A good performance management system is one that provided employees with the following benefits. First, it should provide employees with a clear understanding of what is expected of them in their jobs. Secondly, it should provide employees with regular feedback on performance. Thirdly, a good performance system should advise on which steps can be taken to improve the performance of employees. And finally, a good performance system should provide a mode of rewarding good performance from employees. Good reward promotes the morale of employees to work even harder apart from promoting the loyalty of employees to the organization.
The major goal of any performance system should be to boost and monitor the performance of employees so that the organizational goals that require the input of employees are properly met. A good way of avoiding shocks to employees during performance evaluation is to continuously provide feedback to employees on performance. This can be integrated by also allowing employees to evaluate themselves by considering if they have met the goals that had been set by themselves and the organization earlier.
In order to effectively link compensation to an organization’s strategy, we need to, first of all, define our success. Workers who achieve this success should then be rewarded appropriately. For a salesperson for example success can be improving sales. Individual and collective success should be defined and acknowledged through reward schemed in order to inspire all employees. Collective success includes for example the increase in sales and or profits for the whole company. After defining success, an organization needs o go a step ahead and define a mode or method of measuring success, this should then be proportional to a compensation scheme that the organization adopts.
Measuring success could be quantitative and/or qualitative. For a salesperson again, compensation could be proportional to the quantities of goods that have been sold. Another important thing that needs to be done by organizations in linking performance compensation is to effectively and efficiently communicate to employees about the modes of performance compensations that exist in the organization so that they work hard to improve performance in order to gain these compensations.
The compensation of employees based on performance can be used to create and promote competitive advantage in an organization. This occurs when employees use their skills to produce the best out of themselves in order to stand out and compensation rewards. They may innovate new solutions and increase their output as they strive to increase performance. When the mode of compensation recognizes an exceptional individual that stands out in the organization based on performance, a kind of competition is created in the organization among employees. This competition increases the total performance for all employees improving the human resource output and therefore the total output of the whole organization.