Submission of Case Assignment

As a part of

Human Resource Management Course

On

Performance Appraisal System

Submitted to: Prof. Sameer Pingle

Submitted by: Madhura Kane (121220) Rohan Wahi (121245) Viral Shah (121260)

Case Submission and Authorization Form

Title of the Case(s)/item(s):

What made InFox change its appraisal system?

Throughout this Agreement the phrase the Case means the case(s)/item(s) listed above plus all or any linked items listed in the accompanying documentation (for example, teaching notes, videos or other materials).

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Madhura Kane, Rohan Wahi and Viral Shah.

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This case has been written under the guidance of Prof. Sameer Pingle for the course Human Resource Management. It can be used for class discussion rather than effective or ineffective handling of management situation. The case can be published for academic purpose with Original/Disguised name.

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Name and Signature: 1. ____________________________________________________ 2. _____________________________________________________ 3. ______________________________________________________

MBA (FT) I, Batch 2012-14 Students, Institute of Management, Nirma University, Ahmedabad

What made InFox change its appraisal system?

In December 2010, Ritesh Verma (Vice President-HR), Vineet Sharma (Head-HR India) and project managers of all InFox BUs of met to discuss overhauling of the existing performance evaluation system and creating a new one from scratch. Vineet needed to verify that the new system not only helped with planning the employees objectives and goals but provided a framework for career development.

Company history
Established in 1991, InFox is a NYSE listed global consulting and IT services company with more than 15,000 employees. From a capital of US$ 250, they have grown to become a US$ 150.23 million company with a market capitalization of approximately US$ 24 billion. In our journey of over 30 years, we have catalyzed some of the major changes that have led to India's emergence as the global destination for software services talent. We pioneered the Global Delivery Model and became the first IT Company from India to be listed on NASDAQ.

InFoxs Competitive Edge

Named Indias most respected company in business-World 2011 survey for the 9th consecutive time. Adjudged Indias best managed company in a study conducted by Business Today Dream company to work for in India and amongst the 100 best places to work for in IT in US. Business Week: Among the top 3 IT service companies in the world. InFox is maintaining its competitive edge due to many factors, out of which organization structure is the main factor. Around 90% of the total revenue comes from repeat business that highlights the faith of the clients in InFox.

Competitive Edge IBU Structure

Software programmers who wrote custom applications for corporations are able to leverage past experience most effectively.

To achieve these economies of experience, the primary organizational construct within InFox is the industry business unit (IBU). IBU are very nice example of using both centralization and decentralization.

The company assigns new employees to an IBU and they tend to stay there for several years. In multidivisional organizations, an IBU structure can greatly facilitate strategy-implementation efforts. It establishes coordination between divisions having common strategic interests facilitates strategic management and control of large, diverse organization, Fixes accountability at the level of distinct business units.

Organization Strategy

InFox has adopted a client-focused strategy to achieve growth. Focuses on limited number of large organizations throughout world. Company has a image of quality driven model rather than cost-differentiating model. Increase business from existing and new clients. Expand geographically. Enhance solution set. It has added new service offerings, such as consulting, business process management, systems integration and infrastructure management, which are major contributors to its growth.

Develop deep industry knowledge Enhance brand visibility. Pursue alliances and strategic acquisitions.

PROBLEM
Viraj is in a foul mood since morning. How can I receive the same rating 2 years in a row? I worked so hard last year, did the night shift for 2 quarters and then this C! WHY me? This forced distribution technique is getting on my nerves. I am definitely going to raise this at the open house next week.

OPEN HOUSE
Ritesh Verma, the Vice President-HR had not seen this coming. He knew there was a general unrest among the employees over the forced distribution technique they used for their annual performance evaluation. But he had not realized the extent of employee dissatisfaction. There had been a heated discussion at the 10am meeting today where he and his team had not been able to come up with satisfactory answers. It had also got him thinking. Was the current system ideal for a growing organization like theirs keeping in mind the alarming rise in attrition rates (Exhibit2)? This was especially important considering their swelling attrition rate. There was time to call a meeting.

THE MEETING
Participants included the senior HR executives of each business unit as well as engineering and project managers. Vineet Sharma (Head-HR, India) was moderating it. He proposed creating a new performance evaluation system from scratch. This would be operational from the next financial year and a special task force would be formed who would be responsible for creating its high level structure. Vijay, Head of the BFSI BU suggested that certain senior employees should also be part of this task force. This will help tight integration of the employees goals, objectives, plans and tasks. This motion was put to vote and passed unanimously. It was decided that the task force would meet once a week to discuss the progress on the system development.

OLD SYSTEM
The original system encompassed seven main principles: 1. The appraisal occurred once a year. 2. It required employees to document their accomplishments. 3. The manager would assess these accomplishments in writing and assign numerical ratings. 4. The appraisal included a summary written appraisal and a rating from 1 (unsatisfactory) to 5 (exceptional). 5. The ratings were on a forced distribution, controlled at the 3 level or below. 6. Merit increases were tied to the summary rating level. 7. Merit increase information and performance appraisals occurred in one session.

This system resulted in inequitable ratings and was cited by employees as a major source of dissatisfaction. The Infrastructure Management System (IMS) InFoxs fastest growing division reported that 95 percent of its employees received either a 3 or 4 on their appraisal. Merit raises for people in this group only varied by 1 to 2 percent. Essentially, across-the-board raises were being given to all employees, regardless of performance.

New Performance Appraisal System

Together the task force created a new system, which differed from the old one in many key respects: 1. The absence of a numerical rating system. 2. The presence of a half-year feedback session. 3. The provision for development planning. 4. Prohibition in the appraisal guidelines of the use of subjective assessments of performance.

The new system has three stages, as opposed to the one-step process of the old system. These stages are spread out over the course of the year. The first stage occurs at the beginning of the year when the manager meets with each employee. Together, they work out a written agreement on the employees goals, objectives, plans, and tasks for the year. Standards of satisfactory performance are explicitly spelled out in measurable, attainable, and specific terms.

The second stage is a mid-year, mandatory feedback and discussion session between the manager and the employee. Progress toward objectives and performance strengths and weaknesses are discussed, as well as possible means for improving performance in the latter half of the year. Both the manager and the employee sign an objectives sheet indicating that the meeting took place.

The third stage in the appraisal process is the formal performance review, which takes place at years end. Both the manager and the employee prepare a written document, stating how well the employee met the preset performance targets. They then meet and discuss the performance of the employee, resolving any discrepancies between the perceptions of the manager and the employee. This meeting emphasizes feedback and improvement. Efforts are made to stress the positive aspects of the employees performance as well as the negative. This stage also includes a developmental planning session in which training, education, or development experiences that can help the

employee are discussed. The merit increase discussion takes place in a separate meeting from the performance appraisal, usually a month or two later. The discussion usually centers on the specific reasons for the merit raise amount, such as performance, relationship with peers, and position in salary range. This allows the employee to better see the reasons behind the salary increase amount, as opposed to the summary rank, which tells the employee very little.

The employees were informed about the new system and its advantages over the old system as well as transparency in communication regarding career development and planning.

VIRAJs DILEMMA
Viraj is now in a fix. The morning mail had come with the offer letter from ACL software. It contained a 30% hike to his current CTC. The other thing that was bothering him was the new performance system which had been launched couple of weeks back. It was introduced with a lot of fanfare by the HR as a radical shift in the way the appraisal would henceforth be done at InFox. It had intrigued Viraj, especially the half yearly feedback process. Appraisals were scheduled to begin next month. Now he was less unsure about the ACL offer. What should Viraj do?

QUESTIONS:
1. What suggestions would you give to Viraj, keeping in mind his future prospects?

2. What type of performance appraisal is central to new system at Xerox? Which, if any, of the criteria for a successful appraisal does this new system have? 3. Given the emphasis on employee development, what implications does this have for hiring and promotions? 4. Are there any potential negative aspects of the new performance appraisal system?

EXHIBIT 1: ORGANIZATIONAL STRUCTURE

EXHIBIT 2: INFOX ATTRITION RATES

InFox Attrition Rates

14.5 14 13.5 13 12.5 12 11.5 11 Attrition rates(%) 2005 2006 2007 2008 2009

Case Notes

1. What is the purpose or objective that the participants should achieve? The purpose of this case is to help participants understand the criticality of Performance Appraisal system. The participants should be able to know what are the expectations of Performance Appraisal system at different levels of the organization such as: a) Expectation of the CEO The system should ensure organizational performance and the process should be robust, systematic and well accepted by all employees as simple, fair and useful. b) Expectation of the Manager Managers would want a system that aids them in getting the best possible performance from their people. c) Expectation of the Employee Employees would want clear communication of expectations in terms of performance, collaborative support from the system to be able to perform at their best and continuous development on the job under the guidance of their manger.

2. Issues involved in the case. The issue involved in this case is that an employee is very unsatisfied with the appraisal system, due to which the employee is considering a switch. More dire effects of this appraisal system is the increasing attrition level.

3. The links between the case, the concept and the tools/techniques relevant in the situation. The case links the performance appraisal system with the satisfaction of the employees. It throws light on how inappropriate appraisal process can cause high level of attrition in the organization.

4. Preparation expected from the participants. Participants are required to have prior knowledge of the Performance Appraisal System. They should be aware of various objectives that an appraisal system should follow.

5. Cross references, if any, to other cases and situations. NA 6. Is individual or group analysis of the case needed? Ideal size of the group. Both Individual and Group analysis of the case is needed. For group analysis the ideal size can be 9-10 members.