This report has been composed to outline the links between organisational performance, reward and motivation.
Performance Management and its relationship to Business Objectives
The Performance management process is crucial to the organisations approach to maintaining and improving employee performance in line with the organisation’s goals and objectives, this is a continuous cycle. It ensures employees are effectively executing the role they were employed for, it highlights any training or development needs and employees are given feedback on what they are doing right and what can be improve. By developing and improving the performance the employee contributes towards the success of achieving the business objective. Business objectives should be communicated to employees so that achievement can be measured, appraised, action planned and monitored.
When employees are educated on expectations and happy in their work they are most likely to perform to the standards required and expected of them enabling the organisation to successfully meet its goals and objectives.
Key Components of performance Management
Performance management is the activity and set of processes that aim to maintain and improve employee performance in line with an organisation’s objectives. It’s strategic as well as operational, as its aim is to ensure that employees contribute positively to business objectives. Ideally, performance should be managed holistically, throughout the range of HR activities and processes. (CIPD, 2018)
Performance management needs to be both vertically aligned with the businesses strategy and long-term goals and horizontally integrated with the business strategy and policies, for example how people are managed.
An organisation needs to develop a Strategic plan and put their vision into writing. If an organisation doesn’t have a vision, then employees and teams don’t have a goal to work towards and are unable to see what part they play in the organisations vision.
Business Plan/ Organisational Goals
A business plan will enable the organisation to plan and develop what needs to happen to achieve the strategic plan. The organisational goals will be aligned to the business strategy to ensure that the vision is achieved.
The business plan/ organisational goal will help determine what each departmental goal should be.
Using the departmental goals, the organisation can then decide what the team goals will be within each department
When all factors have been decided, this can help set individual goals and objectives, these should be SMART goals
• Specific – What are you going to do? How are you going to do it?
• Measurable – Establish criteria to measure progress
• Attainable – Identify goals that are important to you and realistic to achieve but not a slam-dunk. Stretch yourself!
• Relevant – The goal should help you achieve your ultimate goal
• Time-bound – Set a time frame for the goal to be achieved
By using the Golden Thread principle, the organisation creates a direct link between the key success factors that have been derived from the business strategy. The effect is that members of each team know what their individual contribution is, they understand what they have to do as expectations are clearly expressed and there are measurements for determining how they are performing and how this ties to the organisational success.
How performance management can affect staff motivation
Satisfaction in employment is contributed to immensely by motivational factors. The correct level of motivation in the organisation ensures employees are happy and will go above and beyond to achieve the business objectives and goals. Performance management is not just a process, it is much more than this, it is used to engage employees.
A lack of motivation results in employees being unsatisfied and unhappy, these employees will be demotivated and will not perform their duties to the best possible standards they can. When these needs are fulfilled the employee’s behaviour changes.
Maslow’s Hierarchy of Needs characterises 5 levels of needs;
Level 1 Physiological These are the basics of food, water, shelter. These are directly related to survival of the individual
Level 2 Safety Personal security, employment, health, property
Level 3 Love/ Belonging friendship, trust, and acceptance.
Level 4 Esteem Respect, self-esteem, recognition
Level 5 Self-Actualisation The need to fulfil our fullest potential.
In order to motivate employee their needs should be satisfied in this order. Level one to three are Basic needs. These needs must be met ensure a basic level of satisfaction and motivation. Without meeting these requirements, including pay and job security the employee would be tremendously dissatisfied and de-motivated.
To enable the organisations employees to be highly motivated the organisation should meet level 4 Esteem, such as recognition for doing something well, this makes the employee feel appreciated and is a massive motivation factor for Employees and Level 5 self-actualisation, giving an employee the opportunity to challenge themselves and learn new skills gives them the feeling of pride and achievements. These factors lead to motivation, satisfaction and great performance.
In 1959 Herzberg wrote the following useful little phrase, which helps explain this fundamental part of his theory. “We can expand … by stating that the job satisfiers deal with the factors involved in doing the job, whereas the job dissatisfiers deal with the factors which define the job context.” (Businessballs, 2017)
Hertzberg motivators illustrates that achievement, recognition, work it-self, responsibility, advancement and personal growth are all motivators. Motivation differs between employees as each individual employee will respond differently to each motivator. Some individuals may be motivated by enjoyment of their work, interest in what they are doing, satisfaction of a job well done, curiosity or a personal challenge for the task they have been set and others can be motivated when their aim is to obtain a goal or reward that is separate from the work they do.
The hygiene factors are what Hertzberg research revealed were the factors that led to dissatisfaction. Bad relationships, poor working conditions, low salary. For example, if an employee is completely dissatisfied with their job, no amount of pay rises will make them feel more satisfied, but if they were recognised for their achievements they would be more motivated.
The purpose of reward within a performance management system
The purpose of reward within a performance management system is firstly to enable to organisation to attract and retain talent. It ensures the right people with the right skills are working in the organisation. Rewarding employees for a job well done encourages the development of a performance culture within the organisation, this promotes job satisfaction and highly motivated employees that will go out of their way to achieve the organisations goals and objectives. This leads to a positive employment relationship.
The components of an effective total reward system and how it links to performance management
A Total reward system is all the tools that an organisation has on offer to attract, motivate and retain employees. The components are everything that an employee deems to be important from an employment relationship. The total reward system allows an organisation to align their reward system with employee’s needs, the performance management policy and the goals and objection of the business.
Compensation – Pay provided to an employee for their time and service
Benefits – Death In service, Pension, health Care, Staff Discount
Work-life balance – Flexitime, working from home
Performance recognition – Recognition for a job well done, this doesn’t have to be financial, just a pat on the back for a job well done can be a great motivator for employees
Developmental ; Career Opportunities – The opportunity to grown and learn new skills to enable an employee to advance themselves and maybe even their career.
A total rewards system initially enables the organisation to attract and retain talent. In the long term a total rewards system will assist the organisation with employee satisfaction and in turn the will result in the employees being engaged. This all contributes to the organisations performance and promotes better results from satisfied, engaged and driven employees.
Five factors that need to be considered when managing performance
Managing performance should be a continuous cycle which purpose is to improve the individual and organisations performance. It is used to measure if an employee is meeting set goals and contributing to the business.
When managing performance, the following factors must be considered: –
Have clear job descriptions from the start. Set SMART targets that are linked to the organisational goals and objectives and agree on a personal development plan. This allows the employee to know what is expected from them
Have regular, timely and honest discussion throughout the year to enable to targets to be monitored on an on-going basis.
Clarify performance objectives to ensure the employee understands what is expected. Assess if any training or development is needed to ensure the employee can meet these targets.
Offer on going coaching and feedback. This can be achieved using the GROW model
Goals Discuss what goals the employee needs to achieve
Reality Discuss where things are right now
Obstacles/ Opportunities Discuss what obstacles may be preventing the employee from achieving or what opportunities may be available to help
Way Forward Discuss and agree a way forward with the employee
This can be recognition or compensation, an employee reward for performance can either be financial or non-financial.
Pay Recognition, i.e. employee of the month
Commission Career Progression
Pension Tea/ Coffee facilities
Health Scheme Lieu Time
Buy Back/ sell Holidays Well Being Support
Each individual employee will react differently to each reward, so it is ideal to know the employee and know what they appreciate and what will motivate them.
Data that is required within the performance and reward management system
Documentation assists a manager to plan a performance review and give guidelines as to what should be discussed:
• Job description – This is a useful document to enable the manager to understand what specific role the employee has and what tasks they should be undertaking.
• Objectives – A manager should know what the employee’s objectives are, these are usually set out and agreed with the employee at the start of the year
• Self-appraisal – This encourages an employee to reflect on their own performance. It will highlight what the employee feels as though they have done well and any areas that they personally feel they require more training and development on.
• Call records/ Sales reports – This gives data on actual performance and shows if the employee is meeting their set targets
• Feedback – this could be from customers or colleagues
• Past performance Reports – this can be used as a comparison to see if the performance is improving, levelled out or declining.
• Pay/ reward – Hr should know what pay and reward has been offered and agreed on so that it can be actioned or any issues that need addressing in line with improvement
• Reports – Senior Management require reports and analysed date for them to review so that they can agree on any positive or corrective actions that need to be considered.
The frequency, purpose and process of performance reviews
A performance review is historically done annually, however this can affect the influence of any appraisal. Open and meaningful conversations should be held on a regular basis, enabling the employee and the employer to have frequent updates on performance.
Performance reviews are a tool for both managers and employees to review performance. This can be discussed openly in a meeting and it can assist in identifying any development areas or reward incentives. The focus should be on current performance and not past performance and this can be used to plan for future performance.
• Day 1 – Set the goals and objectives
• Provide regular feedback throughout the year so the employee and employer can continually reflect on progress
• Prepare for the meeting – By setting performance goals and objectives from day 1 this provides a frame work for the performance review. It gives a structured measure to assess how the employee is performing:
• Objectives for the period under evaluation;
• Continuing or unresolved issues
• Evaluation of any development
• Objectives for next year
• Support required in order to achieve these objectives
• Personal development objectives
• Any issues of major importance or concern
• Arrange for the performance review – Ask the employee to prepare an assessment of how well the last objectives were achieved, and consider what the next year’s objectives should be
• Prepare the environment – This should be casual, friendly, comfortable, and completely private and confidential
• Start the discussion – Make sure the employee is relaxed and explain there is no surprises, refresh the meeting’s purpose.
• Progress the discussion – follow the framework outlined. To agree achievements, objectives and areas of improvement.
• Deal with difficulties – If regular conversations have been had, there should be no surprises. Try to focus on the facts at available and carefully consider what the employee might have to say. Avoid arguing and listen politely, taking care to separate facts from feelings
• Agree areas for improvement – Agree together any areas that need attention and any development or training that may be required.
• Rate the performance – reflected on performance against expectations, value what the employee has to say.
• Close the discussion – Reach and agree a mutual understanding of the new objectives and how they are to be achieved and the target or review dates. End on a positive note.