W25619

IS IT FAIR TO LET THEM GO? USING PERFORMANCE APPRAISAL

DATA TO DECIDE ON STAFF CUTS

Matt Pereira wrote this case under the supervision of Karen MacMillan solely to provide material for class discussion. The authors do
not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names
and other identifying information to protect confidentiality.

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Copyright © 2021, Ivey Business School Foundation Version: 2021-10-05

INTRODUCTION

It was August 2020 and Rodey Wing, a partner at global management consulting firm Kearney, had an
unsettled feeling. He had just wrapped up a concerning call with the chief human resources officer (CHRO)
of Mopsy Superstore, an important client. Wing had been working with Mopsy Superstore to develop a
cost-cutting strategy to help the company weather a period of declining revenue and profit connected to its
flailing optometry business.

After reviewing the issues at Mopsy Superstore, Wing had identified a solution that seemed
straightforwardat first. The company had changed its operations significantly, and there were many
employees that were not being fully utilized. Wing had determined that he should recommend laying off
1,500 employees in the optometry division in order to improve Mopsy Superstore’s profitability. To
determine who should face termination, Wing reviewed performance review information from the company
and pre-selected a group of low-performing employees. It was a tough decision, since it affected people in
a negative way, but it made sense for the overall good of the company. If these cuts were not made, the
whole division would be at risk.

Before delivering his recommendations, Wing decided to conduct a disproportionate impact assessment in
order to determine the impact of this decision on protected classes. A member of the LGBTQ+ community
himself, Wing cared deeply about equality, and had committed much of his career to advancing those priorities
at Kearney. As Wing reviewed the results of the assessment, he was concerned to see that protected classes
constituted a larger-than-expected proportion of the employees slated to be laid off. Employees from protected
classes belonged to minority groups based on race, colour, religion, national origin, sex, gender, sexual
orientation, and gender identity, physical/mental disability, and veteran status. Wing immediately put in a call
to the Mopsy Superstore CHRO. Unfortunately, the discussion served only to compound his worry. The
CHRO knew the process well and had observed performance review calibration discussions at the territory
level. She described a performance review process that had a great deal of subjectivity.

Having previously scheduled a meeting with Mopsy Superstore’s senior leadership to provide final
recommendations on the best way to realize cost savings, Wing had to quickly determine what the ideal course
of action was now that he had the assessment information. He wondered how he could advise his client in a way
that would help the business financially but also strengthen its equity, diversity, and inclusion (EDI) efforts.

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 Page 2 W25619

COVID-19 PANDEMIC

In early 2020 a deadly virus—COVID-19—was discovered in Asia which, in the following months, spread
to countries around the globe. 1 To prevent further spread of the virus, many countries instituted lockdowns,
where only essential businesses could operate. Public health experts also encouraged social distancing and
the avoidance of unnecessary outings. The United States was heavily impacted by the virus, with millions
of cases and hundreds of thousands of deaths by the end of 2020. The public health emergency plunged the
previously growing US economy into a recession, affecting numerous industries, including retailers. 2 The
lower foot traffic and higher e-commerce reliance among consumers had devastating effects on the eyewear
and optometry industry in particular. The pandemic also coincided with a time of increased conversation
and action surrounding racial justice in the United States.

RACIAL JUSTICE AND THE BLACK LIVES MATTER MOVEMENT

In the summer of 2020, the United States was facing a long-overdue reckoning on race as a result of the
killing of George Floyd, an African-American man, by police. Racial justice was at the forefront of public
conversation, in part due to the work of the Black Lives Matter (BLM) movement. The BLM movement
began in 2013 after the acquittal of the man who killed Trayvon Martin, a 17-year-old African-American
man. BLM’s goal was to eradicate white supremacy, stop violence inflicted upon Black communities, and
work for the validity of Black life. 3

Conversations and action around racial justice came amid the broader context of African-American men
and women being discriminated against in many facets of life, and disproportionately being killed at the
hands of police and law enforcement agents. Among them were George Floyd (2020), Tamir Rice (2014),
Laquan McDonald (2014), John Crawford (2014), Freddie Gray (2015), Walter Scott (2015), Alton Sterling
(2016), Philando Castile (2016), Terence Crutcher (2016), Antwon Rose (2018), Sandra Bland (2015),
Deborah Danner (2016), Atatiana Jefferson (2019), Breonna Taylor (2020), and countless others. 4

Many government officials, corporations, non-profit organizations, and individuals resolved to take steps
to reduce and eliminate the lasting impacts of white supremacy. 5 For many companies, this meant
increasing organizational EDI efforts as a first step.

MOPSY SUPERSTORE

Mopsy Superstore, a multinational retailer, had headquarters in Ann Arbor, Michigan. The company had
over 5,500 locations and 250,000 employees in North America. Mopsy Superstore operated large grocery
outlets that provided a wide array of services for customers, including groceries, clothing, electronics,
pharmacy services, and optometry services. Wing’s team was focused on the optometry division, as it was
experiencing significant challenges with ballooning costs.

1
“Coronavirus Disease (COVID-19) Pandemic,” World Health Organization, accessed April 20, 2020,
https://www.who.int/emergencies/diseases/novel-coronavirus-2019.
2
“COVID-19 to Plunge Global Economy into Worst Recession since World War II,” The World Bank, June 8, 2020,
https://www.worldbank.org/en/news/press-release/2020/06/08/covid-19-to-plunge-global-economy-into-worst-recession-since-world-war-ii.
3
“About,” Black Lives Matter, accessed April 5, 2020, https://blacklivesmatter.com/about/; Alem Tedeneke, “The Black Lives
Matter Movement Explained,” World Economic Forum, August 11, 2016, https://www.weforum.org/agenda/2016/08/black-
lives-matter-movement-explained/.
4
Anti-Defamation League, “Black Lives Matter: From Hashtag to Movement,” ADL, June 2, 2020,
https://www.adl.org/education/educator-resources/lesson-plans/black-lives-matter-from-hashtag-to-movement.
5
“Black Lives Matter Movement,” The Guardian, accessed June 28, 2021, https://www.theguardian.com/world/black-lives-matter-movement.

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 Page 3 W25619

Mopsy Superstore had consistently been viewed as a leader in EDI practices. The company had received
high scores on the Corporate Equality Index and Disability Equality Index, and had been recognized by
various Latino-, Black-, and veteran-focused publications for its efforts in creating a diverse and inclusive
workplace. Many employees viewed these elements of Mopsy Superstore’s culture as core reasons why
they chose to work at the company.

OPTOMETRY DIVISION

Mopsy Superstore had an optometry service available at about 5,000 of its locations. The full-service
optometry practice allowed customers to visit an optometrist for eye exams, and to purchase glasses, contact
lenses, and other related products. The division employed about 25,000 optometrists, an average of five per
clinic. The roles of each optometrist were standard across stores, with each team member largely
responsible for the same tasks. The optometry division operated separately from the rest of the store, with
a separate management hierarchy and independent operations. With annual sales of over US$3 billion, it
represented one of the largest optometrist and eyewear retailers globally.

In the mid- to late-twentieth century, the optometry space was highly fragmented. Over time, however,
optometry providers had consolidated, with brands such as Optometric Care Inc., Luxottica Group, and
National Vision Holdings Inc. increasing their market share significantly. Along with Mopsy Superstore,
many other general retailers moved to offer optometry and eyewear. As a result, industry competition
increased significantly. The industry had also faced significant downward pressure on prices, due to a rise
in discount eyewear providers and direct-to-consumer brands. From 2015 to 2020, the physical retail
segment of the industry had grown at an annual rate of just 0.6 per cent in the United States. 6

KEARNEY AND MOPSY SUPERSTORE

Kearney was a global management consulting firm that operated in 40 countries with over 3,600 employees.
The company was founded in 1926 and had worked with more than three-quarters of the Fortune Global
500 companies, as well as public sector and non-profit clients. The firm had a broad array of strategic,
digital, analytical, and operational capabilities that supported clients across various industries.

As the effects of the pandemic worsened, Mopsy Superstore hired Kearney to develop a plan to improve
profitability within its Optometry division. Wing and his team interviewed employees and reviewed
company data before putting together the following insights and key findings.

KEY FINDINGS

Wing’s team found that the Mopsy Superstore optometry division was significantly overstaffed. While
employees in the optometry division were paid on an hourly basis, they were guaranteed a certain number
of work hours per week. The guarantee made labour costs fixed. This resulted in times when multiple
optometrists were on site regardless of changes in customer traffic throughout the day or week. During
these hours, many employees were idle and not needed for servicing customers. Wing’s team determined
that 1,500 employees were redundant during the majority of their hours. The company could not sustain
these additional employees for much longer without jeopardizing the division’s long-term survival. Even if
Mopsy Superstore were to stop hiring new employees, and waited for existing employees to leave or retire,

6
IBISWorld, Optometrists Industry in the US - Market Research Report, January 11, 2021, https://www.ibisworld.com/united-
states/market-research-reports/optometrists-industry/.

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 Page 4 W25619

the savings would be insufficient. The attrition rate was 5 per cent annually, meaning it would take over a
year to reduce the workforce by 1,500. Furthermore, the job market was challenging and this would likely
deter employees from leaving. As a result, historical turnover rates were probably not a good proxy for
forward-looking turnover.

Based on past project experience, Wing determined that the best way to select employees for termination
would be by looking at performance reviews. The 1,500 lowest-performing employees among the 25,000
working in the optometry division would be laid off. This was to be done on a territory level, with the
lowest-performing employees in each territory being slated for termination. The number of employees
being laid off from each territory was to be based on that territory’s respective size.

DISPROPORTIONATE IMPACT CHALLENGES

While the proposed plan seemed straightforward, Wing conducted a disproportionate impact assessment
before making a formal recommendation to the company, as was standard practice for Kearney. The
assessment revealed that certain protected classes were overly represented among the group being
terminated (see Exhibit 1).

Of the 25,000 employees in the Optometry division, 15 per cent (3,761 people) were considered to be from
a protected class. Wing planned to recommend that 6 per cent, or 1,500, of all employees be laid off. This
should have resulted in the termination of about 226 protected class employees (3,761 × .06). However, the
analysis showed that the number of protected class employees slated for termination was much higher, at
441. This meant 29 per cent of the total layoffs would be made up of employees from protected classes. All
things being equal, this figure should have been 15 per cent, since that was the representation of protected
class employees in the overall population base.

PERFORMANCE REVIEW PROCESS

Wing was curious to learn more about the performance review practices of the organization and thus began
sifting through the details. Performance reviews took place for employees every six months: once in the
middle of the year, and once at year-end. Each employee was scored across various dimensions (see Exhibit
2) that included performance goals (worth 60 per cent) and leadership skills (40 per cent). He looked closely
at the simple performance appraisal form that managers used during their evaluations (see Exhibit 3). The
review was conducted by each employee’s direct manager. Mopsy Superstore relied solely on the input of
that manager in evaluating the performance of his or her respective employees. Wing was alarmed at the
high degree of subjectivity involved based on only one manager’s view.

In evaluating employees, managers informally collected feedback from key partners, peers, and the
employees themselves. Next, managers filled in the performance appraisal form, providing an overall rating
and comments on the employee’s progress towards performance goals. Finally, the manager met with the
employee to go over the ratings. The rating forms were then submitted to the central appraisal system.
Senior managers at the territory level quickly reviewed appraisals in a mostly unstructured format, but
changes, or even questions, were rare at that stage.

Wing asked his team to investigate to see if there were differences in the ratings of all employees versus
employees in protected classes. The findings (see Exhibit 4) showed that employees from protected classes
consistently scored lower than average on every dimension in the performance appraisal. Wing knew that
some would argue that employees from protected classes simply were worse performers in this sample of
employees, and that fairness demanded that the worst employees be the ones to go.

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 Page 5 W25619

DECISION

Wing had to think carefully about his recommendation. He wanted to position Mopsy Superstore for long-
term success. Wing asked his Kearney team to help him brainstorm potential recommendations. The options
suggested for consideration included the following:

1. Continue with the proposed planKearney could recommend laying off the previously selected 1,500
employees. A plan based on performance appraisal ratings would be most fair.
2. Reduce the overall number of people being terminatedThis recommendation would involve lowering
the total number of people slated for termination from 1,500, effectively lowering the number of
employees from protected classes being laid off proportionally.
3. Move forward in select territoriesThis potential option meant moving forward only in territories with
the least disproportionate impact. If this option was chosen, Wing would have to decide which
territories qualified and which did not.
4. Cap the number of individuals from protected classes to be terminatedBy capping the number of
employees from protected classes being terminated at a certain level, the disproportionate impact could
be lessened, though not eliminated fully.

Driving home from the office, Wing thought about the options. He knew he would have to make a decision
quickly on his final recommendation. With the widespread impact it would have on so many people, he knew
he had to make the right choice and think through broader improvements that Mopsy Superstore should pursue.

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 Page 6 W25619

EXHIBIT 1: DISPROPORTIONATE IMPACT BREAKDOWN

Projected Percentage
Percentage
Number of Number of of
of
Employees Employees Employees Employees
Employees
Territory Employees in Protected that Need to from from
in Protected
Classes be Protected Protected
Classes Per
Laid Off Classes to Classes to
Territory
be Laid Off be Laid Off
1 2,750 138 173 28 16% 5%
2 2,000 400 90 33 37% 20%
3 1,750 175 108 21 19% 10%
4 2,250 293 115 32 28% 13%
5 3,750 675 241 92 38% 18%
6 3,500 805 189 76 40% 23%
7 3,000 810 211 95 45% 27%
8 1,500 105 72 16 22% 7%
9 4,500 360 301 48 16% 8%
Total 25,000 3,761 1,500 441 29% 15%

Source: Created by the authors.

EXHIBIT 2: ELEMENTS OF THE PERFORMANCE REVIEW PROCESS

Percent of
The Measure What It Means How It Is Rated
Total Rating
Performance Performance goals are set, Managers and employees 60%
Goals supporting division strategic priorities. identify multiple goals and
Commitments are identified jointly measures. Managers provide
between manager and employee. one composite rating
(Examples: 10% increase in average regardless of the number of
customer satisfaction, demonstrating goals based on employees’
strong communication with the rest of achievement of their
the team; strong time management commitments.
leading to higher customer volume.)
Leadership Skills Leadership skills are defined in terms Managers provide a rating for 40%
of Customer, Team, and Growth. each leadership theme (and
the overall mean of the ratings
is calculated).

Source: Created by the authors.

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 Page 7 W25619

EXHIBIT 3: PERFORMANCE APPRAISAL FORM

Employee Name:
Store #:
Manager’s Name:
Date:

Rating Category Rating

Performance Goals
Composite Score for Goals Achieved 1 2 3 4 5

Comments:

Leadership Goals
Degree to which the employee supported customers, provided
strong customer service, and recognized customers as a key 1 2 3 4 5
stakeholder for Mopsy Superstore.

Comments:

Degree to which the employee worked collaboratively in a team

setting, supported other co-workers, and contributed to a positive 1 2 3 4 5
and strong team spirit and dynamic.

Comments:

Degree to which the employee worked to help Mopsy Superstore

achieve growth objectives, through a strong work ethic, idea 1 2 3 4 5
generation, and supporting others.

Comments:

Rating Employee’s Performance Level

1 Does Not Meet Expectations
2 Partially Meets Expectations
3 Meets Expectations
4 Somewhat Exceeds Expectations
5 Significantly Exceeds Expectations

Source: Created by the authors.

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 Page 8 W25619

EXHIBIT 4: AVERAGE PERFORMANCE REVIEW RATINGS OF ALL EMPLOYEES AND PROTECTED

CLASSES

Employees in
All Employees
Protected Classes
Performance Goals
Composite Rating 3.73 3.41
Leadership Skills
Customer 3.97 3.24
Team 3.89 3.58
Growth 3.42 3.26
Total Rating 3.74 3.39

Source: Created by the authors.

This document is authorized for use only in Omar Fernando Cifuentes Zapata <of.cifuentes@uniandes.edu.co>'s UNIANDES 202310_MADM4653_01 COMPORTAMIENTO
ORGANIZACIONAL OFCZ at Universidad de Los Andes - Colombia (UniAndes) from Mar 2023 to May 2023.