Several years ago Arrow Electronics instituted an Employee Performance Review (EPR) system. However, the process was not providing the CEO. Steve Kaufman, the results that he had hoped for when it was instituted. The original goal of the EPR system was to help identify those individuals within the company whose performance was outstanding and whose career should be accelerated. It was also designed to pinpoint those who would be better pursuing their career elsewhere. The EPR system created turmoil in the organization as it was felt that managers did not rate their employees fairly and honestly. Neither the managers, nor the employees were happy with the system. The following will critically assess the EPR system and will suggest recommendations to improve it.
The evaluations were to be filled out by branch managers regarding their employees. The valuations used a Likert scale that asked the branch managers to subjectively rate employees on a number of characteristics regarding the employee's performance. The first hint that the evaluations do not accurately represent the employee population is that the population of employees consistently received a 4.5 if out of a possible five. No one received and 1 or 2 in any of the seven performance areas. Everyone was above par and no one was below par. This alone suggests the absence of a bell curve that could be expected in any normal sample distribution.
The absence of a normal sample distribution points to skewness in either the sample population or bias in the answers to the questionnaire. If the skewness is due to population bias then that means that every employee within the organization is outstanding. It would mean that there are no average or underperformers within the organization. This is highly unlikely and it is more likely that bias in the survey answers is the culprit. This means that the branch managers did not represent an accurate picture of their employees. There are many reasons why this could occur and this is the primary question that must be asked in this analysis of the evaluation process.
In the beginning of the case, the CEO indicated that the EPR was not considered "real work" and that branch managers had more important things to do. This demonstrates a lack of commitment to the valuation process and could be interpreted as a lack of support for human resources activities. If the CEO expected an evaluation that provided a snapshot of strategic goals, then this needs to be reflected in his leadership style and outward attitude towards the EPR process. Management plays an important role in setting the attitudes towards the company and the company's strategic goals. A lack of commitment and support from upper management is another problem that needs to be resolved in this case analysis.
Another significant problem among the sales force is a lack of support for newly hired college graduates. The company offers them an excellent starting salary and advancement program. However, the other members of the sales force uses discriminatory language towards them. This makes the IROC "idiot right out of college" feel unwelcomed. They do not get the support of their fellow coworkers and are made to feel like an outcast. This increases the likelihood that they will move jobs soon, regardless of the salary, to a place where they feel more welcomed (Burton, Wu, & Prybutok, 2010). Currently, the salary structure promotes this type of discrimination, as those who have just graduated from college receive a higher pay than those who have offered dedicated years of service and experience to the company.
The original purpose of the EPR was to give the CEO and branch managers a snapshot of their strengths and weaknesses in terms of employee performance. It was to help them identify areas that need improvement and a way to help bring the performance of the organization in alignment with expectations. The purpose of the EPR was to provide employees constructive feedback as to what they are doing right, and areas that need improvement. By providing constructive feedback to individual employees, it was felt that the performance of the entire organization would be raised. The purpose of the EPR was in alignment with strategic goals of the organization, but in the execution, it failed to meet the strategic goals. This critical analysis will provide recommendations to help bring the EPR into alignment with the strategic goals of the organization.
Kaufman stated that employees are the most valuable asset that the company has. Arrow Electronics has no manufacturing facility, no proprietary products or patents, and no "cutting edge" research labs. The only thing they have is a large sales force to promote their products. The salesforce is their most valued asset. Unfortunately, many of the relationships between the sales force and customers are personal relationships and if that relationship weakens, so do sales (Burton, Wu, & Prybutok, 2010). Sales and marketing personnel that cannot maintain excellent customer relationships have a significant impact on revenues. Unfortunately, when sales people leave, so does their loyal following of customers. The industry is notorious for high turnover over rates, which can be as high as 25% a year. Longevity with a single company is not characteristic of the industry. The industry is plagued by a low degree of employee loyalty. Loyalty is tied to monetary compensation, rather than intrinsic value (Burton, Wu, & Prybutok, 2010). Because the business is cyclical, when sales drop, compensation for the sales force drops and they will leave for a competitor whose compensation is higher, taking their loyal customers with them.
Validity of the Evaluation
The absence of a normal bell curve in the original EPR survey immediately raises questions of validity. As discussed earlier, this either points to bias within the population, or it points to bias in the sample results. It has already been determined that it is unlikely that the company has a natural population of employees that are all outstanding performers. Therefore, the possibility of sample population bias can be eliminated based on the low probability that a company has a population of all outstanding employees. Therefore, in order to resolve the issue of bias in the EPR, one must look elsewhere for the source of this bias.
It is obvious that the source of the bias must stem from the branch managers that filled out the survey. There many reasons why this might occur. Branch managers might have felt pressured to represent their branch in a positive manner so that they did not look bad to upper management. They might have not wanted to destroy rapport with their employees by giving them a bad evaluation. A third reason why branch managers might not have represented employee performance accurately is a lack of criteria upon which to base their answers. The EPR was subjective and branch managers might not have a proper set of benchmarks on which to base their evaluation.
It is also possible that the branch managers were simply too busy and that they just checked something quickly without giving it any thought. This would mean that the EPR had absolutely no meaning whatsoever in terms of employee evaluation. At the beginning of the case, the CEO indicated that he did not feel the evaluation was a good use of the branch managers' time and that they needed to get back to "real work." This indicates a lack of commitment to the EPR and to human resources in general. This lack of commitment to the employee valuation process may have permeated throughout all levels of the organization. It may be that the managers did not see the valuation as a good use of their time and they simply checked all good marks just to get it done and get back to their "real work." However, the probability that every single branch manager felt this way and treated the survey in such way is as unlikely as a possibility that every single employee is above average and deserves a raise.
Likert scale evaluations inherently bring up concerns over reliability. Although the results can easily be translated into a numerical value, one has to remember that it is still a subjective evaluation process. A Likert scale has one key caveat from an empirical standpoint. Quantitative analysis is best suited for problems that can be reduced to a numerical data point. This allows the researcher to perform descriptive statistical analysis that can easily be translated into a conclusion. This means that the researcher can obtain a simple answer to the questions. However, the ability to provide a quick and easy answer can be misleading when the questions are asked using a Likert scale.
In the case of Arrow Electronics, the question being asked was if the employee's performance was above average, average, or below average. The answer to this question would lead to different actions by the branch managers and upper management. The purpose of the EPR was to provide an easy way, based on obtaining…