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Chapter 1 (Performance Management and Reward Systems)

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62 views20 pages

Chapter 1 (Performance Management and Reward Systems)

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shakeelakousar24
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© © All Rights Reserved
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Performance Management

• Performance management is a continuous


process of identifying, measuring, and
developing the performance of individuals and
aligning performance with the strategic goals
of the organization.
Two main components of definition
• Continuous process
Process Management is ongoing. It involves a
never ending process of setting goals and
objectives, observing performance, and giving
and receiving ongoing coaching and feedback.

• Alignment with strategic goals


Performance Management requires that
managers ensure that employee’s activities and
outputs are congruent with the organizational
goals.
Contribution of Performance
Management System
• Motivation to perform is increased (feedback makes
people eager to learn)
• Self-esteem is increased (By recognizition and
appreciation)
• Managers gain insight about subordinates. 
• The definitions of job and criteria are clarified
• Self- insight and development are enhanced
• Administrative actions are more fair and
appropriate
• Organizational goals are made clear
Contribution of Performance
Management System
• Employees become more competent
• There is better protection from lawsuits (data
collected during performance evaluation can help
document compliance with regulation)
• There is better and more timely differentiation
between good and poor performance
• Supervisor’s views of performance are
communicated more clearly
• Organizational change is facilitated (Any change can
be facilitated by continuous feedback and improvement)
Disadvantages/ dangers of poorly
implemented PM system
• Increased turnover
If the process is not seen as fair employees may become
upset and leave the organization.
 
• Use of misleading information
If a standard system is not in place there ere multiple
opportunities for fabricating information about
employee’s performance.
 
• Lowered self esteem
Self esteem may be lowered if feedback is provided in an
inappropriate and inaccurate way.
 
Disadvantages/ dangers of poorly
implemented PM system
• Wasting time and money
Performance management systems cost money and quite a bit of
time.
 
• Damaged relationship
As a consequence of a incomplete system the relationship among
the individual involved may be damaged. 

• Decreased motivation to perform.


Motivation may be lowered for many reasons, include the feeling
that superior performance is not translated into tangible or
intangible rewards.
 
Disadvantages/ dangers of poorly
implemented PM system
• Varying unfair standards and ratings
Both standards and individual ratings may vary across and with
in units and also be unfair.
 
• Emerging biases
Personal values, biases, and relationships are likely to replace
organizational standards.
 
• Unclear ratings system
Because of poor communication employees may not know
how their ratings are generated and how the ratings are
translated into rewards.
Reward system
• A reward system is the set of mechanisms for distributing both
tangible and intangible returns as part of an employment
relationship.
• Various type of return:
• Base pay
• Cost-of living Adjustments and contingent pay (Merit Pay)
• Short-Term Incentives
• Long-Term Incentives
• Income Protection
• Work/Life Focus
• Allowances
• Relational Returns (Include recognition, status, employment
security, learning opportunities etc)
Returns and their degree of dependency
on the performance management system
•   RETURNS   DEGREE OF DEPENDENCY
• Cost-of-living adjustment • Low
• Income protection • Low
• Work/life focus • Moderate
• Allowances • Moderate
• Relational returns • Moderate
• Base pay • Moderate
• Contingent pay • High
• Short-term incentives • High
• Long-term incentives • High
Purposes served by a Performance
Management System
1. Strategic:
To help top management achieve strategic business
objectives.
2. Administrative:
To furnish valid and useful information for making
administrative decisions about employees
3. Informational:
To inform employees about how they are doing
and about the organization’s and the supervisor’s
expectations. 
Purposes served by a Performance
Management System
4. Developmental:
To allow managers to provide coaching to
their employees.
5. Organizational maintenance:
To provide information to be used in
workplace planning and allocation of human
resources.
6. Documentational:
To collect useful information that
can be used for various purposes.
Characteristic of an Ideal PM System
• Strategic Alignment: 
The system should be aligned with the unit and organization's
strategy.
• Thoroughness:
The system should be thorough regarding four dimensions  
- Employees should be evaluated
- Major Job responsibilities should be evaluated
- Evaluate performance spanning (Entire Review Period rather
just few weeks)
- Feedback is provided on both positive and negative
performance
Characteristic of an Ideal PM
System
• Practicality:
Systems that are too expensive, time-consuming, convoluted will
obviously not be effective. Good systems that are

-Easy to use
-available for use
-it is acceptable for those who use it for decision.
-Benefits of the system out weight the cost. 

• Meaningfulness:
The system must be meaningful in several ways.
- Standards and evaluations for each job function are important and
relevant.
- Only the functions that are under the control of the employee are
measured.
Characteristic of an Ideal PM
System
- System provides for continuing skill development of
evaluation.
- Results are used for important administrative decisions.
• Specificity:
Detailed guidance is provided to employees about what is
expected of them and how they can meet these expectations. 
• Identification of effective and ineffective performance:
The system distinguishes between effective and ineffective
behavior and results, thereby also identify employees
displaying various levels of performance effectiveness.
Characteristic of an Ideal PM
System
• Reliability:
Measures of performance are consistent and are free of error. 
• Validity:
- Measure includes all critical performance factors
- Measures do not leave out any important performance factor
-Measures do not include factors outside employee control.
• Acceptability and fairness:
Employees perceive the performance evaluation and rewards
received relative to the work performed as fair. (Distributive
justice)
Employees perceive the procedure used to determine the rating and
subsequent rewards as fair. (Procedural justice)
Characteristic of an Ideal PM
System
• Inclusiveness:
Employees participate in the process of creating the system by
providing input on how performance should be measured. 
• Openness:
Good systems have no secrets.
-performance is evaluated frequently and feedback is provided
on an ongoing basis.
- Appraisal meets in a two-way communication process and
not one-way communication delivered from the supervisor to
the employee.
-Standards are clear and communicated on an ongoing basis.
-Communications are factual, open, and honest.
 
Characteristic of an Ideal PM
System
• Correct ability:
There is an appeals process, through which employees
can challenge unjust or incorrect decisions. 
• Standardization:
Performance is evaluated consistently across people and
time.  
• Ethicality:
- Supervisors suppress their personal self-interest in
providing evaluations.
- Employee privacy is respected.
- Supervisors evaluate performance dimensions for which
they have sufficient information only.
 
Integration with other human resources and
development activities
 
• Performance management system serves as
important “feeders” to other human resources
and development activities.
• Performance management training.
Performance Management provides information
on developmental needs for the employees. In
the absence of good performance management
system, it is not clear that organizations will use
their training resources in the most efficient way.
 
Integration with other human resources
and development activities
• Work force planning  
Performance management also provides key
information for the workforce planning. Specifically,
an organization’s talent inventory is based on
information collected through the performance
management system.  
• Recruitment and hiring
Knowledge of an organization’s current and future
talent is important when deciding what type of skills
need to required externally and what types of skills
can be found within organization.
Integration with other human resources
and development activities
 
• Performance management compensation
Compensation and reward decisions are likely
to be arbitrary in the absence of a good
performance management system.

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