Rob Parson at Morgan Stanley Hire or Fire

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Background • • • • • Morgan Stanley Capital Market Service Paul Near Rob Parson The Performance Evaluation Process at Morgan Stanley .

stimulates global investment and trade. Importantly. As the table below shows.Industry Profile • • The financial services industry is a vital component of the US and world economies. depends on its ability to remain competitive both at home and abroad. these trends are especially strong in the rapidly growing “BRIC” countries (Brazil. • . Russian. are now found outside the United States. and presents investors with a broad array of products and services to increase return and manage risk. Underscoring growth in the BRICS — current estimates indicate that the BRICs will account for 50% of global GDP by 2050. It provides the fuel that promotes job creation and sustains economic growth and innovation. and 95 percent of the world’s consumers. India. and its ability to service customer needs. The long-term health and vigor of this sector. A robust finance industry provides businesses with new ways to lower the cost of capital. And why are these non-US markets essential for future US economic growth and job creation? The answer lies in the growing market share of non-US markets — more than three-quarters of the world’s GDP. approximately two-thirds of the world’s debt markets. these financial services and products help facilitate and finance the export of manufactured goods and agricultural products. many of the best future growth opportunities for the global companies lie in non-US markets. about two-thirds of the world’s equity market capitalization. but in markets around the world.1 Not surprisingly. A vibrant US financial services sector requires having access to clients not only in the US. while helping the US become the world’s number one exporter of services. and China).

[4] The corporation. and Investment Management. Morgan Stanley operates in 42 countries.000 employees. and has more than 1300 offices and 60. Morgan & Co. The company found itself in the midst of a management crisis starting in March 2005[5] that resulted in a loss of a number of the firm's staff[6] and ultimately saw the firing of its then CEO Philip Purcell three months later. Morgan).[2] The company reports US$287 billion in assets under management or supervision. Morgan (grandson of J. • • . In its first year the company operated with a 24% market share (US$1. came into existence on September 16. New York City. in response to the Glass-Steagall Act that required the splitting of commercial and investment banking businesses.1 billion) in public offerings and private placements.P. 1935.[3] It is headquartered in the Morgan Stanley Building. Institutional Securities. financial institutions.Company Profile • Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations. Harold Stanley and others. The main areas of business for the firm today are Global Wealth Management. formed by J. and individuals. in Midtown Manhattan.P. partners Henry S. governments.

Gary Stuart has to now decide whether to promote him or not. To not promote Parson would mean that he would lose a valuable employee and star producer and would create an empty position in a very critical area within the firm.Problem Identification • Rob Parson had been a super performer at Morgan Stanley. Gary would have to mobilize a lot of support internally in the firm. To promote Parson. He had single handedly made significant gains in building Morgan Stanley’s reputation and revenues in a very short period of time. However in doing so he had violated many of Morgan Stanley’s norms and culture and had built a hostile environment around him. .

Parson had the ability to generate innovative products and was most definitely extremely valuable to the firm. He had therefore broken several rules and processes within the organization and had built an environment around him where people perceived him as volatile. Parson was unable to do so. cocky. Parson was thrown into this environment for the sole purpose of improving the Capital Markets division. abilities and skills. Parson acknowledged that he was not the Morgan Stanley kind.Analysis • The environment within Morgan Stanley was that of teamwork and innovation. but he had never been presented with an opportunity within Morgan Stanley to formally get trained and fitted into the organization culture.5%) His superiors knew that Parson would be impossible to replace. and insincere and not a team player. (Market share of 2% had increased to 12. They were aware that Parson had generated millions of dollars in a sector that historically had been break-even. Paul Nasr had implicitly promised Parson a promotion and had relaxed cultural selection criteria by selecting him on the basis of his knowledge. . building consensus and treating employees with dignity and respect. abrasive. Parson produced results. overbearing. In spite of which. Although Nasr was able to adapt to the culture at Morgan Stanley. He had built Morgan Stanley’s reputation (rankings of 10 to 3) and revenues.

It was not accurate since it did not capture all the aspects of job performance specifically revenue generated. The 360 degree evaluation left out the most important mission of Morgan Stanley: to be the world best investment bank. Nor did the evaluation measure what it was specifically supposed to measure. Debates and discussions should be encouraged to assist social conformity. The 360 degree process at Morgan Stanley appeared to be a very shallow process in that it was not formulated by setting goals and customizing it for the employee and setting action plans that are linked to the organization goals. products innovated etc. Evaluation questions should be more concise and should focus on the job function of the employee. There were no definite questions that were aimed at measuring the different dimensions that the process was expected to evaluate. Careful attention needs to be given to make sure that the evaluation along with the mission statement does not go the ENRON way. It also fails to realize that different job functions require different performance standards and fails to mathematically compute weighted average over all the different dimensions to determine whether an assessment dictates that an employee should be promoted or not. The evaluation process truly only had 2 questions where the evaluator had to note down the employees three strengths and three areas of development. In Parsons example there should be more questions that exemplify his lack of inter-team skills and hot headedness. Feedbacks to employees should be more frequent than once a year. Management and Leadership effectiveness. Morgan Stanley had not formulated any consensus on how they were actually going to implement a decision. It did not appear that they had an appeals committee and they rather had an employee (Parson) dissatisfied with his evaluation than to pacify him and explain his evaluation by an appeals committee. This will eliminate decision biases like anchoring and inability to adjust and the law of small numbers. Parson claimed that he had never read his reviews. Performance assessments are a good source of developmental feedback to employees. Morgan Stanley should take special measures to make sure that employees who are not team players are not discarded but groomed accordingly. The self evaluation should be redone to remove self serving attributions and overconfidence by taking external circumstances/constraints into consideration and then asking for a candid opinion. The firm also did not take consideration for internal reliability since there were no questions on the report that could compare two measures of the same concept. Commercial Orientation and Teamwork/One Firm Contribution. Questions should be formulated to find out if the assessee took the opportunity to change his weak points over a period of time and if he repeated them again. At the end of the day. Strong examples to cite strengths and weaknesses were missing. Teams should be asked to get together and give regular constructive feedback to individual team members. There were no performance standards that measured the individual in comparison to the performance of the group. The areas that the performance evaluation process aimed to improve were: Market/Professional skills. Instructions and training on how to make effective performance assessments was not given to assessors. The evaluation was neither reliable nor valid. The 5 Why? Example could be used to assist in cognitive repair on the evaluation report. However the 360 degree performance evaluation could work as a cognitive repair tool. the entire 360 degree approach should also be a culture within Morgan Stanley. cooperation and cross-selling. In doing so. This by itself is a good indication that the 360 degree feedback is just a process and is not doing what it was intended to do. Assessors need to be asked to consider circumstances and then make evaluations on the assessee to eliminate fundamental attribution error. The evaluation had a potential towards central tendency by managers who are caught up at the end of the year with increased work loads and potential towards halo errors in departments which work together in groups. The firm also had objective questions on the evaluation form as opposed to specific questions which leads to interrater un-reliability and invalidity due to various personal biases and fundamental attribution errors that different evaluators could have. This would also take into consideration the availability and representative bias that the evaluator may have developed. leads generated. While the 360 degree performance evaluation by itself is a good start as a tool for performance evaluation. • • . Professional Development Goals & Career Goals) evaluation report. every organization looks at individual contributions towards revenue generation. Nasr had not even commented on Parsons performance objectives (Business Goals. an understanding of how the assessment is used under varying circumstances are also required. clients acquired.360 Degree Performance Evaluation • Mack had introduced the 360 degree evaluation process at Morgan Stanley to encourage employees to conform to a new way of doing business that emphasized team-work.

was aggressive and hard working and responsive. the more administrative work he will encounter. I believe that he should be asked to read his evaluation reviews and make a public acknowledgement of his deficiencies as a team player and a promise to try and be a better one. His clients loved him. He should be assigned a mentor who will guide him and hone his rough edges so that he continues being a star producer within Morgan Stanley in the future without being the odd man out culturally. . This would help soothe the employees who will not be receptive of Parsons being promoted and who have had a tough time dealing with Parson in the past.Rob Parson: Promote or Not? • Parson was unique in his drive. Parson should also be made aware that the higher he goes up in the corporate ladder. I strongly believe that Parson should be promoted for his stellar performance and for his other qualities. He also showed tremendous progress in his team and interpersonal skills. ambition. pursuit of business. determination and knowledge of the business. He had excellent cross-selling skills. • In addition to promoting Parson.

It is also necessary for Morgan Stanley to hire the right individuals should culture be necessary so that the new hire is not only job – fit but also organization – fit. In that essence it is necessary for Morgan Stanley to realize that not all job functions in the organization can be filled perfectly by adhering to the job culture that has been developed. They also need to set up the appropriate appeals committee and encourage employees dissatisfied with their evaluation to approach the committee. . This will give employees a sense of belonging and a buy-in to the evaluation process. They plan to achieve their mission by creating an environment that fosters teamwork and innovation and dignity and respect. it is important that Morgan Stanley also set team goals that each individual team player should be responsible towards. provide exceptional service and add maximum value to the needs of their clients. Particularly in the case of the Capital Markets division where Morgan Stanley had traditionally been behind. Lastly Morgan Stanley needs to invest in training camps to assessors of performance. expectations and performance evaluation process within Morgan Stanley. While individual goals should also be set. The performance evaluation form needs to be redone consistent with the organization culture with specific questions as opposed to generalized objective questions. it is important to realize that the strategy of the company should dictate the culture in the division and not vice versa. A formal boot-camp should be made mandatory for all new hires to orient themselves to the cultures.Recommendation PROMOTE!! • • Morgan Stanley’s mission statement is to be the world’s best investment bank.

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