Magnitude Technologies is a worldwide leader in hardware, software and services essential to computer networking. Until recently, Magnitude Technologies’ various offices across the world used more than 20 different systems to measure employee performance. Furthermore, up to 15% of employees did not receive a review; only 2% of all employees received the lowest category of rating; and there was no recognition programme in place to reward high achievers. Overall, it was recognised that performance problems were not being adequately addressed, and tough pressure from competitors was increasing the costs of managing human performance ineffectively. Magnitude Technologies also realised that to improve its ability to meet its organisational goals it was necessary to link these to each employee’s goals. Given this situation, Magnitude Technologies’ CEO announced that he wanted to implement a forced distribution performance management system in which a set percentage of employees were classified in each of several categories (e.g., a rating of 1 to the top 20% of performers; a rating of 2 to the middle 70% of performers; and a rating of 3 to the bottom 10% of performers). A global cross-divisional HR performance management team was put in place to design and implement the new system. The first task for the performance management team was to build a business case for the new system by showing that if organisational strategy was carried down to team contributions and team contributions were translated into individual goals, then business goals would be met. Initially the programme was rolled out as a yearround people management system that would raise the bar on performance management at Magnitude Technologies by aligning individual performance objectives with organisational goals by focusing on the development of all employees. The desired outcomes of the new system included raising the performance level of all employees; identifying and retaining top talent; and identifying low performers and improving their performance. Magnitude Technologies also wanted the performance expectations for all employees to be clear. Before implementing the programme, the performance management team received the support of the CEO who communicated that the performance management system was the future of Magnitude Technologies. The CEO also encouraged all senior leaders to ensure that those reporting directly to them understood the process and also accepted it. In addition, the CEO encouraged senior leaders to use the system with all of their direct reports and ensure that the system was used throughout their respective divisions. The CEO also instructed senior leaders to stop the development and use of any other performance management system, and explained the need for standardisation of performance management across all divisions and global offices. Finally, the CEO asked senior leaders to promote the new programme by communicating about it to employees and by assessing any needs in their divisions that would not be addressed by the new system. The Magnitude Technologies global performance management cycle consisted of the following processes: Goal cascading and team building Performance planning Development planning Work execution with support from managers and / or colleagues, where required Ongoing discussions and updates between managers and employees Annual performance review 2 Training resources were made available on Magnitude Technologies’ intranet for managers and employees, including access to all necessary forms. In addition to the training available on the intranet, conference calls took place before each phase of the programme was begun. Today, part of the training associated with the performance management system revolves around the idea that the development planning phase of the system is the joint year-round responsibility of managers and employees. Managers are responsible for scheduling meetings, guiding employees on preparing for meetings, and finalising all development plans. Individual employees are responsible for documenting the development planning preparation forms and attending the meetings. With forced distribution systems, there is a set number of employees that have to fall into set rating classifications. As noted, in the Magnitude Technologies system, employees are given a rating of 1, 2 or 3. Individual ratings are determined by the execution of annual objectives and job requirements as well as by a comparison rating of others at a similar level at Magnitude Technologies. For employees receiving a 3, the lowest rating, a performance improvement plan is discussed and agreed to by the manager and respective employee. Employees who achieve a rating of a 3 do not qualify for salary increases or bonuses. Employees with a rating of 2 receive average salary increases as well as average bonuses. Employees receiving the highest rating of 1 receive high salary increases and large bonuses. These employees are treated as “high potential” employees and are given extra development opportunities by their managers. The company also makes significant efforts to retain all individuals who receive a rating of 1. Looking at the future, Magnitude Technologies plans to continue reinforcing the needed cultural change to support forced distribution ratings. The performance management team continues to educate employees about the system to ensure that they understand that Magnitude Technologies still rewards good performance; they are just measuring it in a different way than in the past. There is also a plan to monitor for and correct any unproductive practices and implement correcting policies and practices. To do this, Magnitude Technologies plans on continued checks with all stakeholders to ensure that the performance management system is serving its intended purpose. (Adapted from: Aguinis, H. (2019) Performance Management. Fourth Edition. Chicago: Chicago Business Press.)

QUESTION 1 (25 Marks) “The key stages of the performance management cycle are planning, implementation, monitoring, and review.” To what extent does Magnitude Technologies’ new approach to performance management align with the key stages of the performance management cycle? Discuss.

QUESTION 2 (25 Marks) Critically discuss whether Magnitude Technologies’ approach is that of performance management or performance appraisal.

QUESTION 3 (25 Marks) “Magnitude Technologies’ CEO announced that he wanted to implement a forced distribution performance management system.” Is the forced distribution performance method appropriate for Magnitude Technologies, or would the balanced scorecard method have been a better approach for the organization? Discuss. 3

QUESTION 4 (25 Marks) Critically discuss the role of leadership and management in ensuring that Magnitude Technologies’ new performance management system is effective