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Case study

Johnson arrived with much acclaim from being the head of Apples successful retail operations.

At Penneys, he immediately began one of retailings most ambitious overhauls, trying to position

the company for success in a very challenging and difficult industry. His plans included a stores within-a store concept, no sales or promotions, and a three-tiered pricing plan. He suggested that

Penney needed a little bit of Apples magic. From the start, analysts and experts questioned

whether Penneys customers, who were used to sales and coupons, would accept this new

approach. Long story short....customers didnt. For the full fiscal year of 2012, Penney had a loss

of $985 million (compared to a loss of $152 million in 2011). Now, you may be asking yourself,

what does this story have to do with HRM? Well, a lot it turns out! When a company is struggling

financially, it is going to impact its people.

And for JCPenney employees, that impact came in the form of a traffic light color-coded

performance appraisal system. In a companywide broadcast, supervisors were told that they

should categorize their employees by one of three colors: Greentheir performance is okay;

Yellowthey need some coaching to improve performance; and Redtheir performance is not

up to par, and they need to leave. Many employees werent even aware of the system

and supervisors were given no guidance one way or the other regarding whether to tell them about

it, although company headquarters chose not to disclose the light system to employees.

Although the uncertainties over how to inform or even whether to inform employees about this

HR initiative is troubling, communication and HR experts say there are other problems with this

green/yellow/red approach. One is that its insensitive to approach the livelihoods of human

beings this way. The easy-to-understand simplistic nature of green, yellow, and red colors

doesnt translate well to what will be a tremendously personal and difficult situation for many

employees, especially those with a red appraisal. Another problem is that labeling employees

can create difficult interpersonal situations. The labels can become a source of humor and teasing,

which can deteriorate into hurt feelings and even feelings of being discriminated against. No

matter how benign a color-coding system may seem, its never going to work. This doesnt mean

that employers dont evaluate employees. But companies should be open about it. Employees

should know that theyre being rated, what the criteria are, and if they have a poor rating, what

options they have for improving. There should also be a fair process of appeal or protest if an

employee feels the rating was unfair

Questions:

1. What is the main issue/issues of this case study?

2. Many managers say that evaluating an employees performance is one of their most difficult tasks. Why do you think they feel this way?

3. What can organizations (and managers) do to make it an effective process? Whats your impression of the color-coded system suggested by the former CEO? As a store department supervisor, how would you have approached that?

4. What could JCPenney executives have done to make this process more effective?

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