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Performance Management: Purposes, Components, Relations Report

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Updated: May 10th, 2020

Four purposes of performance management and its relationship to business objectives

One of the purposes of performance management is the enhancement and the maintenance of the workers’ achievements on the top level. The maintenance concerns all workers on every level of the establishment, and it is made so that the establishment is at its highest efficiency. When the enhancement and maintenance are properly conducted, the whole business will meet less difficulties on the way to its goals. Another purpose is to keep the workers motivated and willing to do their best. The workers should have an opportunity for development – especially those who prove their efficiency – and see the result represented in the form of timely rewards. When the workers are motivated, it is easier to convey one’s expectations to them. The next purpose is the conveyance itself. The workers should be given to know what the expectations are and educated on the most optimal ways of achievement; they should have clearly set targets and guided on their way through. The fourth purpose of performance management we are going to mention is the administrative one. It basically concerns the administrative decision making concerning the financial matters. The wages should be administered, the promotions should be decided upon, etc. (Ashdown, 2014).

Five components of performance management processes

In efficient establishments, performance management works systematically and engages all employees. The processes related to performance management usually consist of five crucial components: planning, monitoring, development, summarizing, and rewarding.

Planning occurs long before the actual work is started, and is given much time and effort to. Planning subsumes that the targets are set for individual employees and groups of them; the plethora of smaller personal and group targets compose the whole objective of the given establishment. Monitoring should circulate all along the working process; the employees’ progress should be reviewed and applied to the scale of the given target. The purpose of that is checking for the employees’ efficiency and allowing them a place to grow. Development is what every employee needs. Performance management, with its constant monitoring of each individual’s work, gives a good chance for development and promotion. Development takes the form of various coaching opportunities that enhance the employees’ skill and make them still more valuable. Summarizing – or rating – is used to illustrate the workers’ performance in groups and individually so that the establishment knows its heroes. The rating can be derived from a group, but each employee has their own rating history; the rewards are based on the results of the rating. Rewards are the key factor of performance management. Whether financial or non-financial, they show the employees that they are valued and keep them motivated and usually do not require much effort or power (Ashdown, 2014).

The relationship between motivation and performance management, as regarded by the reinforcement and cognitive theories

Although money has always been – and still remains – the key motivating factor, there are many more that an establishment can offer to the workers. It is necessary to take into account the individuals’ personal values when motivating them. We shall regard the concept of motivation through the prism of two theories: the theory of reinforcement and the cognitive theory. The theory of reinforcement is primarily concerned with encouraging the employees’ behavior. This or that type of action on the side of the employees is rewarded by advancement, bonus, or recognition, which, in turn, further promotes this specific behavior. The main point of the cognitive theory is that it is grounded on the individual approach to every employee. It is assumed that the reasons they work are diverse, as well as the occurrences and factors that can motivate them. An individual approach presumes that the employees should be motivated equally, but in their own ways: they should be given different sources of motivation, as per their preferences (Leatherbarrow, 2010).

The purposes of reward within a performance management system

One of the purposes of reward within a performance management system is to increase the performance of one’s establishment through attracting the best performers. That is, if the reward is designed to correspond with their performance and encourage them to keep it up, one will be able to choose the best of the best workers that are suited for their expectations. Attracting the right people is crucial – but still more important is to keep and value what one already has, which is the second purpose of reward. People of the right caliber are rather hard to find, and rewarding them according to their performance will keep them happy and unwilling to go and search the job elsewhere.

The components of a total reward system

There are five components of a total reward system: compensation, benefits, work-life balance, performance recognition, and career development.

Compensation subsumes something beyond the wages to keep the workers motivated. For instance, the performance-based payment is probably the best way to increase the output. Also, the system of incentive payment can be used, providing a consistent compensation both in the short and in the long run. This system can prove appealing for top performers since they are well aware of their high level of output and can always count on the incentive.

Provided the establishment accounts for everything, be it the vacation package or the sick leave, benefits that amount for a little more than the insurances are the most attractive for the average employee. They can also attract more efficient performers that would be willing to stay for longer if the establishment provides them with employee-friendly retirement plans.

As to the non-financial reward component, there is always the harmony between work and life that the establishment should advocate for. The business ethics subsumes the recognition of the workers’ necessity to rest and have time they could spend on themselves and their families. Once the employees feel their personal life is significant for their establishment, the establishment will gain their trust and respect.

Performance recognition can come in the form of the incentives as well as the peer- and team-recognition. Based on the achieved goals and the professional behavior, the non-financial recognition can come in the form of a thank-you letter and a bill or a luncheon to honor the employee of the month. The workers should be aware that their efforts do not come unnoticed.

Finally, there should always be an opportunity of career development. Offering coaching and training seminars and rewarding the excellent performers with promotion is a motivation and loyalty boost that is hard to underestimate. It does not only improve the loyalty, however; it also means the better quality of human resources that are encouraged to do their best.


Ashdown, L. (2014). Performance Management. London, UK: Kogan Page.

Leatherbarrow, C. (2010). Introduction to Human Resource Management: A Guide to HR in Practice (2nd ed.). London, UK: Chartered Institute of Personnel and Development.

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