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You are really busy in your job, but you just got an important request from the organization’s President to conduct an audit of the company’s current performance appraisal system. By far the most problematic and volatile issue at Stewart Incorporated has been salary increases and promotions. Because the company promotes from within, comparisons generally have to be made across employees in different departments. To combat arguments of subjectivity and bias in the decision-making on raises and promotions, Stewart’s links these rewards to objective measures of performance.

More specifically, rather than using the subjective ratings of employee’s performance by their supervisors, ongoing accounts of sales results are maintained for each employee through the use of the HRIS. Based on this sales information, each department manager assigns the employees in their department to one of the following five categories:

1. Superior / top 10 percent

2. Very Good / next 20 percent

3. Good / middle 40 percent

4. Fair / lower 20 percent

5. Poor / lowest 10 percent

Administrative decisions (regarding pay and promotions, etc.) are then made across departments using these ratings that people receive in this forced distribution. Additionally, to provide feedback to the employees concerning their relative performance, data on sales are updated daily on the HRIS and are posted in the break room. It is hoped that the feedback is motivating to employees. In addition, the posting of the sales data provides that there will be no surprises for the employee when the semi-annual performance appraisal interviews come around. It is interesting to note that since the performance appraisal system has been implemented, there has been no formal complaints registered regarding the performance appraisal system or salary and promotion decisions. However, sales managers themselves have mentioned that they do not feel as comfortable now that they are required to assign employees to the “fair” and “poor” categories.

Overall, Stewart’s has tried to create a top-rate personnel system in their company. Despite their efforts, management fears that there are some personnel issues that may be contributing to the loss of sales for the company. Again, the poor economy is a favorite excuse for the decline in sales, but there is more to it than that. Human resource policies may also be contributing to it as well.

For example, there have been many recent complaints that employees have not been as patient or courteous with customers as they should be. This was best summarized by the manager who said, “My people are beating up the clientele to make a sale” – the very opposite of what the training program trains them to do.” This lack of customer service is frustrating since the training program has been proven to be effective in the past. Additionally, there seems to be great deal of competition within departments that is hurting a team effort. Although intergroup rivalries between departments have always been viewed as healthy and normal, the lack of cohesiveness within each department is seen as a problem. Be complete when answering the following questions. Always remember to include answers to all parts of the questions.

EXERCISE 3 QUESTIONS

1. Identify and describe at least three strengths of the performance management system. Why are they strengths?
2. Identify and describe at least three weaknesses of the performance management system. Why are they weaknesses or what are some of the negative consequences that are caused by these weaknesses?
3. What changes would you recommend for this performance appraisal system (you must include at least three substantial changes to the system)? How would each of the changes you suggest improve the system? Be ready to report all suggestions to the President (and then to managers, employees, etc.)!