As a way of mapping the general terrain of performance and reward management, this chapter overviews the general meaning, nature and purpose of performance and reward management practice. We begin by examining the definition and dimensions of employee performance. Next we consider the possible purposes of performance management. Following this, we investigate the main requirements for the effectiveness of a performance management system. Attention then turns to the definition of employee reward, the non-financial and financial reward elements covered by a ‘total reward’ approach, and the three main categories of financial reward or ‘remuneration’. Finally, we examine the general objectives of a reward management system.
What is ‘performance’? The trite response is that it depends on who you ask. A critical post-structuralist may say that performance is whatever the dominant management discourse says that it is. To a pluralist, the answer will depend on the stakeholder concerned: a shareholder is likely to equate it with share price improvement and annual dividend payments, a manager on a profit-sharing plan may nominate annual net profit, a production manager may suggest labour productivity, and a customer might suggest product quality or cost-attractiveness, while to a production line employee performance may equate with job and income security and workplace health and safety. Such responses do indeed highlight two important facets of performance: first, it is a subjective, constructed (and hence frequently contested) phenomenon; second, and relatedly, it is open-ended and multidimensional. In short, what is important about performance is not just how ‘high’ or ‘low’ it is but also how it is defined and measured, by whom and for what purpose.