Application Case"Rank and Yank" at LuxCarEmma Gilmart, the newly appointed CEO of LuxCar, a large luxurycar manufacturer, had a lot on her mind. She had spent years work-ing her way up the hierarchy since joining as a graduate trainee, andshe now realized that being at the top was not going to be easy.The firm was rapidly losing market share to more innovative, styl-ish, technologically advanced, and energy-efficient cars manufac-tured by rivals. In comparison, Gilmart's employees, particularly thedesigners and engineers, were content with the same old-fashioned,"boxy"-looking, petrol-devouring cars that they had churned out foryears. It seemed that there was a culture of mediocrity: the LuxCarway of working was doing things the way they had always been donebefore, with minimal effort.Searching for answers, Gilmart thought about her earlier expe-riences managing one of the firm's production plants. Most of thestaff around her seemed to be quite hard-working and committed,but others certainly weren't. On reflection, she realized that there hadnot been a single involuntary termination in all her time there. Shestarted to think about what kind of motivation the staff needed toachieve excellence. She saw that, even if performance was poor, therewere no obvious serious repercussions. Why was the performancethe "rank and yank" method, it was inspired by General Electric's CEOJack Welch, who famously argued that leaders should rank employ-ees' performance and then fire the bottom 10 percent each year. Thisapproach made sense to Gilmart as a way to stimulate motivation.She reasoned, "Why should we be tolerating underperformance? Is itnot better to focus benefits, training, and development on our bestperformers and not waste money on the worst? Poor performers mustnot have the right skills to do their jobs; surely it is healthier for themand the company for them to find another job that makes better useof their skills?"She sent a memo to all managers that employees were to be ratedusing three categories and a cap would be placed so that no more thana certain number of a manager's subordinates could be placed in eachone. These were role model (20% of employees), meeting expectations(70% of employees), and below expectations (10% of employees).The "role models" would obtain a significant salary increase and alsoreceive the majority of the company's training and development. The"meeting expectations" group would get a modest salary increase andsome training, while the "below expectations" group would be markedfor dismissal.Gilmart was not prepared for the consequent outrage and chaos.Within three months, staff were picketing outside the firm's headoffice. Others had simply left, claiming they would never be a "rolemodel" because of their manager's bias or a lack of places availablein that category (so no matter what they did they couldn't achieve it).appraisal process not effectively identifying employees' actual perfor-mance, whether it was supporting the organization, and how it couldbe improved?An employee survey was conducted to find the answers. It wasfound that the annual appraisal was essentially considered a "tick-box"exercise. Managers viewed the appraisal exercise as a waste of timeand exaggerated ratings to avoid unpleasantness. Likewise, sub-ordinates paid it little heed and didn't feel it captured their perfor-mance accurately anyway. An integral part of employee engagementhad been lost and the result was a lack of motivation for employees toinnovate, look for cost savings, or generally improve.This appraisal process had changed very little since the firm hadbeen founded more than 50 years ago. Once a year, a manager wouldfill in a graphic rating scale form for each subordinate (similar to that in.Table 9-2 but with a range of performance values from unsatisfactoryto excellent) and submit it to the HR department. The problem? In thelast ten years, only six employees from more than 7,000 had been ratedas less than satisfactory! Yet the ultimate performance of the companywas far from satisfactory.Fundamental change was required. Gilmart had read an articleabout the forced distribution method, which places predeterminedpercentages of ratees into performance categories. Sometimes calledEven the highest performers were leaving because of hostilityfrom colleagues perceived as lower-performing and a general feel-ing of unease with the competitive environment. It was becomingapparent why GE all but dropped this system after Welch left, ashad other high-profile proponents more recently, such as Microsoftand Amazon.But hat was solution? Both the original and new appraisalmethods had, for very different reasons, proven ineffective. Gilmartread more literature on performance appraisal and found that thesewere far from the only methods. She also found behaviorally anchoredratings scales, alternation ranking, the critical incident method, man-agement by objectives, mixed methods, and many more.As anxious as Gilmart was to get the picketers back to work and thefactories functioning effectively again, she wasn't sure that it was evergoing to be possible to find a perfect performance appraisal system.Questions9-17. Gilmart's proposal of using the forced distribution methodwas met with outrage and chaos. But do you think there issome merit in such an appraisal system? Why or why not?9-18. Evaluate the other performance appraisal methodsmentioned in this case. Which would you recommendfor LuxCar?9-19. Does this case prove that a perfect performance appraisalsystem is impossible? Discuss.

Question

Application Case&#34;Rank and Yank&#34; at LuxCarEmma Gilmart, the newly appointed CEO of LuxCar, a large luxurycar manufacturer, had a lot on her mind. She had spent years work-ing her way up the hierarchy since joining as a graduate trainee, andshe now realized that being at the top was not going to be easy.The firm was rapidly losing market share to more innovative, styl-ish, technologically advanced, and energy-efficient cars manufac-tured by rivals. In comparison, Gilmart's employees, particularly thedesigners and engineers, were content with the same old-fashioned,&#34;boxy&#34;-looking, petrol-devouring cars that they had churned out foryears. It seemed that there was a culture of mediocrity: the LuxCarway of working was doing things the way they had always been donebefore, with minimal effort.Searching for answers, Gilmart thought about her earlier expe-riences managing one of the firm's production plants. Most of thestaff around her seemed to be quite hard-working and committed,but others certainly weren't. On reflection, she realized that there hadnot been a single involuntary termination in all her time there. Shestarted to think about what kind of motivation the staff needed toachieve excellence. She saw that, even if performance was poor, therewere no obvious serious repercussions. Why was the performancethe &#34;rank and yank&#34; method, it was inspired by General Electric's CEOJack Welch, who famously argued that leaders should rank employ-ees' performance and then fire the bottom 10 percent each year. Thisapproach made sense to Gilmart as a way to stimulate motivation.She reasoned, &#34;Why should we be tolerating underperformance? Is itnot better to focus benefits, training, and development on our bestperformers and not waste money on the worst? Poor performers mustnot have the right skills to do their jobs; surely it is healthier for themand the company for them to find another job that makes better useof their skills?&#34;She sent a memo to all managers that employees were to be ratedusing three categories and a cap would be placed so that no more thana certain number of a manager's subordinates could be placed in eachone. These were role model (20% of employees), meeting expectations(70% of employees), and below expectations (10% of employees).The &#34;role models&#34; would obtain a significant salary increase and alsoreceive the majority of the company's training and development. The&#34;meeting expectations&#34; group would get a modest salary increase andsome training, while the &#34;below expectations&#34; group would be markedfor dismissal.Gilmart was not prepared for the consequent outrage and chaos.Within three months, staff were picketing outside the firm's headoffice. Others had simply left, claiming they would never be a &#34;rolemodel&#34; because of their manager's bias or a lack of places availablein that category (so no matter what they did they couldn't achieve it).appraisal process not effectively identifying employees' actual perfor-mance, whether it was supporting the organization, and how it couldbe improved?An employee survey was conducted to find the answers. It wasfound that the annual appraisal was essentially considered a &#34;tick-box&#34;exercise. Managers viewed the appraisal exercise as a waste of timeand exaggerated ratings to avoid unpleasantness. Likewise, sub-ordinates paid it little heed and didn't feel it captured their perfor-mance accurately anyway. An integral part of employee engagementhad been lost and the result was a lack of motivation for employees toinnovate, look for cost savings, or generally improve.This appraisal process had changed very little since the firm hadbeen founded more than 50 years ago. Once a year, a manager wouldfill in a graphic rating scale form for each subordinate (similar to that in.Table 9-2 but with a range of performance values from unsatisfactoryto excellent) and submit it to the HR department. The problem? In thelast ten years, only six employees from more than 7,000 had been ratedas less than satisfactory! Yet the ultimate performance of the companywas far from satisfactory.Fundamental change was required. Gilmart had read an articleabout the forced distribution method, which places predeterminedpercentages of ratees into performance categories. Sometimes calledEven the highest performers were leaving because of hostilityfrom colleagues perceived as lower-performing and a general feel-ing of unease with the competitive environment. It was becomingapparent why GE all but dropped this system after Welch left, ashad other high-profile proponents more recently, such as Microsoftand Amazon.But hat was solution? Both the original and new appraisalmethods had, for very different reasons, proven ineffective. Gilmartread more literature on performance appraisal and found that thesewere far from the only methods. She also found behaviorally anchoredratings scales, alternation ranking, the critical incident method, man-agement by objectives, mixed methods, and many more.As anxious as Gilmart was to get the picketers back to work and thefactories functioning effectively again, she wasn't sure that it was evergoing to be possible to find a perfect performance appraisal system.Questions9-17. Gilmart's proposal of using the forced distribution methodwas met with outrage and chaos. But do you think there issome merit in such an appraisal system? Why or why not?9-18. Evaluate the other performance appraisal methodsmentioned in this case. Which would you recommendfor LuxCar?9-19. Does this case prove that a perfect performance appraisalsystem is impossible? Discuss.

Accepted Answer

An individual's work performance is assessed systematically and on a regular basis in relation to…