HRM Case Study on TechSavvy: Time to eliminate the underperformer?

Submitted To: Homayara Latifa Ahmed Asst. Professor Institute of Business Administration University of Dhaka
Submitted By : Tanvir Alam Gultekin Binte Azad Asif Iqbal Khalid Al Mashfique Mayesha Mehnaz Group 7 ZR-17 RQ-32 ZR-35 ZR-46 RQ-57

Submission Date: 22-05-12

TechSavvy: Time to eliminate the underperformer?

Well then, let us begin shall we? the President said with an encouraging smile. Where to begin, Sir! TechSavvy is such a huge success. It is currently ranked 5th in Fortunes Magazines wealthiest companies, and it has won several national and international accolades in the past year. What do you think is the reason behind your recent success? James got it all out in a rush. Aah, yes. 2012 has indeed been kind to us. Well, I put it down to the dedication and commitment of TechSavvys employees. We only recruit the best candidates and their intelligence and drive is what propels us forward. And we, in turn, reward them justly, the legend said, the pride evident in his face. Sir, can you elaborate on how you reward your

J
enter.

ames stood in front of the Presidents office. A bead of perspiration trickled down his brow. He knew that this was the opportunity

employees? James asked. Here at TechSavvy we reward the best of the best. If you had looked around the offices, you might have noticed the relaxation centers and spas on every floor. They have been specially designed for the fast trackers of TechSavvy. And then, there is of course our no-nonsense appraisal system. People with good appraisals are rewarded with a hefty bonus at the year end and also receive a share in the companys profits, the President said. And how do you judge who is better, Sir? James asked, curious. Im glad you asked that. Well, you see, its rather like your annual school report card. Some employees receive Es for Excellent, most receive Ss for Satisfactory and a few receive CCs for Causing Concern. The only difference is we limit the number of Es, Ss and CCs we give out, the President replied. And why is that? James questioned. Mostly, it is to avoid leniency, severity and central tendency errors. Also, it helps employees realize

he had been waiting all along. This was the one interview that could make or destroy him. He tapped lightly on the door. A gruff voice told him to

The President was sitting in a chair that seemed too small for him. He seemed to be a small, wrinkly man of sixty. He stood up to greet James and politely asked him to take the chair opposite to him. Here was the man himself; or the Legend, as everyone in the tech industry called him. James took a moment to come to terms with his bearings. The cabin was warmly lit with several motivational posters along the walls. He thought that this must be a wonderful place to work at. The Presidents voice interrupted his thoughts. Welcome to TechSavvy, young man. I understand that you are here to conduct an interview for the Daily Prophet? he said. Indeed sir, I am, James answered politely.

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TechSavvy: Time to eliminate the underperformer?

their weaknesses by comparing themselves with their peers. And off the record James, even though we are one of the wealthiest companies in the world, we only have a finite number of bonuses to give out. This ensures that only the most deserving ones get the bonus, the President said with conviction. I see. What happens to those who receive CCs? James was hurriedly scribbling as he asked this. They are put through training and counseling. If they are still unable to manage at least an S, they are let go. TechSavvy has no tolerance for laggards, he said sternly. Are the employees accepting of this system? James was confused. Of course they are. TechSavvy employs around 92000 people. If they werent accepting, they wouldnt be working here. You can talk to my employees if you want. I believe they would be more than happy to share their experience, the President offered. That will be very helpful Sir. Thank you for your time. James stood up to shake hands with the President. No problem. My secretary will show you the way out, he replied. The secretary ushers James towards the employees cabins. A lone man of fifty, sitting nonchalantly at his desk, catches Jamess eye. The secretary tells him that the man is a certain Tom Riddle. James walks up to him and introduces himself. Mr. Riddle seems eager to talk. So James asks him about his experience at TechSavvy. Ive been with this company for 25 years. Ive given it everything I have. All throughout my life, Ive been a model employee. Ive always gotten Es on my evaluations and enjoyed all the perks that came with it. And now, in my final years, this company has turned its back on me, he says with a sigh. But why would they do that? James asks, astonished. Because TechSavvy no longer needs me. Im old and dispensable, Mr. Riddle says matter-of-factly. Sir, Im sorry but I dont understand what you are saying. James is confused beyond measure. Ive mentioned to you how Ive always gotten Es all throughout my career and enjoyed the best that this company has to offer. But last year, I got an S. I asked my supervisors, because they are the only ones who do the appraisal. They said that there was no change in my performance and that I should be happy with what I got. But I wasnt. So I probed farther and one of them finally cracked and told me the real reason. He said their hands were tied. Because of the forced distribution, they were only able to give out 3 Es in IT. And they chose to give them to the new recruits for retention purposes. I am nearing the end of my job career whereas they are indispensable to the firm. Two of them are on my current task team. I cant even look them in the eye. he concludes. But Sir, there must surely be something you can do. Have you tried taking this matter to the President? James asks. I wrote him a letter eleven months back. He is yet to answer it. Another performance appraisal looms on the horizon. I am surely doomed, the old man says dejectedly. I dont know what to say. He honestly didnt. Its okay, son. Ive accepted my fate. And look at you, sitting here in a dark office listening to the ramblings of an old man. The sun shines bright. Go and enjoy it! The old man says, slapping his back. Good luck, Sir. And thank you for your time. The man just shakes his head. James steps out of the

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office, his thoughts a confused mess.

TechSavvy: Time to eliminate the underperformer?

Learning Objectives:
1. To analyze the current performance appraisal system and evaluate its alignment with the organizations culture. 2. 3. Learning to evaluate a performance appraisal system and to generate necessary recommendations. To assess the possible outcomes of seeking legal action against a company.

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TechSavvy: Time to eliminate the underperformer?

Questions and Answers:

What is your opinion of the current performance appraisal system in TechSavvy? Is it at par with its team-oriented focus?
TechSavvy currently evaluates its employees on the basis of a forced distribution method. It aligns the employees in accordance with previously decided performance-distribution percentages. In TechSavvy, for example, the supervisors were only able to give out 3Es in IT. This had been pre-assigned by management and hence the supervisors had no other

An effective performance appraisal system needs to be in place before forced ranking is undertaken

option but to comply. Now to give a fair opinion of the rather controversial forced distribution method, one needs to consider both the pros and cons associated with it. Proponents of forced distribution state that the approach may: Foster a high performance culture in which the workforce has a continuous chance of improving. Although the fate of Mr. Riddle does seem unfortunate, there might be some people who actually deserve the S or CC. Receiving a lower grade will motivate them to strive harder to achieve an E and the associated bonus. This feeling might be further strengthened when they see their colleagues enjoying the added benefits of a good appraisal. Force supervisors to make tough decisions and identify the strongest and weakest links in a group. Had there been no pre-assigned distribution, the supervisor might have given everyone a good grade (leading to both central tendency and leniency error) in order to be better liked among his subordinates. Alternatively, if a supervisor is too strict in his evaluation, he might give everyone a bad grade on average leading to strictness error. Hence TechSavvys appraisal system ensures that these errors are avoided, ensuring that only the truly deserving ones enjoy the perks of a good appraisal. (Lisa, S.) Those who are opposed to forced ranking suggest that the process may: Demotivate workers. Mr. Riddle was very discouraged when he received his first S in 25 years despite no change in performance. The forced ranking left his supervisors with no other option. Discourage collaboration and teamwork. When employees know that they are up against each other, they tend to act in their individual interests rather than in what is beneficial for the whole group. Give rise to gender, age or race distribution. Many argue that managers often use forced distribution to serve their individual biases. In Mr. Riddles case, for example, he was given an S because he was old and dispensable. Alternatively, the new recruits were given Es because of retention purposes.

seek to engender a competitive culture. It is useful when making distinctions between employees and making

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It is obvious from the above arguments that the forced distribution method is best suited to organizations that

TechSavvy: Time to eliminate the underperformer?

difficult decisions like layoffs. It instills the concept of Survival of the Fittest into the minds of employees who then compete with each other for scarce organizational resources. Hence this method is very suitable for hypercompetitive cultures. TechSavvy, on the other hand, has a more team-oriented focus. In such cultures, forced distribution may be counterproductive, since it pits associates against each other. (Fisher, C, D., Schoenfeldt. L, F., Shaw, J, B) Team members are busy competing with each other for good grades, rather than functioning together as a

Its usually best to replace C players. Development efforts too often result only in their moving up just slightly and displacing other marginal performers

whole. TechSavvy only has a finite number of bonuses to give out. Accordingly the forced distribution makes team members compete for these bonuses, hampering largely in the process. Two of Mr. Riddles team members received Es in their evaluation, whereas he only received an S. This greatly upset Mr. Riddle, who cant even look them in the eye. If such is indeed the situation, then it would be very difficult for this team to work together both in the present and in the future. The forced distribution does not seem to be at par with TechSavvys culture. Given its team focus, it would thus be beneficial for TechSavvy to employ an appraisal system that rewards teamwork and collaboration and removes the element of competition within employees.

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TechSavvy: Time to eliminate the underperformer?

How might the performance system be redesigned to eliminate/address the current issues?
In order to redesign the appraisal system, one first needs to know the problems associated with it. The forced distribution system currently practiced at TechSavvy has given rise to a number of issues mainly: Employee appraisals only take place once a year, thus reducing feedback opportunities and chances of improvement. The appraisal is kept confidential. Employees are not judged on the basis of specific Key Performance Indicators (KPIs), but on the basis of overall performance. This lack of transparency leads to low procedural justice in the system. On those occasions when employees are part of exclusive high-performing teams where each member is equally talented and bears an equal share of the weight, someone still must be ranked low, despite meeting performance plan goals. Hence there is low distributive justice in this system. This ultimately lead to Mr. Riddle receiving a low score despite giving his best efforts. There is evidence of age discrimination in the system. All the new recruits at IT received Es on their evaluation, whereas Mr. Riddle received an S because he was old and dispensable. This issue must be addressed as quickly as possible if TechSavvy wants to avoid potential lawsuits. So, to bring internal equity in TechSavvy, along with transparency and fairness in the performance appraisal system, one solution might be a 360 degree assessment system. (Peiperl, M, A.) It is feedback that comes

from members of an employee's immediate work circle. With the increase in focus on teamwork in TechSavvy, the emphasis of appraisal has shifted to employee feedback from the full circle of sources which includes selfevaluation, evaluation of peers and supervisors.( (Fisher, C, D., Schoenfeldt. L, F., Shaw, J, B.) Self-assessment: Self-appraisals are particularly valuable in situations like TechSavvy where the supervisor cannot readily observe the work

Charlie is better than Sam, but not as good as Mary

behaviors and task outcomes. This form of performance information is actually an informal part of the assessment. The supervisors at Tech-savvy, can ask their employees How do you feel you have performed? in a somewhat formal approach. In this way they can identify the key accomplishments of the employees and how they feel about themselves. If self-ratings are going to be included in the appraisal, structured forms and formal procedures are recommended. Moreover, the self-assessment should take place in every quarter of the fiscal year to ensure a continuous flow of motivation in achieving potential targets. The peers: With downsizing and reduced hierarchies in organizations, as well as the increasing use of teams and group accountability, peers are often the most relevant evaluators of their colleagues performance. Peers have a unique perspective on a co-workers job performance and employees are

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generally very receptive to the concept of rating each other. Peer ratings can be used when the

TechSavvy: Time to eliminate the underperformer?

employees expertise is known or the performance and results can be observed. Peer evaluation will be a very effective tool in TechSavvy as team orientation is the integral to organizational structure. Using this tool, the behavioral factors of an employee can also be judged in terms of acceptable behavior and good interpersonal skills. Moreover, the increased use of selfdirected teams make the contribution of peer evaluations the central input to the formal

The research indicates that positive feedback charges up a worker, but negative comments sap the job of some of its intrinsic motivation

appraisal because by definition the supervisor is not directly involved in the day-to-day activities of the team. So, the addition of peer feedback can help move the supervisor into a coaching role rather than a purely judging role. Superiors (Supervisors): Evaluations by superiors are the most traditional source of employee feedback. A 360 degree assessment should include both the ratings of individuals by supervisors on elements (KPI) in an employees performance plan and the evaluation of programs and teams by senior managers. The supervisors must inform the employees beforehand the basis against which they are being evaluated. To make the rating fair, superiors should be able to observe and measure all facets of the employee performance to make a fair evaluation. Moreover, supervisors need training on how to conduct performance appraisals. They should be capable of coaching and developing employees as well as planning and evaluating their performance. Thus, after considering all the above recommendations, the redesigned performance appraisal scheme should have: .A quarterly self-assessment, peer and superior evaluation instead of the yearly basis. This will help ensure a continuous flow of motivation and feedback to enhance attainment of performance targets. A higher weightage on peer evaluation followed by supervisors evaluation and self-assessment. The peers and superiors must clearly mention the basis of each score and justify the reasons behind giving a particular grade. Moreover, the superiors and peers are liable to answer any sort of queries on the score. Keeping this in mind, TechSavvy might arrange an interactive session after the performance appraisal.

All in all, 360 degree evaluation will help address most of the issues faced in the current performance scheme in TechSavvy.

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TechSavvy: Time to eliminate the underperformer?

Do you think it is feasible for Mr. Riddle to file a lawsuit against TechSavvy? Please explain the rationale behind your answer.
Mr. Riddle has been working at TechSavvy for the last 25 years. He fell on the wrong end of a forced distribution method which is used by the company for employee performance appraisals. He has the following alternatives which he can choose from on the matter: 1. 2. Take legal action against the company Accept TechSavvys evaluation of his performance

Mr. Riddle had dedicated the major part of his professional life to TechSavvy. The least that TechSavvy could have done was to honor him for his loyalty and dedication by giving him a grade he deserved. Not only did they fail to do that, the supervisors were also unable to give him a proper explanation as to why his grades suffered. He was snubbed from getting an E in his evaluation even after a performance worthy of the grade because the number of Es given by the company was limited. For retention purposes, only 3 new recruits were given Es. Hence, Mr. Riddles grade suffered. Clearly, Mr. Riddle was discriminated on the basis of his age. The new recruits seem more important to them even though Mr. Riddle gave his whole life to TechSavvy. Mr. Riddle was, in his own words, old and dispensable. Here, Mr. Riddle was a victim of discrimination on the basis of age. This unfair action against him would not hold in court and TechSavvy would have no other choice but to settle the lawsuit with a large amount of money. There is indeed very little chance of the lawsuit getting revoked. (Alsever, A.) Hence, if he decides to take legal action against the company, it is safe to say that he would be paid a handsome amount to settle the lawsuit. The only drawback to taking legal action is that everything between him and the company would end on a bitter note. He gave 25 years of his life to TechSavvy. And to end his time in the company by filing a discrimination lawsuit against them would be the worst possible scenario if professional image and goodwill is Mr. Riddles priority.

The strategy has also resulted in legal troubles for such companies as Microsoft, Ford, Goodyear, 3M, and Capital One, which have fought discrimination lawsuits filed by former employees who claimed forced ranking was used to discriminate on the basis of race or age.

All in all, there should be no doubt that Mr. Riddle should take legal action against TechSavvy, unless he feels his professional image and goodwill is too important for him, and he wants to end his career in the company on a positive note.

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TechSavvy: Time to eliminate the underperformer?

References
1. Lisa, S. (2002, June 20).Forced Ranking- A Good Thing for Business. Workforce. Retrieved on May 22, 2012, from www.workforce.com 2. Fisher, C, D., Schoenfeldt. L, F., Shaw, J, B., 2009. Human Resource Management. Boston, New York: HMC. 3. Peiperl, M, A. (2001, January).Getting 360-Degree Feedback Right. Harvard Business Review. Retrieved on May 22, 2012, from http://hbr.org/2001/01/getting-360-degree-feedback right/ar/1. 4. Fisher, C, D., Schoenfeldt. L, F., Shaw, J, B., 2009. Human Resource Management. Boston, New York: HMC. 5. Alsever, A. (2007, March 20). What is Forced Ranking? CBS news. Retrieved on May 22, 2012, from http://www.cbsnews.com/8301-505125_162-51059306/what-is-forced-ranking/

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TechSavvy: Time to eliminate the underperformer?

Appendix A: Case Source

Originally published Monday, October 9, 2006 at 12:00 AM

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Microsoft exec puts her stamp on human resources

In Microsoft's hypercompetitive culture, employee evaluations are a fact of life. For the past 15 years, a ranking system forced managers... By Benjamin J. Romano Seattle Times technology reporter

In Microsoft's hypercompetitive culture, employee evaluations are a fact of life. For the past 15 years, a ranking system forced managers to limit the number of top scores and associated bonuses to their staff, even if everyone pulled an equal share of the weight. Someone had to get the shaft. The forced curve was company policy. And it climbed up a list of employee gripes that grew as Microsoft's stock, which accounts for much of the company's compensation, languished.

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TechSavvy: Time to eliminate the underperformer?

In May, after barely a year as Microsoft's human-resources chief, Lisa Brummel swept away "artifacts of the past," starting with the widely disliked forced curve. She announced myMicrosoft, a broad program including resources for career development, management training and new perks. Now in her 18th year with the company, Brummel calls it the biggest humanresources policy change ever introduced. These course corrections come as Microsoft faces perhaps its stiffest competition for talent, often referred to as the raw material of the technology industry.
myMicrosoft v.1.0

Big changes Microsoft employees recently learned how they fared under a new evaluation and compensation system introduced in May. The new myMicrosoft employee program also includes new perks. The company is reviewing version 1.0 of the program and plans to continually tweak it. Here are some other elements of the program: Management training More manager accountability and opportunities to improve skills. Career development A clearer path to the next promotion to help employees plan their careers at the company. On-campus services At the Redmond corporate headquarters, employees have access to laundry and dry-cleaning, grocery delivery and convenience stores. More food options were added to company cafeterias. Free towel service in employee locker rooms was also restored. Discounts Microsoft arranged for employees to get discounts on services such as housekeeping, yard and pet care and auto repair. Source: Microsoft

Recruiters say talented programmers have virtually unlimited choices from industry stalwarts to the companies that have thrived past the dot-com bust Google and Yahoo! foremost among them and a new crop of well-funded Web 2.0 startups. And Microsoft is as hungry for workers as it has been at any time since the peak of the tech bubble in 2000 and 2001. Its global work force ballooned by 16.7 percent to 71,172 in fiscal 2006, which ended June 30. While Brummel doesn't expect that blistering pace to be matched this year, she said the company's growth plans are unchanged. Keeping employees happy and recruiting new workers are critically important to Microsoft's success. And Brummel is just getting started. "With our employee base the way it grows, the type of people we want to bring in here, the way our whole system works we have to keep evolving it," she said. So far, the rank and file appears to have welcomed Brummel's initial efforts. And while top Microsoft executives typically don't comment on individual performances, the company's leadership appears to be pleased with her. She has the green light to continue expanding the program.

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TechSavvy: Time to eliminate the underperformer?

Under the new system, evaluations were completed last month and employees from Redmond and Fargo, N. D., to Bangalore, India, and Cambridge, England, learned how they had fared in the past cycle, when bonuses and raises hit their bank accounts Sept. 15. Employees are now supposed to be judged against specific, measurable performance goals instead of against their peers. They're also evaluated on potential long-term contributions to the company (although these rankings are still given on a mandated curve). In theory, managers can distribute bonuses and stock to reward employees as they see fit. Brummel said Microsoft put more money into compensation she wouldn't say how much and expects the top performers to see rewards "above and beyond" what they got in the past. Global work force Reactions have run the gamut, and it's difficult to characterize the experience of employees across the world. The author of Mini-Microsoft, the widely followed, anonymous blog where employees railed against the forced curve, wrote: "I think for most Microsofties, the rewards ended up being very similar to last year. A few folks on each team might still be trying to pop their eyes back into their sockets. I'm pleased." Other Microsoft employees expressed ambivalence and noted that there's still confusion on how it works. Many are withholding judgment until at least the next go-around. More important to morale, some said, is the stock's recent rally it has now recovered all of this year's losses and optimism over imminent high-profile product launches, including the Zune digital media player next month and the Windows Vista operating system, scheduled for a broad rollout in January. Brummel said she's received universally positive feedback from managers on the new system and employees have been "generally positive," but are wondering what their reviews mean for their careers. "And in fact, we don't know, because everything will build on what we did this year" and in subsequent years, she said. Brummel, 46, grew up in Westport, Conn., received a degree in sociology from Yale and started her career selling college textbooks. She was recruited by Microsoft while finishing an MBA at University of California at Los Angeles. She spent 16 years in a variety of management roles throughout Microsoft's product groups before reluctantly accepting the top human-resources post. During an evening meeting in her office, she said "no" three times before Chief Executive Steve Ballmer persuaded her to assume responsibility for keeping a global work force happy and aligned with company goals. Human-resources experts say employee review and compensation systems are among the most important tools to communicate goals to workers. "The performance-management system tells you what it is in this company that we value and reward," said Herman Aguinis, a professor of management at the University of Colorado at Denver Business

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TechSavvy: Time to eliminate the underperformer?

School, and author of a recent book on the topic. "If you're changing the things that you value and reward, people are going to change their behaviors accordingly, so it is a very powerful tool to change a company's culture." Addressing issues Brummel said there's much more to an employee's experience at the company, and myMicrosoft seeks to address a spectrum of issues. She has been deliberate in her efforts to learn more about employee concerns. Brummel, who walks the same halls as Microsoft's topmost executives, embarked on a "listening tour" shortly after she got the job. Once a week, usually in the morning, Brummel would find a conference room big enough for at least 100 people and invite everyone from adjacent buildings to come talk with her directly. Brummel is modifying that effort as she gathers feedback on myMicrosoft and prepares a new set of changes to roll out with version 2.0 of the policy. Later this month, she plans to begin an internal blog, InsideMS, where employees can raise issues anonymously if they choose and she can contribute to the discussion when appropriate. She sees this as a more favorable venue to air company complaints than external blogs such as MiniMicrosoft, which she reads but does not participate in. "One of the reasons why I don't participate in any of the external blogs is you have no idea whether it's a Microsoft employee posting, or somebody else posting just to ... provoke a discussion," she said. She also implored employees during the company meeting last month to "be responsible" with what they write, especially regarding Microsoft's intellectual property. New initiatives Another new initiative addresses an awkward internal-transfer process that discouraged people from exploring their options. In the past, an employee needed a manager's permission to move to another team. Now, managers are notified, but can't block a move. Brummel said the new system shortens the internal interviewing process and "allows people to move more freely." This is another change employees have long asked for. Looking further ahead, Brummel said the company will revamp the way managers are evaluated by their staff. Now employees can give feedback on their direct manager, but not on people further up the ladder. That's probably the biggest change on tap for myMicrosoft 2.0, she said. It's hard to gauge what impact any of this will have on recruiting and retention. Brummel knows of at least one example of a college recruit taking note of the changes. She's more optimistic about myMicrosoft's impact on recruiting in the coming months as employees get comfortable with the changes and attest to their experience under the new system. Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

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TechSavvy: Time to eliminate the underperformer?

Seattle Times researcher David Turim contributed to this report.
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