Question 4. Performance Management at Datang (25 marks)

Serving the markets of PRC, Hongkong, and Macau, Datang Logistics has been in the computer hardware logistics business for more than 10 years. Presently, the company has about 500 employees and operates 5 medium-sized distribution centers that receive, store and deliver computer hardware product to small retail outlets. In each distribution center, there are three major departments:

• Front office office staff responsible for taking orders, i.e., receiving and processing orders,

• Warehousing department warehousing staff responsible for case loading, i.e., receiving,

  storing and loading computer products on trucks,

• Delivery department truck drivers responsible for case delivery, i.e., transporting the

  computer products to retail outlets.

  Until recently, Datang has enjoyed good business and profit from its clients. Aiming to run the business more professionally and boost employee performance, the HR manager announced a year ago the implementation of an employee performance management system with immediate effect. Having promptly inspected some existing work records and time sheets, the HR manager assigned a set of performance evaluation criteria for the three major departments:

• Front office staff order taking speed, i.e., number of orders taken per person per week,

• Warehousing staff case loading speed, i.e., number of cases of product handled per man-

  hour, time required to load each truck,

• Truck drivers delivery speed, i.e., length of time to complete the delivery route.

Along with these evaluation criteria, employees were given by the HR manager targets of raising their existing performance by 10 percent. Upon enforcing the performance requirement, levels of individual employee performance as measured according to the newly established evaluation criteria indeed increased. Nevertheless, while employees in the three major departments achieved somewhat better individual performance, the organizational performance unexpectedly suffered. The top management team saw not only an apparent rising trend of the total cost per case (which seriously hurt the profitability), but also an increasing number of customer complaints on order error, case/delivery damage, delivery inaccuracy or untimeliness, and customer discourtesy. Another newly emerging problem that drew the concern of the top management team was the escalating amount of conflicts among the three major departments. Indeed, before commencement of the performance management practices, Datang had been able to achieve good profitability by upholding its long-time mission of providing excellent service quality. Now, the top management team is considering that the performance management practice should be the main culprit and, particularly, the way employee performance is evaluated should be re-designed.

In the context of Datang, answer the following questions:

1. a) What is the existing performance measurement method at Datang? What are the typical

   advantages and disadvantages/challenges of such a method? (5 marks)

2. b) Propose with reasoning a revised set of performance goals that you consider more appropriate for each of Datangs three major departments. Hint: first tabulate your revised set of performance goals for each department and then write a paragraph on your reasoning. (10 marks)

3. c) Besides your answer to Part (b), recommend any five other actions Datang should take to increase the effectiveness of its performance management system. (10 marks)