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Performance Appraisal at Pepsi 1


Submitted to: Mr Haroon Ahmad

December 15th, 2011

Performance Appraisal at Pepsi 2

Table of Contents

Introduction 3

Pepsi Pakistan 3

Research Methodology 6

Human Resource Management 8

Performance Appraisal 9

Uses of Performance Appraisal 11

Methods of Performance Appraisal 13

Management by Objectives 16

How is PDR conducted at PepsiCo? 18

Process of Performance Appraisal 19

Motivation 21

Importance of Performance Appraisal at Pepsi 24

Recommendations 27

Conclusion 28
Performance Appraisal at Pepsi 3


Pepsi International is a world renowned brand. It is a very well organized multinational

company, which operates almost all over the world. They produce, one of best carbonated drinks

in the world. Pepsi is a symbol of hygiene, quality and service, all over the world. Pepsi is

producing Cola for more than 100 years and it has dominated the world market for a long time.

Its head office is in New York.


The market in Pakistan is surely dominated by Pepsi. It has proven itself to be the No.1 soft

drink in Pakistan. Now days Pepsi is recognized as Pakistanis National drink. In 1971, first plant

of Pepsi was constructed in Multan, and from there after Pepsi is going higher and higher. Pepsi

is the choice soft drink of every one. It is consumed by all age groups because of its distinctive

taste. Compared with other Cola in the market, it is a bit sweeter and it contributes greatly to its

liking by all. Consumer’s survey results explain the same outcome and Pepsi has been declared

as the most wanted soft drink of Pakistan.

Pepsi's greatest rival is Coca Cola. Coca Cola has an international recognized brand. Coke’s

basic strength is its brand name. But Pepsi with its aggressive marketing planning and quick

diversification in creating and promoting new ideas and product packaging, is successfully

maintaining is No.1 position in Pakistan. In coming future Pepsi is also planning to enter into the

field of fruit drinks. For this purpose it has test marketed its mango juice in Karachi for the first

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When Pepsi was introduced in Pakistan, it faced fierce competition with 7up, lemon and lime

drinks, which was established during 1968, in Multan. Pepsi introduced its lemon and lime,

"Teem" to compete with 7up. It successfully, after some years, took over 7up, and this enhanced

Pepsi's profits and market share. In Pakistan, Pepsi with 7up enjoys 70% of the market share

where as the coke just has 20% markets share.

Pepsi is operating in Pakistan, through its 12 bottlers all over Pakistan. These bottlers are Pepsi's

strength. Pepsi has given franchise to these bottlers. Bottlers, produce, distribute and help in

promoting the brand. Pepsi also launched its fast food chain KFC i.e. "Kentucky Fried Chicken.”


Our mission is to be the world's premier consumer Products Company focused on convenient

foods and beverages. We seek to produce financial rewards to investors as we provide

opportunities for growth and enrichment to our employees, our business partners and the

communities in which we operate. And in everything we do, we strive for honesty, fairness and



"PepsiCo's responsibility is to continually improve all aspects of the world in which we operate -

environment, social, economic - creating a better tomorrow than today."

Our vision is put into action through programs and a focus on environmental stewardship,

activities to benefit society, and a commitment to build shareholder value by making PepsiCo a

truly sustainable company.

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Performance with Purpose

At PepsiCo, we're committed to achieving business and financial success while leaving a

positive imprint on society - delivering what we call Performance with Purpose.

Our approach to superior financial performance is straightforward - drive shareholder value. By

addressing social and environmental issues, we also deliver on our purpose agenda, which

consists of human, environmental, and talent sustainability.

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The main significance of the project is to identify the level job satisfaction and performance

among the employees after and before the conduction of Performance Appraisal Exercise. And

more importantly we tend to analyze the different techniques of performance appraisal used by


Managerial usefulness of the study

To point out and suggest the organization to adopt remedial actions to remove those loopholes to

aiming to improve the productivity and efficiency of the worker and increase the level of job



The research methodology we used for this project is simple and easy in comprehending. We

used two methods for collecting the desired information regarding PepsiCo Human Resource

Management and Performance appraisal which were primary and Secondary data collection

method. We conducted a field study by visiting the HRM department of PepsiCo. We

interviewed the Head of the HR department Mrs.Hajra Omer and got the following information.


Every Study suffers from certain limitations and so does this project. So, the applicability of the

findings and recommendations is subjected to the following mentioned constraints/limitations:

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 Respondents were reluctant to give their views on data.

 Shortage of time duration for the research work.

 Hiding of some true facts by the respondents due to the fear of the management.

 Though care has been taken, judgment errors may have occurred.

 Employees being very busy did not get enough time to give responses whole-heartedly.

 Some of the responses given by the respondents were not legible and clear.
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Human Resource Management

Human Resource Management (HRM) is a process of bringing people and organization

together so that the goals of the each department are met. . It is that part of the

management process which is concerned with managing Human Resources in an

organization. Simply put, Human Resource Management is a management

function that helps manager recruit, select, train and develops members for an

organization. Hrm tries to win the wholehearted co-operation of their employees. In

short, it may be defined, as the art of procuring, developing and maintaining competent

work force to achieve the goals of an organization in an effective and efficient manner.

Human Resource Objectives

HR objective are designed to look out for the well being of all employees of the company.

 Provide leadership and direction to employees of the company.

 Career Development planning for all employees of the company

 Ensure thorough training of nationwide employees.

 To provide individual employees with orientation on the company at the time of joining.

 To provide employees with solutions to their problems.

 Maintaining data records of all employees of PEPSICO (Human Resources information


 To evaluate and retain those employees who are assets to the company.
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Performance Appraisal

In simple terms performance appraisal may be understood as the assessment of an individual’s

performance in a systematic way, the performance being measured against such factors as job

knowledge, quality and quantity of output, initiative, leadership abilities, supervision,

dependability, co-operation, judgment, versatility, etc. A formal definition of Performance

Appraisal is “It is the systematic evaluation of the individuals with respect to his or her

performance on the job and his or her potential for development”

Performance Appraisal is a systematic and periodic way of conducting an impartial rating

of an employee’s excellence in matters pertaining to his present job and to his potentialities for a

better job. Thus under Performance Appraisal, we not only evaluate the performance of a worker

but also his potential for development.

Objectives of Performance Appraisal

The main purposes of employee assessment are:

Training and Transfers have been effective or not. Performance is concerned and to assist them

with constructive criticism and guidance for the purpose of their development for dialogue

between the superior and the subordinate, and improves understanding of personal goals and

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When to Appraise?

The appraisals are conducted whenever the supervisor or personnel managers feel it

necessary. However systematic appraisals are conducted on a regular basis; say for example

every six months or annually.

Whose Performance should be rated?

To the question as to whose performance should be rated? That is, who can be rated? The answer

is obviously – Employees and when we say employees, it may be individual, group, teams, or


Who are Raters?

Raters are immediate Supervisors, specialists from HR Department, Subordinates, Peers,

Committees, Clients, Self-appraisals, or a combination of several.

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Uses of Performance Appraisal

Poor Performance indicates the need for retraining. Likewise, good performance may indicate

untapped potential that should be developed.

Followings are the some major use of Performance Appraisal to the organization:

Compensation Adjustments

Performance evaluations help decision-makers determine who should receive pay raises.

Many firms grant part or all of their pay increases and bonuses based upon merit, which is

determined mostly through performance appraisals.


Promotions, transfers and demotions are usually based on the past or present performance. Often

promotions are reward for past performance.

HR performance

Good/bad performance throughout the organization indicates how well the human resource is



Performance feedback allows the employee, manager, and personnel specialists to intervene with

appropriate actions to improve performance.

Job Design Errors

Poor performance may be a symptom ill-conceived job designs. Appraisals help diagnose these

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Good or bad performance implies strengths or weakness in the personnel department’s staffing

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Methods of Performance Appraisal

PepsiCo uses the 180 degrees appraisal cycle through the technique or methods that have been

used by the PepsiCo is the Graphical Rating Scale also known as the tabulation method. It is

conducted through the ERP system which is supported by the Oracle. In PepsiCo the appraisal

system is known as the PDR i.e. performance development review.

Graphical Rating Scale

1. Definition of the rating scales

The Rating Scale is a form on which the manager simply checks off the employee’s level of

performance. This is the oldest and most widely method used for performance appraisal. The

scales may specify five points, so a factor such as job knowledge might be rated 1 (poorly

informed about work duties) to 5 (has complete mastery of all phases of the job).

2. Content of appraisal

 Quantity of work. Volume of work under normal working conditions.

 Quality of work. Neatness, thoroughness and accuracy of work Knowledge of job.

 It is a performance appraisal form that contains five sections.

 Section I: Employee qualification

 Section II: Performance

 Section III: Integrity

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 Section IV: Leadership skills

 Section V: Succession planning and resource training.

 Dependability. Conscientious, thorough, reliable, accurate, with respect to attendance,

relief, lunch breaks, etc.

 Judgment

 Attitude. Exhibits enthusiasm and cooperativeness on the job.

 Cooperation. Willingness and ability to work with others to produce desired goals.

 Initiative.

3. Rating scales

Rating scales can include 5 elements as follows:

• Unsatisfactory

• Fair

• Satisfactory

• Good

• Outstanding

4. Advantages of the rating scales

•Graphic rating scales are less time consuming to develop.

• They also allow for quantitative comparison.

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5. Disadvantages of the rating scales

• Different supervisors will use the same graphic scales in slightly different ways.

• One way to get around the ambiguity inherent in graphic rating scales is to use behavior based

scales, in which specific work related behaviors are assessed.

• More validity comparing workers ratings from a single supervisor than comparing two workers

who were rated by different supervisors.

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Peter F. Drucker was the first who gave the concept of MBO to the world way in 1954 when his

The Practice of Management was first published.

A c c o r d i n g t o Prof. Reddin, “ B O i s t h e e s t a b l i s h m e n t o f e f f e c t i v e n e s s

a r e a s a n d effectiveness standards for the managerial positions and the periodic conversions

of these into measurable time bound objectives linked vertically and horizontally and with future


MB O helps and increases emplo ye e motivation but it relates over all

goals to the individual’s goals and helps to increase an employee’s

understand of where the organization is and where it is heading.

MBO results in a “means ends” chain. Management at succeeding lower level in

the organizations establishes targets which are integrated with those at the next higher level.

Thus, it can insure that everyone’s activity is ultimately aimed towards

organization’s goals.
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MBO identifies performance deficiencies and enables the management and the

emplo yees to set individualized self- improvement goals and

t h u s p r o v e s e f f e c t i v e Training and Development program.

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How is PDR conducted at PepsiCo?

There are certain steps and procedures the company follows while conducting the PDR and they

are as follows:


To Set the objectives and goals for the employees.


Review the performance after three months.

Step 3

The next review is held in the mid of the year. This review is to evaluate if any employee is

lacking or behind the targeted standards. And if it is so Special Training is given to speed up the

work process.

Step 4

The next step is of self-evaluation held in October-November.

Step 5

Finally the performance appraisal is conducted by the HR department.

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Process of Performance Appraisal

Performance Appraisal is a nine step process:-

Step 1

In this step the performance standards are established based on the Job Description and Job

Specification. The standards should be clear, objective and incorporate all the factors.

Step 2

Under this step, the Performance Standards are informed to all the employees including


Step 3

In this step, the instruction given to appraisal are followed, measurement

of employee performance by the appraisers through observation, interview, records and reports

are done.

Step 4

This step finds out the influence of various internal and external factors on actual performance.

Step 5

This step is to comparing the actual performance with that of other employees and previous

performance of the employee and others.

Step 6

The sixth step of Performance Appraisal Process, the actual performance ismeasured with the

standards and finding out deviations.

Step 7
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The seventh step compares the actual performance of the employee and other employees doing

the same job and discuss with him about the reasons for the positive or negative deviations from

the pre-set standards as the case may be.

Step 8

This step suggests necessary changes in standards, job analysis, internal and external


Step 9

The last step is the follow-up of performance appraisal report. This step includes guiding,

counseling, coaching and directing the employee or making arrangements for the training and

development of the employee in order to ensure improved performance. If the actual

performance is very poor and beyond the scope of improvement, it may be necessary to take

steps for demotion or retrenchment or any suitable measure.

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Motivation of employees for performance appraisal

Firms often face the problem of employee de-motivation when it comes to performance appraisal

and so PepsiCo is no exception. In order to overcome this hurdle special training sessions are

held by the company throughout the year. In these training sessions employee are informed and

convinced about the importance and benefit of performance appraisal. First, the employee gets a

very clear cut understanding of his job duties, authority and responsibility in the organization.

Second, the employee is appraised of his highs and lows in performance. When the highs are

rewarded, the employee's morale is boosted tremendously and when the lows are reprimanded,

he takes care not to repeat the same mistakes in the future.

For the management, performance appraisals bring out the key and non-key performers. The

management then takes steps to hone the key performers and develop the non-key performers

into putting in their best. Performance appraisals identify the areas where training and

development are needed.

Performance Appraisal as a Motivation Tool

Motivation is the process that energizes employees and propels them to pursue their goals. Well-

designed and well-executed performance appraisals have a strong motivational impact.

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Appraisals have the power to motivate employees because they provide a number of

interconnected benefits:

They demonstrate the need for improvement. If employees don’t have a clear understanding of

how they’ve been performing, they can’t be motivated to make any improvements.

They meet higher-level psychological needs. Researchers continue to find that recognition is one

of the most powerful forms of motivation for large numbers of employees. Although you can

find numerous possible sources of recognition on the job, performance appraisals are an

opportunity for employees to receive formal, significant, and enduring recognition from their


They build a sense of personal value. When managers take the time and effort to carefully

review, analyze, document, and discuss performance with employees, the underlying message to

the employees is that they’re important and valuable, and this alone is quite rewarding, whether

the feedback is positive or not.

They enhance personal development. Performance evaluations are motivational for employees

who are looking to enhance their personal learning, growth, and development. Appraisals are a

highly valuable source of information, insights, and tools necessary for such progress.

Performance appraisals are similarly motivational for employees whose needs are centered on

achievement, goal attainment, and sensing personal effectiveness, respect, and trust.

They turn employees around. When employees are performing poorly, performance appraisals

can provide the wakeup call that they need to get refocused and reenergized. With performance

appraisal, however, the purpose of the session is not strictly disciplinary, so the employee is

more likely to walk in with a more receptive and open mind. As a result, your comments
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regarding an employee’s questionable performance have an excellent chance of being heard and

generating action as a result.

They increase satisfaction. When performance appraisals meet the employees’ needs in such

areas as gaining recognition, sensing achievement and competence, experiencing growth, and

meeting objectives, they’re also contributing to the employees’ job satisfaction, and this is one of

the most important elements at work today. When employees are satisfied, some of the most

visible indicators are reduced turnover, absenteeism, and tardiness.

On the flip side, when employees are subjected to a shoddy or even nonexistent performance

appraisal system, the opportunities to fulfill these higher-level employee needs are substantially

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Importance of Performance Appraisal for PepsiCo

Performance appraisals, a very important function of the human resources department for any

organization, are conducted to gauge the net worth of all its employees. Appraisal methods

benefit the organization immensely. The aim of appraisals is to improve the present performance

of the employees and draw on the future potential.

The HR department undertakes this processes usually annually in which they procure, analyze

and document facts about the performances of the employees of the organization. Similarly,

PepsiCo conducts evaluation in a sequence as mentioned earlier after three months, than at mid-

year, following this in October-November than the final performance appraisal at the end of the

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During a performance appraisal review, a supervisor and an employee discuss the employee's

strengths and weaknesses. This gives the employee individual face time with the supervisor and

a chance to address personal concerns. Further it helps to find the problems faced by an

employee in detail and the training that they need. This is very important because if the

loopholes are not established the entire organization will suffer. Plus the employee might be

asked to leave the job.

Feedback is enhanced through performance appraisal. Employees need to know when their job

duties are being fulfilled and when there are issues with their work performance. Managers

should schedule this communication on a regular basis. This leads to motivate the employees for

their good performance.

Performance appraisals allow employees and supervisors to discuss goals that must be met to

advance within the company and build a strong career. This can include identifying skills that

must be acquired, areas in which one must improve, and educational courses that must be


Performance appraisal also helps in succession planning that is considering the opportunities and

positions for employees to succeed another position. It helps the human resource managers to

determine the employees capable enough to takeover someone else’s position when they leave.

Performance appraisal is important for determining the cost effectiveness of the human resource

and payroll. As it determines the employees who need to be given increments and who are the

ones whose income should be reduced. This also helps to set budgets.
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When employees know there will be regularly scheduled evaluations, they realize that they are

accountable for their job performance. Besides communicating employees' individual goals,

employee appraisals provide the opportunity for managers to explain organizational goals and

the ways in which employees can participate in the achievement of those goals.
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PepsiCo should build a strong management and development framework to stand the vigorous

competition from the various industries.

There should be on-line information of all the employees regarding all the activities performed

by them like performance, communication skills, quality of work, over time devoted by each

employee, etc.

By adopting MBO method, Employees compete against each other and don’t help others.
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PepsiCo is a name of standard and quality product. PepsiCo is stressing more on its short term

planning strategies to make its image good enough in the world community. And is stressing

more on the customer services and health and nutrition factors. It has a strong management to

keep the PepsiCo on the height of professionalism and commitment to quality.

The Performance Appraisal methods vary from one organization to another. Change in method

of Performance Appraisal has observable and immediate side effect on organizational processes

like work task, job design, organizational structure, knowledge and skill required, and values,

attitudes and behavior of employees.

Substantive changes in one or more of the above factors leads to perceive or actual psychological

threat of job displacement, reduction in economic security, disruption of social arrangements and

redefining of authority relationships.