Harvard Business School Case Study: Compensations and Performance Evaluation at Arrow Electronics

This case study was another example of failed systems to give compensation by measuring employees performance.

My thoughts while reading this case, however, were how come a large and successful company such as Arrow Electronics cannot put a non-compete system in place to prevent its sales force from going to a competitor and why did they not have systems in place to ensure even when an individual from their sales got hired by competition he/she would not be able to take their customers with them.  Is it possible that a 4th largest electronics distributor does not have a legal department??

What is also disturbing is that their CEO, Steve Kaufman, even though able to see the flaws in their performance evaluation and compensation systems, was trying to fix the system by introducing more problems to it.  How could one possibly rate her employees on 7 categories on a 1 to 5 scale?  On a scale where employees are compared against each other in their respective groups and where supposedly perfection is impossible.

Mr. Kaufman’s view was that nobody could possible be a 4 and a 5 in all the categories.   My question is what if someone was a perfect 5 in all those categories in his company?  Where would he or she place in his company?  And what if one team 5 inexperienced members while another team has 5 experiences salesmen?  Does that mean the first team on average is performing worse than the second team?

Reading this article, made me look up Arrow Electronics on the internet.  To my surprise, they are not doing that bad in the stock market!  Maybe they are doing things differently now….

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~ by aliahmadian on March 8, 2010.

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