An effective performance management strategy constitutes the blueprint for the accomplishment of organizational objectives. The approach to the employee’s or the whole department’s performance evaluation varies in different companies, as it is always an integral part of the corporate culture.
Amazon case study presents the Organization and Leadership Review (OLR) as an appraisal system, which, despite its radical nature and questionable ethics, proves to be one of the tech giant’s key success factors. In this paper, Amazon’s performance management strategy is evaluated from an HR Consultant’s point of view with the implementation of the TCUA framework.
Theory: Organization and Leadership Review and Employee Motivation
Firstly, it is crucial to apply theoretical knowledge to the issue and analyze the impact of OLR on employee motivation. According to Lussier and Hendon (2019), Amazon generates more revenue with a smaller workforce, compared to its competitors. OLR is also known as stack ranking, a managerial approach that allows for rating employees.
I believe that, despite high performance at the company, such a strategy lacks empathy and redirects employees’ motivation form competing with other corporations to competing among coworkers. OLR implies only one-way communication since the outcome depends on the manager’s assessment and not the employee’s evaluation.
Thus, Amazon’s appraisal system provides few chances for a promotion, contributing to insufficient motivation in many individuals and adding to the high employee turnover. At the same time, the company sticks to its performance management strategy and promotes the best performers since the executives value speed and efficiency over their staff’s loyalty. In general, OLR meets Amazon’s objective that aims primarily at delivering the best customer service and engaging the highest-performance employees.
Apart from the adverse impact on motivation, bias and stereotypes are attributed to performance appraisals utilized by Amazon, aggravating the accuracy of OLRs. During the meetings, executives suggest those employees whom they find suitable candidates for promotion. However, the employees’ performance is evaluated based on personal experience, which creates an opportunity for bias and stereotyping of the rater.
Thus, only the most enthusiastic employees, who put effort into maintaining good relations with all supervisors can succeed since any manager can deny the promotion. I find this strategy biased in its essence as it focuses on people with a set number of traits, such as ambitiousness, competitiveness, and lack of empathy.
At the same time, a dedicated individual, who is willing to contribute to the company’s performance but possesses weaker communication skills than their colleague, can miss the chance for promotion. Motivation is at stake again, and the turnover rates continue to grow. However, the OLR accuracy can be improved by using technologies that monitor and measure hard data rather than only personal opinions, creating a possibility to succeed for more employees.
Concept: Appraisal Systems Similar to OLR
The concept of performance appraisal implies the duration and regularity of the process. Some systems resemble OLR and use similar principles to assess employees’ performance. For instance, a narrative method or form, which requires the supervisor to write an evaluative statement, relates to verbal recommendations which managers share during promotion discussions at Amazon. Alternatively, the critical incidents method has the same purpose of recording and evaluating the negative and positive performances of an employee (Lussier & Hendon, 2019).
However, the appraisal system that resembles OLR most closely is the ranking method, which evaluates the employees’ performance from the worst to the best by comparing them to each other, rather than to a standard. Namely, the forced distribution approach determines the percentage of employees in different performance categories (Lussier & Hendon, 2019). Therefore, the ranking method and its variation, forced-ranking, can be considered similar to OLR used by Amazon as they monitor and promote the best performers.
Understanding: An Alternative that Would Benefit Amazon
Given the performance appraisal systems discussed above, I can conclude that the ranking method would best suit Amazon’s objective. It would detect and retain the most productive employees while taking the necessary corrective measures for 10 % at the bottom of the list. Even though I find the method controversial and dangerous for corporate ethics, it is crucial to take Amazon’s ultimate goal into account and build upon it.
The company is a fast-paced, highly-developed environment that requires quick learners and enthusiastic leaders to thrive and accomplish their mission of delivering positive customer experience. Properly managed, the ranking system would allow for an efficient resource distribution; however, it should be designed to promote the employees free of bias and offer enough motivation to grow within the company.
To ensure the applicability of performance reviews like the ranking method and OLR, I find it necessary to consider its advantages and disadvantages, compared to management by objective (MBO). OLR follows the principle of one-way communication, which does not imply self-evaluation as in the MBO approach.
Therefore, the major drawback of the OLR-alike methods is the inability to set individual plans for each employee. Instead, every person’s performance is compared to that of the best employee, despite the specific circumstances and personal aims. MBO, in turn, considers particular situations and establishes the best ways to resolve issues. Another significant disadvantage is the risk of destroying collaboration since employees can shift their focus to outranking their colleagues.
While beneficial for the top performer, this outcome hinders the company’s total efficiency. As to the advantages, I believe that the ranking system is an excellent tool for managers to evaluate performance, if applied correctly and free from prejudice. Instead of purely relying on feedback and personal assessment, actual data should be used to eliminate the drawbacks and enhance the utilization of the appraisal system.
Application: Electronic Performance Monitoring for OLR
The application of electronic performance monitoring (EPM) can be advantageous for Amazon as a high-technology company. In addition to personal recommendations used in the OLR approach, hard data collected by work time usage, computer content tracking, and other technology-monitored activities would be a good supplement for fair performance evaluation.
Employee behaviors during work hours are crucial for the company’s efficiency, and having an accurate record would help managers discuss achievements and issues with subordinates. Besides, EPM could minimize the risk of corruption and flattery in those individuals who strive to excel and get a promotion by all means, since their manager’s personal opinion would not be decisive. Therefore, EPM can be essential for Amazon as a fast, innovative firm to apply OLRs effectively.
In conclusion, Amazon’s appraisal system is considered through the prism of performance management in this paper. The TCUA framework was used to analyze OLR and its main aspects. As an HR Consultant, I have applied the knowledge of theory and concepts of different appraisal systems and their impact on employee performance.
Besides, the understanding of Amazon’s hallmarks and the ability to estimate the advantages and disadvantages of OLR have allowed me to suggest an alternative method to monitor the company’s efficiency. The application of EPM in the “real world’ would help Amazon supplement their evaluation process.
Lussier, R. N., & Hendon, J. R. (2019). Human resource management: Functions, applications, and skill development. (3rd ed.) Sage Publishing.