Contents

1. Overview of the company.............................................................................................................2

2. Overview of the Issue....................................................................................................................2

3. Theoretical analysis of the case.....................................................................................................3

4. Previous/Current Performance management system (PMS)..........................................................4

5. Recommendations for improvement.............................................................................................5

6. Evaluation of the current Performance management system (PMS) and the newly proposed
Performance management system.........................................................................................................6

7. The effect of new system on highly performing employees and averagely performing employees
7

References.............................................................................................................................................8

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1. Overview of the company
The Colombo Fort Land & Building Company PLC (CFLB), together with its subsidiaries,
engages in real estate and property development activities in Sri Lanka. It also engages in the
manufacture and marketing of chemicals, paints, hardware, and building materials;
manufacture and marketing of consumer durables and food products; marketing and
distribution of pharmaceuticals; marketing of motor vehicles and accessories; and provision
of vehicle maintenance services. In addition, the company involves in the operation of
inbound tours and tourist hotels; production, processing, and marketing of tea, rubber, and
desiccated coconut; road construction; and management of investment portfolio, as well as
provision of water proofing and industrial flooring. The Colombo Fort Land & Building
Company PLC was incorporated in 1895 and is based in Colombo, Sri Lanka.

(Source: http://www.cflbplc.com/)

2. Overview of the Issue

The human resource issue is related to the hotel chain of The Colombo Fort Land & Building
Company PLC. There are few luxurious hotels under the company which are Sigiriya Village
Hotel, Club Palm Bay Hotel and Marawila Resort.

The current managing director Mr, Sanjeev was appointed recently and before him it was
Mr. Dhaman who led the hotel chain. Mr. Dhaman had his own way of managing employee
performance and rewarding them which can be identified as very unstructured. The substance
of the issue is Sanjeev had taken a promotion decision for one of the employees for a
managerial position to work for one of the hotels which was suggested by the group HR
department and the Chief Operating Officer (COO) of the respective hotel is questioned the
validity of managing director’s decision and instead he suggested his own candidate for the
available vacancy. The COO has been there in the company since the beginning of the hotel
and has worked closely with the previous managing director. All the performance
management systems and promotions were very informal and based on the personal
affiliations in the times of the previous managing director. The issue had arisen between the
HR department and the COO as a result of not having a formal performance management
system. If there were such a formal system, the COO will not be able to question the

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promotion decisions taken by the HR department as they are based on formal evaluations and
also the decisions will be very transparent.

3. Theoretical analysis of the case

Human resource management relates to the total set of knowledge, skills and attitudes that
firms need to compete. It involves concern for and action in the management of people,
including: selection, training and development, employee relations and compensation
(Pettigrew & Whipp, 1991). Huselid in 1995 has stated that the HR procedures of a company
have a direct impact on the employee productivity and financial performance. HRM has been
evolved from just a function of managing people to a level where it is now considered as a
strategic aspect of the company. Instead of employees being considered as just employees,
now they have been identified as a competitive advantage of the company (Becker and
Huselid, 2006). These all facts have led organizations to adopt Strategic Performance
Management Systems (SPMS) under strategic HRM. In SPMS top management will set the
objectives for the employees based on the company’s strategic direction and then the
performance is evaluated based on quantitative and qualitative analysis. In the proposed
performance management system which will come later in this report, the procedures are
based on the balance scorecard approach which is a SPMS, covering both quantitative and
qualitative aspects introduced by (Kaplan and Norton, 1992)

In the hotels section, the PMS was exclusively run by the head of hotels group which is much
unstructured so may be the PMS within the CFLB group and its other companies operate in a
structured manner compared to the previous system that was there under Dhaman’s
leadership. As the new head of the hotel chain, Sanjeev would have seen how PMSs work
within other companies such as John Keells and Aitken Spence which have luxury hotels so
as he is now the head of the hotel chain, he should consider on implementing similar systems
to CFLB hotels as well.

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4. Previous/Current Performance management system (PMS)
In the era of the previous MD, MR. Dhaman, there was no formal PMS. Even the COO of the
hotel accepts that charismatic leadership style of Dhaman and personal relationships has
helped him to develop high performer. Identification of the people who deserved to be
groomed as managers were all done by Dhaman based on his personal experience and
confidence obtained by working with the people. Dhaman’s charisma seems to be the main
factor that he was able to have a loyal set of employees who performed well at financially
difficult times irrespective of the pay the employees got. Rather than influencing by affecting
the task environment of followers or using material incentives or threat of punishment,
Shamir, House and Arthur (1993) state that charismatic leadership is seen as giving
meaningfulness to work by infusing work and organizations with moral purpose and
commitment. Visiting the managers at certain times, paying his gratitude to them and
admiring them were enough for the manager to get motivated themselves for the future. Not
having a formal PMS and still getting the maximum performance from the seemed very
attractive in terms of the company and its profits due to the charismatic leadership but
following highlights were identified under Dhaman’s tenure. The systematic procedures may
not always identify the right person to be rewarded and promoted instead personal experience
and confidence will properly identify the exact person to a particular position. This is the way
Dhaman used to identify high performing individuals. The identification of individuals was
done in such a way that Dhaman identifies them based on his personal biasness and
confidence regarding the managers. This communicates the lack of formal and transparent
PMS within the company. This becomes an issue where there may be more performing
managers who are not seen by Dhaman as his identification heavily depends on the personal
affiliations. This can demotivate the highly performing managers who were not highlighted
by him. The current informal system doesn’t seem to be fair for all the managers as anyone
who is able to build a relationship with Dhaman will be promoted within the company. This
is because there may be individuals who are high performers but do not like to have personal
and special relationships with the MD of the company as a principle. There are few big hotels
under the company and it is impractical for the MD to remember all of them the managers so
only few would reside in Dhaman’s memory as the high performers eliminating the other
high performers. This will eliminate those unseen high performers definitely and they may

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not get the opportunity to be promoted and developed hence this is a major weakness of the
unstructured performance management system. Even after the appointment of the new MD,
the PMS system has not been changed hence it is being continued.

Following recommendations can be given in order to formulate a new performance

management system which is completely based on transparent ways of measuring employee
performance and promoting them accordingly. This is because it is not ethical to continue
with a performance management system that is heavily based on the personal affiliations
since it can harm the reputation of the company too. If companies like John Keells or Aitken
Spence which are known to be the luxurious hotel operators in Sri Lanka, they are having
formal and well-structured performance management systems. Human resource management
is not a primary function of the value chain according to Micheal Porter and it is considered
as a secondary function. But still when there are head to head competitions at corporate
levels, it is essential that even the secondary functions are well organized and it allows the
company to successfully face to the competition hence following recommendations are made
to develop a well-structured performance management system.

5. Recommendations for improvement

The new PMS should be very formal and structured and should be developed based on the
concept called balance scorecard that covers not only the financial perspective but also the
non-financial perspective which is highly relevant to the companies like hotels. The new
system should work in such a way that key results areas are set and progress of the
employees is tracked and measured. According to Dessler (2005) aligning individual
performance goals with the organization’s wider objectives would increase the engagement
of the employee. Empowering employees in this way motivates them than just admiring them
from just words by a charismatic leader. In comparison to the Dhaman’s method, in the new
system it should try to get all the managers participated to the performance management
program rather than allowing few individuals being participated based on the personal favors
like in Dhaman’s system. The system is results oriented so it is believed that results oriented
PMS is far better than just saying the employees to achieve a certain target. Under the new

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structured PMS, employees will have a clear idea on what needs to be achieved and how it
needs to be done in order to get promoted. Key results areas should be developed under the
balance scorecard approach and should be communicate the whole scenario to the
employees. Simply the employees who were able achieve the objectives set under key results
areas will be rewarded so every manager has an equal chance to get rewarded. Deutsch
(1975) has said that individuals who perform and contribute more to the company should
receive a higher percentage of rewards than individuals performing less. In addition to the
PMS proposed, Potential Assessment centers and a career development committee should
also be established where the potential assessment centers will evaluate each and every
employee in terms of the performance and the career development committee will decide and
implement the changes needed to develop the careers of the mangers and other employees.
Once the good performers are identified from the formal process which is not like the one
that Dhaman had, the employees will be directed to the Potential Assessment centers to shape
out his skills and techniques. Those good performers get the chance to be promoted
accordingly.

6. Evaluation of the current Performance management system (PMS) and the

newly proposed Performance management system
According to Rob Dransfiels (2000), the organization can create performance objectives at
every level within the organization right down to personal objectives for individual members
within the organization. When analyzing the performance management systems under the
previous MD and the new proposed PMS, it can be identified that both the two systems have
focused on identifying individuals, rewarding, promoting and developing them that leads
them to be the future leaders of the company. This is not the first time that the company is
going to take a promotion decision for a managerial position at its hotels because even at the
previous MD’s tenure he has also focused on doing the same thing as what the newly
proposed system is trying to do with the implementation of new PMS. The difference of
these two systems is the way of identifying individuals for the development as future leaders.

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7. The effect of new system on highly performing employees and averagely
performing employees
According to a research done by Lepak and Snell (1999), the top performers’ contributions
would significantly influence the overall organizational effectiveness. However, the
contribution of consistent performers is also vital and overall success would depend on the
support of consistent solid performers (Collins & Smith, 2006). A potential risk with “A”
players is that they tend to leave the company in order to join with another well performing
company after them being developed as fabulous careers. It may be not about the salaries
always but also such “A” players are always seeking for their career development. In this
situation, the proposed Career Development committee has a huge task to retain the highly
performing employees within the company.

Under the current system, the average employees don’t have many opportunities to become
as star players as the career development only happens based on the personal affiliations. But
with the introduction of Potential Assessment centers and career development committee,
now solid players have also been given the opportunity to get their careers polished. In one
way the division of employees as high performers and average performers can demotivate the
average performers but it can be the drive to motivate the average performers to become high
performers and get promotions. The company can consider in offering financial or non-
financial benefits to the solid performers in addition to what they get as incentives currently.
This will alienate the demotivation effect of the solid players to a certain extent as this just
eliminates the demotivation so the employees can work at their current productive levels. But
it should be acknowledged that new system will impacted favorably on the solid players than
the current system.

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References
Becker, B. E. and Huselid, M. A. (2006) Strategic Human Resources Management: where do
we go from here?. Journal of Management, 32(6), pp. 898-925.

Collins, C. J., & Smith, K. G. 2006. Knowledge exchange and combination: The role of
human resource practices in the performance of high-technology firms. Academy of
Management Journal, 49: 544-560.

Dessler G. (2005) Human Resource Management (10th edition). Upper Saddle River, NJ:
Pearson Education Prentice Hall.

Deutsch, M. (1975) Equity, Equality and Need: What Determines Which Value Will be Used
as the Basis of Distributive Justice?. Journal of Social Issues, 31, pp. 137-49

http://www.cflbplc.com/

Huselid, M.A. (1995) The impact of human resource management practices on turnover

productivity, and corporate financial performance. Academy of Management Journal, 38(3),
pp. 635-672.

Kaplan, R. S. and Norton, D. P. (1992) Balanced Scorecard - Measures that Drive

Performance. Harvard Business Review, 70(1), pp. 71-79.

Lepak, D. P., & Snell, S. A. (1999) The human resource architecture: toward a theory of
human capital allocation and development. Academy of Management Review, 24: 31-48.

Pettigrew A, Whipp R, Managing Change for Competitive Success, 1993, Blackwell

Business, Oxford.

Rob Dransfiels (2000), Human Resource Management

Shamir, B., House, R.J., & Arthur, M.B. (1993). The motivational effects of charismatic
leadership: A self-concept based theory. Organization Science, 4, 1–17.