1. What overall changes could you recommend to the executive team at Egan’s about its HR practices?
2. What are the pros and cons of Egan’s performance appraisal system? Do you think it identifies the best employees? Do you think it helps develop employees to perform the best they can?
3. Can increased sales be linked directly and/or indirectly to the appraisal system? How about some of the other performance effects? How would you change the system?
4. How do you account for the fact that absenteeism has decreased at Egan’s while turnover has increased?

At the end of fiscal year 2004, revenues at Egan’s Clothiers had increased 21 percent over 2003 and had increased at a compounded rate of 24 percent over the past five years. That’s the good news. The bad news is that costs have risen at an even more rapid rate, thereby shrinking the company’s gross margins. As a consequence, Egan’s profitability (measured as return on sales and return on net assets) has actually fallen by 14 percent over the past three years.