Abstract
There is direct relationship between the good characteristics of the performance appraisal system and the compensation plans of an organization. The compensation plans are the decisions made by the management depending on the results of the assessments on the workers performances.
The goals of both performance appraisal and the compensation plans are to improve the performance of the workers, which in effect improves the goals of the organization. The performance appraisal systems and the compensation plans must operate within the regulations that govern the employees’ relationship with the organization. Such regulations are found in labor acts such as the Fair Labor Standard Act (FLSA).
Introduction
The performance assessment system is a prescribed course of actions that contains the expectations of the organization and the manner in which employees will be evaluated on how they have performed against the expectations of the organization (Resurreccion, 2012).
The workers’ performance assessments are meant to enhance the performance against the organization objectives. The major aim of the performance appraisals is to motivate and enhance the workers’ performances towards the attainment of the organization goals.
Human resources management makes reliable and accurate decisions concerning the conduct of workers as well as their performances using the performance appraisals. In fact, decisions regarding promotions of workers, termination of workers, need for improvements of skills and compensations are arrived at through assessing the employees’ performances (Resurreccion, 2012).
Good characteristics of a performance appraisal system
Performance appraisal systems should have the following traits in order to be considered perfect for application in the management of the employees’ performances. The management should apply performance appraisal system that is objective and seen to be unbiased.
In other words, employees and the stakeholders should consider being equitable and fair. In essence, the performance appraisal system should create an environment where workers have confidence and trust on the process. Generally, the performance appraisal system should be inclusive, unbiased, just and impartial (Gruman & Saks, 2011).
The other characteristic of a good performance review system is the ability to be relevant to the job performance it is supposed to measure. The performance appraisal system should measure specific job performance and not the individual characteristics of the employees.
The success of the job performance depends on the principles established by the performance evaluation (Resurreccion, 2012). The relevance of the performance assessment to the specific job measurement relates to the trait of acceptability. The appraisal performance standards should be acceptable to all parties. All parties should also establish the method of evaluation through combined partnership and group work.
In addition, the workers performance evaluation procedure should possess characteristics that indicate high reality. The characteristics include reliability, dependability consistency and stability. The high reality characteristics are critical in decision-making process during the performance assessment (McKenna et al., 2011).
Characteristics such as validity and reliability provide sufficient scientific proof of the assessed results. In other words, the system provides similar scientific evidence of the workers’ performance even if different assessors do the evaluation.
The other critical characteristic of the performance evaluation is the ability to differentiate the effectiveness of the employees in an objective manner. Put in different perspective, the performance appraisal system should differentiate effective and ineffective employees without biasness (Resurreccion, 2012).
The decisions during assessment process should not be determined by the perceptions of the assessors towards the employees. The ability of the performance appraisal to provide an employee with a particular rating does not qualify the assessment system to be objective and fair. Moreover, the rating does not make the employee be effective. In essence, the appraisal system should be efficient to differentiate workers in terms of their attainment of the company objectives.
Finally, the performance appraisal system should be convenient, structural, comprehensible and instantly recognizable (McKenna et al., 2011). The mentioned characteristics enhance the understanding of the implications of the performance appraisal. The employees as well as the implementers should understand the content of the appraisal system. The review system should also provide a framework for the future growth and development of the workers.
Linking the performance appraisal system and the compensation plans
One of the major goals of the performance appraisal is to increase the productivity of the organization. Attaining high productivity requires increased performance by the workers. In essence, there is direct relationship between increased productivity and increased workers’ performances.
The relationship between increased productivity of the firm and high performance provides a linkage between the performance appraisal and the compensation plans of the organization (McKenna et al., 2011). In fact, compensation plans are part of the wider performances appraisal since decisions on the workers payments are determined by the performances of the employees.
As indicated, if properly conducted, the assessment of the employees’ performances helps the organizations improve on their efficiency and effectiveness in attaining its objectives. In addition, the effective employees’ performances appraisals help organizations set goals for their workers.
Further, proper assessment of the employees’ appraisal help managers of the organization make decisions relating to employing, job design, reassignments and termination of employees, relegation, improvement of skills and most importantly compensation (Gruman & Saks, 2011).
While making compensation decisions, human resources management must take into consideration the main purpose of compensation, the methods of compensation and the way such payment will motivate workers to improve on their performances. In essence, the major objective of the compensation plan of an organization is to attract, retain and motivate employees (Gruman & Saks, 2011).
To attain these major goals, the compensation system should comply with the regulations that govern the employees’ remunerations such as the regulations contained in the Fair Labor Standard Act (FLSA). The compensation system should also simplify the administration of employees towards greater performances.
The compensation system can only attract, retain and motivate employees when it is perceived to be satisfactory. Increased compensation of an organization will attract employees with skills and needed competence. As a result, employees’ performances are enhanced towards attaining the desired goals of the organization.
Essentially, the strategic choice of compensation plans such as the gain sharing plans, merit pay and stock options influences the way employees attain the goals of the business. Organizations should adopt a strategic compensation plan that enhances the employees’ development and growth (Gruman & Saks, 2011).
Moreover, the firm should adopt the compensation plan that upholds the culture of participation and empowerment within the workforce. In addition, the organizations should adopt compensation strategic choices that develop the culture of protection and reliability of employees. Most importantly, compensation plan should increase the business competitive advantage through sustaining the employees’ personal growth and development that result in enhanced performance.
Compensation and benefit plans that take into consideration needs of workers are critical in the general output of the employees. According to Resurreccion (2012), there is direct correlation between appropriate compensation and increased productivity. Essentially, compensation has a direct impact on the employees’ performances. Good remunerations increase the worker’s motivation and job commitment that are translated into high performances.
References
Gruman, J.A. & Saks, A. M. (2011). Performance management and employee engagement. Human Resource Management Review, 2(1), 123–136.
McKenna, S., Richardson, J. & Manroop, L. (2011). Alternative paradigms and the study and practice of performance management and evaluation. Human Resource Management Review, 21(6), 148–157.
Resurreccion, P. F. (2012). Performance management and compensation as drivers of organization competitiveness. International Journal of Business and Social Science, 3(21), 20-26.