Performance Management in Pepsico

PERFORMANCE AND COMPENSATION MANAGEMENT: MICROSOFT

Microsoft is a multinational corporation which builds up by two Americans, Bill Gates and Paul Allen during the year 1975. Microsoft Corporation develops, manufactures, licenses, and supports a wide range of software products for computing devices. The headquarters of Microsoft Corporation is located in Redmond, Washington, USA. The starting of Microsoft Corporation is by Bill Gates and Paul Allen who addicted to programming and computer. The two Americans start their business with just a very small firm to sell applications they had created for domestic customers. Soon, when Bill Gates realize that the BASIC, the simple programming language that taught programming was very potential to be use in kind of computers. MITS Altair, the microcomputer was happened to be released. These two Americans work very hard to make BASIC compatible with MITS Altair. Finally the success with Basic Altair and Microsoft Corporation start to move on its long path of successful and well known. Since year 1993, Microsoft Corporation launched its first Windows, named as Windows NT. Microsoft corporation continuously develop Windows operating system  which were more improved such as Windows 95, Windows 97, Windows CE ,Windows 2000, Windows 2003, Windows 2007, Windows Vista, Windows XP, Windows 7, Windows 8.

"Employees are a company's best asset" as a multinational company which is well known in worldwide, Microsoft is practicing a set of performance management and appraisal system which allowed Microsoft to continue in developing and growing. One man work can never build a success legend such as Microsoft. Before year 2000, Microsoft heavy relying on stock options as one of the way to compensate employees. During year 2006, Microsoft started to implement changes of rewarded system with more flexibility. The new implemented system allowed employee to get more merit pay, annual bonuses and restricted stock unit. However, this new implemented system is confusing and inconveniences.

During year 2011, Microsoft had introduced forced ranking evaluation system to overcome the issue of confusing and inconvenience Forced ranking evaluation is a type of forced distribution method, where managers are required to distribute rating for those evaluated, into a pre-specified performance distribution ranking percentage or normal distribution. Forced ranking is the performance appraisal practices that assigning pre-determined percentages of individuals in an organization to each level of performance rating. In a nut shell, forced ranking approach forcing managers to designate a small percentage of their direct report as under performers Forced ranking is a system started by General electric CEO, Jack Welch and it is soon follow by a lot of big corporations such as Cisco Systems, HP, Intel and etc.

Force ranking approach in Microsoft is done by assessment of manager who are one or two level above the employee towards the performance criteria that required to fulfill by employee being evaluated. An employee will receive a rating within ranges of 1 to 5. Ranking 1 considered as highest while ranking 5 determine as lowest scale. Each level of ranking quota a certain number of employees only. This ranking system considered as 5 point scale system.

There is an argument whether forced ranking is a good practice or whether it is poisoning the performance and appraisal system. There are certain advantages of force ranking system which help organization in smoothing performance appraisal system.

Firstly, forced ranking provide a full, clearly and reality image to employees related to their exact ability which indicates the position they are standing on. Depends on whether they are on a status which can fulfill the needs of a company by the skills and  ability they have, it is consider as on par performance. Vice versa, if they do not have the ability to fulfill the criteria that used to evaluate them, these employees will consider as below par. Forced ranking play an important role to help the employees to see the reality while forcing them to find solution for improving themselves. Former General Electric CEO Jack Welch says, the most cruel management approach failed to expose the employee their real situation. In the aspects of company benefits, company can allocate more resources to top performance employees by eliminating those who are on bottom tier with no improvement. Employees that can stay means really high in quality because those low performers are eliminated.

Secondly, forced ranking provide justifications and standards for compensating the top performers. Through forced rankings, each employee is ranked clearly based on company requiring standards. There is no doubt or unclear define of whose employees is better. The rankings itself will tell everything where the person who get high ranking is worthy to take more valuable compensation compare with those who cannot perform well will deserve only little compensation. Microsoft provides an interactive intranet portal that allows employees to see the changes of their compensation based on their performance ratings. Forced ranking simplified the process of evaluating and compensating employees.  Clearly define of compensation benefit boost the satisfactions of employees. (Miller, 2012)

Besides advantages, forced ranking contain disadvantages which can harm company. Firstly, forced ranking can lead to less collaboration among employees. The competition among employees is very high and the competition may not be a healthy type because every employee in the company is trying to perform their best to eliminate others so that they can stay longer. The employees are forced to treat colleagues like the enemies. The employees in Microsoft Corporation might be put in a very high pressure working environment with fears and depressed feelings due to the worries of being a bottom tier performer. There is no harmony working environment under forced ranking system.

Secondly, the employees might act unethically or illegal in order to survive and eliminate others. Taking the energy company, Enron as an example. This company collapsed during year 2001 due to the publicized accounting scandal. Forced ranking is forcing the defaulted employee to work in a high pressure environment in order to achieve a high standard accounting result. Microsoft who practices forced ranking system may force the employees to behave the action such as corruption, fraud, cheat in order to make their jobs and performance up to par.