Performance Management in Pepsico

PEPSICO

Company Background PepsiCo., Inc., is a global snack and beverage company which manufactures, markets, and sells carbonated and noncarbonated beverages; various salty, sweet, and grain-based snacks; and food products worldwide. In 2004, the company had 153,000 employees worldwide and generated $29.2 billion in annual sales.

 Practice Description  PepsiCo’s dual performance ratings measure managers’ progress at building workforce strength through establishment and evaluation of both business and people objectives. To drive accountability, the company links the outcome of each individual rating to merit increases and variable compensation, thus ensuring people management remains cent

Performance Management is one of the oldest organizational concepts that is amongst the most relevant even today. Having already seen plenty of overhauls to the approach, strategy and governance of Performance Management frameworks over the last 3 decades, it is once again at the cusp of a major transformation.

The implication for implement performance management in flexible workforce is there might existing free rider in the group projects who take advantage for the performance score in the success completed projects. Not all individual are contribute the same level of effort to the projects had been done. (Performance Management) Hence, Pepsi Co must carefully analyze each employee’s contribution. In addition, it may be inaccurate if just focus on specific projects that have been done, whereby Pepsi Co should review the performance entire of period where the appraisal cover.

The manager might be evaluating an employee base on its own feeling, length of service, irrelevant criteria to rate the employees’ performance. (Performance Management) Furthermore, the manager may rush through the appraisal process which might not be able to record the accurate information that truly reflects the employee’s performance. (Performance Management) Lack of proper or accurate appraisal system will mislead Pepsi Co planning and it is costly for the organization. (Madar, 2007) This will also cause stumbling stone for the organization to strengthen its business competitiveness.

Performance Appraisal at Pepsi-Cola International

Pepsi-Cola International (PCI), with operations in over 150 countries, has devised a common performance appraisal system that focuses on motivating managers to achieve and maintain high standards of performance. Administrative consistency is achieved through the use of a performance appraisal system of five feedback mechanisms - instant feedback, coaching, accountability based performance appraisals, development feedback, and a human resource plan. The common system provides guidelines for performance appraisal, yet allows for
modification to suit cultural differences. For example, the first step of instant feedback is based on the principle that any idea about any aspect of the business or about an individual’s performance is raised appropriately and discussed in a sensitive manner. The instant feedback message can be delivered in any culture; the important thing is not how it is done but that it is done. The purpose of instant feedback is
always to improve business performance, not to criticise cultural styles. Using this system, PCI tries to balance the cultural and administrative imperatives of successful managing the performance of a diverse workforce.

objectives Performance appraisal:

• To review the performance of the employees over a given period of time
• To judge the gap between the actual and the desired performance.
• To help the management in exercising organizational control.
• Helps to strengthen the relationship and communication between superior – subordinates and management – employees.
• To diagnose the strengths and weaknesses of the individuals so as to identify the training and development needs of the future.
• To provide feedback to the employees regarding their past performance.
• Provide information to assist in the other personal decisions in the organization.
• Provide clarity of the expectations and responsibilities of the functions to be performed by the employees.
• To judge the effectiveness of the other human resource functions of the organization such as recruitment, selection, training and development.
• To reduce the grievances of the employees.

 Practices of Performance Management

Providing Feedback. Providing feedback is the most common justification for an organization to have a performance appraisal system. Through its performance appraisal process the individual learns exactly how well he/she did during the previous twelve months and can then use that information to improve his/her performance in the future

Encouraging Performance Improvement. How can anyone improve if he doesn’t know how he’s doing right now? A good performance appraisal points out areas where individuals need to improve their performance.

Motivating Superior Performance. This is another classic reason for having a performance appraisal system. Performance appraisal helps motivate people to deliver superior performance in several ways. First, the appraisal process helps them learn just what it is that the organization considers to be ‘‘superior.’’ Second, since most people want to be seen as superior performers, a performance appraisal process provides them with a means to demonstrate that they actually are.

Counseling Poor Performers. Not everyone meets the organization’s standards. Performance appraisal forces managers to confront those whose performance is not meeting the company’s expectations.

Determining Compensation Changes. This is another classic use of performance appraisal. Almost every organization believes in pay for performance. But how can pay decisions be made if there is no measure of performance? Performance appraisal provides the mechanism to make sure that those who do better work receive more pay.

Encouraging Coaching and Mentoring. Managers are expected to be good coaches to their team members and mentors to their proteges. Performance appraisal identifies the areas where coaching is necessary and encourages managers to take an active coaching role.

Supporting Manpower Planning. Well-managed organizations regularly assess their bench strength to make sure that they have the talent in their ranks that they will need for the future. Companies need to determine who and where their most talented members are. They need to identify the departments that are rich with talent and the ones that are suffering a talent drought. 

What about relationships between employees and the company ?

So Pepsico is managing to do “the old way” what many organizations try to do with lots of technology and ambitious programs. “Yes, it works without tools provided the manager/employee relationship is good“. That’s why Pepsico is investing that much on the quality of human relationships and management quality.

At Pepsico, individual objectives are 50% business related, 50% personal. So delivery and behavioral skills are equally valuated. Each employee can define with his manager a personal objective which, if met, would make the coming year a sucessful year for him. It could be “starting playing tennis again”, “pick up my kids at school on Thursday”. It helps manager to understand employee’s expectations and priorities, what makes sense, and play an active part in helping the employee to reach the objective. For example by not scheduling any meeting on Thursdays after 4.00 pm for the one who wants to pick-up his kids… “All these things contribute to bring trust and well-being into relationships“.

Compensation Management- Pepsico , best practices they are applying, and compensation-related challenges they are facing; analyzing how your company applies compensation practice to determine the positive or negative impact to the company and its stakeholders; examining the ways in which laws, labor unions, and market factors impact the company's compensation practices. Provide specific examples to support your response and evaluating the effectiveness of traditional bases for pay at the company you researched.

Compensation Strategy of PepsiCo

The compensation program of PepsiCo is being designed to provide the fixed income to the employees of the organization. The compensation strategy of PepsiCo is defined as follows:

1. Providing Base Salary: The salary of the employees of PepsiCo is reviewed on regular time period and benchmarking is done on the basis of similar positions in the competitive group organizations.

2. Annual Incentive Compensation: PepsiCo provides annual incentive compensation schemes to their employees on the basis of their annual performance rate. These performance-based compensation rewards are provided under the Internal Revenue Code System in the organization.. They determine the exact amount of compensation on the basis of their financial result, strategic position and the overall performance.

3. Long-Term Incentive Compensation: The top authorities of PepsiCo ...