HRM60018 - Performance Management at Siemens: Case Study Analysis

This case study analyzes the performance management system at Siemens, a multinational conglomerate. The report begins with an executive summary, followed by an introduction outlining objectives, company description, research methodology (case study analysis), and limitations. The organizational findings detail core elements like target setting, evaluation, peer validation, feedback, and implementation. The study then compares Siemens' practices with relevant performance management theories, focusing on remuneration, core factors, and evaluation mechanisms. The comparison highlights the importance of employee engagement, performance review, and development, while also assessing the evaluation procedures. The conclusion and recommendations section provides insights into the effectiveness of the Siemens system and suggests areas for improvement. The study emphasizes Siemens' focus on culture, people, and governance in systematizing its performance management process, aiming for a holistic approach to employee development and organizational success.

Running head: PERFORMANCE MANAGEMENT AT SIEMENS
PERFORMANCE MANAGEMENT AT SIEMENS
Name of the Student
Name of the University
Author Note

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Executive Summary
The study is focused towards evaluating the performance management system of Siemens. The
focus is towards evaluating the performance management system at Siemens comparatively with
the evaluation of the best practices as per the relevant literatures. The implications suggest that
the performance management systems that are at par with the best organizational practices as
pointed out by the relevant literatures. It was found that the performance management system
implemented at the organization are effective in determining the positive progress of an
employee through the organizational journey.

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Table of Contents
Executive Summary.........................................................................................................................1
1.1 Objectives..............................................................................................................................3
1.2 Company Description............................................................................................................3
1.3 Research Methodology..........................................................................................................4
1.4 Limitations.............................................................................................................................4
2. Organizational Findings...............................................................................................................4
2.1 Core Elements........................................................................................................................4
2.2 Target Setting.........................................................................................................................5
2.3 Evaluation..............................................................................................................................5
2.4 Peer Validation, Feedback and Implementation....................................................................6
3. Comparison of Theories..............................................................................................................7
3.1 Comparison with remuneration and core factors...................................................................7
3.2 Comparison of performance management factors.................................................................8
3.3 Comparison of the evaluation mechanism.............................................................................9
4. Conclusion and Recommendations............................................................................................10
5. References..................................................................................................................................12

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1. Introduction
1.1 Objectives
The objective of the study is to evaluate the performance management system at Siemens
and analyzing the findings in light of the best practices provided in the relevant literatures. A
crucial objective is to find more about the effectiveness of the performance management system
in the organization towards productivity. The performance management practices that are
implemented across the organization is to be analyzed in light of the relevant theories concerning
the subject. The extent of the alignment of performance management of the company with the
theories of performance management is to be found.
1.2 Company Description
The company being considered for this report is Siemens. It is a multinational
conglomerate based in Germany with headquarters in Berlin. The company has a long history as
it was established in 1847 by Werner Von Siemens and Georg Halske. The main areas of
business operation for Siemens is Energy, Industry, Healthcare, Cities and Infrastructure. The
medical diagnosis equipment made by the company generate around 12% sales for the
company.The subsidiary for healthcare of the company is called Siemens Healthineers. However,
the industrial automation division is the most profitable area for the organization.The company
employs more than 379 thousand employees globally. The current revenue of the company 83.04
billion Euros in 2018.

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1.3 Research Methodology
The research methodology that is used for the report is case study analysis. Hence, the
report can be said to be based on qualitative studies. The findings generated from the case study
analysis would be comparatively discussed with the literatures that are relevant concerning the
subject of performance management. Qualitative research would be utilized to gain a deeper
understanding of the relevant ‘best practices’ and the extent of implementation in large
organizations.
1.4 Limitations
A significant limitation of the study is that primary data in regards to the performance
management systems are not available.
2. Organizational Findings
2.1 Core Elements
In Siemens the core elements that make up the performance management process are
divided into various systematic phases. These include in accordance of their progression: target
setting, evaluation, round table, feedback and implementation. The roles and responsibilities of
the various groups are identified accordingly. The higher manager, the manger, the employee and
the HR all have part to play in the core processes. The higher manager contributes to the target
setting, approves the round table and informs about the implementation. The manager is
responsible for target setting, evaluation, roundtable, feedback and implementation.The
employee participates in the target setting, contributes towards the evaluation process,
participates in the feedback process and is responsible for the implementation. The HR is

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normally concerned with supporting and consulting during the target setting and evaluation. The
HR facilitates the round table and provides essential support throughout the process.The core
elements actually focus on creating a framework through which performance can be managed
effectively.
2.2 Target Setting
Siemens uses target setting as the first important step in the entire process of performance
management. This helps the organization to develop clear goal in sight for improving the
performance potential of the workforce. The employees are considered within a target group.
They are then provided targets in accordance with their individual performance requirements.
The managers are given the tasks to set targets for their subordinates. The managers are expected
to create targets that are achievable and realistic. The employees are informed about the targets
and how they can contribute effectively to the productivity of the organization (Siemens.com
2019). The targets are emphasized to be limited in number by the organization and strongly
related to the performance requirements of Siemens as an organization. An interesting thing is
that a mutual dialogue takes place between the employee and the manager before setting the
targets. The employee proposes an individual target that is based on the understanding of his
role. An agreement is reached between the manager and the employee and the targets are formed.
The targets are formed by the end of the year and the beginning of the New Year. Only in case of
departmental strategy change, job responsibility change or structural changes can the target be
modified. The higher managers make sure that the strategies are aligned with the larger targets.
The HR coaches focus on facilitating the entire process.
2.3 Evaluation

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Evaluation process in Siemens is systematic and can be grouped within various sub
processes. It is the process of individual assessment that is carried out by the managers. It
measures the performance of the employees and the potential. Firstly, the performance
evaluation takes place in the organization. It is measured through the feedback provided by the
stakeholders and the perception for performance of the employee themselves. The employee data
is calculated periodically to help in this process. The degree of achievement becomes very
important to measure the performance. The bonus is provided in regards to the same. The
individual performance percentage is measured. On the basis of this the bonus incentives are
provided to the employees. The incentives become larger on the over achievement of the stated
target (Nyberg, Pieper and Trevor 2016). Employee ratings are provided, which are formed as
the capability ratings of the organization. Secondly, the evaluation of the potential of the worker
is done. The measurement of potential facilitates the positioning of employee on the potential
matrix. In Siemens potential is usually measured through three essential components. These are
1. The ability to learn, 2. The ambition of the employee, 3. The capacity of
capability(Siemens.com 2019). These are measured through various sub categories that fall
under the larger aspects in order to form a holistic image of performance. Thirdly, the potential
matrix is plotted with the measurements derived from potential and performance.
2.4 Peer Validation, Feedback and Implementation
The round table facilitates peer validation in Siemens. The aims of this program are
application of evaluation criteria in harmony, a greater objective evaluation of performance and
the verification of the statements of potential through comparison of the peers. The performance
evaluation of the employees are openly discussed by the managers. There are some essential
tools that are used. First, the potential matrix is used for performance validation. This measures

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the SLF results and the capabilities of the SLF. Second, the merit matrix are utilized for
determining actions towards the compensation. This is also based on results of the SLF and
comparison with the markets (Siemens.com 2019).
3. Comparison of Theories
Performance management theories in the recent years have focused towards improving
employee motivation for providing effective performance. In most of the available literatures the
focus is on setting specific targets to achieve for the employee against specific goals.
3.1 Comparison with remuneration and core factors
One of the primary aspects of the best practices as recommended through the relevant
literatures is the employee remuneration and benefits. One of the various views of the
remuneration system is concerning the base salary. It depends on the fixed portion of the pay that
is guaranteed. It is time-based and is the largest accepted remuneration component (Geiler and
Renneboog 2016). Some of the benefits include the attraction, satisfaction, retention,
engagement and work life balance. In Siemens this type of a remuneration system is present and
generally provides the employees with these benefits. The other part of the pay structure is the
performance related rewards which is also an important factor that is considered in the
remuneration provided by the company (Nyberg, Pieper and Trevor 2016). The performance pay
includes the merit based pay that is provided annually along with the team incentives, profit
sharing and the share bonus plans. These help to provide motivation that is extrinsic, reinforcing,
effective in regards to goal setting and socially cognitive. There are however also other areas of
performance management. According to Rosemann and vom Brocke (2015) there are six core
elements related to process management. These are strategic alignment, method, technology,

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governance, culture and people. Concerning the same it was found that Siemens focuses more on
culture, people and governance. There is more focus on systematizing the entire performance
management process. The core elements were target setting, evaluation, round table, feedback
and implementation. All these processes are important as they focus on bring about systematic
evolution of the performance process of the employees.
3.2 Comparison of performance management factors
The performance review and development is a significant factor in performance
management. It helps to evaluate the various dimensions of performance potential towards
measuring its effectiveness in providing value to the organization. The theories state that the
performance management cycles depend on the aspects of monitoring, learning and
development, action plans, formal review meetings, formal assessments and informal feedbacks.
Hence these factors become important in determining how the organization can help the
employees to perform better. The aspects are dependent on the values of competencies,
behaviors and results. Here, it can be said that some of the important performance enhancement
and assessment criteria are ability, capability and ambition. Ability determines the competencies,
capability determines the results and ambition determines the behaviors. According to
Buckingham and Goodall (2015) currently existing frameworks used in companies do not focus
much on employee engagement. This results in ineffective performance management at the
various organizations. However, if the Siemens is taken into consideration the target setting is
done on the basis of the effective engagement with the employees. Noeet al. (2017) opine that
organizations need to provide more importance towards improving the performance potential of
the employees (Kearney 2018). This is definitely evident from the case study as it can be seen
that in the evaluation process implemented at Siemens, performance and potential are provided

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equal importance. Potential evaluation is provided much emphasis in the organization.
Performance matrix helps in the effective assessment of the individual. Feedback helps to
determine the various perspectives that determine the value of the individual (Bititci, Cocca and
Ates2016). Implementation helps to put into perspective the success factors of the PM system.
Control helps to regulate the entire process. The potential ring is very effectively utilized by the
organization to evaluate the employee. The three aspects of this are the ability to learn, ambition
and capability capacity. Peer evaluation helps to determine how far the employees are able to
perform with the coordination of their peers. By implementing an effective framework, the
organization actually focuses on improving the performance management systems. The three
aspects of target setting, evaluation and round table are effective in determining a holistic
performance management framework (Audenaert et al. 2019). The holistic development of
performance systems are the only way forward for managing performances effectively.
3.3 Comparison of the evaluation mechanism
The evaluation procedure is effective in determining the performance effectiveness of the
employees. Evaluation mechanism is one of the most important aspects of performance
management as it helps to measure the capabilities and efforts of the employees towards
providing essential performance to the organization. Performance counseling becomes very
important to effectively implement any Performance Management system (Thomas, Thomas and
Firestone 2015). The three phases of performance evaluation, potential evaluation and the
formation of the potential matrix are effective in evaluating the effective potential of the
individual to help in the counseling process (George et al. 2016). It is important to note that the
organization is as effective as the performance enhancement and evaluation systems. What is
more important is the systematic process of evaluation. In this process, the potential for

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performance of the individual employee is measured. Moreover, the effectiveness of the
employee to align his capabilities with the required capabilities for the organizational
performance is rightly evaluated through the potential ring. Measurement of capacity, ambition
and ability to learn are very important in determining the effective value of the performance
ability of the employees (Iqbal, Anwar and Haider 2015). This process eventually culminates
very effectively in the round table through the usage of the potential matrix.
4. Conclusion and Recommendations
In conclusion it can be said that the performance management systems that are at par with
the best organizational practices as pointed out by the relevant literatures. It was found that the
performance management system implemented at the organization are effective in determining
the positive progress of an employee through the organizational journey. It is evident that
Siemens uses a large number of stages to determine employee performance effectiveness.
However, there are still certain recommendations that can be used to further enhance the
performance management system.
Firstly, the performance management system should be made more flexible to incorporate
more changes as and when necessary. As of now the process is quite rigid in terms of the overall
framework of performance management.
Secondly, the performance management system in the organization is very lengthy. This
means that the system takes a longer process to complete. This can be effectively enhanced
through making the control and feedback process more flexible and efficient.
Thirdly, a less complex evaluation framework is required for the organization. As of now
the present evaluation process should be diluted. The process can be said to be very effective but

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complicated. Hence, there is the need for making the process simpler by actually keeping the
basic framework same.
Fourthly, there is a need for better rewards policies to provide essential encouragement to
the employees. Rewards process can be based on the present evaluative, feedback and control
processes. This will make the performance management system easier to implement.