PERFORMANCE AND REWARD MANAGEMENT

Performance and Reward Management

Performance and Reward Management

Introduction

The meaning of the term "performance management" has changed over the years. In the past it was often taken to mean rating employees using atrait-based instrument - one looking at factors such as neatness, punctuality, - etc., as opposed to focussing directly on work output. The evaluation process also tended to be secretive. The employee did not participate and was not told what rating he or she received.

This style of performance appraisal is no longer considered good practice. There is general agreement that performance management should be:

task-oriented: based on results as opposed to personal traits, and measuring results against pre-defined goals and targets

participative: involving the employee as well as his or her supervisor, both in the setting of goals at the beginning of the rating period and in appraising results at the end developmental: the evaluation process should do more than rate employees - it should assist them to improve their performance, and to identify any training or other support that may be required to this end.

Discussion

Many countries have introduced performance management processes along these lines. Several countries have experimented with performance-related pay. One approach is to make salary increments or progression past some point on the pay scale conditional on good performance. The disadvantage of such asystem is that it can revert very rapidly to aformalistic process in which virtually everyone gets their increment. Moreover, it does not permit any distinction between adequate performers and outstanding ones.

Alternative approaches are to award variable increments according to employees' individual performance ratings, or to award avariable performance bonus over and above the annual increment. In the United States, for example, the Civil Service Reform Act of 1978 required that 50 per cent of any pay increase be variable depending on performance(Heinrich 2002).

Service-wide performance-pay schemes tend to be costly to administer. Studies have identified various problems in the way performance-pay schemes operate:performance payments tend to be small by comparison to normal pay owing to budgetary constraints there is often alarge time-lag between the end of the appraisal period and the payment of the related reward even where performance-pay schemes allow for variable payments, most employees tend to receive similar ratings: managers appear unwilling to differentiate among their subordinates

finally, performance-related pay is only one element in the staff management system and cannot make up for serious deficiencies elsewhere. If, for instance, pay is perceived by staff to be inadequate, performance bonuses of afew per cent are unlikely to motivate employees and may simply be seen by them as aminor pay supplement.Because of the problems associated with pay-for-performance schemes, it has been suggested that they should be introduced gradually in selected units rather than throughout government in one go. This would increase the chances of success by keeping the scheme manageable. Another way of achieving this is to limit pay-for-performance schemes to senior officials. Typically, performance management systems for senior officials include elements additional to performance-pay, such as time-limited contractual ...