Performance management is an integrated strategic process that is linked to organizational success and individual employee motivation. There exists an integrative relationship between performance management and reward management within an organization. This report explains these links through a description of performance management purposes in relation to organizational objectives.
The purpose of performance management
Performance management is concerned with how an employee works. It also looks at how he or she is managed and developed, to improve his or her performance. It is concerned with how the management maximizes the contribution of employees to the organization. According to Armstrong and Baron (2005), improving and developing an employee leads to a sustainable organizational success.
Performance management links different human resources management aspects, thereby creating a coherent approach to “people management and development” (Atkinson & Shaw, p. 174, 2006). These aspects include employee reward, human resource development, and organizational development.
Secondly, it is concerned with the enhancement of individual and organization performance effectiveness. It ensures that the work effort of an employee is goal-oriented and can be developed further to meet organizational objectives.
Thirdly, performance management enhances communication and understanding between an employee and the line manager (Atkinson & Shaw, 2006). It creates a shared understanding of individual goals and expected competencies. It also aligns performance to the organization’s objectives and long-term goals. This maximizes the contribution of an individual to the achievement of organizational strategic objectives. It also underpins the relationship between performance management and organization success.
Performance management processes
These include performance appraisal, objective setting, reward review, and joint discussions. Performance appraisal is the first component that involves performance review meetings between the manager and an individual employee. It begins with the preparation of the stage where the objectives of the review are shared between the manager and the concerned employee.
This is followed by a discussion meeting where the reviewer and the concerned employee discuss employee performance in progress within the reference period. On top of these, training and development needs are discussed. Finally, the outcomes of the discussion are recorded and confirmed by the management of an organization.
Appropriate actions, strategies, and development needs are also implemented to enhance performance that lead to organizational success. It is important to note that all the aforementioned stages of performance appraisal should be followed by organizations. This is because skipping one stage can result to failure or poor performance.
The objective setting component involves linking individual objectives to organizational goals. It is a joint exercise between a line manager and his or her employee. Performance measures and standards are used to underpin these objectives. In addition, these objectives can be expressed as accountabilities that promote individual and organizational performances. Performance standard are then developed to help an organization improve its performance.
The reward review component involves the designing, implementation, and maintenance of improved individual and organizational teams’ performance (Martin, Jackson & Martin, 2010). Reward reviews are geared towards creating integrated policies and strategies that reward employees according to their contribution to the organization, competencies, and skills. These support the development of employee and organizational performance that lead to organizational success.
Motivation and performance management
Performance management is conceptualized by a motivation theory. This is premised on the links between performance reviews and motivation. It is important to realize that the performance is influenced by individual skills, competencies, aptitude, knowledge, attitude, and behaviour (Martin, Jackson & Martin, 2010). These factors underpin individual motivation in the workplace.
The needs theory can be used to explain the relationship between performance management and motivation (Martin, Jackson & Martin & CIPD, 2010). Individuals have varying needs that can, or cannot be satisfied by working.
It is important to realize that these needs may be tangible or intangible. In addition, the Maslow’s hierarchy theory identifies these needs as physical, safety, social, ego, and self-fulfilment (Martin, Jackson, Martin & CIPD, 2010). According to this theory, the fulfilment of these needs motivates employees at different levels. Managers incorporate these in the performance management to improve employee motivation.
Secondly, cognitive theories recognize individuals as rational thinkers that differ in the ways they perceive rewards (Martin, Jackson, Martin & CIPD, 2010). This implies that motivation is an individual aspect. Equity theory explains the relationship between performance management and motivation. The theory postulates that an employee is motivated if he or she perceives to be treated equitably with respect to the job input. For instance, if employees are rewarded for their input contributions, they are likely to be motivated.
Purpose of rewards within performance management
The rewards are used to recognize an individual’s contribution to an organization. The main purpose of rewards within performance management is to help an organization attract, retain, as well as motivate individual employees (Armstrong, 2009). Secondly, rewards play a significant role in motivating, committing, and improving the employee morale. They are also intended to support organizational goals, thereby improving organizational success in the long-run.
Total reward includes both financial and non-financial (Armstrong, 2009). Financial rewards are extrinsic and relate to payments. On the other hand, non-financial rewards are intrinsic and relate to individual recognition, career guidance, development, work-life quality, access to challenging assignments.
Financial rewards include remuneration, which is the amount of money paid to an employee for the work done. The increase in remuneration motivates an employee, and hence encourages better performance. In addition, performance can be rewarded financially through increasing a basic pay or remuneration. Such pay additions may include bonuses, incentives, service-related pay, skill-based pay, commissions, or competence-related pay (Armstrong, 2009).
Recognition is a powerful component of non-financial total rewards. It involves recognizing individual achievements and excellent performances. Recognition can be in the form of a compliment, praise, promotion, appreciation, gift certificate, and dinner among many others (Armstrong, 2009).
Performance management is essential in improving individual and organizational efficiencies. This is achieved through performance appraisal, reward reviews, and objective setting. These three play a significant role in motivating employees, as well as aligning their duties to meeting organizational goals.
Armstrong, M. (2009). A Handbook of Human Resource Management Practice. Cambridge, UK: Kogan Page Limited.
Armstrong, M., & Baron A. (2005). Managing Performance: Performance management in action. London: CIPD.
Atkinson, C., & Shaw, S. (2006). Managing performance. London: CIPD.
Martin, M., Jackson, T., Martin, M., & CIPD. (2010). Human resource practice. London: CIPD.