Performance And Reward Management In Modern Business Environment

B8MN108 HR Performance Management

Characteristics of an ideal performance management system

In today’s business environment, it becomes necessary to review the performance of employees time-to-time so that any deficiency faced by the employees come to notice. In performance management system, employees as well as manager work together to plan and monitor the performance (HRINZ, 2015). For ensuring the effective performance management system, there should be certain factors. The ideal performance management system is such that is valid, reliable, evaluative, practical, and specific. In the first section of the report, characteristics of an ideal performance management system have been discussed in detail. By reviewing the performance of employees continuously, motivation of employee’s increases which further results in better productivity. Besides this, it offers various benefits that are being taken into consideration. In addition to this, disadvantages of poor performance management system are discussed. It plays a major role in the organization by ensuring the proper functioning of HR department. Therefore, aim and role of performance management system is highlighted. At the end of the report, discussion is carried on the reward system.

A tool that is used to communicate the goals of the organization to all the employees. It also reflects the individual performance as well as achievement of an employee that further evaluates and keeps the record of every employee in the organization. It helps the manager to manage all the resources that results in success of the organization. It is very wide and complicated function of HR department in organization (Carpi, Doughlas & Gascon, 2017). It includes various activities such as continuous communication, joint goal setting, continue reviewing the performance of employees and providing feedback for their performance. Performance management is a incessant process by recognizing, determining, and developing the performance of teams and individuals in the organization.

It helps in building a culture of high performance for individuals as well as teams that further helps in jointly take the responsibility for improving processes of business in continuation. In the words of Rollins, (2015), it is a process of assisting the employees in identifying their skills and knowledge required for effective job performance.

• Valid- an ideal performance management system measures only valid thing associated with the task. For example- while evaluating a “customer service representative” in call centre, not evaluate them on the bases of their ability to handle heavy machineries (Mayhew, 2018).
• Legality- legality is an essential aspect of evaluating an employee. An ideal performance management system is such where the evaluation for employees is done by consulting with an attorney.
• Proper training for evaluators- it is true that no performance management system is succeed when the persons who are doing evaluation are untrained. Performance management system is successful when the evaluators understand the duties and responsibility of persons to whom they are evaluating.
• Assessment- an effective performance assessment has measurable factors and objectives. For example- a person providing customer service will be assessed on the variety of factors such as percentage of calls that are resolved, length of calls and several other metrics. As these criteria’s do not capture all the things that an employee done for the company. There are various other factors such as helpfulness towards the other workers, positive attitude, and willingness to do work until late (Thompson, 2017). Therefore, an ideal performance management system not only considers the tangible contribution but it also considers the intangible contribution.
• Feedback- an ideal performance system ensures the feedback on continuation basis. It is true that if supervisor sets only the expectation but fails to provide the guidance to its employees then in this case it becomes difficult to achieve the objectives in effective manner. Therefore, it is required by the supervisor to check the performance of its employees on a continuation basis, provide suggestions based on the realistic goal, and correct information.
• Practicability- it is 0true that systems that are costly, convoluted and time-consuming are not effective. A good system is that which is easily available and easy to use. For example- performance data, that is entered using the user-friendly software.
• Specific- an effective performance management system guides the employees regarding what is expected from them and how they will meet the expectations.
• Inclusive- A good performance management system include the input from various sources on continue basis. The evaluation process must include the concern of every person who all is affected by the output. Besides this, employees input must be gathered from the employees before reviewing the performance of employees.
• Ethicality- a good system always complies with the ethical standards. It means that the person who is doing evaluation must quash the personal interest of own. Besides this, supervisor also evaluate only for those dimension in which it has adequate information by keeping in mind the privacy of workers in the organization.
• Meaningfulness- a good performance system is meaningful in various ways. Firstly, all the standards that are conducted for each job must be relevant to that job. In addition, the assessment must put emphasis on those functions that are under the control of employees. Lastly, evaluation should be done on continuous basis and provide the continuous skill development for evaluators (Gatty, 2018).
• Identification of effective as well as ineffective performance- A good system of performance management must provide the information for effective and ineffective performance. The system should also distinguish between the effective and ineffective behaviour of employees and allowing the identification of employees that displays several level of performance effective.

• Supporting employees to perform well- effective induction programmes for newly joined employees are essential for setting clear expectation for performance. If the initial stage is managed well then it is possible to minimise the capability issues of individual by doing personal development. Taking feedback from this process also helps in identifying the problem with recruitment and job design (Bacal & Associates, 2018).

Development of employee’s capacity can be achieved by various ways. Every employee including those who are on the similar position can be encourage for how they are performing and what they can do to improve their performance. In various cases, the needs can be met through providing training but there are many other possibilities like mentoring, working on projects and e learning (Bacal & Associates, 2018).

• Linking of individual goal with the goal of organization- Through performance management system, goals of the organization is communicated to the employees. The main purpose of performance management is to link the goals of its employees with the organization (Bratton and Gold, 2017). In this, personal interest of the employees is linked with the organizational goal.
• Boosting the performance of employees in the organization- Performance management system helps in boosting the performance of employees through empowering, motivating, and implementing an effective and efficient mechanism of reward. It also helps in improving the performance of employees by linking the reward with their outcome (Griffin, 2018).
• Promotion of efficient two-way communication- the purpose of performance management is to promote a two-way communication between the employees and supervisors in order to clarify the roles, communicating the organizational and functional goals, providing a continuous feedback for improving the performance of employees (Hanson & Pulakos, 2018). Identifying strengths and weaknesses in individual- Performance management system is done to identify the weaknesses and strength in an individual. It keeps the record of every person that helps in identifying the person weakness and area of strength.
• Open- where there is no secret is said to be open and effective performance management. In addition, it has two-way communication in the appraisal meeting as well as there is open and honest conversation (Landy, Zedeck and Cleveland, 2017).
• Seeking the performance improvement- In organizations, performance management identifies the barriers that hinder the effective performance. It identifies the reason for inadequate performance. By knowing this, organization can take the further action according to the deficiency. Therefore, the purpose of performance management is to identify the deficiency in performance of employees and take suitable actions for further improvement.

• Quitting by employees due to unfair outcome- is an employee is performing well but still assessed unfair then it may lead low motivation to exist in the organization. Even if the employees not quit the job, it will not engage actively in the organization’s activities.
• Low self-esteem- employees who feel that the evaluation is not done fairly will loss the self-esteem in the organization. It can create the offence towards the management as well as organization (Kettner, 2018).
• Demotivation- when employees feel unrecognized and unappreciated, their motivation level down, and further it lead to the poor performance. When employees are not appreciated for their better performance, their morale decreases that further leads to lower performance rates (Success Factors, 2018).When the performance of employees down, they do not perform well in the organization that further impact the productivity of the organization.
• Increment in legal risk- providing the negative appraisal to employees without any proof proves to be extremely risky. As employees who feel that they are not evaluated based on fair means can take the legal action against the organization.
• Managers are forced to give up on the resources- in addition to the time costs, manager are also required to allow its employees to work as per the peer review in order to prepare for the annual appraisal. The entire department as well as the whole organization has been forced to shut down and put their goals back until the year reviews is done.
• Failure of setting standards make the process unfair- If an organization do not have any particular standards for employee’s role, they will not know what is good or bad performance. It means they will not be able to distinguish between good and bad performance.
• Hindrance in development of employees- an ineffective performance management system hinders the development and progress in employees. In this case, employees will not be able to rectify their mistakes. In the absence of proper and timely feedback, there is no scope left for the improvement of performance (Mack, 2018).
• Damage in relationship of individuals- Due to the deficiency in system, the relationship among the individual might be damaged and sometimes permanently (Kettner, 2018).
• Wastage of time and money- A poor implementation of performance management system puts stress on manager.  Most of the manager spends approx. 210 hours in a year on the activities of performance review. The large amount energy and time that is spent on performance management is overblown if the system does not provide the benefits.
• Unclear reward systems- due to lack of communication, employees sometimes not understand the link between the behaviour and their results. Same, employees may not understand how their rating has turned into the rewards. In addition, a poor implementation of performance system will cost the agency in several ways. It not only fails in building the progress toward its mission but also has a harmful effect on the relationship, time, motivation, and energy of employees (Armstrong and Taylor, 2014).
• Employees suffer due to dissatisfaction at job- when the instrument for performance evaluation is not valid, employees start taking the job as burden and it creates the dissatisfaction at job. Consequently, the productivity on the part of employees starts decreasing and become a hindrance for the organization success.
• Misleading or false information may be used- if a standardized system is not used, there are multiple opportunities for misleading the information about the performance employee. When a proper system is not used for the assessment of the performance of employees, it puts the organization in danger to do research on the effective measurement system. It also needs the cost as well as time to assess the correct method for measurement (Meijerink, Bondarouk and Lepak, 2016).  
• Demeaning of communication system between employees and employer- system of performance management involves a two-way communication between the employees and employer. Therefore, if manager does not take interest in evaluation of its employees, it will negatively affect the performance history of employees at organization. If employees feel that more emphasis is given on the error, employee will definitely loose the incentives for working hard. In addition, too much appreciation for the success makes the worker over-confident and arrogant. All these things, negatively impact the organization.

Benefits of performance management system for employees, managers, and organization

Performance management system plays an important role for the employees, managers, as well as organization. There are several contribution made by the performance management system which are as follows-

• Increase in motivational level- getting the feedback back foe one’s performance helps in increase the motivation for future performance. Through performance management system, one can get the knowledge regarding the on-going performance of individual and can recognise the one based on the past success. This will provide the fuel for the future achievement.
• Helps in assisting the manager to gain insight about subordinates- managers and supervisors who are given the responsibility of appraisal gain the various new insights. Developing a productive relationship with the colleague is a key competency for the manager. Gaining the new visions from a person’s personality and performance helps the manager to build a positive relationship with the respective person (Mone and London, 2018).
• Increase in competence level of employees- Performance management is a tool that helps in increase the competence level of employees. By providing continuous feedback to employees, they come to know about their strengths and weaknesses. It helps in improving their performance where they are lacking (Aguinis, 2013). By doing this, their competence level increases and results in better productivity.
• Improved management control- employees who know well that what is expected from them requires the manager too have a clear picture of what is expected from them in managing. In an organization, when the manager has assigned the goal for specific department, it has more capability of allocating the task to each of the employees in an organization. Manager set the goal for department as well for each employees goal associated with the department. At the same time, some of them can bring a detail plan of how the employees will see the responsibilities to help the department in achieving its goal. This helps the manager in saving the incredible time of manager (Farnendez, 2017).

The manager exactly knows what the task was allocated to employees and it helps the manager in checking whether the work is done according to the schedule and direction or not. In addition, performance management also helps the manager to bring the employees on correct track back because a manager receives bonus and incentives as well feel a sense of accomplishment when its employees achieve the target.

• Planning- By reviewing the performance of employees frequently, staff as well as managers starts planning in advance and execute the best objectives in favour of the organization. As a result, it helps in better management of human resource and enables the manager to work on the business rather than work in the business (Human Resource Management, 2018).
• High visibility- due to the frequent review of performance, visibility in organization increases intensely. The areas that are non-performance receive more attention, focus and the problems acted upon more quick. Most of the performance management system gives the reporting about who all have achieved and not achieved their targets (Podgórski, 2015).
• Personnel actions are more appropriate and fair- Performance management system provides the correct information that further used for personnel actions such as promotions, merit increase, transfer, and termination. Therefore, it ensures the fair reward system on a credible and fair basis. The decisions based on sound performance system ensure the improvement in interpersonal relationship as well as enhancement in supervisor-subordinate trust.

Performance management plays an important role in the organization by ensuring continuous feedback to its employees. Its aim is to align the individual objective to the objective of organization. It also ensures that the individuals in organization hold the corporate values by performing their task. It also has aim of establishing a best culture for teams and individual take the responsibility of their individual skills and organizations. It has another aim of developing the abilities of individuals in order to meet the expectations of organization. Mainly, it concerns about the guidance for those people who want to develop themselves in the organization.

Performance Management System is an important area that is handled by the senior manager and HR manager in the company (Hearn, 2018). It assists the HR manager to know the gaps in performance of employees and fill those gaps by taking corrective actions. It plays the role as five stages of the cycle. First, it ensures what organization wants to achieve throughout its business processes. Afterwards, the strategies that are set out in the planning stage are executed by taking suitable course of actions. It also ensures the monitoring of progress. In the next stage, data that is received from tracking of activities is analysed to know the reasons of those activities that are not on track. In the end, it predicts the outcomes of the processes.

It is a mechanism for distributing something in return to the employees for their performance. It can be in the form of monetary and non-monetary terms. It plays a major role in the organization to motivate the employees in performing well. The employees receives both tangible as well as intangible returns. Tangible returns include the allowances, bonus that is received besides the salary of employees (Human Resource Management, 2018). Employees strive for various intangible incentives also in the organization. These include recognition, status, future growth opportunities and some challenging work. These financial as well as non-financial rewards help in motivating the employees in the organization.

Stages of performance management system cycle

Reward of an employee is greatly depending on the performance of the employees in the organization. It is true that connection between the team of various persons is the hardest part. This is an essential issue due to the planning, setting the expectations, checking performance of employees and develop the abilities in employees to perform in a best possible manner. When rewards are linked with performance of employees, it becomes easy for the organization to achieve the acceptable target. Without reviewing the performance of employees, it is not possible to reward the employees correctly. Without an appropriate performance management system, rewarding employees will lead to conflict in the organization (Patricia, 2015). Performance management is not associated with the pay. The key use of reward in the performance management is to increase the motivation level of employees in the organization. Various organizations use the performance management system to reward the employees in the organization. This helps in providing fair pay to employees in the organization. Usually at the time of rewarding, past data and current performance of employees is kept in mind so it does not create any further confusion in the mind of employees.

Conclusion 

From the above discussion, it is concluded that Performance management system is important for the success of the organization. It helps in reviewing the performance of employees  properly on timely and continuous basis. It is essential for the organization is to use the effective performance management system. For this, the performance system should ensure the correct and reliable facts so that employees rely on their output. In addition, practicability and validity is also an important factor for the ideal performance management system. The purpose of performance management system is to boost the morale of employees by giving further direction for improvement. Due to poor performance system, organization faces various problems. The major impact of poor system is on the employees. Their morale decreases and sometimes they quit the job also due to unfair evaluation. In this way, it plays a major role in the HR department.

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