The Performance Management: Huawei
Huawei is a leading global information and communications technology (ICT) solutions provider. Driven by a commitment to sound operations, ongoing innovation, and open collaboration, have established a competitive ICT portfolio of end-to-end solutions in telecom and enterprise networks, devices, and cloud technology and services. Huawei’s ICT solutions, products, and services are used in more than 170 countries and regions, serving over one-third of the world’s population. Huawei has over 44,000 employees, of whom 48% are dedicated to R&D. Huawei’s global R;D centers are located in Bangalore in India, Silicon Valley and Dallas in USA, Stockholm in Sweden and Moscow in Russia in addition to those in Beijing, Shanghai, Nanjing, Shenzhen, Hangzhou and Chengdu in China. Huawei is committed to enabling the future information society, and building a Better Connected World. Major products are based on Huawei’s self-designed ASIC chips and shared platforms to provide high-quality and cost-effective products and solutions with quick response.
In 2014, Huawei recorded a profit of 5.5 billion USD. Its products and services have been deployed in more than 170 countries and it currently serves 45 of the world’s 50 largest telecoms operators. In June 2016, Huawei is reportedly working on and designing its own mobile OS for future usage. From July to September 2017, Huawei surpassed Apple and became the second largest smartphone manufacturer in the world after Samsung. In September 2017, Huawei created an NB-IoT city-aware network using a “one network, one platform, N applications” construction model utilizing IoT, cloud computing, big data, and other next-generation information and communications technology (ICT), it also aims to be one of the world’s five largest cloud players in the near future.
The Performance Management Process of Huawei
Performance management system can guarantee fairness and efficient about performance management and stimulate employee’s performance, which were implement in a circle with four segments (performance goal, performance coaching, performance rating, performance result). The performance management circle begins with setting performance goal based on enterprise strategic goal and the goal including enterprise core business, department core business and position core business equip key performance indicators (KPI). In the process of performance appraisal, there have special performance management organization and responsibility system to supervision, implement and guarantee the effectiveness when take performance assessment among different levels of employees?including top managers, middle managers and general staffs?and also to be responsible for the improvement of performance management system. (Appendices A-1)
At the beginning of each year, all employees in Huawei according to company strategic objectives signed the PBC (Personal Business Commitment), made detail work plan for all employees, and the company mainly according to the half-year cycle to design staff’s PBC and secondary head’s design for one-year period. At the same time, executives and employees reach an agreement on performance appraisal target which is the combination of performance objectives, measure and improvement. In the process of set up performance goal we must obey SMART (Specific, Measurable, Attainable, Realistic, Time-based) principle and analysis internal and external environment of company facing.
It is mandatory in Huawei that managers at all levels should not be less than three times every six months to direct and guide employees with a formal interview and a detailed written record. Performance coaching mainly includes three aspects: performance diagnosis is to help employees improve work methods and skills. Process monitoring refers to the director within the department to establish and implement the system of “two-way communication”, at any time to correct employee behavior and the feasibility of the target deviation. Data collection is to collect and record the employee behavior or the result of key events or data. So, on the one hand it can help to understand the status of the employee’s work with the effect of the nip in the bud, on the other hand it will reduce the distance with employees and is conducive to stability and subsequent management.
The performance evaluation mechanism of Huawei mainly includes three aspects: First is the liability result oriented and individual key events behavior result evaluation. Second is hierarchical classification reporting on activities based on company strategy, namely the complete degree of commitment PBC and desired result. Third is based on the position qualification standards at all levels to investigate employee actual ability whether meet the requirements of office. The emphasis of the assessment is different for different levels employees of Huawei. High-level managers should pay attention to enterprise long-term interests, the mainly appraisal way is reporting and KPI which is the combination of quarterly and annual reporting on activities. The grass-roots staff mainly focus on the completion of reality tasks and self-improvement, with assessment of IPBC, which is the combined of quarterly assessment and annual evaluation. And for ordinary employees, especially to measurement staff, review monthly. Under the fairness and equality principle it fully implements evaluation team system in the appraisal process. And it focuses on evaluation of the responsibility sense, mission sense, team spirit, skills, ideological and moral quality of workers.
Performance results as the main reference basis for an employee promotion, deployment, assessment. Evaluation results on the one hand take into the promotion and salary basis, on the other hand as part of the performance improvement, according to survey if there is gap between the expected goals and reality performance after evaluate and without staff performance communication in the late, the head of the department will be given red card to warning. The basic purpose of performance appraisal is not to layoffs but to put employees in a suitable post through the examination, to ensure that everyone is able to achieve the ability of performance goals, and then through the realization of individual performance goals to complete the company’s overall strategic objectives. There may be a variety of reasons lead to bad performance result, usually through training or relieve to another post to improve the performance. Supervisor should pay attention to communication with the staff about performance result and next step planning goals.
Internal Staff Shareholding System
At Huawei, there is an internal staff shareholding system. With the help of international human resource consulting firms, Huawei implemented the virtual limited share system, virtual share option plan and MBO virtual share plan, which have enhanced the incentive plan. Their staff shareholding system has helped to support the company’s development through the provisioning of effective, long-term incentives for staff.
Employee Stock Ownership Plan (ESOP).
At Huawei’s inception, Zhengfei who is CEO of Huawei designed the Employee Stock Ownership Plan (ESOP). Today, Zhengfei himself holds only 1.4% of the company’s total share capital, with 82,471 employees holding the rest (as stated in Huawei’s 2014 Annual report, as of December 31, 2014). Furthermore, because Huawei is not a public company and owned by its employees, employees take a large share from the companies earning. In the case of Huawei, the total net profit that was earned over the last twenty years is considerably smaller than the total net profit that was paid out to its employees. To be specific, the sum of employees’ salaries, bonuses and dividends is 2.8 times the company’s annual net profit, and plans are to further increase the ratio to 3:1.
The structure of the ESOP is based on two important premises. The first are the Confucian values of equality and harmony, which underlie Zhengfei’s desire to prevent wealth gaps between employees from becoming too big. To achieve this, Zhengfei believes that if employees own the company they will be motivated to act as entrepreneurs and initiate more projects that could help all of them to earn more and diminish differences in wealth creation considerably. The second premise is built on the idea of equity. The harder you work, the more you can earn — but working overtime is only rewarded extra if the work directly addresses the needs of their customers. This plan not only controls wealth gaps and allows employees to earn more, but also allocates more influence and authority to those who show strong skills.
One limitation is that, due to legal constraints, non-Chinese employees are not able to participate in the ESOP, despite many of them having expressed a desire to be included. To meet these demands, Huawei has recently adopted a long-term incentive plan called Time-based Unit Plan (TUP). First piloted in 2014, TUP is a profit-sharing and bonus plan based on employee performance for all eligible employees (“recipients”).
In Zhengfei’s view, people care about belonging to and being proud of a collective but also have the desire to differentiate themselves from others. Huawei’s ESOP can satisfy both human needs. The ESOP emphasizes the idea that Huawei belongs to everyone in the company and that Zhengfei expects all employees to act like owners, with dedication and commitment. This entrepreneurial spirit allows the company to learn and innovate, collectively, in support of Huawei’s mission: “To improve quality of life through communication.”
The Improvement Suggestions based on Huawei’s Performance Management System
Huawei become the leader of other companies, not only because the performance management process around in efficient cycle with internal performance plans, performance implementation and management, performance evaluation and performance feedback, but also because other aspects of human resource management combined in a whole. Performance management closely linked together with the enterprise’s position system, qualification system, personnel selection and training system, salary management system.
There are some suggestions to the managers of enterprises can follow that gain explicit about their performance management goal. Firstly, make the performance management knowledge popularization for all employees. Secondly, introduce and cultivate performance management talents help to understand performance management goal, at the same time, promote the organization strategic target and encourage employees setting their own goals according to enterprise goal. Third, detail performance management process and improve the application of evaluation results to help the employee clear performance management goal.
In the process of performance management, the lack of communication mechanism, can lead to assessed rights abuse, thus caused controversy and disputes. Therefore, it is necessary to private enterprises to set up effective communication channels, in order to avoid managers from the frontline staff. In specifically, on the one hand, the enterprises encourage employees take part in formulate performance planning and performance appraisal process, on the other hand, managers should constantly communicate with employees, find the problems in the process of assessment and should be timely feedback to employees, at the same time, provide useful information, discuss countermeasures, help employees improve performance and complete performance targets.
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The Performance Management Process of Huawei