INSTRUCTIONS:

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CASE STUDY (30 MARKS)

In January 2008, Kathmandu based Siddhartha Hospital (SH) implemented a for a

performance appraisal program for its 200 staff nurses. Initially the program faced some
resistance from a few nurses and supervisors, but the system was welcomed by many as an
objective way to appraise the performance. Complaints also centered on the time required to
complete the appraisal review process and the fact that supervisors disliked to confront
nurses who disagree with their performance review. Nursing supervisors are required to
appraise the performance annually and to forward to the HR department a copy of each
appraisal form.

In July 2009, Janardhan Ojha, manager of the hospital, reviewed the appraisal reports of all
nurses since the inception of the program. From this review he concluded that the majority
(82%) of nurses were evaluated as performing at an average level as indicated by a global
rating given at the bottom of the form. Approximately, 10% were rated above average or
superior, and the remaining percent received below standard performance reviews. As a
response to these findings, Ojha decided to base the annual raise for all nurses on the
consumer price index. This, he concluded, would allow the nurses to maintain their standard
of living while guarantying all nurses a yearly raise.

As part of the hospitals employee involvement program, Ojha holds quarterly meeting with
groups of employees to solicit their feelings regarding hospital policy and their jobs. Both
positive and negative opinions are expressed at these gatherings. These opinions are used to
modify hospital policy. At meetings in the past years, a number of both junior and senior
nurses had expressed dissatisfaction with the across the board pay policy for annual raises.
The biggest complaint concerns the lack of motivation to increase the performance level,
since all nurses are paid the same regardless of individual performance. Based in these
comments ojha has considered changing the nurses' compensation policy. During the past
seven months, nine of the better nurses have quit to take jobs with the hospital against the
award of annual increases on a merit or pay for performance basis.

QUESTIONS 1 (10 Marks)

What are the major issues in the case and what are the possible impacts of adopting a merit
pay plan for hospital nurses?

QUESTIONS 2 (10 Marks)

What problems might the supervisors face in conducting the performance appraisal of
nurses?

QUESTIONS 3 (10 Marks)

Which alternative incentive program as against the one practice by SH do you recommend?
Why?

*** END OF QUESTIONS ***

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