Components of a Compensation & Performance Management Program

Compensation and performance management has emerged as a specialized area of management and HR. A compensation and performance management program is essential for any organization that seeks to get the best out of its employees.

At a very basic level, performance management can be described as the assessment of an employee’s performance at work. This is done during a fixed period of time and is meant to help management evaluate the efficiency the said employee brings into work. How this is closely related to compensation is that in every organization, it is performance that decides the compensation an employee gets.

This closely ties compensation with performance management, and makes it an essential element of an organization. Proper compensation and performance management helps an organization understand the value of each employee, and thus helps it make the most prudent use of resources.

A motivator for higher employee performance

Compensation and performance management also motivates an employee into higher performance. One of the ways by which this is done is the pay-for-performance tool, by which in addition to a fixed compensation, an employee is entitled to a higher earning based purely on performance over a period of time or in relation to a defined set of responsibilities or tasks.

Another reason for the importance of compensation and performance management

A sound compensation and performance management program is an objective standard for judging an employee’s ability to deliver to the organization’s satisfaction. A compensation and performance management program is also a good reason to justify a hike or lack of it. When the compensation and performance management program is properly documented, it provides transparency in the employee appraisal process.

Features of compensation and performance management

Sound compensation and performance management should have some core components:

compensationandperformancemanagement

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