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MASTER

HUMAN RESOURCES MANAGEMENT

MASTERS FINAL WORK

INTERNSHIP REPORT

TRAINING REPORT AT EUGSTER & FRISMAG PORTUGAL –

PERFORMANCE APPRAISAL

RUI PEDRO GANITO MARCOS

OCTOBER 2016

MASTER IN

HUMAN RESOURCES MANAGEMENT

MASTERS FINAL WORK

INTERNSHIP REPORT

TRAINING REPORT AT EUGSTER & FRISMAG PORTUGAL –

PERFORMANCE APPRAISAL

RUI PEDRO GANITO MARCOS

SUPERVISOR:

RITA MARTINS DE SOUSA

OCTOBER 2016

ii APPENDIX VI – CODE OF ETHICS .......................................................................................... X APPENDIX VII – LIST AND DEFINITION OF CORE AND OTHER SKILLS ..................................... XIII

Graphic Table of Contents

CHART 1 – GENDER DISTRIBUTION…………………………………………………… 14

CHART 2 – ANTIQUE – IN YEARS……………………………..……………………….. 15

CHART 3 – LEVEL OF EDUCATION………………………….………………………….. 15

CHART 4 – EVALUATION DIAGRAM ........................................................................ 19

Table of Contents

TABLE 1 – WEIGHT DISTRIBUTION PER JOB / FUNCTION ......................................... 20

TABLE 2 - CORE SKILLS AND OTHER SKILLS .......................................................... 21

Formula Table of Contents

FORMULA 1 – GLOBAL EVALUATION FORMULA…………………………..…………… 22

i

Acknowledgements

Firstly, I would like to thank my thesis advisor Professor Rita Martins de Sousa for the outstanding support on steering me in the right path whenever necessary. I would also like to thank the organization where I have performed my internship, Eugster & Frismag, and the Human Resources department for receiving me and making me part of their team. Finally, I want to express my deepest gratitude to my parents without whom, none of this would be possible. As well as my colleagues and friends Ana Ribeiros and Sofia Moura for making part of this journey with me.

ii

Resumo

Este relatório tem como objetivo explicar as atividades realizadas durante o estágio na Eugster & Frismag Portugal. O estágio teve diversos objetivos, designadamente, apoiar o departamento de recursos humanos nas atividades relacionadas com a gestão de recursos humanos, incluindo as áreas de comunicação, avaliação de desempenho, formação, recrutamento e seleção. Este relatório de estágio aplica uma metodologia de investigação baseada na observação e análise do sistema de avaliação de desempenho aplicado na área de fabrico, bem como em todos os procedimentos inerentes ao processo. Para além disso, o estágio possibilitou a construção de duas novas grelhas de avaliação para áreas diferentes dentro da empresa, designadamente, a administrativa e a de gestão. Conclui-se alertando para alguns eventuais problemas futuros. Entre estes salienta-se, os problemas decorrentes do feedback tardio, e da ausência de recompensas relacionadas com a produtividade na organização. Por último, sublinha-se que a existência de um Código de Ética e Conduta não se traduz na explicitação de tal tópico no sistema de avaliação. Palavras chave: Gestão de Recursos Humanos, Avaliação de Desempenho, Código de Ética

1 Introduction

Under the Master of Human Resources Management by the Lisbon School of Economics and Management, I have taken the decision to perform an internship program at Eugster & Frismag Portugal to develop my skills absorbed during the master program. The internship program had the length of four hundred hours (400 hours), under academic orientation of Rita Martins de Sousa, PhD and under training orientation of Karina Marques, HR Director at Eugster & Frismag Portugal, whom supervised and kept up with all the work developed during the internship’s period. The problem identified is based on the lack of a Performance Appraisal System at Eugster & Frismag Portugal. Such system should be adopted in an organization with this size, although, this structure needs to be adequate to the inherent specificities, so that this management tool becomes effective and robust. The questions about the Performance of an Appraisal System can only be answered in a long-term perspective. Although, through a planned and adequate conceptualization of the organization needs, it is viable, considering the literature, to preview the possible reactions the organization might suffer with its introduction of this system. In the short-term it is required to understand: What are the main goals of this performance appraisal system in a generic level and specified to the job? Which methodology should be adopted? Which metrics should be implemented, and which periodicity of the appraisal? The metrics adopted and the methodologies used are ethical and in line with the mission and visions of the organization?

2 Performance Appraisal

Performance appraisal is an important management tool to assess employees’ efficiency and performance at the workplace, therefore, employees are considered as a strategic asset for the organisation, determining the organisations’ survival (Ahmad & Azman Ali, 2004). Meaning that, this system requires a tailored strategy to the organisation, so that certain goals are achieved at specific situations, making sure that certain activities of its divisions, departments and other units as well as individual employees are aligned and contributing to the organisation’s strategy. Even though, organizations may look similar to one another, they usually have different cultures, operating in different environments, using different technologies, and other crucial aspects (Allan, 1994; Rowland & Hall, 2012). Most performance appraisal systems focus unnecessarily on recording the past performance of an employee instead of focusing on changing and empowering the future performance of an employee. Not also that, but the more traditional performance appraisal systems use ineffective motivational tools, such as negative reinforcement or punishment. On the other hand, most modern performance appraisal systems focus on improving performance, through coaching, guidance, training and support, although, it does not mean it is the only way to approach the goal of performance improvement. If the employee receives enough information from the performance management system in order to understand what is wrong with the performance and why it is wrong, with enough support to change it, the performance management system reaches its intended goal to improve the performance (Lee, 2005).

Although, there are certain organisations which have taken a more strategic approach to human resources management and look at performance management as a pivotal integrative role in relating employee resourcing, reward, relations and development practices to strategic objectives (Rowland & Hall, 2012). With that in mind, it is necessary to evaluate periodically the output of an individual, measured against certain expectations, so that it gets easier for both parties to meet their outlooks (Ahmad & Azman Ali, 2004). Additionally to the need of periodicity, it ought to be free of bias, meaning that it ought not to be influenced by race, gender and age (Allan, 1994). To ensure that expectations are met, it is vital to provide training on how to participate and conduct an appraisal, making this a vital component to ensure that expectations are realistic and the feedback gets a greater acceptance from the appraised, as well as an increased effectiveness of the process (Cook & Crossman, 2004). Whenever needed a training refreshment should be considered as convenient as possible to make sure that everyone can still conduct and remain with the required skills to perform it. According to (Allan, 1992), even with training, the support of the human resources management staff is vital to identify possible problems and correct them. 2.1 Assessment interview & Rating systems After the vital training on how to participate and conduct an appraisal interview, subordinates should be involved on establishing standards and new goals, by doing that, the performance appraisal system ensures a better acceptance and effectiveness from the employees (Allan, 1992; Jawahar, 2007).

doing this, organizations improve and construct psychological contracts with the employees (Cook & Crossman, 2004; Lee, 2005). The main goal is to have the employee contributing in the description, interpretation and redirection of the performance feedback and not reacting to the ratings given. So, feedback achieves the same levels of a positivism when compared to a positive rating, without the negative effects from it (Lee, 2005). Most experts agree that timely and accurate feedback is the key to a sustained and successful performance. However, many appraisal processes do not allow employee involvement or interaction during the process with the supervisor, so that he or she can manage his or her efforts (Lee, 2005). Making the shift from an appraisal system where the usage of measurement, documentation and rating systems are a common practice, to a method where tracking and monitoring the performance, adjusting and regulating are standards, it requires a new approach, so that the process reflects and focuses mainly on the feedback and the performance improvement (Lee, 2005). Introducing feedback, instead of appraisal, might look informal, but at the same time it is far more effective than traditional appraisal systems. Feedback is information, provided in the heat of the moment that can help the employee better understand how he or she is performing, otherwise, the appraisal would only occur in the next six months, or current year (Lee, 2005). Furthermore, the enrichment of the job should also be taken into account, because after appraisal, that collected data should be used to create opportunities, such as mentoring or technical experts, that might provide a rise on the older employees’ abilities, skills and opportunities to contribute when

hierarchical advancement is unlikely. This HR practice boosts and empowers older employees, keeping them in the organization, passing through their knowledge and serving as mentors to younger employees (Kooij et al., 2013). 2.2 Fairness of Performance Appraisal and Organizational Commitment In the process of appraisal an employee’s performance is one of the most important determinants of organizational justice (Folger, Konovsky, & Cropanzano, 1992; Greenberg, 1986). Although researches argue about the category of fairness, there is a general consensus that organizational justice consists on at least three components, distributive justice, procedural justice and interactional justice. (J. A. Colquitt, 2012; Hassan & Hashim, 2011). The procedural justice is based on the perception of workers and the procedures used to evaluate their fair performance, while distributive justice is based on the means that performance or rewards received from the use of these procedures is fair (J. A. C. Colquitt, Donald E.; Wesson, Michael J.; Porter, Christopher O. L. H.; Ng, K. Yee, 2001; Greenberg, 1990). The interactional justice is based on the interpersonal treatment, among other decision factors (J. A. Colquitt, 2012). According to (Salleh, Amin, Muda, & Halim, 2013), previously to the system introduction, it is critical to determine the acceptance or satisfaction of the employees with such systems and understand if they feel that the processes are being fairly conducted. Meaning that apart from the technical aspects, the employee’s approval needs to be considered as the root for the formulation and execution of a performance appraisal system. If the employee acceptance is taken into consideration, it could improve its effectiveness and the level of the

to believe that accurate ratings can become a damaging effect on the employee motivation and performance as well as the willingness to improve, for instance a good employee whose performance is being hurt because of a personal problem. Also managers want to avoid conflicts inside their department, as well as avoiding the creation of negative performance records that can affect the employee’s career future. Although the same study reports that managers and supervisors are very cautious when deflating the ratings, due to ethical, legal and motivational consequences. But when managers deflate or inflate intentionally the ratings, they are serving some other purposes (Longenecker & Ludwig, 1990). 2.3.1 Ethical Perspectives on Inaccuracy in Performance Appraisal The intentional inaccuracy can be seen through three different ethical perspectives: formalist, utilitarian and bluffing perspective. It is required a balance between both perspectives to truly understand the perspectives behind the ethics of intentional inaccuracy rating in performance appraisal (Longenecker & Ludwig, 1990). The formalist perspective reflects Kant’s position towards the lie and fraud. For instance, if a Human Resources department is considered in a formalist perspective, this department only wants the appraisal data to be the most accurate as possible, rejecting any kind of favouritism or paternalism. Although the appraiser, who is usually the manager or the supervisor, wants to use the appraisal to encourage the employee (Longenecker & Ludwig, 1990). The utilitarian perspective considers the good and the bad consequences, weighting the ones affected by an action or a decision. Meaning that, in the case of a performance appraisal system when a manager inflates or deflates a rating,

he or she does not have a perspective that it will affect a broader functionality of the performance appraisal within the organization on the long run, ignoring those effects and thinking on the short term and forgetting that promotion data, training decisions, performance awards programs are correlated with the accuracy of the data recorded by the performance appraisal system (Longenecker & Ludwig, 1990). The business bluffing perspective considers that most managers and subordinates believe, a performance appraisal is a negotiation process where both parties try to enhance performance and use it as a tool to their advantage. By doing it, managers are making performance appraisal system rules corrupted, destroying it on the long run (Carr, 1968; Longenecker & Ludwig, 1990). 2.4 Possible Complications Over the last few years, researches (Dusterhoff et al., 2013; Jawahar, 2007; Pichler, 2012) have pointed out to several factors that are related to employee reactions to performance appraisals. For instance, bringing more positive feedback into the performance appraisal is seen as one way to improve the performance review process (Dusterhoff et al., 2013). Appraisal systems, may result into an unfair process or an inequitable distribution of rewards due to supervisors who are often holding on to stereotypical views on workers which might have an impact on the appraisal results, resulting in a discriminatory decision that affects promotions but also training opportunities (Maurer, Wrenn, & Weiss, 2003; McDowall & Fletcher, 2004). If the outcomes of appraisal is perceived as unfair by the employees, then

3 Eugster & Frismag Characterisation

3.1 History and General Characterization of the Group E&F Group is headquartered on the towns of Romanshorn and Amriswil in the Swiss-German Canton. It is a multinational Group whose activity started in the year of 1976 when its Founder, Mr. Arthur Eugster, created his first company dedicated to the manufacture of small household appliances. Since then the Group has developed significantly under the superior direction of Mr. Arthur Eugster that remains his major shareholder, always counting on the invaluable cooperation and support of his brother and partner Mr. Markus Eugster. Nowadays, E&F Group is made of two companies, in China as a joint- venture with a local partner and in Torres Vedras as a located company (EFP). All these units’ employ over 1.500 employees that produce a yearly turnover of several hundreds of millions of Euros. At this moment, Eugster & Frismag is moving to a Kaizen lean production, which means, it is using all its efforts to bring the organization into a lean production and the main targets are: Innovation, Flexibility/Reactivity and Quality Process and Product Optimization. 3.2 Vision & Values Eugster & Frismag has a vision for the year 2020. That vision is to achieve a zero error thinking, zero stocks, be an innovation leader and have the focus on the customer as the centre of all thoughts and actions.

Eugster & Frismag focuses its values on several stakeholders, like: Partners, Employees, Customers and Suppliers. These values are the respect, tolerance and common success. 3.3 Code of Ethics In April 2014 E&F Group developed a code of ethics (Appendix IV) that expresses the ways of dealing with stakeholders, management policy and its environment. The approach described by E&F code of ethics is based on respect, tolerance and a sense for common success, especially with the relationship among employees who deserve equal opportunities of personal and professional development. Not only that but it also assures that all the working processes are ergonomic and the supply chain is environmentally friendly, according to the law. When recruiting and selecting a new candidate, E&F will not take any discrimination based on race, skin colour, religion, gender, marital status, age, physical characteristics, nationality, sexual preferences, political or union associations and medical condition. In terms of management policy, E&F prefers to think on the long run, allowing itself to obtain know-how with relevance and efficient usage. Moreover, E&F distances itself from any type of corruption or bribery, compromising always on following the business ethics and all the correct applicable laws, mirroring it to all of its partners and suppliers. The Code of Ethics has an overall perspective not only legal, but also based in ethical principles.