Reward System

Definition of Performance Management (PM)

The Performance Management Contribution
Disadvantages of Poorly-implemented PM systems
Definition of Reward Systems
Aims and role of PM Systems
Characteristics of an Ideal PM system
Integration with Other Human Resources and Development Activities
Performance Management: Definition
Continuous Process of
Identifying performance of individuals and teams
Measuring performance of individuals and teams
Developing performance of individuals and teams
And
Aligning performance with the strategic goals of the organization
Performance Management
o

Strategic business considerations

Ongoing feedback- So employee can improve performance

Driven by line manager

Performance appraisal
o

Assesses employee

Strengths &

Weaknesses

Once a year

Lacks ongoing feedback

Driven by HR

Contributions of PM System

Disadvantages of Poorly-implemented PM Systems

Reward Systems
Definition
Set of mechanisms for distributing
Tangible returns
Intangible or relational returns
As part of an employment relationship

Tangible returns
Cash compensation
Base pay
Hourly wages, Salary
Cost-of-Living Adjustment (COLA)
To combat the effect of inflation in an attempt to preserve the employee buying power
Contingent Pay/ Merit Pay
Additional pay based on employee level of performance
Incentives (short- and long-term )
Bonuses (short term) or stock options/ownership (long term)
Other Benefits, such as
Income Protection Program
Serve as a Backup to employee salaries in the event when employee is sick, disabled, or
no longer able to work.
E.g. Disability pay, medical insurance, pension plans, savings plans.
Allowances
E.g., housing, transportation, mobile, gym facility, phone bills.
Work/life focus
E.g., vacation time, counseling, financial planning, flexible work schedules (e.g.,
telecommuting, non-paid time off).
In fact, a recent survey including both employees in general and HR professionals in particular showed
that health care/medical insurance is the most important benefit, followed by paid time off and
retirement benefits
Intangible returns
Relational returns, such as
Recognition and status
Employment security
Challenging work
Learning opportunities

 Work/life focus (to help employee balance work/home life)

Such as vacation time,

flextime and telecommuting,

services (e.g., counseling, financial planning, fitness activities)

Relational Returns

Such as recognition,

status,

employment security,

challenging work,

opportunities to learn,

opportunities to form personal relationships

Returns and Their Degree of Dependency on the Performance Management System

Role of PM Systems

Strategic Purpose
To help top management achieve strategic business objectives
Administrative Purpose
To furnish valid and useful information for making administrative decisions about employees
Informational Purpose
To inform employees about how they are doing and about the organization's and the
supervisors expectations
Developmental Purpose
To allow managers to provide coaching to their employees
Organizational maintenance Purpose
To provide information to be used in workplace planning and allocation of human resources
Documentation Purpose
To collect useful information that can be used for various purposes (e.g., test development,
personnel decisions)

Strategic Purpose

By linking the organization's goals with individual goals, the performance management system
reinforces behaviors consistent with the attainment of organizational goals.

Onboarding refer to the processes that help the new employee from being Organizational
outsider to organizational insider.

Administrative Purpose
To furnish valid and useful information for making administrative decisions about employees.
Such administrative decisions include-:
Salary adjustments
Promotions
Retention or termination
Recognition of individual performance
Identification of poor performers
Layoffs
Merit
Informational Purpose
Serve as an important communication device.
First, they inform employees about how they are doing, and provide them with information on
specific areas that may need improvement.
Second, related to the strategic purpose, they provide information regarding the organisations
and the supervisors expectations, and what aspects of work the supervisor believes are most
important.
Third, How they can improve their performance
Developmental Purpose
Developmental purpose refers to both short-term and long-term development aspects.
Performance feedback/coaching
Identification of individual strengths and weaknesses
Causes of performance deficiencies (which could be due to individual, group or contextual
factors).
Tailor development of individual career path

Organizational Maintenance Purpose

Workforce planning
Talent inventory, which is information on current resources (e.g., Skills, abilities, promotional
potential and assignment histories of current employees).
Assess future training needs
Evaluate performance at organizational level
Evaluate effectiveness of HR interventions (e.g., Whether Employees perform at higher levels
after participating in a training programme).
Documentation Purpose
Validate selection instruments
Document administrative decisions
Help meet legal requirements
Characteristics of an Ideal PM System

Strategic
congruence

Thoroughness

Practicality

Meaningfulness

Specificity

Identification of
effective and
ineffective
performance

Reliability

Validity

Acceptability
and fairness

Inclusiveness

Openness

Correctability

Congruent with organizational strategy

Consistent with organizations strategy
Aligned with unit and organizational goals

Standardization

Ethicality

Thorough

All employees are evaluated

All major job responsibilities are evaluated

Evaluations cover performance for entire review period

Feedback is given on both positive and negative performance

Practical
Available
Easy to use
Acceptable to decision makers
Benefits costs

Meaningful

Standards are important and relevant

System measures ONLY what employee can control

Results have consequences Evaluations occur regularly and at appropriate times

System provides for continuing skill development of evaluators

Specific
Concrete and detailed guidance to employees

whats expected
how to meet the expectations

Identifies effective and ineffective performance

Distinguish between effective and ineffective

Behaviors

Results

Provide ability to identify employees with various levels of performance

Reliable

Consistent
Free of error
Inter-rater reliability
Valid

Relevant (measures what is important)

Not deficient (doesnt measure unimportant facets of job)

Not contaminated (only measures what the employee can control)

Acceptable and Fair

Perception of Distributive Justice

Work performed evaluation received reward

Perception of Procedural Justice

Fairness of procedures used to:

Determine ratings
Link ratings to rewards

Inclusive
Represents concerns of all involved

When system is created, employees should help with deciding

What should be measured
How it should be measured

Employee should provide input on performance prior to evaluation meeting

Open (No Secrets)

Frequent, ongoing evaluations and feedback
2-way communications in appraisal meeting
Clear standards, ongoing communication
Communications are factual, open, honest

Ethical

Supervisor suppresses self-interest

Supervisor rates only where she has sufficient information about the performance dimension

Supervisor respects employee privacy

Integration with other Human Resources

and Development activities
PM provides information for:
Development of training to meet organizational needs
Workforce planning
Recruitment and hiring decisions
Development of compensation systems