Ineffective appraisal system at nike customer service department in damco

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business HOANG THI HOA INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2018 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business HOANG THI HOA INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: DR QUOC PHAM Ho Chi Minh City – Year 2018 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO Table of Contents Executive summary CHAPTER Background 1.1 Company background 1.2 Symptoms of probem in Nike customer service department .7 1.2.1 Low employee satisfaction 1.2.2 Low performance 13 1.3 Initial causes – effects map 18 1.3.1 Initial causes – effect map identification process .18 1.3.2 Initial causes – effects map analysis 19 1.4 Updated causes – effects map 22 1.4.1 Boring job 22 1.4.2 Organizational instability 23 1.4.3 Ineffective appraisal system 24 CHAPTER Problem justification 27 2.1 Problem definition 27 2.2 Problem existence 28 2.2.1 Quantitative research result .28 2.2.2 Second qualitative research result (15-Aug-2018) 31 2.2.3 Conclusion 32 2.3 Problem importance 32 CHAPTER 3.1 Causes validation and solutions 35 List of real causes .35 3.1.1 Theory inform 35 3.1.2 Third qualitative research result (22-Aug-2018) 36 3.2 The set of solutions 37 3.3 Change plan design 39 3.3.1 Plan schedule .39 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO 3.3.2 Target setting .39 3.3.3 Steps to build new appraisal system 40 3.3.4 Conclusion 46 References .48 Supporting document .51 First qualitative research (8-Aug-2018) 51 Quantitative research 77 Quantitative research methodology .77 Questionnaire – Quantitative research: 78 Quantitative research result 80 Second qualitative research (15-Aug-2018) 82 Methodology 82 Interview guide .83 Third qualitative research (22-Aug-2018) 94 Methodology 94 Interview guide .95 Current KPI of Nike customer service department 107 Proposed KPI for customer service executive of Nike customer service department 111 Employee counseling form 113 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO Table of figures Figure 1: Work experience in Nike customer service department Figure 2: Employee satisfaction result of Nike customer service department 2013-2017 Figure 3: Turnover rate 2013-2017 of Nike customer service department in Damco and APLL .11 Figure 4: Recruitment cost of Nike customer service department in 2013 – 2017 .12 Figure 5: Nike customer operation index from 2013 to 2017 .14 Figure 6: Customer satisfaction ratio of Nike Customer Service Department 16 Figure 7: Initial Causes - Effects map 18 Figure 8: Updated causes - effects map 22 Figure 9: Average score of question 3-10 in quantitative survey 29 Figure 10: Age and work experience of employees in Nike customer service department .31 Figure 11: Plan schedule .39 Figure 12: Proposed appraisal process 46 List of tables Table 1: List of people left Nike customer service department in 2017 .24 Table 2: List question from to 10 in quantitative survey 29 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO EXECUTIVE SUMMARY It can be said that appraisal system plays an important role in company operation To be specific, it was stated that appraisal system is one of the key element to increase employee motivation and productivity (1) Therefore, ineffective appraisal system can make employees feel dissatisfied with the job and as the result, there would be low productivity (2) Moreover, it was also mentioned that about low organizational commitment and intention to leave of employee when the company appraisal was not effective (2) Furthermore, high employee turnover rate has many hidden costs such as productivity loss, workplace safety issues, and morale damage (3) That is the current situation at Nike customer service department in Damco, ineffective appraisal system is the central problem causing low customer satisfaction and low employee satisfaction which resulted in high turnover rate as well as high recruitment cost After conducting researches by both qualitative and quantitative method, the main causes found are unclear key performance indicators (KPI) and lack of ongoing performance feedback, one way of communication appraisal process In order to solve the central problem of ineffective appraisal system, the possible solutions are developing detail, specific KPI for Nike customer service department employees and building up effective appraisal process including self-appraisal as well as ongoing performance feedback This solution can take advantage of available resource with the coordination between human resource department and manager of Nike customer service department in estimated six months with no extra cost The aim of this low cost and feasible solution is to lower the high turnover rate at Nike customer service department Furthermore, it is also the solution to increase employee satisfaction which also linked to customer satisfaction In addition, lower turnover rate can save money for new recruitment and training program for new employees as well as keep Nike customer service department stable In short, this cost saving solution can eliminate almost the current problems of Nike customer service department in Damco INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO CHAPTER BACKGROUND 1.1 Company background Damco is one of the world’s leading providers of freight forwarding and supply chain management services with more than 100 years of history The company has 11,400 employees in more than 300 offices around the world and a global presence in about 100 countries Damco is part of A.P Moller - Maersk Group – the biggest shipping line in the world (4) To be more specific, Damco is at the forefront of developing innovative supply chain solutions Damco fuse their global network and depth of expertise with pioneering digital innovations to enable their customers to stay ahead Damco’s vision is to connect and simplify supply chains across the globe Damco Vietnam was established since 28/11/2007 with three offices in Hanoi, Hai Phong and Ho Chi Minh city The main office is in Ho Chi Minh According to Damco HR report in June 2018, there are five departments in Damco Vietnam with total 816 employees: • Finance: 37 employees • Human resource: employees • Warehouse and distribution: 438 employees • Procurement: 21 employees • Supply chain management (SCM): 312 employees Supply chain management (SCM) department in Damco Vietnam is separated into many sub teams based on the Customer that team handle Nike customer service department is one of the key team of SCM because of the highest volume of Nike cargoes shipped via Damco which accounts for 30% of total volume Damco is handling INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO Nike Customer Service team are taking responsibility of Nike customer care, warehouse management, managing all projects related to Nike cargoes, as well as doing planning to make sure cargoes shipped as Nike requirements and communicating with all relevant parties to solve troubles and ensure shipments delivered on time It can be said that customer service team is the representative of all departments in Damco to directly contact with Nike customer If there is any issue, other parties have to report to customer service team, therefore the KPI of customer satisfaction is extremely important in this Nike customer service department Nike Customer Service department currently has 18 members The current manager has taken over Nike Customer Service department since December 2016 She already had six year experience in freight forwarding part, and just started moving to customer service part since joining Nike customer service department Nike customer service department is a dynamic and active team with mainly young people Below is the current work experience status of Nike customer service department: Work experience < year 1-2 years 3-5 years > years Number of employee 4 Figure 1: Work experience in Nike customer service department (Source: Damco HR report in June - 2018) It can be seen from figure that over 60% of work experience in customer service department is under years All seven employees with under one year experience are fresh graduations The advantage of young people are their pro-activeness, dedication to contribute to the team, willingness to work over time Besides, the cost of hiring fresh graduation is lower compared with hiring experienced one However, the disadvantages of short experience time is low productivity because it takes time to hand over between the old team members to the new comers and high training cost In INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO addition, lacking of experienced one in the team raises concerns to Damco’s customer about the quality of service, especially key and professional customer like Nike 1.2 Symptoms of probem in Nike customer service department In order to identify if there is any abnormal signs in the current operation of Nike customer service department, available internal data was analyzed such as HR report collected from HR department, customer KPI report which was published by management team in order for employees to know the current level of performance… The advantages of these internal data are its availability and its ease to approach, besides the cost saving and cost efficiency; moreover, it can reflect the real time series data According to the internal data, there are four abnormal trends in the performance of Nike customer service department: Low employee satisfaction: detail will be shown in following part Low performance of the employees: detail will be shown in following part High turnover rate: the abnormal trend of turnover rate will be discussed in more detail in figure However, high turnover rate may not be the main symptoms because it can be impacted by many elements such as: the market trend, personal plan, external better opportunities, lacking of engagement… It can be seen that some elements such as the market trend, personal plan are external factors and they cannot be controlled by the organization So, it can be said that low employee satisfaction can impact to turnover rate but it will be bias to say that turnover rate is a symptoms of problem Low customer satisfaction: it can be said that the performance of Damco will impact to the customer satisfaction However, customer satisfaction can also be impacted by the performance of the rivals, the change in the standards of customers, market trends Therefore, it cannot be seen as the main symptom of the problem INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO It can be stated from above explanation that there are only two main symptoms based on the available internal data: low employee satisfaction and low performance that will be analyzed in following parts 1.2.1 Low employee satisfaction It can be said that employee satisfaction is one of key elements a firm need to focus on Low employee satisfaction can lead to the serious consequences of high turnover rate and high recruitment cost which definitely impact to overall performance of whole Nike customer service department 1.2.1.1 Low employee satisfaction data analysis Employee satisfaction is of utmost importance for employees to remain happy and also deliver their level best Satisfied employees are the ones who are extremely loyal towards their organization and stick to it even in the worst scenario Moreover, employee satisfaction is essential to ensure higher revenues for the organization Last but not least, satisfied employees tend to adjust more and handle pressure with ease as compared to frustrated ones (5) With all respect to the importance of employee satisfaction, Damco is also conducting employee satisfaction survey annually in December To be more specific, and the score is from (Totally dissatisfied) to (Totally satisfied) and the target on employee satisfaction is set for manager level The employee satisfaction survey was including questions related to four main items: Damco working environment, colleague collaboration, manager assessment and any comment to make Damco a better work place 100 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO Transcript Part I: Introduction Thank you for your participation today My name is Hoang Thi Hoa, I am a student of ISB and I am conducting a research related ineffective appraisal system at Nike customer service department Therefore, we highly appreciate your support on attending this interview which will take about 10-15 minutes and include questions regarding your experiences, evaluation and suggestion for appraisal system at Nike customer service department in Damco I would like to have your permission to tape record of this interview, so that all information will be accurately documented Please feel free to let me know in case you wish to stop using the recorder or the interview itself Besides, we would like to emphasize that your response is confidential and will be used to develop a better understanding of how you and your peers view your job satisfaction and what might influence it Are there any questions about what I have just explained?  No, it is clear Are you willing to participate in this interview?  Yes, I am Part II: General information of participants Please introduce about your name, position, responsibility and experience  I am Truong Thoai Uyen My position is customer service team leader of Nike Asia Pacific team at Nike customer service department I have been working here for years How long have you been working at Nike customer service team?  (No need to ask because the participant already answered in previous part) Part III: Question about participants’ actual evaluation 101 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO According to the result of the survey you have participated in on 13-Aug-2018, employees of Nike customer service department are not satisfied with the current KPI system, what you think is the main reasons?  I have worked here for years but there was a lot of changes in KPI board last year It was the first we had the KPI about cross selling, which meant that we have to sell the product of Damco and gain more revenue for the company The problem is: we are customer service department, not the sale department We not have the duty to win more customer Secondly, the Nike customer already have contract with all carriers and use all carriers’ service, including trucking and customs clearance So, there will be no chance for cross selling That why no one in the team can reach the target of cross selling KPI I believe that it is unreasonable to have such KPI in my department Maybe it is suitable in freight forwarding because that team handle freehand customers, they not have contract with any carriers so Damco can offer them the extra service Prompt: • How you evaluate about the measurability of your KPI?  One more problem is that I have the same KPI with customer service executive level while I have different task such as team management So, I think it would be better to separate the KPI for each job level How many time per year is appropriate to review the performance of employees?  I think it is twice a year Beside the KPI system, what you think about the current appraisal process?  The process is quite short and simple At the end of each year, we can have the final result based on the assessment of the manager Prompt: • What you think about the communication between manager and employees? Do you have the right to raise feedback?  No, we just accept the final result announced So, there is no communication in the process of appraisal It is quite one way of feedback • What about ongoing performance feedback? 102 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO  When we have trouble in daily operation, we raised to the manager, then we can get the feedback But there is no overall feedback on our performance till the end of the year Do you have any suggestions to make the appraisal system is better?  I believe that it will be better if the employees can have the self-appraisal first and the manager should listen to the feedback from employees before having final result So, employees can feel that it is fairer for them Thank you for your time 103 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO Transcript Part I: Introduction Thank you for your participation today My name is Hoang Thi Hoa, I am a student of ISB and I am conducting a research related ineffective appraisal system at Nike customer service department Therefore, we highly appreciate your support on attending this interview which will take about 10-15 minutes and include questions regarding your experiences, evaluation and suggestion for appraisal system at Nike customer service department in Damco I would like to have your permission to tape record of this interview, so that all information will be accurately documented Please feel free to let me know in case you wish to stop using the recorder or the interview itself Besides, we would like to emphasize that your response is confidential and will be used to develop a better understanding of how you and your peers view your job satisfaction and what might influence it Are there any questions about what I have just explained?  No, it is clear Are you willing to participate in this interview?  Yes, I am willing Part II: General information of participants Please introduce about your name, position, responsibility and experience  I am Huynh Dang Van Anh I currently work as a customer service executive at Nike customer service department I have been working here for years Before that I worked at Solution operation department for over year Damco is my first company after graduation How long have you been working at Nike customer service team?  (No need to ask because the participant already answered in previous part) Part III: Question about participants’ actual evaluation 104 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO According to the result of the survey you have participated in on 13-Aug-2018, employees of Nike customer service department are not satisfied with the current KPI system, what you think is the main reasons?  I think because it cannot evaluate the performance of one person effectively It does not cover all scenarios For example, if someone made mistake in the beginning of the year, so she fail one KPI But in the next months, she did try her best and got a lot of achievement, but there was no plus score for her performance at the end of the year What the manager can see was just she fail the KPI at the beginning of the year Moreover, there is some KPI is not clear enough Prompt: • Can you please explain more why some KPI is not clear enough?  I meant some KPI are not clear to measure, such as how you evaluate if one person have engagement with the team or not It depends on the feeling of the manager I think it should be converted to something that can be easily measured • What you think about the achievability of your KPI?  There is some KPI that cannot be achieved Not only me saying that it cannot be achieved, my teammates also have the same idea So, I believe that it cannot be the problem about my performance, it is the problem of the KPI How many time per year is appropriate to review the performance of employees?  Twice a year would be perfect If there are a lot of review session per year, we will not have enough time for daily operation Beside the KPI system, what you think about the current appraisal process?  It think it is not clear enough because it more depends on the manager feelings Nothing ensure that the assessment of the manager is correct Prompt: • What you think about the communication between manager and employees? Do you have the right to raise feedback?  I think because of no feedback from employees was received and involved during the appraisal process is the reason makes the decision mainly on manager feelings 105 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO • What about ongoing performance feedback?  There is feedback at the end of the year but no feedback throughout the year That is why sometimes we feel that there is lack of motivation because no compliment or recognition from manager when the performance is good Do you have any suggestions to make the appraisal system is better?  Firstly, some KPI need to be adjusted to make it clearer and eliminate the KPI that is not suitable in this department Secondly, the appraisal process need to add employee self-appraisal and also escalation point when employees feel that the assessment of the manager is not correct Thirdly, there should be more plus score in the KPI to motivate the team member Last but not least, ongoing feedback is important Thank you for your time 106 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO Summary of result in second qualitative research Question Participant Answer coding - Not detailed - Hard to measure - Not achievable - Not appropriate - Not achievable - Not separate per job level - Lack of plus score - Not detailed - Hard to measure - Not achievable - Quarterly - Semi-annually - Semi-annually - Semi-annually Main reasons that employees are not satisfied with the current KPI system How many time per year is appropriate to review the performance of employees? Assessment on current appraisal process 1 Suggestions to make the appraisal system is better Lack of ongoing feedback Lack of ongoing feedback - Lack of ongoing feedback - Lack of two way communication - Set the quarterly meeting privately to review performance - Give ongoing feedback - Add self-appraisal - Adjust the performance rating instrument - Add self-appraisal - Add plus score - Give ongoing feedback Category Performance rating instrument Performance rating instrument Performance rating instrument Review session Review session Review session Appraisal process Appraisal process Appraisal process - Review session - Ongoing feedback Review session - Performance rating instrument - Review session - Ongoing feedback 107 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO Current KPI of Nike customer service department PERFORMANCE EVALUATION REPORT Employee’s name: Position: Review date: Cross selling Does employee meet the target of cross selling 5000$ per year? ☐ Far below requirements ☐ Below requirements ☐ Meets requirements ☐ Exceeds requirements ☐ Far exceeds requirements Reasons: 108 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO Quantity of Work Consider the amount of work accomplished and the employee’s ability to meet deadlines ☐ Far below requirements ☐ Below requirements ☐ Meets requirements ☐ Exceeds requirements ☐ Far exceeds requirements Reasons: Work Habits Consider the employee’s planning skills, time management, attendance, dependability and compliance with office practices ☐ Far below requirements ☐ Below requirements ☐ Meets requirements ☐ Exceeds requirements ☐ Far exceeds requirements 109 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO Reasons: Attitude Consider how well this employee works with others and his or her willingness to take instructions and cooperate ☐ Far below requirements ☐ Below requirements ☐ Meets requirements ☐ Exceeds requirements ☐ Far exceeds requirements Reasons: 110 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO Job Knowledge and Skills To what extent does this employee possess and use required knowledge and skills? ☐ Far below requirements ☐ Below requirements ☐ Meets requirements ☐ Exceeds requirements ☐ Far exceeds requirements Reasons: How you rate this employee’s overall performance? ☐ Far below requirements ☐ Below requirements ☐ Meets requirements ☐ Exceeds requirements ☐ Far exceeds requirements 111 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO Proposed KPI for customer service executive of Nike customer service department Name Title Customer service executive CSO/office Objective Achieve Profitable Growth Service Delivery Ho Chi Minh Description (what it means) and activities (what steps are expected of a person) This objective is about how my work contributes to making sure Damco is profitable and continuously growing towards our strategy ambitions Service delivery and satisfaction Target Staff's actions to contribute to team's target Weight CM1 $ growth: - Score 1: CM1 2017 + 3% - Score 2: CM1 2017 + 5% - Score 3: CM1 2017 + 10% - Score 4: CM1 2017 + 13% - Score 5: CM1 2017 + 15% Container utilization, CFS ratio, crossselling, upselling… 20% CM1 management (claim due to team mistake, service failure , missing or wrong charge database maintain): - Score 1: > 500 USD - Score 2: from 125 USD to 500 USD - Score 3: < 125 USD - Score 4: projects Personal development plan completion: - Score 1: plan - Score 2: plan - Score 3: plans - Score 4: - plans - Score 5: > plans 10% Apply tips to increase number of file/ FTE Tips: People/ Customer/ Quality/ Productivity / Profitability Team/ SCM/ CSO Project such as leading warehouse tour for new comer, team birthday party,… Developmen t plan related to work such as improving soft skill, presentation skill,… 10% 10% 10% 5% Final score 113 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO Employee counseling form Name of employee: _ Position: Date: Behavior Describe the problem or unacceptable behavior: Describe how the problem or unacceptable behavior must change: Action plans Describe what the employee must to correct the situation, how he or she will it and by what deadline Describe what the employer will to help the employee correct the situation 114 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO Consequences Describe what the consequences will be if the problem or behavior is not corrected: Session conducted by: _ Date: I have read the above and have been given an opportunity to ask questions Employee comments: Employee signature: Date: ... each department To be specific, customers of Nike 16 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO customer service department are the Nike s factories located in Vietnam,... assessments from all destinations handled by Damco and evaluate the performance of Nike customer 14 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO department in general once... customer service department 24 INEFFECTIVE APPRAISAL SYSTEM AT NIKE CUSTOMER SERVICE DEPARTMENT IN DAMCO Table 1: List of people left Nike customer service department in 2017 Month in 2017 January