Performance Management at Vitality Health Enterprises,

Inc.

Submitted By:N V Jagadeesh KumarNisha AgrawalSusrita Maharana

Vitality Health Enterprises1987- Company was founded in Ames

1989- Established its own manufacturing facility in Ames

1991- Business had grown to $3million per year

1994- Signed a distribution agreement with leading pharmacy retailers.

1995- Launched the company into global markets

1997- Acquired Herba Pure Nutraceulticals and changed their name to Vitality Health Enterprises

Late 1990s- Floated IPO

2007- Company had grown to nearly 7000 employees

2008- Global crisis bought relative stagnation to company’s growth

Hired Beth Williams as the new CEO

Vitality Health Enterprises

Beth Williams

Global VP of skincare products at Barstow & Wyden

Disciplined operational mindset

Popular for reducing global production costs by 12% during her 3 years at B & W Beauty

No-nonsense approach and willingness to handle difficult issues.

Hired as a new CEO of Vitality Health Enterprises

Working off the Fat

Williams organized a committee to track the performance of all non-sales and non- executive employees.

PMET studied evaluations and rewards system using internal & external benchmarking, focus groups and employee interviews.

Problems of PMS: 13 different rating levels(A+ to E-)

Homogeneous ratings

Top performers felt slighted and undervalued financially.

Job evaluation points- pay policy associated with the position

Technical Knowledge

Problem solving-skills

Level of accountability

Pay policy line= Base salary + ( Job evaluation points* Increase per point)

Working off the Fat (conti...)

Comparative Ratio Based on individual performance in the company

Increase with rise in merit and falls whenever salary-line formula is moved upward

Comparative ratio= Employee’s current salary Current market rate

Benchmarked compensation to keep pay policy line at about 75th percentile.

Low employee turnover

Stability of a flat salary

No provision for bonus or alternative forms of compensation

Seniority based increment

Difficult to differentiate top performers and low performers.

Revitalizing the PMS: June 2009

Forced distribution model of performance rankings- shift from absolute to relative ranking system.

Not rated for too new employees or position difficult to rate

Ranking Category

Target Constraints

Top Achiever(T) 10% Max of 14%Achiever(A) 75% Min of 70%

Low Achiever(L) 12% Min of 7%Unacceptable(U) 3% No minimum

Not Rated --------- ---------

Evaluation team researched the core competencies and key duties of different jobs.

Managers need to develop specific goals with their employees.

Performance reviews were to be conducted at the beginning of the year.

Incorporation of a system of performance-related short and long- term cash and equity bonuses.

Limited stock options for upper level of management and directors.

Revitalizing the PMS: June 2009 (conti...)

Turning back the clock on performance: December 2011

Williams appointed Hoffman as a VP of HR To head PMET2

PMET2 compared performance rankings data for early 2009 and early 2011 and found a shift in distribution of rankings.

Surveyed to know the response of employees:

54%- preferred new system

31%- preferred old system

15%- indifferent

Managers response to new system

Managers felt difficult to discuss with employees since it affects the merit increase.

Employees didn’t do the work which where not part of their evaluation.

Unwilling to spend time on implementing process.

Managers response to new system (Conti..)

Rigid forced distribution system

Using Not rated employees category as a tool to reserve higher rankings for old employees

Uniform rankings

Reluctant to disclose the rankings to the employees

Rotation of highest rankings between employees from one year to the next

The future of performance management at Vitality Health Research done by Evaluation team

showed both positive and negative comments

Forced distribution initially helps to get rid of poor performers but later it removes good performers as well

Be a star if my team falls flat or fall flat if my team is a star

Hoffman need to present this in the Board meeting

Thank you