REWARD BASED

PERFORMANCE
MANAGEMENT
Performance management is the systematic process by
which an organization involves its employees in
improving organizational effectiveness.

Rewarding means recognizing

employees for their performance
and acknowledging their
contributions to the agency's
mission.
REWARD MECHANISMS
1. Salary increase
2. Outstanding performance awards
3. Promotions
4. Change of responsibilities and status
5. Transfers
6. Placement decisions
7. Appreciation letters and certificates
8. Announcement in newsletters, journals
etc.
MAKING REWARDS EFFECTIVE:
 The employee should know the aspects of his
performance that have been judged or
assessed as deserving of reward
 The employee should know clearly the nature
of reward being given to him
 The employee as well as his co-employees in
the organization should perceive the rewards
as a form of recognition and should attach
some value to them
PROBLEMS ENCOUNTERED IN
REWARD MANAGEMENT:
 Quantification of performance
 Comparison of performance with different
types of abilities and efforts to high
performance, and giving weightages to the
same
 Demoralization among employees who are
not rewarded but who consider themselves
as high-performing employees
 Isolating individual employees’ contributions
from group contributions
 Subjectivity in performance assessment
FIVE MAJOR PRE-CONDITIONS TO THE INSTALLATION OF AN EFFECTIVE REWARD STRUCTURE

 Measurement: “If you don’t measure it you won’t get it.” There are various
measurement systems of which Balanced Scorecard, which sets multiple objectives
and is perhaps the best known.
 Monitoring: If the performance measures are not monitored properly or only
monitored in a review at the year end, it can give the manager signals that they
don’t really matter or, worse still, that failure is acceptable providing all the
managers fail together.
 Control of the tools for the job: The organization must ensure that the individual
is not over dependent on factors outside his control to achieve the performance
measures set out (this is the ‘how’ part of the equation).
 Consistency: Ensure that short term organizational factors don’t over-influence
managers or drive them from their real objective. The organization must also
ensure that its own design (be it bureaucratic or loose) is appropriate to what is
being asked of managers.
 Reward and strategy in line: An organization’s achieving a clear strategy is not an
event that will take place in the future; it is a journey. A remuneration system can
be put into an organization even when it has a relatively muddled strategy
providing that organizational and management disputes are resolved by reference
to strategy and the “balanced scorecard”. Only then will there be pressure on the
organization to refine its strategy, structure and remuneration systems.
BASED ON THESE FIVE PRECONDITIONS, THERE IS A CHECKLIST OF TEN
FACTORS THAT THE EFFECTIVE REMUNERATION AND REWARD
STRUCTURE MUST ACHIEVE:

 Support the business strategy

 Encourage the desired behavior
 Reward relevant performance
 Be fair
 Be substantial
 Be tax efficient
 Be timely (The reward must take place close to the
achievement)
 Incorporate non-financial rewards (Recognition can be as
important as cash)
 Be firm (A bonus lost through missing target should not be
recoverable whereas a salary increase should only be
delayed until target is reached)
 Be crystal clear
CRITERIA FOR BUILDING EFFECTIVE
REWARD SYSTEMS I.E. THE SMART CRITERIA
 Specific. A line of sight should be maintained
between rewards and actions.
 Meaningful. The achievements rewarded should
provide an important return on investment to
both the performer and the organization.
 Achievable. The employee's or group's goals
should be within the reach of the performers.
 Reliable. The program should operate according
to its principles and purpose.
 Timely. The recognition/rewards should be
provided frequently enough to make performers
feel valued for their efforts.
OBJECTIVES:

 To attract new employees to the

organization to elicit good work performance
, and to maintain commitment to the
organization.
 Motivate performance
 Promote skill and knowledge development
 Contribute to corporate culture
 Determine pay costs.