Performance Appraisal and Compensation: HRM Report Analysis

This report delves into the crucial connection between performance appraisal and employee compensation within the realm of Human Resource Management. It begins by exploring various performance appraisal methods, with a specific focus on the 360-degree feedback approach, detailing its process and application in evaluating employee performance. The report then analyzes how these appraisal methods are utilized to determine employee compensation, emphasizing the alignment of performance with rewards. Furthermore, it examines the impact of performance appraisal systems on key stakeholders, including management, employees, and union members. The report also offers recommendations for preventing ethical and legal challenges that can arise from the integration of performance appraisal and compensation plans, stressing the importance of fairness, transparency, and effective communication. The conclusion underscores the significance of a well-designed pay-for-performance system in motivating employees and driving organizational success, highlighting the need for continuous evaluation and adaptation to meet the evolving needs of the workforce and the organization.

HUMAN RESOURCE
MANAGEMENT
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Method of employee performance appraisal..........................................................................3
Use of employee performance appraisal method for employee compensation......................4
Impact of performance appraisal on three different stakeholders..........................................5
Recommendation for prevention of ethical and legal challenges faced by an organization due
to the alignment of performance appraisal and employee compensation...............................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
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INTRODUCTION
There are various kinds of performance appraisal methods that are being used
consistently by management around the world to make sure that employees are given the reward
for their efforts and work in an efficient manner. However, it is also essential that such
performance appraisal method is used efficiently for the purpose of determining employee
compensation. The current report will discuss the importance of performance appraisal program
for employees and its overall impact on employee compensation in the longer run (Board, 2018).
The impact of performance appraisal on three different stakeholders of the company will also be
analyzed in detail under the report. It will help in better understanding of job analysis etc.
Through proper evaluation and implementation of such a strategy, it becomes easier for an
organization to align performance appraisal and compensation plan over time (Schaufeli & Taris,
2014). This report will discuss the ‘360 degree feedback’ performance appraisal method and how
the same can be aligned with employee compensation of the organization. 360 degree feedback
method is used to gather necessary feedback for an individual employee are taken from different
colleagues, departmental heads, supervisors and managers to decide a compensation plan. It is
discussed in detail under the report.
MAIN BODY
Method of employee performance appraisal
Employee performance evaluation or appraisal is a key factor which is essential to
improve as well as enhance the quality of work and inspire them to do well in an effective
manner. A comprehensive employee performance evaluation process often consists of different
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evaluation methods to help judge an employee’s performance (Bogner, 2018). Using multiple
techniques can help an organization get a broader perspective of the areas where the
organization's employees need to improve and the steps you can take to support the growth of the
employees. There are plenty of performance appraisal methods which can be used by
management for the purpose of evaluating the employee performance in an effective manner.
One of the methods, which is being used as performance appraisal and evaluation is 360-degree
feedback method (Bothur, Zheng & Valli, 2017).
360-degree feedback method
360-degree feedback method is one of the strategies which are often used by various
organizations and employees evaluation software for carrying out the evaluation process in an
efficient manner. The process consists of taking anonymous feedbacks from teammates,
employees and other peers on various aspects of employee’s performance in an efficient manner
in the longer run (Goh & Yip, 2014). The person from whom feedback will be taken includes
subordinates, customers, and even the individual himself about his perception of his own self and
what future expectations he carries.
This method helps in providing an opportunity for the purpose of studying various skills as well
as the capabilities of employees in an effective manner (Byrnes, 2014). It also helps in making
necessary networks, igniting leadership and collaboration among all the employees of the
organization. The aim of such kind of method is to make sure that only the best employee in the
team is rewarded for the work done. This will inspire and motivate other individuals as well to
do well in upcoming tasks of the organization (Ruggunan, 2016).
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Use of employee performance appraisal method for employee compensation
360 degree feedback method involves taking feedback from various members of the
organizations, once the same is done by the manager, depending upon the nature of feedback,
whether positive or negative, the compensation plan if framed for the concerned employee or
group of employee. For example, if a particular process or team has done well, their annual
compensation may be increased by a specific percentage, say 5-8 %, or they can be given certain
kinds of bonuses or perks, the aim is to motivate and reward employees who have contributed in
the growth of company. The 360 degree feedback system can be implemented in each and every
department of organization, the supervisors can be asked for a report on the performance of
employees on monthly or quarterly basis, so that it can be tracked and HR department can do
necessary changes in the compensation plan of the concerned employees. The employee pay for
performance compensation plan selected by the management must be accepted by the people
within the organization. It is essential that the supervisor must also be fair towards employees
and they need to be attentive during the whole process in an efficient manner (Lockyer, 2013).
Supervisors and employees must be given necessary training, in order to ensure that the system
selects is implemented in an efficient manner. The most effective compensation plan that will be
based on performance, will ensure that organization’s best performers gets the greatest reward
possible for the work done, while average performers must receive a bit lesser than the best
performers. On the other hand, poor performers must not be rewarded and they will not receive
any kind of rewards in terms of increase, etc (Mizouni & Lazarova-Molnar, 2012).
360 degree feedback plan can be used for deciding on employee compensation. Under
this the feedback received from colleagues, subordinates, supervisors, managers and the
individual himself can be used to decide the compensation that should be given to individual, and
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whether the person deserves an increment for the same or not. This is a very useful and effective
system of performance appraisal, which can be aligned with employee compensation easily
overtime.
Impact of performance appraisal on three different stakeholders
Stakeholders of the organization which will get affected with the pay for performance
plan includes management, employees, and union members. These are important stakeholders of
the organization which gets affected by the compensation plan which is being selected. For
example, if the 360-degree feedback method will start to work, then managers and employee are
likely to feel accepting of the system being used and incentivized by the compensation rewarded
to them (Nesbit, 2012). However, if the performance evaluation system is not adequate then the
conflict between employees and managers would ensue ultimately derailing the entire process.
Jealousy and animosity would introduce bias into the reviews which dilute the process
(Rowbotham, 2013). Union members are also one of the stakeholders which get affected by the
performance appraisal system that is being implemented in the organization. A good system will
ensure their satisfaction, and a bad system can lead to protests, time off from work and a loss in
output for the organization (Pawlik, T., & Neumann, 2015). Therefore, the importance of good
pay for performance appraisal system cannot be denied.
Recommendation for prevention of ethical and legal challenges faced by an organization due to
the alignment of performance appraisal and employee compensation
There are plenty of ethical and legal challenges that the company will face if the system
select is not adequate and does not contain the stakeholders which are affected by such a system.
Therefore, it is essential that compensation plans must be planned and the people who execute
the same must have adequate knowledge of human resource management. If something is
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overlooked or neglected and something happens where the reviews are no longer accurate, then
this could place the company in legal trouble (Peña, 2016). A faulty system in place can be
regarded as discrimination in pay and a complete violation of the protected classes under the
laws frame by the governments in this regard. Hence, it does not matter which kind of
performance appraisal method is being used, it is essential that the ultimate goal of proper and
effective communication between employees and managers are being met. The aim should be to
make performance reviews as productive as possible (Poulsen, 2013). It is important to keep the
whole process simple and lead the same with a positive attitude and should not indulge in a
confrontation with peer members, supervisors, subordinates with regards to the system. It should
be made consistent and effective throughout. 360-degree feedback is a system of performance
appraisal which is a two-way conversational system, it also aims to address the necessary
concerns of employees (Ross, 2017). The manager or supervisor should be an active listener of
their concerns to provide necessary feedback to them in an effective manner, thereby improving
the workings of the company as a whole over a period of time.
CONCLUSION
Thus, from the above discussion, it can be concluded that effective pay for performance
compensation plan can help an organization in motivating its employees to perform efficiently
for the growth as well as the development of the organization. However, the selection of proper
pay for performance plan is essential, which address the needs and desires of all employees in an
efficient manner. It should be designed to make sure that great performers within the process are
rewarded and poor performer should get inspired to do well in the future. The impact of such a
system on various stakeholders should be analyzed and then necessary amendments within the
system should be made to make it suitable for the organization and its processes in an effective
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way. The alignment of pay for performance with compensation plan will ensure a higher level of
productivity as well as profitability in the longer run.
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REFERENCES
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