Please answer the 4 questions at the end of the case study.

Length: 2-3 complete paragraphs for each case study question. Case study questions are available at the end of the case study.

The Case of the Missing

Performance Reviews

Susan R. Stryker and James B. Stryke

After working her way up the managerial ladder in the finance

departments of a number of large manufacturing companies, Margo

Romano finally landed what she believed was her dream job: chief financial

officer and a member of the executive committee for a financially successful,

family-owned tool and die manufacturing business. Initially, she had been

concerned about being the first nonfamily member to hold a position on the

executive committee, but the firm was highly regarded in the industry, and

the compensation package was excellent. She was also working hard to de-

velop a good rapport with the other members of the executive committee,

especially the CEO. The CEO, the daughter of the founder of the company,

had told Margo privately that although some of the other family members

had initially been concerned about bringing a nonfamily member onto the

executive committee, she had supported her and told them that Margo was

the perfect match for the position.

After Margo had been with the company for about a year, the CEO called an

executive committee meeting to announce that, for the first time in company

history, the company would have to downsize to respond to rapid changes in

its manufacturing business. Margo and the CEO had met several times prior

to the announcement to review the financial situation, and Margo had agreed

with the CEO that downsizing, although always a painful process, was neces-

sary for the long-term health of the 40-year-old company.

Margo was pleased that the CEO publicly stated that Margo would be in

charge of the entire process of reorganizing the company because she trusted

that Margo would do things in a thoughtful and an ethical manner. Further,

after the meeting, the CEO told Margo privately that she had complete faith

in her and, in fact, trusted her more on than she did the head of her human

resources department, who had been around for quite some time now.

On Margos recommendation, the company decided to make its layoff de-

cisions based on the annual performance appraisal scores of the employees.

Margo directed that each department manager submit a list of employees

ranked according to the average score of their last five annual performance

appraisals. Several years ago, the company had initiated what it felt was a very

fair performance management system. At the start of every year, each man-

ager and employee met to establish five goals for the employee for the coming

year. After agreeing on the goals, the manager and the employee signed off on

those goals. At the end of the year, they met again, and the manager assigned

the employee a performance rating based on accomplishment of the agreed-

upon goals. Both, manager and employee then signed off on the annual score.

As long as the performance appraisals had been conducted in a fair and im-

partial manner, this seemed to be the best way to approach the challenging

task of layoffs. In fact, this method of review has been used by other major

U.S. corporations, including General Electric.

As Margo was reviewing the performance evaluations, she noticed that in

three departments, employees were listed at the bottom of the performance

list for that department but had N/A where the evaluation score should

have been written. When she asked the managers to explain, they told her

that these workers were old-time employees who had been with the company

since the beginning. The formal performance-appraisal system had only been

instituted 10 years earlier, and the former CEO and founder of the company,

the current CEOs father, had agreed to these long-time employees request

that they keep receiving informal evaluations as they always had.

In a private meeting, Margo raised the issue with the CEO, stating: Yes,

I am aware that some of our oldest employees havent been evaluated in a

long time, said the CEO, but frankly, and just between you and me, its time

for them to retire anyway. They just arent performing the way they used to.

However, remember that the companys been very good to them; they will

have a good retirement package, not to mention the severance youve con-

vinced me to offer. Letting them go will let us lower our overhead and save

jobs for the younger peopleyou know, the ones with young kids and fami-

lies just starting out. Margo thought for a moment. Have these employees

been informed that their performance has not been satisfactory she asked?

Well, good question, the CEO responded. Ive tried to talk with each one

of them, or most of them, in any case, informally every year and weve talked

in general about when they might want to consider retiring for a number of

years now. Its true, some of them seemed to get the hint, others didnt. But in

any case, we have got to do what is in the best interests of the company, dont

we? If we dont, in this competitive environment, no one will have a job.

As they got up from the table, the CEO put her arm around Margos shoul-

der. By the way, she said, you should know that both the executive commit-

tee and I think youve really been doing a good job. This makes me feel good

about what a good choice I made when I hired you! she said with a smile.

Also, Im glad you talked with me today about these employees. Its a good

reminder that you and I always need to keep all communication channels

open! Margo smiled in return as she left the CEOs office. But as she walked

down the corridor, she knew there were some important issues she needed

to think about.

Questions:

1. What are the key ethical questions raised?

2. What ethical principles apply in this case?

3. What is your solution to the ethical dilemma? What is the right thing

for Margo to do?

4. What ethical-leadership lessons have you learned?