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This article discusses the purpose of performance management, components of performance management system, motivational theories and their application in performance management, and tools and information necessary for effective performance and reward management. It also assesses the options of an organisation to review good or poor staff performance.

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CIPD Certification Module 2
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Assignment 3PRM Part B
A.C 1.1 Purpose of performance management and its relation with business objectives
Performances of the employees are one of the major reasons for a company to succeed in
achieving the objectives of the business. Performance management is a function of the HR
department where the performances of the employees in a certain period of time has been
monitored and reviewed (Mon and London 2018). Based on this review the employee will be
provided with feedback and opportunities to improve or a better position. In order to improve the
performance of the people a company should provide opportunities like technical training, skill
development etc. The purpose of performance management is to help the employees develop
their potential in order to do that tasks that they have been allocated efficiently (Bao et al. 2013).
On the other hand, from the perspective of the company the performance management helps in
understanding the gaps in process of business and addresses them strategically. With the help of
motivation like promotion and reward or remuneration hike based on the performance
management tools results the employees can be retained (Vukšić et al. 2013).
Every business organisation sets objectives and strives towards achieving these objectives
the performance management of the employees help in achieving these objectives by identifying
the gaps in the performance which would help in achieving the objectives of the business in a
more efficient manner (Vukšić et al. 2013).

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A.C 1.2 Components of performance management system
The HR department of an organisation has the performance management system set up
according to the characteristics and features of the company (DeNisi and Smith 2014). For
example: a manufacturing company’s performance management will be different form a
software development company. However, there are a few components that are general and
should be followed in order to ensure that the process is effective (Aguinis 2013).
 Setting objectives and goals are an important part of performance management, this helps
in arriving at a concrete conclusion regarding the way the performance of the employees
should be. It is a part of performance planning. Setting goals help in keeping the focus of
the process in one direction and thereby ensuring efficiency in the process (DeNisi and
Smith 2014).
 Setting parameter of aligning the performance with the goals will help in understanding
the positives and the negative aspects of the employees. This will also help the
supervisors in providing proper and constructive feedbacks to the employee who is being
evaluated.
 Communication and feedback is an important part of the process, this helps the
employees to improve and develop skills and expertise which not only helps in achieving
the performance goals but also the objectives of the company. Learning is a part of this
component as it helps in improving in the process (DeNisi and Smith 2014).

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A.C 1.3 Motivational theories and their application in performance management
Motivation is the desire to act in a certain way or the willingness to achieve certain goals.
The two theories are:
Herzberg – Two factor theory
This theory is based on the fact that the opposite of satisfaction is not dissatisfaction rather it is
not satisfied (Alshmemri et al. 2017). Herzberg in this theory has developed two factors
motivation and hygiene. The motivation factors are the ones which are the reason for a person to
be satisfied with his job role. On the other hand the hygiene factors are the ones which are
necessary to keep one motivated. In performance management the motivation factors can be
used in order to help the employees understand their potential and develop their career in the
company accordingly. These are recognition, growth opportunities, value of the job,
responsibility etc (Alshmemri et al. 2017).
The hygiene factors on the other hand do not add a positive value to the satisfaction of
the employees and also does not have a long term impact on the people, hence in the
performance management these factors should be considered to be secondary. These are the
maintenance factors if the motivational factors are present then these complement to improve the
level of motivation among the employees (Alshmemri et al. 2017). Some of the examples of
these factors are: the remuneration of the employee, the policies of the company, the work
environment and the physical work condition, Job security etc. Therefore while developing the
HR policies or the performance management systems in the organisation the HR department
must ensure that the motivational factors are highlighted and are targeted to achieve and then
complement the system with the hygiene factors (Alshmemri et al. 2017).

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Goal-setting theory
This theory is based on the performance management and indicates how it leads to
motivation. Specific and challenging goals in performance are the focus of the theory and the
commitment of the people in achieving these goals are the key determinants of motivation
(Locke and Latham 2013). Goals influences motivational behavior and accomplishment of the
goal leads to motivation. In the process it is important to keep few of the aspects in mind. For
example the goals that have been set should be realistic and attainable; it should also be
quantifiable in order to understand the rate of success. To achieve the goals there must be
complimentary factors such as support, required skills, resources, and moral support etc (Locke
and Latham 2013).
Setting of a goal as mentioned above is an important part of the performance
management system. It helps in developing a focused effort in achieving the objectives. The goal
setting theory also emphasizes on the importance of feedback in the process of performance
management. The following diagram will specify the statement (Locke and Latham 2013).
A.C. 2.1 Purpose of reward in performance management
Reward is the positive returns that an individual receives for performing a task (Karami et
al. 2013). In an organisation, the employee works in exchange of remuneration or salary unless
the person is volunteering for the work. In this process of performance management rewards are
viewed as a factor of motivation among the people (Shields et al. 2015). Another long term
purpose of reward in performance management is to reduce the cost of employee turnover by
retaining them by reward their contribution towards achieving the goals of the business. The

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employees of an organisation are deemed to be one of the most important stakeholders as their
performance is directly responsible for the performance of the company. Rewards in the process
ensure that the employees are motivated and encouraged to perform better. It also set s a
standard of what is being expected by the company from the employees (Karami et al. 2013).
The reward system also encourages the employee to perform better or improve the
performance. For example: there are parameters and clauses associated with getting a reward, an
employee in order to achieve the reward can strive in order to achieve these parameters. Rewards
can be in the form of remuneration or gift, it can be recognition or promotion or opportunity of
growth in terms of learning (Shields et al. 2015).
AC 2.2 Pros and cons of using financial and non-financial reward
Financial reward: it is the reward where the employees receive rewards in terms of monitory
benefits, for example: hike in the remuneration, reward of a particular amount or material gifts
are also categorized as financial reward (De Gieter and Hofmans 2015).
One of the major pro of financial reward is that the value of the reward is upfront and it helps in
targeting specific behaviors. It helps the company in achieving short term goals for the business.
Financial reward helps in elevating the monetary condition of employee even if it is for a short
period of time. As the impact of the process is instantaneous, the people are immediately
motivated (Karami et al. 2013).
However, the short term impact of the reward is the major con in the system; this is because the
impact of the monitory rewards wears off with time. It is also perceived by many as an
entitlement rather than being a motivator, which beats the purpose of the company to reward the
people.

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Non-financial reward: these are the rewards which are not materialistic and are not quantifiable
by the monetary value of the reward. For example: recognizing a person for their extraordinary
performance by awarding them a prize, token of appreciation or providing flexibility at work are
some of the non-financial reward which helps in motivating the people of the organisation (De
Gieter and Hofmans 2015).
These rewards have a long-term impact and thus provide the employees with incentive to
work and perform better. It helps in building a sense of belongingness among the employees as
well as establishes the fact that their performance is being recognized. One of the major
advantages of the process is that the company also achieves a long term employee and thus
reduces the cost of employee turnover (De Gieter and Hofmans 2015).
The cons of the process are that many do not value the rewards as it does not have a
quantifiable value upfront. People would rather choose to get monetary incentive over non-
monetary ones (Karami et al. 2013).

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AC 3.1 Assess the options of an organisation to review good or poor staff performance
Over the years there are a number of tools and frameworks that are implemented by the
HR department to review the staff performance. Based on a number of factors such as the nature
of the job and the scale of the business etc the staff performance is reviewed.
KPI or key performance indicator: while a person is allocated a job role there are
number of responsibilities which are handed over, these are the KPIs, if a person is successful in
performing each of these responsibilities then it is deemed to be a good review (Ahmed et al.
2016).
Performance appraisals: this is another commonly used performance management tool,
it is aligned with the parameters of the job role and by achieving these parameters the employee
is entitled to a rise in the remuneration. This assessment is based on a certain period of time.
360 degree feedback: here the supervisors and the managers play an important role, the
employees are provided with constructive feedback in order to help them improve their
performance. These feedbacks help the employee in understanding their strengths and
weaknesses and in return improve in the process. As there are a number of feedbacks for an
individual received, the chance of being biased reduces (Ahmed et al. 2016).
MBO or management by objective: this is the process of defining the objectives and
strategizing the performance or the responsibility based on the individual objectives.

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AC 3.2 Tools and information necessary for effective performance and reward
management
The Human resource department of an organization is responsible for developing the
performance management framework of the company. The tools that are necessary for the
purpose are:
 Understanding of the objectives of the business and the operations of the organization is
important in order to prepare the performance management framework (Ahmed et al.
2016).
 The skill of managing human resource is also an important tool in the process as the
performance of the people is responsible for achieving the objectives of the company
(DeNisi and Smith 2014).
 Developing and planning a framework that is best suited for the particular organisation.
As discussed above there are a number of options to choose from however, the
framework that is being chosen must align with the nature of the company and the
purpose of the business (DeNisi and Smith 2014).
 One of the most important tools in the process is the purpose of the business and the
objectives, this helps in developing the motivators and the scope for the people to grow in
the business (Ahmed et al. 2016).
The information that is required to evaluate the performance is also an important tool in the
process of performance management. The kind of information that is required is as follows:
 The job role or the responsibility of the individual whose position is being evaluated
should be identified before evaluation

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 The tenure of the person who is being evaluated should be known (Mon and London
2018).
 The past performance of the employee as well as the milestones and achievements that
has been achieved by the employee in the given period of time.
 The relation shared in between the employee and the supervisor must also be identified in
order to ensure that the performance evaluation is unbiased (DeNisi and Smith 2014).
 The potential of the employee and the self assessment of the employee is also important
in formation in the process of performance management as it helps the HR department to
understand the capability of the person (Ahmed et al. 2016).
Additional requirement
Before attending the module I thought that performance is constrained to the performance
appraisal and evaluation once a year. Now I know that the company employees the process of
KIP indicators in order to manage the performance. The process of performance appraisal is in
12 months cycle and this provides the employee with a higher chance of remuneration. In the
module I have learnt the various aspects of performance management and why is it important for
the company. I have learnt the role of the HR department in improving the performance of the
people and thereby contributing towards achieving the objectives of the business.

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Reference list:
Aguinis, H., 2013. Performance management (Vol. 2). Boston, MA: Pearson.
Ahmed, T.M., Bezemer, C.P., Chen, T.H., Hassan, A.E. and Shang, W., 2016, May. Studying the
effectiveness of application performance management (APM) tools for detecting performance
regressions for web applications: an experience report. In Proceedings of the 13th International
Conference on Mining Software Repositories (pp. 1-12). ACM.
Alshmemri, M., Shahwan-Akl, L. and Maude, P., 2017. Herzberg’s two-factor theory. Life
Science Journal, 14(5), pp.12-16.
Bao, G., Wang, X., Larsen, G.L. and Morgan, D.F., 2013. Beyond new public governance: A
value-based global framework for performance management, governance, and
leadership. Administration & Society, 45(4), pp.443-467.
De Gieter, S. and Hofmans, J., 2015. How reward satisfaction affects employees’ turnover
intentions and performance: an individual differences approach. Human Resource Management
Journal, 25(2), pp.200-216.
DeNisi, A. and Smith, C.E., 2014. Performance appraisal, performance management, and firm-
level performance: A review, a proposed model, and new directions for future research. The
Academy of Management Annals, 8(1), pp.127-179.
Karami, A., Dolatabadi, H.R. and Rajaeepour, S., 2013. Analyzing the effectiveness of reward
management system on employee performance through the mediating role of employee
motivation case study: Isfahan Regional Electric Company. International Journal of Academic
Research in Business and Social Sciences, 3(9), p.327.

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Locke, E.A. and Latham, G.P., 2013. Goal Setting Theory, 1990 GARY P. LATHAM AND
EDWIN A. LOCKE. In New developments in goal setting and task performance (pp. 27-39).
Routledge.
Mone, E.M. and London, M., 2018. Employee engagement through effective performance
management: A practical guide for managers. Routledge.
Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., Johns,
R., O'Leary, P., Robinson, J. and Plimmer, G., 2015. Managing employee performance &
reward: Concepts, practices, strategies. Cambridge University Press.
Vukšić, V.B., Bach, M.P. and Popovič, A., 2013. Supporting performance management with
business process management and business intelligence: A case analysis of integration and
orchestration. International journal of information management, 33(4), pp.613-619.