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FILE - GROUP 4 VITALITY HEALTH ENTERPRISES.DOCX
Q1. 5 Identify the major challenges faced by the existing PMS (PMET1) at Vitality.

● 3 The PMET discovered that the performance management system presented

problems for nearly 2,500 professional staff, mostly scientists and engineers and their

product managers who worked in teams in R&D. It had 13 different rating levels, which

created chaos and managerial abuses.

● Managers rarely gave bad ratings as they thought it would offend their employees. 4

This resulted in a somewhat homogenous rating and failed to distinguish performers from

nonperformers sharply.

● Since performance ratings were used to determine merit-based wage increases and

other rewards, employees also felt undervalued financially, recognizing that they received

similar rewards as their less-productive co-workers. There was an imbalance in recognition

and rewards to employees.

● The point system 1 used for salary calculations and performance-based raises was not

well accepted. Employees with consistently higher performance sometimes even received

smaller raises than their less-productive colleagues. The system was designed in such a

way that was just staying with the company would inevitably result in a high gradual salary,

regardless of overall performance. 2 The system itself made it difficult to identify and

reward top performers and equally difficult to identify and terminate low performers.

● There was an absolute ranking system and not a forced distributed model, so many

employees were receiving high rankings even when their department was failing to meet

development and production goals and schedules.

● The system wasn't trustworthy. They didn't want to enrage the staff. It was claimed that

the system was complex and unreliable. There were 13 distinct rating levels (From A 1 to

E, Including pluses and minus). Unfortunately, this rating system allowed for management

abuses because it was unstable and could be manipulated to promote employees. "The

system itself made it impossible to identify and reward great performers and equally

difficult for identifying and firing bad performers," it was stated in the case. The fact that
"Managers rarely granted A ratings for fear of disrupting a spirit of collaboration and

egalitarianism within the R&D divisions" is another proof that the case is unreliable. A

crucial component of every job is a job analysis, which the system as a whole lacked. This

affects how you carry out the task that has been given to you.

Q2. Design a performance management system (other than 360-degree) to address the

issues identified in Question 1, and better help the organization achieve its strategic goals.

Explain which shortcomings are addressed and what new issues can potentially arise with

each recommendation you make.

New PM system:

To identify 1 the top performer and average performer, it’s very important to implement

the forced distribution system. But a department's internal bell curve will reveal only one

side of the story. Until and unless an employee from department A can compare their

performance with an employee from department B, the purpose of an objective evaluation

system will be incomplete. So, even if the scope of responsibilities is very different

individual-wise/team-wise/department-wise, an apple-to-apple comparison is essential to

make the process transparent and fair for everyone.

1 In the new PM system, KRAs will not be set at the beginning of the year for

departments or teams. All the departments will have their targets, and basically, 6 they

have to determine their critical success factors, which will ultimately help them to make

their output relevant for the business. And at the end of the evaluation period, the

respective contributions of different departments will be compared to determine their

respective ranks. The department which 1 can help the business by maximum

contribution will enjoy the maximum increment. And under each department, the
contribution of different teams will be force-fitted, and likewise, within a team, the

employees will

be compared through a bell curve in the same manner. At each level of the hierarchy, the

comparative contributions will be evaluated, and performance-based increments will be

assigned.

So, in this way, intra and inter-departmental apple-to-apple fair and transparent

comparison can be made possible, and employees at large cannot raise doubts over the

credibility of this assessment process.

Issues addressed:

● The drawback of the 1st PM system was that 1 there was no inter or intra-departmental

comparison of performances. When two individuals from two different departments were

considered, both of them could get the same rating if their individual compliances against

their individual KPIs were equal. To address that issue, the new PM system is

recommended where it will be easy for anyone to gauge the relative performance of the

employees within the department 1 and the employees across the departments.

● The new PM system would create a dashboard showing the outputs of different

departments. It would create an objective evaluation that will help to reduce the conflicts

and confusion of injustice. Before questioning the manager, the employees could 7 easily

figure out on their own who did what and the respective hit in the business.

● Here, in the new system, no team would be judged on their pre-defined KPIs/KRAs. So,

the evaluation system will not bind the employees to fulfill their pre-defined targets. Rather

every department will try its best to outperform its competitors.

● The new PM system will set a date (e.g., 1st October), after which if any employee joins

the organization, they will not be a 1 part of the PM system. The new employee will be

evaluated on their individual KPIs.

Which new Issues could arise:

● Sometimes, it is very difficult to map a team's performance with the organization's goals.

Hence critical evaluation will be required by the person who will measure the departmental

output 6 to determine the hit in the business. Within a department, force-fitting team

performance will become a challenge to the team/department/functional heads. So, the

organization will have to invest hugely in L&D.

● When an employee joins an organization at an entry-level, random allocation to a

particular team/department may lead to bias as individual performance is linked to team

performance. If the 8 team does not perform well, it can drag the newcomer down with it,

as in the new system, individual efforts will not be judged directly.

● It will take time to initiate the change and to keep records of these accounts; heavy

implementation of an information system is required. So, the project will be capital

intensive.

Group 4: 3 Vitality Health Enterprises

1
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