more integrated accounts based on the work of McGregor (1960) Vroom and Deci (1974), Nadler and Lawler (1983)  and Steers and Porter (1987), established a need for a process that would incorporate these ideas and move beyond the now discredited precursors to Performance Management of the 'Merit System', 'Management by Objectives' and 'Performance Appraisal'.

Whilst Performance Management incorporates elements of each of its predecessors, in its most developed form, Performance Management is distinguishable and unique. The Merit System or Rating System originated in the 1940's and 1950's and required managers to rate employees on both work and personality factors. A rating scale of 1 to 5 was the normal ranging from 1 (poor) to 5 (Outstanding).  Work factors were typically defined as knowledge of job, output, accuracy etcetera (etc).whilst personality factors were typically defined as confidence, attitude, and judgment  etc.  Invariably,  the Merit System was used to trigger pay reviews,  as they were not tied to objectives they tended to generalize but  were inherently subjective and attempted to quantify the patently unquantifiable judgments of personality. Although simple Merit Systems have been discredited and no hard evidence exists to demonstrate they actually improve performance, they still, in practice, exist today - in some cases masquerading as Performance Management systems. 

Management By Objectives was popular in the 1960's and 1970's, the term being coined by Drucker in 1955. Management By Objectives was in essence the principle of the cascade( – from corporate objectives to unit objectives to individual objectives to review of individual objectives, review of unit objectives and back to review of corporate objectives. It was a feedback loop characterized by extensive paperwork and adherence to rules and methods of the system as opposed to a process of working. Furthermore it concerned itself primarily with the managers of the organization with the employees invariably subjected to the pre-existing merit system. It was a top down process which did not engage with employees and paid little attention to core values or their communication.

Performance Appraisal systems emerged in the late 1970's and into the 1980's. They were a mix of the Merit system and Management by Objectives. They were more often than not the property of the Personnel Department and were imposed bureaucratic systems. They tended to operate top down and were focused on the annual appraisal meeting which was retrospective in its approach.  They quickly became perceived as the trigger for reward and hence the emergence of the concept of pay-related–reward or performance-pay. The word appraisal itself undermines the process as it conjures images of something that is done to individuals, with neither the manager nor subordinate comfortable with the notion of one person telling another person what they think about them.  True Performance Management where it is practiced today is unique and distinguishable from its predecessors. It does contain elements of all previous systems from the merit scale to the cascade to the annual review meeting. It differs in the following: Performance Management is a way of continuous working for all participants in a partnership. It is about day-to-day not year-to-year. Performance Management is primarily concerned with what needs to be done both in terms of objectives to be achieved and the individual's development needs to achieve them. It is about tomorrow and not yesterday. Performance Management is owned by line management and the employee and not the preserve of HR. Performance Management is a primary tool in corporate communication and employee engagement and delivery of the desired corporate culture. Performance Management is about aligned and integrated effort, recognizing the importance of everyone and everyone's responsibility and accountability for performance. Performance Management is about developing the individual to maximize their performance capabilities and recognises the differences in individual capability. Performance Management measures performance objectively with equal concern for input (knowledge, skills, expertise and competence) and output (results and contribution).  Performance Management is embedded in the inverted hierarchy. Employees deliver output, quality and customer satisfaction, managers provide strategy and structure. It is the manager's role to support the employee and not the other way around. Managers can only be successful if their reports are successful. It is their job to remove any barriers to performance. Performance Management does not rely on elaborate forms and systems. The less administrative burdens on all concerned the better the process. Performance Management is more concerned with the nature and value of the process for the manager and the employee than it is in the content of the Performance Management documentation and system. Performance Management demands training for all involved, particularly in the areas of goal setting, coaching and feedback.

Performance Management is concerned with standards and equality of practice and will always have a quality assurance process. Performance Management will always be high on the Senior Executive team's agenda. Performance Management can be and is distinguishable from its predecessors. It has a much wider remit than improving individual performance or dealing with poor performance. It is about integrated and sustained high performance within an organization. It is about realizing the full potential and capacity of the Human asset and aligning that capacity and potential to organization aims. It is about creating an environment where individuals can realize their own potential and in the words of McGregor (1960) “create the conditions such that the members of the organization can achieve their own goals best by directing their efforts towards the success of the enterprise”.

1.2     Statement of the Problem

          The orderly description of past events about the productivity of employees in selected oil companies operating in Nigeria is filled with a lot of checks to progress and development arising from management plights. Most government and privately owned institutions suffer from what is termed as inefficiency syndrome. While some institutions have actually achieved an appreciable level of efficiency relative to human and material resources at their disposal. Others are yet to attain a greater level of efficiency. Over the years, some employees in the selected oil companies operating in Nigeria have been known to be remiss in their duties. They also show indolence, non-chalant attitude, apparent indifference and apathy to work which tantamounts to inefficiency, despite the efforts of the management to improve their standard of living. On the other hand, many oil companies are generally known for high motivation of workers and the resultant effect is that the workers should pay back by way of high productivity which brings about tremendous organizational growth. But this is not so in all cases as some workers can not remain faithful and committed to their work.

The report is that the employees are not being rewarded according to their level of work performance.  Other elements of genuine grievances included nepotism, undue favouritism, unwarranted sympathy and unprecedented indulgence amongst others. Intractably paramount in their discussions is lack of a productivity enhancement tool in the industry. The ultimate, according to the employees’ perception, is that people would work so hard enough without the commensurate compensation in terms of promotion, pay rise, praise, promise, recognition or reward of any kind.

This gap on the part of the management by non-commensurate compensation is the issue that is making people to doubt whether there are experts in the departments to critically analyze performance because it is obvious that high performance should attract good motivation from the management. However, the problem of this study is how these oil companies use performance management approach to motivate their workers to achieve high performance as well as the growth of the organization.

1.3. Objectives of the Study

          This research is to amongst others:

1.        i.            Investigate  whether performance management could motivate an employee towards high performance in the Nigerian oil industry.
2.      ii.            Identify the extent to which performance management contributes to the development of an efficient workforce in the Nigerian oil industry.
3.   iii.            Verify the degree to which the application of performance management philosophy in the selected oil companies operating in Nigeria is both development and reward-driven.

Determine whether performance management could be used as a process for dealing with the underperformance of employees or team in the Nigerian oil industry