Managing Employee Performance and Reward Concepts, Practices, Strategies

In the past, managing employee performance and reward was a relatively uncomplicated affair. On the performance management side, it was a matter of requiring supervisors to assess each of their subordinates once a year using a simple rating scale instrument, perhaps with a few management-imposed objectives included for good measure. On the remuneration side, the focus was on developing and maintaining a job-based base pay and benefits structure that tempered external competitiveness with a degree of attention to internal equity. In the more complex traditional pay systems, there may also have been an element of individual performance-related reward, perhaps in the form of assessment-based merit increments or one or other of the traditional forms of payment by results, possibly coupled with a modest level of collective short-term incentives in the form of profit-sharing. Underlying all was an accent on the maintenance of a traditional top-down management culture, a mechanistic organisational structure and a stable relational psychological contract.

How things have changed! Today, performance and reward practitioners find themselves confronted by myriad alternative design options: everything from competency-based assessment and performance coaching, with broad-graded and broad-banded base pay structures, to goal-based short-term incentives for individuals, teams and business units, and an ever-growing range of sophisticated equity plans for employees at all levels – from those on the production line to the habitués of the executive suite. The world of the management practitioner is positively awash with competing performance and reward theories, fads and fashions, with specialist consultants ever keen to push their products, and this has made the task of managing employee performance and reward far more challenging than ever before. And today’s employees also have different expectations from those of twenty years ago. In many organisations, the very basis of the employment deal has shifted from long-term engagement to short-term transaction; and there is evidence that in many developed countries younger employees have embraced this ‘new deal’ and adjusted their expectations and reward valences accordingly.