Compensation and Performance Evaluation at Arrow

After reading the case, it was pretty evident that the Abandon the Employee Performance Review (EPR) system because the system is not able to effectively identify over and under achieving individuals. No one is satisfied with the outcome of the system. Employees are unhappy with the reviews they’re receiving and managers are upset to go through with the process. This ultimately is a failure in the organization’s system that needs to be addressed and replaced. Sales associates would seek for other positions at other distributors when the market was slowing down because 60-80 percent of their salary is based on commission. This behavior indicates that they’re not invested in the company and the working environment is adverse and unaccommodating to its employees. Having a high turnover rate in employees will ultimately affect the company, especially if they have to hire new people and invest training time to replace the “W-2 Hoppers” and fill the vacuum.

I disagree with Kauffman’s concept of allowing his 43 branch managers to make and learn from their own mistakes when it comes to hiring the right people. An organization should direct, instill and promote a set of objectives that all employees should follow. Certain behaviors that can lead to damage and cause the company to suffer should be avoided. The organization should establish a more successful hiring process followed by strict standards and expectations to filter out undesirable hires in an effort to prevent high turnovers. The average life span of a worker is 3-4 years before that individual is “stolen” by another company. That’s 3-4 years of training and investment that your company provided before that member jumped ship to apply their knowledge (the knowledge that your business provided) to help your competitors.

Their current strategy of college recruiting plan is obviously flawed. Hiring 90-100 graduating college students and requiring them to go through with 26 weeks of the extensive training process isn’t going to magically transform them into hard working and motivated employees. If anything else, the high transiency rate should be an indicator that the current system in place is a failure. The rating scale for employee evaluation is good idea in that it allows managers to provide necessary feedback about their performances and recommend areas for improvement. However, it does have its deficit. For example, wording of the evaluation will initiate the domino effect of employees comparing themselves with the evaluation of their colleagues, followed by questions such as “Who’s better than I am” will follow. This can create animosity among co-workers.

In the end, the rating system failed. Managers were very reluctant to have to tell their employees what they’re doing wrong, so they tend to assign everyone 4’s and 5’s which nullifies the purpose of the evaluation. In turn, employees got the impression that their performance is great when they receive 5’s and don’t think they need to improve on anything.