Performance Management Systems Linked to Reward

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Table of Contents

Executive Summary
Introduction
Performance management system
Motivation
Total reward system
Summary and Conclusion
Reference List

Executive Summary

This report covers the fundamentals of performance management, and explains what all the managers and supervisors should know concerning the concept of performance management. In addition, the report creates special emphasis on the importance of employee motivation to performance.

In explaining the different concepts, the report uses relevant literature and specific theories, which help the reader to understand the information clearly. Further, the report aims to help the Brook and Kent Company limited in proper implementation of their performance management so as to help improve the quantity and quality of work that the employees produce.

Introduction

Most organisation do not really comprehend what performance management really means. Therefore, these organisations are usually dismayed at why sometimes the employees may be working hard, and are satisfied with their jobs but still the outcomes from the work of the employees do not reflect the input that the managers and supervisors expect.

This usually makes the managers and supervisors to wonder what they may be doing wrong in helping to increase the productivity of the workers. In most of these situations, the managers or supervisors have usually gotten the concept of performance management all wrong, hence this is portrayed in the outcomes of the work done by the employees.

Performance management can be explained in simple terms as the activities which an employer or the organisation may take to ensure that the goals which are set are consistently achieved and in an efficient and effective method. The performance management can be used to evaluate the performance of employees, a department within the organisation or the performance of the whole organisation in general.

Generally, performance management tries to bring out the best out of the employees’ ability, to enable the organisation achieve good returns. For instance, some organisations use reward based performance management to reward the employees who are perceived to have high performance. Rewarding is a form of recognition for the employees contribution towards the attainment of the main objectives within the business.

This report will attempt to evaluate the main concepts of the performance management, which should be applied to organizations to ensure the effectiveness of their performance management systems.

The paper will also cover the assumptions which different organisations make in implementing their performance management systems, which ultimately lead to the inefficiency of the performance management systems in ensuring better performance of the employees and therefore better returns for the company. Moreover, the findings of this report will be based on the problems that Brooks & Kent Company limited, a small construction SME, faces.

Performance management system

For many organisations, the performance management system is first implemented through the creation of an effective business strategy, i.e. strategic planning. The business strategy determines where the business would like to be after a specific period of time.

Normally, the period may be six months, one year or even ten years. In addition, the business strategy should have a close relationship with the main objective of the business, as well as pay close attention to the means of performance appraisal in recognition of outstanding achievement by the employees of the company (Verweire and Berghe, 2004, p 93).

The performance appraisal may take different forms; Brook and Kent opted for the reward based appraisal. However, the appraisals may also be used in other forms which are not reward-based. The reward based appraisals of Brook & Kent takes the form of promotions, salary increase and the issue of bonuses to outstanding work by the employees.

This helps in improving the motivation of the workers as their effort is recognised by the management of the company. In the research, the following systems were reviewed, to explain the reward based management organisation of the Brook & Kent and how the theories may be used to solve some of the problems existing at the company and improve productivity. Therefore, the main purpose which makes an organisation to implement a performance management system is to ensure that:

The employees do the work which the organisation requires them to do. Normally, the performance management system specifies the specific work which the employees supposed to do (anon. 2007 p 1).
The employees know the amount of work that the organisation requires them to do and the quality of the work which they should produce. This therefore guides the employee by putting specific targets which the employee is supposed to meet to satisfy the organisation (anon, 2007, p 1).
The performance management system also ensures that the employees’ output is monitored closely and the information on their ongoing performance communicated to them. This makes the employees to make the necessary correction on their quantity or quality of work to ensure that they achieve the set performance in the set period of time (anon, 2007, p 1).
The performance management system also ensures that exemplary work is rewarded, based on the performance management system that the organisation is using. The performance management system also ensures that necessary measures are taken on an employee who fails to meet the set performance standards (anon, 2007, p 1). Both these measures ensure that the organisation achieves its strategic objectives as set out.

The main components of a performance management system include:

Communicating the performance expectations which the organisation requires its employees to achieve;
Maintaining and monitoring the ongoing performance of the employees of the organisation; and
Conducting regular performance appraisal (Anon, 2007 p 2).

During the initial stages of the implementation of the performance management system, the organisation should come up with effective strategies which fit with the main objectives of the business. In normal circumstances, the application of the organization strategies should be implemented using the appropriate performance management system. How the organisation implements the strategies in the performance management system ensures whether the strategies will be effectively met. After the planning stage, the organization should effectively communicate the strategies to the employees and ensure that they are embedded in the organisational culture of the company concerned. This ensures that the employees will continuously strive to achieve the set performance standards as they relate with the standards. This is usually the most important component of a performance management system.

If the organisation fails to effectively communicate the performance management system to the employees, there is a very high possibility that the performance standards in the organisation will not be achieved. This is because the employees may not associate with the set standards and may be on the perception that the performance management system does not benefit them (Taticchi, 2010, p 245).

For an effective and efficient performance management system, the organisation must continuously maintain, monitor and analyse the performance management standards. The organisation must use data which is reliable, and have an effective method of interpreting the data.

This helps the organization to determine the progress of the employees with regard to the performance management standards which have been put for them. The organisation should also communicate its findings to the employees so that they may take the necessary measures.

The organisation should have effective means of appraising exemplary performance of its employees. This helps in motivating the workers who have performed better and also help in motivating the other workers to also perform better as they are guaranteed efficient appraisal methods.

However, if the organisation fails to plan and implement the performance appraisal effectively, it may lead to reduced performance of the employees. This may happen if only a few people are rewarded and there are many other people expecting to be rewarded. This makes those people who were not rewarded to get demotivated (Rao and Rao 2004 p 13).

Motivation

Motivation of employees is a very vital aspect, which all managers usually consider. Employee motivation can be defined as the set of forces, which guide a person to continuously strive to achieve a certain goal.

Generally, the origin of the forces may either be internal or external. Employee motivation enables the individual to find pleasure in the process of achieving the goals set by the company to continuously endeavour to improve on the outcomes of his activities. Therefore, motivated employees will perform better as they find pleasure in their activities and therefore put more effort in implementation of the activities.

Different organisations implement performance management systems so as to help improve the quality and quantity of output that the employees produce. The organisations aim to do this by improving the motivation of the employees in different ways to enable them to achieve the required performance standards.

To achieve this, the performance management system has several methods of employee appraisal, which help in motivating the employees to perform better as the organisation would recognise their outstanding contribution to the organisational goals. The performance management systems not only determine the appraisal methods, but it also determines what actions will be taken on the employees for failure to reach their performances.

Performance management usually determines the rewards which the employees will get due to the achievement of their performances. Normally, the rewards may be in the form of promotions, bonuses, salary increases or recognition. This helps in motivating the employees to achieve the rewards.

However, the performance management is also used to determine what measures will be taken to an employee who fails to achieve his expected performance. The measures taken may range from demotions, forfeited bonuses and allowances to loss of the job. This, according to Jeremy Bentham’s “the carrot and the stick motivation theory” helps in motivating the employees to achieve their performances.

According to Bentham, all individuals are motivated by the urge to avoid pain and find pleasure in the activities they take. Bentham stated that “a worker will work only if the reward is big enough or the punishment is sufficiently unpleasant” (Cited in Shah and Shah, 2010). Bentham was of the view that if you want a donkey to move you either have to dangle a carrot in front of it or whack it with a stick from behind hence the name, “the carrot and the stick” (Shah and Shah 2010).

In the context of employee motivation in relation to performance management, pay rise, promotion, bonus or recognition are the “carrot” which aid in motivating the worker. More often, the employee will strive to achieve his/her performance so as to get the rewards. On the other hand, demotions, forfeited bonuses and allowances, and loss of the job are the “stick” which motivates the employee to work and achieve his/her performance, in a way of avoiding such ‘stick’.

The relationship between motivation and performance management can also be explained by the Victor Vroom’s valence x expectation motivation theory. Vroom states that “an employee is motivated to perform better if he/she believes that the better performance will lead to better performance appraisal and that this shall result into the realisation of personal goal in form of some reward” ( shah and shah, 2010, part 8).

In our context, the performance management outlines the various appraisal methods which may be given to the employees in case he/she attains his/her performance. According to Vroom, the employee is not motivated by the actions taken against him/her for failure to reach the set performance. However, the employee gets motivation from the perceived rewards which he/ she may get due to attainment of his/her performance.

There are usually different appraisal methods which are used by different organisations to help in motivating their employees. However, a recent form of performance appraisal which is mostly used by different organisation is the total reward method of appraisal.

Total reward system

It is widely agreed by different scholars that people do not work just to get paid; the reasons that make people work are far much more than the pay, which the organisation may offer to the employees. Therefore, for an organisation to be able to effectively motivate the employees they must not just use the payment, but must also understand and take measures to ensure that the employees needs are met, which in turn leads to motivation.

Different theories have been proposed to explain the source of motivation of the employees, some of which have already been discussed above. Therefore, to achieve motivation, the organisation needs to use the total reward system to acquire motivation of its workforce. However, careful observation of the motivation theories shows that employees are mainly motivated due the fulfilment of their needs, both material and immaterial. This is usually the basis of the total reward system.

Total reward is defined by Worldatwork, the association which deals with total reward in the US, as all the tools which an employer may use to attract, motivate and retain employees and anything which the employee recognises to be valuable according to the employment relationship (Armstrong, 2002, p 8). The total reward system therefore, has many components, both financial (material) and non-financial (immaterial).

Different scholars have proposed different constituents of the total reward performance management appraisal method. However, even though the general components are different, most of the components are similar to those proposed by Worldatwork. The main components of the total reward system according to Worldatwork (2005) are: pay, benefits, and learning and development (Jiang et al, 2009, p 4).

Pay refers to all the forms of recognition which have monitory value attached to them. It includes base salary, bonus & allowances and any other form of recognition which has financial payment attached to it. This payment helps in attracting highly qualified personnel to the organisation and also in retaining them.

The benefits include retirement benefits, healthcare benefits, savings and time, which the employee may be given to spend as he wishes. The benefits which are given to the employees are mainly meant to protect their future and reduce uncertainty. Moreover, reduction in the uncertainty of the employee helps in increasing his motivation to the work as he is assured of his future needs being met by his employer (Armstrong, 2002, p 9).

Learning and development facilitates career growth and knowledge improvement in employees. Normally, learning and development may take the form of career development and training. This usually helps in retaining the employee into the organisation as the activity satisfies the personal development needs of the individual. Moreover, learning and development is not necessarily a financial gain to the employee; it just helps to improve the employee satisfaction by and helping to quench his thirst of knowledge.

Summary and Conclusion

The above report has explicitly explained the performance management systems. The understanding of the performance management system will enable Brook and Kent to take the appropriate measures to help in improving the employee motivation.

The main problem, which Brook and Kent faces, is the fact that their appraisal methods are not effective. In addition, managers do not appraise exemplary performance at the required time, and delay in appraising the achievement makes the employees feel demotivated as their contribution to the organisation is not recognised.

Moreover, some of the employees feel that they deserve to be rewarded yet fail to get the rewards, as it takes long to reward exemplary work. Brook and Kent should therefore implement a performance management system which regularly recognises exemplary work.

The organisation should also implement a total reward performance management appraisal system which will cater for all the needs of the employees not only material but also immaterial. Implementation of the recommendations and a clear understanding of the performance management systems will enable Books and Kent Company limited to have high quantity and quality returns after the implementation of the performance management system.

Reference List

Armstrong, M., 2002. Employee Reward. London: CIPD Publishing. Web.

Anon. 2007. Performance management. North Carolina State personnel manual. Web.

Jiang, Z. et al. 2009. Total reward strategy: a human resources management strategy going with the trends of the time. International journal of business management, vol. Web.

Rao, T. V. and Rao, T. V., 2004. Performance management and appraisal systems: HR tools for global competitiveness. New Delhi: SAGE. Web.

Shah, K. and Shah, P. J., 2010. Theories of motivation. Lay networks. Web.

Taticchi, P., 2010. Business Performance Measurement and Management: New Contexts, Themes and Challenges, Berlin, Springer. Web.

Verweire, K and Berghe, L., 2004. Integrated performance management: a guide to strategy implementation. New Delhi: SAGE. Web.

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