Performance and Compensation Management

Topic 1

Learning Objectives

Explain performance management Distinguish performance management from performance appraisal Advantages of performance management Recognize the multiple negative consequences that can arise from the poor design and implementation

Learning Objectives

Understand the concept of reward system and its relation to performance management Distinguish among various types of employee rewards, including compensation, benefits and relational returns Describe and explain key features of an ideal performance management system

1.1 DEFINITION OF PERFORMANCE MANAGEMENT

A continuous process of identifying, measuring, developing the performance of individuals and teams and aligning performance with the strategic goals of the organization.

1.1 DEFINITION OF PERFORMANCE MANAGEMENT Contd

Two Main Components of the Definition:

1. 2.

Continuous Process Alignment with strategic goals

1.2 THE PERFORMANCE MANAGEMENT CONTRIBUTION

1. 2. 3. 4. 5. 6.

Motivation to perform is increased. Self-esteem is increased. Managers gain insight about subordinates. The definitions of job and criteria are clarified. Self-insight and development are enhanced. Administrative actions are more fair and appropriate.

1.2 THE PERFORMANCE MANAGEMENT CONTRIBUTION, Cont

7. 8. 9. 10.

11.

12.

Organizational goals are made clear. Employees become more competent. There is better protection from lawsuits. Better and more timely differentiation between good and poor performers. Supervisors view of performance are communicated more clearly. Organizational change is facilitated.

1.3 DISADVANTAGES OF POORLY IMPLEMENTED PM SYSTEMS

1. 2. 3. 4. 5. 6.

Increased turnover. Use of misleading information. Lowered self-esteem. Wasted time and money. Damaged relationships. Decreased motivation to perform.

1.3 DISADVANTAGES OF POORLY IMPLEMENTED PM SYSTEMS

7.

8.

9.

10.

11. 12.

Employee burnout and job dissatisfaction. Increased risk of litigation. Unjustified demands on managers resources Varying and unfair standards and ratings. Emerging biases. Unclear ratings system.

1.4 DEFINITION OF REWARD SYSTEMS

A

reward system is a set of mechanisms for distributing both tangible and intangible returns as part of an employment relationship

1.4 DEFINITION OF REWARD SYSTEMS Cont

1.

2.

3.

4.
5. 6. 7. 8.

Base Pay (focuses on the position and duties performed rather than individual contribution) Cost-of-living Adjustment and Contingent Pay (merit pay) Short-Term Incentives Long-Term Incentives Income Protection Work/Life Focus Allowances Relational Returns

1.5 AIMS AND ROLES OF PM SYSTEMS

1. 2. 3.

4.
5. 6.

Strategic Purpose Administrative Purpose Informational Purpose Developmental Purpose Organizational Maintenance Purpose Documentational Purpose

Served by a performance management system

Table 1.4 Purpose

Strategic Administrative Informational Developmental Organizational Maintenance Documentational

1.6 INTERGRATION WITH OTHER HUMAN RESOUCES AND DEVELPOMENT ACTIVITIES

PM systems serve as important feeders to other human resources and development activities PM provides key information for workforce

planning

A relationship exists between performance management and compensation systems PM is a key component of talent management in organizations

Chapter 1: Summary

Performance management is a continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning performance with strategic goals of the organization Performance appraisal emphasizes the assessment of an employees strengths and weakness and does not include strategic business considerations.

Chapter 1: Summary Contd

From employee perspective, a good system increases motivation and self-esteem, helps improve performance, clarifies job tasks and duties, provides self-insight and development opportunities and clarifies supervisors expectations Poorly designed and implemented PM systems can have disastrous consequences for all involved

Chapter 1: Summary Contd

Reward systems include all mechanisms for determining and distributing tangible and intangible returns PM system serve multiple purposes PM provides info on who should be trained and in what areas, which employee should be rewarded, and what type of skills are lacking