Running head: PERFORMANCE MANAGEMENT- CASE STUDY 1

Performance Management- Case Study

Swathi Maddali

BUOL 632- University of Cumberlands

Performance Management- Case Study

Performance review and management is a key to efficiency in any organization. The best

way to achieve organizational goals is to lay out clear goals for the company and all its

employees and regularly monitor and measure progress towards that goal. It is also important to

constantly evaluate and reconsider the short-term and long-term goals set in place and work

accordingly. The goals need to be measurable so that it is easy to understand, monitor and

achieve [ CITATION Nik \l 1033 ]. In order to get to a destination, it is very important to

identify where we currently are and what path to choose to get to the destination based on our

criteria of cost, time and resources available. The same approach needs to be followed with any

company. This paper discusses the performance management system employed by Vitality

Health Enterprises Inc. and attempts at suggesting a method that would be more appropriate for

their use based on the information provided in its Harvard Case Study paper [ CITATION

Joh12 \l 1033 ].

Vitality Health Enterprises Inc. is a cosmetics, personal health and nutrition company that

was founded in 1987 in Ames, Iowa [ CITATION Joh12 \l 1033 ]. As of 2007, they were a 7000

employee company with about three fourth of that number located at Des Moines and the others

in global offices across Asia, Southeast Asia and Europe. The founder and CEO of the company

was Hikaru Kikuchi. In 2008, owing to the great depression and Kikuchi’s health, Beth Williams

was appointed as the CEO of the company. She was known for optimizing operational efficiency

by cutting down cost and streamlining the organizational structure. As part of that effort, a

performance management system had to be deployed to understand inefficiencies and move

towards greater performance with optimum costs.

Question 1

An employee’s performance may be evaluated by their peers, supervisors, managers,

cross-functional team members or customers based on which line of work they are in

[ CITATION Jos171 \l 1033 ]. If for example, an employee is working on the manufacturing

floor, their immediate supervisor would conduct their performance assessment. If an individual

works in a team that has collective goals along with individual goals then both their manager and

team members would do the performance assessment. If an individual is part of a team that

works directly with customers and provide them some service then their performance would be

based on the feedback that they receive from their customers. Performance assessment

responsibility should be given to someone who works directly with the individual, have the

ability to set/ review their goals, monitor their progress and then perform an unbiased assessment

and feedback.

Question 2

The first step to handle a situation where performance in lacking is trying to understand

the root cause. The cause can be directly related to the skill levels of an individual, the resources

provided to them, the work environment or an external factor that no one has any control over. If

the cause is an external factor that could not be controlled, for example- long lead times from a

vendor then maybe the goal setting before performance assessment period was not done

correctly. The goals need to reflect work that a particular individual can perform. So next time,

they can probably do a better job at identifying the inputs and outputs that an employee needs in

order to perform their job and at what time. The manager is responsible for facilitating

availability of these inputs that are needed.

If the cause is difficult work environment. There are many different reasons for a work

environment to feel uncomfortable. For example the work location is too hot or cold for the

employees to be able to do their work efficiently, difficult commute, remote locations where

other daily life functions such as banking, car repairs etc are not available close by, people at

work are not respectful or it could just be that the employees don’t feel motivated enough to put

in their best due to lack of encouragement or proper incentive etc. These problems may be fixed

with the help of HR professionals by coming up with training programs for employees to

communicate behavioral expectations, establishing proper feedback channels for employees to

put forth their grievances/ suggestions so that the HR professionals can constructively work on

bringing about changes in the organization.

If however, an employee lacks the skillset to do their job, this needs further evaluation on

whether they can learn with proper training and how long that would take and if that ramp up

time is worth investing one’s time and money on. It is possible that the employee is highly

capable but is placed at the wrong job based on their skillset, in that case they can be moved

laterally. If the employee however, does not show interest or is unable to learn something new,

they must be let go of.

Question 3

The new performance management system was just given to the employees to follow and

hence takes considerable effort for them to understand and implement. The new ranking system

enforced a distribution curve that each manager had to stick to. They would have to divide their

team of employees into 4 different ranks and a fifth rank was set aside for employees who had

just joined/ were too new to be placed in such ranking. This allowed for a comparison of

employees which was not possible before. In addition, employees were rated based on their
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ability to fulfill their specific goals. This system allowed for providing cash benefits and equity

bonuses for employees who would perform well and give them an incentive to stay back. While

this system was better than the previous one in that it provided some way of differentiating top

performers from the rest of the team, it was still not good enough. Some managers felt that it

took away a lot of their time from their core jobs in fulfilling this performance assessment

requirement. It also made it more difficult for them to discuss their assessment with their

employees since it was directly linked to the compensation that they would receive and due to

the fact that this system was highly comparative or relative to what other employees were doing.

This made it more difficult to suggest new training programs for the employees or offer

opportunities for improvement. It made it more difficult to offer feedback in a productive way

[ CITATION Joh12 \l 1033 ].

Some managers felt that forcing this type of a curve on every team was too stringent.

Employees who performed really well consistently would not actually get any additional

incentive and inversely, employees of a failing department could get rewarded significantly well.

Some managers would just refrain from ranking their employees who had been on the team for

less than a year so that they could reserve top rank spots team members who had been there

longer. Or some managers would simply rotate the top rankers spot amongst their employees.

Some managers felt very intimidated in having to choose some team mates over others. Some

managers would rank their employees but not be transparent about how they ranked them. All

these prevented the HR personnel from actually getting a good picture of the performance- good

or bad. In some cases, it would force managers to assign top rankers in a department even though

there were none and alternatively, even if someone would have performed reasonably well they

could be labelled an underperformer just because someone would have had to take that title. It
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did not really help with incentivizing good performance and identifying opportunities for growth

for individuals and teams. It also did not provide an incentive to managers to conduct these

appraisals considering that this process was significantly more intense than the previous

performance management system. Overall, this performance management system needs to be

changed. While it is an improvement over the previous system and is headed in the right path, it

definitely has a lot of room for improvement.

Question 4

The first thing that needs to be changed is that the performance evaluation system should

be determined in consultation with all employees/ a few representatives from each team. It

should definitely not be something that is handed down to the company from a black box

[ CITATION Ela04 \l 1033 ]. Performance evaluation should be customized based on the type of

work a particular department does and how they contribute to the overall company vision and

strategy. The ranking system should not be so rigid that it no longer is representative of what the

employee did or how well they did. It should not be a forced distribution curve. Another aspect

that jumps out from the case study provided is that the managers and employees seem to find it

uncomfortable to talk about performance at the end of the year as if it is a surprise element. This

surprise element can be reduced by maintaining transparency about expectations right from the

beginning of the evaluation period and also setting those expectations along with the employee to

make sure that they align with both company goals and personal goals. Also, it would help to

establish checkpoints every quarter or so to discuss progress towards those goals, any

roadblocks, and alignment on expectations and also evaluating whether the goals set at the

beginning of the year are still the best/ if they need to be re-aligned with the company and

personal goals. This way at the end of the evaluation period, it is easier for the managers to
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complete the assessment process and communicate it with the employees. Additionally, for the

employees the assessment good or bad mostly will not be a surprise and will help them move

towards achieving their personal goals as well. Most importantly, the appraisers should be

provided adequate training on conducting the chosen performance evaluation system.

Management By Objectives is probably the most effective evaluation technique that can

be used in this scenario [CITATION Jos171 \p 193 \l 1033 ]. This is a product based company

and hence there are many functionally different departments right from research to marketing

and so enforcing one performance management system for everyone and evaluating all of them

on the same scale is not fair.

Question 5

The changes mentioned above will be discussed one by one. The first step is drafting a

procedure for a Management By Objectives Evaluation system and consulting some senior

managers and executives within the company to offer their feedback. Once a somewhat

acceptable form of draft has been compiled, feedback should be obtained from the rest of the

company. Employees and managers alike should be encouraged to provide their feedback and

maybe even provided incentives like fun games, refreshments/ a team outing to participate in this

effort and should definitely be educated about how important and serious this effort is. Once the

performance management process is established, there should be a pilot run of implementation

with a representative few members from each department. Now with that feedback in place, the

process can be buttoned up. For the purposes of Vitality Health Enterprises Inc., their goal is to

be able to identify top performers and the ones who are slacking. While testing out the system,

one must have an expected result in place to see if the new system produces what is expected.
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Once the new system passes this test, it is ready for implementation. In order to deploy

this system, training programs need to be incorporated at all levels of the company so that

everyone understands how it works and does not feel overwhelmed with the amount of work that

needs to be put in to it. At the end of the first assessment period, it should be evaluated through

employee feedback to see the satisfaction rates of employees and managers alike with the new

system and incentive program. Once a proper evaluation method is established, an appropriate

compensation method also needs to be identified that will satisfy employees and help retaining

and attracting top talent within and to the company.

Question 6

The consequences of the recommendations provided above can truly be determined only

after a pilot run. Overall the recommendations provided above are appropriate for Vitality Health

Enterprises Inc. Based on the old performance management system that had a flat salary and

compensation structure and the new ranking system, it is clear that both of those do not work. It

is clear that having a better way of setting goals, communicating them and a direct result of

achieving or not achieving those objectives needs to be set. The only risk to failure for this new

system is if the managers and/ or employees fail to align their objectives to the company’s

objectives. This issue can be resolved by having the whole company follow a top down approach

in setting objectives and linking them to make sure that there is alignment. This also provides

employees with an understanding of how they are contributing to the company and gives them

visibility into how the rest of the company is contributing. This is quite a big feat to achieve if

the company is too big. In that case, the company can be divided into groups based on goals that

they need to achieve and performance management systems can be monitored and implemented

separately amongst those groups.

Question 7

Yes the new performance management system is better than the old one that it replaced in

many ways. The biggest change is that the reward system is driven by how well an individual

performed as opposed to having a flat system throughout the organization. The old system

rewarded individuals based on evaluation points which their managers decided on. They would

also be compensated further based on a comparative ratio which again was not very objective.

The higher the comp-ratio for an employee, the lower the percentage increase in their salary

would they see. In other words, consistency was not rewarded. This type of a system would

definitely lead to top performers leaving the company soon. The new system on the other hand

provided a ranking system by which top performers could be separated out from others and low

performers could be identified. Additionally, the new system allowed for a system of providing

short term and long term incentives to encourage good performance and retain good employees.

Question 8

The relative nature of the new performance management is critical in retaining top talent

at the company but also identifying employees who are not doing well. The company will want

to optimize their costs and get the best of talent for the lowest cost possible. Time and money are

of the essence in any business and utilizing them the best way one can is paramount to any

company’s success. It is important even for the employees to be able to learn from their fellow

employees and lean on them for help when needed. So understanding who is doing well helps in

understanding the expectations better. It is important to establish that one gets what they deserve

and that there is equality in the work environment.

Question 9

Here is a form that may be used for performance management based on the Management

By Objectives method suggested above. Each employee starting from someone at the top

executive level will set objectives in the following format:

Table 1
Management By Objectives Table
Objectives Key Results Due Dates
Objective 1 Key Result 1
Key Result 2
Key Result 3
Objective 2 Key Result 1
Key Result 2
Key Result 3
Objective 3 Key Result 1
Key Result 2
Key Result 3

Each Objective will have 2-3 key results that determine if the objective has been reached.

Each objective needs to be linked to an objective of someone at a higher level or at the same

level. Each key result will have a due date. The employee will first put their inputs in based on

their manager’s objectives. This whole set of objectives and key results will be agreed upon by

the manager. Following an assessment period the employee will need to fill up a form about how

well they completed their objectives, how their manager could have helped better/ what help they

will need in the future. The manager will similarly fill out a form based on the form that the

employee filled up. Here are examples of the form-

Table 2
Employee Performance Appraisal Form
Objectives Percentage Complete Comments What could the
manager have
done to help?
Objective 1- Key Result
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1
Key Result 2
Key Result 3
Objective 2

Objective 3

The managers will have to then fill up more sections in this form-

Table 3
Manager Performance Appraisal Form
Objectives Percentage Comments What could Did they Percentage
Complete the manager meet their of
have done Objective? objective
to help? met
Objective 1-
Key Result 1
Key Result 2
Key Result 3
Objective 2

Objective 3

This form can also be seen by the employee so they know where they stand and what to

expect from their performance appraisal.

Conclusion

In conclusion, an effective performance management system is integral for any

company’s overall performance. While Vital Health Enterprises Inc. is on the right path, they

need to improve their system further in order to emerge as the leader in the cosmetics and

personal health industry.

References

Bika, N. (n.d.). What to measure in employee performance reviews. Retrieved from Workable:

https://resources.workable.com/tutorial/measuring-employee-performance

Bingham, J., & Beer, M. (2012). Performance Management at Vitality Health Enterprises, Inc.

Briefcases, Harvard Business School.

Martocchio, J. J. (2017). Human Resource Management. Boston: Pearson.

Pulakos, E. D. (2004). Performance Management- A roadmap for developing, implementing and

evaluating performance management systems. Society for Human Resource Management.