Ineffective appraisal system at nike customer service department in damco

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 satisfa

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

Table of Contents

Executive summary 4

CHAPTER 1 Background 5

1.1 Company background 5

1.2 Symptoms of probem in Nike customer service department 7

1.2.1 Low employee satisfaction 8

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 2 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 Causes validation and solutions 35

3.1 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

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

1 First qualitative research (8-Aug-2018) 51

2 Quantitative research 77

Quantitative research methodology 77

Questionnaire – Quantitative research: 78

Quantitative research result 80

3 Second qualitative research (15-Aug-2018) 82

Methodology 82

Interview guide 83

4 Third qualitative research (22-Aug-2018) 94

Methodology 94

Interview guide 95

6 Current KPI of Nike customer service department 107

7 Proposed KPI for customer service executive of Nike customer service department 111

8 Employee counseling form 113

Table of figures

Figure 1: Work experience in Nike customer service department 6

Figure 2: Employee satisfaction result of Nike customer service department 2013-2017 9

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 3 to 10 in quantitative survey 29

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

CHAPTER 1 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: 8 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

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:

Figure 1: Work experience in Nike customer service department

(Source: Damco HR report in June - 2018)

It can be seen from figure 1 that over 60% of work experience in customer service department is under 2 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

Work experience Number of employee

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:

1 Low employee satisfaction: detail will be shown in following part

2 Low performance of the employees: detail will be shown in following part

3 High turnover rate: the abnormal trend of turnover rate will be discussed in more detail in figure 3 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

4 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

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 1 (Totally dissatisfied) to 5 (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

Figure 2: Employee satisfaction result of Nike customer service department 2013-2017

(Source: Yearly employee satisfaction survey of Damco) According to figure 2, it can be seen a sudden decrease in employee satisfaction in

2017 compared with the four previous years The score at 3 means that the attitude of employees was just neutral, not agree / satisfied In five years from 2013 to 2017, the target employee satisfaction of whole Damco remained the same at 3.7 This target is set by the average score of all teams in Damco in previous year Therefore, figure 2 shows that only in 2017, the employee satisfaction score of Nike department was under target

In survey result of 2017, below are areas that have lower score than previous years:

• Workload: It was claimed that the workload in Nike customer service

department was high and employee did not have work-life balance Working overtime more than 8 hours per week in long period was making the employees tired and not looking forward to going to work daily

• Recognition: Lacking of recognition within the team in specific and within the company in general

• Compensation: it was said that the compensation was not fair with the

workload

3.2 3.7

• Training program: the training program was not fit with employees’ level and expectation Employees were registered to all the training sessions that the company conducted while they expected to have specific training that can complete the skills they are missing

• Managers did not spend enough time on supporting their employees

1.2.1.2 Consequences of low employee satisfaction

As mentioned before, there are two main impacts of low employee satisfaction to Nike customer service department are high turnover rate and high recruitment cost

1.2.1.2.1 High turnover rate

Turnover rate has been defined as the percentage of em ployees who leave the

company or business to other companies in a period of time (6) This forces the

company to find their replacement at an additional cost Besides, turnover could also

be defined as “The ratio of the employees of an organization who left in a particular period of time with the average number of employees in that organization during the same period of time”

High turnover rate in a long run will affect to the productivity, service delivery, growth and increases the organization’s cost of recruiting new staff; and training and

developing the new staff to occupy such vacancies (6) Therefore, it is important to maintain turnover rate at an appropriate level

Figure 3: Turnover rate 2013-2017 of Nike customer service department in Damco

at Nike customer service department is an abnormal signal In addition, compared with turnover rate of Nike customer service department in APL logistic company – main competitor of Damco, that ratio of Damco was nearly double APL logistic In

Vietnam, there are only two logistic companies handle sea shipments for Nike: Damco and APLL All people handling Nike shipments from these two logistic companies will be updated in Nike teamsite In short, in same industry, Damco could maintain lower turnover rate than APL logistic from 2013 to 2016, however, this rate of Damco significantly increased in 2017 and reached nearly double that number of APL logistic

in mentioned year

It is essential to look at the turnover rate because if this rate is high, then it is really a great loss for the company (6) An organization with higher turnover ratio will face to greater risks of performance failures in the long run Besides, it is not only about the high recruitment cost mentioned in following part, it is also about the impact of high

Turn over rate

Turnover rate of Nike customer service department in Damco Turnover rate of Nike customer service department in APLL

turnover rate to Nike customer service team morale because the current employees have to share the workload when the new comer has not catch up with full process Moreover, because of high turnover rate, there are always a lot of new comers in the team, therefore, the relationship among team members are disconnected and need time

to rebuild up Last but not least, also due to high turnover rate, people in Nike

customer service department need to focus more on paper work to share workload with new comers instead of focus more on customer needs while customer care should be the key responsibility of one customer team This fact makes employees are confused about the company vision which is focusing on customer care

1.2.1.2.2 High recruitment cost

The second direct consequence of high turnover rate is the increase in recruitment cost

In other words, it is the expense of finding replacement personnel (7) Therefore, as the result of high turnover rate in 2017 of Nike customer service department

mentioned in above part, the recruitment cost was increasing significantly in that year

Figure 4: Recruitment cost of Nike customer service department in 2013 – 2017

(Source: Annual report of HR team)

According figure 4, there is a significant increase in Recruitment cost of Nike

customer service department in 2017 compared with that number in 2015 and 2016 Each employee who resigns costs the company money All of the money invested into that employee through training, education and licensing walks out the door with the quit employee When a replacement is hired, the company spend money on those same areas to prepare the new hire for the position In short, high turnover rate create a high pressure on human resource management mission and recruitment cost

The recruitment cost includes internal recruiting costs and external recruiting costs Internal recruiting costs are organizational costs and internal expenses, like recruiters’ salaries and money spending on your referral program External recruiting costs refer

to every expense paid outside of your company, like job board fees, agency fees and costs associated with a background check service (8) (9)

1.2.2 Low performance

The second symptom of problem is the low performance of Nike customer service department and its serious impact: low customer satisfaction

1.2.2.1 Low performance data analysis

It is extremely important to maintain the quality of the service offer to customer

because low performance of the staff can directly impact to customer satisfaction Besides, this index also one of the elements for Damco head quarter to evaluate the performance of each country at the end of the year beside net profit

The performance of Damco is measured by customer global operation index which is scored by the client monthly to evaluate the service provided by Damco in general including KPI maintaining, communication, customer mindset, initiatives, The score

is from 1 (Totally dissatisfied) to 5 (Totally satisfied) The client of Nike customer service department is Nike Nike team in Vietnam will collect assessments from all destinations handled by Damco and evaluate the performance of Nike customer

department in general once per year Same practice will be applied for all countries handling Nike shipments

Figure 5: Nike customer operation index from 2013 to 2017

(Source: Customer operation index report in Damco)

It can be seen in Figure 5 that there is a significant decrease in customer operation index of Nike customer service department in 2017 compared with 2015 and 2016 As current practice, the target for each team will be set higher than the performance of previous year to encourage improvement in daily work So, in 2017, there was a big gap between actual performance compared with the target at the beginning of the year Among all KPIs, the main KPIs that had bad performance are:

• Planning with wrong destinations: Nike complained about some cases cargoes were delivered to wrong destinations, as the results, there were charges

occurred to convert the cargoes back to correct destination Although these charges were absorbed by Damco, however, Nike still got bad impact on the time delivery

• Low container fill rate: which meant that the volume in each container was not

as high as Nike expected For example, the maximum fill rate of one container

Customer operation index

Nike operation index Target for Nike team

40 high cube is 70 cubic meters, but Nike customer service team just can stuff the cargoes at 67.2 cubic meters at average in 2017

• Slow response from Nike Customer Service team: Same as the feedback from Nike’s factories, Nike also commented that they got slow response from Nike customer service department for urgent cases

1.2.2.2 Consequences of low performance

As the result of low performance, there were many service failures and some KPIs could not meet Therefore, it is obvious that the customer satisfaction was impacted Regarding to the importance of customer satisfaction, it was emphasized that: firstly, the more satisfied the customers are, the greater is their retention; secondly, the

satisfaction of customers ensures the positive word of mouth; thirdly, customer

satisfaction ensures the financial benefits to the firms who serve them To sum up, it is

no surprise, that firms seek to increase customer satisfaction (10) In addition, the existence of high levels of customer satisfaction, customer perceived value and

customer relationship management enhance the relationship of customer with the firm which strongly boost up the overall performance of the firm (11)

Therefore, with the respect of the importance of customer satisfaction, Damco is

taking customer satisfaction survey yearly on November, the survey is sent to all customers of each department Therefore, the result is counted for each department Besides, at the beginning of each year, the management team of Damco also set a target of customer satisfaction for each department To be specific, customers of Nike

customer service department are the Nike’s factories located in Vietnam, total 44 factories

Figure 6: Customer satisfaction ratio of Nike Customer Service Department

2013-2017

(Source: Yearly customer satisfaction survey of Damco)

It can be seen from figure 2 that Customer satisfaction ratio of Nike customer service department in 2017 suddenly decreased to 74.7% Meanwhile, from 2013 to 2016, the customer satisfaction ratio was maintained with a stable level at around 99% The target of customer satisfaction in 2017 was set at 99.5%, which means that the actual ratio is 25% under target Besides, from 2013 to 2016, the difference in customer satisfaction ratio between Nike department and average number of whole Damco was under 1%, but in 2017, the difference was 13,1%

After looking at carefully on the feedback from customers, they claimed that they are unsatisfied with the service provided by Nike customer service department on below criteria:

• Nike customer service team attitude: Some employees in Nike customer service department showed that they were not willing to support additional request

from customer such as providing vessel schedule, advising about booking

revision process Moreover, delay in vessel departure time notice is sent late to customer which causing wrong document submission and wasting time for revision

• Late email response: Damco have committed to all customers that emails

should be replied within 3 working hours, however, there were many cases that customers complained Nike customer service staffs replied email after one day and customer had to call for reminder

• Being hard to contact Nike customer service staffs before 9:00 AM while

working hour of Damco is from 8:30 AM to 5:30 PM: there is a fact in Damco that employees usually come to work late, after 8:30 AM because no finger print is required at the beginning of the day and the working style of Western countries is based on the performance, not on the working time Therefore, it is hard for customer to contact Damco employees via desk phone before 9:00

AM

• No support in urgent cases: there were cases reported that although customers called to Nike customer service team seeking for urgent help however, they received the request from Nike customer service staffs to send an email and wait for the reply later within 3 hours instead of solving the trouble right away This will seriously impact to some urgent decision from customer side which can lead to charges occur and the most important thing is impacting to customer loyalty

In short, Nike customer service department is suffering with two main symptoms of problem – low employee satisfaction and low performance - which also leading to more serious impact to low customer satisfaction, high turnover rate and high

recruitment cost With all these serious issues, it is essential for Nike customer service department to find central problem in order to solve all these issues

1.3 Initial causes – effects map

In order to find out the causes leading to above symptoms, a qualitative research was conducted The main mission of research is to identify the central problem of all these issues All the potential problems are listed into below initial causes – effects map:

Figure 7: Initial Causes - Effects map

1.3.1 Initial causes – effect map identification process

Firstly, the main purpose of this qualitative research are understanding actual

evaluation of current employees, former employees as well as manger about current situation of Nike customer service department including: high turnover rate, low

performance, low customer satisfaction and low employee satisfaction

Secondly, depth interview is used as the method of this qualitative research because there may be some private information participants do not want to share publicly as in the focus group Moreover, in a one-on-one setting, the interviewer can devote

complete attention to each research participant, listen actively and take time to

establish good rapport Also, researcher can make the surroundings more relaxing for individual interviews

Thirdly, five participants selected are current employees, former employees as well as current manger based on the database from HR department There is no requirement about age, gender in this selection in order to have an accurate view on the problem Participants were interviewed in private place for better sharing and avoid being

disturbed by others on 8-Aug-2018

Furthermore, the interviews were recorded so that all information will be accurately documented for research purpose under allowance of the participants Each interview was appropriately fifteen minutes

In addition, the interview guide consists of 10 to 12 questions depends on the position

of participants They are open-ended questions

The first group question regarding to question 1;2;3 elicited information about basic employee information, including their name, position title, work experience in Damco

as well as in Nike customer service department in specific After that, the second group of questions related to participants’ actual evaluation about current situation / symptoms of problem in Nike customer service department as well as their proposal to overcome all the issues

1.3.2 Initial causes – effects map analysis

According to the depth interview research, there are fifteen causes that led to five mentioned symptoms in Nike customer service department which all listed in initial causes – effects map (figure 7)

It can be seen from initial causes-effects map in figure 7 that there are fifteen potential causes which can be divided into three main groups:

1 Boring job: the job nature of customer service department is one kind of paper work, many tasks are repeated day by day Besides, people have to work on the computer all the time and it is rarely to have a chance to have face to face

meeting with customer, everything will be completed via mail and phone

Therefore, this can be considered as boring job for young people who would

like to learn new knowledge and experience while most of people in Nike

customer service department are young one As a result, boring job can be seen

as one element that lower the employees’ satisfaction

2 Organizational instability: on 27-Jun-2017 whole Maersk group, including Damco was hit by cyber-attack and all the system was down on that day

causing vessel and cargoes delayed and led to congestion at some of the 76 ports run by its APM Terminals unit, including in the United States, India, Spain and the Netherlands (12) It took Maersk group over one month to cover back all system In the meantime, all employees of Damco had to work

manually without system to which causing overtime five time higher than on normal months This period had a bad impact on the employees’ point of view

to the company sustainability

3 Managers lack of management skill can be seen as the causes of the followings:

• Lacking of management skill from managers can cause no recognition in the team, while this can be considered as the motivation for employees in the job As a result, employees feel undervalued in such case

• Managers that do not manage the team effectively can divide unfair workload among team members, so some team members can have high workload than others This can be seen as rude behavior and employees feel that they are treated unfair

• In Damco Vietnam, the manager of each team have the right to decide compensation of each team member Lacking of management skill can make manager have wrong decision about compensation and sometimes, the compensation is lower than expectation of employees while no specific reason is advised to convince employees that the compensation

is match with them which make employees’ satisfaction is lower

• Lacking of training and coaching program can be the result of lacking of management skill from managers This also means that employees feel that they are missing orientation advised from their managers Also, no

training, no development plan can make employees feel that no job opportunity is opened for them or they are not potential enough All of these elements can lead to the result that employees do not feel satisfied with the managers and the company

The root causes of manager lack of management skill are lacking of experience and ineffective appraisal system The manager of Nike customer service

department just took over that position since December 2016, therefore, she was quite new with supply chain management field although she had six years

of experience in freight forwarding department; however, these two fields are different On the other hand, lacking of experience also impact to appraisal process because at Damco, the manager has the right to build up KPI (key performance indicator) for subordinates in whole department It is obvious that appraisal system is the tool for manager to evaluate the performance of

employees and use as a foundation for salary / human resource / performance planning decisions Therefore, ineffective appraisal system can be the central problem

In general, all these fifteen variables mentioned in initial causes - effects map need to

be re-evaluated by literature review to make sure no bias in qualitative research and central problem is well defined To be specific, it can be said that boring job is a very general issue so it is hard to solve Besides, there is no scale to measure how to

evaluate one job is interesting or boring, this is based on the attitude of each employee Furthermore, organizational instability is also a macro issue and currently, Damco was back to normal status so it can be said that this problem does not directly connect to the symptoms anymore Last but not least, it is also necessary to check if ineffective appraisal system is indeed the central problem of all sub causes Therefore, all these three groups of causes need to be reviewed by supporting theories in order to come up with an updated causes – effects map

1.4 Updated causes – effects map

Figure 8: Updated causes - effects map

In order to come up with updated causes-effects map shown in figure 8 and avoid any bias in initial qualitative research, literature was reviewed to identify the central

problem Three groups of potential problem would be reviewed respectively to match with three group in initial causes – effects map as following

1.4.1 Boring job

It can be said that boring job may not be the central problem because of following reasons:

Firstly, as mentioned before, the job nature of customer service department is one kind

of paper work, many tasks are repeated day by day Working on computer all the time

is required and there is limit chance to have face to face meeting with customer

However, the nature of this job has been existed for a long time, but in previous years, the turnover rate was not as high as that in 2017 as well as the employee satisfaction was not that low More importantly, it is difficult change the nature of the job

Secondly, when recruiting employees to Nike customer service department, a paper test and 2 times interviews were applied to find candidates who had characteristics

match with paper work Therefore, there was already having the action plan of Damco

to prevent the impact of boring job to employee satisfaction and turnover rate

Thirdly, the literature is not showing the strong linkage among boring job and

employees were treated unfair as well as no work-life balance as well as other

potential problem

In short, boring job should be eliminated out of updated causes – effects map It is better to look at the central problem that is admitted by literature as well as linked the potential problem in real case together

management’s constant reorganization, changing direction and shuffling people

around disconnects employees from the organization’s purpose Employees do not know what is going on, what the priorities are or what they should be doing This causes frustration leading to confusion and inefficiencies (14) Therefore, it can be said that organizational instability is indeed one of the elements that can impact to high turnover rate and employee satisfaction

Looking back to the fact that Damco was hit by cyber-attack on 27-June-2017,

however, after one month the system of whole Maersk group was up and running and after two months, all operations were back to normal In other words, the problem of organizational instability was eliminated in July 2017 However, when looking at the

HR report about number of employees left Nike customer service department in 2017,

a lot of people did leave the company before June as below table Therefore, it can be said that organizational instability is not the central problem at Nike customer service department

Table 1: List of people left Nike customer service department in 2017

Month in 2017 Number of people left Nike customer service department

In employee satisfaction survey, there are many complains related to recognition

program which will lead to the feeling of undervalued among employees and as result,

it will impact to performance of each employee

Besides, to define which individual has outstanding performance and give them

recognition, it should be based on appraisal system Therefore, it can be said that an ineffective appraisal system will have bad impact to recognition activity of the team

1.4.3.2 Compensation

Obviously, compensation is a motivation tool which should support high performance (16) Therefore, low compensation will lead to low employee’s motivation As a result,

it also impacts to low employee performance and finally, customer satisfaction

In addition, there is a close link between compensation and appraisal system (1) In other words, appraisal system provide a solid basis for wage and salary administration Overall, in order to find the root cause of low performance and low customer

satisfaction, it is necessary to look at the compensation Compensation need to be linked with employee’s performance So, it is back to the problem of using appraisal system to do performance evaluation

1.4.3.3 Employee are treated unfair

According to employee satisfaction survey, there was comments from employees about being treated unfair in the way recording over time They was rejected overtime record despite of going to work from 7:00 AM while working hour is from 8:30 AM to 5:30 PM

It can be seen that if over time policy is mentioned clearly in the appraisal system, there will be no disagreement between manager and employee The employee even can approach to higher level of management team if he feels that his manager does not follow the policy and he is treated unfair Being treated unfairly can make employees lower their job satisfaction Job satisfaction is a key motivational aspect of a job (17) The relationship between job satisfaction and turnover is consistent Dissatisfied

employees are more likely to quit their job than satisfied ones

by companies in which direct supervision of workers is difficult A promotion may also be a reward that results both in advancement within the firm and greater

responsibility Therefore, lacking of promotion will make the employees feel

demotivated in workplace which can lead to intention to quit the job

Besides compensation, appraisal system also provides data for human resource

decisions (1) Promotion is also one of human resource decisions and of course, based

on their performance So, it is no doubt that ineffective appraisal system can lead to wrong promotion decision

1.4.3.5 High workload

High workload is considered as a cause of job stress which influences the employees' job satisfaction and their overall performance in their work (19) While, according to

HR Overtime report, from Jun to Aug 2017, over time of Nike customer service

departmentwas 2160 hours, which seriously impact to employee work life balance

In case of too much workload, the manager of each team can raise up the issue of their own team to higher level of management team to find the solution The solution can be receiving support from other teams and hiring new member or hiring part time staff In order to convince the management team, it should be based on appraisal system to provide fact and figure

CHAPTER 2 PROBLEM JUSTIFICATION 2.1 Problem definition

According to Pallab (20), a performance appraisal system is an integral employee practice of the macro human resources (HR) framework of an organization It is a formal and at times informal and documented process of the performance of

workers, professionals and other staff members of an organization All professionally managed businesses and enterprises have performance appraisal systems to measure the intrinsic worth and work performance of employees and encourage, motivate and reward them based on their performances

Besides, a performance appraisal system is part of the human resource planning

process of an organization Therefore, it can be said that appraisal system plays an important role in one company operation Well-defined structures, frameworks and procedures define a workable and effective performance appraisal system A

systematic and timely use of the system reflects the commitment of business owners, enterprise top management and human resource personnel toward their employees and extended workforce Its deployment and usage involves detailed and periodic

assessment and grading of an employee‘s overall performance, future potential,

organizational commitment and the resulting promotions and rewards (20)

To be specific, performance appraisals can be done semiannually or annually

depending on specific organizational policies Some appraisals can be even in shorter duration for new comers Appraisal can be measured by various parameters and

organization-centric metrics such as teamwork ethic, consistency in job performance, individual performance, professional attitude, goal orientation and targets achieved (20)

In fact, appraisal system can be established by either human resource department or business unit managers, supervisors and other project leaders It is obvious that most employees work under or report to immediate supervisors or managers A line

manager or senior executive often has the closest and up-front view of an employee’s

work ethic, specific roles and responsibilities, capabilities and overall performance during a particular time period Therefore, the inputs, reports and reviews from line senior or manager plays a crucial role in an organizational performance appraisal system and can often make the difference between a timely promotion and maintaining

of status quo (20)

In short, an effective performance appraisal system brings a lot of benefits to the

organization because it showcases the professional working standards and governance ethics of an organization

2.2 Problem existence

With the aim of clarifying if ineffective appraisal system is indeed the existed problem

in Nike customer service department, one quantitative research and one qualitative research were conducted Because the number of employees in Nike customer service department is small (only 18 members) so the qualitative research is necessary to have

a deep analysis

2.2.1 Quantitative research result

The quantitative research were conducted on 13-Aug-2018 at Damco office with the methodology mentioned in supporting document part 2 “Quantitative research”

From the evaluation of Nike customer service staffs for current KPI system in the survey, it can be said that they did not consider this KPI system is effective when the average score is mostly under 3 in likert scale from 1 (totally disagree) to 5 (totally agree), which means that they are just at level of disagree or neutral

Figure 9: Average score of question 3-10 in quantitative survey

Table 2: List question from 3 to 10 in quantitative survey

3 You know clearly your KPI?

4 Your KPI is measurable?

5 Your KPI is realistic and achievable?

6 Your KPI is having clear time-bound?

7 Your performance is evaluated based on KPI?

8 Your salary is adjusted based on appraisal result?

9 You are satisfied with the current appraisal system?

10 You do NOT need a new appraisal system?

Source: Quantitative survey

It can be seen from table 2 that, when evaluating the KPI system based on SMART model: specific, measurable, achievable, realistic and time-bound, the highest score is about time - bound at 3.89 The lowest score is question related to achievability at 1.83, which means that the staff of Nike customer service department disagree that the KPI set for them was achievable The result of questions related to specification and measurability is only over 3, not yet reach to 4

Moreover, employees at Nike customer service department felt that their performance and salary are not evaluated based on KPI system This can be seen as the signal of ineffective appraisal because it cannot perform as a tool for manager to make decision and there is no link between the KPI and the salary (1) Furthermore, the result of the survey also show that Nike customer service employees are not satisfied with the current appraisal system and they expect to have a new and better one

Besides, 100% of respondents indicated that their performance was reviewed only once per year Which means that the current appraisal system is lack of following up steps

Last but not least, according to the survey, the staffs of Nike customer service

department are young, 72% of that are under 30 years old It is somehow linked to high turnover rate of this department As a result, the working experience of people in this department is not long, 72% under 3 years and only 6% over 10 years

Figure 10: Age and work experience of employees in Nike customer service

department

Source: Quantitative survey

2.2.2 Second qualitative research result (15-Aug-2018)

The purpose of the second qualitative research is to understand deeply about the

evaluation of employees on the current appraisal system This research is to support for the above quantitative research due to the small scale of respondents (18

participants)

The methodology of this third qualitative research is mentioned in supporting

document part 3

There are 5 main points can be summarized from the responses of the interviewees:

• Some items in the KPI is quite general, not detailed enough There is no KPI for collaboration and communication while these two items are important to a customer service team

• Some items is not achievable, especially cross selling point because of the special nature of Nike account, there is almost no chance for customer service team to sell any additional service of Damco to factories while Nike already have own contract with outsource suppliers

• There is no item to get plus score when there is improvement or extraordinary performance or tips saving to encourage employees There is only minus score when KPI is not met

• There is no official statement about the link between KPI result and salary, it is more based on manager decision

• All respondents comment that they need new appraisal system that we eliminate all pain points of current one

or tips saving Therefore, employees lost motivation in the job and willing to move to other companies if the benefit is better

After finding the central problem, it is critical to analyze the problem importance to see how this central problem impacts to the company

2.3 Problem importance

It can be seen from previous part that appraisal system plays an important role in company operation From the viewpoint of organization, appraisal system is defined as

a tool to measure and improve performance, to allocate resource as payment and

promotion From the view point of employees, the appraisal system is a feedback

mechanism, a contract that makes explicit what is expected and is used as a basis for fairly allocating scarce rewards and developing on the job performance (21)

The importance of appraisal system was also emphasized by Longenecker (1) that appraisal system can:

• Increase employee motivation and productivity

• Provide a solid basis for wage and salary administration

• Facilitate discussions concerning employee growth and development

• Provide data for human resource decisions

• Provide manager with a useful communication tool for employee goal setting and performance planning

Because the appraisal system is very important in a corporation, therefore, ineffective appraisal system will have a big impact as following:

Firstly, according to Brown et al (2), ineffective appraisal system can make

employees feel dissatisfied with the job Moreover, the employee is likely to feel that their contributions are not valued as they have limited capacity to exercise any process control and experience some confusion about the performance expectations of the organization (22) This can be linked to the low employee satisfaction at Nike

customer service department which mentioned in symptom part The employee

satisfaction at Nike customer service department in 2017 was just 3.2 while the target was 3.7

Secondly, Brown et al (2) also mentioned about low organizational commitment and intention to leave of employee when the company appraisal was not effective In other words, a low quality performance appraisal experience will be associated with higher intentions to quit Linking to the fact of this case, the turnover rate of Nike customer service department was also really high in 2017 which was 56% compared with only 32% at the main competitor This high turnover rate was having the big consequences related to high recruitment cost as well as low team morale and low team productivity

Thirdly, ineffective appraisal system is also related to low performance according to DeNisi et al (23) because employees are confused on how to achieve the company expectation and lose motivation in the job As a result, low performance will lead to low customer satisfaction while customer is the main source to bring revenue to the company Indeed, the customer satisfaction of Nike customer service department was low in 2017 as mentioned in symptom part which may lead to the decrease in customer loyalty

Next, in a company that has ineffective appraisal system, there will be a weak linkage between performance and wage / benefit (1) As a result, employees are dissatisfied with the salary / benefit Furthermore, as mentioned in previous part, compensation is

a motivation tool which should support high performance Low compensation will lead

to low employee’s motivation The dissatisfaction of employees at Nike customer service department was already indicated in qualitative result

After that, an ineffective appraisal system will make it is difficult for manager in

setting goal (23) Besides, it is hard for manager to manage employees’ performance and have the performance improvement

Finally, an effective appraisal may be the reason of lack of fairness in manager

evaluation (24) which causing bias in work place because there is no official document

so that employee can based on to question back the manager when being treated unfair

or escalate to higher level of management team

Therefore, as the appraisal system is extremely important in one company, it is critical

to build a better appraisal system to solve the problem of low employee satisfaction and low customer satisfaction as well as get the performance improved

CHAPTER 3 CAUSES VALIDATION AND SOLUTIONS

3.1 List of real causes

In order to find out the real causes of the central problems, theory was reviewed before conducting the second qualitative research in order to ensure all potential causes were considered and checked in this real case

3.1.1 Theory inform

The causes of ineffective appraisal can be listed as following (25):

1 Unclear performance criteria / ineffective rating instrument: If there is

ambiguity in the job description, goals, traits or the behaviors, then the basis for the evaluation the process is considered as failure from the beginning Besides, an

effective two-way communication is critical for the performance planning process prior to any evaluation to set the standard by which a manager's performance will be judged

2 Poor working relationship with the boss: one of the keys to an effective

performance review is the trust and confidence of the manager in his / her

subordinates It is said that the poor working relationship with the boss makes the rating process become lacking of credibility which impacts to the final result

3 Lack of ongoing performance feedback and ineffective link to reward systems:

to increase the effectiveness of the formal review process managers stated that ongoing performance feedback throughout the year is needed Positive feedback would be a motivation for employees Moreover, it is stated that employees would like to know if they are not performing well in the eyes of their boss sooner rather than later so that they can have chance to improve

4 Lack of focus on management development or improvement in the long run

5 Superior lacks of rating skills or motivation when conducting performance appraisal to rate the subordinate's performance In such circumstance, the conclusion

of the superior can be incorrect

3.1.2 Third qualitative research result (22-Aug-2018)

In order to identify the real causes of problem in Nike customer service department, one more qualitative research was conducted on 22-Aug-2018 with in depth interview method Detailed methodology of this qualitative research is mentioned in part 4 of supporting information

Based on the responses from the interviewees, the result of qualitative showed out that there are two main causes of ineffective appraisal system as following:

1 Unclear performance criteria/ineffective rating instrument: the KPI evaluation form does not mentioned detail objective for each position In other words, all

positions at Nike customer service department have the same KPI While there are two job level under manager in Nike customer service department which are team leader and customer service executive Therefore, it is necessary to separate KPI for each job level Besides, some KPI are difficult to achieve, maybe it is appropriate in other department but it is not suitable in Nike customer service department

2 Lack of ongoing performance feedback and the appraisal process is just one way of communication, the manager have the right to decide final result of employee performance but employees do not have the right to give feedback and discussion with their own manager This fact can easily lead to bias which makes the employees felt that they are treated unfair in previous part Besides, the manager herself also does not have any source to double check if her decision is correct or not Furthermore, the performance is just evaluated once per year at the end of the year and there is no

feedback from manager throughout the year As the result, employees had no chance

to get immediate feedback from manager once having trouble or having great

performance after one task As a consequence, the employee do not have the

motivation when getting no compliment or recognition on time and they also cannot get any lesson on time if doing anything wrongly

3 Ineffective link to reward system: there is no official statement indicating the connection between the appraisal result and the salary or benefit This raises the

concerns from employees about the bias in decision of manager

In conclusion, there are three real causes of ineffective appraisal system in Nike

customer service department, which are: unclear performance criteria/ineffective rating instrument, lack of ongoing feedback and ineffective link to reward system It is necessary to build up solution to solve above three root causes of central problem ineffective appraisal system

3.2 The set of solutions

It is proved in previous parts that ineffective appraisal system is the main root cause of low employee satisfaction as well as low customer satisfaction in Nike customer

service department and it is critical to solve this problem because of its high impact

To be specific, solving the problem of ineffective appraisal system can also improve the problems of no recognition, low compensation, employees are treated unfair, no promotion and high workload Moreover, the impacts of this problem mentioned in previous parts such as high turnover rate, high recruitment cost… can be improved Moreover, an effective appraisal system can encourage the positive performance and increase the long-term commitment between employee and the company

To solve the problem of ineffective appraisal system, the possible solution is to rebuild

an appraisal system that includes five following elements:

1 A detailed appraisal form, all KPI must be stated clearly in this appraisal to avoid any dispute between employees and managers In addition, all KPI need

to be reviewed and remove some inappropriate KPI It need to have standard evaluation form, disciplinary procedures

2 In addition, the process of appraisal need to have two way interaction which also need to focus on making sure effective evaluation from manager side as

well as proactive sharing / feedback from employee side It need to have clear feedback guidelines

3 Ongoing feedback is given to employees to make sure they are motivated when having good performance and they can learn lesson from the mistake

4 It is critical to have the connection between appraisal system and pay increase

as well as promotion This is also an effective way to motivate employees as well as increase the customer satisfaction

5 An effective appraisal system can motivate employees for better performance and promote their recognition

Furthermore, clear appraisal system can effectively avoid bias from manager side Besides, an effective appraisal system can provide a solid basis for wage and salary administration (1), therefore, the manager can base on this appraisal to decide the wage and salary of team member to avoid any dispute or dissatisfaction from the

employees In addition, appraisal system can be considered as a source for manager and HR to have plan for employee growth and development Last but not least,

appraisal system can also provide manager with a useful communication tool for

employee goal setting and performance planning (1)

The solution of building up new appraisal system can be executed by the cooperation between HR team and Nike customer service department manager Employees of Nike customer service department contribute their ideas, expectations to make the appraisal system meet the expectation of both manager side and staff side No external

consultant is needed because the size of Nike customer service department is small, only 18 members Furthermore, the manager and the team they understand about the requirement much deeper than outsourcing

Moreover, it is taken advantages of the internal resource so the cost is low To be specific, the annual salary of all employees at Damco is fixed and this task is not

required headcount added as well as no external consultant is needed, so this is a very cheap solution for the company but it can help big impact to the performance of whole