Performance Appraisal case study
The Sales Manager at AX Systems, a small Spanish company which manufactures computer equipment, had announced his intention to leave the firm. To succeed him, there were two internal candidates being considered. The first, Juan Diez Martin, was a 20 year veteran who believed that the job was his given his seniority with the company and the fact that he was named Salesperson for the Year for the past 5 years. The second, Jose Luis Rodriguez Gonzalez, was with the company a respectful 5 years and had received much customer praise and recognition in that time.
A decision to promote Jose Luis was made at the hands of the HR Manager who based his decision on the position job description and the employees’ performance appraisals which were evaluated on a trait scale by their department manager. The appraisals were vague and were not communicated to the employees. There was no “action plan” put into place to ensure employees’ performance could be improved.
The decision to promote Jose Luis was told to the employees jointly in the HR Manager’s office. After this time Juan claimed that the decision was unfair and came as a result of the Sales Manager being friends with Jose Luis. At that time the HR Manager provided both Juan and Jose Luis’ appraisals for Juan to review.
The failures here were that the individual selected for the position was selected in an unfair way. He may not be the best person for the job. Also, the way in which the entire process was handled was inappropriate. The HR Manager should not have informed the employees together nor should she have provided any of Jose Luis’ confidential information to Juan.
To respond to the immediate problem, the job offer should be rescinded while the management team has an opportunity to review which candidate is the best fit for the position. While this may create some controversy, the company will have to manage this.
The HR Manager should be severely disciplined for his actions, up to termination (contingent upon his performance in other areas).
Finally, to solve this issue from an organizational standpoint, the company should implement hiring and promotion procedures and follow them. They should also institute changes to the appraisal system and train supervisory staff on performance management.
The selection of Jose Luis for promotion was not done in a suitable manner. This problem stemmed from the Human Resources Manager failing to assess the appropriate core competencies of the incumbents and the Sales Manager failing to manage Juan and Jose Luis’ performance.
The issues with the promotion decision were as follows:
The Human Resources Manager made his promotion decision on the basis of the Sales Manager Job Description and the trait scale performance reviews of Juan and Jose Luis. He felt that he should promote the person who adhered most to the profile. On this basis the HR Manager overlooked the importance of: planning, motivating others (programming team’s work, supervising others) and organizing. He simply looked at two traits, albeit important ones: communication and leadership. Further, a promotion shouldn’t be based solely on an appraisal system especially one which is 90 degree.
The trait performance appraisals which were used to judge Juan and Jose Luis were very vague.
They didn’t consist of anything but a rating system. They didn’t have dimensions or any explanation as to the rating. Thus, the rating system appears arbitrary. For example, Juan received Salesperson of the Year for 5 years yet his performance review wasn’t nearly as positive as Jose Luis’.
The performance appraisals were not shared with the employees thus there was no opportunity for the employees to clarify the expectation, to understand the gap in performance or to improve their performance.
Juan claimed that the Sales Manager was friends with Jose Luis. Although this hasn’t been substantiated, if true, this could have resulted in a rater error. Liking a person is substantially correlated with positive performance reviews. Personal biases for any number of reasons could also sway the appraisal (i.e. halo effect) which is why a more in-depth review would be preferred.
In terms of how Human Resources managed the promotion, there are several additional failures. First, the employees were told of the decision at a joint meeting. They should have been told separately. A brief, but respectful explanation should have been given to Juan; Jose Luis should have been given the details of his promotion. Second, upon asking for a justification,
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Juan was provided with the evaluation of both himself and Jose Luis. Jose Luis’ evaluation should have remained confidential.
The first option is to maintain the decision to promote Jose Luis. Implications are as follows:
Although Juan was given an explanation, it’s fair to assume that he would continue to feel bitter about the decision. Although he doesn’t appear to have any basis to sue for legal damages, he could claim that the company discriminated against him perhaps on the basis of his age or some other factor. (We are assuming that Juan is older simply given his seniority with the company.)
The company should make it clear that their decision is simply due to position fit. They should also make sure that Juan knows that he is valued for being such a good salesperson. However, it should be made clear that being a good salesperson doesn’t necessarily translate into being a good manager.
The company should further work on relations with Juan to make sure he remains motivated. A rewards system for the Salesperson of the Year should be implemented.
Jose Luis should be mentored and monitored to make sure that expectations are clear and that he is capable of doing his job.
The company should seek legal advice just to be sure that Juan doesn’t have a case against them and/or to prepare if he does.
Cost of Option 1
The second option is to follow through with promoting Jose Luis, but to find a position with increased responsibilities and salary for Juan. The implications are as follows:
Juan could be promoted into a Senior Salesperson role; a supervisory role or even be considered for a promotion at another site. This may serve to placate him.
There are a few reasons that this alternative isn’t the best option. First, positions shouldn’t be created simply to keep employees happy. The organization needs to create and fill positions based on strategic objectives. Second, if the performance appraisal that was carried out was accurate, he shouldn’t be moving up simply because of his tenure with the company.
Cost of Option 2
The third option is to rescind the job offer and to carry out a proper selection process including the two incumbents as well as any other internal or external incumbents. The implications are as follows:
The company should seek legal advice and be prepared in case Jose Luis wishes to seek legal action. Although employment contract as generally considered “at will” whereby it can be terminated at any time, the company should still be well prepared. Although it’s not good practice to do this, it’s not entirely unusual when either a company find out new and relevant information about a candidate or when the company strategy changes. In this case, the new information was that there was less information about the candidate than previously thought.
A senior level staff such as the Director of HR should speak with Jose Luis as quickly as possible to inform him of the error caused by the HR Manager. He should be informed that his performance is well recognized, but that the company has an obligation to everyone involved to ensure the hiring process is done correctly. If he is indeed the best person for the job the company will soon discover this.
The job should then either be posted on a suitable employment website to gather candidates or, more preferably due to time pressures, be sent to a recruiter who may have candidates on hand. In this case, the interviewing can take place within one week’s time and a decision could be made within two weeks.
The interviews should be well prepared. There should be at minimum two people present including the Director of Sales and a competent HR person (we would like to leave the current HR Manager out. This will be discussed later.) The interview questions should be valid.
In conjunction with the interview, employee track record (not including the performance appraisals which were uncertain) and seniority with the company, a decision should be made in a fair and equitable manner.
Decision should be privately discussed with each internal candidate.
Cost of Option 3
The fourth option is to rescind the offer, and to carry out a proper selection process but only considering the two internal candidates. The implications are as follows:
The company needs to seek legal as outlined above.
A senior level staff such as the Director of HR should speak with Jose Luis as quickly as possible as outlined above.
All procedures as outlined above should follow with the exception of considering any additional candidates.
Cost of Option 4
Regardless of which option is taken with respect to the promotion decision, there are several organizational alternatives that need to be considered:
1. Discipline or Terminate HR Manager
As laid out in the Problem Statement, the HR Manager’s failures are what ultimately led to this situation.
He should be disciplined and retrained. Given how pivotal knowledge of hiring and performance management is for an HR professional, the company should evaluate whether or not the incumbent is the right person for the job. Terminating employment may need to be considered. The Director should assess the other responsibilities of the HR Manager.
2. Create a Clear Hiring and Promotion Policy
Although companies are able to hire and promote employees as they see fit, it is in the best interest of everyone if clear guidelines are followed in order to find the right person for the job. In this case, simply clarifying the core competencies (at least 6 of them) then matching these to the candidates’ abilities would have aided the situation.
3.. Implement a Standard Performance Review System
The system could be paper-based or an easy-to-use software system. It should be behavioral based and include dimensions as well as examples of the dimension. It should list goals that are: Specific, Measurable, Attainable, Reliable, and Timely.
The company should consider which of the following they would like to include: peer reviews, subordinate reviews, 360s, Customer Appraisals and Self-Reviews. Using at least some of these methods would garner more reliability with the result.
The review also needs to be communicated to the employee along with an action plan of how the supervisor can help the employee succeed in his/her job.
4. Train all Supervisory and Management Staff in Performance Management
This point should be conducted in conjunction with point 3. This one-day training session can be created and carried out in-house by the HR Team. It should include Frame of Reference Training and the Critical Incident Technique. The purpose of the training will be to:
Improve communications between supervisors/managers and their team;
Accelerate the development of key competencies;
Motivate employees to take responsibility for their own behaviors; and
Eliminate surprises at review time.
The best option although it will be a difficult one, is to take the fourth option, to rescind the offer and to conduct a fair and ethical hiring process for the position deciding between the two internal candidates. Although it may not send the best message about the company to rescind an offer, it is clear that the process was not done properly. The decision to hire internally is simply because it seems as though the company will be capable of finding a qualified manager between Juan and Jose Luis. If not, external candidates can be considered, but this doesn’t seem to be a likely scenario.
The company should opt for this option for a number of reasons:
Quite simply, it is the right thing to do. Juan deserves a chance to prove himself given his 20 years of experience coupled with being the Salesperson of the Year for 5 years.
There is enough internal talent that hiring from inside only makes sense. It is cost-effective since the company won’t have to pay for a recruiter.
There will be some negative responses to this decision, but the company must respond quickly and professionally to stymie this. Adhering to a bad or unfair decision could result in the same consequences.
In terms of the Complimentary Alternatives, the company must implement all of them. The HR Manager made several serious mistakes and needs to be dealt with either by discipline or perhaps by termination. This will be contingent on how well he performs his other job duties and how well he can explain himself and or improve his behavior.
The policies regarding job hiring/promotion need to be clarified and adhered to. Performance Management needs to be addressed by implementing a proper appraisal system and by training all supervisory staff.
The changes required can be implemented in the following ways:
- Jose Luis should be spoken to immediately by the Director of Human Resources. The Director should explain the situation respectfully and with empathy. Without too much detail the
Director should take full responsibility of what has happened and assure Jose Luis that the individuals at fault will be dealt with accordingly. Further, he should be assured that he will be fairly considered for the position and that his service is sincerely appreciated. Given how sensitive this situation is, the Director should be very careful during the meeting to be empathetic while keeping the meeting as brief as possible. It should be made clear that this decision should be kept strictly confidential at this time. This will keep company rumors at a minimum.
2. The Director of Human Resources should have a private meeting with Juan immediately following the meeting with Juan to tell him that he will still be considered for the position through an appropriate process if he is still interested in the position. It should be made clear that this decision did not stem from his complaint, but from the company lacking the proper information to make an informed decision. Juan needs to fully understand that he still may not get the position. (The purpose is to make sure that if he doesn’t get the job he knows that the decision was made in a fair way; receiving bad news twice can be very difficult so preparing him for the worst case is fair.) Again, it needs to be clear that this decision is strictly confidential.
- The factors weighing into the promotion need to be clarified. Both candidates should be interviewed. Their knowledge, experience and seniority should be considered, as should performance knowledge such as being name the Salesperson of the Year for 5 years (Juan) and for receiving customer praise and recognition (Jose Luis).
- The interview and decision process should take place within the next few days.
- The decision should be communicated to both employees separately and respectfully. The candidate who did not get the position should be given an explanation and be given the opportunity to grow in their position. The company must follow through with this promise.
- The HR Manager needs to be disciplined and trained or simply terminated. His ability to meet the expectations of other tasks will be the deciding factor. This should be done immediately.
- The HR Director should create a clear hiring and promotion policy and be sure to clarify this with any hiring managers. The HR team should fully understand the policy to make sure they enforce it. This should be done within the next month and should take: four hours to create and edit; 15 minutes per manager to read; 2 hours to meet with the HR team to clarify the policy. Note: It is fair to promote employees without a rigorous interview approach when the decision is made by those who are fully aware of the employee’s performance. It should simply not come down to one uninformed individual.
- The Performance Review System need to be fully addressed. We suggest implementing a combination outcome and behavior based software system including dimensions and examples of dimensions. Although we see the merit in the Critical Management Technique, we will consider this next year in the interest of time and because we feel combined with performance management training it may not be required. (Managers should be able to identify critical incidents to dimensions without having them named at the outset.)
The appraisal should consist of three parts: manager appraisal, self appraisal, and customer appraisals (in the case of salespeople). This will hopefully show some agreement amongst multiple raters therefore adding to the validity of the reviews.
Sourcing, purchasing and training management should take a total of a month and a half. The system cost is approximately 3,000 Euro. Sourcing and training should take a total of 10 hours (HR Administrator), 4 hours (HR Director), 2 hours per manager. Some further decisions about the appraisal system:
- Specific, Measurable, Attainable, Reliable, and Timely goals should be clearly linked to the strategic goals of the organization to ensure employees see their function as a worthwhile contribution.
- Rewards and recognition should also be linked to the appraisal.
- Training should be provided for any knowledge gap in addition to an ongoing development plan.
- Appraisals should be communicated with employees in an open and non-threatening way. The appraisal should consist of a two-way conversation between manager and employee.
- The company should train all supervisory staff in Performance Management. This training teaches supervisors the importance of not only how to prepare for and conduct an appraisal, but shows the importance of managing performance in on ongoing fashion. It should be created and facilitated in-house by the Director of Human Resources (and his team) in a one-day workshop.
One key point is that supervisors should keep a record of concrete behavioral examples to reduce actual and perception of bias.
In terms of managing performance, any behavior that warrants discussion (positive or negative) should be discussed at that time. It’s futile and unfair not to share this with the concerned employee.
The training should be created by the HR team and take no more than a month and a half to finalize. In order to get all of the materials together and to organize a day for all supervisory staff, the training should take place in two months time.
The HR Director should have continued communication with each of the managers on a regular basis to ensure they continue to use the methods learned in the Performance Management training. It should be further encouraged that managers keep the communication open between all of their staff.
Carrying out the above mentioned changes to the performance appraisal and, more generally, the performance management system will create an environment with employees who are not only more equipped to do their jobs but more motivated. Consequently, the company will be in a better position to meet their strategic goals.
From a legal standpoint, this system protects both the company and the employee. Employees will know what the expectation (and failure) is. In any instance where the company is confronted with legal action for situations such as unlawful dismissal, it should be easy to foster proof of: job description, written instructions, employee review of appraisal results, an action plan to improve behavior, agreement among multiple raters, and there was rater training.
Cost of Solution
The Performance Management Training should contain the following:
- How to motivate employees to improve their performance
- Benefits to providing regular feedback
- Inventory of skills and capabilities
- Support the termination and layoff process
- Guiding Principles
- Communication Principles & Active Listening
- Principles of Feedback:
- Describe the behavior in non-threatening terms
- Express consequences of this behavior
- Help employee make a plan to discontinue behavior
- Use positive feedback to show recognition of effective behavior
- Always use motivating, not deflating terms.
- Positive Reinforcement of Behavior
- Performance Diagnosis – My employee is not doing what I want him/her to do; what should I do?
- How to handle a performance coaching meeting. Learn the art of script writing.
- Corrective Action – When and how do we discipline an employee for poor performance?
- How to write a corrective action letter.