There is an ongoing debate about separating performance management discussions from reward or compensation. I strongly believe that there are two very real outcomes of performance management one that is developmental and the other monetary benefit. There are arguments both for and against this debate. If we understand and believe in the importance of goals and money as motivators, then it only makes sense to club discussions on accomplishments with financial rewards. What’s more motivating and reaffirming than seeing how your performance (effort) has resulted in monetary reward and recognition (consequence). That association is undeniably strong and aligns with the motivation theories driven by extrinsic reward. There was a study conducted by Lawler (2003) to support that tying rewards to performance appraisals tends to be associated with more effective performance management systems.
So where does development fit in all this. Well, here is where we come across the fork in the road to effective performance management. Training and development discussions during performance reviews lose significance in the context of rewards and past performance and do not work. (Lawler 2000). This is attributable to the fact that discussions of performance and rewards typically are more focal in the conversation and distract us from meaningful discussions about future development.
However, if we have indeed transcended from the retrospective approach of performance management and also accepted other ways to assess compensation decisions, then it shouldn’t matter if reward and development were both equally important outcomes of performance assessment. Employees aren’t just satisfied or motivated with monetary rewards the more enduring ones that drive retention are embedded in developmental goals that speak to the future and individual progress within the organizational context. As long as we don’t favour one over the other, I do not see a problem in entertaining both discussions as part of performance management.
As we continue to evolve and improve performance management practices, I think we can all concur on the fact that it is not by any means an easy task to establish a performance management system and there is no perfect system out there that would be right for an organization. In my experience performance management works best when you build a culture of delivering results through accountability and investment in talent management. You have to commit to conversations about clarifying and aligning goals and expectations, building strengths, leveraging skills sets and collaborating on mapping a career path that becomes the underlying rhetoric.
Ultimately Human Resources will have to play an active role in adopting a renewed approach to change perceptions around performance management. Organizations are looking forward to establishing a performance management system that grows and sustains talent through engagement, collaboration and a culture of feedback and ownership of talent management.