Performance and Reward HR

1. Explain at least 2 purposes of performance management and its relationship to business objectives. Armstrong and Barron (1998) describe Performance Management as “a process that contributes to the effective management of individuals and teams to achieve high levels of organisational performance”. One of the key purposes of Performance Management for the organisation is to identify talent and ensure that suitable development opportunities are available for the employee so they are able to reach their potential. For example, companies may undertake ‘Succession Planning’ and run ‘Emerging Talent’ programmes, ensuring that potential future leaders are equipped with the skills they need to drive the company forward. As well as high performers, Performance Management is also used to manage ‘under-performers’ within the organisation. By clearly defining expectations between manager and employee, the performance management process allows managers to highlight and monitor poor performance.

In a broader sense, Performance Management is used to align employee motivations with organisational goals. Organisations are encouraged to communicate the company’s vision and culture to employees and managers are encouraged to set individual objectives that are aligned with the company’s strategic aims. This shared understanding gives the employee a sense of purpose in their day to day role as they feel they can become a contributor to the company’s success. This is a form of intrinsic motivation for the employee. Organisations have also recognised the importance of linking performance with financial reward, a form of extrinsic motivation. Some organisations link financial reward to employee behaviour in line with company culture.

2. Identify 3 components of performance management systems.

Induction and socialisation is the initial stage of an effective performance management system. Objective setting is a key example of this, when an employee begins a new role or at the