Lance Amato, CFO for Mills Paper Company, sat at his desk dreading the upcoming meeting with John Carpenter, a general accountant with the company. He was going to notify Carpenter of his termination from the company. Although it was going to be a difficult meeting, Amato felt the company had no choice and had done everything possible to assist Carpenter in meeting the performance expectations that had been set for him. As he sat waiting for the meeting to begin, Amato reviewed Carpenter’s performance record and history at Mills. Carpenter had been hired by Mills Paper Company two years earlier. At the time, he was 56 years old and had come to Mills with considerable experience. When hired, Carpenter signed a written performance agreement, a patent and confidentiality agreement, and a standard ethics letter. Mills used a management by objectives performance appraisal system for its managerial staff. The expectations and objectives of positions were put into a performance agreement annually. Within one week of employment, Carpenter and his supervisor at the time, Henry Castagnera, had agreed upon the objectives and performance metrics for Carpenter’s position. Carpenter signed the MBO agreement. Carpenter’s tenure at Mills Paper was marred by a number of poor performance appraisals and demotions. In the first quarter after he started work, Carpenter received a poor performance rating from his direct supervisor. At the time, several managers, including the president of Mills, expressed their disappointment and concern about Carpenter’s performance as division controller (see Exhibit 3.5). However, the files indicated that despite the poor performance rating, Carpenter received a seven percent salary increase the first year of his employment.

Due to the reorganization of the company shortly thereafter, Carpenter was assigned to a different division and supervisor. His new supervisor, Bob Crane, had prepared a set of objectives for Carpenter. During a mid-year review, Crane rated his performance as “needs improvement.” The review he submitted contained substantive comments to support the rating (see Exhibit 3.6). As part of the improvement plan Crane developed for Carpenter, it was agreed that his performance would be reviewed again in three months. Crane had noted the following in Carpenter’s personnel file at that time, “There has not been positive action in order to improve, and in some areas we have even lost ground.”

Crane made further suggestions for Carpenter’s improvement that included meeting with general managers at Mills to help him understand their needs. He also charged Carpenter with developing and issuing a new forecasting form for use in the division. When Carpenter did not meet performance expectations, he was demoted by Crane to financial analyst with a change in title, reduced grade and responsibilities, but remained at the same pay. Once again, Carpenter was told his performance needed to improve. Subsequent papers in the file showed Carpenter’s performance did not improve or ever reach the level expected of someone with his background and skill. In a last ditch effort to manage Carpenter, Amato had given him the option of being demoted to a general accountant or being terminated for inability to perform his job. Carpenter chose to accept the second demotion with decrease in salary from $65,000 to $61,000. A set of performance objectives were developed for Carpenter in his new position. However, after two months it was clear that Carpenter was not able to meet the minimal targets that had been set for him. His financial reports continued to be of poor quality and were inaccurate. Finally, the decision was made to terminate Carpenter. As Amato reviewed Carpenter’s file and the performance reviews, Amato wondered why they had not dismissed him earlier.

Amato looked up when he heard a knock on his door. It was Carpenter. After a rather formal greeting, he told Carpenter he was terminated for poor performance and would receive 21-weeks severance pay, payment for unused vacation time, and could also use the company’s outplacement services. Carpenter reacted first with shock and then anger. He slammed the door as he left Amato’s office. Two months later, Mills Paper Company was notified that Carpenter had filed a complaint with the local EEOC Office alleging age discrimination, unfair performance appraisal, and negligent and intentional infliction of emotional distress.

Questions

1. Evaluate Mills Paper Company’s management of John Carpenter’s performance. What are the strengths and weaknesses of their approach to performance appraisals (i.e., management by objectives)?

2. Do you agree or disagree with Lance Amato’s observation that Carpenter should have been terminated earlier?