Performanc e Appraisal at HP

Performance Appraisal at HP

Table of Contents
Table of Contents.................................................................................................. 2 Acknowledgement................................................................................................ 3 Introduction.......................................................................................................... 4 The HP a!....................................................................................................... 4

The HP Culture................................................................................................... 4 CurrentPractices................................................................................................... " Appraisal #low .................................................................................................. $ Performance Appraisal at HP................................................................................ % &anagement b! 'b(ecti)es.............................................................................. % *. +oal ,etting................................................................................................ % 2. Performance -)aluation............................................................................. . Performance Appraisal at HP/ -)aluation........................................................... &anagement b! 'b(ecti)es/ -)aluation.............................................................. ,trengths and eaknesses of &0'....................................................................

Possible ,ources of Problems............................................................................... 1 Conte2t 3iagram................................................................................................. *4 3ata #low 3iagram............................................................................................. ** -ntit! 5elationship 3iagram............................................................................... *2 5ecommendations.............................................................................................. *2 5ecommended Appraisal Tools........................................................................*2 *. 5ating ,cales............................................................................................ *2 2. Checklists................................................................................................. *3 3. #le2ible 6ob 3escriptions7 -mplo!ee Influence in the Process.................*3 4. 5ater Training and -mplo!ee -ducation...................................................*3 ". -nsure the 8alidit! and 5eliabilit! of the Performance Appraisal.............*4 $. -nsure that Communication is 'pen........................................................*4 Conclusion.......................................................................................................... *4 2

Performance Appraisal at HP
0ibliograph!........................................................................................................ *"

Acknowledgement
The report in its present form and state would not have been possible without the able guidance and support of Prof. Francis Castelino. He was our constant source of reference and we are very grateful to him for exhorting us to apply ourselves in the course of creating this report.

We would also like to thank our seniors and classmates who provided us with references re uired for the collection of the data re uired for the pro!ect.

Performance Appraisal at HP

Introduction
Hewlett"Packard is considered as one of the most successful companies in the world. #ts operations extend to different countries and locations. Considered as one of the contributors to the company$s success is its uni ue culture % a culture that values innovation& development and employee empowerment. The company$s culture& values and ob!ectives can be summari'ed through its (HP Way) philosophy. *ne of the basic tenets of the HP Way is +anagement by *b!ectives. +anagement by *b!ectives has emerged as one of the more popular performance appraisal systems today. +ore and more companies are adopting this system of performance planning and evaluation. This report is about the performance management system at Hewlett" Packard. +ore specifically& it tackles and the performance appraisal system in the organi'ation. The purpose of this paper is to identify the strengths and weaknesses of the current performance appraisal system at Hewlett" Packard and provide recommendations in order to prevent possible problems and make the system more effective and efficient. Hewlett-Packard Hewlett"Packard ,HP- is a technology solutions provider to consumers& businesses and institutions globally. The company$s offerings span from #T infrastructure& personal computing and access devices& global services and imaging and printing for consumers& enterprises and small and medium businesses.

The HP Way
The HP values& written by .avid Packard in /010 are the centerpiece of the Hewlett"Packard Way. The HP Way and the company$s values are no different from other large companies. The difference lies in the seriousness with which values are treated as management tool. The central element in all activities in Hewlett Packard is the 2HP Way$& a set of beliefs& ob!ectives and guiding principles& and described by 3ill Hewlett as the policies and actions that flow from the belief that men and women want to do a good !ob& a creative !ob& and that if they are provided with the proper environment they will do so. HP treats every employee with respect and everyone$s personal achievements are recogni'ed. The HP way can be summari'ed as a combination of different concepts. These concepts are love of the product& love of the customer& innovation& uality& open

communication& commitment to people& trust& confidence& informality& teamwork& sharing& openness& autonomy& and responsibility.

The HP Culture
Hewlett Packard has a pay"for"performance plan. #n order to make this plan successful& the company embraces an organi'ational culture that embraces pay for performance. 4uch a culture emphasi'es goal setting& rating and5or ranking of performance& and performance dialogue between supervisors and subordinates.

Performance Appraisal at HP
Hewlett Packard operates in more than /61 countries. The company has a performance"based culture. 7mploying more than /89&999 people& Hewlett Packard is known as a great place to work. The company values every employee from all levels and they are viewed as important individuals with uni ue ideas& skills& experiences and perspectives that they bring in their !obs. The employees are encouraged to share and express their ideas and skills. Hewlett Packard is an organi'ation that provides employees with opportunities to learn grow& and develop their skills. :oal setting is an important process in the organi'ation. #n this process& the employees coordinate with their supervisors in setting up their individual development paths. ;earning within the organi'ation is intended to be flexible& fast and rewarding. The Hewlett Packard culture empowers people and allows them& to make the most of their skills& personality and career. :oal setting is also important in performance appraisal.

CurrentPractices
#n order to provide a foundation in the analysis of the performance appraisal system used by Hewlett"Packard& a brief background of performance management and performance appraisal is necessary. Performance management can be defined as the integration of performance appraisal systems with broader H<+ systems as a means of aligning employees$ work behaviours with the organi'ation$s goals. = performance management system consists of the processes used to identify& encourage& measure& evaluate& improve& and reward employee performance at work. Performance management helps organi'ations sustain or improve performance& promote greater consistency in performance evaluation& and provide high" uality feedback. Performance management helps organi'ations link evaluations to employee development and to a merit based compensation plan. #t forms a basis for coaching and counselling& permits individual input during the evaluation process& and allows for a blend of ualitative and uantitative evaluations. Performance management provides a process that helps manage employee expectations of !ob demands and factors that reveal how well the !ob is done. Performance management is an outgrowth of management controls whose purpose is to ensure that work is progressing according to the organi'ation$s plans. Performance management according to 4nell ,/00>- is the principal set of practices by which control is manifested in organi'ations. Control is defined as any process that is used to align the actions of individuals to the interests of the organi'ation. Controlling is the management function concerned with monitoring performance to ensure that it conforms to plans. Control is accomplished by comparing actual performance with predetermined standards or ob!ectives and then taking action to correct any deviations from the standard. The three basic re uirements of the control process are?

o o

7stablishing performance standards % 4tandards are used to set expected performance levels for machines& tasks& individuals& groups of individuals and the organi'ation as a whole. +onitoring performance and comparing it with those standards % The primary purpose of monitoring performance is to provide information on what is actually happening in the organi'ation.

Taking necessary corrective actions % Corrective action can be taken after the actual performance has been assessed and compared with performance standards.

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Performance Appraisal at HP
=s part of the control process& the purpose of performance management is to make sure that employee goals& employee behaviours used to achieve those goals& and feedback of information about performance are linked to the organi'ational strategy.

Performance appraisal is the process by which an employee$s contribution to the organi'ation during a specified period of time is assessed. Performance appraisal is integral to the successful operation of most organi'ations. .uring this process& employees are evaluated formally and informally to determine the nature of their contributions to the organi'ation. =ppraisal occurs during time periods and in meetings that are scheduled to produce reasoned consideration of contributions& but it also occurs informally as employee contributions are observed& or when an evaluation is brought to the attention of others. Performance appraisal is treated as an evaluation and development tool& as well as a formal legal document. =ppraisals review past performance % emphasi'ing positive accomplishments as well as deficiencies and drafting detailed plans for future development. The performance evaluation also serves a vital organi'ational need by providing the documentation necessary for any personnel action that might be taken against an employee.

Appraisal Flow

Performance Appraisal at HP
Performance Appraisal at HP
Management by b!ecti"es

The activities of HP employees were guided by a comprehensive system of management by ob!ectives ,+3*-. The performance appraisal system starts with the establishment of long" and short"range ob!ectives derived from company and group ob!ectives. =t each company level& overall ob!ectives were communicated and subunit ob!ectives were negotiated. HP lets the employees decide on how they would accomplish the goals that they have set. The goals were made to interconnect hori'ontally and vertically throughout HP. The management by ob!ective process is part of the company$s strategic planning which defines the ob!ectives and responsibilities that a !ob entails. =lthough the top management is the one who initiates the process& every employee is given opportunity to influence the setting of ob!ectives. 7mployees are encouraged to suggest on how they can contribute to the success of the business unit. #n an +3* system an employee meets with his or her manager& and they collectively set goals for the employer for a coming period of time. These goals are usually uantifiable& they are ob!ective& and they are usually written. .uring the specified timeframe& the manager and the employee periodically meet to review the employee$s performance relative to attaining goals. =t the end of the specified period& a more formal meeting is scheduled in which the manager and employee assess the actual degree of goal attainment. The degree of goal attainment then becomes the individual$s performance appraisal. HP combined +3* with the paired"comparison approach. The paired comparison approach measures the relative performance of employees in a group. = manager lists the employees in the group and then ranks them. HP managers invested considerable time and energy ensuring that an individual$s pay level within their salary range reflected their performance when compared to others. Performance was !udged by the immediate supervisor but ad!usted based on a ranking process& conducted by managers in face"to"face meetings& which compared employees in different departments with similar responsibilities.

#$ +oal ,etting
#n Hewlett Packard& there has been a long tradition of targets being determined by both boss and employee. This reflects not only the longstanding policy of decentrali'ation within the organi'ation but also the difficulty of imposing performance targets on employees who are facing changing demands and working in fast"changing markets. These conversations are participative. The discussions attempt to cover the diversity of situations the employees would face. #n the monthly formal meetings as well as in informal settings& manager and employee have the opportunity to revise these targets in light of new information about the environment of client behaviour. The revisable nature of the performance targets& together with the degree of influence employees have over their goal setting& means that perceptions of fairness are high in terms of the targets being realistic and achievable.

Performance Appraisal at HP
%$ Performance &"aluation
#n HP& the performance appraisal is used primarily as a development tool. Formal meetings between manager and employee are held every uarter& culminating in a full annual appraisal. 7mployee voice in the evaluation was strong. 4elf"assessment exercise are strongly encouraged in HP. +anagers devote a great deal of time not only to discussing problems and identifying areas for improvement& but also to giving feedback. This occurred not only in formal meetings& but also on an on"going basis. This informal process helped to cement new organi'ational values by correcting and reinforcing behaviours and attitudes. #n order to achieve a rounded picture of employee performance& the company has introduced socially based measures of evaluation such as @A9"degree appraisal.

Performance Appraisal at HP' &"aluation

Hewlett"Packard has an effective and efficient performance appraisal system. The performance appraisal system is effective and efficient because it is aligned with the rewards and the goals and ob!ectives of the organi'ation. The performance appraisal is also an effective tool in measuring the contributions of each employees& including their strengths and weaknesses. #t also gives a clear view of the training needs of the employees. However& the fact that there are problem areas or that the performance appraisal system used has weaknesses cannot be discounted. #t is of utmost importance that the sources of possible problems and challenges in the performance appraisal are identified in order to avoid mistakes.

Management by

b!ecti"es' &"aluation

The +anagement by *b!ective performance appraisal that Hewlett Packard employs tends to reward employees who achieve the agreed targets with increased pay or promotion& while those who do not attain ob!ectives are seen as to have failed and penali'ed accordingly. +3* also tends to focus on the number of ob!ectives to be attained& or the 2 uantity$ of the performance or outcome that is to be attainedB in some situations& the level of difficulty or the uality of the results might be more important.

(trengths and Weaknesses of M)

The strengths of +3* as a performance appraisal system are?

o o o o

#t increases the employee$s involvement in setting performance ob!ectives and increases the motivation re uired to reach those ob!ectives #t offers an ob!ective& factual basis for measuring accomplishments #t is entirely !ob centered #t establishes the appraiser as a facilitator of performance rather than a critic of performance

Performance Appraisal at HP
o o
#t assures the organi'ation that all employees are working toward a common purpose #t supports psychological concept that people will exercise self"direction and self"control in the accomplishment of organi'ational aims that they have participated in setting. *rgani'ations that use +3* fre uently report that they are very effective& highly motivating performance appraisal systems. +3* systems communicate to employees exactly what is expected of them& and provide clear behavioural benchmarks for performance. .evelopmental feedback is inherent in the entire +3* process& because the employees$ skills and abilities are taken into account at the front end when goals are initially set and along the way as progress toward the goals is measured. #n an +3* system& goals are highly personali'ed and reflect the employee$s experience and training.

+3* as a performance appraisal tool has also some weaknesses. These include the following?

o o

#t is an organi'ational philosophy and cannot operate at one organi'ational level without operating at all levels +3* cannot be implemented at all organi'ational levels simultaneously& nor can it be implemented from the bottom up % it must begin at the very top of the organi'ation and works its way down

o o

#t re uires a total and si'able commitment of management support& interest& and time if it is to succeed +3* is not applicable to all types of !obs. #ndividuals performing routine& repetitive& or machine"paced !obs are better appraised by another method

7mployees re uire extensive training before they normally respond in a positive way to +3*.

Possible (ources of Problems

=lthough the performance appraisal system used by HP can be considered as effective and efficient& the management must make sure that the possible sources of problems are identified and avoided. The company must take necessary measures in order to prevent problems with the system. The possible sources of problems are the following? 1. Personal Bias *ne of the biggest problems in every performance appraisal system is the tendency of the appraiser to be bias. =n evaluator$s personal feeling about the person being appraised can affect the result of a performance appraisal. 2. Lack of Appraiser Training =nother source of problems that the organi'ation must be aware of is the lack of appraiser training.

Performance Appraisal at HP
3. Insufficient Information #nsufficient& inade uate and incorrect information can also be a source of problems and difficulties. . Lack of !ocumentation = ma!or problem with most appraisal system is that they do not re uire continuous documentation of employee performance. When documentation does exist& it is often inade uate to support an accurate assessment of employee accomplishments. Con"existent or inade uate documentation leads supervisors to commit many performance appraisal errors.

Conte*t +iagram

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Performance Appraisal at HP

+ata Flow +iagram

**

Performance Appraisal at HP
&ntity ,elationship +iagram

,ecommendations
+3* is the primary tool that HP uses in appraising employee performance. The company was able to establish as effective +3* system that is able to measure the performance of the employees against the goals that they have set. However& relying on +3* alone can lead to different problems and difficulties. +3* has both strengths and weaknesses. #n order to maximi'e the strengths of +3* and minimi'e its weaknesses& the company must make use of other performance appraisal tool.

,ecommended Appraisal Tools

*ther than +3*& the company can also make use of performance tools to make sure that the performance appraisal system is effective and efficient. The following are the recommended tools for HP?

#$ ,ating (cales
*ne of the most widely used performance appraisal method is some form of a rating scale. The use of rating scales is popular among organi'ations because it is simple and easy to use. With rating scales& employees are evaluated according to a set of predetermined factors& such as uantity of work& uality of work& absenteeism& or the like. 7ach evaluation factor is ranked from the lowest level of performance to the highest in as many as fifteen categories.

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Performance Appraisal at HP

%$ Checklists
Performance appraisal checklists provide the evaluator with a series of statements& phrases& or ad!ectives that describe employee performance. These statements may be subdivided into specific factors such as uantity of work& uality of work& and so forth& with the descriptors listed under each category. *ccasionally& the phrases or ad!ectives are simply listed without categori'ation. The appraiser marks the statement or ad!ective considered to be most descriptive of the employee$s performance during the period covered by the appraisal.

-$ Fle*ible .ob +escriptions/ &mployee Influence in the Process

The manager and the employee should be the ones responsible for !ob analysis& !ob design and !ob description. The organi'ation$s generic or model !ob descriptions should be used by managers and employees only as a basis for developing and agreeing their own description of the !ob the employee really does. Dob descriptions should not be written and imposed on !ob holders from above. The responsibility of designing the !ob description should remain with the manager and the !ob holders. The contents of the !ob description should be agreed by both the !ob holder and the manager. :etting employees$ commitment is a key to setting effective goals. 7mployees should participate fully in the setting of ob!ectives for their own !obs& and have an opportunity to contribute to planning the ob!ectives of the work group& the department and the organi'ation as a whole. 7ach individual$s goals must fit in with those of the wider work group or workplace. How much you involve employees in setting their targets will depend on the organi'ation$s approach to performance management and on its style and culture generally. =t the very least& managers should ensure that the person responsible for achieving a particular ob!ective understands and accepts it. 7mployees will not feel committed to targets that are !ust handed down to them by management.

0$ ,ater Training and &mployee &ducation

*ne approach to performance appraisal training is to alert managers to common errors of !udgment so they can spot them in how they evaluate others and guard against them. =ppraisal methods that have clear performance dimensions are likely to reduce rating errors. For any appraisal system to be effective& training must focus on helping managers develop specific skills and confidence in their ability to effectively evaluate others. These skills should include goal setting& communicating performance standards& observing subordinate performance& coaching& giving feedback& completing the rating form& and conducting appraisal review. =ppraisals without training are a sure route to ineffectiveness& frustration and dissatisfaction. #t is also important to make employees understand the appraisal system. 7veryone in the organi'ation needs to understand why appraisals are being conducted and how the system operates. The more clearly stated the organi'ationEs

*3

Performance Appraisal at HP
purpose for appraisals& the less confusion and ambiguity surrounding the process. The goal should be that everyone knows why you are conducting appraisals.

1$ &nsure the 2alidity and ,eliability of the Performance Appraisal

7stablishing the validity of performance appraisal begins with !ob analysis& the process wherein !ob performance factors are clearly identified. These factors may include such items as uantity of work& uality of work& meeting deadlines& and adhering to prescribed procedures. The factors must be specifically defined so as to reflect expected outcomes. uantifiable and

3$ &nsure that Communication is

pen

=ll employees have a strong psychological need to know how well they are performing. =n effective performance appraisal system ensures that feedback is provided on a continuous basisFnot in an annual written evaluation& but in the form of daily& weekly& and monthly comments from a supervisor. The annual evaluation and its accompanying interview or performance discussion must be devoid of surprises. While the interview presents an excellent opportunity for both parties to exchange ideas in depth& it is not a substitute for day"to"day communication about performance.

Conclusion
Hewlett Packard has one of the best performance appraisal systems around. The performance appraisal system used by Hewlett"Packard supports the company$s culture& ob!ectives and philosophies. The primary toll used in the performance appraisal process is +3*. +3* as a performance appraisal tool is considered effective and efficient. The performance appraisal system at HP* starts with the establishment of short"term and long"term goals derived from the company and group ob!ectives. The advantages of +3* for HP are that it empowers employee. #t lets employees decide on how they would accomplish the goals that they have set. 7mployees are also encouraged to suggest on how they can contribute to the success of the company. +3* is truly an effective performance appraisal system. The effectivity of every performance appraisal system lies in how it is used and expertise of the ones who uses it. This paper presented some of the possible sources of problems and their possible solutions. This paper also presented some recommendations on how the current performance appraisal system at HP can be further enhanced.

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Performance Appraisal at HP
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