Case study: Performance Management at Vitality health Enterprises, Inc.

Vitality Health Enterprises in brief:

 Vitality enterprise was founded in 1987 in Ames Iowa by Hikaru “Fred” Kikuchi.
 Vitality started with importing products from Japan and marketing them.
 Vitality established its own manufacturing facility in Ames in 1989
 Vitality combined with several leading pharmacies in 1994
 Vitality went global in 1995
 In 1997, Vitality changed its name to Vitality health Enterprise and it became public.
 By 2007, more than 5500 employees in HQ worked for Vitality health Enterprise and
around 1500 employees worked in global offices.
 Due to the global crisis in 2008 Vitality health Enterprise bought relative stagnation to
company’s growth. So, Beth Williams was hired as the new CEO of Vitality health
Enterprise.
Working off the Fat:
 Beth Williams organized a commission to evaluate the performance of all employees
except from sales and executive employees.
 Vitality health Enterprise has 13 several rating levels starting by A+ to E which leads
to way for managerial abuses.
 PMET studied evaluations and rewards system using internal & external
benchmarking, focus groups and employee interviews.
 PMET discovered that many managers, gave almost everyone C or a B, provided D or
A ratings, and rarely give Es.
Result: A homogenous ratings that failed to sharply distinguish active (performers) from
passive (non-performers). Top performers felt slighted and undervalued financially.
 The firm started a new rating system where employees were now rated with respect to
one another by differentiating among employees on the basis of performance. However,
there is fifth category, Not Rated, for employees who were too new to the company or
their position to receive an accurate rating.
 Job evaluation points- pay policy associated with the position
o Technical Knowledge
o Problem solving-skills
o Level of accountability
Pay policy line= Base salary + (Job evaluation points* Increase per point)
Individual salaries were further adapted by a comparative ratio or ‘compa-ratio” based on
individual performance in the company. Individual salaries increase with rise in merit and
falls whenever salary-line formula is moved upward
Compensation was adjusted by the new program. The new plan incorporated a system of
performance-related short and long-term equity bonuses, this will allow for limited stock
options to upper levels of management and directors as an incentive to successfully
implement the new PMS.
PMET2 compared performance rankings data for early 2009 and early 2011 and found a shift
in distribution of rankings.
 Surveyed to know the response of employees:
 54%- preferred new system
 31%- preferred old system
 15%- indifferent
Managers felt more difficult to discuss performance with their team member because the
yearly review process was tied s closely with merit increases