Integrating Reward Systems with Performance Management in HRM

This report examines the critical integration of reward systems (including compensation and benefits) with performance management within the framework of Human Resource Management (HRM). It emphasizes the importance of aligning organizational objectives with individual skills and competencies to overcome implementation challenges. The report delves into how a well-integrated system can enhance employee engagement, capability, and overall performance, while also addressing potential ethical and legal challenges that may arise. It highlights the significance of leadership in connecting performance management with reward systems, referencing scholarly sources to support its arguments. The report proposes methods for improving performance management systems through reward management integration, outlining how managers can drive team performance toward achieving organizational goals and subsequently rewarding the team members for their accomplishments. The discussion covers the strategic alignment of rewards with performance objectives to reinforce a cycle of recognition and achievement within the organization.

HUMAN RESOURCE MANAGEMENT
1

1. The performance management system needs to have a shared understanding of what an
organization aims at attaining at the organization level (Mujtaba, and Shuaib, 2010, p 11).
Aligning organizational objectives along with an individual's skills, competency and
result delivery becomes important. When the reward system such as compensation,
benefits, is aligned with performance management targets then its implementation
challenges can be overcome. Performance management can then emerge as a systematic
procedure that a manager can apply for making the team members achieve the team's
objectives and attaining the organisation performance. An aspect of performance
management requires the identification of accountabilities and tasks by defining
competencies. Rewarding is viewed as a critical aspect of effective performance for
meeting the established performance. With a corrective process of the reward system, it
can help improve employee performance.
2. Employee engagement, capability, and performance might be hampered from new
challenges arising from ethical and legal challenges. New challenges arising from ethical
and legal aspect might create an ambiance of mistrust amongst employees. In case ethical
and legal aspects were present initially then much challenge is not presented, however,
the challenge is faced in its new introduction (Armstrong, and Baron, 2004, p 110). It
might also deter employee motivation and lessening their satisfaction. Employees might
view a new introduction as a measure taken against them and consider the company
acting against their interest. This might hamper the overall productivity of the employees
and demotivate them in their capability to perform a certain task.
2

3. Leaders need to view performance management system to be integrated with that of the
reward system. Research undertaken by Ferreira and Otley (2009) reflects the importance
of integrating performance management system with that of a reward system. The work
discusses the challenges in case such a system is not integrated. As performance
management system serves the purpose of developing and enhancing overall performance
effectiveness, the manager along with the team members need to work together for
monitoring and reviewing team performance. A leader or manager can use such an
integrated system for working in favor of the organization to achieve the organization's
goals. Absence of integration can lead to a lack of coordination amongst the
organizational departments, systems, and structures for delivering adequate results. With
an integrated performance management system it is possible to achieve organization
goals and also reinforce the performance cycle by recognition and rewarding of
performance.
4. The performance management system can be implemented in an enhanced manner by
integrating rewards management system (Aguinis, 2012). It will be a strategic driven
alternative by which the manager is able to drive the team towards the attainment of
performance objective and finally reward the team members for the same. The manager
or the leader can first devise the organizational objective and then propose the reward or
benefit in connection with attaining such objective. Finally when the performance
objective has been achieved then the team or individual can be rewarded for the
performance outcome. This is one of the methods by which performance management is
3

aligned with the reward system.
References
Aguinis, H., 2012. Performance management, 3rd ed. Upper Saddle River, NJ: Pearson Prentice
Hall. Chapter 10, ‘Reward systems and legal issues’
Armstrong, A. and Baron, A., 2004. Managing performance: performance management in action,
2nd ed. London: CIPD. Chapter 7, ‘Performance management and rewards’, pp. 103-114.
Ferreira, A. and Otley, D., 2009. The design and use of performance management systems: An
extended framework for analysis. Management accounting research, 20(4), pp.263-282.
Mujtaba, B.G. and Shuaib, S., 2010. An equitable total rewards approach to pay for performance
management. Journal of Management Policy and Practice, 11(4), pp.11-121. Retrieved from
http://www.na-businesspress.com/JMPP/mujtaba_abstract.html
4