Redefining Employee Accountability in Sri Lankan Workplaces

Introduction

In today's competitive corporate world, employee responsibility is essential for organizational success. In Sri Lanka, as firms confront increased transparency expectations, performance management systems must grow to keep up. Agency theory, which investigates the connection between employers and employees and how their interests might be matched, provides useful insights into this difficulty.

Figure 1

Understanding Agency Theory

Agency theory is a notion that focuses on the link between principles and agents. The principle is the higher entity, and they delegate tasks to the agents. Michael C. Jensen and William Meckling popularized the agency theory idea. In a business scenario, shareholders are the principals, and company executives are the agents. In a political environment, elected officials are the agents, while their people are the principals. The idea highlights the conflict of interest and priorities between principals and agents. Conflict arises when they are working to achieve a certain objective and agents operate on behalf of the principal. (Corporate Finance Resources, 2024) In a traditional setup, this alignment is often achieved through monitoring, performance evaluations, and rewards. However, the requirement for more transparency in modern organizations is pushing a reassessment of traditional processes.

Figure 2 Source: https://www.wallstreetmojo.com/agency-theory/

In Sri Lankan firms, where hierarchical structures are common, agency theory helps explain why performance management methods might occasionally fail to hold people responsible. Employees may be less motivated to achieve corporate goals if they do not completely grasp how their job corresponds with them, or if performance standards are unclear.

 

Redefining Accountability in the Sri Lankan Context

To overcome this issue, Sri Lankan enterprises can benefit from redefining accountability by increasing openness in performance management. The first stage is to define clear performance measures that are consistent with the organization's strategic goals. Transparent communication regarding employee expectations ensures that both managers and staff understand the success criteria. According to (Pratt, 2023), firms that clearly communicate performance objectives enjoy a 20% boost in employee productivity, as people are more engaged when they understand how their individual performance adds to the company's success.

Incorporating real-time feedback into performance management systems promotes responsibility. Traditionally, feedback in Sri Lankan companies has been annual or quarterly, which may not offer employees with enough opportunity to improve their performance. By providing continuous feedback, managers can hold employees responsible in real time, and employees can make changes before performance disparities increase. This strategy not only improves alignment between employee and company goals, but it also promotes a culture of trust and transparency.

Performance Transparency and Employee Motivation

Transparency is also important for encouraging staff. According to agency theory, when employees understand how their performance is evaluated and how their efforts affect the organization's success, they are more inclined to perform well. In Sri Lanka, where respect for authority and defined hierarchies are frequently stressed, cultivating a culture of open communication regarding performance might help to bridge gaps and minimize confusion. Companies such as Hatton National Bank (HNB) have created transparent performance management systems that explicitly relate performance results and compensation, ensuring that employees understand how their efforts contribute to company goals. These systems include not only monetary incentives, but also non-monetary benefits, such as professional development opportunities, which encourage employees to achieve and surpass objectives. (Hatton National Bank PLC, 2024)

Furthermore, clear performance systems are essential for building confidence between employees and management. When employees believe the assessment process is fair and based on clear criteria, their trust in leadership rises, resulting in more engagement and lower turnover.

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Conclusion

In Sri Lanka's changing corporate climate, redefining employee accountability through transparent performance management systems is critical to synchronizing employee and company goals. Agency theory emphasizes the necessity of harmonizing employer and employee interests, and by adding transparency, firms may develop better responsibility, incentive, and trust. As firms adapt to global trends and local obstacles, open and fair performance evaluation methods will be critical to achieving long-term success.

 

 

 

References

Corporate Finance Resources, 2024. Agency Theory. [Online]
Available at: https://www.wallstreetmojo.com/agency-theory/
[Accessed 19 11 2024].

Hatton National Bank PLC, 2024. HATTON NATIONAL BANK PLC Annual Report 2024, Colombo: HATTON NATIONAL BANK PLC .

Pratt, A. H., 2023. Redefining Accountability. [Online]
Available at: https://leadingedgeteams.com/redefining-accountability/
[Accessed 19 11 2024].