Performance Appraisal System In Nokia

This record is targeted at critically analysing the performance appraisal and their proper implications in modern day firms operating in turbulent and changing business environment, needing valuable, uncommon and inimitable business processes to achieve sustainable competitive advantage. In order to achieve the aim of this statement, the researcher has chosen Nokia, the Finnish telecom large that has been outlined as the best telecommunication company to be employed by by Forbes International (Datamonitor, 2009). The business is also among one of the most significant in terms of market capitalisation within European countries and for that reason owes much to the Finnish national culture within its management, especially real human resource management. Sketching upon Times (2005), the company has its modest roots among the many forestry organizations a century previously in Finland; however it has evolved through the years through its effective human being resource policies to hire more than 50, 000 people throughout the world with procedures spanning all the developed, rising and growing economies. It has been argued by Nokia (2009a) that 'people insurance policies' have performed an important role in the go up of the firm within telecommunication sector that required high degree of creativity and development by its employees and workforce. The company is one of the few businesses within telecommunication industry that has income in excess of 20% to 25% for greater than a decade, which have not been effected by the fierce competition by other businesses in contemporary businesses (Nokia, 2009b). It can therefore be highlighted that intellectual capital has been one of the key source of achieving these efficiencies and performance within the business enterprise that contain been translated into sustainable competitive advantages.

Nokia - Organisational Background:

Nokia has held the management position within the global mobile handset sector for greater than a decade, which includes however been challenged at different details with time by a variety of other manufacturers however the company has improved its business model to align itself with the changing business environment. Drawing after Datamonitor (2009), the business has varied into related business in the wake of stiff competition from value and luxury sections, therefore demanding both high amount of differentiation and cost leadership by the firm. The company is currently actively pursuing its position within telecommunication equipment, Tv set set-top containers, and mobile telephony software and hardware development.

In the light of Nokia (2009c), the business has its roots like a great many other traditional Finnish companies within forestry in 1865, however the company evolved over the decades and be one of the leading players in mobile technology in 1960's. It really is argued by Pollitt (2004) that the key changes within strategy of the firm arrived in 1980s when senior management become centered on growing intellectual capital and keeping powerful of the company, which was in conjunction with open public offerings of the firm. The company became part of the global firms after starting trading in London (1987), Frankfurt (1988) and NY (1994). The company has acquired a number of businesses during its evolution and has strategically gathered the recruiting from these organizations, which has again benefited from its performance appraisals, pay-for-performance, and skill retention strategies, which have been critically analysed in this statement.

Human Source Strategy:

Nokia has been outlined by both academic and commercial literature among the organisations you can use for comparability and benchmarking due to the fact that it is flat structured and networked across its global businesses (Christopher, 1995). This composition of the organization has resulted in the fact that it is agile and adaptable to seize any home window of opportunity that shows up within the business enterprise environment of the company. This structure has been aligned with the organization strategy of the firm to achieve broad market competitive emphasis within the marketplace that has actual differentiation competitive benefit in conditions of Porter's Generic Strategies, that can be illustrated the following

Cost Leadership



Narrow Target



Lower Cost


Competitive Advantage

Competitive Scope

Nokia's Position on Porter's General Strategies

Adapted from Porter (1985)

Strategic Core

Strategic Periphery


It can be argued that to be able to attain the strategic goal and targets of the organization to be an agile and adaptable entity that can achieve competitive benefit, the firm required a strong human learning resource strategy that is consistent with these changes. Sketching upon Briscoe & Schuler (2004), there's been radical change within the HRM strategy of the business after the visit of Mr. Jorma Ollila as the CEO of the firm in 1992, who initiated the pay-for-performance concept within the company. The idea behind the refocus of the HRM strategy has been to create a reimbursement mechanism that in aligned with the performance and hard work of employees, therefore motivating employees to achieve the key performance indicators that are assigned to them. This is aligned with the "Nokia Way", the values of the company, which were identified to include performance of employees among the key in attaining overall aims of the company. It's been argued by Nokia (2009d) that Nokia Way has been seen as the common glue that has performed the HRM strategy of the company aligning it with the business environment. There's been significant discourse within books highlighting the "best fit" procedure of the business towards its keeping talent through appraisals and compensations that are effective and successful.

Performance Management and Nokia:

The Nokia Way has been outlined within the books as one of the key documents consolidating the HRM strategy of Nokia which is this doc that has outlined retention of high performers. Pulling after Stanley et al (2000), it could be argued that the report is no different from HRM policies provided by a great many other organisations; however the manner in which it is prepared on day to day activities has been highlighted as the main element good thing about the firm. Sketching after Nokia (2009a), performance of individuals working within Nokia is undertaken from a range of sizes, but three of these are believed very important, which include: (a) overall customer satisfaction added by the individual; (b) admiration for others within the team; and (c) successes of individuals and their ongoing learning.

The books has outlined that there's been number of issues within management of performance of individuals and their appraisals within companies. Pulling after Rutter (2002), within Nokia managers and employees have been given high degree of independence in producing the proportions into quantifiable goals, goals and targets, which can therefore be related to the entire performance with their team, division and the organisation. This has been because of the initiative of the company to keep entrepreneurism alive within the firm, where the target is on "getting things done" alternatively than follow prescriptive steps and steps.

According to Lynn (2002), these characteristics of performance appraisal have been achieved through a variety of in-house programs, such as: "hearing you", "buying you" and "pay-for-performance". The purpose of these programs is seen to be aligned with the entire business strategy of obtaining high degree of efficiency and success of the business, which would therefore help create value for the stakeholders. Erik & Jonathan (1995) have argued that these programs are a way to an end i. e. to build up an integrated system of performance goals preparing, development of strategies to achieve these goals, and quantification of the entire performance. It ought to be noted that in order for the seamless move of performance management between these different programs, the culture of the business takes on an important role. This is why that the company is rolling out a team orientated internally competitive culture, which deters negative implications of the competition, however highlighting the positive aspects of it to accomplish tactical goals and prices.

The performance management of the organization also has been widened into other reigns of HRM, which is often outlined from the variety management within the organization. Drawing upon Briscoe & Schuler (2004), it could be argued that the business environment of the business highlights that there is lot of diversity within the needs of the customers across the nationwide markets. To be able to fulfil these requirements, the company should mimic the business environment in its internal business environment, making its resources and competencies aligned with it. This according to Nokia (2009d) can be achieved through the diversity management and planning of the company that want performance appraisals to include features and quantification of diversity of thinking. You will find amount of characteristics that contain been outlined within the books surrounding performance management in terms of diversity addition and management. However, Rutter (2002) has highlighted that it ought to be achieved at product, practical and cultural level, therefore providing the direction for companies to use you need to include in their performance management.

The performance appraisals also need to include the achievement of individuals within corporate cultural responsibility (CSR) area, which has become one of the key criteria for performance at commercial level. Drawing after Nokia (2009a), in '09 2009 the company has highlighted that minimizing its carbon footprint and making employees to volunteer for educational industries in expanding countries would be included in to the performance appraisals of the employees. This might help the company in attaining high amount of strategic alignment with the current demands of companies to be in charge of the extended social and environmental issues within countrywide and international economies, where they operate.

It can therefore be argued that performance appraisals within Nokia are used as tactical tools, which can help achieve the expanded aims and goals of the company. It has been argued these appraisals has helped the firm in retaining intellectual capital that is aligned with the entire viewpoint and "Nokia Way", which have been in the centre of developing ecological competitive advantage. It could be argued that performance appraisals undertaken by the company are valuable, uncommon and inimitable competency of the company, which contribute a lot in achieving the overall aim and goals of the company.

Pay for Performance and Desire:

The overview of the commercial literature adjoining performance appraisals has outlined that at Nokia performance, rewards and desire management are all interlinked with each other, so that there is an integrated part that can be used to achieve the aim and aims of the firm. It ought to be noted that the company uses pay-for-performance as the main element tool which logically moves from effective and successful performance appraisal techniques employed by the organization. Harry (1999) has argued that a person of the main element vulnerability of per-for-performance management systems is the fact performance needs to be constantly watched over the business and its functions so the strategy could work in synch with realities on surface. The reward composition apart from pay within Nokia in addition has been designed in a manner that performance appraisals and drive tendencies of people feed into the system to accomplish optimal results.

The key concern that has been confronted by the management at Nokia is to analyse the performance appraisals of employees working in several economic and public conditions, therefore making their external environment an important drivers in how the compensation is identified. This is why there has been discussion surrounding the entire standardisation of the pay and compensation structure in the company or localise it according to the national and regional monetary conditions. Nokia being truly a truly global company has therefore been faced with this issue way more than every other organisation, which also stems in to the overall prize management and bias of individuals in conditions of intrinsic and extrinsic incentive structures.

Nokia has therefore taken performance appraisals very seriously, where there are segments within these appraisals, which were linked with the overall pay and compensation structure of the business. It really is highlighted that company has included both hard and smooth areas of compensations and rewards in the light of the appraisals (Pfeffer & Langton, 1993). Therefore, it can be argued that the appraisals aren't only accountable for the introduction of overall pay of the individual, but also the sort and mix of motivational tools that are put on their particular performance regimes and movements over the months.

The performance appraisal process implemented by Nokia has been seen very open, broad targeted, yet including employees and their individual teams. The compensation of people within Nokia comprises on the results of the appraisals in the form of pay, bonuses, incentives, company commodity and other benefits. The business uses "buying people" (IIP) as an total annual meeting between managers and employees, where conversation surrounding their concentrated function along with extensive company goals are talked about, that happen to be then quantified into the key proportions that are lay out in the light of changing business aims of the company. It should be mentioned that Tahvanainen (1998) has conducted an empirical research on the hyperlink between performance appraisals and pay structures at Nokia. The study has outlined that pay composition within Nokia is considered highly competitive in regards with the other challengers, which is dependant on 360 degree feedback called "hearing you", which is an informal dialogue between different clubs, which brings about making them discuss their objectives and make a deal their usage of resources and information, which can help them all in attaining their own respected goals and performance targets. The company has also rolled out the digital version of IIP, which uses company's intranet to go over and appraise the performance of electronic teams that uses competencies of people across the globe to accomplish high amount of efficiency and effectiveness in achieving the entire goals of the organization.

Key Advice:

The critical review of academics and commercial books adjoining Nokia's performance appraisals has been outlined as a successful model in this particular record. The critics however dispute that in recent trends the company has lost its management position within mobile handset sector, which includes led to its shifting emphasis towards other sectors. The proper development and deployment has both been advised within the record as key performance signals of the organization, which includes been viewed as resulting from available, clear and inclusive performance management and appraisal techniques. To be able to further improvise the performance management and its appraisals, the researcher has discussed recommendations in the next discussion.

There have been critics that have argued that although Nokia has strategically aligned its performance management with the seeks and targets of the company, however there are still key gaps using its alignment with the business enterprise environment, which require attention. It could be argued that although pay-for-performance have its motivating functions for the high performers, however for the average executing, which are the majority within any company, this can act as a demotivating factor. It could be advised that Nokia, like any other company would have normal distribution of performance among its employees, suggesting that not more than 15% of the total employee people would maintain the high or underperforming categories, as the break of 85% of workforce would fall into the average performance. This, corresponding to Pfeffer & Langton (1993) has led to the vulnerability within the company to alienate these 85% of the labor force, which would add value into the products and services of the company. The performance appraisals should therefore be natural and standardised across the organisation, where like-for-like comparisons are undertaken, that happen to be abridged between functions to attain high amount of performance and efficiency.

It can be recommended that the wide open standards used within the organization, which boils down to the debate between professionals and employees claim that each appraisal cannot be weighed against the other appraisals, therefore which makes it hard to compare on like-to-like grounds, which can result in distortion of performance results. It can be argued that commercial portion of the company has been one of the high performing section across the firm, which is often due to the fact that sales, income and income are quantifiable parameters, while performance of employees in support functions is much harder to access through tangible performance indications, which is also true about these functions. This, matching to Storey (1992) can add insecurity on the list of intellectual capital of the company regarding their job, pay and other benefits received from the firm. It can therefore be highlighted that the business has to supply the security of pay and then add bonus-per-performance on top of that to make it more plausible in modern uncertain times, with job losses and market failures. The inner competition between groups can result in deterring forces that could affect the entire performance of the company, as associates would engage themselves in negative activities to undercut access to information and resources for other groups, making the company lack efficiency and efficiency.

Conclusive Remarks:

In the light of the critical overview of literature and practice of Nokia in neuro-scientific performance appraisals, it can be argued that this HRM strategy of the firm has become a source of competitive benefits for the company. It has been discovered that pay-for-performance has only been suitable within Nokia due to the success and efficiency of the performance appraisal systems, which have emerged just, clear and inclusive by employees. The actual fact that the system is inclusive, the record shows that it acts as an implicit form of drive for employees to truly have a competitive internal business environment, where groups compete to attain high amount of efficiency for the business. It can be argued that performance appraisal strategy of the organization is consistent with its broad focused differentiation based corporate strategy, therefore leading to achieve the proper goals and aims.

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