PERFORMANCE MANAGEMENT AND REWARDS SYSTEM IN CONTEXT

SUMMARY

COMPILED BY:
TESTIANA DENI WIJAYATININGSIH / 0201618006
MOHAMMAD QUSHOY/ 0201618014

PROGRAM STUDI ILMU PENDIDIKAN BAHASA (INGGRIS)

PASCASARJANA UNIVERSITAS NEGERI SEMARANG
2018
 PERFORMANCE MANAGEMENT AND REWARDS SYSTEM IN CONTEXT

INTRODUCTION
By developing the capabilities of teams and individual contributions give deep impact on
managing the organizations. This can be done by applying the strategic and integrated approach
to deliver sustained success to organizations by improving the performance of the people who
work in organizations. As stated by Aguinis,2009:2) A continuous process of identifying,
measuring, and developing the performance of individuals and teams and aligning performance
with the strategic goals of the organization called performance management.
In addition, the goals and objectives can be achieved by the organizations only through
the combined efforts of their employees and it is the task of management to get work done.
Employee performance management is fundamental to the effective operation of organizations.
Performance management is an integral part of the employees and organizations relationship. It
is essentially an integrating activity that permeates every fact of the operations of an organization
(Laurir J. Mullines, Management and Organizational behaviour 2007, 410.) It is true that
successful organization knows, how to win today's competitive world they must attract, develop
and retain talented and productive employees. Big organization's get their competitive edge from
performance management system that helps them to hire talented people. On the other side, the
organizations have to place employees in the right position, along with their individual
performance with the organization's vision, objectives and develop their abilities and reward with
contributions to the organization. The success of organizations is based on the two main
Components of Performance Management (PM);
a. Continuous Process
PM is ongoing that involves a never ending process of setting goals and objectives,
observing performance, and giving and receiving ongoing coaching and feedback.
b. Alignment with Strategic Goals.
PM requires that managers ensure the employee’s activities and outputs are congruent
with the organization’s goals and, help the organization gain a competitive advantage. PM
creates a direct link between employee performance and organizational goals and makes the
employees’ contribution to the organization explicit.

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 The organizations also need to be efficient in doing right things, in the optimum use of
their resources and in the ratio of out puts to inputs. But organizations must also be effective in
doing the right things and in their out puts related to some specific purpose, objectives.
Performance should be related to such factors as increasing profitability, improved the results in
important areas of organizational activities.
Besides, we should understand the difference between Performance Management and
Performance Appraisal. Performance management is an ongoing process to gain organization’s
goals. On the other hand, performance appraisal is the systematic description of an employee’s
strength and weaknesses. It focuses on the conversation between managers and employees in
which feedback is exchanged and coaching is given if needed.

PERFORMANCE MANAGEMENT AND REWARS SYSTEMS IN CONTEXT

Performance Management is a process of designing and executing motivational
strategies, interventions and drivers with on objective to transform the raw potential of human
resource into performance. All human beings possess potential within themselves in a few or
more functional areas. However, utilization and conversion of 8 this potential into deliverable
performances is often sub optimal due to a variety of reasons. Performance management acts as
an agent in converting the potential into performance by removing the intermediate barriers as
well as motivating the human resource". (Kandula, 2006:5).
There are some advantages of the implementation of a PM system, such as; motivation to
perform is increased, self-esteem is increased, managers gain insight about subordinates, the
definitions of job and criteria are clarified, self-insight and development are enhanced,
administrative actions are more fair and appropriate, organizational goals are made clear,
employees become more competent, there is better protection from lawsuits, there is better and
more timely differentiation between good and poor performers, supervisors’ view of performance
are communicated more clearly, organizational change is facilitated, and it needs to enhance
motivation, commitment, & intentions to stay in the organization.
On the other hand, there are some disadvantages/dangers of poorly implemented PM
systems such as; increased turnover, the use of misleading information, lowered self-esteem,
wasted time and money, damaged relationships, decreased motivation to perform, employee
burnout and job dissatisfaction, increased risk of litigation, unjustified demands on managers’

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and employees’ resources, varying an unfair standards and ratings, emerging biases, and unclear
rating system.
The implementation of Performance Management has the big point on the rewards
systems. Why? Rewards systems have important role to achieve the job satisfaction among
employee’s and using this as a competitive weapon against business rivals.
A reward system means that the set of mechanisms for distributing both tangible and
intangible returns as part of an employment relationship. An employee’s compensation usually
referred to as tangible returns and intangible returns that referred to as relational returns.

Tangible returns include cash compensation (base pay, cost-of-living and merit pay,
short-term incentives, and long-term incentives) and benefits (i.e., income protection, work/life
focus, tuition reimbursement, and allowances).
In addition, intangible returns that referred to as relational returns recognition and status,
employment security, challenging work, and learning opportunities.
Besides those definitions, rewards systems have another definitions which can be
described below;
1. Base pay,
2. Cost-of-living adjustments and contingent pay,
3. Short-term incentives,
4. Long-term incentives,
5. Income protection,
6. Work/life focus,
7. Allowances, and
8. Relational returns.

Furthermore, developing Performance Management (PM) system is an essential for an

organization and it should pay attention to the aims and roles of PM systems. All the aims and
roles of PM can be described below;
1. Strategic means to help top management achieve strategic business objectives and to
communicate them to stakeholders.

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 2. Administrative is to furnish valid and useful information for making administrative
decisions about employees.
3. Informational is to inform employees about how they are doing and about the
organization’s and the supervisor’s expectations.
4. Developmental means that to allow managers to provide coaching to their employees
Organizational maintenance: To provide information to be used in workplace planning
and allocation of human resources.
5. Documentational means that to collect useful information that can be used for various
purposes (e.g., test development, administrative decisions).

Based on the definition above, it can be easier if we understand the activities for every
role and aim of Performance Management. Firstly, the strategic purposes have some activities
such as; to help link employee activities with the organization’s mission and goals, to identify
results and behaviors needed to carry out strategy, to maximize the extent to which employees
exhibit the desired behaviors, and to produce the desired results. Secondly, the administrative
purposes consist of some activities which is to produce information used by the reward system
and other HR decision making (e.g., promotions, termination, disciplinary actions). Thirdly, the
informational purposes is to enable employees to learn about their performance in relation to the
organization’s expectations. The fourth, the developmental purposes is to provide performance
feedback that allows individuals to learn about their strengths and weaknesses, to identify
training needs, and to make better decisions regarding job assignments. Fifth, organizational
maintenance provide useful information for workforce planning and for evaluating the
effectiveness of other HR systems (e.g., comparing performance before and after an expensive
training program to determine whether training made a difference). Sixth, documental purposes
are to support HR decisions and help meet legal requirements.
In addition, to support and manage the purposes of Performance Management, it need a
surveys on Performance Management, for example; the subjects of industrial and organizational
psychologists working in HR departments in more than 100 different organizations. It can be
explained below;
1. Multiple purposes are possible.

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 2. The two most frequent purposes are administrative (i.e., salary decisions)and
developmental (i.e., to identify employees’ weaknesses and strengths).
3. Overall performance management served at least two of the purposes.

Next, to support an ideal Performance Management, we must describe the characteristics

of ideal PM which can be seen below;
1. Congruent with strategy (i.e., there is a clear link among individual unit, and
organizational goals)
2. Congruent with context (i.e., the system is consistent with norms base on the culture of
the organization and the region and country in which the organization is located)
3. Thorough (i.e., they include all relevant performance dimensions)
4. Practical (i.e., they do not require excessive time and resources)
5. Meaningful (i.e., they have important consequences)
6. Specific (i.e., they provide a concrete employee improvement agenda)
7. Able to identify effective and ineffective performance (i.e., they help distinguish
employees at different performance levels)
8. Eliable (i.e., the measurement of performance is consistent)
9. Valid (i.e., the measures of performance are not contaminated or deficient)
10. Fair (i.e., people participating in the system believe the processes and outcomes are just)
11. Inclusive (i.e., they include input from multiple sources on an ongoing basis)
12. Open (i.e., they are transparent and there are no secrets),
13. Correctable (i.e., they include mechanisms so that errors can be corrected)14.
Standardized (i.e., performance is evaluated consistently across people
and time).
14. Ethical (i.e., they comply with ethical standards)

To measure those ideal characteristics of performance management described above,

some researchers conducted study about the implementation of good performance management.
For example Study from Mercer found that Workers can improve their productivity if there are
clear direction, support, training, and equipment. He states that successfully implementing a
performance management system can give workers the direction and support that they need to
improve their productivity.
In addition, many trade-offs take place in the real world implementation of performance
management systems; however, the closer the system is to the ideal characteristics, the greater
the return will be for the employees, supervisors, and the organization as a whole.

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PERFORMANNCE MANAGEMENT SYSTEMS ACROSS NATIONS
1. Mexico
PM has been popular since the 1970s. Systems in Mexico are similar to those
implemented in the United States; for example the measurement of results.
2. United Kingdom
PM has emphasized on talent management and total rewards management. PM provides
critical information regarding the identification of top performers, which helps talent
management, and critical information to be used in administrative decisions, including the
allocation of rewards. Therefore, PM becomes an established organizational practice and is
influenced by broader societal issues such as socioeconomic, political, and legal trends.
3. Germany
PM has been affected by the established practice of long-term employment relationships.
Thus, PM systems emphasize long-term goals and usually do not have a short-term focus.
Systems share some similarities with France given their membership in the European Union,
which provides a common legal framework for many labor-related issues.
4. France
PM faces unique contextual issues such as legal requirements to invest in employee
training and development and the need to emphasize individual accountability. PM systems are
not implemented in a vacuum, and it is important to consider the broader environment when
designing and implementing a system.
5. Turkey
Turkey’s unique contextual issues involve being a democratic and secular state—yet
ruled by a single-party government. Personal relationships play an important role in Turkish
culture, thus an important challenge is the implementation of systems that ensure valid, reliable,
and fair performance measurement.
6. India
When the India economy has been on “overdrive”, the intense international business
activity is leading to a change in traditional values, at least in work environment, from more
collectivistic to more individualistic and short-term.
7. China

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 PM systems emphasized mostly attendance and skills and make broader sets of behaviors
and the relationship between PM and other organizational systems. Important issues to consider
for successful implementation of PM include respect for age and seniority and the emphasis on
social harmony.
8. South Korea
Using Hierarchical work relationships and emphasize the importance of groups over
individuals. The establishment of a democratic government in 1987 and the Asian financial crisis
of 1997 affected organizational practices substantially. These led many organizations to adopt
what in Korean is called Yunbongje (i.e., merit-based systems).
9. Japan
Employment and seniority as key organizational practices, firms also consider the
importance of new knowledge acquisition. PM systems in Japan tend to emphasize behaviors to
the detriment of results.
10. Australia
The Australian economy has made an important shift from manufacturing to service, and
there are important demographic changes in the workforce including an increased presence of
women and members of ethnic minority groups.

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A Case Study: Network Solution, Inc
Network Solutions, Inc., is a pseudonym which is being used to protect the identity of the
actual company in question. It is a worldwide leader in hardware, software, and services essential
to computer networking. It is used to measure performance within the company. Since quality
initiatives were driving change in several areas of the business, Network Solutions decided that
these initiatives should also apply to “people quality.” Network Solutions wanted to improve its
ability to meet its organizational goals and realized that one way of doing this would be to ensure
that they were linked to each employee’s goals. The Network Solutions global performance
management cycle consisted of the following process:
1. Goal cascading and team building
2. Performance planning
3. Development planning
4. Ongoing discussions and updates between managers and employees Annual
performance summary
Today, part of the training associated with the performance management system revolves
around the idea that the development planning phase of the system is the joint year-round
responsibility of managers and employees. Both managers and employees are responsible for
preparing for the meeting, filling out the development planning preparation forms, and attending
the meeting.
Network Solutions plans to continue reinforcing the needed cultural change to support
forced distribution rating by checking with all stakeholders to ensure that the performance
management system is serving its intended purpose.

CONCLUSION
To sum up the discussion above, we focus on the some statements and questions which
can be explained below;
a. Based on the issue of local government system will hire many higher overseas
lecturers which can improve the universities ‘quality and make them better. It also is
not the violation if the government concerns about the base pay for every lecturer. So,
it is fair for many lecturers from Indonesia. Don’t think too much about it because it
is only an issue which haven’t implemented yet.

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 b. The Performance Management systems must give feedback as a continuous process.
What happened if the top leader cut the rules? This is the role of Performance
Management will help by doing communication and feedback from two sides
theoretically and practically. Theoretically means as an ideal Performance
Management and practically means that power speaks than communication.
c. The Performance Management should undertake that the marketing strategy will help
the ideal Performance Management. Everyone who can join and create the good
atmosphere in working area will contribute to the success of organizations.
d. If the overseas lecturers come to Indonesia, it will cause many overseas university
built in Indonesia. The best violation is for many private universities. They must fight
hard to develop their private universities in order to be existed and be competed in
this era.

In conclusion, the more our effort to apply the Performance Management, it will give
more profit to our organizations. For example, Network Solution that used to measure
performance within the company. In their system, the training associated with the performance
management system revolves around the idea that the development planning phase of the system
is the joint year-round responsibility of managers and employees.

REFERENCES
Aguinis, H. (2009). Performance Management. (2nd ed). New Jersey: Pearson Education, Inc.,
Upper Saddle River.
Kandula, S. R. (2006). Performance Management . In Performance Management. Strategy.
Intervention. Drivers. (1st ed.). (p. 5). Asoke K. Ghosh.