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Performance Management at Vitality Health Entreprises,Inc

Case Analysis

Human Resource Management

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Basamgari Mounica (2013PGPM14) Anand Chaurasia (2013PGPM16) Mathan Anto Marshine P (2013PGPM36) Rachit Devendra Pradhan (2013PGPM39) Soumya Choudhary (2013PGPM52) IIM Indore - PGP, Mumbai ICSI - CCGRT, Navi Mumbai

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Human Resource Management

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CONTENTS
Executive Summary Problem Statement Problem Analysis Recommendations 4 4 5 7

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Human Resource Management

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Executive Summary

Problem Statement

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Human Resource Management

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Problem Analysis
Vitality Health enterprises decided to roll out its new business strategy in face of decreasing earnings in 2009.The focus was primarily on reviewing the current performance management system and making it coherent to ensure increased employee motivation and accountability. Analysis of Old PMS System (Till 2009) Had 13 different rating levels (A-E and pluses and minuses) and managers were asked to rate employees on the scale based on their individual performance levels Pay policy line was done on the following basis Pay Policy Line = Base salary + (Job evaluation points * Increase per point) Job evaluation points were calculated on the basis of the level of the accountability, technical knowledge and problem solving skills Individual Salaries were further modified by comparative ratio .This ratio was defined as the employees current pay in comparison to the current industry pay rate. Problems with Old PMS System (Till 2009) 1. The top performing employees ended up getting similar grades to other less productive employees leading to decreased motivation and frustration. 2. The comparative ratio technique used by the company led to consistently high performers receiving smaller raises than their less productive colleagues. The reason being the increase in comparative ratio kept decreasing on the percentage basis as the employee climbed through the range. 3. The current compensation structure did not give much concern to the overall performance since there was no bonus or alternative form of reward/recognition. The benchmark compensation was set at 75th percentile with regard to their compensation peer group which made actual compensation figures go 7-8% higher than the competition. This ensured tenure of high salary regardless of overall performance. As a result, it was difficult to identify and reward top performers or terminate low performers and hence, the low turnover experienced by the firm was among productive scientists and product engineers.

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Human Resource Management

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Analysis of New PMS (Introduced in 2009) New system replaced the earlier 13-point scale with a 5-point scale making it easier to determine the category each employee fits into. This was brought to replace the existing absolute ranking system by a relative ranking one wherein the employees were evaluated with respect to the performance of their fellow colleagues and the pre-determined standards for the respective job. The rankings were designed to be fit to a distribution in order to have a distinct picture of the relative performances of all employees. Incorporated performance based incentives in the compensation structure. These included short and long term cash and equity bonuses and limited stock options to senior managers and were aimed at retaining top talent. Conducted reviews and announced results for all employees at the same time of the year, thus ensuring better measurement of collaborative efforts and reducing the impact of external factors on relative rankings. Evaluation of employees on the basis of their performance in terms of achieving specific goals identified for their respective jobs

Problems with New PMS (Reviewing done in 2011) Due to the concept of relative ranking every team would have some top achievers and some poor performers hence even if the team was performing poorly, there would be some top achievers and even if a team performed excellently there would still be some poor performers Required a higher involvement of the managers but did not reward them appropriately for it. Compensation was very closely tied with performance review which resulted in employees becoming more defensive and less open to coaching Considered duties which were a part of their job description for the performance evaluation hence the employees were unwilling to perform duties outside the mentioned job description. To play safe, Managers rotated higher rankings between their employees from one year to the next either to avoid putting in too much of effort or to avoid angering their team Some managers submitted rankings which would fit the curve but told employees that they had submitted something higher to maintain good relations with employees Some managers submitted uniform rankings to avoid differentiating between their employees compelling HR department to change the rankings to fit them to a distribution, further leading to inaccurate rankings.

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Human Resource Management

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Recommendations

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