Case Study On New Performance Appraisal System At Xer 325704

Case Study On New Performance Appraisal System At Xeroxin The Mid-1980

In the mid-1980s, Xerox Corporation faced a significant challenge with its existing performance appraisal system, which was not effectively motivating employees. Instead of fostering development and engagement, the outdated system left employees discouraged and disgruntled. In response, Xerox developed a new performance appraisal system aimed at improving fairness, understanding, and developmental focus. This case study explores the evolution from the old to the new system, the key characteristics of each, and the implications for organizational practices.

Old Performance Appraisal System at Xerox

The original appraisal process implemented by Xerox was based on seven principles:

• The appraisal was conducted annually.
• Employees were required to document their accomplishments.
• Managers evaluated these accomplishments and assigned numerical ratings.
• Ratings ranged from 1 (unsatisfactory) to 5 (exceptional), with a written summary.
• Ratings were forced into a distribution, with most ratings at or below a 3.
• Merit increases were directly tied to the summary rating.
• The appraisal process and merit increase discussions occurred simultaneously.

This approach led to significant dissatisfaction and perceptions of inequity. For example, in 1983, 95% of employees in the Reprographic Business Group received either a 3 or 4, leading to minimal variation in merit increases across the board. Consequently, merit raises were often uniform and did not genuinely reflect individual performance, undermining motivation and fairness.

The New Performance Appraisal System at Xerox

Recognizing the deficiencies, Xerox assembled a task force composed of senior HR executives, consulting with employee and middle management councils. They reimagined the appraisal process, resulting in a system emphasizing development, fairness, and ongoing feedback, fundamentally different from the old model.

The new system introduced several key changes:

• Elimination of numerical ratings.
• Implementation of semi-annual feedback sessions.
• Focus on development planning and growth opportunities.
• Prohibition of subjective performance assessments, emphasizing measurable performance standards.

The revised process spans three stages over the course of a year. In the first stage, managers and employees meet at the beginning of the year to set measurable, specific goals in a written agreement, clarifying standards of satisfactory performance.

The second stage involves a mandatory mid-year review, where progress against objectives, strengths, weaknesses, and potential improvement strategies are discussed and documented through signed objectives sheets.

Finally, at year-end, a formal performance review occurs. Both parties prepare written assessments of performance relative to goals, then meet to discuss and resolve perceptions of achievement. The review emphasizes constructive feedback, recognition of accomplishments, and developmental planning, including identifying necessary training or education for growth.

Merit increases are handled separately, often a month or two after the review, allowing managers to explain specific reasons, such as performance or interpersonal skills, behind salary adjustments. This differentiation offers transparency and clarifies how performance influences compensation.

Post-implementation surveys revealed positive outcomes: 81% of employees better understood their work group objectives, 84% viewed the appraisal as fair, 72% understood their merit increase percentage, 70% achieved their personal goals, and 77% saw the system as a step forward, confirming the system's effectiveness.

Analysis of the System's Effectiveness and Implications

The shift from a ratings-dependent to a developmental, feedback-oriented system aligns with contemporary best practices in performance management. The emphasis on ongoing dialogue fosters continuous performance improvement and employee engagement. Furthermore, separating merit discussions ensures clarity and fairness in compensation decisions.

This system also influences organizational practices beyond appraisal; it impacts hiring, promotions, and training. Clear goal-setting and developmental planning create a pipeline for identifying high potentials, better aligning talent management with organizational needs. It encourages a culture of accountability, learning, and transparency, thus enhancing overall organizational performance.

Management’s perspective on the new system is generally positive, considering the improved employee perceptions of fairness and understanding, which likely translate into greater motivation and retention. The involvement of various levels in system design also indicates buy-in and acceptance, critical factors for successful implementation.

Nevertheless, potential negatives include the increased administrative workload due to multiple meetings and documentation. Some managers might struggle with maintaining consistent, objective feedback free from bias, despite guidelines. Moreover, the success of such a system heavily depends on managers’ skills in providing constructive feedback and developmental guidance, which varies across individuals.

Conclusion

The transformation of Xerox's performance appraisal system in the 1980s exemplifies a shift toward a more employee-centered, developmental approach. By moving away from numerical ratings and forcing distribution, the new system promotes fairness, clarity, and ongoing engagement—factors crucial for organizational success. While challenges remain, especially regarding administrative burden and managerial skill, the system's overall effectiveness underscores the importance of aligning appraisal practices with organizational culture and goals.

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