PERFORMANCE MANAGEMENT AT VITALITY HEALTH ENTERPRISES

Group 4 - Section C

ADITYA KULASHRI DP/12/20

PETETI CHANDA TERESA 0203/57
KATKAM DINESH KUMAR 0191/57
R K DIVYA SRI 0212/57
VEDANT MODI 0231/57

Introduction:
James Hoffman was appointed Vice President of Human Resources at Vitality Health Enterprises. He and Beth
Williams, the CEO were worried that the successful run of the company would lead to complacency among the
employees. The Performance Management Evaluation Team (PMET) headed by James Hoffman, Vice President of
Human Resources compared the performance ranking data the old system (covering 2008 performance) and the new
system (covering 2010). The team also had collected responses on a survey questionnaire from the employees to
evaluate the two systems.

Old Policy New Policy

Performance Ratings and Evaluation
 Vaguely defined KPIs and KRAs
 Majority of the employees were awarded B or C
ratings (97.5%). Only 0.54% employees were
awarded A rating and 1.93% were awarded D.
 Homogenous ratings in the name of
egalitarianism and teamwork, thus individual
contribution wasn’t focused on.
 The performance ratings made the over achievers
and under achievers indistinguishable leading to
similar rewards and a pool of unsatisfied good
performers
Compensation Structure
 Flawed distribution of raises; they were given on
the basis of level of compa-ratio at which an
employee/position has been assigned
 Rewards not commensurate to performance
 Little to no provision for bonuses or alternate
forms of compensation
Outcomes and Consequences
 The system gave ratings based on relative performance
 Clear KPIs and KRAs were defined for employees in
conjunction with their managers
 The review cycle of all the departments were synced.
 Forced distribution system was too rigid
 Even if a whole team does great, still only few get top
ranking
 Reduced time and effort because of fewer ratings
 54% employees preferred the new system
 Over and under achievers were noticeable
 Performance-based short- and long-term rewards were
introduced
 Company equity became a part of the bonus
 Stock options for upper management
 Inconsistency of people with higher rating getting lower
increment was solved
  Demotivation for top performers
 Poor performers were not thrown out
 Top performing scientists were leaving (research
scientists who voluntarily left Vitality had an
average of 5.1 annual break throughs compared
to 3.7of company average.
 The revenues in the next 2 years of implementation of
the new system went to record levels.
 Some managers felt that the evaluation system took
time away from other more important works
 Decreased collaboration as it is a relative rating system
 A new person joining may look to join low performing
team, for increasing his rating in the team
 Too many people (min 70%) in one single bucket
(Achievers), so difficult to differentiate among them.

Challenges:
 
 Lack of efficient communication between managers and the PMS team in the method of using performance
assessments and in turn difficulty to align the objectives of the department with those of the individuals.
 There was still a lack of career growth and development plan for the employees.
 The managers were not exposed to proper training where they could be given the necessary tools to be leaders
and skills for performance management for successful implementation of objective assessments.
 The new system ‘forced’ managers to fit the employees into a bell curve. This is a structural change and
requires time and training.
 There was no room to exhibit organizational citizenship behavior, thus no incentive for taking up anything
beyond one’s job description

Recommendations:

Plans pertaining to compensation and performance management should be completed with the supervision and advice
of human resources generalists.

Create a leadership academy that is aimed at managers, which should cover HR issues, difficult situation management
and performance assessments. Following this plan, the HR area should monitor, and provide guidance and advice to
all leaders taking this course.

Personnel evaluation plan: carry out self-assessments where attitudes can be identified and future objectives of each
collaborator can be determined. This will help employees trust the process and in turn the managers can detect what
are the areas of improvement. These assessments can be done quarterly.