Question

Answer the following questions based on your understanding of the content.

Precision Manufacturing produces machine parts and has nearly 200 production employees and 50 employees in its front office with responsibilities ranging from data entry to marketing. Jackson Smith is the new compensation manager at Precision, and his first task is to implement a merit pay program that would tie to the company’s performance appraisal process. For the last 10 years, all employees have received an annual pay increase, but it has been an across-the-board increase, with all employees receiving the same percentage increase in base pay. Jackson and the company president have agreed that implementing a merit pay program to provide pay increases based on performance would support the company’s competitive strategy by rewarding employee productivity. The first step in developing the merit pay program is to ensure that the performance appraisal process aligns with the proposed program. The purpose in implementing the merit pay program is to provide employees with pay increases as a reward for performance, and, therefore, effective measurement of performance is essential. Jackson must now review the current appraisal process to ensure it will tie to the proposed merit pay program. The current appraisal process is fairly simple. Once each year, the supervisors at Precision provide their employees a written performance appraisal. The supervisors use a generic form to conduct their appraisals, and the same form is used for all employees. The form asks the supervisor to rate the employee on a scale of 1 to 5 in four areas: quantity of work, quality of work, attendance, and attitude. Once the form is completed, the supervisor meets with the employee to share the results. Both the supervisor and the employee sign the form, and then it is placed in the employee’s personnel file. Jackson’s initial research on the appraisals has brought several concerns to his attention. First, employees do not have written job descriptions that clearly state their performance expectations. Further, his review of past appraisals suggests that the supervisors tend to rate all of the employees about the same. Very rarely is an employee rated exceptionally high or low; most are rated as average. Finally, it seems that employees and supervisors communicate very little

about performance. Aside from the one meeting a year to deliver the performance appraisal, the supervisors tend to talk to employees about their performances only if the employee is having a problem. Jackson knows he has a lot of work ahead of him to create a performance appraisal process that will provide a reliable assessment to support a merit pay program. First, he must clearly identify the problems with the current performance appraisal process, and then he must lay out a plan to correct any deficiencies.

Question 1: What are some problems with Precision’s performance appraisal process that might cause challenges for Jackson to implement a merit pay program? (50 Marks; 500-word limit)

Question 2: As an HR professional, how would you advise Jack on improving the current performance appraisal process and aligning it to the pay-for-performance plan? (50 Marks; 500-word limit)

Answer 1

Ans 1) Below are some of the problems with precision's performance appraisal process

a) The Job description is not clear for the employees

A written job description is not available for the employees and hence most of the employees tend to work whatever the immediate supervisor tells them to do. It does not give any clarity on how the work should be planned and employees tend to work as and when the requirement arises and it impacts their performance as well.

b) Mode of appraisal is the same at all levels

Each employee is evaluated based on the generic form which has the same parameter that is used for evaluating. It generalizes the role and each role has a different scope and evaluating everybody at the same parameters will lead to improper appraisals.

c) No importance is given to the appraisal process by employees and supervisor

Neither the employee nor the employer is interested in doing apprisal amicably and most of them do it just for the sake of doing. This takes out the fun and the reason to do innovative jobs and makes the whole organization old fashioned and eventually affects the competitive advantage of the organization.

d) Common rating

Everybody is given a common rating, which leads to motivation among the employees and they know that they will get exact appraisals and won't try to innovate and grow the culture of the organization. This just makes the whole appraisals useless and just make it a function that has to be done only for documentation purpose.

e) Occurrence of appraisals

Only once in a year, the appraisal happens, but no quarterly or half-yearly meetings are done to see the progress of the employees. This helps to keep everything under control and everybody is in touch with their yearly goal. Also, it acts as a medium where the employee can vent out his problems in achieving a certain job and the support that he needs to achieve the goal. The supervisor and manager can also state the expectations clearly to the employee and thus the communication leads to better understanding.

Ans 2) To implement the pay per performance plan in the organization, the following changes need to be done

a) Define the key performance indicators for all the levels of the organization

Each employee of the organization should have a written job description with mentioned key performance indicators. So that everybody will be evaluated for their specific goals. It helps to measure the performance properly and accordingly the appraisal is done.

b) Training of employees on the new appraisal process

Supervisors and managers should be trained properly to conduct the appraisal process and lower-level employees should know how the appraisal process is done and how their performance becomes a key factor for performance appraisal.

c) Redesigning the compensation plan

Redesigning the compensation plan to be more of result-oriented and the compensation be paid only when the key goals are achieved. Include more incentives at the lower levels of the organization to keep the motivation level high and make these incentives related to the achievement of goals.

d) Quarterly appraisal meetings

These meetings will look into the progress of each employee and efforts are made to rectify any problems. Often due to the dynamics of the work, the roles of employees change, and hence these changes should be incorporated in the appraisals.

e) More involvement of HR with employees

HR has to interact more with the employees so that the real problem can be understood and the policies can be made employee-friendly which leads to more motivation among the employees and in turn, improves the productivity of the organization.

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