Organizational behavior performance appraisal paper


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Organizational behavior performance appraisal paper

  1. 1. Megan BA 302 - Organizational Behavior Instructor: Michael Buck Brandy Ramer( Tony Plasker( Farzane Kord( Megan Dickson(
  3. 3. INTRODUCTION "Without continuous growth and progress, such words as improvement, achievement and success have not meaning." ~Benjamin Franklin Benjamin Franklin uttered these words when the industrial revolution was still in its infancy. Psychology and Organizational Behavior were not fields of study and it would be years before industry would comprehend the notion of maximizing performance through regular feedback. Today his words and wisdom can be applied to many fields, including annual performance appraisals. What exactly are performance appraisals? According to Organizational Behavior, authored by Talya Bauer and Berrin Erdogan, a performance appraisal is a process of companies providing feedback to employees (Bauer 2013). Conducting performance appraisals helps employers determine promotions, raises, and even helps assess job performance. Interestingly enough, a person’s reputation within the company is often reflected in their performance appraisal (Hogan and Shelton 1998). It is of extreme importance that the performance appraisals are accurate, unbiased and well-rounded. Therefore any performance evaluation must be rated by an individual who has expert knowledge of the skills being rated (Becker and Miller 2002). 2
  4. 4. Our group conducted a case study at Lanphere Enterprises, Inc. in the Beaverton KIA dealership. We interviewed three employees and asked them a series of questions regarding the performance appraisal process at their company to determine how they are conducted, and how effective they are. First our case study will give a quick overview of Lanphere Enterprises. We will then discuss the findings we discovered through the interviews we conducted. Last, we will give our recommendations based on the findings from our research and interviews. We will discuss what we feel the company should stop, start and keep doing. COMPANY INFORMATION On the Welcome Page of the Beaverton Kia website, they have the following quote “We are on a mission to change the way people are treated whether you're buying a car or not. It's the people that make it a Special [sic] place to buy a car and a Great [sic] place to work” ( Our team conducted three interviews at the Beaverton KIA car dealership, which is owned by Lanphere Enterprises, Inc. In 1960, Bob Lanphere opened a motorcycle shop called Beaverton Honda in Beaverton, Oregon. His business would continue to expand and today is known as Lanphere Enterprises Inc. Lanphere Enterprises is a retailer of cars, motorcycles, boats and maintenance services for their products. Their number one priority is customer service, as the core of their business is based on positive buying experiences and word-of-mouth promotions. The company employs over 600 people in the Northwest and operates nine dealerships in Oregon and Washington. Our team interviewed three employees from the Beaverton KIA Dealership. 3
  5. 5. First, we would like to thank the three employees who assisted us with our case study. They were open, honest, and agreeable. They were genuinely interested in their performance appraisals process, very accommodating and generous with their time. The first individual we interviewed was the General Manager of the location. He has been employed in the auto industry for more than 15 years and has worked as the General Manager for a few years. The second individual we interviewed was an automobile salesperson for Beaverton KIA. He has worked in the auto industry for more than 12 years, though only a few of them have been with KIA. The last person we interviewed was the Director of Human Resources for Lanphere Enterprises. She has worked 14 years at Lanphere Enterprises and has worked in H R for 35 years. A full copy of all the interview questions is located in the Appendix. FINDINGS Some of our findings were consistent across all three of our interviews while others were heavily influenced by the perspective of the person being interviewed. As such, some questions were asked in all three interviews while others were only relevant to one or two of the people being interviewed. In general the interviewees were candid with their answers and paused on occasions to give thoughtful feedback. PERFORMANCE APPRAISAL PROCESS At the Beaverton Kia dealership they have a monthly performance appraisal. At the GM level the appraisal process consists of a thick booklet produced every month which numerically measures the performance of the dealership. We were not allowed to see the booklet, however as 4
  6. 6. the GM thumbed through it, we noticed many numbers, graphs and color coded charts. The GM indicated that every aspect of the dealership was measured and compared to other Kia dealerships as well as other Lanphere Enterprises dealerships. As part of the process, the General Manager reviewed these numbers with each of his Department Managers, who in turn reviewed individual numbers with each employee. An interview with the salesperson confirmed this process within the Beaverton Kia dealership. Our interview with the HR Director revealed that the Beaverton Kia dealership is the only one within the family that holds monthly reviews below the General Manager level. However, all the Lanphere Dealership GM’s are starting to meet and share best practices. The monthly performance appraisal by numbers is one of the practices being implemented in other dealerships. There is no performance appraisal process for positions that are not measured by numbers, such as lot attendants, receptionists, book keeping and other similar positions. At the parent corporation, there is no annual appraisal process. Annual goals are set and there are regular progress checks towards those goals. THE GOOD All three interviewees understood the process and how their numbers are measured. Furthermore, all three expressed that they liked the absolutely objective nature of the process. The GM indicated he liked the notion that his dealership was benchmarked against other Kia dealerships, noting that Kia buyers and the Kia brand were fairly constant across the country. The salesperson liked the notion that there were no disputes about performance. He was expected to sell at least nine cars per month and good months meant good reviews, bad months meant something else. The HR director particularly liked the objective nature of the 5
  7. 7. measurements because it meant that politics and camaraderie outside the workplace did not enter into personnel decisions. Co-worker input is not part of the appraisal process and all three interviewees agreed they would not want it included in their appraisals. The GM thought it would be interesting to get that feedback, but he was skeptical he would get accurate feedback from within his dealership because he surmised people might feel like negative feedback would incur retaliation or some form of retribution. He did express that he had an open door policy and he would listen to ideas. This was not a guarantee he would implement those ideas, but he would listen to them. The salesperson did not see the need for input from co-workers because he “gets along with everybody.” This implied that there is some form of internal politics in play. He did mention that there were disputes on who made a sale and even though well-defined standards and practices exist, there were still many instances where the actual facts were in dispute around how much each individual had done on a particular deal. The HR Director confirmed the automobile business was highly politicized and therefore inviting co-worker feedback was a recipe for disaster. The GM and the salesperson, who received appraisals, thought they were useful because they were accompanied by suggestions for improvement. The GM also pointed out that he often times found ways to publicly recognize good work. This included everything from a physical pat on the back to calling the good work out in staff meeting. He also said any discipline or coaching happened in private. HR affirmed that this was the recommended approach and implied that the Kia GM should be a model for performance appraisals. 6
  8. 8. All three interviewees felt that the commission based compensation model was good because it kept the employees engaged and did not limit potential earnings. The GM was adamantly opposed to any other form of compensation. The salesperson was not as emphatic but he also liked the commission model. This could have been either the veracity of his opinion or how he chose to convey it. The HR person believed the commission model motivated employees to stay focused and committed. THE BAD The GM did take exception to comparisons against other Lanphere Enterprises dealerships. He said Kia has made a pretty good name for itself over the last few years. Honda and Toyota have been making a name for themselves over the last few decades so he felt those comparisons were interesting, but not necessarily fair. The GM and the HR Director both pointed out that there was no formal process for evaluating employees on anything other than numbers. The sales person expressed support for the idea, but suggested that the key to being successful was staying positive rather than something that would be identified in a performance appraisal. Positivity was a topic that was also mentioned by the GM and the HR director as a key factor for success. While this seems to be a universally accepted requirement for success, none of the interviewees suggested any program, process or defined effort to develop or at least screen for this trait. The HR director pointed out that the existing appraisal process only applied to Beaverton Kia and there was no process for the parent company employees or certain jobs within the dealerships. 7
  9. 9. Across most of our interviews, there was an overriding theme that was hinted at and referenced around the presence of a highly politicized work environment. The HR director explicitly mentioned “The Good Ole’ Boy” mentality. Allusions to cronyism and preferential treatment were made. The HR director also referenced the car business being a predominately male industry with a lot of Type-A personalities. The GM pointed out that the HR role is limited to problem solving and the HR director characterized a large portion of her job as law suit avoidance. She further admitted there had been several lawsuits in the past and implied things should have been handled differently. THE INTERESTING IDEAS During our interviews, several interesting ideas came up in passing, either as the result of a direct question or as a tangential aside to an answer. One of the more interesting ideas was the notion that even though the corporate headquarters for Lanphere Enterprises was physically right next door to the Kia dealership, they rarely saw anyone from “corporate”. When they did see somebody, it was because they needed something. The GM said he would welcome the leadership over to be a visible presence and give encouragement to the staff. If this is not 8
  10. 10. happening at the dealership right next door, we can assume it is not happening at the other dealerships either. A more formal annual review process was one of the things the HR Director was looking to implement across the organization which looked at more than just numbers and started to introduce the idea of employee development. Somewhat related to this topic, the HR director was also working on implementation of more formal management training. This training would include some basic “do’s and don’ts” around the hiring and management process. The GM also touched on the idea of a more people driven performance appraisal at the end of the year that would encompass more than simply reporting back numbers. It was unclear if this would somehow be tied to pay or some manner of bonus or if this was simply an idea for long term employee development. The HR director had an interesting idea around instituting a profit sharing plan and is even working on a proposal. She did no go into details about how such a plan would work although she did say that everybody would be eligible. Her belief was that such a plan would help motivate the non-commission people to contribute to the overall success of the dealerships. The GM and Salesperson tied into this theme of overall recognition as well. In general the system is built to reward sales, but it completely ignores other less tangible measures of success. Furthermore, not everybody is eligible for those commission based rewards even though they might well have a material impact on the success of the business. RECOMMENDATIONS As we researched the appraisal process and compared that research with what was in place, we found that the process in place had good elements, bad elements and missing elements. 9
  11. 11. Our recommendations for Beaverton Kia and the parent company, Lanphere Enterprises are broken out into three sections. The first section defines areas where the process is deficient or counterproductive. These parts of the process should be discontinued. The second section of our recommendations looks at the pieces of the process that are working well and should be carried forward. The final section our recommendations looks at pieces that should be added to improve the overall quality of the appraisal process. STOP DOING Based on our interviews we recommend that Lanphere Enterprises no longer compare non Kia dealerships to Beaverton Kia. The notion of comparing Infiniti, Honda or Toyota brand awareness to Kia is not a reasonable comparison. Honda and Toyota have had decades to work on their brand awareness. Infiniti caters to a completely different segment of buyers. Kia has worked on their branding the last few years whereas other car brands have had decades. By comparing Kia with Infiniti/Toyota/Honda, they ignore the investment made over time in licensing, advertising, direct mail campaigns and other brand building activities that Infiniti/Toyota/Honda might not need. Comparisons to non-Kia brands, does not provide an accurate picture of how the dealership is performing. Furthermore, it may well also inaccurately portray the performance of those other dealerships, masking potential successes or failures. KEEP DOING Our interviews showed that the current process has some significant advantages. For instance, comparing Beaverton Kia to other Kia dealerships gives Lanphere Enterprises objective and measureable goals and relevant feedback. This allows Beaverton Kia and Lanphere Enterprises to scale their goals to reflect macroeconomic events as well as potentially rapidly 10
  12. 12. changing segment buyer preferences. Furthermore, it allows the parent company to accurately measure the impact of events such as sales promotions, positive media coverage or marketing campaigns. From a longer term strategic perspective, leveraging this data will help them make future decisions around topics like dealership expansion, location or other efforts. One of the more significant findings was the universal acceptance and enthusiasm for the objective nature of the measurement criteria. All participants knew precisely how they would be measured. This is helpful in two ways. First it allows the dealership to set goals. Progress and achievement for those goals is unambiguous. Having an absolutely objective measurement helps the dealership and parent company gird itself against potential lawsuits. Furthermore is mitigates internal politics and the effects of the “Good Ol’ Boy” network that is present in auto dealerships. Our recommendation is to retain this aspect of the process. Another positive aspect of their existing process is sharing select relevant data down through the organization. Sharing this data allows managers and individuals to formulate an accurate understanding of the internal operations of the dealership. Awareness of measurement criteria and current status toward those measurements may lead to positive behaviors and new ideas for how to improve the overall business environment. The commission based pay structure was also cited as a positive aspect of the process. Even though this feedback is not given in a formal manner as part of the monthly sharing of the numbers, the financial incentive to sell more cars is a very strong message. This is motivation for the sales people to stay engaged and contribute to their own personal bottom line which also has a material impact on the overall bottom line of the entire dealership. This commission structure seems to lead to higher employee engagement and satisfaction. Those factors are also 11
  13. 13. associated with higher customer satisfaction, customer loyalty and business profitability as well as other desirable outcomes for businesses. (Harter, Schmidt, and Hayes) All three interviewees referenced the potential for conflict and an occasional need for corrective action. We recommend that Beaverton Kia continue their practice of praising in public and disciplining in private. Furthermore, we recommend that if this is not a common practice across all the Lanphere dealerships, that it be immediately implemented as a shared methodology. Lanphere should also leverage the good interpersonal relationships people have to deliver effective performance messages when warranted. (Pichler) Based on our research, we thought that peer reviews would be a strong recommendation. We were going to recommend implementing a crowd source way of reviewing people. Coworkers would provide anonymous feedback on an individual providing context to the numeric measurements in use. The co-workers selected for feedback would be peers, subordinates, superiors or other employees a person had worked with through the course of the year. The 360 degree feedback process seems to be the future trend in employee appraisals (Silverman 2012). Based off the interviews, we concluded that this industry would not benefit from such a process. The automobile dealership industry tends to more political. Concerns around retaliation, retribution, and accuracy would plague this approach. Therefore, Lanphere should keep their top down approach of performance appraisals. START DOING All Lanphere Enterprises associated dealerships should adopt Beaverton Kia’s policy of sharing monthly sales reports with people under the General Manager level. This should include lot attends, receptionists, bookkeepers, and all other employees of Lanphere Enterprises. This 12
  14. 14. step will make all employees aware of the goals and encourage all employees to help in tangible and intangible ways to reach those goals. This type of feedback has a direct correlation to employee engagement. (Bulent, Seigyoung, Michelle, and Abeer ) Lanphere Enterprises should add ways to encourage and measure employee growth into their appraisal system, concentrating on employee development areas that have an indirect benefit for their job. Areas such as computer, interpersonal, or management skills would improve their ability to perform their job at the highest levels. This process should be instituted at the parent corporation and across all dealerships. Progress toward these goals could be incentivized and rewarded via a profit sharing program. It is commonly understood that performance appraisals are tied to raises and pay. We recommend that Lanphere take on a more open policy when it comes to pay schedules. We strongly recommend this open pay policy for their office team and other non-commission employees. We suggest creating a pay for performance matrix. For example, if Jane meets the requirements for accounts receivables but then also collects an additional $10,000 she would receive her base pay plus $1,000 for that extra work. This more open pay policy will encourage office people to be more engaged. Our interviews revealed that commission or bonus based pay structures were popular. Implementing a solution like this must be based on objective and quantifiable measurements. An open pay policy builds trust within the company because workers are assured compensation is based on performance rather than the politics such as that were alluded to in our interviews. (Silverman 2013) These new performance appraisal recommendations should be applied to everyone within Lanphere Enterprises. Ideally, these new measurement mechanisms will be based on numbers or 13
  15. 15. other objective criteria. In the interviews we concluded that objectivity can be problematic in this industry. Therefore, all recommended performance appraisal aspects should contain control mechanisms so objectivity is preserved. Performance appraisals will be different for each role. Each job will be evaluated and require a clear job description. For instance, a bookkeeping position might be evaluated on accounts receivables measurements such as how many accounts are paid on time, or how many past due accounts have been contacted. This number based evaluation system will be the new way to objectively quantify each employee’s performance. All job duties will be dissected using goal based numbers and employees will be evaluated on output and their performance toward goals (Light 2013). Using a system of tiers will further incentivize employees. We recommend quarterly appraisals in conjunction with audits. We believe frequent feedback would be more effective than yearly performance appraisals. This feedback should also take into account previous performance appraisals. Therefore, December numbers are compared to November numbers as well as numbers from the previous December to adjust for seasonal impacts on the business (Silverman 2011). 14
  16. 16. CONCLUSION We know employers want to keep employees motivated. But, how do employers accomplish that? It turns out that what generally motivates employees is personal recognition and telling them they have done a good job (Nelson 2000). Through our case study and interviews at Lanphere Enterprises we were able to gather enough data to reach strong conclusions and make solid recommendations so the company can motivate their employees. We concluded through our case study, that some areas of their existing process are motivational, but not all employees are receiving motivation. Some employees are not being evaluated at all. Other employees are just being evaluated by numbers. Our case study also shows that the optimal performance appraisal process differs from organization to organization. What works for one organization or industry, may not work for another. We would like to thank Lanphere Enterprises, especially the Beaverton KIA location for participating in our case study. We appreciate their honestly, openness and eagerness to participate in our case study. Even though Benjamin Franklin was not talking about Beaverton Kia, or even the auto industry when he said, "Without continuous growth and progress, such words as improvement, achievement and success have not meaning," his words are clearly still applicable. 15
  17. 17. REFRENCE LIST Bauer, Talya, and Berrin Erdogan. Organizational Behavior. 1st ed. Vol. 1. [Irvington, NY]: Flat World Knowledge, 2009. Print. Bulent, Menguc, Auh Seigyoung, Fisher Michelle, and Haddad Abeer. "To Be Engaged or not to Be Engaged: The Antecedents and Consequences of Service Employee Engagement." Journal of Business Research. 66.11 (2013): Web. 25 Nov. 2013. Geraldine A. Becker and Charles E. Miller. Examining Contrast Effects in Performance Appraisals: Using Appropriate Controls and Assessing Accuracy. The Journal of Psychology. 136.6(Nov. 2002) p667. Word Count: 6434. 25 November 2013 Web. Harter, J.K., F.L. Schmidt, and T.L. Hayes. "Business-Unit-Level Relationship Between Employee Satisfaction, Employee Engagement and Business Outcomes: A MetaAnalysis." Journal of Applied Psychology. 87 (2002): Web. 25 Nov. 2013. Hogan, Robert and Shelton, Dana Human. A Socioanalytic Perspective on Job Performance. 11.2/3 (1998): 129. Psychology and Behavioral Sciences Collection. Web. 27 Nov. 2013 Light, Joe. "Careers: Performance Reviews by the Numbers." Wall Street Journal Jun 29 2010. ProQuest. Web. 25 Nov. 2013 Nelson, Bob. “Are Performance Appraisals Obsolete?” Compensation and Benefits Review Web 27 Nov 2013. 16
  18. 18. Pichler, Shaun. "The Social Context of Performance Appraisal and Appraisal Reactions: a Meta-Analysis." Human Resource Management 51.5 (2012): 70932. Print. Silverman, Rachel E., and Leslie Kwoh. "Careers: Performance Reviews, Facebook Style --Employers Try to Flatten Management and Encourage Teamwork with Worker Evaluations by Peers." Wall Street Journal Aug 01 2012. ProQuest. Web. 25 Nov. 2013. Silverman, Rachel E. "Careers: Psst...this is what Your Co-Worker is Paid --- Welcome to the 'Open' Company, Where Every Detail about Salary, Financials and Products is Open for Viewing by all." Wall Street Journal Jan 30 2013. ProQuest. Web. 25 Nov. 2013. Silverman, Rachel E. "Yearly Reviews? Try Weekly; Accustomed to Updates, New Generation of Workers Craves Regular Feedback." Wall Street Journal (Online) Sep 06 2011. ProQuest. Web. 25 Nov. 2013. 17
  19. 19. APPENDIX LIST OF QUESTIONS 1. Were you aware of the guidelines that your manager was using to evaluate your job performance beforehand? 2. Do you feel the appraisal system is fair and unbiased? 3. Do you feel the performance evaluation you received adequately represented your performance in the past year? 3. Did your company ask you to complete a self appraisal before the meeting? 4. Any Alternative Methods your company may use to assess your performance? 5. Do you agree with the areas that your performance was based on? 6. What do you think about having co-workers being part of the appraisal process? They being able to give feedback on your performance? 7. What are your thoughts on if pay scales were universal and well known and the only way to increase pay was to be promoted? 8. What would be your thoughts on with your appraisal there was data about how your job performance influences the bottom line of the company? Would you feel empowered? 9. Is communication with your boss as open in your experience as it is during appraisal time? 10. Do you take constructive suggestions well? 11. Do you find appraisals to be constructive? 12. What would make you more engaged in your work? 13. If you had control of your goals in your work environment what kind of goals would you set? 14. Do you think appraisals enable you for career advancement? 15. Do you feel awkward talking to your boss about performance? FIRST PAGE OF ARTICLES 18