DEVELOPING A PERFORMANCE MANAGEMENT SYSTEM PIONEER NIGERIA LIMITED
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO STUDY
This chapter provided an internal analysis of Pioneer Nigeria Limited, the challenges that exist within the company and the possible course of action to meet the challenges. It also explained the purpose of study, theoretical framework and the research objectives and questions. The chapter finally highlighted the scope and limitations of study for the research work. Pioneer Nigeria Limited (PNL) is a small limited liability company founded in 1985 under, The Companies Act 1968 currently, The Companies and Allied Matters Act 1990 as a distributor for sale of foreign products namely: Bird’s Custard Powder, Cow and Gate Baby Milk and Kleenex Tissue paper for Brian Munro Limited United Kingdom. In 1988 PNL diverted to the manufacturing sector for the refining of edible vegetable oil following registration as a factory under the Nigerian Factories Act 1987.Its manufacturing functions started fully in 1988 with staff strength of seven employees using a chemical refining Plant system. PNL products then were Soya bean, Groundnut and Palm kernel oil on a very small scale and contract refining on behalf of third parties.
The company currently manufactures Palm Kernel vegetable oil from local raw material used mainly by corporate organisations as a raw material for production of their Products mainly Biscuits and Cheese balls and sold into local markets and outlets all over the country for domestic consumption. It also produces distilled fatty acid which is a by-product of the palm kernel and is used by soap manufacturers as their major raw material. The company’s capacity is to produce 1,500 tons per month and 18,000 tons per annum, at an average sales price of N245, 000 naira per ton – an income of N4, 410billion naira would be generated annually. However the company’s actual performance is an average of 800 tons per month and 9,600 tons per annum at an average selling price of N245, 000 naira per ton giving an income of N2, 352billion naira annually, giving an adverse variance of N2, 058billion and this figure could increase if these challenges were not addressed.
The Researcher serves as the Executive Director in charge of Administration and Marketing activities of the company and generally oversees all facets of running the company such as purchasing and stocking up all raw materials, all administrative, marketing and planning functions with the exclusion of the operational production functions which is handled by semi skilled artisans. The company has lasted the test of time as one of the pioneers in the vegetable oil industry in Nigeria. Having developed good business relationship with its suppliers and better bargaining powers than its competitors, PNL has created a niche for itself by producing high quality vegetable oil which overtime has been the choice of its customers. Despite increase in the company’s turnover in the last decade from an annual turnover of N1million to a current turnover of about N2billion, the company is not yet operating at its optimal. The researcher’s company employs semi skilled male artisans based on the strenuous working hours (continuous batch refining system) and conditions and the categories of low skilled competences required, such as plant operators, electricians, welders, boiler operators, maintenance operators etc. They work on a 10/12 hour shift basis. These employees are mostly disgruntled and belong to the lower cadre of the populace, of low level social background, poor family conditions and limited education.
The autocratic style of leadership coupled with no structural procedures (particularly in respect to financing decisions) in place is affecting the strategic planning of the company. Management is also faced with the problem of human, financial and fixed asset resources being allocated haphazardly. The company has inexperienced finance personnel who lack focus and direction in achieving financing, investing and operating decisions of the company. Consequently, objectives and goals are not clearly defined and performance cannot be evaluated. PNL has also faced some other external challenges such as competitive rivalry to threats from new entrants into the industry which has eroded the revenue of the company. The unforeseen circumstances surrounding PNL such as inflation, economic/political instability, and change in Government policies, regulations and technological advancement contributed to the challenges faced by the company. In addition to the above, a single customer who accounts for about 75% of the company’s revenue is of great concern to the Management since most of the revenue comes from the customer and as such PNL is vulnerable to an extent. In conclusion, threat of close substitutes such as Soya bean, Palm Olein, Sunflower, Olive oil, etc and intense competition in the industry has affected the returns and profitability of the company. All these have led to non-achievement of the objectives and strategic mission and vision of the organisation. Management’s questions is how to find a root cause to this declining and how to orientate employees to perform optimally by managing them in the best possible way to enhance productivity to achieve the company’s goals and objectives and in turn affect profitability and growth (Price, 2007). In order to fill the present vacuum in the human resource management of the company and to take the company to the next level, it has become a dire necessity to establish an effective and efficient Performance Management System.
1.2 PROBLEM STATEMENT
The company is faced with the challenge of disgruntled employees, absenteeism, staff retention issues and in turn poor performance and inability to meet PNL’s objectives and goals. The style of leadership coupled with haphazard human, financial and fixed asset resources allocation and lack of a reward system to motivate employees are also part of the challenges. There is also the problem of competitive rivalry and threats from new entrants and substitutes in the market to unforeseen issues of inflation, economic/political instability and changes in Government policies and regulations and technological advancement. As a result of all these challenges, employees’ productivity and performance have been declining. Management’s dilemma is how to address these issues and have an efficient and effective workforce. Management needs to put a performance management system in place to address the problems and achieve the company’s goals and objectives of productivity, profitability and growth.
1.3 PURPOSE OF STUDY
The main purpose of this study is to develop a performance management system in Pioneer Nigeria Limited to increase productivity, profitability and to achieve a result oriented company.
1.4 OBJECTIVES OF STUDY
Arising from the purpose of study, the following research objectives were raised to:-
1. Determine the effects of performance management on company’s income and profitability.
2. Determine the impact of organisational structure and culture on employee performance.
3. Ascertain the causes of poor employee performance in the researcher’s company.
4. Determine the effect of staff retention and turnover on performance.
5. Adapt a model or theory of performance that fills the gap on performance.
1.5 RESEARCH QUESTIONS
Based on the objectives of study, the following research questions were raised:-
1. How would performance management affect the company’s income and profitability?
2. How does the current organisational structure and culture impact on employee performance?
3. What are the causes of poor employee performance in the researcher’s company?
4. What is the effect of staff retention and turnover on performance?
5. What relevant model or theory of performance can be adapted to fill the gap on performance?
1.6 THEORETICAL FRAMEWORK
The theoretical framework was based on the model by Gevity Institute Cornell University (2007) the works of Horwitz (2009) and the balanced scorecard model framework by (Kaplan & Norton 1992; 1996). The performance management model by Gevity Institute Cornell University (2007:2-14) on managing employee performance for business success framework design highlighted that an effective performance management system supports a company’s approach to managing employees and achieving financial goals. A performance management system impacts an organisation in three key areas – business strategy, employee management and employee development. Understanding the potential benefits in each area would help design a performance management system that produces the best results for the company.
The theoretical framework on performance best practices by Horwitz (2009) identified the following nine key factors for an effective Performance management system with emphasis on manager employee discussions.
– Including development plans for the future.
– Providing training to managers.
– Measuring the quality of performance appraisals.
– Resolving poor performance.
– Getting beyond the judgment of Managers.
– Making it consistent across the organisation.
– Ensuring that feedback happens regularly.
– Using performance reviews to support the performance evaluation.
– Including ongoing goal review and feedback.
The balanced scorecard model framework by Kaplan and Norton (1992:72) allows managers to look at the business from fourperspectives, the customer, the internal business process, the learning perspective and the financialperspective. Altogether, the balanced scorecard translates vision and strategy into objectives and measures across these balanced sets of perspectives. By doing so, the balanced scorecard includes measures of desired outcomes as well as processes that drive desired outcomes of the future.
1.7 SIGNIFICANCE OF STUDY
The study would be beneficial to both management and the employees as a whole and as a research academic framework for the company. The existing gap in performance and developing a model that addresses the problem would be of immense benefit to the company. It also addresses an existing problem with a practical solution.It also helps to put training and development processes in the HR procedure in the company. It would be a roadmap for improved plans that would be beneficial to employees. The company would also benefit from the performance management model as it would lead to strategies that could only propel the company to a more rewarding position and give that competitive edge advantage. Finally, the study would help organisations that want to improve productivity and performance to obtain financial success over its competitors, achieve same.
1.8 LIMITATION OF STUDY
This study is limited by the sample size of the company as it is a small company with a size limited to eighteen people. In addition, the research may be limited by the researcher who serves as an Executive Director and some of the employees that have personal biases. The respondents may give distorted information because they desire to be favoured by management.
1.9 DELIMITATION OF STUDY/SCOPE
The influx of the Vegetable Oil Industries has increased in the last five years. The study is limited to Pioneer Nigeria Limited only.
1.10 RESEARCH PROCESS
Every research work requires answering a question to stimulate or provoke change particularly in action learning. The main goal of this study is to address the research question and to conclude same within next 4 ½ months period. An additional goal is to serve as a step for positive change in management’s effort to develop a performance management system in the company. The research design is a census study as all staff and management numbering eighteen were sampled. The sampling method was by the qualitative and quantitative approach whereby informal open interviews were held with employees and researcher developed questionnaires were administered and analysed. Observations from documentary evidence from the clocking cards were also analysed. Data was analysed using statistical tools such as pie charts and percentages. Validity ascertains the accuracy of the study’s research process, which was achieved with both face and content validity. Preliminary analysis of data was done in order to test the validity and reliability of research information. It was sent for face and content validity based on judgment of the researcher and her adviser.
1.11 OPERATIONAL DEFINITION OF TERMS
The following terms defined below are explained in the context they were used in this research work: Edible Vegetable Oil: This can be defined as the different kind of edible vegetable oils including Olive oil, Palm oil, Soya bean oil, Sunflower oil, Safflower oil, Peanut oil, Grape Seed oil, Sesame oil and Rice bran oil. The generic term vegetable oil when used to label a cooking product may refer to a specific oil such as Rapeseed oil or a blend of variety of Oil as often based on Palm kernel, Soya bean or Sunflower oils (wikipedia.org/wiki/cooking oil) .
The Companies and Allied Matters Act 1990: (The Companies Act) is the principal law regulating the incorporation of businesses in Nigeria (Copyright @ 2011yahoo.com). Nigerian Factories Act 1987: This is explained as An Act to provide for the registration etc of factories, to provide for factory workers and a spectrum of workers and other professionals exposed to occupational hazards but for whom adequate provision has not been formally made regarding the safety of workers to which the Act applies and to impose penalties for any breach of its provision (International Labour Organisation, Natlex 2011).
A Chemical Plant: is an industrial process Plant that manufactures or otherwise processes chemical usually on a large scale (wikipedia.org/wiki/chemical Plant).
Contract Refining: means processing a wide variety of crude oil for customers to their individual and often diverse requirement and specification at a fee.
Continuous and Batch Operation: means chemical processes run in continuous or batch operation production. In continuous operation, all steps are ongoing continuously in time. The feeding and product removal are ongoing streams of moving material which together with the process itself all take place simultaneously and continuously.
NAFDAC: is the National Agency for Food and Drugs Administration and Control (NAFDAC) is a Nigerian government agency under the Federal Ministry of Health responsible for regulating and controlling the manufacturing, importation, exportation, advertisement, distribution sale and use of food, drugs, cosmetics, medical devices, chemicals and prepackaged water (copyright@nafdacnigeria.org).
Employees: refers to the workers of Pioneer Nigeria Limited and they are under twenty (20) in number.
Semi Skilled Artisans: are apprentices and journey men working for wages or piece rates with their hands without the aid of powered machinery (Gale Encyclopedia, 2004)
Shift System: is a working system in a factory using shifts i.e. with groups of workers who work for a period and are then replaced by other groups (Economics- Dictionary.com). Pioneer operates a two shift system for the semi skilled employees, from 7am to 7 pm and from 7 pm to 7 am six days a week.
Performance Management: is a means of getting better results from organisations, teams and individuals by understanding and managing performance within an agreed framework of planned goals, standards and attributes or competency requirements (Armstrong, 1994:23).
Naira: is the official currency of Nigeria and officially about 155 Naira is exchanged for $1.
1.12 CONCLUSION
The Researcher has looked at the concept of performance as it relates to employees within an organisation and the correlation of performance with motivation, incentives and rewards. The next chapter reviewed the literatures of vast authorities and relevant information to this research on the performance management system concept.