Performance management systems
Performance management systems
The strategic aspects of performance-related
pay processes are exemplified in the integration of appraisal and performance-related
pay processes within performance management systems. These links have information about rating scales of various
kinds (including trait, competency and behaviourally-anchored systems:
- More than three quarters (77%) of UK employers have bonus schemes but managers
are the most likely to benefit.
Many modern systems are based on 360-degree assessment.
- In the wake of recent corporate scandals, 360-degree feedback has emerged as a tool that may help prevent future disasters.
Management by objectives (MBO)
The origins of strategic performance
management can be traced to the concept of management by objectives. This
is a technique to establish individual performance objectives which are
tangible, mesaurable and verifiable. Individual objectives are derived
or cascaded from organizational goals.
Prescriptions for performance management systems
A number
of authors have set out to create templates or rules for performance management
systems. This section of Human Resource Management in a Business Context
describes two such methods.
Reward management
Reward or compensation management is
an aspect of HRM which focuses pay and other benefits on the achievement
of objectives. Typically, it incorporates other changes in pay administration
and policy, including:
* decentralization
of responsibility for setting pay levels
* uniform appraisal
schemes
* flexible working
practices
* performance-related
pay
Recent Mercer research in Canada indicates that variable pay can improve both productivity and employee satisfaction. See
Also see this perspective on incentives:
The basis of performance-related pay systems
What is performance-related
pay for? This section of Human Resource Management in a Business Context
details appraisal-related and collective performance schemes.
Flavour of the (last) month?
A decade ago, Rosabeth Moss
Kanter observed that whenever any US organization came up with a 'new'
pay scheme, a merit element was involved. Today it continues to be applied,
even to the public sector.
Criticisms of performance-related pay
There is a widespread
opinion among senior managers that PRP must be a good thing - but the evidence
for its effectiveness is not overwhelming. (...) However, research does
indicate that most employees are unhappy with PRP. Questions of fairness,
managerial judgment, reward value, relationship to company performance,
demotivation, flexibility, and conflict with team philosophy are discussed
in this section of Human Resource Management in a Business Context.
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