Performance and Compensation Management

Case 1: Bonuses in Bad Times

If you were the CEO of this company (Superado), would you give your employees the-end-of year bonus?

Superado is a supermarket chain situated in Spain. Luisa Fernandez is the CEO of Superado, who has been a member of the Superado family since she was a child (Beyersdorfer, Dessain, Ton, 2012). Her father started it as a small business in Seville. Luisa used to see the stores with her father when he was visiting all his sites within the past 30 years (Beyersdorfer, Dessain, Ton, 2012). After the death of her father, Luisa became CEO. She was devoted to Superado and promised to continue the businesses correspondingly.

It is worth noting that she is a sensible person who understands that the current state of the economy is not beneficial to provide the employees with annual bonuses; however, she is in good relations with her employees and does not want to disappoint them (Beyersdorfer, Dessain, Ton, 2012). Considering her position, Luisa intends to ensure that the workers receive the annual bonuses.

First, Jorge Ramos, being a store manager for Superado, has suggested providing bonuses for the employees, claiming that they cannot be responsible for the poor results of their stores as they put much effort to serve the customers. Moreover, due to their performance, the sales in the store increased the sales in other supermarket chains by 20%, which is a significant number during recessions (Beyersdorfer, Dessain, Ton, 2012). However, it results from the way of treating employees in Superado. They receive better salaries as compared to the workers in the neighboring supermarkets, have convenient work shifts, and get bonuses and managers’ training (Beyersdorfer, Dessain, Ton, 2012). Moreover, they work full-time and have corresponding contracts. However, it is impossible to predict their performance if they do not receive annual bonuses on the eve of holidays.

Moreover, bonuses should be provided to the customers as they contribute to the flourishing of the supermarket. While talking with Luisa, Jorge noticed the queue of four people in one checkout line and ran to open the other gates to serve the customers preventing them from waiting. Another employee, Rosa, understanding the risk of the recession and the decrease in sales, offered a decrease in the product range (Beyersdorfer, Dessain, Ton, 2012). Superado offers products for different tastes sorted and stored in the supermarket under the names of Diary, Meat, and other (Beyersdorfer, Dessain, Ton, 2012). Thus, visiting the supermarket, the customer is choosing between what he needs and what he wants to buy which leads to spoiling the products. The solution is to offer fewer products that will allow the client to make the choice easier, while Superado can economize on the unsold products and their recession. Thus, the saved money could be spent on annual bonuses.

Finally, bonuses should be provided to maintain the model of the Superado chain and the contribution of its employees, especially in the competitive atmosphere. Recently, the store of the Grand place chain has been nearly opened and its managers intend to poach the Superado employees. Therefore, the CEO should be prudent before expressing any offense or not paying bonuses to the staff (Beyersdorfer, Dessain, Ton, 2012). Superado should strengthen its reputation among its employees, customers, and competitors. Announcing the annulment of the annual bonuses would spread quickly. Moreover, the employees working in different communicate and share information, which could lead to some staff losses and a decrease in their devotion to the work. All these factors would deteriorate the business, which would be more expensive than spending a considerable sum on bonuses. While the other chains may not pay the annual prizes, Superado will continue this policy to motivate the employees and enhance their performance. In addition, the annual bonuses show the gratitude of the owner to the people working in the supermarket, who contribute to the flourishing of the business and increase in income. It is gratitude for their daily efforts, which ensure the development of the company.

Consequently, reviewing the advantages and disadvantages, the company should ensure payment of the annual bonuses to the employees on the eve of holidays. Moreover, each employer should be responsible for the provision of fair treatment to the employees, and pay reasonable salaries as a sign of great gratitude for their daily job to promote the business and receive high incomes. In addition, the employer should follow the achievements of the competitors and prevent them from poaching his workers, whereas timely paid bonuses will ensure his success. Moreover, during periods of recession, the employees are highly subjected to the raise of prices. Thus, they need increased salaries, especially on the eve of holidays. It will help them to spend their vacancies correspondingly and return to work with better enthusiasm and gratitude to their employer for the possibility to work and develop in this prosperous chain with other employees. Thus, while allocating the budget for bonuses, the employer should consider the possible risk of refusing to pay this amount to the staff.

Case 2: Southfield Packaging

Southfield is a USA Company that provides packaging services and materials to manufacturers of medical devices and equipment. The company is majorly operating in the USA and cooperates with American companies. Recently, Southfield sales have grown significantly due to the increase in the older population, thus boosting the need for the provision of its services. The benefit of Southfield among other companies is its diversity of offered services and products, including packaging and cushioning for medical equipment and machinery widely used in orthopedic, spinal, dental, and veterinary clinics (Beer, Zalosh 2013). Another advantage of Southfield lies in its manufacturing abilities as compared to the reseller companies that just sell the products and services and cannot compete on price. Employing 500 full-time employees, Southfield holds 60% of the annual clients’ retention rate which is 25% higher than the industry average (Beer, Zalosh 2013). The key focus of the company is to suit the personal needs of its clients. Therefore, the company has implemented an appraisal system to examine the work of its employees and constantly realize the new services and products along with the evolving industry.

What is your evaluation of the performance appraisal process system (especially the evaluation form) at Southfield?

Performance appraisal is a key driving force to intrinsically motivate employees as well as define those who demonstrate the best results. The performance appraisal system is directly related to numerous human resource management practices, including job analysis, tutoring, development, and remuneration. Performance appraisal sustains job analysis in the organization. It implies that the employees know that if they implement their duties respectively in an effective manner and in case they show better performance by the expectations of the employer, they will earn appraisals.

The current appraisal form and process at Southfield are considerably efficient. The system involves the right criteria being measured that allow identifying the most effective workers and the detection of those who do not seriously treat their work. Based on the SPR conduction, the managers distinguish between the pay rise, bonus allocation, or their abolition. These processes are influenced greatly by the idea of SPR file keeping, where presentations for the client, the outstanding effort as well as performance, and email responses to a specific query are saved by the manager (Beer, Zalosh 2013). Further, the information is discussed by the manager with the employee that allows for assessing the performance rates and establishing new aims. The SPR system also measures internal business processes, customer, financial, and organizational capacity (Beer, Zalosh 2013). In addition, the common reward process is aligned. A bonus is given based on the overall company’s performance that can provide employees with a “wide picture” view. However, the rise in salary is based on individual performance providing owners with the ownership of their peculiar tasks.

Even though the system proves to be efficient, the measurement process requires renovation in the current rapidly-evolving world. All the workers are measured based on the same set of criteria. The measurement description and characteristics seem rather generic and fail to define specific behavior, which should be assessed about the responsibilities and role of the employees (Beer, Zalosh 2013). The evaluation form does not provide each characteristic measured according to the specific weights. Moreover, it is unclear, which of the specific judging criteria the manager detects while evaluating the performance. Thus, it is essential to communicate the system to all employees. During the implementation of the evaluation method, the director of the specific department along with the manager should attend the performance evaluation meeting.

Thus, to ensure a more efficient measurement system, there is a necessity to review the current characteristics being measured. It is recommended to borrow and adapt the Hay Point Method and arrange the measured characteristics into three key groups Accountability, Know-How, and Problem Solving. They should be weighted accordingly and ensure that the final scoring is more transparent as the removal of the managers’ element can affect the final score. It is also necessary to develop different criteria sets for each role instead of utilizing a mutual characteristics list for everyone. It will help to guide people in various roles on the particular actions that are vital for their position’s success. Another recommended implementation is the presence of SMART goals in the review as they put a specific timeline in right place and provide a tangible and real goal, which can be pursued and worked towards. Finally, to explain how the SMART goals are established and measured, it is efficient to follow the model offered by Peter Drucker that involves the components, such as jointly planning, individually operating, and jointly controlling. Such a system ensures that both the manager and subordinate are liable for establishing, measuring, and providing ownership to both parties. Thus, it is significant for the managers to be part of the process to assure that the set aims are aligned with the company’s strategy.

• How could Sanders do better in the meeting?

This appraisal system provides the employees with the possibility to discuss their performance directly with the manager during the appraisal meeting each December, where they review the deals from the previous year. They usually interact for two hours at the meeting, while the manager underlines the outstanding employees’ performance as well as the shortcomings. During the SPR final meeting, the employees are given a copy of their year performance with warnings and achieved goals (Beer, Zalosh 2013). Moreover, the workers are given a week time to review the measurements and write extra comments to highlight the skills acquired and circumstances that did not allow them to achieve the goals. It is an efficient idea as, eventually, the employees have concern that they are not appraised about the growth or bonus as they could have been treated (Beer, Zalosh 2013). Thus, an appraisal meeting between the subordinates and the employees can serve as the bridge of communication between the manager and employee that will influence the corresponding performance of the company.

Being a manager of Southfield, it is the responsibility of Sanders to review and utilize the appraisal process as well as constant communication to bridge the job competency profile with his employees’ competency profiles. However, the manager, namely Sanders, does not stick to the meeting requirements, which is evident from the meeting of Sanders with Belby (Beer, Zalosh 2013). The meetings are not regular, and while Sanders considers that he regularly communicates with Belby, the case shows that Belby thinks otherwise. However, Belby supposes that he outperforms many of his peers which can be argued, as the major business measures, such as customer retention rate, can deny this fact (Beer, Zalosh 2013). Moreover, Belby is not aware of Sanders’ considerations regarding his long-term career prospects (Beer, Zalosh 2013). Thus, Sanders needs to increase the frequency as well as the depth of appraisals to have a better understanding of his employees and their needs which could help them exceed the target purposes and ensure higher income for the company.

Aside from some deficiencies in the appraisal frequency and design of the appraisal form, the example of the performance interview, which happened between Sanders and Belby, showed that these appraisal meetings do not follow a protocol. The appraisal meeting violated the protocol as the evaluation interviews should be conducted a minimum of once a year, they should last at least two hours as well as should be closed while “undisturbed” (Beer, Zalosh 2013). However, in the case of Sanders’s meeting with Belby, all three protocols were violated, which implies that Sanders does not seriously focus on the appraisal. It is evident that their attitude of Belby differs from that of Sanders and that he concentrates on his ambitions without putting effort into properly conducting the appraisal of the company. Sanders should consider respectively the appraisal meeting protocol implementing some changes, as the meeting should be held once in six months with the discussion, which should last three hours minimum. Moreover, the proper analysis of the employee’s file should be conducted with a corresponding conclusion, which should increase his effectiveness. Moreover, there is clear miscommunication between both sides occurred due to the generation gap as well as different values. Sanders seemed not likely to explain any reasons or consequences of his decisions to Belby if not necessary, whereas Belby did not seem to start confronting Sanders in case the topic was not disrupted (Beer, Zalosh 2013). Consequently, there is an accurate gap between both men, while the appraisal interview would provide the best possibility to solve the issues and fill the gap. Sanders should more carefully treat the employees and make tight interpersonal relations to be a strong example for them as well as better control the employees’ performance.

To conclude, being a large company, Southfield conducts the SPR appraisal evaluations of its employees to determine the efficiency of their work and implement some changes to improve the general performance of the company and increase income. The system of the SPR involves conducting diverse measurements to distinguish the level of aim achievement and suggest possible changes to the employees. However, the rapidly-evolving world requires continuous renovation of the appraisal system. It is necessary to introduce changes to the changes in accuracy of the measurements, particularly in form of the characteristics measurement and the criteria of appraising. Thus, it is recommended to adopt the Hay Point Method to ensure more transparent appraisal criteria, while the measurements of the diverse characteristics for a certain role should be implemented to examine more strictly the employee performance. In addition, it is necessary to set the SMART goals with defined timelines and tasks as well as control their execution by jointly planning, individually operating, and jointly controlling the system. However, the appraisal meeting is not perfect, and it requires some regulations, particularly those related to the overall performance of the manager, namely Sanders. He should regularly conduct the meetings, allocating enough time for discussion and ensuring that the relations with employees are tight and interpersonal.