Given globalization of economy and business, hiring and retaining top performers has assumed critical importance for the organizations in delivering excellent results year after year. Moreover, devising performance-linked reward and compensation system is necessary for winning and keeping talents for attaining and sustaining corporate success. This article explores the bottlenecks associated with effective implementation of performance management system, strategizing its effective implementation and finally devising a robust reward system.

The concept of performance management has been the most significant development in the sphere of human resource management in recent times, although the phrase was used for the first time in 1976 by Beer and Ruh. Performance management has two major implications in the organizational context - first is to improve organizational performance for business success, and second is to devise a robust reward system. In a fiercely competitive and complex global business environment, talents are the driving force - the engine of new economy. Therefore to attain and sustain competitive advantage has become the survival kit of the organizations. Given the increasing war for talents, the competition for acquiring and retaining talents has assumed epidemic and global proportions making reward and compensation a very costly affair for the organizations. Hence, organizations are emphasizing performance-oriented reward system for getting right return of their investments on talents. However, implementing performance management system effectively itself poses numerous bottlenecks, leave alone devising a robust reward system.

There is a need to look closely at performance management and appraisal systems, since many are not only useless, but can actually harm productivity as well as the relationship between employees and managers. Its role in enhancing organizational performance has lately attracted the attention of progressive organizations. Like any management concept and tool, the success and failure of any performance management system can be attributed primarily to the management and its employees. Experience shows that a number of factors add to the failure of the performance management system in the organizational context. Some of the major reasons are:

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