Performance Appraisal in Huali Company

Abstract: Huali company was a competitive company in its industry with good organizational climate
of communication and cooperation. However, after the implementation of the new KPI performance
appraisal system for salespersons, obvious change of the behaviors of salespersons occurred. The
salespersons strived for achieving goals by no means and communication and collaboration across
departments became less. As the result, the performance of the whole company declined and the
organization climate became no longer harmonious and smooth.
Keywords: Performance Appraisal; Performance Management; Key Performance Indicator(KPI)

Introduction
It is the early winter in Shanghai, the evening gloomy sky was shrouded with a layer of thin mist.
As could be seen from the window on floor 18 of the office building in Xujiahui, the street light was a
bit blurred. The work of the day came to an end, and the office area of Huali Company had been very
quiet. Some employees were preparing to close the computer, and others were tidying personal items.
They were waiting the time to rush to the attendance machine. At this time the front desk phone rang,
the receptionist, Miss Ding, reluctantly picked up the handset: “Hello! This is Huali Company.” “May
I speak to Xie Ming?” “I'm sorry. He went to visit the customer.” Miss Ding repeated these words
every day many times. The office area of Sales Department looked particularly quiet, and most of the
seats were empty. They might be visiting customers, and the remaining were holding the handset of
the phone or filling the report on the computer. The occasional whisper was fleeting. This situation
had lasted in the company for more than six months. Since the company introduced a new KPI
performance appraisal system, the daily concerns of salespersons became the number of calls and
visits to customers, sales and other quantitative indicators. However, it was not the case before.

1. Background
Huali is a private company engaged in information intelligence services, which was established
in 2002. Its main business is to provide various types of information intelligence services for the
marketing department, including advertising, public relations and other departments. Its main products
include cross-media advertising monitoring database, market monitoring platform, and market
statistics database. On the basis of standardized data products, it provides customers with higher
quality targeted customized services, such as competitive brand monitoring services for the marketing
department and public relations effect monitoring for the public relations department. With the
company’s development and growth, the boss wanted to cooperate with a prestigious foreign company
and learn from its management experience for better development. In 2008, the company officially

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began the negotiation process of joint venture. A year later, they succeeded in introducing investors
from the US and the company was changed into a joint venture. However, what the hell this seemingly
wonderful handshake brought to the company?

2. How many ‘cold calls’ did you make today?

How many ‘cold calls’ did you make today? All the salespersons ask themselves this question
every day, which is also a frequent question in their occasional discussion. This began after the joint
venture. Americans introduced KPI in order to make the work of the sales department more
transparent and more easily quantified. The employees have been very familiar with the word KPI
since the Americans told everyone in the training that ‘KPI’ is the abbreviation of ‘key performance
indicator’, that is, those key indicators contributing to the corporate performance.
In this new KPI system, the indicators for salespersons are very detailed and quantitative, such as
the number of cold calls made by a salesperson to new customers every day, the number of visits to
the customers every week, and the monthly sales accomplished. Salespersons always joke that they
are “with the customer or on the way to the customer”. Indeed, in the early implementation of KPI, the
work of all salespersons became “full”, everyone was busy completing the daily, weekly and monthly
tasks, and their work was strongly oriented.

3. A day of Sales Department

This day, the Sales Department was busy as always. Huang Xuming, the manager of the Sales
Department, was sitting in his office to review the monthly sales report in a daze, when the ring of the
phone awakened him. It was Ma Wenchao, the manager of the Marketing Department.
“Hey, Huang, our latest version of promotion plan has been sent to your department for a week,
and we are looking forward to your feedback, but there is none!”
“Everyone is busy! They even have not enough time every day to make calls and visits to
customers, so they have no time to look at you plan!”
“But this program is closely related to your work and can help you better accomplish the sales.”
Ma Wenchao explained.
“They really have no time. Well, I’ll remind them again.”
Mr Huang closed conversation with Ma Wenchang and put down the handset. The phone rang
again. He heard the sweet voice of the secretary of general manager Zhao Zhiguo: “Mr. Zhao called
you to his office.” Certainly it was not a good thing. Huang Xuming pondered, smoothed his hair, and
went to the general manager’s office.

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 As soon as he entered the general manager’s office, he saw the gloomy face of Mr. Zhao, and the
American boss also sat aside. Mr. Zhao pointed to a customer complaint sent by the Customer
Department: “The salesman Chen Lei was complained. His visit was too frequent and affected the
customer’s work!” In order to complete the number of visits, Chen Lei visited the customer every day
and was refused by the customer. The American boss also added: “The visit to the customer requires
communication skill! What is communication? Understand?”
Huang Xuming actually was also very helpless, KPI set the number of visits and sales, and the
salespersons had great pressure. Recently, some employees had resigned due to dissatisfaction with
the company’s performance appraisal system, and many employees were looking for their next
employer. There was a resignation on his desk this morning by Lin Mi, who had always been their
most excellent salesperson. Huang Xuming felt it a big pity. If such a talent went to the competitor, it
would be a big blow to the company.
It was lunchtime. Huang Xuming looked at the mails in Outlook, when a mail sent by the Product
Development Department two days ago caught his eyes. That was a notice. The company planned to
install a new set of information monitoring platform connected with the 3G network, and it informed
the Sales Department and other relevant departments to participate in the product introduction meeting
at 2 p.m. that day. People were reluctant to attend this kind of meeting every time, because they knew
that it would waste a lot of time, and the number of cold calls and other KPI requirements would not
be accomplished.
Huang Xuming looked around the open office area, but there were only a few people. He said:
“Wang Dazhi, attend the meeting of the Product Development Department this afternoon.” “Ah, I
have to meet the customer at one o’clock, and I have to go quickly. You see. I even have no time to
have lunch.” Wang Dazhi grabbed his bag to go out. Huang Xuming looked at Xie Ming and Zhao
Hongyi: “You both attend the meeting this afternoon. It’s good for the development of customers. It is
settled!” Xie Ming and Zhao Hongyi had no time to react before this happened. Zhao Hongyi
complained: “I can’t accomplish the task of visit today!” Xie Ming turned clever eyes: “It’s easy for
me to complete more than 10 visits every week. I keep a good relationship with a customer, and last
week he had signed the visit form for this week”, full of triumph.
It was lunchtime, and there were more people in the Cafe than the office area at work time.
Huang Xuming held his food plate and sat down as usual. He didn’t have the appetite, when he heard
two young employees chat. One is Hu, who joined the company half a year ago, and the other is Tian,
who had just joined for two weeks. Both graduated from a prestigious university in Shanghai, young,
smart and diligent. Huang Xuming quite liked these young people.
“What about your work?” Hu asked with concern.
“I haven’t made clear a lot of things, and if only there is an experienced salesperson to guide
me.” Said Tian.
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 “Yeah, it’s the same with me. But it will be ok when you get familiar with everything.” Hu
comforted him.
Huang Xuming heard this and thought: we should give these new recruits good training, but now
the experienced salespersons are always busy outside, and everybody thinks that guiding the new
employees will waste their own time to do business. Huang Xuming said to himself, we should pay
attention to this issue. In fact, he himself was also very busy all day for the performance indicators.
In the afternoon, Xie Ming went to the meeting of the Production Department. As soon as he sat
down, a person patted his shoulder behind: “Hey, buddy! Long time no see. What are you busy with
recently?” He turned round and saw Xu Cheng, a marketing staff, whom he used to work with. “KPI!
Endless visit every day...” “I see. You’re so busy. Your income must have doubled.” “Don’t joke. It’s
the same as usual. The market is getting harder and harder, and the order is getting less and less. What
about you?” In the meeting, they were just like long-lost friends, sitting in the back corner and
whispering. Xie Ming paid no attention to the product introduction.
The meeting was over. Xu Cheng suggested: “Buddy. Let’s have a cup of coffee.” Xie Ming had
not been there for a long time, and considering that the weekly task had been completed, agreed. Xu
Cheng said: “It is difficult to see you, and even we meet, we have no time to chat.” Because of KPI,
the salespersons even in the office area are hurrying, and even meeting with colleagues by the
drinking machine, they just smile and nod or simply ignore them. They both worked quite long time in
this company, and chatted about a lot of things a few years ago. At that time, although there was no
quantitative performance appraisal, everyone believed that they and the company were inseparable,
and everyone was trying to expand the company’s market share. For example, in order to make the
company more competitive, the Sales Department, the Marketing Department and the Product
Development Department used to discuss in the meeting to form a series of products and services to
meet the new needs of customers, thus making the company the leader in the market segment. They
talked about the year when they often discussed late and then ate instant noodles together.

4. What will happen in the future?

Huang Xuming in his office looked at the resignation submitted by Lin Mi in the morning and
had thought about a lot of things. Huang Xuming worked here when the company was founded. At the
beginning, the market base was very good, so the company did not put too much energy on the market
expansion. But as the industry became more and more mature, competitors began to slowly grab the
company’s market share, and some old customers could not stand the temptation and began to
cooperate with competitors, so the market became difficult gradually. Even so, at that time the
salespersons were still very confident and passionate. But now, everyone was seemingly busy every
day but not as passionate as before.

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 Huang Xuming used to joke and talk with the staff, and now they seemed not to have any interest.
Salespersons mechanically completed the cold calls and visits every day, the departments of sales,
marketing and product development had less communication. Although the customer visits became
more and more frequent, the result was getting worse. The case like Chen Lei had occurred several
times, and some time ago there were several salespersons calling the same customer, and the customer
complained that the call was seemingly from an insurance company. Excellent salespersons began to
leave, and the development of new customers was not satisfying. The market continued to be eroded
by competitors, the confidence of employees was declining, the relationship between people was not
as harmonious as before, and leaders often shouted to staff. Huang Xuming often felt embarrassed
between the boss and the staff. Why did such “advanced” performance appraisal system produce this
effect?
Working for a long time, his neck pained, so Huang Xuming stood by the window to stretch
himself. Looking at the bustling city, suddenly he felt that he was tiny and helpless and he didn’t
know what would happen in the future.

Questions:
1. What is the purpose of the company to introduce this new performance appraisal system?
2. What happened after the company implemented new performance appraisal system? Why?
3. Do you have any suggestions for how to implement performance appraisal system in this
company?