Case Study 5 Performance MGMT at Vitality Health Ezzie

Performance Management at Vitality Health Enterprises, Inc.
Case Study #5
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MBA 6334: Talent Management: Engaging and Retaining Employees
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Tuesday
February 9, 2019
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Executive Summary
Virality Health is at risk of losing highly talented research scientists and employees
because of a performance management system created by the CEO, Beth Williams. Beth charged
the New V.P. of HR, James Hoffman, to validate her revised performance management system
for the next board meeting. The cost of R&D was increasing, and James feared that the “chain of
success was allowing employees to relax, leading to a culture of ineffective performance
management.” The R&D department was not innovating because they have been demotivated by
a performance system that let the employees think they were average. The R&D department was
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able to maintain the following consistent costs verses gross profits: for 2009, the R&D cost was
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28%, 27% in 2010, and 27% expected in 2011; R&D costs verses total revenues are 34.5% in
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2009, 33% in 2010, and 33% expected in 2011. The rising cost in R&D is elastic with the
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revenues and may not be the main concern; the main concern was retaining the highly talented
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employees and enabling then to be innovative.

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Vitality Health old performance management system rated employees against their job
which made it difficult to identify and reward top performers, and equally difficult to identify
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and terminate low performers. The managers were hesitant to evaluate their employees properly
with an accurate performance appraisal. Beth dramatically changed the performance evaluations
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rating system to a ranking system; which managers were supposed to judge their employees
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against their coworkers within a team. Such a system created an organizational environment
within R&D that disengaged the highly talented research scientists and employees, and allowed
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those highly talented employees to leave the company.
The revised system should be further revised, however since James is working on a
limited time frame, he should consider the following recommendations: managers are properly
trained to conduct coaching and counseling, ensure the employees’ roles are aligned with the
organization’s goals, create a development program such as a dual-career ladder, succession
planning and workforce planning program, and effectively communicate the company’s key
values. There are five recommendation which will help retain the highly talented employees.
One, is to effectively communicate and emphasis the company’s key values, this would help
create a structured corporate culture to match the organization’s values. Two, provide regular
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feedback and coaching employees, this will help managers provide clear direction for the
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average employees. Three, the employees’ roles need to be aligned with the organizational goals,
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this will help reinforce the alignment to the company’s mission, vision, and values. Four, develop
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a succession planning and workforce planning program, this will help the organization’s talent
management supply chain. Five, provide a development program, this will assist employees with
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their career planning.

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Problem Statement
The problems with the old performance management system were: difficult to identify high
performers and reward those high performers, difficult to identify poor performers and terminate
poor performers, and different managers scored easier than other managers. The potential
problems with the revised performance management system were: collusion between employees
and managers, highly talented employees might quit, system may not appear fair, and a decrease
in teamwork and cooperation.
Application of Course Concepts

The primary concept is the development of an effective performance management system. The
secondary concepts are succession planning and workforce planning programs, coaching,
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training (learning) and development programs.
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Overview & Recommendations
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The old performance management presented a 13-level rating system (i.e. A to E, including
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pluses and minuses) which managers were worried about offending their employees that resulted
in their managers not objectively evaluating employee performance. The old system did not
distinguish between performers and non-performers as most of the employees received ratings of
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Cs or Bs. Managers rarely gave As because they worried about upsetting “a sense of teamwork”
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resulting in high-performers feeling “slighted”. The old system did not incentivize high-
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performers because they would get the same pay as less-productive coworkers. Low-performing
employees were not dealt with properly. The old system also had an added stressor which a pay
policy was used to determine an employee’s raise via salary calculations and performance-based
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raises. The problems that led the company to revise the system was the inability to identify and
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reward their top-performers and the lack of identifying low-performers in order to coach them
and provide them direction.
The revised system resolved a couple of issues, low-performing employees were easier to
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identify, and the rating system was eliminated. Some key features of their revised system:
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implemented a targeted and forced distribution model, connected compensation to performance

standards, new emphasis is to manage people, and performance is compared to planned
objectives. Four potential problems with a target/forced distribution performance management
system are: a decrease in teamwork and cooperation as the model compares an employee
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performance to other employees, talented people might leave, possibility of managers being in
cahoots with employees, and the model may mot appear to be fair or equitable.
The revised system has caused employee permeated morale problems as it is designed to put
teammates against each other; and place their manager in a position to judge their employees
verses each other within a team. This system is the opposite of what a team work is designed to
achieve, teamwork is designed to cover each other’s weaknesses, not expose a team member’s
weaknesses by being judges by their direct manager. The managers also did not receive proper
training on the new system as an email was sent out, which Beth has dictated the new
performance and compensation systems to be implemented without proper testing or validity of
the program. It its counterproductive to implement a plan which picks winners and losers; and it
added an unwarranted impact of subjecting managers to improperly measure their employees’
performance appraisals that do not justify a ranking system.
The ranking system was not objective in proper compensation based on performance. For
example, a team can have multiple high performer, but the manager can only pick a maximum of
14 percent of their staff to be rated as a “top achiever” and leaving 75 percent of the team
members to believe that the are not “top achievers” and only “achievers”. This leave the rest of
the employees thinking they are just average which created an adverse impact on morale and
work performance. The employees were not engaged because the system disincentivized
objective performance reviews. Proper performance management is objective and should be
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aligned with the organization’s objectives, not the organization’s subjective plan.
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These employees were subjected to thinking they were average in a critical department for
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innovation, the R&D department. The adverse impact of the program disengaged the highly
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talented scientists, who are the backbone of the organization in an evolving and emerging
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market. There are no apparent succession or workforce planning in place which is a recipe for a
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decrease in highly talented R&D department. The new VP of HR, James Hoffman, was put into a
peculiar position by Beth to validate the current system to the board with a limited time frame.
Beth basically insinuated that he should validate the system, James’ findings and evaluation of
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the system might put Beth in a bad light in front of the board of directors.
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The first recommendation is to provide constructive feedback to the employees by conducting

regular coaching sessions. These sessions can help under performers and average performers to
gain constructive feedback to improve their performance. These sessions can also provide
constructive feedback for high performers to prevent them from being complacent as there is
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always room to grow, especially in the R&D department as the market demands innovation to be
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competitive. The challenge of coaching is that the managers seem to be conflict avoidant. To
over come this, the managers need to be trained properly on how to provide constructive
feedback.
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The second recommendation is to consider developing a succession planning and workforce

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planning program. This will allow the company to ensure their talent management supply-chain
is efficient and effective. By having a plan to replace key employees is critical in the retention of
highly talented employees. The challenges with succession planning are whether or not to tell an
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employee they are in the plan. If an employee is told they are included in the plan, this can be a
good retention strategy, but then the disadvantage here is the employee might have unrealistic
expectations, especially if the plan changes and they are no longer in the plan. If an employee is
not told they are in the plan, high performers may leave the company and leave them unsure of
their future in the organization, but the advantage here is that this allows managers flexibility in
the succession planning as business needs change.
The third recommendation is to provide employees training and development programs with a
dual-career ladder. The dual-career ladder includes managerial and technical programs to help
develop the company’s current talent. By offering two pathways to opportunities could enhance
employee commitment and increase employee engagement. These programs will help with the
employee-employer relationship and help the employee better understand how their job is
aligned and contributes to the organization’s overall mission. Offering skill development could
enhance the employee’s performance, satisfaction, and self-efficiency. Investing in training and
development programs can enhance employee commitment and increase morale by increasing
knowledge, skills, experience, and expertise should translate to an increase in employee self-
efficiency, self-esteem, and employer commitment (Mello, 2015, p.188). The barriers to training
and development are the costs of the programs.
The fourth recommendation is to communicate and emphasize the company’s key values. The
employees need to emphasize the company’s key values will help with the structure of the
organizational culture. Effectively communicating the company’s key values will help in creating
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an environment where employees know what values are embraced in the organization. The
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barrier to here is that the organization needs to first identify what are the key values of the
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company.
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The fifth recommendation is to align employees’ roles with and reinforce organizational goals.
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This will help the employees’ role to be aligned with the organization’s vision, mission, and
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values. The employees’ roles should be aligned to the overall objective and goals of the
company. By aligning and reinforcing the organization’s goals and objective will give employees
clear direction as to where the company is going. If the company is headed in a particular
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direction in their objective, and this is not properly communicated down to the employees, then
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the alignment of their roles are not aligned. The main barrier to aligning with and reinforcing
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organizational goals is the company needs to first understand their own identity and properly
translate their vision, mission, and values.
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Conclusion
Both the old rating system and the revised ranking system had many weaknesses. The old
performance management system did not properly identify high performers and low performers.
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The revised system was able to identify low performer but did not objectively identify the high
performers. The revised system forced distribution was inappropriate as it caused morale issues
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and demotivated highly talented performers. For example, you can have a team with excellent
and highly talented employees and they meet and exceeded their goals, but on 14% of the team
could be formally acknowledged as “top achievers” and the remaining team members receive
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formal acknowledgment based on their performance review that they are just an “achiever”.
Reference
Mello, Jeffery A. (2015). Strategic Human Resource Management. Stamford, CT. Cengage
Learning.
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Performance Management at Vitality Health Enterprises, Inc.

success was allowing employees to relax, leading to a culture of ineffective performance

employees and enabling then to be innovative.

those highly talented employees to leave the company.

organization’s goals, create a development program such as a dual-career ladder, succession

their career planning.

Application of Course Concepts

implemented a targeted and forced distribution model, connected compensation to performance

The first recommendation is to provide constructive feedback to the employees by conducting

The second recommendation is to consider developing a succession planning and workforce

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