An Evaluation of Performance Management and Total Reward Systems

This essay delves into the critical aspects of performance management and total reward systems within organizations. Part A examines the key factors for effective and ethical performance management, including goal setting, communication, employee recognition, and ethical considerations. It emphasizes the importance of aligning employee objectives with organizational goals, fostering open communication, and providing regular feedback. Furthermore, it underscores the significance of ethical considerations such as impartiality, transparency, and fairness in performance evaluations to create a positive work environment. Part B then shifts to the concept of "total reward," exploring its application, justification, and benefits. It emphasizes the importance of a comprehensive approach that encompasses both financial and non-financial incentives to motivate and retain employees. The essay discusses the shift towards variable pay, the need to align rewards with business objectives, and the relevance of non-monetary incentives in meeting employee psychological needs. It also highlights the significance of ethical considerations and the role of performance management in creating a fair and transparent working environment.

Performance Management & Total Reward System of Employees
PART A
Since people are the most critical drivers of value in organisations, effective and ethical
performance management is essential to their success. Employees should know what is
expected of them, and they should be managed engagingly, have the appropriate skills,
productive capacity, and assistance, and are committed to objectives. Employee performance
is monitored, maintained, and improved following an organisation's goals through
performance management. It is a combination of actions rather than a single action that
should be treated holistically (Armstrong, 2022). This essay will examine some of the most
critical factors organisations should consider in determining if their performance management
practices are effective and ethical.
Key factors an organisation should consider in evaluating whether performance
management processes are effective.
Setting personal and team objectives that relate to the organisation's strategic goals,
planning performance to meet the objectives, analysing and evaluating progress, and
growing people’s knowledge, experiences, and talents are all part of performance
management (Armstrong, 2022). One essential feature is that performance management is a
continual process, not a one-time event (Aguinis, 2007). As a result, good performance
management must pull together diverse, integrated operations into a continuous
‘’performance management cycle’’ (Torrington et al. 2008). In the broader sense, PM is
described as applying management approaches and practices to tackle performance criteria
at both the organisational and individual levels. In a limited sense, PM is utilised to set
targets and monitor performance using an appraisal system. It is a method of combining

goal-setting, performance evaluation, and growth into a unified system. The purpose is for
ensuring that employees' performance is aligned with the company's vision and mission and
includes performance improvement, development, and behaviour management (Dessler,
2009)
The following are critical factors for an effective performance management framework:
Long term goal setting -Organisations must properly set goals. They must be long-term,
meaningful, and comprehendible. Employees should understand why these specific goals are
important and how they contribute to organisational objectives (Osabiya, 2015). When
employees know and fully comprehend how their jobs matter, they would engage so much
more about their jobs and be a lot more motivated.
Setting goals ought to be a collaborative effort. Whereas goals used to trickle down from the
top of an organisation, modern corporations are aligning objectives upwards (Olian&Rynes,
1991). As a result, goal-setting should include discussion with the employee and be open
about the organisation's values, strategy, and challenges. Employees can use this data to set
goals that support organisational objectives and make decisions to further these targets.
Moreover, when employees are placed in the heart of the action and given the freedom to
create their targets (before having them authorised by their direct supervisor), they feel a
greater sense of autonomy and responsibility for their tasks. This invariably leads to more
excellent employee performance.
Honest communication and collaboration. According to Armstrong (2022), ‘’ The nature
of performance management involvesa continuing dialogue between managers and the people
they manage’’. Employees expect and appreciate their leaders and managers to be upfront
and honest in all circumstances. They would not want to be pushed in the dark when a
business faces difficulties. They would like to be kept up to date on current events. In
addition to this, they desire real-time communication while building good relationships with

their colleagues and managers. This will entail constructive feedback and open dialogue –
even when such communication is harsh or unpleasant.
Employee recognition and reward. An effective performance management strategy should
prioritise employee recognition and reward (Edirisooriya, 2014). Employees might also feel
valued for their labour and commitment. If employee recognition is not a primary concern, it
will almost certainly adversely influence voluntary institutional turnover.
Honest evaluations and reports on a routine basis. The stronger the individual performance,
the more regular and exact the reviews. Employees seek constant updates on their job, and
the more engaged they are about their performance, the more likely they are to improve and
exceed (Kinicki et al., 2013).
No high employee intends to stay at an organisation for the long term without polishing and
enhancing their skills. Employees value career development, not to forget that companies
benefit when their employees are much more competent.Employee development through
training and career initiatives (Garrow and Hirsh, 2008).
Key factors that organisations should consider when making performance management
processes ethical.
Applying ethical considerations to performance management is vital because organisations
and their actions are expected to be built on the foundation of ethics (Gotsis and Kortezi,
2010; Solomon, 2009). The process of planning, controlling, evaluating, and reviewing
employee performance depends on the principles of impartiality, neutrality, openness, and
good corporate governance. Ethics is a rational thought process that focuses on determining
what ideals to accept and when to accept them, i.e., an individual’s or a group's moral

position or collection of moral principles (Harris, 2011). Ethical behaviour is defined as that
which is founded on a set of moral convictions about what is good and wrong, as well as
professional conduct rules (Banks, 2020). As a result, managerial ethics refers to the norms
and moral ideals that managers employ in their work.
The importance of ethics in performance management (Stainer, Stainer and Gully,1999) is to
improve society since corporate actions affect their social environment. An ethical
performance management system motivates employees to uphold the organisation’s core
values. Since the organisation's ethics are in harmony with its environments, on the other
hand, the company values its employees and provides a pleasant working environment for
them to succeed in life (Harter, Schmidt and Keyes, 2003). This framework is supposed to
operate transparently, with all parties participating in the performance management system
respecting each other's requirements, values, and concerns. Individual, rather than communal,
accountability is emphasised for personal decision-making, behaviour, and action.
Ethical performance management creates or transforms culture such that the organisation’s
vision encompasses its employees, customers, and society. Employees’ decision-making,
behaviour, and actions are then supported by the organisation’s ideals and values when they
are congruent with an ‘ethical’ vision.
Finally, this ethical method to performance management provides a fair and open working
environment for the employees, allowing them to examine the foundations of critical
decisions. The overarching goal of high ethical performance management is to provide an
honest evaluation of performance and work to design a strategy to increase his or her
effectiveness.

References
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embracing performance management research. Journal of Organizational Behavior: The
International Journal of Industrial, Occupational and Organisational Psychology and
Behavior, 29(1), pp.139-145.
Armstrong, M., 2022. Armstrong's Handbook of Performance Management: An Evidence-
based Guide to Performance Leadership. Kogan Page Publishers.
Banks, S., 2020. Ethics and values in social work. Bloomsbury Publishing.
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Garrow, V. and Hirsh, W., 2008. Talent management: Issues of focus and fit. Public
Personnel Management, 37(4), pp.389-402.
Gotsis, G.N. and Kortezi, Z., 2010. Ethical considerations in organisational politics:
Expanding the perspective. Journal of Business Ethics, 93(4), pp.497-517.
Harris, S., 2011. The moral landscape: How science can determine human values. Simon and
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Harter, J.K., Schmidt, F.L. and Keyes, C.L., 2003. Well-being in the workplace and its
relationship to business outcomes: A review of the Gallup studies.

Kinicki, A.J., Jacobson, K.J., Peterson, S.J. and Prussia, G.E., 2013. Development and
validation of the performance management behaviour questionnaire. Personnel
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Olian, J.D. and Rynes, S.L., 1991. Making total quality work: Aligning organisational
processes, performance measures, and stakeholders. Human Resource Management, 30(3),
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Osibisa, B.J., 2015. The effect of employees motivation on organisational performance.
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Improving Performance in the Workplace: Volumes 1‐3, pp.161-175.
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management. International Journal of Technology Management, 17(7-8), pp.776-785.
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Essex: Pearson Education Limited.

PART B
This essay assesses the concept of "total reward" and how it might be applied and explains its
justification and benefits. A foundation of non-financial incentives underpins the idea of total
reward. Total reward complements regular pay by considering the advantages that employees
receive from their work, such as skills, expertise, opportunities, and recognition. The goal of
such a reward package for the business is to adopt the incentives to match the needs of
individual employees at a cheap rate (Redman and Wilkinson 2006).
According to Torrington et al. (2008), the reward is fundamental to the job relation, and how
much and in what manner an employee is reimbursed is a major consideration. Since salaries,
bonuses, and other kinds of incentives, make for more than 50% of an organisation's overall
costs, all of this is fundamental to human resource management. As a result, it is a crucial
factor determining income and competitive edge for commercial enterprises. The cost of
rewarding employees in the public sector is influenced by the amount of taxes, which
influences the amount of taxes. As a result, the company's financial success has a bearing on
reward systems. The goal is to create competitive reward packages that entice, retain, and
encourage employees while also limiting expenditures to preserve the organisation’s business
and financial sustainability.
According to Leopold and Harris (2009), the desire to tie reward schemes to firm
performance arose as a response to growing competitive challenges and continually changing
markets and a disdain of inflexible traditional methods to reward. Variable pay is a suitable
option to pay structures that do not consider individual contributions. This form of reward is
on the rise, and it can be related to various circumstances. These include the following: the

quest for HR policies that connect individual efforts to business objectives; they might be
seen as an important attracting, securing, and motivating key personnel; and so on. Also,
there is a perception that tying rewards to employee performance is more encouraging and
equitable than providing uniform awards for varying performance criteria. Also, this is a
trend away from collective agreements controlled by trade unions. A view that rewarding the
proper behaviour promotes the firm’s intended objectives by providing a visible means of
acknowledgement for performances and conditions that facilitate the organisation’s goals.
Organisational success is largely considered as necessitating some level of synergy between
human resources and business objectives.
Employee motivation, dedication, and adaptability must be increased through measures,
including a competitive reward plan, to retain their employment and sustain overall
performance. Incentives intrinsically motivated, such as salaries or wages, allowances,
commissions, and dividends, are not included in the reward management system. Also, it
includes non-monetary incentives that meet an employee’s psychological demands for
employment variety and challenge, achievement, recognition, responsibility, opportunities to
learn new skills and advance in their careers, and the ability to have more say in decision-
making. Non-monetary incentives are comparable to intrinsic motivation (Mckenna and
Beech 2008).
Various models of job relations are discussed by Bacon et al. (2009). Employees are viewed
as psychological entities rather than economic entities in the ‘unitarian’ relation, with strictly
economic objectives being less relevant than psychological objectives. The paradigm is built
on the idea that employees and employers share common goals. Income and other
organisational goals are intertwined with satisfying work, fair treatment, and other primary
objectives of employees. Maslow's Theory of Motivation posits that after basic needs are
addressed, people crave self-esteem in the context of ambition for recognition, prestige,

power, acceptance, trust, and performance, as Adair (2006) defined. These variables boost to
excel at work, and reward systems such as the unitarian model take these demands into
account.
Armstrong and Brown (2006) explore the Towers Perrin total reward model. It is a four-
quadrant paradigm, with rewards in the upper two quadrants and learning and development
and the workplace culture in the lower two quadrants. Transactional rewards are represented
by the wages and benefits quadrants. These are pecuniary and necessary to recruit and retain
employees, but competitors can readily copy them. The learning and development and
workplace culture quadrants, on the other hand, are interactional non-financial rewards that
are vital to boosting the worth of the upper two quadrants. When companies combine
relational and transactional rewards, they gain a tremendous advantage.
As part of the total reward system, the employer has access to a wide range of employee
benefits. These benefits are not included in payor salaries yet are valuable to employees.
These so-called ‘fringe benefits’ can make up a significant portion of a total compensation
package, particularly for higher-paid personnel who may benefit from tax and status
advantages. These benefits include paid vacations more than the legal minimum, retirement
benefits, maternity and parental leave, and so on (Redman and Wilkinson, 2009).
Intangible benefits are more difficult for competitors to duplicate, which is one advantage of
a total reward system (Bussin, Pregnolato, and Schlechter, 2017). The long-term objectives
are served by increasing the presumable worth of intangible assets, but this is challenging to
attain and even more challenging to measure. Many significant intangible rewards are
innately encouraging rather than externally appealing and outside management's total control.
Psychologists use these phrases to differentiate between external factors of positive
motivation, such as remuneration or admiration offered to employees by their employer, and
internally generated positive motivation. A person who puts much effort into a job just

because he or she considers it intriguing or pleasurable illustrates intrinsic motivation. The
outcome may be substantial satisfaction of the employee in question, but it did not directly
result from any managerial activity. All administrators can attempt to build and maintain a
culture where employees can find intrinsic motivation and enjoy fulfilling jobs (Torrington et
al. 2008).
According to Armstrong (2022), a holistic, total reward strategy is one in which no
dependence is placed on one or two reward mechanisms acting in isolation, and every way
individuals might be rewarded and satisfied via their work is considered. The goal is to
maximise the combined impact of various incentive programs on motivation, commitment,
and job satisfaction. Total reward strategies are vertically integrated with company strategies
and horizontally integrated with other HR initiatives to establish internal consistency. The
advantages include a higher impact, in which the combined effect of the various sorts of
rewards has a more profound and longer-lasting impact on people's motivation and
commitment. Individuals are also attracted to the prospect of improving their employment
connection and having more flexibility to meet their specific demands, which strengthens the
employee-organisation bond.
Studies have revealed that many workers would be willing to forego a pay raise in exchange
for more flexible working alternatives (Idris, 2014). Flexible working guidelines are
appreciated throughout the age range with above-average reactions from youths, with more
than three-quarters consenting that it is a vital benefit, with two-thirds consenting that a better
work-life rebalancing is the most significant benefit by less stress and fewer travel
difficulties.
The total reward is gaining traction among businesses, as its perceived benefits are
considered as being strongly linked to corporate competitiveness. The key distinction
between the complete approach and traditional incentive techniques is that the comprehensive

approach satisfies the desire for recognition, esteem, and intangible rewards for the employee
who reacts to its goals through their behaviour and commitment. The entire compensation
concept strives to create a relationship between the employee and the company’s plan, and its
flexibility can be advantageous in times of economic crisis by limiting costs.
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Pearson Education Ltd.