Brandon W. Jones

The system that is set up at performance review and compensation systems at Arrow Electronics are broken. There are two specific aspects of the system that are broken: the employees are rated on a bell curve type system for their evaluations and the compensation system for the sales force isn’t competitive for the market.

First, the CEO, Steve Kaufman, has required that the employees are rated on a bell curve type system for their evaluations. Since the evaluation system is set up as a bell curve, the supervisors and managers must always be comparing their employees against each other. Once the employees realize that they are being compared against each other, they will stop working as a team and begin competing against each other rather than viewing the group as a team that works together. The individuals will try to look and perform better than their coworkers so that they get the better review and receive the better compensation. In this type of a system there are no incentives to work together because when one employee succeeds it in turn looks bad for the other employees.

Second, the compensation system for the sales force wasn’t competitive for the market. As the case study pointed out, Arrow Electronics trained and created strong sales force employees, but were unable to reap the benefits in return. After just two years with the company, the employees were very marketable with their experience and extensive training. At that point, they were of great value to many companies in the market, but didn’t receive the market-value compensation within Arrow Electronics. In order for Arrow Electronics to be a competitive company and grow in the market, they must set up a compensation package that incentivizes the employees to stay with the company. The biggest issue with raising the compensation for the new hires to market value was that the seasoned employees would also be on the same compensation level. That would in turn create a lot of resentment amongst employees and further hurt the system. The seasoned employees didn’t have a proper compensation system in place because that rewarded them for their many years of experience and service and they weren’t making anything more than the industry average. The system must be changed so that each year the employees get an incremental increase that is equal or greater than market value. If the experienced employees receive a competitive wage they won’t feel resentment towards the new employees.

The system for performance evaluations and compensation are two of the most important systems for retaining the qualified employees.

The main point in the article was that performance reviews are a waste of time and don’t promote progress within an organization. I agree with some of his points but disagree with others.

It is true that a performance review is completely ineffective when the boss doesn’t give the employee any specific targets/goals for performance. When the boss just does a performance review on abstract principles and not on concrete metrics, it is an ineffective performance review.

On the other hand, when an employee has a very specific job description with very specific tasks, such as a factory worker, a performance review can be very effective. When the employee has a set of responsibilities that are clearly outlined, it is very easy to do a performance evaluation. Either the employee completed their work or they didn’t and there isn’t much room for interpretation. For an evaluation system to be very effective, the metrics need to be very specific for both the evaluator and the person being evaluated.

SAS Institute is a good example of how to run an organization effectively and smoothly. They were quite different from their competitors in several ways. They were very different in the way that they did their outsourcing, recruiting, compensation, and benefits. They set up a system helped the employees to work effectively and efficiently. The system wasn’t too stringent on the employees. It gave them freedom to set their own schedules.

SAS did very little outsourcing which helped to provide more opportunities for new employees within the company. By avoiding outsourcing, they were able to retain more control over every aspect of the work that they did. Temporarily it is fine to avoid outsourcing, but in the long run it becomes very expensive to do all processes in house. They could also run into problems with entering markets that are unrelated to their core processes.

SAS also have a very distinct way of doing their recruiting. Because they had a flat organizational structure, they were able to promote from within and have the existence of nepotism. Although it was fine as a small company to have this recruiting structure, as a large company this could create major problems. By allowing nepotism within the organization, they are subject to suits based on unfair hiring practices. They are opening themselves up for major problems down the line.

Their compensation structure was good because it promoted strong efforts on behalf of the employees. The bonus structure that was in place was good because it gave employees something to shoot for, but it was very bad because it didn’t have any specific set of metrics. All the metrics that were explained in the case study were subject to the opinion of the supervisor or the manager.

The structure for providing benefits was fair in some regards because it was a “pay as you use” system. Because the system was a pay as you go system, hard working and successful employees with many years in the company could be severely hurt if they have health problems later in their careers because their premiums will be much higher. At the same time, the system promotes healthy living for the employees which reduces the cost of the overall health system.

Although there are many possible areas of improvement within the system that SAS was using, their current system is very strong compared to many systems in the industry.

The system at Nordstrom was a failed system. It did not reward the employees based on the hours that the employees put in. There are three areas that the company went wrong. First, it didn’t let the employees know upfront what kind of hours they would be expected to work. Second, it had an overly strong competition between the sales associates within the stores. And third, their pay structure was broken. All three of the above points illustrate that the system was broken.

As the first point indicates, Nordstrom would hire people under a specific set of duties and responsibilities and expect a completely different set. The managers wouldn’t explain how the compensation system was going to be set up based on the sales per hour structure. Once the employee was hired on, they would then expect them to work extra hours without pay or they would give them bad reviews as not being a team player.

The second point stated that they had an overly strong competition system between coworkers. The employees that had the highest sales per hour ratings received the best working hours. They were also encouraged to work hours without pay so that they would get higher per hour ratings. Because the sales per hour ratings were so important, employees would do what they could to steal customers from other associates. They would also avoid helping their associates to keep them from getting the good ratings. This created a culture of cut-throat competition.

The third area that Nordstrom was broken was in the pay structure that they used for their employees. They required the employees to attend meetings and stock shelves/inventory and counted their hours towards selling hours or non-compensated time. The meetings and shelving time added significant time to the employees working time, but hurt their sales-per-hour rating. They also expected the employees to “go the extra mile” on their own time without extra pay.

The system should reward the employees for the work they do and not hurt them for time spent in meetings and shelving. They should be working in the favor of the employees. They should set up a system that encourages the employees to “go the extra mile” without penalizing them on their hours. If Nordstrom expects the employees to work extra time without pay, they should put them onto salary so that they are getting paid accordingly.

In the case study, Specialty Medical Chemicals, there are some significant systemic problems. There were three main areas of problems that were occurring in the case. The three areas were: the management approach taken by CEO Carl Burke, the response of the existing vice presidents, and the system as a whole.

When Carl Burke became the CEO, he was an outsider to the company. He first took the approach of, “I am just going to ride the wave for a little while and see where it takes me before I make any drastic changes.” As he did this, he found that the company wasn’t performing as he felt it should. Because he had spent his entire career with a single company, his overall outlook was very narrow-minded. He felt that all companies should operate the same way that he was used to operating at Merck. Although it was important for him to come in with his own ideas, it was equally as important that he come in with a little more flexibility.

He had a tendency to think that the people were the problem, when it was actually more of a system problem. He did, however, begin to think more in terms of the system with the arrival of Laura Wells. He began to think of ways to change the system while getting rid of individuals in the process. A more effective approach would have been to utilize the existing people’s strengths.

In the system that existed when Carl Burke arrived, there was a set of executives that were very set in their ways. Each of the vice presidents had their specific way of doing things. In addition, they were each too focused on the betterment of their own department which caused them to lose sight of the goals of the company as a whole. Each of the VPs was trying to build an empire out of their own department. Each of the vice presidents had the mentality of everyone else vs. me. With that mentality, they were not willing to work together.

Overall, the system/environment of the company as a whole was broken. Some key indicators that the system was broken were that the VPs weren’t freely communicating with each other, Carl Burke didn’t receive much cooperation from the management team, and the VPs were all building there own empires.

Carl was taking a step in the right direction by reorganizing the system within the company. It was a good idea to try to change some of the duties of the vice presidents giving them more responsibility and more flexibility. Part of his plan was to get rid of some of his management team which could be very detrimental to his company. Rather than get rid of them, he should fix the system and put them into a position that best utilizes their talent and experience. By taking that approach, he will not hurt the morale or create fear within the employees.

As was demonstrated by both Tony Dungy and Lovie Smith, yelling at people isn’t the only way to get them to do what is expected. Both of these men have set up a system that sets expectations for individuals and then holds them responsible for reaching those expectations. In these systems, there are specific consequences depending on whether or not the individuals meet the expectations. If the person does not live up to the expectation there is a negative consequence, but if they do live up to the expectation there is a positive consequence. In reality, the success or failure of an individual or group is significantly determined by the way the system/environment is set up. Tony Dungy and Lovie Smith have set up a system that helps those involved to succeed. The athletes in their systems know what they can and cannot do at all times and are able to act accordingly.

This article was very interesting because it explained how Scott’s Miracle-Gro Co. set up a health care system where everyone was required to participate in a full/all-inclusive health screening in order to receive the lowest premiums on their insurance. Joe Pellegrini, the supply-chain executive, was the individual who designed and was then in charge of the program implementation. He definitely had the right idea on how to lower health care costs. For a company to succeed in today’s economy, it is essential that everyone within the company be held responsible for their choices in areas that it will affect the success of the company. In most companies, health care expenses are one of the largest expenses on the company. In many cases, health care expenses can be avoided through good choices by individuals. People who live healthy by eating right and exercising regularly have a much lower risk of health problems than those who do not eat right and exercise. With the system Joe set up, those who make healthy choices are rewarded while those who don’t are not. Joe even went to the extent to set up a work out/health facility across the street from the company operations office to make it easier for employees to work out. Joe was building a system that would encourage and enable the employees to succeed.

I am agreeance with the tone of the article that the transplant system as a whole was where the mistake was made. Although the surgeon, James Jaggers, should have checked the blood type before starting the surgery, he should not be the only one held responsible for the mishap. In the system that was in place, everyone involved in the transplant process was taking everyone else’s word on the blood type and not checking it themselves. The system should be set up such that the people involved cannot fail unless they go against the system. The instance of Dr. James Jaggers may have been significantly publicized and received a lot of attention, but the article stated that there were other cases where the blood types were not matched for the transplants; those other doctors were just lucky because their patients didn’t die after the operation.

In order for the system to be successful, they must eliminate most if not all chances of possible mishap. A proper system should be setup such that the chance for human error is minimal. This ideal system would have a set of several checks where the person would have to sign there name to catch errors along the way, before an error becomes life threatening. In the case of the Duke medical system/organ procurement organization, there weren’t enough checks to catch the error of the blood type.

There are many lessons that can be learned from a successful company. Southwest Airlines is a great example of how the proper use of the human resources department can create a competitive advantage. Many companies say their employees are their most important asset, but relatively few companies act accordingly. I learned from the case study that in big corporations it is actually possible to treat the employees as the most important asset, which in turn it creates a competitive advantage. Southwest Airlines put the needs of their people foremost creating a unity amongst the employees that was very strong.

As Southwest Airlines demonstrated, the people within a company are the most important asset. When the employees feel needed and appreciated they will work harder. In addition, it is very important for the employer to take care of its employees so the employees can trust the company. One of the biggest factors in employee satisfaction is the measure of trust they have in the company.

An additional factor that was very important to Southwest Airlines was allowing the employees to be themselves. Some companies will say that they allow employees to be unique, but they will immediately upon hire try to put the employee into the predetermined mold of what they expect them to be. From the Southwest Airlines case, I was able to learn how to allow people to be themselves. People can be put into a job where they are required to do certain tasks but then given the freedom to make decisions and interact using their best judgment.

Another important factor that leads to employee satisfaction is the employee’s ability to make important decisions without having to constantly ask permission. I have worked in situations where the line was very unclear between decisions I could make and decisions only the supervisor could make; those situations created a great amount of uncertainty in me hindering my ability to work most effectively. I have also worked in other situations where I was able to make decisions without having to ask my supervisor. In those situations I felt more confidence and was able to be a better employee. In addition, the situations where I was given more trust helped me to be more conscientious about the work I did.

The results were really interesting on the study of work environment shown in the Wall Street Journal article “The Rules of Engagement” by Sue Shellenbarger. The article stated that when employees are happy they are able to get more work done. Happy employees have a higher level of production. Although, the article explained that happier employees are more productive, it didn’t go into detail as to why they are more productive.

The reason why happy employees are more productive is because they are less focused on themselves and more focused on the task at hand. Whether or not someone is happy is determined by an internal choice of each person. There are, however, many factors that can make the choice to be happy easier or harder. When many things are going for someone, they tend to be happier. On the other hand, when someone feels like the whole world is against them, they lose their desire to be happy. Companies cannot create happiness within employees; they can only do everything within their power to create an environment that facilitates happiness. People are most happy when they feel they are in control of their lives and things are going their way. People are also happy when they feel they are being trusted. Companies can create an atmosphere that promotes happiness by trusting the employees and allowing them to control their own schedule.

This approach of giving schedule flexibility does not work in every situation, however. In manual labor environments, many times the work is accomplished in teams where each person is responsible to accomplish a given task within a given time period. If a worker is not present, they cannot do their part and the work does not get done. Until everyone is at the work location, the maximum efficiency cannot be achieved. On the other hand, in an office where each employee works on their own to accomplish their given tasks, the employer can give much more schedule freedom to the employee.

The bottom line is that each employer needs to look at their specific work environment and decide how to best show trust in their employees. Once they can trust their employees, they can begin to give them more freedom. By giving them more freedom, they will promote the happiness of the employees. When the employees have a sustained level of happiness in their jobs, they will be more productive and help the success of the company as the article stated.