Eckel Industries is a one-plant company that has about 2,000 employees. Managers from different departments discussed how they interpret and execute performance appraisal to suit their needs. Managers dread the performance management process and only do it because it is part of their job description.
Eckel Industries is a one-plant company that has about 2,000 employees. Managers from different departments discussed how they interpret and execute performance appraisal to suit their needs. Managers dread the performance management process and only do it because it is part of their job description.
Eckel Industries is a one-plant company that has about 2,000 employees. Managers from different departments discussed how they interpret and execute performance appraisal to suit their needs. Managers dread the performance management process and only do it because it is part of their job description.
A Case Study on Eckel Industries In Partial Fulfilment of the Requirements in Human Resource Management with Organizational Behavior (HRM535M)
Submitted By: Austria, Kristofferson Cua, Raymond Gerald Reyes, Bernadette Vital, Jhona Jane
Submitted To: Dr. Mary Margaret Que A Case Study on Eckel Industries 2
Summary / Synthesis Eckel Industries is a one-plant company that has about 2,000 employees. The case focused on the concerns of a small group of managers from different departments towards the performance management process within the firm. They also discussed how they interpret and execute performance appraisal to suit their needs. These can be summarized as follows: It is subjective. The scales are subject to each managers interpretations, and the scores may depend on his/her relationship with the report. The scores may also be adjusted to the point where it doesnt reflect the actual performance of the employee. The reasons presented are to motivate or discourage, to conform with the reward that the manager think the employee deserves, to reflect the employees potential. They only recall 15% of the employees performance and tend to value the most recent ones. Point of View In this case study, we will take the point of view of the Vice President of Human Resources, who is responsible for setting the correct process in performance management to ensure that they are executed in a manner that is fair, and aligned with the companys goals. Statement of the Problem We have identified the problem by undergoing first the gap analysis, in Table 1. Table 1 Ideal Actual Managers have a good understanding of the performance management process and how it ties up with the goals of the organization
Managers dread the performance management process and only do it because it is part of their job description. Performance criteria are properly defined. Performance criteria are not properly A Case Study on Eckel Industries 3
Employees have a common understanding of what is required by each performance criteria.
defined which causes confusion and inconsistencies on how employees are rated. Performance appraisal is objective and reflects the true performance of the employee. Performance appraisal politics are prevalent.
Performance appraisal techniques should be constantly evaluated to avoid rating errors and ensure reliability and validity of ratings. No proper feedback as the managers who have stayed long in the firm (12 years) still are dreading the performance appraisal of their employees.
Managers are aware of the importance of performance appraisal in all areas and its impact not just on the employees but on the whole unit/organization. Managers look at performance appraisal as a tool to manipulate actual performance rating of employees. To summarize, the problem in this case is What should Eckel Industries do to implement a fair and sustainable performance management process? Statement of Objectives The context and purpose of this study aims to elaborate the objectives and eventually what influenced the recommendation are as follows: Reduce and eventually eliminate the practice of performance appraisal politics within the organization. o It is important for an organization to achieve validity and reliability in the performance management process. Performance appraisal politics creates an illusion of employee engagement to those who benefited from it. However, over time, employees might expect the same treatment and not be motivated to perform their best. On the other side, those who did not benefit from appraisal politics will certainly lose trust on the process which will have a negative impact on their performance. Achieve common understanding among employees regarding the performance management process of the organization. A Case Study on Eckel Industries 4
o When an entire organization has a common understanding of the performance management process, managers are able to execute the various phases of the process more smoothly. It also allows the organization to better align employee expectations with the organizations goals. Retain the organizations top performers. o Attrition is unavoidable, in fact, a certain rate of attrition is healthy because it provides opportunities for high performing employees to move up the corporate ladder and allows the organization to take in new talent. However, when an organization loses its top performers, higher costs are incurred to train new people, replace the lost productivity, and keep the remaining employees motivated. Reduce surprises to employees during performance feedback. o Because performance ratings are normally tied to an organizations reward system, employees often times react negatively to receiving a poor rating especially when it came as a surprise to them. It is therefore important for an organization to have the proper process in place to ensure that employees are aware of how they are performing even before the official rating is provided to them. o Proper performance appraisal will also address the employees weaknesses, thus improving their performance in the future. Avoid accusations of unfair performance management practice from employees which could lead to legal implications for the organization. o Lack of a proper and fair performance management process and poor implementation of it could result to disgruntled employees which could cause a domino effect within the organization. The organizations reputation as an employer could also suffer making it difficult for them to attract quality employees. Depending on the degree of injustice and unfairness, the organization could also be sued for discrimination and unjust dismissal.
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Areas of Consideration The group used the SWOT Analysis to flesh out the things that needs to be considered in the case. Strengths: The managers have sufficient knowledge on the business because of their tenure in the company. Thus, they have the ability to correctly determine what a good performance is in terms of job skills. The company benefits from bringing in fresh blood to the organization (like Tom) as he questions the current practices in Eckel (politics of performance appraisal in Eckel Industries). A performance appraisal method is already in place (graphic rating scales). Weaknesses: There is a lack of consistency in the managers understanding of how performance appraisal should be done. There is a lack of enforcement, by the HR of Eckel Industries of the proper performance management process, as the managers were able to do the performance appraisal as they wish. There is a lack of proper feedback between managers and employees as the performance appraisals are not objectively conducted. There is an improper allocation of the budget for rewards because of the skewed performance appraisal methods. The current practice may be subject to legal complaints from their employees. There may be a lack of corrective action to address the weaknesses and gaps of some of the employees because of the biases.
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Opportunities: The growing technology is continuously making it easier for managers to ensure alignment in goals and improve performance management. The science of performance management is continuously evolving, which can be used by the company to identify which model fits the nature of their business more. Other companies are constantly building their best practices, which Eckel can learn from. The growing market of skilled managers can be leveraged to hire more experienced ones that will do performance management more effectively. Compare performance management of Eckel with the industrys best practices to fill in the gaps and to have a better performance management model. Threats: The growth of other companies in terms of their performance management may seem attractive to employees who become victims of performance appraisal politics. Alternative Courses of Action The alternative courses of action are formulated in consideration of the objectives of the case to solve the problem statement. Each ACA is verified using the pros and cons to check the ethical position and for moral decision making. ACA 1: Maintain status quo Pros No changes in the current practices, therefore no undue attention will be called on which will make the company look like it is operating properly. Cost savings as the performance management method will not be reviewed / altered, which may bring in costs. A Case Study on Eckel Industries 7
The managers will just continue with their current approaches on performance management and no effort will be spent for any process adjustment. Cons The politics in performance appraisal will not be addressed. The unfair and unjust practices of the managers during performance appraisal will persist, affecting not only the employees but the whole company as well. The employees development will not be properly addressed due to incorrect recognition or non-recognition, depending on the personal opinion of the manager. ACA 2: Conduct an extensive review of the performance management process, make significant changes to it as necessary and cascade the changes to the whole organization (management, managers, and employees). Pros: This will address the gap in the performance management method in Eckel Industries. The employees will feel better as they know that they are properly evaluated. They will also perform better because they know that the performance appraisal will not involve any politics (no favoritism, etc.). The company will be more efficient as proper feedback will be provided to the employees. The good performance of the employees will be rewarded. The weaknesses of the employees (job performance, person skills, etc.) will also be addressed. Merit increases and promotions will be given to those who actually deserve it. The personal / career development of the employees will also be properly addressed as these are the usual topics discussed during a proper performance appraisal and feedback discussion. The managers will be more knowledgeable of the performance management process and will help them to become better managers. A Case Study on Eckel Industries 8
The company will save on costs by allocating the rewards only to where it is due. The managers will not feel that performance appraisal is a dreadful responsibility. Instead, they will feel that it is a privilege and an important responsibility, which can help their subordinates to achieve career and personal development and improvement. Cons: Additional costs from the review of the process and any additional programs, techniques, software which will be employed to improve the performance management process in Eckel Industries. Employees who previously received lower ratings (even if these have been objectively made) might feel animosity towards their managers. The managers might resist the changes that the HR will impose. ACA 3: Require all managers to undergo mandatory training on performance management process Pros: This will provide all the managers the same perspective on performance management and its implications when not properly executed. Provide managers the importance of proper performance appraisal and the effect on the company. Cons: The managers may feel hostile and not willfully agree to this, because this might imply that they are not doing proper performance appraisals. This ACA will not address the possible issues in the current performance management method done in the company. The current performance management system will not be reviewed and evaluated. Additional costs will be incurred from the training. A Case Study on Eckel Industries 9
ACA 4: Replace managers who engage in appraisal politics Pros: New managers will not have any bias towards the employees because there has been no history of relationship (less familiarity with personal issues, etc.) Might improve the performance appraisal culture in the company by removing those who have engaged in performance appraisal politics. Cons: Hiring of new managers will be costly to the organization Might encounter legal concerns when replacing the current managers on the basis of appraisal politics as the company might have a difficulty in proving that the existing managers engage in performance appraisal politics. The existing employees might feel degraded because of the sudden change in their managers which will affect their job performances. The new managers may, later on, also engage in performance appraisal politics. This ACA is like a band aid solution and does not address the performance appraisal concern. The company should integrate in its core values the proper performance management. Recommendation The decision criteria and weights provide the important areas to consider in choosing the best solution for the case. Each criterion is assigned of weights depending on the level of its importance in the organization. 1. Sustainability of the performance management method Weight: 30% Definition: Performance management centers on ensuring that activities in the organization are aligned with the company goals and good governance. This criterion also focuses on how management is able to retain its top performers while maintaining a healthy attrition rate. A Case Study on Eckel Industries 10
Rationale: A good performance management method directs work towards common goals, provides a clear understanding of job expectations, presents regular feedback about performance, offers advices for improving performance and sets rewards for good performance (Financial Services Authority, 2013) 2. Leadership style, people development, and company culture Weight: 20% Definition: This criterion focuses on how the management handles all areas in the organization such as setting goals and employee motivation towards achieving the companys goals, the quality of relationship between the employers / managers and employees, the openness in communication, honesty in providing accurate and constructive feedback, and the effectiveness of teamwork (the results or the job done by the manager and his or her subordinates). Rationale: An effective leadership style controls the flow of the business and directs the organization into its mission and vision. It is important that a leader be professional enough to handle activities such as evaluation so as not to distort the actual idea/event. Relationship among members of an organization reflects the culture of the business. It is important to monitor the level of relationship to avoid conflict of interest, and other unethical practices. 3. Employee and employer protection Weight: 20% Definition: This criterion emphasizes the right of employers and employees to be protected from biases, discrimination, unfair treatment and false accusations. Along with that, the organizations ability to protect itself from legal issues is also an important factor. Rationale: Employee protection invokes the right of the employees for respect, fair judgment and guard from actions of managers/employers. Employer protection from legal issues is also an important factor because not only is it costly to defend a lawsuit, it also negatively impacts an employers reputation and prevents it from entirely focusing on moving the business forward. 4. Cost of implementation Weight: 15% A Case Study on Eckel Industries 11
Definition: This criterion focuses on the cost associated to implementation of an ACA. Rationale: In every organization, cost is an important consideration because financial success is and will continue to be one of the main goals of most organizations. Even for non-profit organizations, cost plays an important role because a companys funds needs to be properly allocated in order for it to achieve its objectives. 5. Reputation Weight: 15% Definition: This criterion focuses on the overall image of a certain unit/company to the people. Rationale: Reputation plays a very important role in the success of a business - it can either make or break a unit/organization. It is important that the firm not only maintain a good financial standing but also an excellent repute in terms of employee development and performance evaluation. Evaluation of the Alternative Courses of Action Table 2 below summarizes the scores that the group awarded for each alternative. Table 2 Decision Criteria % ACA 1 ACA 2 ACA 3 ACA 4 Sustainability of the performance management method. 30% 10% 25% 20% 17% Leadership style, people development, and company culture. 20% 5% 17% 10% 13% Employee and employer protection 20% 5% 17% 15% 10% Cost of implementation 15% 15% 5% 8% 5% Reputation 15% 5% 15% 8% 5% TOTAL 100% 40% 79% 61% 50% A Case Study on Eckel Industries 12
Sustaining and developing the business operations of the organization which is currently in a challenge of having a strategic performance management process is the concern of this case. This inspired the proposed ACAs and after thorough evaluation of the criteria resulted to the best solution. The table shows that ACA 2, wherein the organization will conduct an extensive review of the performance management process, make significant changes to it as necessary and cascade the changes to the whole organization, got the highest score among the four proposed action. ACA 2 garnered the highest total score among the four alternative courses of action. The group recommends that the organization conduct an extensive review of the performance management process, make significant changes to it as necessary and cascade the changes to the whole organization. ACA 2 was graded a score of 25/30 under the criterion Sustainability of the performance management method primarily because doing an extensive review and modifying the existing performance management process will allow management to better align its organizational goals with each employees objectives. Management would be able to use lessons learned as well as feedback from employees on the existing performance management process and use those as inputs in coming up with a centralized and better structured one. For example, managers could be required to document the performance of their staff on a monthly or quarterly basis, or the organization can implement a 360-degree feedback process. Both should help reduce the issue of managers recalling only 15% of an employees performance for an entire review period. ACA 2 was graded a score 17/20 under the criterion Leadership style, people development, and company culture because the ACA provides an opportunity for the organization to create an environment that supports people development. For example, upper management could require all managers or performance evaluators to conduct a regular checkpoint meeting with each of their staff as a venue to provide formal feedback about the staffs performance. This will not only reduce surprises on the employees part during performance rating communication because they would already have an idea about their current standing but it will also give the employees opportunity to work on their areas for development. A Case Study on Eckel Industries 13
Having great teamwork and genuine concern for the career development and advancement of employees is a great culture to have in any organization. ACA 2 was graded a score 17/20 under the criterion Employee and employer protection because it allows the organization to change their existing practice to protect themselves from legal liability due to employee complaints on the fairness of the performance management process. Without proper training though, significantly changing the process might not be enough as certain evaluators might have a different understanding of how the process works so the same unethical practice presently in effect might still persist. But when consistently implemented across the organization, the performance management process is a great way for an organization to show their employees that everyone will be treated, evaluated, and rewarded fairly for their contributions. ACA 2 was graded a score of 5/15 mainly because it will require the organization to incur a considerable amount of cost and spend a significant amount of time and effort to accomplish. While it might be such a huge undertaking, the investment would definitely be worth it if it enables the organization to better fulfill its vision. ACA 2 was graded a score of 15/15 primarily because the ACA is a great way for the organization to show their employees that they do genuinely care and prioritize the development of their people. An employee who feels that they are being duly rewarded for their hard work will have more motivation to do much better. A motivated employee would result to better performance and productivity which could then lead to better financial results for the organization. Theres no better way for an organization to enhance their reputation than to have their own people say great things about it. The group believes that ACA 2 provides the best way for Eckel Industries to address the many issues that they are facing with their existing performance management practice. Because ACA 2 requires such a major undertaking, Eckel Industries may opt to divide the implementation into phases starting with the highest priority issue of performance appraisal politics as a short term goal. The long term goal is to have a performance management process that is able to satisfy the various objectives enumerated under Statement of Objectives above. A Case Study on Eckel Industries 14
Implementation Table 3 below shows the different barriers that the group is foreseeing with the implementation, and how they can be addressed. Table 3 Constraints / Barriers Addressing the Barriers Management: Efficient performance management in the organization might not be a priority as the company was able to tolerate the fine-tuning in the performance appraisals over the years. The top management may not be willing to incur expenses to review the current process and on top of that, they might not be willing to provide budget for the significant changes to the whole organization. The management should understand the need for the companys goals to be aligned with performance management as its employees are the key to the achievement of the company goals. A cost-benefit analysis should be presented to them to highlight that aligning performance management with companys goals, and reducing (and eventually removing) personal biases in performance appraisal will more than offset the additional costs that will be incurred in reviewing and changing the performance management process. This will strengthen the case of this endeavor, and create better chances of getting their support.
Managers: The managers have already an existing perspective on performance appraisal and how it is done in the company. They have allowed fine-tunings and are often subjective in doing their appraisals of their subordinates. Their notion on performance appraisal and performance management, in general, might be difficult to alter, especially that they have practiced their own kind of personal performance management over the years. Once the review has been made, the company should provide the managers a clear view and better understanding of the companys performance management process and how these affect their teams output, efficiency, and development. The relevance of proper performance management should be emphasized to the managers so they will be aware that the fine- tunings that they do should not be practiced. Regular touchpoints between the managers and HR/top management should also take place to ensure that the managers follow the prescribed performance management process of the firm.
Employees: Some employees might have received better performance appraisals from their managers due to the current practices in Eckel The scheme to review and to perform the corresponding corrective action on the companys performance management A Case Study on Eckel Industries 15
Industries. These employees might not willingly participate in the changes in the performance management and may lead to collusion with other employees or managers and still adhere to the current performance appraisal practices. process will give a clear message to the employees that the management takes this initiative seriously. The HR should also be able to effectively communicate to all the employees the advantages of proper performance management, which affects not only the organization but the employees development as well. Persistent communication and feedback should always be performed to monitor the progress of the changes in performance management. If certain collusions still happen, employees should have a confidential means to report them to the head of the HR department.
Action Plan: 1. Conduct discussion with managers and evaluators about their experience with the existing performance management process to understand their challenges and struggles with it. The top priority issues to be addressed should also be identified. Task Owner: HR Timeline: After upper management buy-in has been received for implementation of ACA 2 Resource Requirement: Managers who conduct performance management 2. Conduct focus group discussions with employees to gather their feedback about the performance management process. Task Owner: HR Timeline: After upper management buy-in has been received for implementation of ACA 2 Resource Requirement: Employees who have previously been evaluated 3. Assuming that the existing process needs to be overhauled, review the various performance management approaches and determine one that best fits the needs and culture of the organization. If necessary, a hybrid implementation of a known approach may be done. Task Owner: HR A Case Study on Eckel Industries 16
Timeline: Upon completion of discussions with evaluators and employees. Resource Requirement: Results of the focus group discussions, and research materials on performance management models 4. Explore the possibility of using technology to enhance the application of performance management. Task Owner: HR Timeline: Upon determination of the changes the existing performance management process. Resource Requirement: IT Department 5. Document changes to the performance management process or if a new approach is to be implemented, create and document guidelines for evaluators to follow in executing the various phases of performance management. Task Owner: HR Timeline: Upon determination of the performance management model Resource Requirement: Current performance management documentation 6. Define the schedule of the performance cycle. Task Owner: HR Timeline: After the guidelines have been completed. Resource Requirement: New or Updated performance management documentation, and top managements input in terms of timeline 7. Roll-out the new performance management process to the entire organization. Task Owner: HR Timeline: After the successful testing of the new performance management tool Resource Requirement: Results of the testing 8. Conduct checkpoint meetings with employees to ensure that they understand the process Task Owner: Managers Timeline: After the updated performance management process has been rolled- out. Resource Requirement: Personal experiences of the employees A Case Study on Eckel Industries 17
9. Conduct feedback session on the new performance management process and conduct calibration meetings to reduce errors and increase reliability and accuracy of the process Task Owner: HR, Managers, Employees Timeline: Quarterly Resource Requirement: Personal experiences of everyone involved in the new performance management process Learning Points It is difficult to avoid involving personal biases and opinions while doing performance appraisals. However, a clear, specific and centralized performance management method will help address these concerns. Continuous feedback and monitoring should be in place to ensure that the reliability and accuracy of the performance appraisal results are reviewed regularly. This will also provide improvement in the companys performance management system. Performance management involves several phases that should be applied continuously throughout the entire performance period. It does not start and end with the performance appraisal process. When performance management is done right, employees should be aware of how their objectives and the organizations expectations from are aligned with the goals of the organization. When an employee is provided regular and timely feedback, there wouldnt be any surprises during the performance rating communication because they would understand how they were evaluated and were given useful inputs on their successes and areas for development. The performance management system should be aligned with the managements plans and the companys goals. References Noe, R., Hollenbeck, J., Gerhart, B., & Wright, P. (2009). Performance Management. Human resource management: Gaining competitive advantage (pp. 338-387). New York, NY: McGraw-Hill.
Financial Services Authority. Employee Handbook. The importance of Performance Management (2013, March). Retrieved September 29, 2013, from www.fsa.usda.gov/Internet/FSA_File/perf_mgmt_09_email1.pdf