Question

Scott Cohen, an expert on performance management, says: “Performance Management programs represent a lost opportunity for most companies. These systems, if designed and implemented properly, can have a strong positive impact on individual performance and financial results – our studies suggest a possible 20 percent improvement in shareholder value.” Cohen goes on to observe that too many companies use performance management programs merely as “window dressing” rather than to add real value.

One key to having a successful pay-for-performance plan is to have an organizational culture that embraces pay for performance. Such a culture will emphasize goal setting, rating and/or ranking of performance, and performance dialogue between supervisors and subordinates. A performance-based culture places a premium on obtaining desired behaviours and results, recognizes that the organization’s success depends on the employees’ successful performance, lets strategic outcomes and goals drive the work of the organization, and rewards desired performance but not poor performance.

H e w l e t t – P a c k a r d ’ s

P e r f o r m a n c e –B a s e d C u l t u r e

Hewlett-Packard’s, operating in 178 countries and doing business in more than ten languages, is a company with a performance-based culture. Employing more than 140,000 people, Hewlett-Packard is known as a great place to work. Hewlett –Packard values ideas and believes that ideas are best developed in a teamwork culture. “That is why everyone at every level in every function is encouraged to have original ideas to express them, and to share them.” Each employee is valued for the unique skills, experiences, and perspectives that he or she brings to the job and organization.

Hewlett-Packard provides employees “every opportunity to learn, grow, and develop skills to drive the company toward achieving its business goals.” It encourages employees “to develop their work and life skills in order to achieve personal as well as career goals.” Hewlett-Packards encourages employees to plan individual development paths that are discussed with their respective managers. Employees and their managers reach mutual agreement upon the individual development paths. Learning within the context of these development plans is intended to be flexible, fast, and rewarding. Hewlett-Packard pride itself on having an “empowering culture that allows people to make the most of their skills, personality, and career.”

Not only is goal setting an important part of employees’ development plans, but it is also a crucial element in on-the-job performance management. Employees have three sets of goals: threshold, target, and aspiration. Threshold goals represent the minimum acceptable performance. Target goals represent the desired and expected level of performance. Aspirational goals exceed the desired and expected level of performance by a significant amount. Attainment of these goals is evaluated using appropriate criteria.

H e w l e t t –P a c k a r d ’ s

T o t a l R e w a r d s p r o g r a m

Performance management at Hewlett-Packard relies, in part, on a Total Rewards program that encourages employees to contributes ideas and attain a high level of achievement. The Total Rewards program includes six major components: competitive base pay, performance-related pay, comprehensive benefits, stock ownership, work life navigation, and sports and social facilities.

While the Total Rewards program differs from nation to nation and by organizational level, all employees are paid market rates for their locations and have benefits packages that are designed to address needs of the location. For instance, differences occur in benefits plans from country to country because of the different laws and regulations that govern the distribution of benefits. In the United States, for example, the benefits package includes a variety of programs for managing work and life demands (e.g. flexible work hours, flexible work arrangement, and educational assistance, among others), staying healthy (e.g. medical, dental, and vision plans), and protecting employees (e.g. life insurance and disability insurance).

All employees also receive performance –related pay that is linked to their attainment of threshold, target, and aspirational goals. “When aspirational goals are met, employees may exceed their target pay potential. Conversely, when minimal thresholds are not met, no variable payment will be made,” this provides employees the opportunity to share in HP’s success.

Performance-related pay may be one of three types: a company performance bonus, pay for results, or sales incentives. The company performance bonus links individual rewards to HP’s overall success. The pay for results variable incentive links compensation for executives and managers to individual, business organization, and company performance results. Sales incentives link the compensation of sales professionals to the attainment of individual, business organization, and company performance goals.

The ultimate effect of and justification for Hewlett –Packard Total Rewards program is perhaps best captured in its corporate rewards philosophy: “Our philosophy on rewards is simple: We believe that when excellent performance is acknowledged is rewarded, people are more motivated and work smarter.”

Discussion Questions

1. What are the primary characteristics of an organizational culture that strongly supports performance management?

2. How does Hewlett-Packard's organizational culture support its performance-management philosophy?

Answer 1

1. Following are the characteristics of an organization that supports performance management:

• High level of trust between manager-employee relationship: The culture that openly supports the performance management has always the deep level of respect and trust between and among managers and employees. Trust has always been a vital component of the strong performance management system.
• Clear goals and objectives are set out in the beginning and these objectives have SMART characteristics. It is established what is expected from employees and how do we evaluate their performance.
• Communication of the bigger picture and the overall philosophy is made and leaders communicate how the work of each employee is essential in the achievement of the overall goals. Here, an organization communicates its mission, vision, and overall philosophy. It is also communicated how the work is aligned to achieve those goals.
• Providing ongoing feedback and what is expected from each employee and how they are meeting those expectations.
• Diagnosis of performance issues by looking at what are the impediments to the employee performance and addressing them on a priority basis.
• Change management is always supplemented by participative management so as to make every employee onboard for any change that might take place in the organization so as to reduce the negative impact on performance.
• Strong sense of ownership and greater autonomy are given to the employees so as to make them accountable at the end of the choices they made and their overall impact.
• Evaluation of employees is made only on those factors that are relevant to the job only and not delving into those factors that are personal or otherwise.

2. Hewlett-Packard's organizational culture supports its performance-management in a variety of ways. The following are some of the ways of how the organizational culture of HP is reinforcing its performance management.

• Total reward program and its alignment with rewarding those who employees who show great performance and discouraging those showing poor performance shows how the message is loud and clear and how each system, process, and structure is made to reward performance so as to elicit the desired level of performance.
• Strong participative management is fostering the culture of rewarding the values and ideas of employees by making each employee onboard.
• Customization of the reward system by making each employee reward for their unique ideas and skills fostering a sense of loyalty and is aiding its performance management by making every employee part of the effort.
• Employees are encouraged to adopt their individual development paths so as to make employees grow and contribute to the overall performance management system.
• Communication of performance management and what is expected from each employee from HP is made by making employees acknowledge threshold, target, and aspirational goals where some goals are mandatory where others are related to the self-actualization of employees.
• Alignment between performance management and the overall philosophy of the company makes everyone give their best to the mission and goals of HP.

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