|Title of unit/s||Resourcing and Talent Planning|
Learning outcomes1. Be able to explain the link between organisational success, performance management and
2. Be able to explain the relationship between performance management and reward.
3. Be able to contribute to effective performance and reward management in the workplace.
4. Be able to conduct and reflect upon a performance review.
The Managing Director of your organisation has requested the HR department to provide a report for the Board which outlines the links between organisational performance, reward and motivation. You have been asked to write the report, and include the following:
|1. A description of the purpose of performance management and its relationship to business objectives and the organisation’s success.||1.1|
|2. An explanation of the key components of performance management|
|3. An explanation of how performance management processes relate to|
|4. An explanation of the purpose of reward within a performance management system.||2.1|
|5. An exploration of the components of an effective total reward system.||2.2|
|6. An identification and explanation of at least five factors that need to be considered when managing performance.||3.1|
|7. A description of the data required by individuals that are involved within a performance and reward management process.||3.2|
|8. An explanation of the frequency, purpose and process of performance reviews.||4.1|
(a) You should conduct a performance review meeting. This should be
either within your own organisation or through an observed role play.
This must be observed and evaluated by an independent person such
as a work manager, assessor or tutor.
(b) Provide short a written reflective review (about 400 words), outlining
the strengths and weaknesses of your handling of the performance
review meeting, and the learning points and actions for you when
undertaking such meetings in the future.
In an era of liberalisation, privatisation, and globalisation (LPG) backed by intense market competition, companies are increasingly concerned about maintaining and attracting a talented and motivated workforce. Therefore, human resource management (HRM) has extended beyond its traditional role to encompass employee performance and its relationship with business objectives and individual goals. Performance management is a practical solution/strategy to address these needs. This report outlines performance management’s purpose and objectives, its main components, and how performance management systems and the link between organisational success, reward, and motivation.
Performance management refers to maximising the productivity of individuals and teams within the organisation to ensure that the organisational functions are running at optimum. Underlying performance management objectives is recognising human resources as the most valuable asset that can help organisations attain sustainable competitiveness (Jain & Gautam, 2014, p.2). Performance management is one of the primary contributors to organisational success; hence companies rely on their performance management systems to leverage employee output.
Performance management systems (PMS) have persisted through history. There are traces of performance management in both the U.S and the U.K during the 18th and 19th centuries. Companies were required to adopt PMS in the United Kingdom in the 1980s and 1990s through legislation. In the U.S, the recognition of PMS by law began in the 1970s. However, PMS were crude and straightforward. Organisations initially applied a rewards-driven approach to influence employee outcome (Jain & Gautam, 2014, p.4). PMS has since shifted towards learning and development because of the current knowledge and technology-intensive organisational processes.
The primary purpose of performance management is to establish a high-productivity culture among employees and teams where they take responsibility for improving business processes and their skills through managers’ guidance. Performance management also ensures the alignment of personal objectives with organisational objectives, thus ensuring that employees uphold the business’s core values. It also provides the terms of productivity by defining individuals and teams’ responsibilities while establishing and implementing accountability measures such as expected results, skills, and behaviours. Performance management also improves people’s ability to meet the target job outcomes and even exceed expectations as they achieve their full-potential (Armstrong, 2009, p.2). Additionally, it provides support and guidance to individuals that enable them to improve individual and job outcomes.
Other objectives include (Armstrong, 2009, p.3):
a). Reward, motivation and empowerment of employees,
b). Aligning personal objectives with the departmental, group and organisational goals,
d). Maximising individual and team potential for the benefit of the organisation and individuals.
Consequently, the main objectives are developing employees, satisfying organisational goals, establishing accountability, defining, evaluating, and providing feedback for employee performance.
Performance management is a systematic and evolutionary process that comprises measurement, dialogue, agreement, feedback and positive reinforcement. The key components include (Armstrong, 2009, p.5-6):
Studies have shown that performance management is critical in forging organisational success. It provides relevant and timely information that informs the planning and decision-making of an organisation. Companies with performance management systems have higher profits, better cash flows and stock performance (Jain & Gautam, 2014, p.5). Thus firms that employ performance management experience better financial performance and productivity. Performance management is also effective in improving organisational performance. It enhances organisational success by ensuring that organisations achieve their business objectives by developing a performance-driven culture. It also improves employee performance and corporate strategy by clarifying expectations and outcomes and identifying talented individuals for specific tasks. Finally, Jain & Gautam (2014, p.8) argue that PM is an operational and strategic focus tool that helps organisations to gain a competitive edge in their respective sectors.
Performance management helps identify employee strengths and weaknesses as well as the evolution of a career development plan, including training and rewards. A reward system guarantees good performance and interest in performance as employees are increasingly encouraged to attain or exceed targets. Therefore, employee reward and motivation through performance management reinforces good behaviour and triggers an internal drive to meet and exceed company expectations (Harter, Schmidt & Hayes, 2012, p.143). PM also supports employee motivation by ensuring that personal goals align with organisational goals, eliciting employees’ continuous drive to reach their full potential.
PM allows individuals to attain their psychological and safety needs, social esteem needs and self-actualisations needs highlighted by Maslow’s hierarchy of needs. PM’s physical and mental improvement strategies create a pleasant working environment for the attainment of organisational goals. PM processes and procedures have the power to influence positive employee behaviour, hence the organisation’s productivity. The standardisation for activities and outcomes and continuous improvement of employees through PM creates a premise for individual competence improvement, thus improving staff motivation and productivity (Dechev, 2010, p.15). Performance-based pay also gives employees an incentive to increase productivity and leads to organisational attractiveness and a higher employee retention rate. PM’s regular and effective performance feedback builds focus and accountability among employees breeding positive attitudes and job satisfaction.
Reward in performance management is used as a strategic tool of staff motivation and is directly linked to individual performance contribution. Reward in PM is a process focussed on reinforcing preferred behaviour and extinguishing undesirable employee behaviour. PM produces performance ratings that inform the organisation’s reward system. Therefore, a reward system is used by organisations to inject productivity into the workforce. Managers get a strategic opportunity to formally recognise employees through reward systems enabling better productivity (Armstrong, 2009, p.152). Therefore, the use of rewards in PM is a stepping stone to achieving company goals. The main components of a reward system include compensation, performance recognition, skills enhancement, work-life balance and benefits.
An effective reward system comprises both financial and non-financial rewards. The primary non-financial rewards include recognising individual and team achievements, providing opportunities for employees to learn, enriching their work experiences, and ensuring skills development and training opportunities for employees. Other factors include career planning, enabling employees to discuss their career direction and use organisational resources to attain an optimum career path. Job engagement using intrinsic motivation factors and showing organisational commitment to integrating individual goals and corporate objectives are also critical components of a sound reward system (Armstrong, 2009, p.153). Financial factors include base pay, benefits and contingent pay. According to Kerr & Slocum (2005, p.133-135), other elements of an effective reward system include comprehensiveness, whereby the reward system recognises small and big wins. Equity in assigning rewards, timeliness, specificity of the merit actions and behaviours, and measurability of efforts are also critical in the reward system.
A performance management system should be strategic and integrated. Various factors impact the effectiveness of performance management (Dorsey & Mueller-Hanson, 2017, p.13):
Data is the key driver of effective performance management systems. The wealth of data required for PM is endless and variable. The traditional source of data was supervisors who have been proven to be potentially biased. Modern PM has more sound and multiple sources of data, also known as 360 degree systems. They include peer ratings, self-evaluation, and subordinate evaluation of supervisors (180 degree systems). The 360 degree systems and peer evaluations are the most common data sources and can sometimes include external sources such as clients. The company top management and appraisal teams also provide PM data (Staronova, 2017, 27-30). The information retrieved from these systems is more relevant and valuable as opposed to traditional systems.
The main goal of performance reviews is to provide helpful feedback on individual and team performance and promote a culture of communication and dialogue in the PM process. The historical records of employee performance contribute to their professional development. Continuous feedback is also essential to the supervisor as it allows them to give employees appropriate time to correct performance or behaviour without blindsiding them, contributing to better working relationships (Pulakos, 2004, p.19). Performance reviews should be a regular and continuous process. Traditionally, organisations conducted performance reviews annually or biannually. Companies have since adopted more frequent reviews such as quarterly reviews. However, supervisors should also engage in regular check-ins of employee performance every other week or month to ensure up to date feedback and employee performance progress. Performance reviews are shifting from a more complex and formal structure to shorter, unstructured and more frequent processes.
The ideal performance reviews process accounts for discussions on employee ratings, rationales for employee valuation, the use of competency models to evaluate and develop employees, and identifying new performance standards for an employee who exceeds expectations. Upon review, managers can suggest effective learning options that meet individual employee needs (Pulakos, 2004, p.19-20). Therefore, a performance review process is dedicated to identifying employee development areas and creating a roadmap to address them. The end product of performance reviews is the development tools for employees, including learning activities, skills development activities and training programs.
Performance review is a critical feedback mechanism, and therefore offering well-thought-out feedback stands out as the most outstanding aspect of an effective performance review. While conducting the performance review meeting, I realised that information plays a pivotal role in the performance review process. Gathering adequate data on the individual being assessed can boost the effectiveness of the feedback process. More understanding of the individual’s job description and personal career objectives helped establish whether the individual attained expectations. The background information I had gathered was beneficial in delivering a constructive performance review.
Unfavourable evaluations can kill motivation. Thus, there is a need to balance negative and positive feedback because all individual output cannot be entirely negative. My greatest challenge was in articulating negative feedback in a respectful yet objective manner. The performance review meeting was overly optimistic and perhaps a lot less balanced because of the fear to demotivate. In the future, I would like to improve upon my delivery of constructive criticism and articulating weaknesses to create the employee’s right impression.
The self-assessment provided by the interviewee was very interesting and enlightening. The interviewee helped me establish their individual goals, value for the organisations, and their desired responsibilities. The self-assessment provided an opportunity to map an effective career development plan and identify relevant training and mentoring opportunities. My most significant learning point was that self-assessment is the key to unlocking and implementing individual development needs. I also learnt that as an employee, I am my greatest advocate. I can either help steer my personal and career development or under-represent my contribution to an organisation, thereby failing to attain an optimum career path.
Before the performance review meeting, I barely considered my skills as an interviewer. All my focus was on the process and elements of a performance review meeting instead of creating a good platform for communication and feedback. In the first few minutes of the assessment, I struggled to make the interviewee comfortable and at ease. It took a few minutes to establish a rapport and to create a space for mutual respect. I was able to overcome this challenge by soliciting more contribution from the interviewee in the earlier stages. By the time we arrived at self-evaluation, the interviewee was comfortable enough to give a comprehensive review of their contribution to the organisation.
I am aware that there are many other elements of effective performance review that I could improve on. Still, I am more encouraged by my impeccable research skills on the organisation’s employee roles and my ability to develop a practical career plan.
Armstrong, M., 2009. Armstrong’s handbook of performance management: An evidence-based guide to delivering high performance. Kogan Page Publishers.
Bae, E.K., 2006. Major Elements and Issues in Performance Management System: A Literature Review. Online Submission.
Dechev, Z., 2010. Effective Performance Appraisal–a study into the relation between employer satisfaction and optimizing business results. Erasmus University.
Dorsey, D. and Mueller-Hanson, R., 2017. Performance management that makes a difference: An evidence based approach. SHRM Science to Practice Series.
Harter, C., Schmidt, C. and Hayes, D., 2012. Performance Appraisal systems, Productivity, and Motivation. Public Personnel Management, 31(2), pp.141-159.
Jain, S. and Gautam, A., 2014. Performance management system: A strategic tool for human resource management. Prabandhan Guru, 5, pp.1-11.
Kerr, J. and Slocum Jr, J.W., 2005. Managing corporate culture through reward systems. Academy of Management Perspectives, 19(4), pp.130-138.
McDonnell, A. and Gunnigle, P., 2008. Performance management. Available at SSRN 1267160.
Pulakos, E.D., 2004. Performance management: A roadmap for developing, implementing and evaluating performance management systems (pp. 1-42). Alexandria, VA: SHRM foundation.
Staronova, K., 2017. Performance appraisal in the EU member states and the European Commission. Staroňová, K.