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Purposes of performance management and its relationship to business objectives

1.Explain at least two purposes of performance management and its relationship to business objectives?

2.Identify three components of performance management systems?

3.Explain the relationship between motivation and performance management, referring to at least two motivational theories?

4.Identify two purposes of reward within a performance management system?

5.Describe at least three components of a total reward system, 1 of which should be non-financial?

6.Explain the factors that should be considered when managing good and poor performance?

7.Identify and establish reasons for poor performance?

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

9.Required to prepare and conduct a performance review meeting?

Performance management is the act of evaluating the progress an organization is making towards the attainment of a preferred goal. Managing performance, thus, serves the purposes of measuring, and optimizing the business’s resources to equip a service to a level agreed-on. Measuring the said resources involve connecting individuals, strategies, and systems so as to increase efficiency and effectiveness to the point of acquiring the desired effects. For things in business to be done right and correctly, an establishment has to have two schemes, one that constitutes leaders and another that insists on achieving distinction.

In an organization that has efficient performance management reaching for leadership skills that can lift above interpersonal attainments, attitudes, and behaviors is paramount. This vital aspect of performance management helps with keeping persons who represent the basic human capital of the organization. These individuals are in control of the execution of primary designs of the business concerns. The second purpose of performance management is optimization of business resources for the maximum possible benefits. A performance management should be secure which would enable it to follow up the schemes, strategies, and people actively for a productive management. In turn, the gross revenue and profitableness would increase.

There is a strong relationship between performance management and business objectives in that it is how the activities of a business are performed that determines whether or not its objectives get met. There is a missing connection between ambitions and results, that affects the objectivity of a business, and that performance management seeks to bring in. Today, there are higher conscious levels in businesses that it is the integrated efforts and powers of their workers to implement the business’s systems that mold all the difference to their successful businesses. It is the role of top-level managers to ensure that the gap between aspirations and effects gets filled by motivating the employees.

Identifying components of performance management systems

A performance management is a system in a business that takes the initiative of managing the performance of employees, to drive individuals and the entire establishment towards the wanted performance and results. The need of having a performance management system is to make sure that all internal stakeholders are working together to attain the overall operational goals. To have a stable performance management that propels a business to its goals, some components need to be focused on -  

The first component is an understanding of the expectations and reviewing the performance of employees towards achieving those expectations. It is paramount for business owners to have clear expectations and to communicate them well to the employees. Aside from just communicating, ensuring that the message is understood is important; and to do so constructive, consistent, and clear feedback should be encouraged. Reviewing performance would then involve measuring how the employees are responding to the set direction. Clear expectations, an understood message, and staff that match the culture of the business result in an easier performance review. If the reviews don’t go well, it is possible that the team members have a misunderstanding of their individual roles. The management would then consider restating the expectations, or offering further guidance, or both.

The second component is reward and recognition of the employee’s efforts. These are aspects of employment that make an employee look forward to another day at the work. Whenever a worker reaches a predetermined goal, a reward from the business should come their way, and the reward does not have to be expensive, what should always be is authentic. Other than a reward, an employee’s achievement can be recognized, say, to others during a team meeting. The third component is corrective action whereby discipline is administered, though hard, to an employee. It should, however, be used as a last resort measure. Letting employees fill a corrective action’s form upon employment is good so as to do away with the anxieties that come with imposing a corrective action. The form should meet legal requirements the employer should, therefore, provide supporting documentation.

In the context of work, motivation is the degree of willingness an individual has to put in and maintain an effort towards the goals of an organization. The relationship between motivation and performance is that when a qualified workforce gets motivated the performance of their work and the results after that gets better with every act of motivation. Having priority programs in business is necessary as they have a huge stake in the inspiration of workers. With the programs, the employees can prioritize what is expected of them in the execution of their work. It enables them to deliver standard results in the right time. Some theories exist on motivation, yet there are two areas of motivation where the confusion arises: motivation to perform and motivation to be in a job.

Exploring the relationship between motivation and performance management

The first theory is Frederick Herzberg’s two-factor theory that applies to a workplace, and it has two motivational areas: satisfiers and dissatisfies. Herzberg’s theory makes a distinction between satisfiers- main sources of job satisfiers-, and dissatisfies- main sources of job dissatisfaction. Job satisfiers, in this case, are such as the work itself, recognition, achievement, and responsibility. Job dissatisfies are, say; salary, working conditions, relationship with other employees, and administrative supervision whenever they are absent, or an employee perceives them as insufficient. The first Frederick Herzberg’s motivational theory got published in 1959 (Herzberg, Mau msner, & Snyderman, 2011), and it says that job dissatisfaction or satisfaction gets impelled by two separate groups of factors. The theory continues to say that satisfaction and dissatisfaction are not on the opposing sides of the same scale; rather the two should be measured separately.

The second theory is expectancy theory that suggests that people choose their actions based on how desirable the perceived outcomes are of those behaviours. It was used with much prominence by Victor Vroom (Vroom, Porter, & Lawler, 2005) in a work context as he sought to determine the relationship between ability, motivation, and performance. He put the relationship as a multiplicative one- performance is equal to the ability of motivation x. Many of people are attracted to this sort of approach, especially employers who can object their motivation effort and forestall a definable mathematical yield for them. The expectancy theory is that of a cognitive process, and it depends on the perception that employees have on rewards. These theories, among others, and variants of them, have been put to use in many research studies and still inform the system of compensation management to date.

Organizations nowadays are portraying a high level of commitment in matters reinforcement of reward systems, which are aligned to the goals of the company and other human resource management practices. The main purposes of reward within a performance management system are attracting and retaining employees and motivating them. In environments that are based on performance, effective reward systems aid with attracting result driven workers who can thrive and succeed.  A reward is, therefore, a vital motivator and may give rise to the enhancement of employees’ productivity if it is implemented properly. Once employees are motivated through an efficient reward system, there are beneficial effects that accrue upon their performance. Motivation instils a feeling of ownership amongst the employees, reduces costs of operationand enhances the interests that employees have on the financial performance of the business.

Purposes of reward within a performance management system

Having the best talent available requires a business to think of compensation in an all-inclusive manner so as to attract and retain talented persons. A total rewards system has the following components: compensation, benefits, and work-life-balance. There is the base salary that employees are entitled to, but in order to motivate the employees, it is necessary to offer other kinds of compensation. There is the short-term inducement pay that offers extra payment for short-term performance improvements. There is also the long-term motivation pay that offers rewards such as cash bonuses and stock options upon sustained performance and productivity for more than a year. When the work force of an organization is well compensated and accordingly, positive results are guaranteed.

The other important component of a total reward system is benefits. An effective total reward system makes an organization go beyond the minimum benefits that are legally mandated. The benefits include the Social Security insurance, unemployment insurance, state disability insurance, Medicare, and workers compensation insurance. To attract top-level employees are a good vacation package, paid leaves and a variety of retirement plans. The third component is work-life-balance whereby the environment the employees are subjected to would promote a healthy balance between work and personal matters. Flexible work schedule, fitness centres, health screenings, nutritional counselling, stress-reduction workshops, childcare facilities, among others are approaches that can boost employee morale and results.

Individual sets of steps are required for managing poor or underperformance as well as good performance of the employees. Management of poor performance should not only be the main concern of the mangers as maintenance of good performance is essential as well. It is because once management acquires expected productivity from the employees, they need to maintain that to hold on to the success. The particular steps required to manage poor performance are –

It is essential at the very first to identify the particular faults in the employee performances and thereafter evaluate them to understand how much the faults are preventing employees to achieve their performance target. Without establishing strong reasons for the underperformance, it would not be easy to identify suitable solution for them.

Provide necessary resources or support

It is an essential responsibility for the management to provide necessary time, support and other performance related resources to the employees, when they are performing below the expectation rate. The steps help in motivating the employees too.

Decide required actions

Describing components of a total reward system

After identifying the flaws and reasons for poor performance, it is necessary to decide the required actions, which can prove effective upon the problems. Decisions regarding the required actions should prioritize the chief and most frequent issues for underperformance.

Monitor and provide feedback

When employees are continuously making poor performances, it is necessary to support and monitor them on daily basis. Constant monitoring would help the managers to identify the mistakes and to improvise them. At the same time, feedback from management works as a motivating aspect that makes the employees feel prioritized.

On the other hand, in order to manage good performance, the following steps are required –

Giving performance appraisals

It is one of most efficient ways of managing impressive performances. Through the way of giving appraisals, managers can motivate them, which would lead them to achieve further success. For example, pay-per-performance is one of the most frequently used ways of appraising performance.

Monitoring and feedback

Continuous monitoring would help in maintaining the expected level of the performance as well as would help the managers in identifying any flaws in the productivity. Thereafter, the mandatory feedback would keep the employees up to date about their performances.

Describe at least two items of data, relating to performance or reward, including one external to the organization.

The two items of data that relate to performance are:

1.Organizational records which are considered to be objective.

2.Feedback data from the customers and suppliers

Organizational records are known to provide valid, reliable, and fair data but these objective data alone cannot be relied on, and that is why a more critical approach is necessary. One of the reasons that the objective data cannot be relied entirely to rate performance is, it is not easy to pinpoint an objective outcome that is significantly and directly, influenced by the performance of one employee. In terms of external sources, customer and supplier’s feedback is considered as one of the most effective items of data related to performance. One of the best ways to judge whether an organization is performing well or not, is to review the satisfaction level of the customers or target market of that organization. Furthermore, an organization’s potentiality and efficiency is determined by the satisfaction level of its suppliers also. Therefore, feedbacks from both suppliers and the customers help to understand whether an organization’s performance is addressing the needs of them or not.  

Managing good and poor performance

A performance review should be conducted as often as the organization and the employee would benefit. One of the purposes of the review is to acquire information about work performance that the administration can use for decision-making purposes and to give employees a feedback concerning their work productivity based on standards of job analysis and description. However, ways to optimize a proper performance review process includes the following –

Inaugurating with setting goals and performance planning

The best way to review performances aptly begins with setting the aim and objective of conducting performance review that will fruitfully contribute to the accomplishment of the business strategies. The main factors in time of setting goals would be key responsibilities and performance expectations. Most significantly, the goals should be specific, measurable, attainable, and relevant and time bound. In terms of performance planning, the significant steps are communicating objectives and setting an appropriate plan for guiding the employees to accomplish the goals fruitfully.

Gather information from formal and informal sources

The Formal feedback process involves weekly tally sheets of sales. Informal feedback involves brief discussions between an employee and a manager. Instead of them, an effective process of gathering feedbacks from the employees is the 3600 feedback process. The sales report and deadline reports should be also taken into serious consideration in time of conducting performance review.

Annual review

Another step that should be included in the performance review process is to review and assess performances on an annual basis. It is required to mention that supervisors stay responsible for conducting and completing the performance reviews and they provide both job description and pre-review form to the employees.  

Provisional performance review

Prior to make review and assess performances on annual basis, it is required from the part of the supervisors to regularly provide the feedbacks to both new and old employees. At the same time, they need to make a formal review of the new employees after three and six months of their employment.  

9. The performance review meeting held between the call centre staff and the line manager was a success. The employee’s commitment to achieving her previous target was of much help as she was willing to go through the appraisal meeting to get the help she needed. A form (shown in the appendices) was filled during the 15 minutes meeting, and informative data was acquired from the employee. The line manager followed the due process of employee appraisal which led to the effective review. Before the interview, she was made aware of what the appraisal would include. As for the line manager, the audit principle was kept in mind, and monitoring was done on just a number of areas that suggested incompetence or competence across broad areas.

The review meeting was also goal oriented, and the review manager carefully weighed the benefits the review would have before deciding on the objectivity and breadth. However, from the meeting, it has been understood that the employee has a dedicated nature towards accomplishing the organizational goals. Therefore, it has been understood that the employee needs to maintain her dedication. Nevertheless, the employee should attempt to improvise her scheduling process and needs to acquire work/life flexibility as her personal issues are bothering her. In that case, the organization can help her by providing pick and drop and extra holiday benefits.


Vroom, V. I. C. T. O. R., Porter, L. Y. M. A. N., & Lawler, E. (2005).

Expectancy theories, organizational behaviour, 1, 94-113.

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