1. Trends and Business Cases of :
Performance Management 2
( PepsiCo)

2. Performance Management
& Best Practices

3. Practice 2 : PepsiCo
Establish Performance Management as an Organizational Priority
Based in New York, is an international food and beverage company.
The company generated revenues of $26.9 billion and employed more than
100,000 individuals in 2001.
Case Description
PepsiCo introduces two discrete appraisal ratings to measure managers’ performance against people objectives as well as business management objectives. The two ratings are kept separate at all times and are directly linked to merit increases and bonuses for each employee.
Goals
To embed strong accountability for managers to perform against people and performance management targets as well as business objectives.
To provide managers with a tool to effectively differentiate employee performance in the two key areas driving the overall performance of the organization.
Results
Completion of the first rating period revealed that a significant number of individuals score more
highly on business performance than they do on people management. PepsiCo reports an increase
in manager commitment to people management as well as higher levels of employee satisfaction
with the performance management process because the dual ratings ensure finer performance
differentiation and manager accountability for people management.

4. Practice Driver Employee research emphasizing the
vital importance of the manager
to employees’ commitment…
…and the importance of manager
quality to employee retention…
…PepsiCo identifies an opportunity to improve its performance management system
① Accountability to People Management
• People management undervalued
• Financial rewards driven by business results
② Rating Categories
• Lack of employee differentiation
• Demotivating rating labels

5. Performance Management
Practice in Context
PepsiCo introduces a new “dual rating” system which examines employee performance
from two perspectives: “Business Results and People Results”
Performance Management
Process at PepsiCo
Dual
Performance Rating

6. Dual Performance Rating
Establish Two Performance Ratings
Business Results
include traditional
financial measures
like sales, revenues, etc.
People Results
measures include
managing people,
cross-functional
teamwork,
and personal
development goals.

7. Dual Performance Rating
Develop Measures for People Expectations
Every “People
Metric” is
designed to be
observable

8. Dual Performance Rating
Evaluate and Calibrate People Performance
Multiple sources of information on individual’s performance
Calibrated across a group of managers to support accuracy and consistency of assessments
Manager Calibration Meeting

9. Dual Performance Rating
Assign Business and People Performance Ratings
While Jeff excels in
managing the business…
Each employee’s
achievements
against key
performance
management
objectives in
both Business
and People
Results are
identified and
evaluated.
…PepsiCo’s new dual ratings highlight a significant gap in achievements against People Results.
In contrast to the old system, Jeff’s People Results are clearly visible and will be addressed

10. Dual Performance Rating
Link Ratings Separately to Compensation
Individuals’ merit increases and bonus awards are based 66 percent on Business Results
and 34 percent on People Results
A low rating in People Results significantly reduces an individual’s merit increase and
bonus eligibility
Compensation Formula
Business Results Score ( ) × 2 = ( ) +
People Results Score = ( )
Compensation Index ( )
Compensation Index (Example)
Compensation
Index
Merit Increase
Range
Bonus
Eligibility Score 0%
0-20
1-3 %
50-90
2-6 %
5-9 %
8-15%
Assuming a base salary of $150,000,
Jeff is rewarded with only an additional
$7,500 owing to his poor people score…
…whereas Vanessa is rewarded an
extra $19,500 merit increase and
an additional $10,000 in bonus.

11. Dual Performance Rating
Provide Performance Focus for Poor People Managers
PepsiCo mandates that employees receiving scores lower than two in either rating must
go onto a developmental action plan
Performance plan
outlines detailed
actions to enable
poor performers
to lift their
performance in
either business or
people ratings.

12. 감사합니다. Our Customer 우리는 귀사의 유익한 파트너가 되길 원합니다. [와이즈포스트파트너즈 담당자 연락처]
와이즈포스트파트너즈 주식회사 HR부문
박 효종 수석 TEL : 02) 785 – 1112 (代) FAX : 02)