The fact of whether a business achieves successful outcomes significantly depends on employees’ motivation and performance. It is so because when these individuals adequately perform their functions and responsibilities, a company can reckon on achieving the stipulated objectives. That is why every firm should invest in designing and implementing an effective performance management system to control and guide its employees. There is an opinion that the system under consideration can only be effective if financial rewards are tied to results. Thus, the given paper is going to explain what a performance management system means to a business and how it is possible to improve employees’ motivation and performance.
Performance Management System Explained
According to Aguinis (2013b), performance management is a continuous process that aims at “identifying, measuring, and developing the performance of individuals and teams” (p. 3). This phenomenon is necessary for employees because it helps them understand their functions and cooperate with peers and managers. Furthermore, performance management allows a company to make sure that all efforts are taken to achieve the business’s strategic goals. However, adverse consequences are likely to occur when a firm fails to have an effective performance management system. For example, they include job dissatisfaction among employees, damaged relationships between employees and managers, decreased results, and others (Aguinis, 2013b).
This information stipulates that it is rational for a business to invest in using the most suitable performance management approaches. That is why the information below will comment on what actions or strategies a firm can utilize to increase motivation and performance among employees.
Ways of Improving Employee’s Motivation and Performance
Firstly, one can state that financial rewards are the most effective solution to the issue under consideration. According to Aguinis (2013b), this term represents tangible and intangible returns that are offered to employees in some situations. For example, it refers to cash compensation, income protection, status, learning opportunities, and others. It means that managers promise to provide employees with some benefits if the latter ones manage to achieve specific results. Consequently, individuals understand that if they perform their duties adequately, they will obtain appropriate rewards.
This state of affairs results in the fact that their motivation and performance become higher because they want to achieve the offered returns. However, the information below will demonstrate that the strategy under consideration is debatable because it can lead to adverse consequences.
Thus, Kuvaas et al. (2018) stipulate that such bonuses can undermine the intrinsic motivation of employed individuals. The researchers indicate that there is “the negative association between individual variable pay for performance (IVPFP) and intrinsic motivation” (Kuvaas et al., 2018, p. 1). One should state that there is logical reasoning behind this claim. It relates to the fact that intrinsic motivation is driven by internal feelings and arises from within an individual. As a result, a person decides to engage in a particular behavior because it is their desire.
At the same time, when financial rewards are used, employees are only driven by external factors, and they do not need to develop or draw attention to their intrinsic motivation. It means that if these factors disappear, individuals’ motivation and performance decrease significantly. Consequently, an effective performance system should also use additional phenomena to contribute to the fact that employees adequately perform their functions without regard to money.
A useful option here is to provide employees with promotion opportunities (Idowu, 2017). On the one hand, this strategy is similar to the approach above because individuals are rewarded with intangible returns for their performance. On the other hand, promotions are more effective because they combine both financial returns and intrinsic motivation, contributing to overall better performance in an organization. It is so because when an employee is promoted, his or her colleagues see that their hard work can result in positive results in the future. As a result, they are motivated to improve their performance.
One should state that this approach requires some efforts from managers because they need to determine which employees deserve the promotion. Idowu (2017) says that a performance appraisal is suitable because it analyzes individual strengths and weaknesses to identify the most valuable employees.
At the same time, employees’ performance can become increased when they clearly understand their position and role in the organization. That is why it is reasonable to use 360-degree feedback systems that gather information on employees from different sources (Aguinis, 2013a). It relates to analyzing the responses of employees’ supervisors, peers, and customers to identify how they perform their duties. If a company uses such a system, individuals will understand that their activities will be assessed comprehensively.
As a result, they will be more interested to work well to be seen as good and valuable members of the organization. Idowu (2017) also admits that this approach is energy-consuming because managers should regularly deal with obtaining and analyzing such information. However, modern technologies make this process easier and faster, which is suitable for numerous companies.
In addition to that, it is possible to state that establishing teams is also useful here. It is so because this step increases commitment and ensures mutual understanding at the workplace (Aguinis, 2013c). In this case, individuals will not be distracted by the necessity to manage conflicts with their peers or suffer from managers’ misbehavior. This fact will allow individuals to spend all their energy on fulfilling job functions and improving their performance. Consequently, an effective performance management system should contribute to establishing a collaborative and friendly environment within an organization. It is possible to achieve this result by providing employees with decent and equal working conditions, respecting individual needs, and overcoming the existing challenges together. In this case, employees will feel that they are valuable members of the team, and this fact will improve their performance and motivation.
Furthermore, Hassan (2016) offers a comprehensive approach to the issue under consideration. The researcher stipulates that increasing employee motivation and performance is a complicated task that requires a few actions. That is why the study by Hassan (2016) indicates that positive results can be achieved with the help of “compensation, career planning, performance appraisal, training, and employee involvement” (p. 15).
Each of these approaches addresses a specific area of employee psychology, leading to better motivation and performance. For example, career planning drives individuals to work well because this behavior is likely to result in some benefits in the future. At the same time, training and employee involvement allow individuals to understand that organizations appreciate them. As a result, they are motivated to do their best to perform their job functions adequately. Thus, the information above means that an effective performance management system should comprise a few aspects.
Performance management is an essential phenomenon for every business, irrespective of its size or specialty. This continuous process assesses and develops the performance of employees to make sure that activity is aimed at achieving the desired outcomes. If a company cannot implement an effective performance management system, adverse outcomes are likely to emerge. They include job dissatisfaction, poor relationships within teams and between employees and their managers, and others. This information stipulates that businesses should take specific efforts to develop their performance management systems because they contribute to improved employee performance and motivation.
Motivation and performance can become increased if a management system includes numerous components. One can say that financial rewards are the only phenomenon that makes individuals work better. However, possible drawbacks of this strategy mean that it is also necessary to consider other approaches. That is why it is useful to tie results to promotions. This step is practical because it drives individuals to work harder in an attempt to achieve some benefits in the future. Furthermore, a 360-degree feedback system is also a useful option because it makes employees improve their performance since they are assessed comprehensively.
In addition to that, it is impossible to overestimate the significance of establishing and developing teams at the workplace to improve employee performance. However, there is an opinion that businesses can only achieve the desired result if they utilize a comprehensive approach, combining a few different steps. Thus, the information in the paper stipulates that every firm should have an effective performance management system to improve employees’ motivation and performance at the workplace.
- Aguinis, H. (2013a). Performance management and employee development.
- Aguinis, H. (2013b). Performance management and reward systems in context.
- Aguinis, H. (2013c). Performance management process.
- Hassan, S. (2016). Impact of HRM practices on employee’s performance. International Journal of Academic Research in Accounting, Finance, and Management Sciences, 6(1), 15-22.
- Idowu, A. O. (2017). Effectiveness of performance appraisal system and its effects on employee motivation. Nile Journal of Business and Economics, 3(5), 15-39.
- Kuvaas, B., Buch, R., & Dysvik, A. (2018). Individual variable pay for performance, incentive effects, and employee motivation. Web.