The aggressive growth strategy of Hewlett Packard

Introduction

            Globalization has opened doors of opportunities for companies and organizations to explore markets beyond their home countries. Because of globalization and increase in mobility, these companies are able to enter new markets and to offer their products and services to new customers. This paper focuses on a multinational company and its performance management strategy concerning expatriates or international assignees. This paper discusses the different challenges and problems in managing the performance of international assignees, analyzing the different areas in international performance management. Recommendations to make international performance management more effective are also presented.

            In order to start the discussion and to provide a foundation for the paper let us briefly discuss international human resource management (IHRM). International Human Resource Management is the process of procuring, allocating and affectively utilizing human resources in a multinational corporation.  HMM managers in multinational corporations need to achieve two somewhat conflicting goals. First, they must integrate HRM policies and practices across a number of subsidiaries in different countries so that overall corporate objectives can be achieved. At the same time, the approach to HRM must be sufficiently flexible to allow for significant differences in the types of HRM policies and practices that are most effective in different business and cultural settings ( 2002).

            Compared to domestic HRM, IHRM requires a much extensive perspective on even the most common HRM activities. IHRM personnel must deal with issues such as international taxation; international relocation and orientation; various other administrative services for expatriates; selecting, training and appraising local and international employees; and managing host-government relations. In the subsidiary level, the HRM personnel are more involved in the employees’ personal lives ( 2008). Subsidiary HRM personnel often arrange housing, health care, transportation, education, and recreational activities for both expatriate and local employees. IHRM activities are also affected by more external forces than are domestic HRM activities. Subsidiary HRM personnel may have to deal with government ministers, other political figures, and a greater variety of social and economic interest groups than would normally encountered in purely domestic HRM ( 2002).

 

The International Assignee

            For the purpose of this report, we will call an international assignee an expatriate. An expatriate is defined as citizens of the country of the headquarters of the multinational firm and employed by the firm in the country of its headquarters that is transferred or assigned to another country, to work in a foreign subsidiary or other type of operation of the multinational firm for more than one year (2004).

            The expatriate or international assignee needs to develop and use the competencies necessary for any managerial assignment. But in addition to these capabilities, they must also develop the following:

• Ability to manage an international business and all the complexities that it entails
• Ability to manage a workforce with cultural and subcultural differences
• Ability to plan for, and conceptualize, the dynamic of a complex, multinational environment
• Being more open-minded about alternative methods for solving problems
• Being more flexible in dealing with people and systems
• Understanding and managing the interdependencies among the firm’s domestic and foreign operations (2004)

 

 

International Performance Management

            Performance management is defined as the integration of performance appraisal systems with broader HRM systems as a means of aligning employee’s work behaviors with the organizations goals. Thus, a performance management system consists of the processes used to identify, encourage, measure, evaluate, improve, and reward employee performance at work (2002). Performance management helps organizations sustain or improve performance, promote greater consistency in performance evaluation, and provide high-quality feedback. Performance management helps organizations link evaluations to employee development and to a merit-based compensation plan. Moreover, it form a basis for coaching and counseling, permits individual input during the evaluation process, and allows for a blend of qualitative and quantitative expectations of job demands and factors that reveal how well the job is done ( 2000).

            In the international level performance management entails more challenges. Basically, international performance is employed to monitor performance and ensure conformance to agreed standards. International performance management is the process that enables multinational companies to evaluate, and continuously improve individual and corporate performance against preset goals and targets (2005).

 

Effective Performance Management for Expatriates

            International performance management is a designed, implemented and evaluated intervention of a multinational company for the purpose of managing performance of its global workforce so that performance (at the individual, team, and organizational level) contributes to the attainment of strategic objectives and results in overall multinational company desired performance.

            Organizations develop performance management systems for a number of reasons, but primarily for evaluation and development. These purposes are much the same for domestic and international operations. The major difference is that implementation of these goals is much more difficult in the global arena. An effective international performance management achieves the following goals:

Evaluating Goals

• To provide feedback to managers so they will know where they stand
• To develop valid data for pay, promotion, and job assignment decisions, and to provide a means of communicating these decisions
• To help management in making discharge and retention decisions and to provide a means of warning employees about unsatisfactory performance

 

Development Goals

• To help managers improve their performance and develop future potential
• To develop commitment to the company through discussion of career opportunities and career planning with the manager
• To diagnose individual and organizational problems
• To identify individual training and development needs

 

Company Background

            Hewlett-Packard (HP) is a technology solutions provider to consumers, businesses and institutions globally. The company’s offerings span from IT 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 David Packard in 1989 are the centerpiece of the Hewlett-Packard Way. The HP values are not uniquely different from most large companies. What sets the HP values and the HP way apart is the seriousness with which values are treated as management tool. The central element in all activities in Hewlett Packard is the ‘HP Way’, a set of beliefs, objectives and guiding principles, and described by Bill Hewlett as the policies and actions that flow from the belief that men and women want to do a good job, a creative job, and that if they are provided with the proper environment they will do so. It is the tradition of treating every individual with respect and recognizing personal achievements ( 1982 cited in  2001). The HP Way is probably best illustrated from a number of words and concepts. These are love of the product, love of the customer, innovation, quality, open communication, commitment to people, trust, confidence, informality, teamwork, sharing, openness, autonomy, responsibility (2001).

The HP Way at Subsidiary Level

            The aggressive growth strategy of Hewlett Packard has led to its entrance to different markets around the world. As a market entry mode, the company used subsidiaries. The values of the HP Way is transferred to these subsidiaries. The HP Way serves as general guideline or ethic for working at HP to ensure that foreign work processes can be adapted into the HP subsidiaries while maintaining the HP Way.

Performance Appraisal at Hewlett Packard

            The activities of HP employees were guided by a comprehensive system of management by objectives (MBO). It began with the establishment of long- and short-range objectives derived from company and group objectives. At each company level, overall objectives were communicated and subunit objectives were negotiated. Objectives were goals and provided much freedom in how the goals would be accomplished. The goals were made to interconnect horizontally and vertically throughout HP. The entire MBO process was part of annual tactical and strategic planning that defined a job’s objective and major responsibilities and performance measures. Although MBO was initiated from the top, the accustomed nature of the MBO planning cycle provided ample opportunity for individual initiative and influence in setting overall objectives. Employees were expected to suggest ways they could help attain the unit’s goals in order to create individual accountability

            In an MBO 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 quantifiable, they are objective, and they are usually written. During the specified timeframe, the manager and the employee periodically meet to review the employee’s performance relative to attaining goals. At 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 ( 2002).

            HP combined MBO with the paired-comparison approach. The paired comparison approach, according to  (2002), measures the relative performance of employees in a group. A 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 judged by the immediate supervisor but adjusted based on a ranking process, conducted by managers in face-to-face meetings, which compared employees in different departments with similar responsibilities.

International Performance Management at HP

            The adoption of the HP Way by overseas subsidiaries entails that the HP Performance Management be employed in these organizations. These companies use both MBO and Paired-Comparison methods in appraising expatriate performance. Expatriates report and are appraised by the host-country managers who in turn report to the parent company.

 

Issues and Problems with the Current Performance Management

1. Invalid Performance Criteria

            International assignees often receive inappropriate performance appraisals because the performance criteria common in their countries are applied to expatriates even though those criteria might not make sense in the foreign culture. In the case of Hewlett-Packard, the performance appraisal criteria that are being employed in the headquarters are also being used overseas. This causes problems because the performance appraisal criteria were designed without considering the external factors that may affect performance in international settings. There is a need for the company to construct criteria for evaluation according the subsidiary’s unique situation.

2. Inadequate Rater Training

            One problem that coincides with invalid performance criteria is inadequate rater training. Performance raters from the headquarters are not properly trained and are not sufficiently educated on the different factors that affect performance in the subsidiary setting. In the home country setting, managers are evaluated by bosses with whom they have significant amount of interaction and with whom they work closely. Problems arise in the subsidiary level because many home-country top executives who complete expatriate’s appraisals lack information about the cultural, social and business contexts in which the work is performed.

3. Rater Bias

            In cases, where performance appraisal is done by host-country managers, problems arise because of rater bias. Individuals from different culture consistently misinterpret each others’ behaviors, possibly basing the appraisals. At times, these misinterpretations will be based on a preconceived attitude on the part of the rater, that is, based on some characteristics of the international assignee that is not directly related to the performance under review.

4. Host Environment

            The environment in the foreign setting is of primary importance. The international context, with its differing societal, legal, economic, technical and physical demands, in a major determinant of international assignee performance. Consequently, international assignee performance and performance expectations need to be placed within its international as well as its organizational contexts.

 

Recommendations

1. Criteria for Appraising International Assignees

            The performance criteria must be structured with consideration to different factors that affect performance in the subsidiary level. An example of the list of  criteria that can be included in the performance appraisal is presented below:

Qualifications

• Training
• Experience
• Technical Skills
• Social and Language Skills
• Education

Targets

• Directly derived from the parent company’s objectives
• Directly derived from the subsidiary’s objectives
• Directly derived from local objectives
• Developmental goals

Attitude for

• Flexibility
• Interpersonal understanding and communication skills
• Ability to cope with the stress of the assignment
• Openness to change

Job Performance

• Result areas; development of local team
• Communication and decision making
• Personal growth and development
• Application of expertise

2. Rater Training and Employee Education

            One approach to performance appraisal training is to alert managers to common errors of judgment so they can spot them in how they evaluate others and guard against them. Appraisal methods that have clear performance dimensions are likely to reduce rating errors ( 1997). 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. Appraisals without training is a sure route to ineffectiveness, frustration and dissatisfaction. It is also important to make employees understand the appraisal system. Everyone in the organization needs to understand why appraisals are being conducted and how the system operates. The more clearly stated the organization's purpose for appraisals, the less confusion and ambiguity surrounding the process. The goal should be that everyone knows why you are conducting appraisals ( 1992).

3. Clear Performance Appraisal Goals and Objectives

            There is no single best way of designing and implementing performance management systems. What works in one organization might fail in another. However, based on the experience of a wide range of organizations tend to point out that effective performance management systems have the following characteristics (2001):

• The performance management system has clear aims and measurable success criteria.
• Employees are involved in the design and implementation of the system.
• The system is simple to understand and operate.
• Effective use of the performance management system is at the core of manager’s performance goals.
• The system allows employees a clear ‘line of sight’ between their performance goals and those of the organization.
• The system focuses on role clarity and performance improvement.
• The focus on performance improvement is closely linked to an adequately resourced training and development infrastructure.
• The purpose of any direct link between the performance management system and employee rewards is made crystal clear, and proper equity and transparency safeguards are built in.
• The performance management system is regularly and openly reviewed against its one success criteria.

Performance appraisal must be free from bias and discrimination. The key is not which form or which method is used but whether managers and employees understand its purpose. An effective performance management system according to  (2002) will be:

• Consistent with strategic mission of the organization
• Beneficial as a development tool
• Useful as an administrative tool
• Legal and job-related
• Viewed as generally fair by employees
• Useful in documenting employee performance

4. Cultural and Social Training for Expatriates and Raters

            The raters and the expatriates must be properly trained in the areas of culture and society of the host-country subsidiary in order to deal with the different cultural and social issues that may affect the performance management of international assignees. Training and development programs that prepare employees for working internationally typically include:

• Language Training – Includes not only learning the language of the host country but also how the people think and act in relations with others
• Cross-Cultural Training – Includes understanding one’s own cultural conditioning, understanding cultural differences, and understanding work attitudes and motivations in other cultures
• Assessing and Tracking Career Development – Includes maximizing the career benefits of foreign assignments and repatriation
• Managing personal and family life in the form of culture shock ( 2002)

 

Conclusion

            International Human Resource Management deals with human resources issues on a different level. Compared to domestic HRM, IHRM requires more planning and there are more factors to consider and to analyze. One of the aspects of IHRM which needs attention from HR professionals is International Performance Management (IPM). Effective IPM requires careful analysis of the parent company’s visions and goals and deep understanding of the environment in which subsidiary operates.  The case of Hewlett-Packard presented different issues and problems that a multinational company faces in managing expatriate performance. These problems and issues are invalid performance criteria, inadequate rater training, rater bias, host environment. Most of these are also being experienced in the parent company, however the problems faced by subsidiaries are more complicated. In order to deal with this, the parent company and the subsidiary must work together in creating a clearer criteria for appraising international assignees, training raters and educating employees, creating clearer performance appraisal goals and objectives, and conducting cultural and social training for expatriates and raters.

 

 

           

 

 

 

 

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