In 2011, despite high revenues, Vitality Health was under a high threat of competition in the global market, and the vice president of the company was afraid that the problem might grow further. The issue was related to the performance measures and management of employees. A number of competitors was growing, especially in emerging markets, but the corporate culture that was based on confidence and success made the employees of Vitality Health relaxed, and it was a risk that they would not be able to cope with potential issues in the nearest future. Thus, CEO and vice president were considering developing a new performance management evaluation team.
The problem of poor performance management at Vitality Health was related to its business model that was based on lowering costs and global expansion. A performance management system was quite outdated, and due to the growing competition in the global market, it was likely to fail in the nearest time. It showed issues, and nearly 2,500 professional employees of the company were not secured. In particular, there were problems with rating system when managers were afraid of giving low rates to their subordinates in order not to offend them. It led to low satisfaction of high-performance employees, as they had similar grades and rewards to those who showed lower performance. As the system was not efficient, a new performance recognition and evaluation were required. It was expected to help motivate the best employees as well as attract new talented performers. CEO of the company decided to introduce the system in 2009, and HR head was selected to implement it. The main difference of a new system is that the performance measures would have modified ranking with respect to other employees. It was expected that the workers would be better stimulated, while the performance management would become more accurate.
The abovementioned solution is described in the case; however, other potential approaches also exist. The first alternative is to improve performance management by the means of introducing the particular performance standards and modifying them depending on the profession of a person, their work experience, and other factors. During their work, the people would try to follow these standards and achieve the results according to them. For example, the engineers and product developers can have standards based on number of new products they develop or quantity of new products that were successfully introduced. With such standards, the employees would be motivated to work better to achieve the standards. In addition, managers would give realistic performance evaluations to the staff, as they would be based on strict performance standards. Previously, they could give employees higher grades in order not to offend them, but with this system, grades would be more fair.
The second potential solution is to make a new system based on risk evaluation and acceptance. Thus, the performance measures and goals would not be stable but vary depending on external and internal risks the company is currently facing. For instance, they may include the risk of growing competition, the risk of a failure in a specific market, or the risk of low quality of a particular product. The system might also include analysis of risks by the means of using risk assessment and key performance indicators. Due to such approach, the company can be more flexible and adapt performance measurements and performance goals of their staff depending on the market situation and competition. For example, the engineers and product developers would get different performance goals depending on market situation and competitive products that are available in the market. Thus, this alternative might also be useful for the enterprise.
Based on the analysis of all the solutions, the company can be recommended to use risk-based performance measures and performance management. Such strategy is the best alternative, as the enterprise is in unstable market situation, and competition is growing rapidly. Thus, setting stable goals and measures for the staff is not positive, as they may not represent the current risks and needs of the industry. With stable goals, it would be hard to adapt to new market demands. Thus, the goals and tasks should be based on market situation and market risks. The framework must include the constant monitoring of market situation and current market risks. The data should be provided on the global, regional, as well as specific markets of the goods. For example, the managers must study the market and find out what the competitive companies plan to introduce into the market. In this way, the managers would quickly change performance goals for the developers to manufacture something similar. If other changes in the market situation occur, the performance goals can be also adjusted for other groups of employees. For example, quality and quantity of products in their performance goals may vary depending on the market and current situation with the rivals.
Compared to the method proposed by the managers as well as constant performance standards, this solution is beneficial for Vitality Health in its current hard situation. The first alternative and the proposed plan in the case are good, but it is hard to implement them quickly considering the changing needs of the market. Controversially, if the risks and changes in the market are considered, the process of implementation may be smoother and well accepted by the personnel, as they would get new rewards with new performance goals.