Arrow Electronics Case Study
Arrow Electronics Case Study
Arrow Electronics is the fastest growing distributors of electronic components in North America and the world’s largest overall at the time of this study. Arrow’s capital structure policy is heavy on dependence on debt financing, which is sharp in contrast to its main rival, Avnet. CEO Stephen Kauffman is struggling with the implementation of an accurate and reliable way to evaluate his employees. Kauffman implemented an EPR (Employee Performance Review) system that was currently not providing him with enough information that he needed to determine the level of performance given to him by his employees. Because of industry trends and compensation practices, the electronics distributors sales force is transitory. The industry has a high turnover in sales and usually when sales reps move to other companies they take their customers with them. For five years Arrow struggled with the accuracy and implementation of their EPR. Arrow saw problems ranging from inflated scores, ratings that reflected the self-serving bias of the managers who administered the appraisal, to lack of consistency. Kauffman decided to respond to these problems by providing training on how to scale, score and administer the appraisal. He made video notifiying managers exactly what he wanted and set goals to what percentage of employees should score in every single one of the categories. When Kauffman received the results from managers he became frustrated because the results were skewed. A problem existed with how the appraisals were given, but the real problem lied with the appraisal itself. The EPR that Arrow was asked to use was asking the managers to evaluate their employees compared to one another, rather than comparing them to expected standards using behavioral targets. The appraisal is worded in a way that each individual employee’s success is defined within the parameters of the success or failure of their coworkers. Because of this
Arrow Electronics is the fastest growing distributors of electronic components in North America and the world’s largest overall at the time of this study. Arrow’s capital structure policy is heavy on dependence on debt financing, which is sharp in contrast to its main rival, Avnet. CEO Stephen Kauffman is struggling with the implementation of an accurate and reliable way to evaluate his employees. Kauffman implemented an EPR (Employee Performance Review) system that was currently not providing him with enough information that he needed to determine the level of performance given to him by his employees. Because of industry trends and compensation practices, the electronics distributors sales force is transitory. The industry has a high turnover in sales and usually when sales reps move to other companies they take their customers with them. For five years Arrow struggled with the accuracy and implementation of their EPR. Arrow saw problems ranging from inflated scores, ratings that reflected the self-serving bias of the managers who administered the appraisal, to lack of consistency. Kauffman decided to respond to these problems by providing training on how to scale, score and administer the appraisal. He made video notifiying managers exactly what he wanted and set goals to what percentage of employees should score in every single one of the categories. When Kauffman received the results from managers he became frustrated because the results were skewed. A problem existed with how the appraisals were given, but the real problem lied with the appraisal itself. The EPR that Arrow was asked to use was asking the managers to evaluate their employees compared to one another, rather than comparing them to expected standards using behavioral targets. The appraisal is worded in a way that each individual employee’s success is defined within the parameters of the success or failure of their coworkers. Because of this