Performance Management: Linking Rewards to Performance

Background Information

The world is changing at a fast rate, with the main areas driving the change being the innovation and technology sectors. With these changes, a need arises for employees to alter how they communicate and interact with their customers as well as other employees.

The current changes also demand that organizations restructure their goals, processes of achieving these goals, and systems in place to achieve them. Competition is a significant factor that requires companies to be on the forefront in making changes remain relevant in the economy.

In performance management, there are several areas of interest to organizations. These areas need a close follow-up together with implemented to maintain an organization’s relevance. One of these areas is the link between rewards and performance. Several authors have described the link between rewards and the performance of employees in organizations, with most concluding a positive relationship between the two. In this paper, a link will be made between rewards and performance.

The paper will be divided into sections to allow structuring, with the first section describing the choice of topic in performance management and reasons for this choice. The current and future trends in the same area will also be discussed, with the impact that the topic is likely to have on the HR function of organizations being analyzed. A summary of the discussion will then follow.

Topic Choice

Throughout the course, performance management has been closely discussed, with the various topics within it being analyzed. The major topic generated interest, with the main one of ‘linking rewards to performance’ generating particular interest. The topic was thus chosen for the report for several reasons.

The reasons for personal interest in the topic included the relevance that it carries in the current management field and the many possibilities for change that exist in line with the global economic and management trends. The other reason for the choice of this topic is the personal relationship that exists based on future interest in the field of performance management.

The performance of an organization is affected by several factors. The main pillar is the relationship that exists between employees and their employers. Successful companies have adequate systems in place to ensure that the interests of the organization are intertwined with those of their employees.

In the center of the employee-employer relationship is the reward system in place to ensure employee satisfaction. Companies that can maintain satisfied employees have a lower turnover rate compared to those with significant disparities between the organization and employee interests. The remuneration and other employee factors in an organization are, therefore, important to study about the link between rewards and employee performance.

The rewards that employers provide to their employees are a significant motivator to their work since they aid in the overall organizational performance. Some organizations have managed to increase their overall rating and customer satisfaction by directly influencing the performance of employees through rewards. It is imperative, therefore, for a manager and other organizational heads to know the link between the rewards to their employees and the overall performance.

The topic also generated interest based on future implications in the field of management. Many researchers and authors have documented changes in the reward systems in the organizations, with the results of these changes directly influencing the organizational rating and performance.

It is, therefore, crucial for performance indicators to include the reward system in organizations to ensure they capture the correct performance contributors. There is also a significant knowledge gap on the topic, with many researchers in the area putting forward some of the questions that should be answered by future studies on the area. This report, therefore, provides a formidable work of trying to answer some of these questions, especially in the future trends in the area and the impact on HR in organizations.

Increasing my knowledge on the topic also has some several personal advantages and implications. In the study around the topic in the coursework, I developed a special attachment and liking for the topic of performance management. Knowledge of rewards and their relationship to employee performance will enable me to personally manage future organizations as may be required during my career. The knowledge will also propel me to the direct interaction with the future employers or employees that I may have.

A personal understanding before the course was also that employee rewarding was only financial. The coursework will enable me to understand the other reward systems in place in organizations.

Performance management and reward systems are not only confined in business and management, and knowledge of the same will enable me to apply the same in other areas as may be required. There is also a need to prepare for future management tasks and enable effective organizational management, and a discussion on the topic will be significant to this effect.

The current and future trends will be discussed about the link between rewards and performance in organizations. There are several trends in performance management that have influenced the rewards of employees and their performance and relevance in organizations.

A significant factor that has affected the way employers approach employee rewards schemes is the tight competition that globalization has brought to all sectors of business. In the current technological and innovative developments, companies can compete locally and internationally, with those without existing frameworks to control such competition remaining behind their competitors.

Globalization has also enabled companies to invest in different parts of the world, and different cultures have resulted in a diverse organizational culture. Different cultures value different rewards in organizations, with this making the reward system in organization significant. To ensure sustained competitive advantage, organizations are putting measures aimed at motivating their employees to ensure that they contribute to the overall organization output.

Traditionally, employers have used remuneration as the primary reward system. However, with the current workforce, several other factors are significant to their output and satisfaction in a specific field. This has led to the development of reward schemes in organizations aimed at ensuring that the workforce is adequately appreciated and in line with the organizational goals.

One of the measures that organizations are exploring and currently putting it to use include the use of leadership attention. This is where the originations treat their employees as part of leadership and involving them in decision-making. Organizations have realized that corporate goals are only realized where the people within the organizations but not necessarily in management are considered as significant pillars to the attaining of organizational goals.

By considering employees as part of leadership and treating them as such, organizations can instill the organizational goals and values in their employees, creating a significant force in the attaining of the organizational goals and objectives. The practice also motivates the employees in a way that remuneration is not able to achieve, contributing to their positive performance. Decision-making is also made easier, with new ideas being readily available through the large pool of ideas that are provided by the new leaders.

Rewards in organizations are performance motivators, which increase the individual employee output. Employees can relate to the organizations they are working for, thus enabling them to perform better in the organization. Companies have also increased measures to ensure they know the factors contributing to their employee satisfaction.

The major ways in which companies are establishing the satisfaction of their employees include the carrying out of surveys within the organizations that allow measurement of the factors. The frequency with which organizations are carrying out these surveys is also increasing, with private companies that provide these services benefitting significantly.

Globalization has also contributed to the changing perception in rewards and performance, with different working environments and cultures being a significant influence for this aspect.

Traditionally, organizations have used finance as the main incentive for employees. Despite cash being a very significant determinant of employee performance, some cultures have different things that they consider incentives in a working environment. These employees consider these factors significant and are willing to exchange their loyalty and work for the incentives.

Most employees consider being known by their manager as being more important than any financial reward, with others considering holidays and material handouts to be more important. These findings have resulted in several organizations altering their rewards systems to include the special incentives. Even with the new incentives that organizations consider important in employee motivation, financial rewards are still the mainstay of any reward system in organizations. Most employees also consider it the most important.

Several factors are recognized as contributing significantly to the overall employee performance in organizations. According to Herzberg, these factors include the feeling of achievement that the employees get from working in an organization, the nature of the work in their organization, personal advancement while at the organizations, recognition at the workplace and their responsibilities (57).

The reasons for the different factors include the difference in cultures, and the differences between individuals, among other factors. Herzberg stated that the above factors are significant in determining the overall employee output in organizations as they increase the external happiness of employees (59).

Schaufeli et al. stated that employees constantly experience burnout in their work and that rewards are a significant factor in combating these experiences (77). The result of such burnout is poor performance and poor consumer satisfaction. The organizations that do not have interests that match those of their employees and consumers and up being poor performers compared to those that put the interest of employees and consumers high on their targets.

Another current trend in rewards and performance in major organizations is the ranking of the rewards based on the performance of the employees. In this, the employees use various performance indicators to alter the performance of their employees.

Those who are found to have performed better are rewarded better compared to their colleagues in the same organization who may not have necessarily contributed to the profit and growth of the organization. Most employers utilize this method of rewarding employees. Several performance indicators have been put in place to facilitate the scheme.

Employees are made to achieve certain targets during their practice, and this is used as a measure for the rewards that they should get. One disadvantage is that the goals may be too high for employees to achieve. This may discourage them in the workplace. The method is also meant to influence human behavior. This may be difficult to exercise in some of the workplaces because of the differences in the employee culture and personalities.

Researchers have characterized the various needs of employees. Maslow provided a significant hierarchy theory that consisted of five basic needs that employees seek to satisfy at the workplace (375). According to him, employees target to satisfy the needs at the lowest level before proceeding to higher levels (Maslow 379).

Job security was considered one of the needs at the lower levels. Employees try to satisfy this need first before proceeding to satisfy others. Latham and Ernst suggested that managers should first ensure that salaries and benefits for their employees are met (183). This strategy will fulfill the basic needs that their employees demand of any organization.

Impact of HR Management

The HR function of organizations is a significant one, with employers targeting to maintain a healthy relationship between the management and employees. Based on the current trends described above, researchers have defined some of the likely eventualities with the change in how employers respond to the changing reward system in other organizations.

Monetary reward is the mainstay of rewarding employees in most of the organizations, and managers are faced with the task of offering adequate remuneration and financial support to the employees to enable them to be productive at the workplace. Managers are also tasked with the provision of basic needs for employees, with the main ones being healthcare, among other things.

With the provision of the basic needs of employers, the organizations are also tasked with the role of ensuring that their self-esteem is adequate and does not influence their working.

A trend, however, is that employees are not necessarily satisfied with the basic needs that are fulfilled in organizations. Instead, they try to seek needs above the basic ones. Organizations are also providing similar needs for employees. These needs, therefore, become irrelevant to employees when considering which company to work for or how well they will perform.

Employees are also at liberty to shift between organizations in search for better satisfaction of their needs. These organizations are trying to ensure that their needs are met. With the changes in the rewarding system for employees, organizations are likely to be unable to meet the needs hence contributing to human resource problems in these types of organizations.

Another likely change in HR with the current trends in rewarding employees is the collection of information on employee satisfaction. Traditionally organizations have regarded customer feedback highly as one of the most significant tools that help them improve on their services.

The knowledge of customer satisfaction and improvements of services based on the same has had significant effects in the past, with organizations using it to structure more efficient services. With these kinds of services, employees have been on the losing end, and most of them have been victims of consumer feedback.

With the realization that the satisfaction of employees is also important in the overall output of an organization, the organizations are now carrying out surveys to establish the levels of satisfaction among their employees. The results of these surveys are then used to formulate employee recognition and reward systems to boost the overall organization performance.

Employee recognition is currently practiced in many organizations, with the measure being targeted to correct any difficulty within organizations and market the organization as the preferred working destination. Employees who are satisfied in organizations are said to be motivated and able to discharge their services better with the promotion of the organization and boosting their overall performance.

Most organizations have also established recognition services for employees. Most of the recognition programs for employees in organizations have more than one objectives, with some of these objectives being retention of employees, create a positive working environment, increase the morale of workers, promote loyalty within the organization, reinforce desired behaviors, promote a change in organizational culture, and promote achievement of organizational values and goals.

The reasons for the changing trends, especially in the HR departments of organizations includes the competition that has forced organizations to reevaluate their goals and ways in which they plan to achieve them. Organizations are likely to increase the number of programs that are aimed at rewarding their employees, as this has been present to promote overall productivity.

The future presents a challenge for organizations; however, with the main one being the difficulty in deducing the right rewards for the various employee cultures. As companies compete to retain useful employees, profitability is also likely to slow as the recurrent budget swells. Most organizations have, therefore, adopted a policy where employees sign contracts that govern their work. This guarantees job security for employees besides ensuring continued service for the organizations.


In summary, rewards are directly linked to the performance of employees in an organization. The topic of the report was chosen based on personal interest in the field that has developed throughout the coursework. The topic is also significantly important in performance management, as organizations can alter it to ensure that they remain competitive in the current global economy.

Researchers have been conducted on the topic, with conclusions being made that there are direct links between the reward systems in organizations and the performance of organizations. Despite this case, there exist many gaps in the knowledge of the topic.

Some of the current trends in the same area include the increased focus on employee rewarding as opposed to traditional consumer focus. Organizations are currently using reward systems for employees to trigger a change in organizational cultures and effect, ensure continued performance and success.

Financial rewards continue to be the mainstay of appreciation and recognition of employees. However, several other methods have been established that aim at capturing the attention of employees in an organization. The changes are likely to see a shifting focus in the organization’s methods of rewarding their employees, which is also likely to see improved services and employee treatment.


Herzberg, Frederick. “One more time: how do you motivate employees?” Harvard Business Review 46.1(1968): 53-62. Print.

Latham, Gary, and Christopher Ernst. “Keys to motivating tomorrow’s workforce.” Human Resource Management Review 16.2(2006): 181-198. Print.

Maslow, Abraham. “A theory of human motivation.” Psychological Review 50.1(2004): 370- 396. Print.

Schaufeli, Wilmar, Marisa Salanova, Vicente Gonza´les-Roma, and Arnold Bakker. “The measurement of engagement and burnout: a two sample confirmatory factor analytic approach.” Journal of Happiness Studies 3.1(2002): 71–92. Print.

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