Performance Management Systems

Performance Management systems

Performance Management systems have a strategic importance because they help the company to enhance motivation, to attract and retain talents and to manage labor costs. The use of performance-based pay has a positive impact on employees’ motivation for several reasons. Firstly, employees’ satisfaction increase and the company could use this way of payment toattract the best candidates. It is an incentive for employees to perform at high level. Secondly, this method is useful to align individual goals with strategic objectives and furthermore is very flexible because it can be adapted according to the company’s diversification. It is important to align job expectations with the strategic goals of the company and to have a skilled workforce that at thesame time is engaged and motivated to reach its objectives.
In an international environment, appraising performance becomes even more challenging. In fact, global organization’s assignees do not have just to develop the necessary competences for managerial assignment, but also to manage the complexity of an international business and the cultural differences in its work force, to be moreopen-minded in solving problems and more flexible in dealing with people and to understand and manage interdependences at different levels of operations. More and more independence is given to several contributors to increase its performance, but at the same tome becomes difficult to evaluate its performance. As a consequence, in the evaluating system there are several problems in choosing the evaluatorand what has to valuate and in establishing performance objectives. For that reason the company should generate different kinds of performance management system according to the different part of the company.
To be effective, pay systems have to deal with several issues. First those systems have to balance long-term and short-term perspectives and to specify and measure performance, beingcareful that all the aspects of performance are considered and that results are under employee’s control. Then companies have to specify the method for linking pay performance and to specify the level of aggregation for reward distribution. Is also important to specify the type of reward, the eligibility for rewards and the proportion of pay-per-risk and both have to be valued by employees. Finally togain employee acceptance the company has to be sure that the plan is clearly communicated and understood and that the work fork believe to be treated equally and fairly. In this way the employees will believe that they can trust the company and that bonuses and awards will soon compensate all their efforts. This concept Furthermore, to increase PM systems effectiveness companies should followseveral criteria: relevance (to the contents and requirements of the job), acceptability, sensitivity (taking in consideration eventually cultural differences), and practicality.
“In many cases the performance management system (and the resulting base pay increase) is the only management tool that can effectively make the link between competencies and pay. Typically the pay increase reflects abalance between competences and results”. Therefore in the developing a PM system is important to create an appropriate linkage between performance and award, to build trust, to show that difference matters, to increase employee involvement through the use of multiple rewards and motivation and non-financial incentives. Is also important to keep in mind that incentive plans cannot ensure employeeproductivity by themselves. They must be coupled with effective human resources practices in order to ensure a successful work environment. These include determining the appropriate rewards, instituting comprehensive performance management systems, widespread and effective communication, as well as buy-in from top management to support the compensation plan.
An incentive plan could be either...