Performance Management System and Strategy

Importance of Performance Management System in Strategic Human Resource Management

The modern market is characterized by cutthroat competition meaning that each organization should explore some of the ways that will give it an advantage over others. Globalization presents managerial challenges to firms irrespective of their levels of diversification. The performance management system is viewed as the only solution to some of the problems facing firms. Studies show that a well-structured performance system plays a critical role as far as streamlining the actions and the visions of the organization. In other words, organizations utilize it as a tool for matching their crucial managerial roles with the sub-functions to realize the desired goals. The performance management system is a wider structure that is often related to other processes, including planning, enactment, appraisal, and evaluation.

All these processes are aimed at strengthening the productivity of the organization, as well as the performance of organizational employees (Cervone, Shadel, Smith, & Fiori, 2006). Since performance management systems encourage the development of team-based responsibilities, they are known to support, empower, and simplify the development of human resources. Organizations in the modern society are faced with the greatest challenge of ensuring that human resources are maintained, created, and empowered mainly because all these depend on the abilities, obligation, and lucidity of the performance of employees. Scholars of management have proved through research that in case human resources are handled efficiently using a highly structured reward system, improved communication, and performance management appraisal, there is a possibility of motivating them, as well as developing their potentials. The traditional performance appraisal system has been on the decline and organizations have been forced to conduct extensive researches on the best way of ensuring that employees are satisfied.

The previous performance appraisal mechanisms focused mainly on the traits instead of focusing on the behaviors of employees. It is therefore identified that the performance system at the time lacked objectivity, which is important in establishing the parameters for measuring the performance of any individual employee. Since a transparent communication system was lacking, the morale of employees was low and this means they were never motivated to accomplish an organizational task. Employees were never involved in decision-making processes implying that they were always opposed to any program aimed at bringing change. The modern performance management appraisal has strong principles that overcome the challenges that the traditional appraisal tool faced. For instance, the performance management system takes a futuristic approach. It does not focus on evaluating the past performance of the employee. Many scholars of management view performance management as a strategic tool, which is holistic since it encompasses each action of the organization. Moreover, the strategic tool is mainly concerned with the management of individual employee, a group of workers, and the general performance of any given organization. Finally, the performance management system is important since it facilitates quality improvement in the organization. It facilitates information sharing, which is critical in building a favorable working environment that respects ingenuousness and affinity.

Relationship between Performance Management System and Motivation

Studies show that a direct relationship between an effective performance appraisal system and motivation exists. If the management applies a productive evaluation mechanism, chances are high that employees will be motivated to realize their own goals, as well as those of the organization. A reward system that favors only a section of organizational employees plays a negative role in demoralizing other employees. This might be considered a loss to the organization, as well as individual employees who aspire to realize their own goals. Several motivation theories show that the performance management system is critical as far as employee productivity is concerned. Motivation is defined as the force that initiates, monitors, and sustains goal-oriented actions in the organization. In other words, motivation encourages people to act in a positive way, which brings about success. A number of forces, which can perhaps be natural, social, expressive, or even mental, drive people to act in a certain way. Instinct theory suggests that people act in a certain way mainly because they are programmed to do so by evolution. Scholars compare this type of human motivation with the migration of animals from the region to the other. Animals do not go through an educational program to learn how to shift from one place to the other. The theory suggests that employees decide to undertake a certain responsibility once they realize that the management will appreciate their effort.

Incentive theory can be utilized in explaining the behavior of individuals in the organization in the sense that people can only swing into action in case they are promised something. These rewards are always external in nature meaning that they must be provided by the organization. Therefore, the organization needs to come up with an efficient performance system that will not favor a section of employees when it comes to distributing monetary rewards. The drive theory is closely related to incentive theory, but it postulates that an individual is forced to act because of tension. This implies that internal tension drives an individual to accomplish certain unmet goals. In the organization, employees are always under pressure to meet the set targets, which are often tight and strict. However, people are only motivated to act when laid down procedures exist in the organization. In this regard, the performance management should be in place to ensure that employees work extremely hard to achieve the organizational goals (Weiner, 2000). Arousal theory is an additional theory that could be utilized in explaining the reasons that drive employees to act in a certain way. Based on the theory, an employee’s productivity tends to increase or decrease because of certain actions of the organization. If the organization advocates for effective communication with clear chains of command, an employee will be more productive (Murphy, 2009). However, cases of nepotism and favoring close friends affect the efficiency of any employee in the organization. In this regard, it is the responsibility of the organization to ensure that effective evaluative measures are put in place to motivate employees.

Rating and Rating Errors

Rating refers to the computing of the employee performance in the organization. It is considered an extremely important aspect of management, but it is also complex in the sense that it suffers from objectivity and fairness. Studies show that all assessments ought to be based on the job-related behavior of an employee meaning that other factors that are not related to the position of the employee should not be considered. A number of errors are often made when rating the performance of the employee. For instance, the rating officer might tend to contrast the behavior of the employee with his or her behavior. The first impression is another type of rating error that tends to affect the evaluation process in many organizations. For instance, the present performance of the employee might be poor because of the social-cultural issues affecting him or her. The situation might improve within a few days, but the management will have considered the employee ineffective based on a single scenario. To prevent any confusion, the use of management by objectives rating scale would be the most appropriate since it does not look at the current behavior of an employee, but instead it focuses on upgrading the standard operating procedures.

Employee Motivation and Performance Management in Public and Non-profit Organizations

Pynes (2009) suggests that there is no difference between the management of performance systems in public organizations and non-profit organizations. In the two sets of organizations, the major aim of human resources is to maximize the potentials of employees to realize the organizational goals and objectives. The two sets of organizations are working hard to groom the competencies of employees with the aim of maintaining leadership in the highly competitive environment. The demands of clients are changing and organizations have no options, but to implement change in order to matches the new expectations. Public organizations, as well as non-profit organizations, underscore the fact that a motivated employee is easy to manage. Motivation is ensured through a clear reward system and offering training to various workers whose skills do not match the goals and the objectives of the organization. Based on this, the use of a performance management system as a tool of maximizing employee potential is of great concern in both sets of organizations.


Cervone, D., Shadel, W.G., Smith, R.E., & Fiori, M. (2006). Self-Regulation: Reminders and Suggestions from Personality Science. Applied Psychology: an International Review, 55(3), 333–385.

Murphy, J. (2009). Inner Excellence. New York, NY: McGraw-Hill.

Pynes, J. E. (2009). Human resources management for public and nonprofit organizations: A strategic approach, (3rd ed.). San Francisco, CA: Jossey-Bass.

Weiner, B. (2000). Interpersonal and intrapersonal theories of motivation from an attributional perspective. Educational Psychology Review, 12(1), 1–14.