performance evaluation

The Annual

Performance Rating



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discuss accurate continuously
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justify prosper document
require excellent



The New Manager

With fifteen years of corporate HR experience under her belt, Sylvia was hired to be part of the upper-management team of Orbit, a small, software development and sales company.

The CEO, Peter then gave Sylvia her first assignment: to look into Orbit’s annual employee performance review process, and improve on it.

The Annual Performance Review

At the end of every year — late December — the managers of the two department of Orbit (software development and the software sales) are required to evaluate each of their staff members based on their own recollections of how employees have performed during the past twelve months.

The Rating Scale

The employee rating consists of a 3 point scale:

3 = excellent performance; better than expected
2 = average performance; as expected
1 = poor performance; worse than expected

An Integral Part of the Company

Then based on the ratings, the company’s annual pay raises for the following year are determined.

Orbit’s upper-management has always thought this to be a great system to ensure quality work, innovation and productivity. They realize that if the company is to grow and prosper, worker performance needs to continuously improve.


However, throughout the years, virtually every employee has been given a rating of 2 (as expected performance).

Peter believes this is not a true and accurate reflection of the employees.

Many employees don’t thinks so either: behind closed doors, Peter has told Sylvia, that several very promising employees have quit the company — and joined their competitors — specifically citing the annual performance evaluation process as a contributing factor to their departure.

And at the same time, the number of underperformers has gradually been on the rise.


In her briefings with the CEO, Sylvia has found that when the department managers rate someone’s work performances as “3” or “1”, they are required to justify and document their choices. They must then meet with those employees for private, one-on-one counseling.

All these have to be compiled into an official report, and kept in the employees’ folder.

Meanwhile, ratings of “2” do not require the department managers to justify, document and meet with the employee to discuss their performance over the last year.


What thoughts and suggestions would you have for the CEO about the annual performance review process the company currently uses?

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1. Sylvia started working at Orbit after she graduated from university. True or false?

2. Describe the company. Is it new or old, big or small, high-tech or low-tech? Are there are many different departments of the company?

3. Was Sylvia’s first task to design and implement new software programs? What is her first task?

4. Describe the employee rating and evaluation process.

5. What are the aims, goals or objectives of the company? What are the short, medium and long-term goals of the company?

6. The employee ratings and evaluation are insignificant, except for record keeping. Is this right or wrong?

7. Have there been problems regarding the performance and rating system? What is or are the problems?
A. Why have the managers given virtually all employees a “2” rating? Do you think this accurately reflects their performance, productivity and contribution to the company?

B. What is the solution to this situation?

C. Does your company or organization have similar employee evaluations? How does it work?

D. Are you and other employees satisfied with this system? How could it be improved?

E. What will happen in the future? How will things operate in the future?


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