The Best Laid

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Background/Issue: Hiram Philips, CFO and chief administrative officer of Rainbarrel products, was very confident about the changes that he brought to Rainbarrel. He had been in the company for only a year and had done lots of infrastructural changes. Now the day had come for Hiram to share the positive results of his new performance management system with his colleagues. Everything looked positively rosy until he heard the results of the annual employee survey and the market survey of Rainbarrel’s valued customers: employee morale was way down, and key customers were complaining.

Analysis: Before Phillips’ arrival a year ago, Rainbarrel had been facing financial difficulties due to lax budgetary discipline and a slowdown in consumer spending after a decade-long boom. CEO Keith Randall was an inspiring leader who focused on innovation, but had allowed the organization to become a little lax. Phillips then instituted the performance management system to control costs using the following metrics: a) reducing headcount by imposing a 10% across-the-board cut on all the units, b) increasing productivity by setting a very simple ratio between quantity and time, c) establishing goals for goods being shipped on time, and d) changing policy on how salespeople earned commissions by rewarding them with a percentage based only on the actual purchase price. The new performance metrics and incentives were intended for his ultimate goal: the importance of straightforward rules and rewards in driving superior performance.

Options:

1) The company should revisit Phillip’s metric of being on time for goods shipped and productivity for customer service. This could save the company from receiving negative feedbacks from customers since the classic case of “keep it simple” did not work for such departments that interact directly with external customers. 2) Philip also should bring quality aspect into his metric to reduce negative feedback. 3) The company should give...
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