Human Resources in Organisations - Red Square Industries - Case Study Example

Running Head: HUMAN RESOURCES IN ORGANISATIONS Human Resources in Organisations Student Name Institution Date Introduction Forced ranking, as a performance intervention, is an evaluation or assessment method of forced distribution where the ratings of the workers are provided by the managers. The managers are expected to distribute the ratings of the employees being evaluated into a performance distribution ranking that has been pre-specified, as Cooper (1998) claims. This is a tool for the management of workforce which has its basis on the idea that the corporation can only thrive and succeed when it has clearly identified the best as well as the worst performers in it. The best performers are always natured by the corporation while the worst performers are always rehabilitated or discarded depending on their ability to change to the required performance level (Meisler, 2008). The two practices of forced ranking include the forced distribution where employees are aligned according to the performance distribution percentages that have been pre-assigned, and are based on comparisons of employees to the set standards. An instance is when the employees are deemed as exceeding, meeting, or not meeting expectations. Peer ranking ranks the performance of the employees from best performance to worst performance in comparison with the performance of other employees, hence is person-to-person based comparison. Of recent, various organizations have started the tough approach of comparing associates against the other associates. This approach, however, is meant to ensure that the managers make the process of performance evaluation show exactly the performance of every team member in comparison to others. The ultimate goal of this is to ensure employees are very productive and perform at the set levels. This is to ensure that the quality of service expected by the organization, the revenue needed by the organization, and the growth goals the organization has are all attainable. This system of performance appraisal actually exposes all the laggards and poor performers openly. In as much as the forced ranking is difficult, it is more valued compared to other comparisons. This is in consideration that other comparisons used to arrive at such employee performance contributions are mostly counterproductive to the organization. This comes as a result of top staffers failing to be commensurately rewarded hence might not be retained by the organization. Conversely, the employees who have been ranked among the bottom performers are not known, as such therefore, are not yet improved, trained, or terminated (Keefe, 2003). In view of the qualities of the forced ranking performance appraisal system, this work aims at explicitly analyzing the case study of the Red Square Industries. The work identifies the problems and their causes, checks on the validity of the system and conduct proper evaluation. This is to furnish the CEO with the necessary information concerning the effectiveness of the performance appraisal system and providing the CEO with necessary recommendations. The case of the Red Square Industries As a performance appraisal system, the forced rank performance appraisal system has been adopted by the Red Square Industries to check and improve the performance of its employees. Here, there is the application of the five- level performance appraisal system in the forced ranking distribution. The superior performers within the industry are given a rating of 1(top 10%), good performers are given a rating of 2 (the next 25%) acceptable performers are given a rating of 3 (the next 45%). The marginal performers are given a rating of 4 (the next 15%) and the unsatisfactory performers are rated 5 (bottom 5%). The company also offers good rewards for the best performers where the employees rated 1 and 2 receive pay increases and bonuses, the ones rated 3 receive pay increases and the ones ranked 4 and 5 only receive increases that are legally required, and which are also applicable to other ranks. However, the employees who are ranked 5 have been given a duration of three to six months to better their performance or be terminated. Impacts The Red Square Industries has received great benefits from the performance appraisal system of forced ranking distribution, considering the advantages it gives to the companies that use it. The benefits included are: Forced ranking is as well beneficial for the Red Square Industries since it correlates with the shareholders’ overall returns. Recent research carried out on companies shows that the companies having performance-management processes which are strong have a strong correlation with the total returns of shareholders. This is within three and five years. The companies that employ the use of individual criteria for the performance assessment of their employees and their managers perform greatly. It is also obvious that forced ranking provides consequences that are well-defined. This is because the employees who are top performers always receive rewards that are substantially bigger compared to the ones of the average performance. For instance getting base pay, being provided with options, and getting bonuses. The performers who are at the bottom of the measuring scale are only given coaching with performance improvement notice. The employees of Red Square Industries therefore are subjected to rewards, coaching, or dismissal depending on their ability to meet the required standards. For instance bonuses are given to ranks 1 and 2 while coaching is done to rank 5. Hence such employees are well-aware of the consequences of their performance (Levinson, 2003). According to Jenkins (2001), forced ranking as well enables the employees to realize their positions within the organization since it provides feedback for the employees. Employees have often complained about the lack of feedback from their organizations about their performance. As such forced ranking gives a message that is very clear on how individuals fall or stand. This is helpful for the Red Square Industries since the employees easily realize their standing in the company. For managers, forced ranking is an effective management tool since it emphasizes on the honesty of managers to their employees. Without forced ranking in the Red Square Industries, the managers would be tempted to assume kindness and avoid confronting the performance problems existing in the organization. Since the managers would hardly admit that they have made a gross mistake in hiring particular employees, forced ranking enables such facts to be clear, as indicated in Grote (2003). Forced ranking has great benefits for the industry’s management since it assists the managers with the budgeting issues. This is because the managers have the knowledge of the rank positions of each employee within the organization. The information is vital in calculating the bonuses, hiring, coaching, and other expenses, as it makes them to be easily estimated hence budgeted for effectively (Boyle, 2001). As suggested by Welch (2005), forced ranking is also appropriate for rewarding the employees who have a passion for their work and who consider recognition as a virtue compared to their peers. In the case of Red Square Industries, the top performers are an example of the employees who have great passion for their work, considering that other employees often leave some tasks for them. Other benefits enjoyed include the fact that Forced ranking is really helpful to the company since it helps the company where job discrimination cases are involved, since it gives reason for the decisions on hiring or firing. It also enables the performance management to be a corporate priority since with the existing real consequences, the meaning of performance management is renewed (Jenkins, 2001). As is evident, the benefits of the forced performance appraisal system are quite numerous. However, beneath the whole benefits there are complaints from some employees and managers. There are employees and managers who are not contented with the performance appraisal system. This is illustrated by the fact that there are some dissatisfactions and contradictions among some workers and managers, especially workers given average and poor rankings. Therefore, in order to determine where the complaints come from, it is important to consider the negative impacts of the forced ranking distribution. Negative impacts Forced ranking is greatly detrimental to the morale of some employees since, in as much as Organizations really want high performance and happy working environment for their employees, they cannot easily have both. This is mostly because most employees are concerned with their performance and the morale of employees who have been graded poor is low.. More studies have indicated that close to 50% of employees in many organizations have admitted that forced ranking has negatively impacted on their morale. This loss of morale is attributed to the constant concerns of employees over their positions in their teams. Further studies on the existing relationship between performance and employee turnover indicate that best performers are less likely to quit from the organization compared to the poor performers (McEvoy, 1997). Forced ranking system is also argued as very detrimental to the organizations and the employees since it damages job satisfaction within the departments or even in the teams. In the case of the employees of the Red Square Industries, this has already occurred since the workplace problems are seemingly being left for the best-ranked. The employees with the rating of 3 are also unmotivated since they perceive themselves as seen by the company to be average. The borderline 2 have as well quit the company. The marginal employees have also failed to improve on their performance even after trainings hence have also expressed dissatisfaction with their jobs (e.g., Bates, 2003). The forced ranking also emphasizes much on individual performance rather than team performance, this in effect discourages some employees to chip in and assist other employees. Hence, in such cases, employees consider accomplishment of their individual tasks as the first priority. The employees are hence completely not willing to assist other employees since this is likely to have great effects on their rankings in the organization. Lack of cooperation and proper communication among the employees within the Red Square Industries is evident. This is portrayed when the poor performers are envious of best performers. As a result the poor performers decline to assist the top performers in handling problems. Forced ranking creates a condition of mistrust between the organization and the employees since the employees are likely to mistrust the system together with the management. A majority of such employees often do not properly know the standard against which their ranking is done. The employees often give some reasons of mistrust. Some reasons suggested by Miesler (44) include the arbitrary nature of the system, its subjective nature, and the possibility of it to be used by the ranking managers to express their temperaments. According to Meisler (2008), forced ranking as well often leads to creation of political context within the organization which sub-optimizes the firm’s larger goals. The managers can hold negotiations with each other in order to maintain the intact nature of their departments. They do this contrary to applying the forced ranking as intended for the elimination of the worst performers in every department. The Red Square Industries also has managers who have declined to allow employees within their departments to be graded, mostly the ones who are politically powerful. They claim that their employees are top performers. As such, the employees may not be willing to do the tasks that won’t be helpful to them at the time of review. This is because there is no sufficient visibility of the projects to the organization’s major players. Innovation is also discouraged within the organization since the employees are not willing to be failures hence stand chances of losing their jobs. This innovation is avoided by the employees in view of the fact that when they make a mistake their grading will be affected. This will therefore enable them to stand high chances of being terminated from the employment. On the other hand, according to their perception, the employees may as well feel unappreciated. As a result, they avoid bringing innovations to the company considering that at the bottom of everything they will still be unrecognized. This is seen in the employees of the Red Square Industries when employees with low performance avoid the tasks related to problem solving, and instead leaving them for the top- performers (pfeffer, 2005). Summary Forced ranking system of performance appraisal is a better way of testing the effectiveness of the workforce of an organization. In the case of the Red square industries, the forced ranking distribution intervention has had varied effects on the employees. The company has enjoyed benefits through using the system of performance appraisal. This is in consideration that it helps the budgeting team find easy time budgeting, ensures that top performers are retained, and identifies managers with better skills for searching talent. This is in addition to the fact that it creates and maintains high-performance organizational culture, enables the company to enjoy better returns from shareholders and provides well defined consequences. Accompanying these negative impacts include favouritism and unfairness by some managers towards other employees and job dissatisfaction. It discourages team work, innovativeness, and healthy competitions among employees. Recommendations It is already evident that the consequences of using forced ranking are taking a toll on the employees and managers of Red Square Industries, like producing tensions, dissatisfactions, resigning of employees and stagnant performance. As such this requires proper measures to be adopted by the management. In view of the already existing situation within the Red Square Industries, it is of paramount value for the management to adopt better management ethics while applying the forced ranking distribution. The management should realize that forced ranking should not be used throughout but should be used only to weed out the poor performers. Continuous use of this system will lead to losing of the better employees, since the poor performers shall have been fired .as such with the continuous use of the system, better performers will begin to be the subject of ranking hence some of them will have to be fired, the bottom ones. It is as well important for Red Square Industries to know that fairness is a fundamental part of the forced ranking distribution. As confirmed by the employee grievances, there has been unfairness and favouritism within the management. This is because some employees belonging to the union are favoured compared to the ones who are not in the union. This has only unmotivated the non-union employees and worsened job satisfaction, hence performance of the employees. If only the management could consider hiring, training and retaining the right skilled workforce, it would have a better chance of satisfying both its requirements and employee requirements. The departments should be big so that the employees could be adequately compared. The management may also consider applying the performance appraisal system to the top management only. This is because their impact to the total organizational success is great. Forced ranking greatly depends on the organizational culture and as such the company needs to adopt an appropriate one. It should emphasize on result-oriented teams, great leadership, and strong performance. The benefits of team work are great and in order to achieve the management should emphasize on coordination and cooperation among the employees. Conclusion The reasons behind the application of the forced ranking performance system are always admirable. For improvement of the organizational performance it is essential to reward the top performers and improve the conditions of the low performers. Measures have to be put in place to ensure that the low performers are not pulling down the high performers. For the case of Red Square Industries, its effects have been unsatisfactory. Hence, the company should recognize that it acquires honest communication, development of thoroughly considered performance appraisal, and provision of tough ranking. This is the key to its effectiveness in the management of employees. Reference Meisler, A. (2008) “Dead man's curve”. Workface Management,. Cooper, C. (1998). “The concise Blackwell Encyclopaedia of management”. Blackwell Business. 4(4) 56-67. 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