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

o Ongoing feedback- So employee can improve performance

o Driven by line manager

Performance appraisal

o Assesses employee

Strengths &

Weaknesses

o Once a year

o Lacks ongoing feedback

o 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

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.

To help top management achieve strategic business objectives

Strategic Purpose

To furnish valid and useful information for making administrative decisions about employees

Administrative Purpose

To inform employees about how they are doing and about the organization's and the supervisors expectations

Informational Purpose

To allow managers to provide coaching to their employees

Developmental Purpose

To provide information to be used in workplace planning and allocation of human resources

Organizational maintenance Purpose

To collect useful information that can be used for various purposes (e.g., test development, personnel decisions)

Documentation Purpose

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

Congruent with organizational strategy

Consistent with organizations strategy

Aligned with unit and organizational goals

Strategic congruence

Thoroughness Practicality Meaningfulness Specificity

Identification of effective and

ineffective performance

Reliability Validity Acceptability and fairness

Inclusiveness

Openness Correctability 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