TEAM NINJA

WARRIORS – GROUP
2
 Mary Shannan (H022-19)
 Mebin Dominic (H071-19)

AMECO CASE


Swapnil Shrivastva (H058-19)
Gayathri M (H021-19)
 Sanapala Leela Prasanna (H042-19)
 Semeena A (H046-19)
PERFORMANCE
 Sreelakshmi K.P (H053-19)

APPRAISALS
 Ameco Beijing: Benefits of Performance Appraisals

Question 1:

Why did Ameco introduce the DCPC monthly performance appraisal program?

Answer:

The problem is that the company’s income is lower than the expense. The following are the reason for
the adoption of monthly performance appraisal program.

1. Increasing Cost of Human Resources: The cost of human resource were increasing at a great
pace. Making it impossible for the company to meet the objective of making ends meet to pay
salaries. The climbing national average wage issued by the State Ministry of Labor and Social
Security added more pressure. The employees’ have of be paid an amount according to the
market value and as the number of employees were increasing and maintaining the minimum
wage for each and every one did not prove to be profitable.
2. Competitors: New competitions entering the aircraft maintenance industry and various existing
companies operating near the Beijing Capital International Airport became catalysts for
increasing salaries. Even though the maintenance business volume of Ameco increased, the
company’s income growth had been crawling mainly due to the stiff price competition in the
industry. If Ameco maintained its current salary levels, many talented employees would leave
the company for higher compensation offered by competitors.
3. Management Problems: Ameco adopted the market development strategy of “follower”, that is
they started hiring more employees to deal with the increasing volume of the maintenance
business as it was increasing in double digit rates. This strategy hampered the satisfactory level
of the employees for not being able to fulfill their demands. And raising the employees’ salaries
to stabilize their staff morale will incur more expense, which is not feasible.
4. Trainings: Training new professional and engineers in the aircraft maintenance to take their
places would take at least five years to realize. Hence training will require a large investment of
time and money which is not feasible solution at present.
5. Shareholders Demand: The shareholders require that staff costs should not be higher than one-
third of the total operating costs. As the number of employees were increasing and maintaining
the minimum wage average set by the State Ministry of Labor and Social Security and
maintaining that did not exceed one-third of the total operating coast was a very difficult target
to achieve. And also ensuring the return of investment for the shareholders was another
concern.
6. Increasing Customer Price Index: Another leading cause was the increase in the customer price
index. Especially for the employees who lived in Beijing, the capital of China, material incentives
were definitely a major factor. And if they maintain the current salary levels, many talented
employees would leave the company for better offers.

Therefore, it was necessary to find ways to increase revenue and employees’ salaries, and to control
costs immediately.
 Management
Problems

Climbing
No time for
national
training
average wage
Monthly
Performance
Appraisal
Program
Increase in
Shareholders
customer
demands
price index
New
competitors
and excisting
competitors

Question 2:

What are the advantages and disadvantages of DCPC?

Answer:

The advantages of the monthly performance appraisal program are:

1. The traditional annual performance evaluation system included a long assessment period. It was
difficult to identify problems in time and control the efficiency of the process. Therefore, this
couldn’t address the main issue which was lower efficiency of AMECO which was the main
reason why the company couldn’t meet its end. By the new DCPC timely steps could be taken
when an operational inefficiency was identified. The product managers were now forced to look
at operational efficiency since it was directly linked to the monthly salary budget.
2. This timely feedback system helped product teams to focus on cost reduction. Overtime costs
were considered a KPI factor. Therefore, all positions except frontline workers required to apply
for any overtime work as opposed to the earlier method of applying overtime after the work
was completed.
3. The most important metrics were chosen to calculate the KPI which enabled the product teams
to focus specifically on those metrics. Along with input-output ratios, non-economic factors
such as flight delay rates, aircraft availability and on-time contract compliance were also taken
into consideration. Points were deducted on safety and quality incidents. This brought the focus
to balancing safety and efficiency as opposed to ‘stability’.
4. The product teams started trainings and sessions on quality, safety and other relevant
management courses by inviting experts from financial, HR department. Project teams also
shortened on-ground maintenance period of aircraft and reasonably split the workload of
maintenance. The times for aircraft to land on the ground were lowered and thus, the times for
maintenance personnel to wait for equipment were lowered. These helped them gain man-
hours of work and employees started asking for more work than complaining about the already
existing work.

The disadvantages of monthly performance appraisal program are:

1. Since this is a monthly activity, the finance and HR department were burdened by calculating
and collating performance indicators from each project and product teams. They had to collect
information regarding input, output, overtime, safety and quality incidents etc. every month.
2. Fluctuations in external environment were not considered in the KPI.
a) The introduction of new engine models and phasing out of older models led to the halving
of the business of engine product department. This in turn reduced workload as well as the
salaries of highly skilled workers leading them to leave the company. Considerable time
was to be spend in training employees on the new engine models, but this did not motivate
them to stay in the company getting meagre salaries.
b) The workload of airline maintenance department increased as Air China, one of their major
customers started introducing the new models of aircraft. The workload increase came with
no new business or revenue and adversely affecting the KPIs since overtime costs was
higher. Thus, despite heaviest workload their salaries were the lowest and employees
starting leaving the company.
3. From the previous points, it is clear that there was no way to balance the workload in DCPC.
DCPC assigned scores solely on the basis of operational efficiency and increased workload was
not taken into account except to deduct points for overtime costs.
4. While healthy competition between product teams are encouraging, sometimes it leads to
unhealthy discussions and loss of bonhomie between product teams during the discussion of
the appraisals. In the case, there were false accusations against the maintenance and engine
product department after getting scores around 80 which lowered the employee morale and
motivation of these teams.
Question 3:

Are the appraisal indicators of Ameco reasonable? Explain your response.

Answer:

Ameco’s performance appraisal indicators were not completely reasonable. The Performance indicators
focused on operational efficiency alone. It should have also chosen indicators whose success relies
directly on the individual employee's performance.

The KPIs were based on:

Economic Indicators-
 Labour Income
 Labour Cost
Non-Economic Indicators-
 Flight Delay Rate
 Aircraft Availability
 On-time contract compliance rate

The performance indicators did not address the following parameters:

1. Impact of External Factors
 The current KPIs focused completely on improving operation efficiency. But, did not
consider the possibility of rapid changes in the external environment
 Signing of annual fixed price contracts with Air China
 Income of Aircraft Maintenance Department was also impacted due to the continued
appreciation of the Chinese Yuan
2. Workload
 Workload of Aircraft Maintenance Department increased rapidly as Air China fleets
introduced new aircraft. This was more work to the department without any added
benefits. Airlines Maintenance Department employees were facing most workload, but
only received 80% performance. While Engine Product Department also received 80%
performance, even though they had much lesser workload
3. Time duration required for the training of the staff for maintenance of new engines
4. Performance Indicators measured only departmental performance, and did not consider
individual performance
 This leads to the phenomenon of “unmerited” workers reaping the benefits
 Lead to demotivation of employees
 For instance, besides having the heaviest workload, employees of Aircraft
Maintenance Department were not awarded highest salaries. This demotivated them,
leading to some leaving Ameco for other companies
Question 4:

How would you further improve the performance management program?

Although the Direct Control of Personnel Cost (DCPC) Program had made significant progress for the first
few years, rapid changes in the external environment have brought impediments to its growth. To
further improve the performance management program, we came up with the following
recommendations:

 Upskilling Training Programs

 Productivity Analytics
 Multi-rater Functionality
 Talent Profiles
 Agile Development Goals
 Feedback and Coaching

Upskilling Training Programs

 Unique and upskilling training programs that are relevant for Ameco can be designed. This shall
subsequently improve employee value and retention. This also rules out the chances of the
employee lacking in contemporary market skills.

Productivity Analytics-driven pay for performance

 Analytical tools enable businesses to determine whether their investments are accruing. The
efficient use of productivity analytics helps the Managers to monitor their employee’s
performance in real-time, thus allowing them to make relevant and informed decisions.
 DCPC assigned scores based on a single variable, that is, operational efficiency. Increased
workload has not been taken into consideration. Thus the amount of workload can be included
as a KPI so that the employee is paid for his/her performance.
 Currently, the KPIs are linked to the departments, while it’ll be more effective if it’s also linked
to the individual performance of an employee.

Talent Profiles

 Managing and handling a Talent Profile System provides a quick reference to the employee’s
skills and performance. This enables effective succession planning for key positions as well as
assists in Job Rotation programs.
 The Job Rotation among Departments reduces Talent shortage scenarios that the departments
may face owing to unforeseeable circumstances. Job Rotation has an additional benefit of
Employee Engagement and Satisfaction.

Multi-rater Functionality

 Some attendees claimed that the airline maintenance department’s workload was so low that
the employees were passing their time. In contrast, in reality, they have the most substantial
workload but not the highest salaries. Thus, multi-rater functionality, like 360-degree feedback,
can be implemented, where peers and other team members review performance. This helps in
removing the issue of unmerited workers reaping the benefits
Agile Development Goals

 Indicators can be considered and updated periodically as per the changing internal and external
environment.
 When the Company was acquiring the maintenance technology of V2500 engines, they were
planning to train a new set of people. This would consume a considerable amount of time and
expenses. Therefore, the advised method would have been to parallelly update them with the
skills required.

Feedback Mechanism

 There is no individual feedback mechanism in the organization. Implementation of Individual

goal settings and concurrently an efficient feedback mechanism would help reflect the
employee’s progress.