Performance and Reward Management

Performance Management

• Performance management is a cyclical process involving valuing, paying, developing, and involving people.
• The diagram visually represents these four aspects:
  • Valuing people: Focuses on recognizing and appreciating employees' contributions.
  • Paying people: Covers financial compensations.
  • Developing people: Involves training and skill enhancements.
  • Involving people: Emphasizes employee participation and collaboration.

Reward Management

• Reward management focuses on strategies, policies, and processes to acknowledge and reward employees' contributions to organizational, departmental, and team goals.
• It's all about ensuring the value of people is recognized and rewarded.

Aims of Reward Management

• Align rewards with business goals and employee values to motivate.
• Reward the right behaviors and outcomes, clearly communicating important actions.
• Attract and retain top talent matching the organization's needs.
• Engage and commit employees to foster a high-performance culture.
• Reward individuals according to the value they create.

Philosophy of Reward Management

• Reward management is rooted in a clearly defined philosophy aligning with organizational values.
• This philosophy underscores human resource management as investing in human capital for reasonable returns.
• Differential reward based on contributions is considered appropriate.

Guiding Principles

• The reward system should operate fairly and equitably.
• Develop reward policies and principles supporting business goals.
• Recognize and reward contributions.
• Provide and maintain competitive pay rates.
• Give line managers greater decision-making responsibility for rewards.

Financial Rewards

• Base pay.
• Performance-based pay/bonuses.
• Pay related to the amount of service provided.
• Financial recognition schemes.
• Benefits like pensions, sick pay, and health insurance.

Arguments Against Financial Rewards

• Financial rewards are unlikely to consistently motivate employees.
• Money's motivational effect varies from person to person.
• Employees who don't receive rewards may become demotivated, negatively impacting quality and teamwork.

Financial Rewards and Incentives

• Financial incentives motivate achievement, skill enhancements, and improved performance through targeted objectives and targets.
• Financial rewards provide recognition and can serve as indirect motivators.

Contingent Pay Schemes

• Contingent pay is supplemental compensation linked to performance, competencies, contributions, skills, or service metrics.

Performance-Related Pay

• Performance-related pay and bonuses are tied to performance assessments.
• Links rewards to preset objectives.
• Focus is on output.
• Works well for individuals motivated by monetary incentives.

Competence-Related Pay

• Pay increases or bonuses are linked to employee competencies and encourage competence development.
• There's a risk of paying for competencies unused.
• May be suitable when measuring outputs is complex or challenging.

Contribution-Related Pay

• Pay and bonuses are linked to both inputs and outputs to recognize the 'how' alongside the 'what.'
• Difficult to accurately measure contribution.

Skilled-Based Pay

• Pay and rewards are tied to acquired skills.
• Encourages skill development.
• Can lead to high costs if employees are rewarded for unused skills.

Service-Related Pay

• Pay is linked to overall time spent in a role, rather than performance.
• Simple to enact.
• Does not reward significant contributors.

Non-Financial Rewards

Job Enrichment

• Offering more engaging, challenging tasks to employees to increase satisfaction and utilize full potential.
• More motivating than job enlargement or rotation.

Job Enlargement

• Adds more tasks to an existing role, but tasks are similar.
• Reduces monotony.
• Does not enhance achievement or satisfaction.

Job Rotation

• Creates varied tasks in existing roles without boosting task complexity.
• Doesn't usually increase the challenge of the job.

Team working

• Team work fulfils employees' social needs and increases productivity flexibility.

Empowerment

• Delegating authority to employees. Managers maintain responsibility for work delivered, even with delegated authority.