Chennai Fashions
You, pursuing MBA in a prestigious B-School, receive an opportunity for a consulting project with
Chennai Fashions, a retailing conglomerate in Chennai. The founder of the company needs you to
study the company’s current performance appraisal system and suggest if any changes to be made.
About the Company:
Chennai Fashions is a retailing conglomerate that owns 20 medium-sized stores located throughout
Chennai. Its major customers are primarily middle- to upper class families that purchase sportswear,
dresswear, and fashion accessories. Chennai Fashions’ has a long-standing belief that their success as
a retailing firm depends on the competencies and efforts of each sales employee. As such, they hire
only people with sales experience and have an excellent training program as well. Until recently the
store has enjoyed a steady growth, but unfortunately, profit and sales are decreasing for the company
now.
By far the most problematic and volatile issue at Chennai Fashions has been salary increases and
promotions. Because the company promotes from within, comparisons generally have to be made
across sales employees in different departments. To combat arguments of subjectivity and bias in the
decision-making on raises and promotions, Chennai Fashions links these rewards to objective
measures of performance.
More specifically, rather than using the subjective ratings of employees’ performance by their
supervisors, ongoing accounts of sales results are maintained for each employee in a centralized
database. Based on this sales information, each department manager assigns the employees in their
department to one of the following five categories:
1. Superior / top 10 percent
2. Very Good / next 20 percent
3. Good / middle 40 percent
4. Fair / lower 20 percent
5. Poor / lowest 10 percent
Administrative decisions (regarding pay and promotions, etc.) are then made across departments
using these ratings. Additionally, to provide feedback to the employees concerning their relative
performance, data on sales are updated daily in the system and are displayed in the break room. It is
hoped that the feedback is motivating to employees. In addition, the posting of the sales data provides
that there will be no surprises for the employee when the annual performance appraisal interviews
come around. It is interesting to note that since the performance appraisal system has been
implemented, there has been no formal complaints registered regarding the performance appraisal
system or salary and promotion decisions.
However, sales managers themselves have mentioned that they do not feel as comfortable now that
they are required to assign employees to the “fair” and “poor” categories. Further, there have been
many recent complaints that employees have not been as patient or courteous with customers as they
should be. This was best summarized by the manager who said, “My people are very aggressive with
the clientele to make a sale – the very opposite of what the training program trains them to do.” This
lack of customer service is frustrating since the training program has been proven to be effective in
the past. Additionally, there seems to be great deal of competition within departments that is hurting
a team effort. Although intergroup rivalries between departments have always been viewed as
healthy and normal, the lack of cohesiveness within each department is seen as a problem.
Adapted from Gruys, M. L., & Stewart, S. (2007). Teaching human resource management concepts with experiential exercises. Journal of
Human Resources Education, 1(1).
