PERFORMANCE MANAGEMENT (Term Paper Sample)

Performance Management Name: Institution: Date: Introduction In 2015, Toshiba joined the list of the world's biggest Accounting scandals after the company was revealed to have overstated its profits. According to Verschoor (2015), managers manipulated figures so as to reach unrealistic company targets. Over a period of seven years, executives overstated profits so as not to disappoint the CEO and the public in general. Top executives also put pressure on managers to achieve goals and meet sales targets late in the year, making it impossible for the sales to be met. Other than disappointing the CEO, the company's corporate culture is another one of the reasons why senior management behaved in a fraudulent manner. According to sources, the CEO at the time, Mr. Sasaki, felt pressured to restore profits after the experienced downturn that year. Toshiba's corporate culture was one that discouraged employees from disagreeing with executives. Managers were, therefore, uncomfortable to tell executives that the sales targets were unrealistic and impossible to reach. Instead, management sold computer parts at hiked prices and inflated profits by three times. This continued to happen even after Sasaki had stepped down. It had become part of Toshiba's organizational culture. This could have been avoided by the presence of external directors for effective corporate governance. Toshiba, however, lacked external directors whom the Financial Services Agency later fined the company 7.3 billion Yen after the scandal. Its auditor Ernst & Young ShinNihon LLC was also fined for not detecting the accounting irregularities in the enterprise. However, this is just one example of a business that has committed fraud caused by unrealistic targets and negative corporate culture, as years before, Japanese camera company Olympus was revealed to have inflated its profits. This study will explore performance management and some of its aspects that were problematic for companies like Toshiba; such aspects include; target setting, corporate culture, employee involvement and Top-down budgeting vs. bottom-up budgeting. Understanding Performance Management In an attempt to reach company goals, objectives, and targets, managers should be in constant communication with the employees. This process is known as Performance Management, and its primary aim is to achieve pre-set company goals by making sure that the workers' tasks lead to the achievement of the organization's objectives. Good Performance Management influences productivity, customer satisfaction, and employee job satisfaction, and promotes values and good behavior. There are different aspects of Performance Management, namely; budgeting, target setting, employee involvement and corporate culture. Top down vs. Bottom-up budgeting approach Budgeting is the process of expressing a plan in quantitative form for a particular period with the objective of predicting cash flows and efficient allocation of resources. A budget gives the company an amount of structure and guideline to follow. For example, annual budgets of the previous year are reviewed the following year to assist managers in determining what aspects of the business needs more funds. A budget also assists executives to judge the performance of the employee by the budget. However, employees are likely to modify the budget to make their set goal easier to achieve. This is known as budgetary slack. Executives can determine what scenario is most suitable based on budgeting. For example, in the case of many scenarios provided to achieve the firm's goals, managers can decide on the most appropriate scenario based on the financial needs of each. The top-down approach of budgeting gives the executives' absolute authority in the process while the bottom-up approach allows for employee/ departmental participation. One of the advantages of the bottom-up approach is it enhances the employees' morale since they are involved in the budgeting process. Managers' understanding and commitment are also enhanced using this budgeting approach concentrating on strategy and also increases communication between departments. At Toshiba, the approach used was the top-down approach that did not allow the affected parties to participate in the budgeting process. However, a bottom-up approach would have been suitable because this approach also contains more relevant information since the involved parties are present. The bottom-up approach also respects various departments, their needs, and their obligations. This approach would have been beneficial to Toshiba because the employees would be involved in the budgeting process and would have allocated funds to department depending on their needs. Target setting Target setting is the process of planning tasks and activities to reach goals. A top target is setting up consists of identifying the target or goals and making progressive steps towards that goal. A successful target plan should involve both managers and employees, with the role of making sure that the targets set are realistic. Goal setting ensures helps management gauge the performance of the employees and the company in general and also sets clear guidelines for the roles and tasks each employee is supposed to do. Other benefits of target setting include aiding in decision making, enhances easier communication, optimum use of resources and efficient use of time. As stated above, the primary cause of the Toshiba accounting scandal was the setting of unrealistic goals by the executives. The firm was bound to unsuccessful because the executives did consult the employees on target setting but rather made these decisions by themselves. Toshiba could have used a different approach by involving the input of the employees. This would give the employees confidence in addressing their criticisms on the set targets, saving the company much money and maintaining a good public image. By setting unrealistic goals, the employees felt pressured into inflating profits so as to appease management. The managers could therefore not use this approach to monitor the progress of the employees and the company since it was based on wrong figures. The executives also gave employees targets to meet within a limited time frame, making the employees more desperate to reach these goals within the period for fear of disappointing the executives CITATION Cur15 \l 1033 (Vershoor, 2015). However, a successful target setting plan would have revealed that the company would need more time to achieve set goals. It is unclear whether Toshiba had a target setting plan to begin with because of the unrealistic expectation, the presence of successful target planning process would have reduced the employees' pressure to achieve set goals and kept fraudulent behavior at bay. Corporate Culture The beliefs, values, and attitudes in the company can affect decision making, employee involvement and the overall success of the business. Organizational culture is not defined in writing, but it develops over time. Organizational culture also known as organizational culture affects the way employees interact with the executives, for example, Toshiba's corporate culture made it hard for employees to express their views on the executives freely because it was against their culture to go against the executive's orders. M...