Performance Management: Linking Rewards to Performance
In today’s world, many businesses strive to align their goals andstrategies to tackle the vibrant forces of the challenges andopportunities in the global markets, the rapid evolution oftechnology and productivity tools, and the organizational mayhem ofacquisitions and mergers. One of the most critical areas that havebeen overlooked is the effect of the organizational change onemployee motivation and behavior. Performance management systems inmany organizations suffer many flaws with the managers and staffcomplaining about their effectiveness.
Performance management is the process through which the company setsboth individual and group directions and examines the performance ofits employees, defines developmental necessities and providesresults. Various employee management systems have been put in placeby different organizations. Some of them include a one on one system(employee/manager), a multi-rater that requires a 360-feedback and apeer review system. It is essential for the performance managementsystem to be in line with the company’s strategies and goals, thesocial system in place, and its management style.
Performance management systems primarily include employee developmentand performance appraisal, and they form the basis of any humanresource management (Jain, 2014). Each system has its benefits andflaws. However, a bad management system can cripple a company sinceit is a highly personal and threatening system for both themanagement and the employees. Performance management systems can bebiased when the managers fail to offer honest feedback anddiscussions to their staff for fear of damaging the association withthem when they are the driving force of the company. Some of thesystems are bureaucratic and cumbersome when only a few individualsreceive recognition based on their relationships with the management,and this spoils the main essence of it which is to enhance individualand organizational outcomes.
A good performance management system should have an excellentrewarding system as well (Shields et.al, 2015). According to researchdone on the rewarding modules, the most successful organizationsattribute their success and sufficient employee engagement to linkingperformance of their employees directly to rewards. The rewardsapproach was initially used in the sales and marketing department,however it has proven to be efficient in all sectors of anorganization. Despite its achievement in the organization structure,proper implementation is critical for it to work (Shields et.al,2015).
Many employees want to receive praise and recognition for work welldone. However, for them to do their jobs well, they require to knowwhat is expected of them, the organization`s goals and strategies,and also get the support of the management (Kehoe & Wright,2013). When they get rewarded, they will believe that their opinionscount and that what they do is important. The rewards should also bepurely on merit and not on some bureaucratic system for it to beactive in an organization. The performance reward system helps theemployees to be highly aligned with the corporate objective since thework quality are performance measures for any company.
It is important for organizations to comprehend that a single rewardsystem is not sufficient for a performance-based awards culture.Therefore, for one to be successful, it must be tailored to theparticular business of the organization and the preexisting humanresource processes (DeNisi & Smith, 2014). Some of the keyconcepts that should be considered will include determining theemployee-management relationships and if the activities that theemployees are doing are helping the company achieve its objectives.Further, individuals who are delivering well should be identified,and salary increases and bonuses should be awarded to those peoplewho are performing highly in the organization. A performance rewardsystem is not sufficient only as a system but psychological, andemotional factors should be attached to it for it to be successful.Therefore, the attitude of the employees is critical in evaluatingthe performance reward system (Kehoe & Wright, 2013).
In an organizational setup, it expected that employees desire to getpay increases based on their success and years of experience (Grandeyet.al, 2013). They also need to develop skills that will enable themto achieve their real potential and the organization’s goals andobjectives. Finally. They also need to trust and believe in theiradministration to provide a good scheme that will see them get salaryincreases when they improve their performances. These increases actas incentives that will aid the human resource management to convincethe employees to buy into the performance reward system which onsuccessful implementation will be very critical for the company.
Key Elements in
When it comes to linking performance to rewards, performancemanagement, goal alignment and a reward strategy are the three keyitems that need consideration (Shields et.al, 2015). Performancemanagement should be able to measure continuously and manage theperformance of employees in a thorough and quantifiable manner. Inmaintaining a level of performance management, performance reviewsare vital in supporting the performance- based rewarding system.Performance reviews can be done on a monthly, quarterly, every sixmonths or basing on the project that is ongoing at the moment in thecompany. Some companies do performance reviews annually, but they arenot effective especially when there is a high employee turnover. Theymay be viewed as cumbersome by the enterprise, but they are apredominant part in making ground for handing out rewards and overallcareer development. In conclusion, performance reviews are criticalpillars in a performance-based reward system (Shields et.al, 2015).
A reward system is also a major factor in linking performance torewards (Jaim, 2014). Reward systems primarily include recognitionprograms and returns that are provided to the employees either asincentives, job promotions, and salary increments. Reward systems arenecessary when it comes to motivation of the workers and continuousimprovement. Traditionally, they were based on the job descriptionand performance. The rewards are also biased to the job’s positionseniority. In many circumstances, we encounter the top managementespecially the Chief Executive Officer taking all the credit when anorganization succeeds. However, the success of the company depends onthose employees who are not in the seniority positions.
Structured incentive scenarios are successful in most organizationssince the workers understand that if they perform to certainstandards, they will be rewarded by a given amount of money. Annualsalary increases and bonuses are also essential since they areoffered on a typical review cycle basis. Goal-driven appraisal plansreward the employees when they achieve individual and time-basedobjectives. In conclusion, regardless of the approach chosen in thereward system, the policies should undergo mitigation, control, andreviews and most importantly they should be fair. The Human ResourceManagement should also adhere consistently to them.
For any performance-reward system to be successful, the managementteam is required to establish specific organizational goals that arelinked to a crystal clear vision which will aid them measure, manageand reward distinct employee performances (Shields et.al, 2015). Whenthe human resource management recruits new hires, communication, andexplanation of the developed goals and strategies are critical toaligning them to the organization`s objectives. When both themanagement team and the rest of the employees understand clearlytheir aims and fit them to those of the organization, theperformance-based rewarding system will flourish, and the companywill grow both financially and instability. Practical performancegoals should not focus on so many areas since it will result indisaster for the organization. They should also be challenging butattainable to inspire performance. Finally, it is key that opencommunication within the company will help achieve the goals and alsoensure that the business strategy of the company is woven into allthe Human Resource efforts.
It is not sufficient to just create a performance-based rewardsystem it should also be also successful in the organization.Therefore, the following criteria can be used to determine itssuccess. The system should fit its particular environment in that itis aligned with the company’s goals and performance goals. Thesystem should also be fair to the employees the performance measuresmust be valid, discernible and understandable. The program must beequitable and competitive at the same time. It should also be fair tothe organization such that, it is self-funding and brings profits tothe company rather than loses (DeNisi & Smith, 2014).
In the same light, the system should be able to compensate theemployees entirely based on their performances directly. Incentivesseem to work best with this model. The model should yield financialreturns to both the company and the employees. All staff from toplevel management to the low-level ones must be incorporated withoutbias. Accurate data about the performance of the individuals isobtained from both external and internal data. A successfulperformance-based reward system attains clarity through clearcommunication throughout the entire workforce. Finally, it sets clearperformance goals and a clear analysis model.
Despite the performance rewards having financial benefits tothe employees, they also help the company gain revenue (Shieldset.al, 2015). Many businesses give their sales and marketingrepresentative incentives based on the amount of product they soldand how much revenue they sold. The high amount of incentives givento a representative reciprocates to significant volumes of goods soldand income generated. A company that has an efficient reward systemis likely to generate more income and in the same process acquiremore clients. Some companies do not base their incentive awards on agiven number of goods only, but also on the customer serviceexperience. Customers are the main clients for any organization, andhigh quality customer relationships are vital to any sales andmarketing division.
It is also evident that rewards help build the morale and attitudesof the workers (Grandey et.al, 2013). Employees who are appreciatedmore often are more enthusiastic rather than those who are not. Theposition of the employees is essential for the overall performance ofthe company, and when they feel like their opinions and jobs domatter to the organization, they will keep their performances high.Employees want to be compensated for their contribution whenever theyfeel that they have done well. Incentives and salary increments willhelp them work harder and with enthusiasm since they understand thattheir efforts are not in vain. Further, when the employees arecomfortable with the rewards system and the organization as a whole,the attrition rates will decrease. As a result, the company’sfinancial stability will increase. Moreover, employee retention andcommitment are improved reducing the amount of money spent inrecruiting new workers.
A performance-based reward system helps the organization achieveteamwork in various departments. Some reward systems are based on theoverall performance of a team rather than that of an individual. Ifthe team does not attain its given objective or goal, they allforfeit the given amount of incentive each would receive. Anyorganization needs its employees to work as a team for the greatergood of the organization. Therefore, group rewards can be essentialin ensuring that all those employees in a given department worktogether without some of the riding on other workers seat and hardwork.
A reward system directly linked can also help the organizationdevelop harmonized tools that can gauge cross-functional teams in thecompany and the performance of the managers (DeNisi & Smith,2014). Companies want to create employees and managers who can worktogether in coming up with significant innovations, engaging in teamsand solving immediate problems promptly. Earlier, we had seen howperformance reviews are essential in creating a successfulperformance-based rewards system. The manager’s or employee’sperformance is evaluated based on return on assets, customersatisfaction, the market share and their satisfaction and motivationlevels. The data obtained from the reviews can help the HumanResource Management team or external examiners receive qualityinformation on every employee. The high performing employees will berewarded while the non-performing ones are motivated to keep up, orthey might lose their positions in the organization.
The performance-based reward system also helps the employees enhancetheir skills in their daily operations. The model strives to alignthe employees to the organization`s goals and the set performancetargets. Therefore, they will be motivated to work and performbetter. Rewards based on projects will motivate the employees toengage in new projects that the company implements. As a result, theyget to learn new skills and improve their resumes too. Moreover, ifthey become successful in the projects, they will get incentives, jobpromotions or salary increments. Finally, a healthy competitionenvironment is fostered in the organization which improves individualperformance (Jaim, 2014).
Performance management is essential in any organization since itensures that the set goals are met in a manner that is efficient andeffective. Reward systems implemented in these companies aim atimproving the revenues, attracting and retaining talent and achievingthe companies’ objectives. Performance reviews, reward systems andgoal alignment are critical elements when linking rewards directly toperformance. The incentives are motivators and help in buildingresult driven professionals that work relentlessly to ensure bothindividual and organizational success. However, for the system towork efficiently, it must be implemented without bias but withfairness to both the employees and the firm. Other than incentivesand other monetary awards that are given through the reward system,better career opportunities, and recognition awards can also be usedto reward exceptional performance.
DeNisi, A., & Smith, C. E. (2014). Performance appraisal, aperformance management, and firm-level performance: a review, aproposed model, and new directions for future research. The Academyof Management Annals, 8(1), 127-179.
Grandey, A. A., Chi, N. W., & Diamond, J. A. (2013). Show me themoney! Do financial rewards for performance enhance or undermine thesatisfaction from emotional labor? Personnel Psychology, 66(3),569-612.
Jain, M. (2014). Performance Management: Linking Rewards toPerformance. Journal of Social Welfares and Management, 6 (1), 41.
Kehoe, R. R., & Wright, P. M. (2013). The impact ofhigh-performance human resource practices on employees’ attitudesand behaviors. Journal of Management, 39(2), 366-391.
Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic,A., McLean, P. … & Plimmer, G. (2015). Managing EmployeePerformance & Reward: Concepts, Practices, and Strategies.Cambridge University Press.