Vitality Health Enterprises has successfully overcome the recessionary pressures and experienced six consecutive quarters of strong revenue growth.The company has been struggling to maintain its industry position for the past few years as a result of growing rate of staff turnover and lack of innovations…
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Vitality Health Enterprises, Inc was founded by Hikaru Fred Kikuchi in Ames, Iowa in 1987. Within the first three months, Kikuchi’s achieved sales revenue of more than $15,000 from the business. In late 1989, the firm established its own manufacturing facility in order to minimize the firm’s dependency on Japanese products. By 1991, Vitality’s revenues grew to $3 million per year and the company stopped depending upon Japanese finished-goods suppliers. Over the next few years, Vitality strived to spread its business across United States and Canada and moved its head quarters to Des Moines with intent to take advantages of better expansion opportunities. By 1995, the company gained a strong global presence by launching its products in countries like China, Japan, and Taiwan. In 1997, Vitality increased the size of its business notably with the acquisition of HerbaPure Nutraceuticals, and a decade later the company grew to nearly 7,000 employees.
In order to address the stagnation caused by the 2008 global financial crisis and to deal with rising material costs, the Vitality recruited a new CEO, Beth Williams. As part of implementing the new business strategy developed, Williams organized the Performance Management Evaluation Team (PMET) to evaluate whether performance management goals were met. The PMET discovered that the many of the employees had not been satisfied with the current performance management system because it often failed to appreciate top performers adequately. Williams identified that rewarding top performers adequately and retaining them with the company for a long time were essential to accelerate the company growth. She also observed that a well planned restructuring of Vitality’s compensation practices would be inevitable to bring the change identified and to attract new top talent. As a result, Williams implemented the new performance management system in June 2009. To be specific, the problem with the firm was that the new performance management system characterized with a forced distribution model of performance rankings, ‘moving from an absolute ranking system to a relative one’ (Bingham & Beer, 2012). The company continued this system for the next two years. James Hoffman, the newly appointed vice president of human resources at Vitality, found that the new performance management system was not really helpful to motivate top performers despite six straight quarters of strong revenue growth. Evidently, the new system also underappreciated the efficiency of top performers and assisted poor performers to survive, because many of the managers had not been effectively abiding by this system. Some shortcomings of the new system also contributed to this problem. Section 2 2. Effectiveness of Vitality’s Performance Management System While analyzing the corporate history of Vitality Health Enterprises, it seems that the firm’s performance management system has not been effective. The firm’s previous performance management system posed numerous problems to its professional staff including scientists, engineers, and product
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