Background
This paper analyzes the case “Performance Management at Vitality Health Enterprises, Inc.” by Bingham and Beer (2012). This brief case follows James Hoffman, a newly appointed VP of Human Resources at Vitality Health Enterprises, and the Performance Management Evaluation Team (PMET) as they implement a new performance management system and struggle with its consequences.
Performance Outcomes
The change in executive leadership used in the new performance management system positively affected the Key Performance Indicators. Taking individual performance in the company as the main factor in promoting an employee, and ranking relative to other employees, motivated employees to perform their work more efficiently (Bingham & Beer, 2012). Although three types of KPIs, result indicators, enterprise condition indicators, and product indicators, were included in the assessment, the principal indicator was not included.
In addition, the employees admitted that they did not feel their work was necessary. For example, one of the engineers even said he was considering moving to the Ivy League because he would feel more useful there (Bingham & Beer, 2012). They could have been included by measuring employees’ participation in various corporate events based on passing loyalty tests and compliance with Vitality Health Enterprises’ values.
Goals Aligned with Key Performance Indicators
Before the shift in leadership, the performance management system allowed informal and political pressures to skew manager evaluations. This was due to the global economic crisis and the health of the company’s head, Hikaru “Fred” Kikuchi (Bingham & Beer, 2012). These didn’t align with the employees’ efforts to reach their objectives. This was because, during the economic crisis, the focus of performance evaluation was solely related to the overall financial performance of Vitality Health Enterprises. The employees wanted to feel their usefulness and the value of each contribution.
Performance Evaluation
The pros of the force-landing approach used in the performance management redesign are that it creates conditions that motivate employees to develop. They will strive to improve their performance to take leading positions in the ranking (Bingham & Beer, 2012). The pros of the force-landing performance management approach are that it can create excessive competition among employees. Instead of the close-knit cooperation among employees, you can get fragmentation within the team due to the struggle for first place in the ratings.
It could have been improved by maintaining the salary calculation approach regarding accounting for the efficiency percentage. However, the manager can make a list by last name in alphabetical order, not by the percentage. Letter grades should also be removed to avoid hostility caused by the envy of colleagues toward each other.
Among other approaches besides forced ranking that may have been equally or more effective is the matrix method. A matrix of ideal employee qualities for each position is being built. The qualities of the prospective employee are compared with the reference ones, and a compliance matrix is built. At the same time, each employee’s individual achievements are taken into account, while the element of unhealthy competition is removed.
Areas for Improvement
The strengths and weaknesses of both top performers and weaker performers can be identified using a survey. All employees would be asked to complete a questionnaire during the working month to assess the complexity of their working day. At the same time, it would be necessary to introduce both the task the employee coped with most successfully and the task that caused difficulties. Thus, based on the review of this questionnaire at the end of the month, workers would draw conclusions about which skills are their strengths and which should be worked on.
To improve the assessment of employees’ strengths and weaknesses in the new system, employees should be invited to share how they evaluate their performance. This will help them feel included in the critical processes within their organization. Other features that would need to be included are employee stress levels. This indicator will help to avoid critical overwork, which can lead to the burnout of valuable personnel.
Performance Consequences
The modifications to the performance review-linked incentive were successful. In the vesting period, employees feel that their efforts have been noticed. They do not want to disappoint the company, maintain a high rating, and get used to earning more (Bingham & Beer, 2012). All these forces encourage employees at the top of the rating to maintain efficiency. Linking reviews with incentives is also carried out quite effectively. The uniform distribution of salary increases depending on the quality of work is a fair distribution of the company’s financial resources.
To allay managers’ worries about the relationship between review results and remuneration, it would be possible to involve third-party experts. The experts should be invited specialists, not representatives of the company’s top management. The specialists involved have the knowledge and experience of evaluating employees and are unbiased. To alleviate employees’ concerns, they should be allowed to discuss the evaluation results with management. If, in the opinion of an employee, they have done more and some of their merits have gone unnoticed, the employee should be allowed to prove that the allocated incentives do not correspond to the volume and quality of the work actually performed.
Reference
Bingham, J., & Beer, M. (2012). Performance management at vitality health enterprises, Inc. Harvard Business School.
