1. Given that the case describes a well-designed performance appraisal process, what specifics would expect to find if you were handed that portion of the company's employee handbook?
   • Include at least one type of performance appraisal method description
   • best practices for that appraisal method (how are employees differentiated, how are performance measures created)
   • description of the training that supervisors receive
   • efforts built into the system that helps avoid/identify biases
   • explanation of efficient use of employee/manager time and resources when engaging in performance appraisal process
2. What are the best arguments (from the text reading) FOR still giving merit increases in this instance?
3. What are the best arguments (from the text reading) FOR NOT giving merit increases (and instead giving cost of living increases to everyone)?
   • What would the "human capital theory" suggest in this instance?
4. If you were Ann, what would you decide to do?
   • Specifically, if the company chooses not to offer the merit pay increases, how should they approach explaining the decision to the employees? What other acts could they do to acknowledge the high-performers?
   • If the company chooses to offer the merit pay increases, how should they approach communicating the decision to the employees?

Activity #2 small pay increase to help adjust to increases in the cost of living. Merit Increases at Diverse Prints While unsure if the company will turn around, Ann remains hopeful. The company has a Tough economic times have had an impact at Diverse Prints, a graphic design and production company. Diverse works with medium-sized companies to design and produce strong reputation for creativity and reasonably priced services and Ann is convinced that as the marketing materials. As companies cut their advertising budgets in response to an unstable economy improves, business will return. As such, she insists on still giving the merit increases. economy, the workload at Diverse also declines. Ann Lewis, the company's CEO, is optimistic Sam argues that without the capability of giving merit pay increases that differentiate poor from about the future, but concerned about retaining their talented staff of designers and support staff. superior performance, the increases will not have the desired effects. Sam suggests still An important part of employee management at Diverse is their annual performance conducting the performance appraisals, but keeping the pay increases separate. Ann argues that appraisal process and subsequent merit pay increases. Diverse takes the employee review the employees understand the troubled times, and feels that eve with a small difference in the process seriously and provides its' employees with constructive feedback on their performance. The merit pay program has been a useful tool in recognizing superior performance and talented increases, the merit pay program is still useful. Further, she suggests that the current slowdown designers have enjoyed generous pay increases over the years. The process clearly differentiates is most likely a temporary problem and next year they will resume their typical increases. levels of performance with those employees with top reviews earning pay increases as high as Despite their conflicting views, the two must now come to an agreement on how to handle this 15% of their annual pay. Conversely, employees with average or poor performance earn little or year's performance appraisals. only small merit pay increases. A generous merit pay budget has allowed for such distinctions to be made. However, this year the merit pay budget is relatively small. Due to budget cuts across the organization, the available merit pay budget is only 2% of payroll. Faced with the limited budget, Sam Hiram, the Director of Human Resources, does not think that merit pay increases should be given this year. Instead, he is recommending that the company spread the funds out and give all employees a