The Problems #1 : The Rating System

• The Company has 13 different rating levels (from A to E

including plus and minuses) which leads to way for managerial
abuses.
• PMET discovered that many managers, gave almost everyone
C or a B, provided D or A ratings, and rarely give Es
 The Problems #1 : The Rating System
• This resulted to a homogenous ratings that failed to sharply
distinguish performers from non performers
What Vitality Did to Improve for
Problem #1
• Vitality launched a new rating system where employees were now
rated with respect to one another by differentiating among
employees on the basis of performance.

• There is fifth category, Not Rated, for employees who were too new
to the company or their position to receive an accurate rating
The Problems #2 : The Point and Salary System

Each position had a base-level monthly salary calculations and

performance based raises. Each position had a base-level
monthly salary that was modified upward along a pay policy
depending on the number of “job evaluation points”
The Problems #2 : The Point and Salary System

Individual salaries were further modified by a comparative

ratio or ‘compa-ratio” based on individual performance in the
company
What Vitality Did to Improve for
Problem #2
• Compensation was adjusted by the new
program. The new plan incorporated a system
of performance-related short and long-term
equity bonuses
• This also will allow for limited stock options to
upper levels of management and directors as
an incentive to successfully implement the
new PMS
 Additional System Vitality Did to
Improve
• All performance reviews were to be
conducted at the start of the calendar year
and delivered to the employees in conjunction
with the annual goal-setting process in
January
• The timetable will put the entire company in
the same review cycle for collaborative efforts
and to limit the effect of external factors on
the relative rankings
The Result
• PMET2 was established to review the new PMS
implementation and compare performance ranking data for
review
 The Result
• Responses to the employee surveys indicate that only
over half preferred the new system (54%), nearly a
third preferred the old system (31%) and the remainder
indifferent between two.
• Managers felt more difficult to discuss performance
with their team member because the yearly review
process was tied s closely with merit increases
• Some empoyees and the managers themselves felt that
they were less likely to perform duties outside their job
description because those responsibility weren’t part
of their review.
 Questions
1. Diagnose the CEO perception that putting blame on
Performance Management

The implementation of the new rating systems are not

changing many old practices. It only reduced the number of
criteria and grading. In reality, the distribution of the Top
Performer and achiever are almost similar.
Even worst the existence of Not Rated criteria for new
employee will drive low enthusiasm and motivation from
new employee.
This will also impact to the turnover rate amongst the new
talents
All investment made for trainings, development new
employees are gone along with new appointed employees.
Our Analysis & Recommendation
As Vitality looks at revising their newer corporate performance
management system, in conjunction with their corporate vision, they
should ensure that the CPM is aligned. The common tools used to
aligned them is the Kaplan & Norton’s Balanced Scorecard

The BSC framework consist of 4 elements; Financial, Customer, Internal

Process and Learning Development. By cascading these perspective to
the performance review, Managers and Employee will always feel that
what they reviewing and conduct is part of their job responsibility and
measured trough their KPI
 Questions
2. If it were justified, develop your own recommendation to
reinvent the performance management system at Vitality
Health Enterprise

Refreshing and re-communicating the strategy through management

and employee training, the entire organization will be able to
understand the vision that CEO is seeking for continued growth
Cascading and managing the strategy through the balanced
scorecard to ‘connect the dots’ between the various components of
strategic planning and management.
provide a new system for performance payout that does not include a
confusing forced distribution that only values individual performance
provide a new system for performance payout that does not include a
confusing forced distribution that only values individual performance
Our Analysis & Recommendation
It also should be noted that Beth Williams and PMET should be
aware of the correct balance of job motivations of R&D staff, as
opposed to sales and marketing staff. In the case of R&D and
scientists, where work can be extremely complex or creative,
bonuses and other forms of variable pay for performance can
largely undermine employees’ work ethic.”
Intrinsic motivation or value for it’s own sake versus extrinsic
motivation or satisfying needs indirectly through monetary
compensation, depends largely on the category that employees
fall into.
Leadership is also something that Vitality need to develop
amongst their Managers
On going recognition program, coaching, mentoring can help the
annual appraisal become more meaningful and monitored