Organisations vary in how much they link individual performance management results, rewards (salary increases, bonuses and incentives) and formal discipline systems. It’s sometimes said as a matter of policy that ‘information collected as part of the performance management process may be used in the allocation of reward or in the application of formal disciplinary or capability actions’ but organisations seldom make clear precisely how it is used.

Performance management information

In HR’s work as business partners, change agents and commitment builders it is worthwhile trying to explore and explain how our organisations use performance management information. At one extreme, line managers can be left pretty much alone to:

• create whatever performance objectives they want for their staff
• collect what evidence of performance against objectives they think fit
• make recommendations for reward based on their own criteria etc.

In this setting you sometimes hear line managers say things like:

“You’ve exceeded all your objectives but I now realise that they were all set far too easy. As a result I’ve decided to give you a lower than average increase next year. We’ll set more challenging objectives in the future.”

Or:

“You’ve worked really hard and well but failed to meet your objectives and I now realise that they were all set far too hard. As a result I’ve decided to give you the maximum allowable increase next year. We’ll set more realistic objectives in the future.”

Working like this is not labour-intensive for HR, line managers do as much, or as little as they feel they can, but it can still cause trouble. Everything, the objectives, the evaluations, the scale of rewards, becomes subjective. Nothing is coordinated and other strategic systems that could draw on performance management information, such as the succession plan or the organisational learning need analysis, don’t get what they need. It can be very demoralising working in such a situation.

Rewarding over-performance

At the other extreme are organisations that explicitly reward over-performance against objectives while also initiating formal discipline or capability actions against staff that under-perform. But such an approach is labour intensive for HR: it requires all stages of the performance management process to run like clockwork, with all line managers setting equally SMART objectives by the same deadlines and all monitoring and evaluating evidence of performance. On the face of it it’s a good idea but it can seem relentlessly inhuman or machine-like in its efficiency. As a result, this approach seems to be abandoned as ‘too much work’ almost as often as it’s trialled.

Compromise in HRM

Neither of these extremes is a workable version of best HRM practice and your organisation probably has a compromise system somewhere in the middle. But it is worth trying to discuss and agree the assumptions your Senior Management Team, your managers, staff and you are making about the links between individual objectives, results, rewards and formal disciplinary systems. Making such complex and ambiguous ideas clear is a challenge and a reward in itself, and doing so should enable your organisation to function in a more effective manner.

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