A performance evaluation system is an invaluable tool for small businesses.

An annual
performance review places all employees on an equal playing field and allows the managers
of the business to see which employees are creating the most value for the company.
Human resources plays an important role in performance evaluations by ensuring that the
process is fair, accurate and managed appropriately.

Ensure a Fair Performance System

Human resource personnel are in charge of ensuring that performance reviews are executed in a non-
discriminatory fashion. This can be done by calculating the percentage of employees that receive top
rankings by gender, age and any other applicable criteria. In a fair work environment, the percentage
of top-ranking employees will be relatively equal across demographic groups.

Train Managers on the Performance System

Human resources conducts performance system training for every manager in the company. This
ensures that each manager is utilizing the system in the same way and is rating each employee based
on the same standards. Thorough training will ensure not only that the system is utilized properly, but
that the ratings are meaningful and fair across the business.

Manage Relationship Between Employee and Manager

Poor performance reviews can lead to tense employee-manager relationships. Often, both the
employee and manager are unsure how to improve the relationship. Human resources serves as a
manager and mediator of any troubled relationships. After performance reviews, human resources can
check in with employees and managers and allow them to voice any concerns that they have. For any
troubled relationships, set up regular meetings with the manager and employee. During these
meetings, the HR representative can discuss the nature of the relationship and provide feedback as to
how it can improve.

Record and Store Performance Reviews

Store performance evaluation records in a secure location or a digital database. Previous performance
reviews can then be used as a scorecard for employee progress and can be accessed to assess
promotions. In addition, ensure that only the proper personal view each individual's evaluations by
keeping a list of people authorized to view performance reports.
 Reward Management
Based on Human Resource Management (4th Edition) by Alan Price - published by
Cengage

Objectives
The purpose of this section is to:

Investigate the relationship between the human resource function and payroll
administration
Outline the rationale behind different compensation packages
Evaluate the link between pay and performance

Pay and compensation

Pay is an important feature of human resource management - after all, it is the main
reason why people work. It is a sensitive and controversial area that has been
extensively debated at both practical and theoretical levels. In the US the term
'compensation' is used to encompass everything received by an employed individual in
return for work. For example, Milcovich et al (2001: 6) state that:

"Employees may see compensation as a return in exchange between their employer

and themselves, as an entitlement for being an employee of the company, or as a
reward for a job well done" (original emphases).

The reward or compensation people receive for their contribution to an organisation

includes monetary and non-monetary components. Remuneration does not simply
compensate employees for their efforts - it also has an impact on the recruitment and
retention of talented people.

The term 'reward management' covers both the strategy and the practice of pay
systems. Traditionally, human resource or personnel sections have been concerned
with levels and schemes of payment whereas the process of paying employees - the
payroll function - has been the responsibility of finance departments. There is a trend
towards integrating the two, driven by new computerised packages offering a range of
facilities. These are described later in this chapter.

There are two basic types of pay schemes, although many organisations have systems
which include elements of both:

Fixed levels of pay. Wages or salaries which do not vary from one period to the next
except by defined pay increases, generally on annual basis. There may be scales of
 payments determined by age, responsibility or seniority. Most 'white-collar' jobs were
paid in this way until recently.
Reward linked to performance. The link may be daily, weekly, monthly or annualised.
Payment for any one period varies from that for any other period, depending on quantity
or quality of work. Sales functions are commonly paid on the basis of turnover; manual
and production workers may be paid according to work completed or items produced.
Catering staff typically rely on direct payment from satisfied customers in the form of
service charges or tips (gratuities).
Both methods work smoothly, provided that scales are easy to understand and the
methods of measuring completed work are overt, accurate and fair. However, there has
been considerable dissatisfaction with the management of pay on both sides of the
employment relationship. In recent years, attempts have been made to remedy the
situation through new systems and a greater reliance on performance-related pay.

HR and payroll administration

Technology and the pay unit

Pay evaluation

Market-driven criteria

Motivation and performance

Pay and performance

Flavour of the (last) month?

Criticisms of PRP

Summary
Pay is a key element in the management of people. The importance of pay begins with
pay administration that deals accurately and swiftly with payroll-related matters. Much of
the information used by pay administrators is shared with the human resource function.
Pay evaluation systems also impinge on human resource territory. Free market
organizations are particularly concerned with performance-related pay as a motivating
factor but this trend appears to be ideological rather than rational since practical PRP
schemes that deliver the results intended are extremely difficult to construct. Current
evidence shows that performance pay is likely to demotivate more people than it
motivates
Performance Management
What is a Performance Management System?
Performance Management is the term used to describe the process set by an organisation to
ensure all employees are aware of the level of performance expected of them in that role, as well
as any individual objectives they will need to achieve to achieve overall organisational
objectives.

You will find that most organisations will have a performance management system in place;
however, the difference will be whether the organisation has adopted an informal or formal
approach towards their employees.

It is not uncommon for smaller organisations, due to the nature of their business, not to have
specific documented processes in place. Any employee goals and objectives set will be mutually
agreed upon between the manager and employee, generally adopting an informal approach.
Larger organisations will tend to have a more formal documented process in place for managing
employee performance.

It is generally considered good practice to communicate what form of performance management

system your organisation uses for its employees during induction process. By the end of the
induction process the employee should be aware of their goals and objectives they need to
achieve within their role to ensure they are performing satisfactorily.

The sole purpose of a performance management system is to assess and ensure that the employee
is carrying out their duties which they are employed to do in an effective and satisfactory
manner, which is contributing to the overall business objectives.

How Can it be Delivered in the Workplace?

At work, an employee may subjectively feel that he/she is carrying out the duties for which they
were engaged, in a satisfactory manner. However, those above that employee and indeed those
around may feel, objectively, that the employee is not carrying out those duties satisfactorily. If
there is no feedback from management to the employee on their progress, then the employee will
never realise that some aspect of their work is wanting.

Therefore, if the employee is identified to be working beneath his/her capacity, then this
performance deficit will need to be addressed sooner rather than later with the employee. As this
performance issue will have direct consequences for the individual, department and organisation
performance. For example, the employee will have no opportunity to improve their performance;
their quality and service may be compromised which can affect the overall business performance
and productivity.
When dealing with an employee that is under-performing, you will have to identify in what areas
they are under-performing in: effective behaviour, effective performance, achieving business
targets.

You will also have to consider whether the employee's under-performance is due to personal
reasons or purely performance related.

A performance management meeting organised to discuss the employee performance should be a

two way discussion which will provide you the opportunity to find out whether there are any
underlying issues that you may not be aware of that are affecting the employee's performance.
For example: clashes of personality, domestic situations, lack of training, etc. From this
discussion you will also be able to assess if the employees lack of performance is purely
performance related. If so, has anything changed in the workplace to cause this issue or change
in attitude?

At the end of the meeting the employee should be aware of the following outcomes:

Fully aware of their performance goals they need to achieve and/or expected
behaviour required by the organisation

An agreed action plan to rectify the employees performance issues, with clear
guidelines on how the employees performance will be measured going
forward

Organise any training needs highlighted by the employee.

Mutually agree a date which is fair and reasonable to review the employee
performance

Potential consequences that could result from the employee performance not
improving. Disciplinary Matters

Benefits the performance management system can provide the organisation

through Development and Training

An effective performance management system will have the effect of focusing employees in an
organisation on the organisation, departmental and individual objectives. Through successfully
identifying employees training and development needs, and by providing constructive feedback
to your employees on their performance. This enable employees to improve and develop their
skill sets within their role, showing the organisation commitment to the employee by providing
them with ongoing career development and training by valuing and recognising their
contribution to the organisation performance.
A remuneration and rewards process can be integrated into the performance management system
to encourage employees to continually improve their individual performance and personal
targets. The value to the organisation will be motivated and trained workforce which will be
focused on the achievement of its strategic goals and maintaining business productivity through
staff retention and succession planning.
Relationship Between Training &
Employee Performance
Employee performance may be related to numerous factors within the
workplace, such as overall job satisfaction, knowledge, and management.
But there is a definite relationship between training and performance, as
training programs can address numerous problems that relate to poor
performance.

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Knowledge

Training programs increase an employee's job knowledge. An increase

in job knowledge means that the employee will feel more comfortable
doing his job and will perform at a high level.

Satisfaction

Job satisfaction can come from feeling comfortable within the

organization, job proficiency and even from the knowledge that an
employee can work hard and get promoted. Training programs can
contribute to all of these factors and lead to more satisfied employees
who perform at exceptional levels.

Innovation

Training employees about the organization, where each employee fits

in the organization and how the organization fits into its overall
industry creates innovation. In other words, employees who have a
knowledge framework, delivered through training, are creative in
solving problems, both in the short and long term.
 Career Orientation

When training programs are offered as a method to progress in one's

career, they also have an effect on how an employee performs.
Employees who know they have a future with the organization are
more likely to be high performers.

Goal Orientation

Effective training targets the gap between what is expected and what
is currently being done. This human performance orientation,
especially if delivered through training, makes an employee aware of
her goals and how she will reach them