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VI. Your Turn: Performance Appraisal at American Energy Development
Summary of Case
John was a Wall Street broker, he believes in tough performance appraisals and an
incentive system that richly rewards success stories and quickly discards poor
Learning Objective
Analyze a performance appraisal system and accompanying merit pay system, identifying
any problems. Identify ways to improve the performance review sessions. Interpret
employee reactions and identify ways to improve employee outcomes.
Teaching Guideline
Use this case to make students analyze some common issues in performance appraisal
systems and merit pay systems. Help students evaluate all possible scenarios for Billy
Ray, and Elizabeth, pointing out best possible outcomes.
Discussion of Case Questions
1. What problems do you see in the performance appraisal system and accompanying
merit pay system? Did any of these problems contribute to the people problems John
had with his two employees in the performance review process?
There is no evidence the PA system is linked to the strategy of the company. Indeed we
the Texas market. It was admirable of the CEO to pay people at the past market rate, but it
might be prudent now to give a bonus for performance rather than merit pay that adds into
2. What might John have done differently in the early communications process to
improve later performance review sessions?
dimensions might have been appropriate.
3. Should Billy Ray have quit? Why? Should John have accepted his return? What
other action might Billy Ray have taken that could have been hurtful to the
company?
The opportunities to sabotage are so numerous that John might have chosen to go back in
4. Was Elizabeth treated fairly? Should initiative be a performance dimension? What
other action might she take? Could she make a case that she was discriminated
against? What defense, if any, might the company have?
The treatment of Elizabeth was shameful. It sounds like she was taken advantage of by
result measures in a field where output is easily quantifiable.
Answers to Review Questions
1. We talked in depth about four ways to improve performance ratings. Pick one that
you think shows the most promise and defend your position.
Choices on performance rating improvement strategies may vary among students
paired-comparison procedures.
oRating:
Strategy 2: Select the right raters
oRater stores information (rater forgets things)
oThe time between storing observations/ behaviors and the performance appraisal
influences relevance of the appraisal
Several guidelines to improve rater training have been summarized.
2. You own a nonunion company with 93 nonexempt employees. All of these employees
pack books into boxes for shipment to customers throughout the United States.
Because of wide differences in performance, you have decided to try performance
appraisal, something never done before. Until now, you have given every worker the
same size increase. Now you want to measure performance and reward the best
performers with bigger increases. Without any further information, which of the five
types of appraisal formats do you think would be most appropriate? Justify your
answer. Do you anticipate any complaints, or other comments, from employees after
you implement your new system?
The nature of the task—packing books into boxes for shipment to customers throughout
of employees are usually less subjective. The behavioral anchors specify performance
expectations representing the different levels of performance possible by an employee.
developing performance dimensions and building the scales to measure how well they
perform on these dimensions. Research indicates participation results in employees having
3. Think about the last group project you worked on. Describe that project and identify
three performance criteria you think would be appropriate for evaluating the team
members. Should every team member be able to rate one another on all these
dimensions? Should the team-member ratings be used for feedback only or for
feedback and part of the overall grade (with teacher approval, of course). Should the
teacher rate each team member on performance (all three criteria) in the group
assignment? How are these questions relevant to setting up a 360° performance
review?
Descriptions of group projects will vary depending on the students’ experiences.
Peer ratings can be implemented on all group projects. The purpose of the peer evaluation
some teams work together better than others; this may result in an uneven distribution of
work and contributions of team members. The following guidelines can be used by the
percentage grade must be justified to the instructor in writing. A zero grade will be
omitted from the computation of the average grade assigned to other team members.
(team-members). This method differs from the 360-degree feedback in that it does not
allow self-evaluation and there are no customers and subordinates for a team project.
4. Angela Lacy, an African-American employee in your accounts receivable
department, has filed a charge of discrimination, alleging she was unfairly passed
over for promotion and regularly receives smaller pay increases than do employees
who perform less well (she alleges). You have to go to your boss, the VP of HR, and
explain what elements of your HR system can be used in your legal defense. What
things do you hope you did in setting up and administering your systems to counter
this discrimination charge?
developed job descriptions.
The company’s policy stipulates that supervisors provide feedback about the
appraisal results to the employees involved, and that the appraisal results are
company’s guidelines in completing Angela’s performance appraisals and awarding her
pay increases.
VII. Appendix 11-A: Balanced Scorecard Example: Department of Energy (Federal
Personal Property Management Program)
customers.
2. Internal Business Processes Perspective—assures that an effective federal
will provide long-term benefits to the federal personal property management
program.
2. National (Core) Measures—The core measures contained in the federal personal
property BSC are measures that the Department expects all entities charged with
Financial Perspective
VIII. Appendix 11-B: Sample Appraisal Form for Leadership Dimension: Pfizer
Pharmaceutical
Exhibit: District Manager Baseline Capability Assessment
Exhibit: District Manager Strategic Capabilities
