KPIs and PRP as the Drive in Organisations

With the use of at least two detailed examples critically examine the view that organisational targets, Key Performance Indicators (KPI's) and Performance Related Pay (PRP) are the modern engines that drive the 'assembly lines' of many contemporary organisations When approaching this topic it is clearly important to have the correct and concise knowledge of just what Taylorism and Fordism are and how intrinsically important they were and are within the confines of the industrial revolution and modern business today. Many people believe that it is Henry Ford alone to whom we can attribute the immense growth and success of capitalism, for it was the mass expansion and methods of his work with Ford which created a model for so many other companies to follow in his wake. He was a master at reducing labour costs, and production costs with the effect that retail costs could therefore be brought down, resulting in an increase in overall sales and therefore profit. Antonio Gramsci called Fordism; ‘an ultra-modern form of production and of working methods such as is offered by the most advanced American variety, the industry of Henry Ford.’ Ford discovered a way to mass produce a product so cheaply that he could make it available to the common man, reduce it’s exclusivity and therefore allow it to become something which was marketed at base level and therefore desired by millions who suddenly discovered something was within their grasp and strived to afford it - naturally increasing sales. Frederick Taylor is equally to be celebrated within the modern world of business, for it is him who developed division of labour, and a wage system based on performance. These are two standard usages in business today. Taylor himself described these as; ‘merely the elements or details of the mechanisms of management’ Indeed, now, these tactics are so widely used and considered such logical means of extracting more proficient labour that it is difficult to remember a time when they were not implicated. So, it is with these initial points in mind that we approach where we have reached and developed these initial ideas today. Key Performance Targets and Performance Related Pay are surely the children of what was once Taylor’s idea of division of labour and performance based wage systems. KPI’s and PRP’s are indeed implicated in massive organisations the world over, successfully. To illustrate the success of these methods we will use two examples of substantial size and profitability, indeed, since he began it all, let us take the company of Ford, and the ever growing conglomerate that is Tesco. Some are of the opinion that the way in which company’s are run has not changed much in the past fifty years, that the ‘assembly line’ is still essentially what is used to motivate workers to produce. Large company’s such as Ford who were once pioneers of the assembly line now use organisational targets, KPI’s and PRP’s to motivate their workers. These work in the way that where people once became more efficient because they stood at the assembly line and each had their own part to add to the product making the process more time efficient, motivators are now used to make the actual production of the work from the individual greater. Depending on the level of management, different forms of motivation are used to achieve this. Ford are particular believers in PRP. Performance Related Pay is used throughout management levels - with higher management to encourage them to constantly creatively find ways to make their men work more efficiently, because not only do they get rewarded for this, but the person in the management position gets rewarded depending on their output. This is often in the form of capped or uncapped commission added onto their basic salary. If a target is reached, X amount of commission is awarded. These targets are then segregational, performance related targets being offered to the individual at base level for achieving a certain number of sales, producing a certain number of products - depending on what sector of the business they work in. There is then a pyramid effect, the person in management of this department, gets commission for each one of his workers hitting their targets, and he also has a departmental target to hit, it is his job to ensure that his team are happy, motivated and working well, because it is in his interests that they hit their own targets, and therefore the overall target, netting him his own performance related bonus. This method works right up the strata to the very top, and ensures that every member of the organisation, no matter how huge, has a reason and indeed a desire to work hard and be productive because they will be rewarded for it at the end.

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