Purposes of performance management and relationship to business objectives


  • A description of 2 purposes of performance management and their relationships to business objectives
  • An explanation of 3 components of performance management processes
  •  An explanation of the relationship between motivation and performance management, referring to 2 motivational theories
  •  An explanation of the purposes of reward within a performance management process
  • A review of 3 components of a total reward system, 1 of which should be non financial.


Purposes of performance management and relationship to business objectives

Performance management refers to a process whereby supervisors and employees outline expectations or goals to be achieved, establish training opportunities, and evaluate performance results including feedback. There are two major purposes of performance management. First, performance management system helps in employee decision-making. Second, it is important part of the employee development process.

Effective decisions enable the organization to achieve set goals. A performance management system can help the management make the right decisions regarding the employees. When the system is used in employee decision-making, the data collected is used to determine the appraisal of employees. For instance, it may become the basis by which the management decides on things such as pay rise, transfers, promotions, and allocation of job tasks. In decision-making, lenient ratings are used to assess the employees. Numerical scores are often used in employee decision-making so as to rank employees depending on performance. Ratings awarded by managers may be used to determine things such as bonuses in employee decision-making (Pulakos & Wiley InterScience, 2009). Employee decision making helps achieve business objectives by enabling the management promote competent and able employees to higher positions.

When the management uses a performance management system in employee development, the focus is normally on employee improvement activities such as necessary training areas, mentoring programs, and enhancing job experiences. Ratings provided for employee development purposes vary widely and on the low end of the scale. The ratings are primarily intended to provide the management with a snapshot of employee’s strengths and weaknesses, and areas of improvement. Categorical ratings are often used in employee development. Employee development helps in achieving business objectives by highlighting poor performance areas where training is needed.

Components of performance management processes

Performance management is characterized by three major components all of which are designed to establish an effective workforce in the organization. The three components include: performance measurement, performance assessment, and performance improvement (O’Leary, 2004). Performance measurement involves quantifying process outcomes. In performance measurement, the management identifies the goals to be achieved with specific timeline for achieving the goals. The management should be result-oriented. In performance measurement, the management is expected to establish benchmarks or points of reference in order to be able to compare performance in different periods. Performance measurement is also important since it can help the management identify improvement priorities.

The second component of performance management process is performance assessment. Performance assessments provides a gateway to reviewing the actual achievements of a particular process against desired results or set objectives. In performance assessment, the organization may employ statistical tools to determine performance or progress. Performance assessment enables the management to gain meaningful data on improvement areas in the entire process. The purpose of a performance assessment is to provide useful information on the progress of the various organizational processes (O’Leary, 2004).

Performance improvement involves continuous adjustments to the established processes in order to improve the chances of achieving desired objectives. As such, performance improvement involves developing feedback mechanisms that can be used in providing information on issues such as goal achievement. Providing feedback is an integral part of the entire performance management process. It enables employees to know their performance and areas they need to improve (O’Leary, 2004).

Relationship between motivation and performance management

Motivation and performance management are integral components in organizational management. The main motivations for employees include fair wages, responsibilities, training, and opportunities to advance in their career. These motivations are largely determined by performance management which involves performance appraisals, training and development, job description and supervision. In other words, organizations should decide on performance management strategies in order to influence the level of staff motivation. Herzberg’s duo-factor theory of motivation is one of the theories that can exemplify the relationship between motivation and performance management. According to the theory, some factors in the organization can lead to job satisfaction, while others can cause dissatisfaction. Job satisfiers include responsibility, challenging work, recognition, and opportunities for growth (Beck, 2004). These satisfiers echo performance management objectives. The other factors known as the hygiene factors include salary, job security, and fringe benefits.

The Maslow’s hierarchy of needs theory can also explain the relationship between motivation and performance management. The theory outlined a hierarchy of human needs ranging from basic human needs to ego-driven needs (Beck, 2004). The four basic needs identified by Maslow includes physiological needs, safety needs, love, and esteem. At the helm is self-actualization needs. Performance management in one way or another improves the motivation of employees since it is concerned with promotions, career development, job appraisals, training, and other factors. The achievement of these factors in the workplace can enable employees improve their self-esteem, and drive them towards self-actualization.

Purpose of reward within a performance management process

Giving rewards is of crucial importance to employees in an organization. Rewarding employees is one way of appreciating their efforts and improving their morale at work. In other words, rewards are given to employees in order to motivate them. Recognizing employees’ efforts or contribution to the organization enhances employee motivation. This improves their performance. Rewards can help an organization retain key personnel. This is because employees who feel appreciated are more likely to be satisfied with their jobs. Rewarding employees also helps the organization to improve its image especially among prospective employees. Employers prefer to work for organizations that recognize the efforts of their employees. Thus in order for a company to attract highly qualified personnel, it must have a good employee relations record. The organization can also use rewards to encourage employees to gain new skills or knowledge that is important to the growth of the organization.

Components of a total reward system

A total reward system comprise of both intrinsic as well as extrinsic rewards (Armstrong, 2007). A total reward system should offer both financial and non-financial incentives to employees. The following are the three components:

The work experience – a total reward system should strive to create a positive workplace for the employees. For instance, providing recognition plans can be a good way of creating a positive work experience. Good leadership strategies can also enhance positive work experience. Leaders should treat employees with dignity and respect.

Learning and development – this is another important non-financial component of a total reward system. The organization should provide training and development opportunities to all employees. In-job-training can provide opportunities for the management to improve employee’s knowledge. Employees should also be free to increase their academic knowledge. They should also be provided with promotion opportunities.

Total pay – this includes the employee benefits and the contingent pay. The organization should provide compensation based on level of education and responsibilities given. The employee should also be provided with additional benefits and compensation plans.



Armstrong, M. (2007). A handbook of employee reward management and practice. Philadelphia:             Kogan Page.

Beck, R. C. (2004). Motivation: Theories and principles. Upper Saddle River, N.J: Pearson Education.

O’Leary, M. (2004). Measuring disaster preparedness: A practical guide to indicator development            and application. Lincoln, NE: iUniverse, Inc.

Pulakos, E. D., & Wiley InterScience (Online service). (2009). Performance management: A new             approach for driving business results. Chichester, West Susssex, U.K: Wiley-Blackwell.

Employee Management-Fair and Unfair Dismissal