Compensation and Performance management: Two Sides of the Same HR Coin While it is unquestionably part of a human resources manager or director's job to ensure that the company achieves some level of cost savings -- and definitely cost benefit -- in its human resources expenditures, this does not mean that keeping compensation packages at the minimum possible level is the ideal target to shoot for. The well-being and satisfaction of employees is important not only to ensure ongoing loyalty and productivity, but also for intrinsic and ethical reasons. When making cost-saving decisions in regards to human resources compensation, then, certain steps and measures must be taken.

First, effective appraisals must be conducted to determine where cost savings is appropriate, and where it is unwarranted. This process must begin with a purposeful appraisal design that is in keeping both with legal and ethical requirements...

Performance management systems must also be reviewed to ensure that employee requirements and directives have been clear and in keeping with management's expectations; it is possible that inefficiencies in these systems could also lead to cost savings without direct adjustment of compensation packages (DeCenzo & Robbins 2009). Often, there is not adequate communication taking place in a regular top-down manner, and thus adjustments and improvements sought by management are not communicated to employees; enhancing communications is often necessary in order to make performance management systems more effective (DeCenzo & Robbins 2009).
Only after employees and the performance management systems in place in the company have been evaluated can…