Rob Parson at Morgan Stanley

Hire or Fire
Syndicate B4:
Hanna 29111020
Hilda 29111304
Firra 29111306
Reski 29111326
Alfan 29111356
Ridzki 29111358
 Background
• Morgan Stanley
• Capital Market Service
• Paul Near
• Rob Parson
• The Performance Evaluation Process at
Morgan Stanley
 Industry Profile
• The financial services industry is a vital component of the US and world economies.
• It provides the fuel that promotes job creation and sustains economic growth and innovation.
A robust finance industry provides businesses with new ways to lower the cost of capital,
stimulates global investment and trade, and presents investors with a broad array of products
and services to increase return and manage risk. Importantly, these financial services and
products help facilitate and finance the export of manufactured goods and agricultural
products, while helping the US become the world’s number one exporter of services. The
long-term health and vigor of this sector, and its ability to service customer needs, depends
on its ability to remain competitive both at home and abroad.
• A vibrant US financial services sector requires having access to clients not only in the US, but
in markets around the world. 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, about two-thirds of the world’s
equity market capitalization, approximately two-thirds of the world’s debt markets, and 95
percent of the world’s consumers, are now found outside the United States. As the table
below shows, these trends are especially strong in the rapidly growing “BRIC” countries
(Brazil, Russian, India, and China). Underscoring growth in the BRICS — current estimates
indicate that the BRICs will account for 50% of global GDP by 2050.1 Not surprisingly, many of
the best future growth opportunities for the global companies lie in non-US markets.
 Company Profile
• Morgan Stanley is a global financial services firm headquartered in New York City
serving a diversified group of corporations, governments, financial institutions, and
individuals. Morgan Stanley operates in 42 countries, and has more than 1300
offices and 60,000 employees.[2] The company reports US$287 billion in assets
under management or supervision.[3] It is headquartered in the Morgan Stanley
Building, in Midtown Manhattan, New York City.[4]
• The corporation, formed by J.P. Morgan & Co. partners Henry S. Morgan (grandson
of J.P. Morgan), Harold Stanley and others, came into existence on September 16,
1935, in response to the Glass-Steagall Act that required the splitting of
commercial and investment banking businesses. In its first year the company
operated with a 24% market share (US$1.1 billion) in public offerings and private
placements. The main areas of business for the firm today are Global Wealth
Management, Institutional Securities, and Investment Management.
• 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.
 Problem Identification
• Rob Parson had been a super performer at Morgan
Stanley. 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. Gary Stuart has to now decide whether to
promote him or not. To promote Parson, Gary would
have to mobilize a lot of support internally in the firm.
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.
 Analysis
• The environment within Morgan Stanley was that of teamwork and innovation,
building consensus and treating employees with dignity and respect. Parson was
thrown into this environment for the sole purpose of improving the Capital
Markets division. Paul Nasr had implicitly promised Parson a promotion and had
relaxed cultural selection criteria by selecting him on the basis of his knowledge,
abilities and skills. Although Nasr was able to adapt to the culture at Morgan
Stanley, Parson was unable to do so. Parson acknowledged that he was not the
Morgan Stanley kind, but he had never been presented with an opportunity within
Morgan Stanley to formally get trained and fitted into the organization culture. He
had therefore broken several rules and processes within the organization and had
built an environment around him where people perceived him as volatile,
abrasive, cocky, overbearing, and insincere and not a team player. In spite of
which, Parson produced results. He had built Morgan Stanley’s reputation
(rankings of 10 to 3) and revenues. (Market share of 2% had increased to 12.5%)
His superiors knew that Parson would be impossible to replace. They were aware
that Parson had generated millions of dollars in a sector that historically had been
break-even. Parson had the ability to generate innovative products and was most
definitely extremely valuable to the firm.
 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, cooperation and cross-selling. The areas that the performance evaluation process aimed to improve were:
Market/Professional skills, Management and Leadership effectiveness; Commercial Orientation and Teamwork/One Firm Contribution. The 360
degree evaluation left out the most important mission of Morgan Stanley: to be the world best investment bank. At the end of the day, every
organization looks at individual contributions towards revenue generation. 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. Nor did the evaluation measure what it was specifically supposed to measure. Instructions and training on how to make effective performance
assessments was not given to assessors. Strong examples to cite strengths and weaknesses were missing. 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. 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. It was not accurate since it did not
capture all the aspects of job performance specifically revenue generated, clients acquired, leads generated, products innovated etc. 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.
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 evaluation was neither reliable nor valid.
• While the 360 degree performance evaluation by itself is a good start as a tool for performance evaluation, an understanding of how the assessment
is used under varying circumstances are also required. Morgan Stanley had not formulated any consensus on how they were actually going to
implement a decision. There were no performance standards that measured the individual in comparison to the performance of the group. The
evaluation process truly only had 2 questions where the evaluator had to note down the employees three strengths and three areas of development.
There were no definite questions that were aimed at measuring the different dimensions that the process was expected to evaluate. 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.
• Performance assessments are a good source of developmental feedback to employees. Nasr had not even commented on Parsons performance
objectives (Business Goals, Professional Development Goals & Career Goals) evaluation report. Parson claimed that he had never read his reviews.
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. However the 360 degree
performance evaluation could work as a cognitive repair tool. In doing so, the entire 360 degree approach should also be a culture within Morgan
Stanley. Careful attention needs to be given to make sure that the evaluation along with the mission statement does not go the ENRON way. Morgan
Stanley should take special measures to make sure that employees who are not team players are not discarded but groomed accordingly. Teams
should be asked to get together and give regular constructive feedback to individual team members. Evaluation questions should be more concise
and should focus on the job function of the employee. Feedbacks to employees should be more frequent than once a year. Debates and discussions
should be encouraged to assist social conformity. 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. Assessors need to be asked to consider
circumstances and then make evaluations on the assessee to eliminate fundamental attribution error. 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. This will eliminate decision biases
like anchoring and inability to adjust and the law of small numbers. In Parsons example there should be more questions that exemplify his lack of
inter-team skills and hot headedness. This would also take into consideration the availability and representative bias that the evaluator may have
developed. The 5 Why? Example could be used to assist in cognitive repair on the evaluation report.
 Rob Parson: Promote or Not?
• Parson was unique in his drive, ambition, pursuit of business,
determination and knowledge of the business. His clients loved him. He
had excellent cross-selling skills, was aggressive and hard working and
responsive. He also showed tremendous progress in his team and
interpersonal skills. I strongly believe that Parson should be promoted for
his stellar performance and for his other qualities.
• In addition to promoting Parson, 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.
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. Parson should also be made aware that the higher he
goes up in the corporate ladder, the more administrative work he will
encounter. 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.
 Recommendation

PROMOTE!!
• Morgan Stanley’s mission statement is to be the world’s best investment bank, provide exceptional service and
add maximum value to the needs of their clients. They plan to achieve their mission by creating an environment
that fosters teamwork and innovation and dignity and respect. Particularly in the case of the Capital Markets
division where Morgan Stanley had traditionally been behind, it is important to realize that the strategy of the
company should dictate the culture in the division and not vice versa. 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.
• While individual goals should also be set, it is important that Morgan Stanley also set team goals that each
individual team player should be responsible towards. 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. A
formal boot-camp should be made mandatory for all new hires to orient themselves to the cultures, expectations
and performance evaluation process within Morgan Stanley. Lastly Morgan Stanley needs to invest in training
camps to assessors of performance. The performance evaluation form needs to be redone consistent with the
organization culture with specific questions as opposed to generalized objective questions. 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.
Thank You