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Human resource aspects of performance management

2.3 Linking rewards to an employee’s performance measurement

Appropriate SMART targets (performance measures) should be set for employees.
These should be:

 relevant – to the organisation’s objectives

 achievable – a stretch target is best

 controllable – by the employee

 prioritised – a small number of prioritised targets is needed

 rewarded – if achieved.

The benefits are consistent with the achievement of the purposes of
reward schemes (section 2.2),

However, drawbacks include:

 dysfunctional behaviour, e.g. employees, prioritising the
achievement of their reward, become too risk averse or seek
bigger risks

 employees become demotivated if they feel targets are:

– out of their control, e.g. reward linked to a team or company
target or is share option based

– too difficult to achieve

– rewards are insufficient or inappropriate for the level of
performance achieved

 employees may become stressed if a significant proportion of
their remuneration is performance-related.

 the cost and time involved for the organisation in developing an
appropriate reward system aligned with appropriate performance
measures.

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