Performance Management and Its Components


Performance management (PM) is an essential part of any company’s successful functioning. By implementing proper PM, an organization can increase its chances for success and eliminate many failures. PM helps to motivate employees and satisfy customers, thus making a company profitable and promising.

Purposes of Performance Management

Performance management carries out several vital aims in an organization. The most critical purpose of PM is to assist a company in accomplishing its key objectives (Cardy and Leonard 8). This goal is connected with understanding the company’s aims and distributing the duties between the employees. When every person in an organization knows their responsibilities, it is easy to combine everyone’s efforts and reach the main objectives. Thus, PM can help the companies reach their full business potential.

PM’s second most crucial purpose is to present important reactions and assessments to the employees (Cardy and Leonard 8). This aim is rather helpful in fulfilling any company’s business objectives as it provides an opportunity to find out the opinions of the people that work there. Being aware of the employees’ feedback allows the manager to improve the company’s functions, remove the negative features, and put more effort into the aspects favored by the employees. What is also important is that the manager can evaluate the employees’ willingness to conform to the best standards. Careful assessment of the workers’ progress in connection with the feedback gives the manager an opportunity to make the best of the organization’s efforts to satisfy the customers.

Components of Performance Management Processes

PM process presupposes the use of several components that make the PM process successful. Among the most common PM elements are the strong measures, clear-cut goals, and control of the performance (Frost 1). Strong measures present the most vital component. They are necessary for successfully conducting and enhancing the company’s PM. With the help of solid measures, a manager can follow the PM process changes and make proper adjustments. Explicit goals are the next vital component of PM. Setting the coherent aims may be used either at the beginning of the PM process or during the later stages when a manager improves the strategy (Frost 1). In any case, there are several demands to the goals: They have to be established on a thorough investigation of the company’s vision, they need to be connected to the performance measures, and they have to be known to all the employees (Frost 1). The third critical component of PM is control of the performance. This element is necessary as it allows the manager to systematically check the performance measures, learn about the new tendencies, and implement new measures resulting from learning.

Relationship between Motivation and Performance Management

Motivation is one of the key drivers of a company’s success. Motivated employees are more eager to show the best performance. Therefore, the managers need to come up with thorough motivational approaches to encourage the workers. There are two types of motivation—intrinsic and extrinsic—and several theories describing its work (Armstrong 60).

Among the most popular motivation theories are reinforcement theory and instrumentality theory. Instrumentality theory is connected with an assumption that doing one thing causes another (Armstrong 62). The simplest explanation of this approach is that people do their job for money. Motivation through this theory is popular in many organizations. However, its big drawback is in disregarding the human factor (Armstrong 61).

Reinforcement theory presupposes that accomplished targets and rewards increase the successful conduct that reiterates every time identical circumstances appear (Armstrong 62). The stronger the support is, the more willing to act effectively the employees are. On the contrary, when workers are often punished or underestimated, they have no desire to try harder.

Purposes of Reward within a Performance Management Process

Reward occupies a vital place in PM practice as it positively impacts the employees’ performance. Reward management has several purposes, the fulfillment of which makes possible the successful operating of an organization. The main aim of reward within a PM process is establishing the performance perception and encouraging the best performance (Armstrong 6). With this, business targets are more likely to be accomplished. Another purpose of a reward system is delineating the fundamental strategies of employees’ conduct and results. Also, reward management helps to regulate the reward system by the workers’ requirements. Another important target of reward is honoring and compensating people based on their achievement and dedication (Armstrong 6). Reward allows the managers to engage and keep the best employees required by a company. Also, it helps to stimulate high employee engagement. Finally, reward management aims to add value to employees by suggesting productive reward practices. It should be borne in mind that reward management is not only about “attaching” value to employees but more about “adding” value to them (qt. in Armstrong 6).

Components of Total Reward System

There are many ways of rewarding employees, and these can be financial as well as non-financial. Among the financial ones, contingent pay and benefits and pensions are frequently applied (Armstrong and Taylor 364). Contingent pay is a type of financial reward connected with an employee’s performance. One of its forms is the addition to the base pay, which leads to continuous pay advancement. Another form of contingent pay is “non-consolidated bonuses” (Armstrong and Taylor 374). Consolidated pay growth may be connected with only performance or performance connected with skills and competence. In the latter case, the pay is called merit. In the former case, it is called performance-related pay. The other popular financial reward is the system of benefits and pensions. The perks may include health insurance, holidays, social security, and other ways of additional payments.

Out of non-financial rewards, recognition is often favored by managers to emphasize the employees’ contribution (Armstrong and Taylor 364). This kind of reward presupposes acknowledgment of an employee’s achievement and encouragement for further inspirational work. Recognition may take the form of ratings, verbal appraisal, and even bonuses.

Works Cited

Armstrong, Michael. Armstrong’s Handbook of Reward Management Practice. 5th ed., KoganPage, 2015.

Armstrong, Michael, and Stephen Taylor. Armstrong’s Handbook of Human Resource Management Practice. 13th ed., KoganPage, 2014.

Cardy, Robert L., and Brian Leonard. Performance Management: Concepts, Skills, and Exercises. 2nd ed., Routledge, 2015.

Frost, Bob. “The Five Elements of Performance Management.” Measurement International, Web.