performance management case analysis

8/12/2019 Performance Management Case Analysis

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PERFORMANCE EVALUATION IN SOUND

STEEL

REPORT

Group 10B

Sanika Gokhale (H13101)

Sanjana Grover (H13102)

Sankalp Saxena (H13103)

Satyam Joon (H13104)


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Executive Summary

The case involves Sound Steel, a company that manufactures pistons, valves and piston

rings. Started by Sanjay Lal and later developed and expanded by him with the help of Abeer

Bannerjee, the company has seen rapid growth. From a single proprietorship it went on to become

a private limited company with the board of directors governing the management.

However, the sudden death of Sanjay meant that additional responsibilities had to be given

to Abeer. This was followed by decline in the growth of the piston division headed by Abeer.

Eventually, Abeers performance was rated as Average and he decided to leave the company.

As per our analysis the key reason for drop in performance is the mismatch of systems

with strategy and structure. Sound Steel is a person driven organization with the Board of directors

completely trusting Sanjay and Abeer micromanaging the entire manufacturing process. There is

also a lack of proper succession planning in case of any exigencies and absence of training and

development of the employees for higher positions.

We start with convincing Abeer to join as an interim CEO during which we can look

outside the company for hiring another CEO. The Performance appraisal of Abeer should be on

the basis of the aggregate company target and not a division based target. Keeping the CSFs in

mind and translating them directly to KPIs, we recommend a performance appraisal system for

workers that evaluates them on those KPIs and uses a MBE approach. Another recommendation is

related to having a more process driven system with setting up standardised operating procedures

in place and introducing a component of training subordinates in the performance appraisal of

AGMs. The company also needs to have a succession planning system in place that can take care

of any exigencies in future.


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Situational Analysis

Strategy:

The Companys key focus is growth by achieving and surpassing targets set by benchmarking

with the industry standards.

Structure:

The company uses aproduct based structure with high control residing with the respective AGMs

of Piston, Valves and Rings.

Systems:

The systems in place are person driven which means there are no set operating procedures in place

and one of the AGMs, Abeer does a lot of micromanagement. Moreover, performance appraisal of

AGMs and managers is also not aligned with organizational strategy

Critical Success Factors

Based on the overall strategy of the organization, the critical success factors are:

Quality: This is critical since with most of the clients; even if a single defective piston isfound the client can reject an entire batch of pistons and not provide the payment for the

whole batch resulting in losses for the organization.

Cost: If a batch is not delivered on time, client can charge with heavy penalties. Similarlyundesired wastage of materials results in additional costs which should be handled by the

workers and supervisors.

Quantity: One of the important factors is that the production targets and clientrequirements are met for every quarter.

For performance management appraisal, these CSFs are directly translated into KPIs.


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Challenges

1. Key positions like that of CEO and AGM of the company are vacant. These vacancies need to be filled immediately because they are critical to the

functioning of the organization. Sanjay in his role as the CEO was directly

responsible for exploring new markets, developing suppliers and managing finance

related issues.

Abeer with his technical skills ensured trouble free installation and stabilization ofthe additional manufacturing capacity and managed internal operations of the

company

2. Performance appraisal of Abeer Rating given to Abeer was on the basis of his role as AGMhis role as the CEO of

the company during exigency was not considered. Abeers resignation was a result

of the average rating he received during this period.

His efforts to restore the piston department were not taken into account whilegiving him his performance rating

3. Person driven organization The company was over dependent on certain individuals such as Sanjay and Abeer

and their absence in such a key time for the company will act as a huge challenge to

their growth.

Along with their absence there were no set standard operating procedures causingunpredictable breakdown in the piston division

4. The reward system CEO and workers performance appraisal is aligned with maximizing organization

profit & sales whereas that of the AGMs are aligned with maximizing their

divisions profit and sales and hence there is no clear consistency regarding the

reward system in the company for various employees

5. Succession Planning, Training and development


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Due to the absence of succession planning in the organization, there is no clearpicture of which person would be promoted in situations where an employee quits

and there is no clear immediate replacement.

There is a major focus within the company on sales and profit but no focus ontraining and development of the employees

Options and Evaluations

1. Introduce standard operating procedures for workers Setting up of standard operating procedures for the workers will lead to them

having a clear understanding of the activities that they need to carry out and also in

a set format.

This will also lead to a reduction in micromanagement by individuals and will alsoensure smooth functioning in case they quit

2. Reward system for workers and managers The reward system for the workers and managers should be aligned on the basis of

their divisions as well as the organizations performance

The workers instead of being evaluated on the basis of the sales of the companymust be evaluated on the basis of the KPIs established i.e. quality, cost and quantity

3. Introduce succession planning The introduction of a procedure for succession planning will mean that in case a

situation arises where an employee quits there would be ready replacement from

within the company and a situation like this where the company is struggling to

find new people in key positions will not arise.

It will also reduce time required to get the systems back up to the previousstandards because there will be people from within the organization who will be

competent enough with the procedures followed in the company.


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Recommendations & Action plan

Our action plan is divided into two phases:

Short Term

Convince Abeer to stay by appraising him on the basis of the aggregate company targetand not the department based target.

During this phase, we promote one of the divisions managers to the designation of AGMfor piston division and also look outside the company to hire another CEO.

Long Term

SOPs introduced for carrying out routine tasks, workers performance to be judged usingthe MBE approach

Workers rewards must be a function of both the organization and the divisionsperformance

A component regarding the training of subordinates must be added in the appraisal ofmanagers and AGMs

Succession planning to ensure that back-ups of people are present in times of exigencies Initiation of quality checks during and at the end of the process.

performance management case analysis

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