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Supporting Good Practice in Performance & Reward Management

Performance Management is a process aimed at improving performance in an effective and efficient manner. It involves following principles that ensure individuals or teams they manage: know and understand what is expected of them have the skills and ability to deliver on these expectations are supported by the organisation in developing the capacity to meet these expectations are given feedback on their performance

Have the opportunity to discuss and contribute to individual and team aims and objectives.

Performance Management should be:
Strategic – it is about broad issues and long-term goals.

Integrated – it should link various aspects of the business, people management, individuals and teams.

Performance management should incorporate:
Performance improvement – throughout the organisation, in respect of individual, team and organisational effectiveness Development – unless there is continuous development of individuals and teams, performance will not improve

Managing behaviour – ensuring that individuals are encouraged to behave in a way that allows and fosters better working relationships.

Armstrong and Baron define performance management as ‘a process which contributes to the effective management of individuals and teams in order to achieve high levels of organisational performance.

As such, it establishes shared understanding about what is to be achieved and an approach to leading and developing people which will ensure that it is achieved.’

The components are important because they tie together organisational and individual objectives, achievements and expectations. An effective system should include:

– Performance Planning

Planning involves both parties agreeing on set objectives to be achieved over a specific period. Clearly defined targets identify needs, wants and create opportunities for advancing within the organisation.

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Reviewing and Appraisal Performance

Obtaining, reviewing and recording information is important as it highlights the relative worth of an employee to the organisation. It’s an analysis of recent successes and failures, personal strengths and weaknesses.

Recognising and Rewarding Performance

This vital component determines the work motivation of an employee. It’s during this stage, employees are recognised and rewarded for good performance.

Coaching and Feedback

It’s through constructive feedback employees develop new techniques, enabling them to maintain control of their performance. Devising a step by step process encourages employees to taking accountability for their own actions and provides aid with expected levels of performance.

Motivation is an important aspect of performance management as it contributes to how well others perform. The different types of methods used, effect employees’ attitudes towards work and on the willingness to stay with the organisation. Performance reviews hold a crucial ingredient in motivating employees, as it’s a fair and accurate assessment of their overall performance. According to McGregor’s Theory, there are two basic management behaviour types: Theory X – authoritarian management style, results driven and operate in an environment of command and control Theory Y – participative management style, consultative and empowering, helping people to develop and encouraging them to take the imitative.

The basic principle of the model remains valid and is applied to 21st century management. Although an authoritarian style of leadership is occasionally necessary, in crisis situations, the participative style is generally accepted as more effective for motivating people. People contribute more to their job and organisation if they’re treated as emotionally mature, responsible and valued employees and are given challenging work.

Maslow’s theory focuses on the link between motivation and the satisfaction of human needs.

The theory consisted of two parts:
The classification of human needs
Consideration of how the classes are related to each other

Maslow suggested, “we generally must first meet the needs at the bottom of the pyramid -physiological needs – before meeting the subsequent needs of safety, belonging and esteem. The closer we come to satisfying one need, the more we want to satisfy the next need in the hierarchy. If we are unable to satisfy one of the needs, we become focused wholly on meeting that need, and the desire to meet other needs is reduced”.

The model provides a useful framework for considering how motivated individuals are and why, however it’s important to remember that not all people are driven by the same needs. Managers must understand the needs being pursued by each employee, recognise the level at which the employee is performing, and use those needs as levers of motivation.

Employee motivation and performance management depends on a good system that offers both financial and non-financial rewards (non-monetary rewards). The purposes of rewards within a performance management system helps: organisations become more competitive.

retains employees and costs.
reduces the organisation’ s turnover.
allows relationships to develop between employees and the organisation. reinforces the image of the organisation among stakeholders or future employees.

It’s essential that managers understand their employees’ perceptions of the importance and fairness of the reward system and then clearly communicate what needs to be done to receive the reward.

The concept of total reward system encompasses all aspects of work that are valued by employees, including elements such as learning and development opportunities and/or an attractive working environment, in addition to the wider pay and benefits package.

Total Reward Component


Individual Growth

Investment in people
Development and training
Performance management
Career enhancement

Compelling Future

Vision and values
Company growth and success
Company image and reputation

Positive Workplace

People focus
Work itself
Trust and commitment
Open communications

Total Pay
Base pay
Variable pay (cash and stock)
Benefits or indirect pay
Recognition and celebration

All aspects of the work are recognised and prominence is given not only to remuneration but also to less tangible rewards. This is important since experience shows that employees place great emphasis on intangible rewards when deciding where to work and the level of commitment to give to their work.

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Supporting Good Practice in Performance & Reward Management. (2016, Apr 24). Retrieved from

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