Four Quandrants Appraisal Strategy

It started with Lehman Brothers filing for bankruptcy. Then there was the Satyam fiasco converting the SWITCH (Satyam, Wipro, Infosys, TCS, CTS and HCL) into WITCH. The US economy plummeted dragging along all the dependents with it. The businesses took a nasty hit. The
All of this at such an apt time of the year that appraisals were definitely contenders for incurring the wrath of recession raising its ugly head.

Many companies implemented different ways to manage cost. Obvious expenses like free tea/snacks/lunch, costly tissue wipes, bus services and international travel were curtailed as first reaction. But when the recession showed signs of persistence companies had to consider using the axe. Some opted for downsizing; others went with pay cuts and few opted a mix of downsizing and pay cut.

A year passed by with no appraisals. We derived our feel good factor from the thought of “Be happy that you have your job”. And then …. there were some early indicators like rise in stock market, reduction in interest rates, increase in number of projects etc, signaling recovery phase. Our company formally announced the appraisals to take place during first week of Jan.

Consider time period starting from 1st Jan 2008. The appraisals were due on 1st Jan 2009. Due to recession and cost cutting measures, 2009 witnessed a salaray freeze (and lay offs too). What is the strategy of organizations to appraise employees on 1st Jan 2010?

Being working in services department for about seven years now, I have always seen four distinct groups in which one can segregate the workforce. The assumptions are:

1. 1. The years of experience and skillsets in each group can be different.



2. 2. Each individual’s years of experience defines an expected level of expertise. This is relative as there is not absolute measure available.



3. 3. The group segregation is driven by billability version indispensability.

Note: This digram is a modified adaptation of the BCG matrix.

The quadrants are divided using Billability and Indispensability as two dimensions.

Billability is the measure of revenue generated by an employee. It is generally driven by the hourly rate and utilization i.e. number of hours billed against available hours billed. Additionally, the billability is harmonized between individuals at different levels i.e. an employee billing two hundred dollars an hour ONLY for a week is considered less billable than someone who bills twelve dollars an hour for ONE MONTH. The fundamental (most of the times) behind such assumption is - Higher billable rates (to customer), higher the cost (to company in terms of compensation).

Indispensability is measure of companies need for retaining an employee because of characteristics like smart, hard working, sincere etc.

From the diagram, it is evident that the stars, which are indispensible and billable, will definitely get a good appraisal. On the contrary, the dogs, which are dispensable and on-bench, will get a mediocre appraisal. The cash cows, dispensable but billable, and question marks, which are indispensable but on-bench, are critical areas which need to be addressed carefully. A cash cow expects an appraisal justifying the revenue they generated from the company. A question mark’s argument would be that lack of opportunity to work on a project is the organizations shortcoming and should not bias his appraisal. A clash occurs when the appraisal of the cash cow matches or is lesser or greater than that of the question mark. If the appraisal matches or is lesser than the question marks, the cash cow considers the appraisal unfair because they consider that the appraisal for the question marks is done using a percentage of the revenues generated by the cash cows. Similarly, if the appraisal of cash cows is more that question marks, the question marks feel unfair because they always consider that they could replace the cash cow and become billable.
Post appraisal, the dogs are bound to quit the organization for better compensation and as the economy is booming, they are sure to find another job. Due to expectation mismatch there are good chances of the cash cows and question marks leaving the organization too. Again, the hike given in an appraisal cannot be compared with the one given during recruitment. This adds to the fury of employees as they feel that the organization is more concerned pleasing the new recruits.

The human mind also plays an important part in priming the employees mind. One year of a salary freeze means that an individual is one year behind schedule on his monetary progress path. To make up for this loss, the simplest strategy is to get an appraisal in parent company and move to a different company. This is applicable to the stars too. If we view the organization along with its competitors as a whole, then there is a tendency of shuffling of resources amongst different companies.

Bottomline: Irrespective of the segregation, there is bound to be high attrition. Difference in pay hike between recruitment and appraisal might result into an employee turnover. Will the organizations develop a preventive strategy or a curative strategy? A preventive strategy implementation aims at employee satisfaction which in turn helps reduce attrition. Curative strategy implementation starts after an employee resigns. The sum of the Nash equilibrium of the entire organization (similar for all competitors), taking two employees of the same/different quadrants at a time will yield that the best cost effective strategy is .................. NO APPRAISALS AT ALL !