Chapter 1: Performance Mgt & Reward System in Context

Performance Management
Continuous process of Identifying, Measuring and
Developing performance of individuals and teams and
Aligning performance with the strategic goals of the
organization
Aligning performance with the strategic goals of the
organization which requires managers ensure that
employees activities and output are congruent with the
organization goal.
Contributions of Performance Management
For Employees
1. Clarify definitions of job and success criteria Ex,
employees gain better understanding of the behavior and
results required of their specific position.
2. Increase motivation to perform Ex, Recognition about
ones past successes.
3. Increase self-esteem Ex, receive feedback about ones
performance fulfills a basic human need to be recognized
and valued at work.
4. Enhance self-insight and development The participant
in the system likely to develop better understanding of
themselves & kind of development activities that values
to them as progress through the organization.
For Managers
1. Communicate supervisors views of performance more
clearly There is greater accountability in how manager
discuss performance expectations & provide feedback
2. Managers gain insight about subordinates It will helps
to build better relationship with that person and gain
better understanding of each individuals contribution to
organizational.
3. Better and more timely differentiation between good and
poor performers They force supervisor to face up to &
address performance problems on timely basis.
4. Employees become more competent

For Organization/HR Function

1. Clarify organizational goals So the employees
understands the link between what they does and
organizational success.
2. Facilitate organizational change Organizational need to
change its culture, then new organizational direction is
establish to align with the goal & objective of the
organization make so employees are provided training
and rewarded for improved performance
3. Administrative actions are more fair & appropriate
provide valid information about performance that can be
used for administrative action such as merit increase,
promotions and transfer so it will lead to improved

4.

interpersonal relationship & enhance employer and

employee trust
Better protection from lawsuits Data collected through
performance management help document compliance
with regulation such as equal treatment to all employees
regardless of sex or background.

Disadvantages/Dangers of Poorly-implemented PM Systems

For Employees
1. Lowered self-esteem if feedback is provided in an
inappropriate and inaccurate way and will create
employee resentment
2. Employee burnout and job dissatisfaction when the
performance assessment instrument is not seen as valid
system is not perceived as fair
3. Damaged relationships As a consequence of deficient
systems, the relationship among the individual involved
may be damaged.
4. Use of false or misleading information if standardized
system is not in place, the multiple opportunity for
fabricating information about an employees performance
For Managers
1. Increased turnover if process is not fair, employees
may upset & leave organization. (quit or minimize
performance)
2.

3.

4.

Decreased motivation to perform it can be lowered by

feeling the employer not translated into meaningful
tangible (pay increase) or intangible (personel
recognition) reward.
Unjustified demands on managers resources - such
system will be resisted because of competing obligation
and allocation of resources (time)
Varying and unfair standards and ratings both standard
& individual rating may vary across & within units and be
unfair.

For Organizations
1. Wasted time and money it will wasted when systems
are poorly designed and implemented.
2. Unclear ratings system because of poor
communication, employees may not know how their
ratings are generated and how the ratings are translated
into reward.
3. Emerging biases Personel values, biases and
relationship are likely to replace organizational standard.
4. Increased risk of litigation Expensive lawsuits may be
filed by individuals who feel they have been appraised
unfairly
Aims and Role of PM Systems
1. Strategic
To help top management achieve strategic business
objectives.

2.

3.

4.

5.

6.

It also play important roles in the onboarding

process which is the process that lead new
employees to transition from being organizational
outsiders to organizational insider.
PM serves as catalyst for onboarding because it
allows new employees to understand types of
behavior & result that are valued & rewarded which
lead to understanding of the organization values
and culture.
Administrative
To furnish valid and useful information for making
administrative decision about employees include
salary adjustment, promotion or termination
Implementation of reward system based on information
provided by the performance management system falls
within the administrative purpose
Informational
serve important communication device.
They inform employees on how they doing & provide
them with information on specific areas that may need
improvement.
They provide information regarding the organization &
supervisor expectations & what aspects of work the
supervisor believes are important.
Developmental
Feedback is important in well implemented PM system
because it can be used in developmental manner.
Manager use feedback to coach employees & improve
performance on an on-going basis.
It allow for identification of strengths & weakness.
Organizational should strive to create a feedback culture
that support for feedback.
Employees will receive information that can help them
individualize their career paths.
Organizational maintenance
Provide information to be used in workforce planning.
It comprises a set of system that allows organizations to
anticipate and respond to needs emerging within &
outside the organization.
It include assessing future training needs, evaluating
performance achievement at organization level and
evaluating the effectiveness of HR interventions
Documentation
Allow organization to collect useful information that can
be used for several documentation purpose.
Performance data can be used to validate newly
proposed selection instrument.
PM systems allow for the documentation of important
administrative decision which is useful in case of
litigation.

1. Congruent with organizational strategy

The individual goal must be aligned with unit and
organizational goal.
2. Thorough
All employees are evaluated include manager
All major job responsibilities are evaluated included
behavior & results
Evaluations cover performance for entire review period
Feedback is given on both positive and negative
performance
3. Practical
System must easy to use & available for manager to
make decision
the benefits using this system must seen as outweigh
costs
4. Meaningful
Standards are important and relevant
System should measures ONLY what employee can
control
Evaluations occur regularly and at appropriate times
System provides for continuing skill development of
evaluators
The result should be used for important administrative
decision
5. Specific
Provide detailed & concrete guidance to employees
about what is expected of them & how they can meet
these expectations
6. Identifies effective/ ineffective performance
To distinguish between effective & ineffective behaviour
& result
Provide ability to identify employees with various levels
of performance
7. Reliable
Measure performance that are consistent & Free of error
Inter-rater reliability
8. Valid
Relevant (measures what is important)
Not deficient (doesnt measure unimportant facets of job)
Not contaminated (only measures what the employee
can control)
In short, measure what is important & do not assess
what is not important & outside control of employees.
9. Acceptable and Fair
Perception of Distributive Justice , include perceptions of
performance evaluation received relative to work
performed, & perceptions of rewards received relative to
evaluation received.
Perception of Procedural Justice, perception of
procedure used to determine the ratings as well as the
procedure used to link ratings with reward.

An Ideal PM System: 14 Characteristics

10.

11.

12.

13.

Perception of Interpersonal justice, refer to quality of

design and implementation of the performance
management system
Perception of Informational Justice, fairness perceptions
about performance expectations & goals, feedback
received & the information given to justify administrative
decision.
Inclusive
Represents concerns of all involved, which when system
is created, employees should help with deciding what
should be measured & how it should be measured
All participants must give a voice in process of designing
& implementing the system
Open (No Secrets)
Performance should evaluate frequent 7 performance
feedback is provided on an ongoing basis.
2-way communications in appraisal meeting which
information is exchange, not delivery from supervisor to
employees without his input
Clear standards, ongoing communication
Communications are factual, open, honest
Correctable
Recognizes that human judgment is fallible
Appeals process provided for which employees can
challenge what may be unjust decision, is important
aspect of good PM system.
Standardized
Ongoing training of managers is provided
Performance is evaluated consistent across people &
time

14. Ethical
Supervisor suppresses her self-interest in providing
evaluation
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:
o Development of training to meet organizational
needs
o Workforce planning, organizations talent
inventory is based on information collected
through the PM system.
o Recruitment and hiring decisions, development
plan provide information on what skills will
acquire in future.
o Development of compensation systems,
whether employees satisfy with given
compensation or not

PM is NOT PA
Performance Management
Strategic business considerations
Driven by line manager
Ongoing feedback
So employee can improve
performance
Performance Appraisal
Driven by HR
Assesses employee
Strengths &
Weaknesses
Once a year
Lacks ongoing feedback
PM Around the World
PM used in United States, Mexico, Turkey, India, Australia,
China, and so on
Common across countries: Need to align individual and
organizational goals to enhance the performance of
individuals and groups
Yet, different countries emphasize different components of
PM
EX 1: PMs in Japan tend to emphasize behaviours to the
detriment of results
EX 2: The current challenge among many organizations in South
Korea is how to reconcile a
merit-based approach with more traditional cultural
values
Reward Systems
It is the set of mechanisms for distributing both tangible
return (include CASH = base pay, cost of living, short
term incentives and BENEFIT = income protection,
allowance) & intangible returns (recognition, promotion,
COLA) as part of an employment relationship.
Types of returns/reward.
1.

2.

Base pay
Given to employees in exchange for work performed.
Include range of values, focuses on potion & duties
performed rather than individuals contribution.
Usually same for all employees that perform similar
duties & ignore differences across employees
But differences within base pay may existed based on
experience & differential performance
Cost of living adjustments (COLA)
Imply same percentage increase for all employees
regardless of their individual performance.
Given to combat he effect of inflation in an attempt to
preserve the employees buying power
Contingent pay or merit pay is given as addition to the
base pay based on past performance.
Contingent pay the amount of additional compensation
depends on employees level of performance.

3.

4.

5.

Short-term incentive
It allocated based on past performance.
It not added to the base pay & only temporary pay
adjustment based on the period (quarterly/annual)
It one time payments and referred variable pay
Incentives is known as advance.
Long term incentive
Attempt to influence future performance over a longer
period of time.
It involved stock ownership / option to buy stocks at preestablished & profitable price
In this, employees personally invested in the organization
success & the investment is expected to translate into
sustained high level of performance.
Income protection
It serve as backup to employees salary in the event that
they sick, disable or no longer able to work.

6.

7.

8.

It include medical insurance, pension plans & saving

plans.
Work life focus
Include program that help employee achieve a better
balance between work & nonworking activities.
Include time away from work (vacation time), service to
meet specific needs (counselling, financial planning), &
flexible work schedule (telecommuting, nonpaid time off)
Allowance
Include allowance covering housing & transportation.
Other allowance include smartphone & their monthly
charger, gym fees, discount loan.
Relational returns
It intangible returns.
Include recognition and status, employment security,
opportunity to learn, challenging work.
All employees receives type of return regardless of their
past performance.