“performance Management at Vitality Health Enterprises, Inc.” Case Study
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“Performance Management at Vitality Health Enterprises, Inc.” Case studyHR Strategy IV Midterm ExamFall 2015Name: Yuting Cai (RUID: 161001401)The questions on this exam relate to the case, “Performance Management at Vitality Health Enterprises, Inc.” This case is available for purchase at the following URL:
R: For now, the full chain of providing both beauty and health products is rare. Not only the combination of products, but also Vitality manufactures its own products and distributes them by different sources of retailers. The company has worked with the leading pharmacy retailers in US and Canada, specialty health and nutrition retailers, and smaller and regional pharmacies. Also, the suppliers and technologies of Vitality are unique.I: The resources of Vitality are not easily imitated. The unique product formula of Vitality is created by Japanese chemists, which made it distinctive from the normal beauty products in US. It harmonizes the Japanese style formulas with the needs of foreign customers’ needs. It is hard for competitors to copy the special formulas.However, the idea of combine inner and outer personal care products could be easily imitated. Other competitors could see the success of Vitality to sell the whole range of beauty and health products. They could use the same way to attract customers.O: The resources are organized to capture value. Vitality provides high quality products to its customers. After the expansion, the company has offices around the world. However, Vitality made all the regional offices’ structures similar to its headquarter. They contain different departments with all the functions. It also recruited a global manager to revitalize the company after the growth.2. What were the problems with Vitality Health’s old performance management system? [Discuss specific implications for value creation/value capture and human capital emergence.] What were the root causes of these problems?Under the old performance management system, many managers tend to give all the employees an average rating to avoid upsetting them. The result could hardly distinguish the top-performing employees and the nonperformers. The top-performing employees would feel unappreciated and dissatisfied with the merit increase for that.The final salary was a combination of the Pay policy line formula and the comparative ratio. The merit increases could decrease if the comparative ratio is higher. As a result, some of the employees might have lower raises than other employees with same performances. Moreover, in order to reduce turnover, Vitality benchmarked the compensation level for each peer group. It made the compensation system flat without any bonuses or alternatives. The salary will automatically increase with the employees’ tenure irrespective of performance. This would generate some free riders and low incentive to the hardworking employees.Value creation/value captureAll of the above could make top-performing employees feel unrecognized and unrewarding. Employees would create more value if they could capture more values. That means if employees knew that they could earn some benefit from extra effort spending on work, they could work harder. However, the company’s compensation system suggested that it doesn’t really matter if they work hard or not. It looked like most of them earned about average level. There is not much distinguishing of the employee financial benefit.