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12 February 2012

Supporting Good Practice in Performance and Reward Management


Two Purposes of Performance Management and its relationships to business
Performance management is a repetitive process, established by organisations to help them in
accomplishing their objectives (goals, as listed in the organisations vision) by maximizing the
performance of an individual, team or whole organisation and ensure that the objectives are
achieved. 1
The Performance Management Process is a key component of organisations overall approach
to the management of its people. As part of the performance management system,
Performance Management Process aims to achieve the following:

To enable an individual employee to know exactly what is expected both in terms of

outputs (the delivery of agreed objectives) and the relevant, appropriate behavioural style (rolerelated competency models), which will underpin the delivery of the agreed objectives.

To enable individual and team effort to be focused on the delivery of the departmental
business plan.

To enable an individual to identify and meet personal development needs which will
facilitate the delivery of agreed objectives.

To enable individual employees to feel motivated and valued for their contribution to the
on-going success of organisation.

To enable individuals to identify and achieve realistic career goals over time.

To enable the organisation to reward individuals fairly based on an objective assessment

of their contribution.

To enable the organisation to audit the capability of its staff.

To enable the organisation to plan for its own staff succession.

An honest and constructive working relationship between a manager and member of

The purpose of performance management is to ensure accomplishment of business objectives
and to increase the strength of the employees.

Daniels, Aubrey (4th edition, July 2004). Performance Management: Changing Behavior that Drives Organizational
Chartered Institute for Personnel and Development 2009 - Discussion Paper on Performance Management, Issued on 2009;
Reference: 4741

12 February 2012
Accomplishment of business objectives is an essential survival goal for an organisation. In order
to accomplish the business objectives these has to be established by the upper management
and than communicated to its own employees. After the objectives have been communicated to
the employees it has to be measured, appraised, action planned and monitored. However, the
performance management process incorporates the entire business objectives evolution since
its inception until its end.
In order to increase the strength of the employees you have to measure it. The performance
management process sets specific goals to be accomplished in certain time. The strength of the
employees is increased by motivation and reward. To motivate and retain high performance by
providing career development programs including motivational and reward strategies,
challenging work assignments and other on-the job learning initiatives that will lad to career
development and ongoing job satisfaction.
The performance management process is usually designed to help employees understand what
they need to learn and how they need to learn it.
Employees are expected to be in a constant growth and learning mode, demonstrating
organization and/or role-specific competencies; the bundles of skills, behaviours and knowledge
that are critical to the organisations ability to execute its business strategy.
Coaching and mentoring programs are used on a formal basis to provide employees with
ongoing support as they develop and apply new competencies.
2. What are the 4 components of performance management system?
An effective performance management system should include the following components:

Setting up objectives: a clear understanding of job expectations

Discuss results; determine performance: regular feedback about performance

Identify strengths; identify areas for improvement; seek joint agreement on action plan:
advice and steps for improving performance

On the job training; formal training; coaching and other development activities: rewards
for good performance.3

3. Explain the relationship between motivation and performance management, referring

to at least 2 motivational theories.
Motivation is about what makes people think, act or behave in particular way. The link between
motivation and performance management its very obvious. If the employees are highly
motivated they will perform better, so better performance can lead to a sense of achievement
and result in greater motivation.

Martin, M., Whiting, F. and Jackson, T. (5th edition). Human Resource Practice: page 168, Fig 6.3

12 February 2012
The following theories each offer advice and insight on how people actually make choices to
work hard or not work hard based on their individual preferences, the available rewards, and the
possible work outcomes.
Reinforcement Theory
The reinforcement theory is based on E.L. Thorndikes law of effect and describes relationship
between behaviour and consequences. This theory focuses on modifying an employee's on-thejob behaviour through the appropriate use of one of the following four techniques:

Positive reinforcement rewards desirable behaviour. Positive reinforcement, such as a

pay raise or promotion, is provided as a reward for positive behaviour with the intention
of increasing the probability that the desired behaviour will be repeated.

Avoidance is an attempt to show an employee what the consequences of improper

behaviour will be. If an employee does not engage in improper behaviour, he or she will
not experience the consequence.

Extinction is basically ignoring the behaviour of a subordinate and not providing either
positive or negative reinforcement. Classroom teachers often use this technique when
they ignore students who are acting out to get attention. This technique should only be
used when the supervisor perceives the behaviour as temporary, not typical, and not

Punishment (ex: threats) is an attempt to decrease the likelihood of a behaviour

recurring by applying negative consequences.

The reinforcement theory has the following implications for management:

Learning what is acceptable to the organization influences motivated behaviour.

Managers who are trying to motivate their employees should be sure to tell individuals
what they are doing wrong and be careful not to reward all individuals at the same time.

Managers must tell individuals what they can do to receive positive reinforcement.

Managers must be sure to administer the reinforcement as closely as possible to the

occurrence of the behaviour.

Managers must recognize that failure to reward can also modify behaviour. Employees
who believe that they deserve a reward and do not receive it will often become
disenchanted with both their manager and company.4

Richard L. Daft, Patricia G. Lane(2007), The leadership experience, 234-235

12 February 2012

The Goal Setting Theory

The goal-setting theory, introduced in the late 1960s by Edwin Locke, proposed that intentions
to work toward a goal are a major source of work motivation. Goals, in essence, tell employees
what needs to be done and how much effort should be expanded. In general, the more difficult
the goal, the higher the level of performance expected.
Managers can set the goals for their employees, or employees and managers can develop
goals together. One advantage of employees participating in goal setting is that they may be
more likely to work toward a goal they helped develop.
No matter who sets the goal, however, employees do better when they get feedback on their
progress. In addition to feedback, four other factors influence the goals-performance

The employee must be committed to the goal.

The employee must believe that he is capable of performing the task.

Tasks involved in achieving the goal should be simple, familiar, and independent.

If the goal-setting theory is followed, managers need to work with their employees in
determining goal objectives in order to provide targets for motivation. In addition, the goals that
are established should be specific rather than general in nature, and managers must provide
feedback on performance.5
4. What are 2 purposes of reward within a performance management system and give an
example of this within your organisation.
The main purposes of reward within a performance management system are to retain, motivate
key employees and to reduce turnover.
Its a known fact that people are the most important asset in the organisation and the company
where Im working for can give a good example. The CEO Awards is an additional short term
reward that is meant to reward outstanding employees that performed extraordinary in a period
of one year.
However, The CEO Awards are open to all employees. The awards for last year were a trip on
one of the Jubilee Sailing Trust vessels. Mainly the award scheme has been introduce to
recognize, reward and encourage contribution to ongoing success of the organization, and
nominations were invited to evidence the following criteria:

Contribution to the success of the business this year

GARY,P. LATHAM(2007),Work motivation: history, theory, research and practice, page 60-70

12 February 2012

Leadership qualities displayed

Contribution to the personal development of colleagues

Contribution to management of health and safety in the business

5. Describe at least 3 components of a total reward system, one of which should be non
The total reward system is a multitude of tools that the employer has in its hand and may be
used to attract, motivate and retain employees. From the employee point of view the total
rewards represent everything that he/she perceives to be of value resulting from the
employment relationship.
The reward concept covers both financial and non financial pay.
The components of a total reward system are:

Compensation is a critical component of the reward system that includes: basic pay
system (annual or monthly salary rate) and variable or incentive pay systems (sales
commissions, appraisal/performance-related pay, skills-base pay, etc.)

Benefits are used to supplement the cash compensation that the employees receive
and are designed to protect the employees and the family from financial risks. Example
of benefits: social insurance(in Bahrain is only for locals), life insurance, medical
insurance, dental, retirement plan, savings scheme, uniform, gym membership,
company car, breaks, clean-up time, company holidays, vacation, personal das, etc.

Work life- in this category is included the followings: workplace flexibility, paid and unpaid
time off, health and well-being, caring for dependents, financial support, community
involvement, and management involvement/culture change intervention.

Performance and recognition - Performance is a key component of the organisational

objectives and involves the alignment of organisational, team and individual effort
towards the achievement of business goals and organisational success. The recognition
acknowledges and gives special attention to employees action, efforts, behaviour or
performance. Recognition programs acknowledge the employee contribution
immediately after the task has been completed. This type of recognition award can be
financial or non-financial (e.g., verbal recognition, certificates, trophies, tickets, dinners,

Development and career opportunity includes learning opportunities (e.g. on the job
learning, tuition, seminars and conferences attendance, corporate universities, self
development tools and techniques, new technology training, etc.);
coaching/mentoring(e.g., leadership training, formal and informal mentoring programs,
association memberships, exposure to resident experts, etc.) and advancement
opportunities(e.g., internal job openings, promotions, overseas assignments, internships,
succession planning, career pathways, etc.)

6. What factors do you need to consider when managing performance and give an example of
how you would manage these varying factors?

12 February 2012
When managing the employees performance we must have in consideration the following factors: the
objective achievement and the behavioural patterns.
From my point of view, I believe that in order to have the best results from a performance
management process we must base our judgment on the following key factors:

Openness between the manager and the individual employee.

Managers and employees both having the necessary skills to use the process properly
for mutual benefit.
Rigour and objectivity in forming and communicating judgements.
Taking the time needed to prepare for and manage each of the four components of the
system (see question number 2 answer).
Also, all the managers has to be trained in how to use the performance management appraisal
and to communicate to their employees all the changes that take place during the performance
management process. A well informed employee will be easier to apprise, this resulting in less
time consuming and good results.
7. Describe at least 2 items of data, including 1 external to the organisation.
Gathering performance information from a variety of sources increases objectivity and ensures
all factors impacting performance are considered. This information should include objective data
like sales reports, call records or deadline reports. Other valuable information includes:
feedback from others, results of personal observation, documentation of ongoing dialogue,
records of any external or environmental factors impacting performance. Many reviews also
include an employee self-evaluation. Other documents that help define performance objectives
include: past performance appraisals, current departmental and organizational objectives and
documented standards related to career goals.
In order to gather feedback from other employees, organizations will often use a 360 feedback
process. Along with the completion of a self-assessment, selected peers, subordinates, and
managers are asked to contribute feedback around pre-identified areas. The feedback is based
upon specifically identified skills or competencies and the final results are compared against the
employee's self-assessment. This type of feedback increases self-awareness and in some
cases is used to support the performance evaluation process.

8. Explain the frequency, purpose and process of performance review, giving an

example of those within your own organisation, or one which you are familiar.

12 February 2012
For Oil Spill Response (the company) the performance management review process works to
an annual cycle which dovetails with the business planning and budgeting processes. In
essence the system works through a three-stage process annually beginning and ending in
January to match the business financial and reporting year.
Stage One
The first phase, which should take place in January, consists of an individual reaching a
work agreement, competencies, occupational standards and personal development plan
with his/her line manager.
Stage Two
Throughout the year the second phase takes place in the form of an on-going updating
process aimed at keeping the work agreement up to date, on target and relevant to the
dynamic environment in which the company operates. A mid-year progress meeting is
Stage Three
At the end of the year a review of each individuals performance takes place, judgements
are made and justified against objective benchmarks and decisions about reward,
development and career progression.
Stages One and Three should run together once the system is in use.

12 February 2012
Activity 2
Although in my day to day job Im not dealing with conducting performance management
reviews I found it very challenging. The performance review meeting helped me to put in
practice what Ive learned in the previous modules, especially the coaching and mentoring
modules. A good performed performance review can do miracles for the person that is upraised
and for the organization but only if the person that conducts it is well prepared.
In order for me to conduct the performance review I had to prepare myself in advance and do
some research regarding this. Ive learned that when you start a performance review you have
to, first off all, know the process and also to explain it to the appraised person. Giving attention
and time, being supportive, open and honest can only help you in bringing out what is the best
in that person. Even if the person didnt do well and didnt accomplish his/her objectives we
should offer, as much as possible, a positive feedback. Ive also learned the performance
management review is not only for the past, its for the future as well.

12 February 2012

DANIELS, A. (4th edition, July 2004). Performance Management: Changing Behavior that
Drives Organizational Effectiveness.

2. Chartered Institute for Personnel and Development 2009 - Discussion Paper on

Performance Management, Issued on 2009; Reference: 4741
3. MARTIN, M., WHITING, F. and JAKSON, T. (5 th edition). Human Resource Practice: page
168, Fig 6.3
4. RICHARD, L.; DAFT, PATRICIA G. LANE (2007). The leadership experience, 234-235
5. GARY, P. LATHAM (2007), Work motivation: history, theory, research and practice, page 6070