Performance and Reward Management Practices

Purposes of performance management and its relationship to business objectives

Performance management is a critical process for every organization because it ensures the possibility to reach improvement. Its main purpose is to control and streamline employee performance. Organizational goals are taken as the basic ones. Then tasks are shared among departments and workgroups. Finally, every employee obtains an individual assignment. Thus, it is significant for companies to make their personnel work to their full potential because only in this way are they able to promote the whole organization and strengthen its competitiveness.

It can be done through another purpose of performance management that deals with employee engagement and motivation. People tend to work better if they know what goal they are going to reach, why, and how. As a result, they can ensure that the company operates appropriately to reach its future destinations. By being involved in organizational operations and understanding them, the members of the staff are likely to become more motivated and willing to develop.

What is more, the commitment to the company is likely to increase, which prevents critical employee turnover and ensures alignment of individual and organizational objectives. It is also important to mention that performance management promotes trust-based relations among the personnel. It allows for rewarding people and teams for particular contributions, making them even more motivated and satisfied with their jobs.

Components of performance management systems

A performance management system includes the identification of the initial focus. It sets up the aim that is required by the organization and that should be targeted by the staff. In this way, the workers get to know what exactly they are supposed to do and how they are expected to facilitate the process from the manager’s perspective. In addition to that, performance management provides those tools and the training that are needed to fulfill these targets.

It allows for the identification of those areas where the performance is either strong or weak and offers some options to fill in the gaps so that required improvement can be maintained. Finally, performance management deals with feedback and rewards. Depending on the way the issue is resolved, positive or negative consequences can be faced. For example, it may be a good reward, such as a bonus and promotion, or bad, such as a warning (Mone and London 227).

The relationship between motivation and performance management

Motivation can be perceived as a set of factors that enhance people’s performance, making them constantly interested and willing to remain occupied in the activities they are engaged in. It can be both internal and external, depending on the source of stimuli. Motivation and performance management are tightly connected because highly motivated members of the staff are expected to work harder so that they can reach better job outcomes.

Similarly, good performance drives motivation because those workers who are recognized for their achievements are willing to show that they can perform even better so that they can be rewarded again. In addition to that, the relationship between motivation and performance management is discussed in the framework of different theoretical approaches (Keren). For instance:

According to the reinforcement theory, employee behavior can be changed through alterations in operational conditioning. It is presupposed that people’s current actions and beliefs have an enormous direct influence on their future. Thus, positive reinforcement is used by managers to make employees repeat particular behaviors with the help of rewards. This kind of motivation is mainly connected with such initiatives as the provision of additional bonuses (paid free days or money), increased wages, and promotion.

As a result, the employee resorts to the desired behavior continuously to obtain some positive reinforcement again. However, it is also possible to focus on negative reinforcement to make the workers perform in a particular way. It is believed that inappropriate working behaviors should be entailed by avoidance or ignorance. In the framework of this theory, employees can also deal with extinction. When managers resort to it, they do not provide any reinforcement regarding workers’ actions. As a result, no punishment or reward is observed, which may demotivate employees or make them willing to perform better to attract managers’ attention.

Finally, some behaviors can be entailed by punishment. This approach is used towards undesired actions that should be avoided. Thus, following this theory, managers are expected to share their views and ideas with the workers so that they can be aware of the things they are doing wrong and right. They direct the personnel, pointing out what behaviors should and should not be repeated, allowing them to receive positive reinforcement as soon as the required corrections are introduced. It is significant to maintain such actions here because those employees whose achievements and efforts are not recognized are likely to get back to the previous levels of performance that were not so beneficial for the company.

One more theory that can be discussed when speaking about the connection between motivation and performance is Adams’ equity theory of motivation. Its main focus is on the distribution of resources. In this way, when comparing the performance of at least two employees, attention is to be paid to their contributions and benefits so that it can be concluded whether they are treated fairly or not. It is presupposed that the workers are looking for equal treatment so that their inputs and outcomes are not underestimated in comparison with other employees. The workers tend to greatly value fair treatment so that its presence makes them motivated.

Thus, if two employees who work equally obtain different wages or bonuses, the one who gets less is going to be disappointed and unwilling to work hard in the future because he/she believes that there is no sense in doing one’s best. That is why managers must pay much attention to the distribution of rewards. They need to motivate some employees while being sure that others do not become demotivated. What is more critical, it is suggested that by treating people with indifference, managers affect employee motivation negatively as well as their performance.

Purposes of reward within a performance management system

Reward in the framework of employees’ performance is very critical because it allows for affecting people’s behavior. It has two main purposes within any organization. First of all, it provides managers with the opportunity to motivate employees and make them more loyal. With the help of motivation, the members of the staff can be successfully retained and turnover rates reduced. Companies must realize that personnel is the most critical possession.

They affect the performance of the company and its competitiveness more than all other stakeholders. Thus, it can be claimed that it is vital for the organization to encourage its employees to do their best and to reward them for their contribution to the mutual success. Those reward systems that are continuously implemented by various companies make workers committed to their workplaces. They allow the person to obtain the feedback they expect for the extraordinary performance.

In addition to that, management utilizes rewards to enhance organizational retention and attract more talent. When people are looking for a job and have an opportunity to choose one position from a range of those that have a lot of common characteristics, they tend to pay much attention to the rewards offered by companies. In this way, those organizations that offer the most advantageous rewards tend to be selected by the talent.

Similar behavior can be observed when discussing those employees that are already working for a company. In the majority of cases, they decide to change a workplace when being dissatisfied with wages or other benefits because they have an opportunity to obtain more advantages in other organizations even when performing the same duties. In this way, managers must develop those rewarding systems that appeal to the members of the staff. Thus, it is advantageous to conduct research and define employee needs so that rewards meet them perfectly. As a result, personnel will be satisfied with the provided advantages and will not be likely to change their workplace. The turnover costing can be significantly reduced in this way (Armstrong 6).

Components of a total reward system


  • Compensation, which determines salary, is critical because it attracts and motivates employees to perform as well as possible. It also makes top performers exceed managers’ expectations.
  • Benefits packages allow companies to attract workers with the focus on those advantages they provide, such as leave of absence, vacation, Medicare, etc.


  • Recognition is another critical element as it ensures that managers notice specific achievements maintained by employees. It also allows people to see that their efforts are appreciated and that they contribute to their company’s performance.
  • Work/life balance provides an opportunity for the members of the staff to find the golden mean between their duties at work and their responsibilities.
  • Opportunities for further development are important because they ensure that the best talent remains in the organization and can get a better position for their achievements.
  • Individual growth and learning opportunities are valued by the personnel because they allow them to achieve more and enter a compelling future. A positive workplace is needed because people within the organization often interact with one another. The absence of misunderstanding and interpersonal issues ensures that they can work as a team for the company’s success (Sharp).

The factors that should be considered when managing good and poor performance

Performance management allows organizations to ensure that their employees appropriately reach or even exceed expected achievements. However, if a person performs one’s duties poorly, the situation can be improved in several steps. First of all, research is needed to identify issues and agree on them. Then, the reasons for poor performance should be pointed out and required action considered.

When it is implemented, monitoring and feedback are needed to control the improvement. If a person performs well, one should be encouraged to work even harder. This can be done when praising and recognizing employees’ achievements so that other members of the staff become aware of them as well. Rewards and benefits should be offered for outstanding achievements based on employee needs so that they are seen as advantageous (North).

Data relating to performance or reward

Both external and internal sources of data can be discussed in the framework of performance and reward. For example, reward and performance benchmarking, as well as salary surveys, refer to the first group. In this framework, salary surveys presuppose the focus made on employee compensation. Professionals discuss salary about specific job categories within the particular region for them to be compared.

It allows for defining the lowest and the highest offerings as well as considering payments provided by competitors (Community Foundations of Canada). Internal data can be reached when focusing on performance review/appraisal, budget, and current salary structure. Salary structures are maintained to reveal how jobs and payments are ranged within a company. They are expressed as grades that point out the value of a job for a particular organization and the whole market.

The frequency, purpose, and process of performance review

Performance review allows for defining and evaluating employee performance and its alignment with organizational goals. It is maintained twice a year as a rule but may also be conducted annually or once in three months.

  • Performance review starts with an introduction and outline of its purpose, which allows the participants to understand what is going to happen.
  • Then workers are asked to evaluate their performance and discuss how to reach organizational goals.
  • They review past performance in general in the majority of cases but may also provide some particular examples.
  • It is also critical to provide an assessment and state whether obtained results are good or bad concerning rationale.
  • Based on this information, managers provide feedback and discuss the next actions.
  • Depending on the results, employees are set back on track with the emphasis made on the set of new objectives with particular alterations in performance practices.

In this way, managers receive an opportunity to record workers’ performance so that they can resort to it when thinking of the future changes needed to enhance competitiveness. This review allows for defining those areas that require the most alterations and providing a list of goals that are to be fulfilled before the next performance review.

Reference List

Armstrong, Michael. Armstrong’s Handbook of Reward Management Practice. Kogan Page Publishers, 2015.

Community Foundations of Canada. “Salary Surveys.” HR Council, 2017. Web.

Keren. “Motivation and Performance Management.” DD Dydtems. 2016. Web.

Mone, Edward, and Manuel London. Employee Engagement through Effective Performance Management. Stony Broke, 2014.

North, Simon. “The Difference between ‘Good’ and ‘Bad’ Performance Management”. HR Zone. 2013. Web.

Sharp, Brian. “What Are the Components of a Total Rewards System?” HR Soft. 2016. Web.

Cite this paper

Select style


BusinessEssay. (2022, November 19). Performance and Reward Management Practices. Retrieved from


BusinessEssay. (2022, November 19). Performance and Reward Management Practices.

Work Cited

"Performance and Reward Management Practices." BusinessEssay, 19 Nov. 2022,


BusinessEssay. (2022) 'Performance and Reward Management Practices'. 19 November.


BusinessEssay. 2022. "Performance and Reward Management Practices." November 19, 2022.

1. BusinessEssay. "Performance and Reward Management Practices." November 19, 2022.


BusinessEssay. "Performance and Reward Management Practices." November 19, 2022.