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PERFORMANCE AND COMPENSATION MANAGEMENT

SUBMITTED TO: SIR MOHAMMAD AHSAN ULLAH DURRANI


SUBMITTED BY: ABEER MAZHAR
REG NO. 36687

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WEBSTER INDUSTRIES- CASE STUDY

EXECUTIVE SUMMARY:

The case introduces Webster Industries who assigned Bob Carter, the
Manufacturing Manager of the company to dismiss 43 employees within a week
and thus reduce the Fabrics division manufacturing department employees by 15
percent. Later the case provides with brief details of the Location, Company
History, Organizational Climate and Websters Employees. The case further
discusses the troubles faced by Webster and the decline in the earnings of second
quarter and how the slowdown in the construction industry hit Websters furniture
and carpeting business. Carter requests Stevens, who was soon to be promoted, to
develop a strategy that will simplify the process of dismissal. Later that evening
Carter and Stevens discusses how it is the right time to remove the fat from the
organization and how much weightage should be given to the Websters
Performance Appraisal System (PAS). On Monday morning Stevens presented his
thoughts on the criteria for developing termination list. Seniority, Fairness, Fat,
Performance and Potential were some measures to consider as suggested by
Stevens while preparing the termination list.

In a memorandum to Carter, Stevens presents a series of guidelines that the


company uses. The Performance Appraisal System (PAS) that is designed three
years ago, has three purposes; to help managers to act as manager to attain
organizational goals, judge responsible for evaluation and decision maker and
helper for developing subordinates. Further in the memorandum the components of
PAS are discussed, which are the Management by objective MBO, a
developmental review and an evaluation and salary review. In the case it is briefly
described how PAS is used as a voluntary basis and is not very consistent tool of
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evaluation in the Webster Industries. The personal audit conducted by Jack Bryant
is again showing the lack of managerial strategies within the organization and thus
in result giving drastically inconsistent results in the organization as there are no
consistent and reliable tools for evaluation of employees. Finally the case
concludes with the attachments of performance description questionnaire, profile
interpretation and salary matrix.

QUESTION/ANSWERS:

1. Mr. Bob Carter has an immediate problem of downsizing 43 managers.


How should he go about doing it?

Answer: Mr. Bob Carter should start by terminating the three individuals who
he firstly proposed to be demoted to Ike Davis the first is Russell Brown and
two other individuals, this leaves us with the termination decision of 40 more
managers. But the Stevens proposal of terminating 48 employees rather than
43 employees and then hiring back 5 employees from sister divisions is totally
absurd in my opinion because, first of all if those employees were competent
enough than they would not have been terminated in the first place and suppose
that if they were terminated only to meet the termination number by their
managers; then rehiring them in sister division would not be appropriate as the
terminated employee would be demotivated and somewhat disloyal to the
Webster Industries and the methodology of downsizing and would have the
ambiguity and doubt of getting terminated again. So this idea of Stevens is very
unprofessional and absurd as this does not make any sense what so ever.
Although Brown clearly had more experience than Stevens, Carter did not

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include Brown in his discussions. The team thus lost Brown's experience, which
could have benefitted the process with more diversity and disconfirming
information. Because he was demoted by his boss, Brown likely had much less
fear of presenting disconfirming information than did Stevens, whom Carter
had just promoted to take up Brown's position. Any who; Carter should go
about terminating the 40 other employees by aligning his termination list with
Abe Websters guidelines and the proposed criteria by Stevens of reducing the
employees who are considered as a fat and poor performers Furthermore,
the employees who are kept just because they have nowhere else to go must be
terminated and hire the employees who contribute towards the organizational
success. The personnel audit data has the 97 percent of employees ratings and
it would be only sensible to use it while devising a termination list as it is the
only most accurate information available to Webster Industries about its
employees.

2. What Problems relating to HR and performance management in particular


this company is facing?

Answer: In the given case of Webster Industries, the company is facing


adverse problems relating to HR are that there is a Performance appraisal
system PAS available but it is not used by managers as often and on regular
basis; as Carter himself admitted that he had not gotten around to using PAS on
regular basis. This issue should have been addressed earlier by the HR division
of Webster as the tool developed for the evaluation of employees must be used
on regular basis. In his memorandum Stevens indicated that the usage rate of
PAS is only 29 percent and is used on voluntary basis which is an alarming
situation for the HR department of Webster. There are evidences of biasness in
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the Performance appraisal system of Webster, this form requires managers to
rate their subordinates; the problem with this is that the questions entail
recollections of past events. Since not all events can be remembered, managers
should not base important decisions solely on memories. Without reevaluating
this questionnaire, managers gave biased ratings that affected employees
results. The Performance Profile lacks specificity. Meanwhile; weaknesses and
strengths are determined by Xs; but what this structure lacks is the maximum
requirement of Xs. There is no substantial evidence that determines how many
Xs are adequate to express a specific level of weakness or strength. How many
is too many and how many represent a certain level of weakness or strength.
Discrepancy can be seen in Attachment 2, where the Xs for most dimensions
are two Xs but in B there is a total of ten Xs. There are flawed tools available
for the evaluation of subordinates but the evaluation tools for the managers are
also not adequate to rate a manager himself. All these blunders in PAS
performance description questionnaire and performance profile lacks specificity
and yard sticks to evaluate the results itself, shows how flawed and incompetent
HR is of Webster Industries.

3. What are your recommendations for the company in the long run? What
changes would be required?

Answer: In the short-run, the company must terminate the fat that is the people
who are an extra burden on the financial situation of the Webster industries, as
well as the excessive division of labor has increased the number of payrolls in
the organization. The tasks should be divided but with keeping the sense of the
economy, one single person must be responsible for multiple but do-able jobs
such as the production superintendent position by itself is adequate for the
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manufacturing department so the assistant production superintendent position is
adding an extra burden onto the organization.

While, in the long-run the companys Human Resource Division must design
certain performance appraisal and evaluation tools which are not ambiguous,
easy to use and have a standard measurement scales. The Websters HR must
also make sure that these Evaluative tools are designed for both managers and
subordinates and are implemented religiously within the organization. The HR
must communicate well the penalties attached of not using the tools and
reporting the results to the HR department. Subsequently, the subordinates must
not remain in the dark regarding their performances only because the managers
have a fear of confronting them, it should be ensured that the managers and
subordinates communicate well with each other of where they stand and how
their performance could be improved. The Personnel Audit tool must be
implemented on quarterly basis in the organization, while ensuring that the
plans worked out by Jack and managers to correct the misperceptions of
employees must be discussed with the employees themselves and conflict
resolution strategies must be applied. Communication is the key in successful
organizations, Webster Industries must promote the level of communication
within and the departments and with other departments as well, rules and
regulations must be communicated well so that no employee is kept in the dark.

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LEARNING:

The Webster Industries case is as a prime example of how the flawed systems,
improper measurement tools of performance and flawed administrative authorities
can lead a company and in turn the employees of the company in the economic
recession and hot waters. In the case, the many shortcomings of a mismanaged
team paralyzed the company. The Organizations should identify the jobs that are
necessary and not a luxury for it, and the managers should strive to achieve the
organizational strategies and align them with their own managerial strategies,
rather than keeping the subordinates in the dark and not working to improve their
performances. In addition to this, the organization must develop standardized tools
that should be used widely and regularly in the organizations, so that a record of
employees are created through standardized, unbiased and unflawed means. The
usage of tools must be enforced within the organizations so that the results are not
skewed and are accurate enough to reach to an unbiased decision when needed.
The organizations must develop managerial strategies those are aligned with the
corporate strategies, communication is the key which can terminate number of
issues in the organizations. An organization with good level of communication
within the departments and inside the department itself can never end up in the
situation where Webster Industries did, if the employees dont even know how
they are perceived by their bosses then how could they amend or reshape their
behavior or performance. And if there are no standard tools for evaluating the
behavior and or performance than how would the managers know which employee
should be promoted or how much should they be compensated.

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ALCON LABORATORIES, INC- CASE STUDY

EXECUTIVE SUMMARY:

The Alcon case starts with the dilemma of sales manager at Alcon, George Leone
who is concerned with the high turnover in the sales force and how to reduce if not
eliminate it using the compensation methods. Alcon, Inc. manufactures, distributes
and markets ophthalmic (eye) surgical equipment, contact lens care products and
other consumer eye care products that treat diseases and conditions of the eye.
Alcons broad range of products represents what many consider as the strongest
portfolio in the ophthalmic industry. Alcon Laboratories Inc. began in 1945 at a Ft.
Worth, Texas, pharmacy as a small, independent pharmaceutical manufacturer.
Alcon Laboratories share of the total domestic ophthalmological drug market was
nearly 20 percent. The marketing department of Alcon was primarily responsible
for assessing the success of sales efforts. Alcons marketing and R&D department
worked close coordination to devise new marketing plans. George Leone was
responsible for overall administration and performance of the sales force, he
directed three groups of personnel; regional sales managers RSM, district sales
managers DSM, and medical sales representatives MSR. The RSM have five major
functions of recruitment, training, maintaining communication and planning and
organizing and spend minimum 35 percent of time personal field visits but no
direct relationship with customers. The DSM have also five major duties of;
recruitment, training, maintaining communication and planning & organizing as
well as spend minimum of 75 percent time in personal field visits. The MSR or the
sales force has six major duties of; making calls to eye physicians, pharmacies,
hospitals, wholesalers. Follow the sales program, fulfil their performance standards
and objectives, planning and organizing territory coverage, maintain

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communications and meeting standards of self-development. The case further
describes about the selling in the drug industry by breaking down the calls to
doctors, retailers, wholesalers and the call mix. In the past six years the annual
turnover of Alcon sales force had averaged approx. 33 percent. The DSM spent
most of the time in hiring, firing, training, compensating the new employees that
they could not work closely with the MSR as they were supposed to. The case
concludes with the views of salespeople, doctors, pharmacists and, wholesalers.

QUESTION/ANSWERS:

1. What are the problems in this organization?

Answer: Failure to identify the Human Resource based need and over
burdening the employees of each department is the root problem that Alcon is
facing, exhausting the resource of manpower could be the fatal consequence of
this poor management and underestimated judgment of responsibilities assigned
to each level of job. The most visible problem in hand is about the high
turnover rate of salespeople in the sales department of Alcon. Though
management is aware that turnover is high among sales personnel throughout
the drug industry is 12.1 percent but Alcons turnover is as high as 42 percent.
Alcon must allocate the tedious process of Recruitment & selection, Training
and development and performance appraisal process of sales force to the
Human Resource Department, while RSMs and DSMs Should be responsible
for maintaining communications with the home office through reporting,
planning and organizing to help set the objectives and fulfil the minimum
amount of time to be spend in the field. As said by one DSM that Before, I just

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worked with men, but now I am running an organization. I hire, fire, train, and
evaluate men. I also run a good bit of sales meetings. These comments from a
DSM clearly represent that the staff is overburdened and there is no proper
setup of HR to fulfil Alcons HR based needs. The goals which are assigned to
the sales force are not SMART goals; they are unachievable in my opinion due
to which there was a reward problem that occurred during the distribution
campaign of May 1964 where the Alcon laboratories faced the reward problem
of production of desired behavior and undesirable consequences.

2. What is your opinion about the high turnover of field staff?

Answer: The high turnover ratio of the field staff suggests that there exists a
reward dissatisfaction within the sales force of Alcon; as implied in the case in
the interview of Don Wade; Alcon promises you the sky in terms of
advancement and then they just dont come through. So, when boys have been
here a while and they dont get promotion as soon as they were told they would,
they leave. These statements clearly shows that there exists a lack of
organizational justice and violation of the psychological contract in terms of
reward dissatisfaction among the sales force of Alcon. In my opinion, another
problem that exists at the very beginning of the hiring process of sales force is
the manual The Man You Want which DSMs use as a tool to hire a sales
person, this manual contains the description of a Man who is perfect in every
sense and then the DSMs belief that magically a Man with all such
characteristics will appear in front of them; in my opinion this manual is absurd
and un-realistic. It is also clearly stated in the manual The Man but what
about hiring women as sales force? This manual is pushing the DSMs towards

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the confirmation bias as the employees who dont fit to the absurd requirement
of this manual are discarded even before interviewing them.

3. What are your recommendations?

Answer: My recommendations for Alcon Laboratories to reduce the turnover


ratio of the sales force is to start with the root problem that exists in the
organization while the process of hiring. The job of a sales person must be
revaluate in detail in order to specify all the job related criteria of the position
rather than irrational manual of The Man You Want which states that a
person should be Twenty-five to thirty-five of age; married (preferred);
college degree (why would an MBA from Harvard will work as a sales man?
How is this even logical?); above average grades (Students with above average
grades would want to be at a managerial position rather than being a sales
person); good work history; good physical appearance; good health; sound
financial position (This point does not even makes a little sense). All these
descriptions in the manual do not even slightly align with the position that
Alcon offers to its sales person so this manual should be discarded entirely and
a new rational evaluative tool for the interviewee should be developed. Another
problem of Reward dissatisfaction must be addressed to the MSRs that the
compensational plans must be discussed openly and clearly to all the employees
in MSR there should be no ambiguity whatsoever in terms of performance
compensation. It should be clearly stated that this much sales and demand
creation will result in this much bonus or this much training and experience in
Alcon will result in a promotion so no employee would feel a violation of their
psychological contract. Openly communicating the strategies and targets along
with the benefits and compensations attached with them are the key to
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organizational success, where nobody (at least the majority) dont feel the
reward dissatisfaction.

LEARNING:

Alcon Laboratories Inc. case is the prime example of how improper yard sticks or
evaluative tools can result in the hiring of wrong person for the wrong job. The
biasness of hiring man could limit the organization to hire more competent and
enthusiastic workforce which consists of women as well. This case also tells us
how over burdening the employees to complete goals which are superhumanly or
unachievable may cause demotivation in the employees, meanwhile it also tells us
that how important tasks of each department must be kept separated and should not
fuse in together. The marketing department, Finance department, R & D
department, Sales department, HR department all must align their strategies with
each other and to that of the organization but the task that must be completed by
HR should not be given to Marketing like hiring, firing, training, compensating etc.
This incorrect assignment of tasks to the wrong jobs result in the wrong choices
which in turn result in organizational problems like turnovers, absenteeism and etc.
This case is also a good example of how perceived violation of psychological
contract and lack of organizational justice can result in the high turnover of the
employees. The targets of each and every employees, the strategies to achieve
them, the feedback to all the employees about their performance and the rewards,
benefits, bonuses and the compensations linked with the performances should be
communicated very clearly beforehand rather than keeping them hidden and
ambiguous.

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