HEWLETT-PACKARD’S “TOTAL REWARDS” 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.

Hewlett–Packard’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 TotalRewardsprogram 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. 2. 3. 4. Evaluate the performance management impact of performance – related pay in terms of goals setting and reinforcement. Why should a performance management system be flexible yet embedded in a company’s culture? How does Hewlett-Packard’s organizational culture support its performance-management philosophy? Why is it important to link an organization’s performance management system to its reward system?



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