Describe the purpose of performance management

Describe the purpose of performance management AND its relationship to business objectives (1.1) (Learners should include at least 2 purposes of performance management and their relationship to business objectives)

Performance management is a crucial component that is normally driven by an organization’s imperative to improve its performance and competence on a continuous basis. Performance management is also defined as a holistic and integrated process, system and approach of aligning individual’s goals with an organization’s goals and objectives. This is normally performed as a way of ensuring that the employees are fully committed to improving their own performance as well as the performance of the organization. As a key component of an organization, the objectives of a performance management system are as follows;

  • To ensure that all the employees understand their individual duties and responsibilities. This will enable each employee to work towards meeting their personal goals which are in line with the overall goals and objectives of the organization.
  • To enable the organizations to give appraisals and rewards to the high performing employees. The process of giving appraisals should be done in a fair and uncompromised manner.
  • To enable the organization to motivate its employees. This will make the employees get a sense of belonging as well as being valued for their efforts of ensuring that the organization continues to successfully achieve its set goals and objectives.
  • To foster competence and growth of employees.
  • To enhance communication between manager and employees.

Employees are regarded as the greatest asset to any organization. This is because of the fact that the overall performance of the employees is what culminates the level of an organization’s success. Performance management usually involves a set of procedures that normally involve assessments and feedback processes.  It is with this profound reason that performance management system is agreeably a vital component that would help an organization in ensuring that each employee makes a positive impact on the organization’s goals and objectives. Hence, performance management is utilized by most organizations that are in pursuit of attaining their objectives which require the optimal utilization of the human capital. In essence, the primary purpose of performance management system is to motivate the employees whose high performance would enable the organization to cut an edge over its competitors.

Explain the components of performance management systems (1.2) (Learners should include at least 3 components)

Performance management is an important way through which the management may identify their employees’ strengths and weaknesses. With the knowledge of the employees’ strengths and weaknesses, an organization may be able to evaluate and come up with effective training options, set plans for further development and provide motivation by ascertaining rewards and career advancements. Additionally, for a performance management system to be labelled as being effective, it has to entail the following key components; Performance planning, performance appraisal and reviewing, feedback on the performance, rewarding good performance, performance improvement plans and potential appraisal

Performance planning

            Performance planning forms the foundation of the performance management system. This is the first important step that is usually performed during the commencement of a performance review and appraisal session. During this stage, the employees decide on an achievable target as well as on key performance areas that they need to improve. This agreement is usually done in the presence of a manager who will, later on, follow up and evaluate the employee’s future work performance.

 Performance appraisal and reviewing

This is normally performed after a stipulated period of months before the end of the organization’s financial year. An employee’s job performance is normally analysed in order to access whether the employee attained his/her targets defined by the key performance indicators. The ratings and achievements are usually filled in a self-appraisal form.

Feedback, assessment and performance counselling to the individual employee

            This is the stage where an employee would receive a lot of feedback on his/her work performance. In addition, employees who are not performing well would be counselled on the areas that they need to work on in order to improve their performance. The feedback process also entails a lot of discussions where the employee may reveal on areas that he/she finds challenging and on how the organization may help in tackling that particular problem.

Explain the relationship between motivation and performance management (1.3) Learners provide an explanation with references TO AT LEAST 2 MOTIVATIONAL THEORIES Ensure you include theorist names and date published

The success of a performance management system is reliant on the employee’s level of commitment to performing their stipulated duties and responsibilities. In order for the employees to gain focus and dedicate their efforts into attaining the best results, they need to be motivated. In order for an organization to successfully attain its set goals and objectives, then it needs a well-motivated workforce. This is because motivation is fundamental to human drive, performance and accomplishments. Motivation is basically an internal propellant which drives an individual towards achieving the set goals and objectives.

According to Meyer, Becker and Veandenberghe (2004), motivation is a set of energetic forces that originates both within as well as beyond an individual’s being, to initiate work related behaviour and to determine its form, direction and intensity. This definition clearly indicates that a highly motivated employee would work hard so as to successfully boost the overall performance of the organization. Highly motivated employees also tend to be highly productive and committed towards achieving the goals and objectives set by the organization.

On the other hand, Frey (1997), argued that the employees work performance may be induced by a mix of both intrinsic and extrinsic motivation. Thus, the managers and directors of an organization have to motivate the employees to attain the highest-level performance of which they are capable of delivering. The managers may do this by providing and appropriate and conducive work environment for its employees. In addition, the managers ought to effectively communicate the standards of performance expected from the employees, and provide constructive feedback and assessment privately to an employee. To top it up, the management should reward, praise and recognize the performance of high performing employees.

Explain the purpose of reward within a performance management system (2.1) (Learners should include at least 2 purposes of reward)

Excellent work needs to be rewarded. Thus, a reward is an important component of  a performance management system as it would promote an employee’s consistency with regards to stellar work performance. Rewarding highly performing employees would undoubtedly motivate the employees to continue with the good work performance whilst meeting and even surpassing the organization’s set goals and objectives.

Rewarding employees may also be done by an organization with the purpose of retaining the best employees. Amid an unprecedented increase in the number of the organizations, most of the employees who are not recognized or rewarded for their exemplary performance are bound to join other organizations that would excellently reward them. Thus, rewarding procedures would not only motivate the employees but also encourage the employees to serve as a committed employee for the organization. In essence, reward contributes to the development of a high performing culture where the employees are aware of the need to perform well and behave accordingly so as to meet or exceed the expectations of an organization.


Identify and explain the components of an effective TOTAL REWARD SYSTEM (2.2) (Learners should include 3 components 1 of which should be non-financial)

A total reward system consists of financial and non-financial rewards. The financial rewards are regarded as total remunerations which comprise of employee benefits, fixed and variable rewards. On the other hand, non-financial rewards that are usually incorporated as part of the reward system include; recognition, praise, career planning, skills development, responsibility and personal growth.

Non-financial reward; – Recognition

Recognition is all about saying ‘thank you’ for a job well done to an employee who will feel encouraged and motivated to continue with high performance. This may be done in a formal or informal way when the manager appreciates the work done by the employee. Recognition usually takes place during the normal dialogues between the managers and their team members. During the period of feedback and assessment, an employee is usually informed of his/her general work performance and on areas where they need to hone their skills.

Financial reward

Organizations may provide its employees with financial rewards that may be in form of cash bonuses or an increase in basic pay. This normally takes place after an assessment of the employee’s performance has been carried out. An increase in basic pay is however limited by a consolidated pay progression that is within the pay brackets attached to the salary levels or salary grades.

On the other hand, cash bonuses qualify as an unconsolidated financial reward to the high performing employee.  Nevertheless, cash bonuses have to be re-earned after a specific period of time. The rate at which one is able to redeem a cash bonus entirely depends on his/her consistency in relation to excellent work performance.

Identify and explain the factors that need to be considered when managing performance

(3.1) (Learners should include factors for both good and poor performance)


In order to manage performance, an employee has to know and comprehend their objectives and the responsibilities that they have in an organization. The objectives which are agreed upon on at the start of the financial year are usually reviewed at the end of the financial year. The factors that need to be considered when managing the good performance are the clear action points referred to as SMART objectives. These objectives need to be Smart, Measurable, Agreed, Realistic and Time sensitive.


The factors that need to be considered when managing poor performance include;

  • The period during which the employee had been underperforming and the results obtained from underperformance.
  • Whether the employees have had job training before performing a given task. Also, there is need to analyse the training results obtained from the training process so as to evaluate whether the employee met the standards before performing his/her designated duties and responsibilities.
  • The availability of resources necessary for the employee to perform a given task.

Describe the data required by individuals involved in performance and reward management processes (3.2) (Learners should include a minimum of 2 sources of data, 1 of which should be external to the organisation)

Documentation serves as vital tools that help the management to give clear work guidelines to its employees as well as providing the structure of a performance appraisal.


Some of the internal documentation that have proved to be useful include; the job description document and self-appraisal document. The job description document dictates the exact responsibilities and obligations that are needed to be performed by each employee. Using the job description document, the managers may access whether or not an employee is fulfilling his or her work responsibilities.


On the other hand, external documentation may be obtained by giving questionnaires to the regular customers who would be able to rate the performance of the employees who normally serve them. The feedback provided by the customers will serve as a form of external documentation that will be used for performance and reward purposes.

Explain the frequency, purpose and process of performance review (Appraisal) (4.1)


Performance appraisal ought to be performed on a regular basis so as to assess and analyse the general performance of each and every employee. Depending on the employees’ performance, the management may decide to appraise or put the employee under a training program that would help him/her to improve in his/her weak areas of performance. On the other hand, performance appraisals need to be performed after a relatively longer period of time that may range from 3 – 12 months. During the performance appraisal assessment, the management may decide to give its employees additional bonuses and an increase in pay. In light of this, both the management and the employee have to agree on a new target and individual goals that need to be achieved before the next event of performance appraisal.


The primary purpose of performance review is to ensure that the employees are on the right track to attaining both their personal and organization’s goals and objectives. The performance reviews also serve as a way of rewarding and recognizing the employee’s performance. The results obtained from a performance review would also be used to motivate and counsel individual employees on how they can further improve their work performance.


The process of performance review is in different progressive stages. The prior appraisals are used to assess whether the employee attained their work performance targets. This is followed by a set meeting where the managers and an individual employee discuss on the general work performance as well as factor that might have contributed to the individual not meeting the previous set work targets. During the meeting, the managers may reward an employee because of his/her good performance. Additionally, the managers may counsel and advise the employees on what to do in order to attain and maintain good work performance. As the meeting winds up, the employee and the managers agree on a new target and set a date for the next review. After the meeting, the managers would perform a follow up where they would access and evaluate the work performance of each employee.