Performance Management at Vitality Health Care - By Dr. Ratna Sinha, Associate Professor, ISBR Business School, Bangalore This 27 slide presentation is the destination to understand how to use the Six Thinking Hats for performance management of the organisation. It explains how to process information and solve problem with the rainbow colour hats. Each slide in his presentation includes a detailed description of a different hat colour and its application. Six hat technique explained with the Vitality Health Care Organisation, further describes, how it allows the necessary emotion and scepticism to be brought into rational decisions and opening up an opportunity for creativity within decision making. This presentation describes the nature and the contribution of each colour of the hat in different predicament circumstances.

1. By
Dr. Ratna Sinha
Associate Professor
ISBR Business School
Bangalore
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Performance Management at Vitality Health Care

2.  Vitality enterprise was founded in 1987 in Ames lowa by Hikaru “Fred”
Kikuchi. Initially it started with importing products from Japan and
marketing them. It went success within 3 months and resulting to
more than $15,000 in sales.
 In 1989 import tariffs and supply constraints forced vitality to start
their own manufacturing unit. By the summer 1991, business grown to
$3 million per year. In 1994,Vitality partnered with several leading
pharmacy.
 In 1995 company went global, targeting markets around the pacific
Rim including Taiwan, China and Japan. In 1997 Vitality acquired
Herbapure Nutraceuticals. Vitality‘s name was changed as Vitality
health Enterprises ,also in this period company went public.
 With the expansion, Kikuchi maintain his vision by matching it to the
Corporate strategy to one his favourite sayings. "Outer beauty can only
be achieved as harmony is reached”.
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3. Case background cont.…
 By 2007 company had around 5500 Employees in HQ and nearly 1500
employees in global offices.
 In mid 2008,global economic crisis brought relatively stagnation to Vitality’s
growth and Beth Williams was made the CEO of Vitality Health Enterprises.
Williams brought a disciplined operational mind-set and was known
throughout the industry for reducing global production cost by 12% during
three years at the helm of B&W Beauty.
 In the first quarter of 2009, Vitality began rolling out its new business
strategy, In addition,Williams organized a committee to review the policies
and methods for tracking the performance goals of all non-sales and non-
executive employees across the entire company .
 Over the next four months, the performance Management Evaluation Team
(PMET) Studied the evaluation and rewards system.
 The PMET discovered that the PMS presented problems for the 2,500
professionals staff.
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4. Six Hat Thinking
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Six Thinking Hats is a simple, effective parallel thinking process that
helps people be more productive, focused, and mindfully involved. A
powerful tool set, which once learned can be applied immediately!

5. 1. MANGER GIVES RATING THROUGH
PMS (A-E).
2. LATER NEW EVALUATION SYSTEM
STARTED.
3. WHEN PERFORMANCE WAS LACKING
PMET2 STARTED.
4. EVALUATION BY MANAGER WITH
RESPECT TO COMMUNICATION
CLARIFIES STAFFING NEEDS.
1(a) Who should evaluate employees performance ?
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6. Yellow Hat
1. In Manager logically we are
looking with vivid experience
whose judgment is important
2. Team leader and top managers
equally in contest for rating.
3. Function Managers, raters peer
may be there for judging
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7. Green Hat
There should be speedy, agile one
size for constant learning method
to judge employee
The evaluation system must not
measure rating tendency of the
evaluator
But the candidates ideal
performance snapshots needed.
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8. Black Hat
Employee is not alone entity must
not be kept in oblivion while rating
Manager and employees are two
sides of coin both to be included
Idiosyncratic rater effect is highly
probable biases to be prevented
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9. Red Hat
During critical exchange of setting
expectation and feedback the
emotional intelligence part of
both the reviewer and reviewees
must be in alignment.
7cs of communication to be
effectively implemented.
Completeness, Conciseness,
Consideration, Clarity,
Concreteness, Courtesy,
Correctness
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10. Blue Hat
Ultimately every leader is
important but the team leader
knows what to do with each
member as he is having vivid
experience of each individual
performance so, they should lead
the way although view of employee
and peers individual must be
incorporated.
Team leader/manager should
know what to do with each team
member rather what they think of
each individual to improve the
performance.
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11. 1(b)What should leader do when the performance is
lacking?
 There should be performance
reviewable system through
conducting interview surveys and
eradicate any homogenous rating.
Competency Icebergs takes
help of Iceberg to explain
competency or the level of
competency to make people
perform to the best of their ability
and improve their performance
invisible part of their characteristics
along with knowledge and skills to
be promoted.
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12. 2(a) Should the new performance review system at Vitality Health be
revised? What changes would you recommend to the new performance
management system ?How should the changes be implemented ?
The company had 13 different rating level
from A-E including plus and minus which
led to managerial abuses.
PMET discovered that many managers gave
almost everyone C or B Provided D or A
rating and rarely gave E.
And hence there was a homogeneous rating
system which fail to distinguish between
performers and non- performers
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New Forced Distribution System
where employees are
differentiated on basis of
performance among themselves

13. Yellow Hat
54% of the employee prefer the
new system more as it values top
performances more:
Easy to determine which category
employee falls into.
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14. Black HatFew categories put more burden on
managers.
Forced distribution system is too rigid
manager need to put employees in
specific gradient just for the shake of bell
curve.
We are trying to create a normal bell
shape curve forcefully.
This system create doubts in mind of
both managers and employee.
New employees abuse, no rated rank for
less than one year saving high ranks for
veteran manager trying to force
employees into distribution
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15. Intuitively appear to be evolving
system.
Adaptation problem as people not
used to bring rated against each
other.
It appears employees are getting
defensive not ready to do things
outside their job description.
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Red Hat

16. Green Hat
 New system must be in accordance with
MACLENNAN NEED THEORY
satisfying and rating for affiliation,
achievement and power.
CHARLES HANDY CULTURE
MODEL organization culture based on
power, role, task and person, the
personal management policy must backup
the organization culture.
 The old PMS was role and task oriented
where as the new PMS is making it person
oriented.
 Need 360 or 180 feedback-
It is a powerful self-development tool used
worldwide in organizations and other
contexts. It is simply an exercise where you
select competencies that are relevant to
your work/life/role circumstances, rate
yourself on where you see yourself, and then
ask others to rate you on the same
 Skewed rating curves would serve the
urpose better than forcefully curve.
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17. Overall the system has tried to
overhaul the process but the
element of idiosyncrasy still persist
although it generates competitive
spirit among employees for short
term.
54% employees referring it due to
affinity towards change but still
short coming are there.
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Blue Hat

18. Problem-2(b)The point and Salary System
Each position had a base –level monthly salary
calculations and performance based raised,
Each positions had a base level monthly salary that was
modified upward along a pay policy depending on the
number of “job evaluation points”.
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19. 19
Compa –Ratio Ranges
(Assumes 500 Job Evaluation Points)
Compa-ratio Lower Bound Upper Bound
80-95 $5944.0 $7058.5
95.01-110 $7059.2 $8173.0
110.01-120 $8173.7 $8916.0
The point and Salary System

20. What Vitality Did to Improve for problem-2(b)
• 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 option to upper levels of
management and directors as an incentive to successfully implement
the new PMS.
• 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. 20
Blue Hat

21. As vitalily 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 align
them is the Kaplan and Norton's’ balanced
scorecard.
The BSC framework consist of four
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 through their
KPI.
providing bonus in case of R&D workers
may not be a good idea may lead to
crowding out theory intrinsic motivation or
value for own work versus extrinsic
motivation or satisfying needs depend on
category employee falls into different
region.
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3.Should the new performance at Vitality be revised?
What changes you recommend and how to implement?

22.  Our intuition says:
 Refreshing and recommunicating 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 pay out
that does not include a confusing forced
distribution that only values individual
performance.
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Red Hat

23. Black Hat
Managers felt difficult to discuss with
employees since it affects the merit
increase.
Employee didn’t do the work which were
not part of the their evaluation.
Unwilling to spent time on implementing
process.
Using not rated employees category as a
tool to reserve higher ranking for old
employees.
Uniform rankings
Reluctant to disclose the ranking to the
employees.
Rotation of highest rankings between
employees from one year to the next.
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24. Research done by evaluation team
showed both positive and negative
comments.
Forced distribution initially helps
to get rid off 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.
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Blue Hat

25. 4.How important is relative nature of the system?
Identify Top Performers Through The Bell Curve Grading
The forced relative ranking compels managers to make decisions and differentiate
between the performances of different employees. Those who are identified as high
performers are rewarded; they feel motivated and work harder to grow in the
company.
Their growth and career plans can be developed suitably and initiatives taken to
retain them within the company. This not only helps retain the top talent but also
builds succession pipelines.
Manage Lenient And Strict Ratings Of Managers
The relative system is perhaps the only method that can be used by the
organization to manage leniency and strictness of managers’ ratings. Lenient
ratings mean a larger cluster of employees in a high-rating group (a right-skewed
bell-curve), and strict ratings mean large numbers of employees in a low-rating
group (a left-skewed bell curve).
These unbalanced ratings may demotivate high performers and retain mediocre
employees. The average manager has a tendency to rate on a lenient scale.
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26. 4.How important is relative nature of the system?
Identify Suitability Of Employees In A Job Position
An underperforming employee may be more suited for another position in
the company. The forced ranking with adequate analysis and HR
intervention can identify other positions for employees. By digging deeper
into the competencies, strengths and career plans of employees and
placing them in positions which map better to their capabilities, HR can
play a key role in employee development.
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27. Thank You!!
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