Is it fair to let them go using performance appraisal data to decide on staff cuts

Case summary In August 2020, Rodey Wing, a consultant at Kearney, was given the task of coming up with a layoff plan for 1,500 employees in Mopsy Superstore's optometry division so that

FOREIGN TRADE UNIVERSITY FACULTY OF BUSINESS ADMINISTRATION

HUMAN RESOURCE MANAGEMENT

CASE STUDY: IS IT FAIR TO LET THEM GO? USING PERFORMANCE APPRAISAL DATA TO

DECIDE ON STAFF CUTS

GROUP 11

Class: QTRE403(2425-2)1.1 Instructor: MSc Ngo Quy Nham

Hanoi, April 2025

Full name Student ID Contribution

Nguyễn Ngọc Diệp 2212250023 20%

TABLE OF CONTENTS

1.1 Company background nh Ỏ.Ĩ.aÀ5 2

1.2 Case SUIIMATY Ắ 53ÕÃ41 2

CHAPTER 2: STRATEGIC ANALYSIS 2

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4.2.1 Reduce layoff number (e.g., 800—1,000) to balance cost-cutting and fairness 8 4.2.2 Target underperforming regions/departments based on data (Value Chain, BCG)

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1.1 Company background

Mopsy Superstore is a multinational retailer headquartered in Ann Arbor, Michigan, with over 5,500 locations and 250,000 employees across North America The company has a wide range of services and products, including groceries, clothing, electronics, pharmacy services, and optometry The optometry division is an independent service and employs about 25,000 workers

Mospy has been known as a leading company in terms of equity, diversity, and inclusion (EDI), earning top scores on national equality indexes However, the pandemic has resulted

in a significant drop in income of the optometry division due to less customer traffic and rising labor costs In order to save the future of the company, Mopsy Superstore hired Kearney, a consulting firm, to come up with a strategy for restructuring

Mopsy’s performance appraisal system comprised semi-annual reviews by direct supervisors, focusing 60% on job performance and 40% on leadership skills However, this system was criticized due to the fact that the evaluation is highly subjective, depending heavily on a single manager’s perspective, and lacked broader peer or cross-functional input

1.2 Case summary

In August 2020, Rodey Wing, a consultant at Kearney, was given the task of coming up with

a layoff plan for 1,500 employees in Mopsy Superstore's optometry division so that the company could cut its costs and survive through the dreadful pandemic times

At the beginning, the idea was to lay off employees according to their work efficiency ratings However, the disproportionate impact assessment, carried out by Wing, showed that

the affected groups, which are race, color, religion, national religion, sex, gender, sexual

orientation, gender identity, people with disabilities, and veterans, were far overrepresented within the workforce and were unjustly dismissed These groups, which only constituted 15%

of the workforce, were found to be 29% of the employees on the layoff list

This situation has revealed the serious problems of unfairness, biased performance

evaluation, and the possible non-compliance with EDI principles Wing was in a difficult situation: he had to introduce layoffs that would save the company money but were also in keeping with Mopsy's pledge to diversity, equity, and inclusion

CHAPTER 2: STRATEGIC ANALYSIS

2.1 Theoretical Framework: PESTLE Analysis

Political:

Following the deaths of George Floyd (2020) and Trayvon Martin (2013), the Black Lives Matter (BLM) movement gained momentum, pushing for racial justice and the end of systemic violence In response, many organizations, including Mopsy, strengthened their focus on equity, diversity, and inclusion (EDI)

Economic:

The optometry industry has faced intense competition and price pressure from discount and

direct-to-consumer brands (e.g., Luxottica, National Vision) Between 2015-2020, physical

retail growth in the U.S averaged only 0.6% annually, reflecting industry stagnation Social:

The COVID-19 pandemic significantly reduced in-store traffic due to health concerns, lockdowns, and a major shift toward online shopping - posing challenges for physical retail models like Mopsy’s

Technological, Legal, Environmental:

These factors currently have no significant impact on Mopsy

2.2 Strategic Diagnosis: Value Chain Analysis

a Inbound Logistics

Inbound logistics covers the receipt, storage, and handling of materials Many firms suffer from redundant manual checks that slow operations without adding value Adopting warehouse management systems (WMS) and RFID can automate tracking, reduce labor, cut

costs, and boost efficiency with high accuracy

b Operations

Operations involve production, assembly, packaging, and quality control Common issues include duplicated quality checks and inefficient workflows Integrating quality control into production stages and optimizing factory layouts can reduce labor waste, increase speed, and lower overhead

c Marketing and Sales

This function promotes products and drives sales Traditional offline marketing and overlapping sales territories often cause inefficiencies Shifting to digital marketing and reorganizing sales regions improves performance, reduces staffing needs, and enhances customer acquisition and retention

d After-Sales Service

After-sales includes support, warranties, and customer care Overstaffing is common,

especially for simple queries Automating with AI chatbots and CRM systems streamlines service, improves response times, and reduces costs while maintaining service quality CHAPTER 3: CASE ANALYSIS

3.1 Performance Appraisal Issues

One significant drawback of the existing performance appraisal system is that it is not standardized Departments are autonomous, so managers read criteria informally and unevenly Descriptive terms such as "strong leadership" or "good teamwork" do not have specific benchmarks, and thus there are dramatic differences in rating among evaluators Such variability detracts from the system's credibility and creates the perception of injustice, giving rise to employee resentment, disengagement, and lower trust of leadership

3.1.2 Biases and Inequity

Unconscious bias in the assessment of performance is another key concern Even experienced managers may use mental shortcuts and become biased Biases are:

* Similarity bias — favoring those employees who resemble the evaluator

¢ Halo/Horns effect — enabling a single quality to influence the entire assessment,

¢ Leniency/Strictness bias — consistently giving high or low ratings

Informal feedback is regularly gathered from staff and peers, with further input from a single manager only, and thus these biases may go uncorrected This takes away from objectivity, resulting in decisions based on personal opinion rather than actual performance - especially egregious in promotion or layoff decisions, where fairness is most important

3.1.3 Impact on Protected Classes

The flawed evaluation system disproportionately affects vulnerable groups - such as racial minorities, LGBTQ+ individuals, and people with disabilities Despite comparable performance, these employees often receive lower ratings due to systemic bias When such ratings inform layoff decisions, it creates disparate impact - a seemingly neutral process producing unequal outcomes

This not only harms affected individuals but also raises serious legal and ethical concerns, particularly for a company known for upholding protected class rights In today’s climate,

where equity and inclusion are paramount, a system that consistently disadvantages certain

groups can damage internal morale and severely harm the organization’s public reputation

3.2 Decision-Making Concerns

3.2.1 Overreliance on Composite Scores

The performance appraisal system at Mopsy Superstore (Exhibit 3) evaluates employees

on four dimensions: Performance Goals (60% weight), Leadership Skills (40% weight,

which includes Customer, Team, and Growth subcategories) Each dimension is rated

on a 1-5 scale, and a composite score is calculated to determine an overall rating (1 = Does Not Meet Expectations, 5 = Significantly Exceeds Expectations)

- According to the complaint, the rating procedure is "highly subjective" and is decided

by managers with input from peers, senior managers, and employees (Page 4) Biases

may result from this subjectivity, particularly if managers harbor unspoken prejudices against particular populations

An employee's total contribution could not be adequately represented by the composite score An employee may, for instance, have excellent customer service

skills but a lower "Growth" score because of circumstances outside their control (such

as the state of the market) Complex human performance is oversimplified when a single score is used excessively

Employees in protected classes had a lower average total rating (3.39) than all employees (3.74), as demonstrated in Exhibit 4 This implies that some groups may be

systematically disadvantaged by the assessment system, possibly as a result of bias or

systemic injustices in the way performance is assessed

Instead of accurately reflecting an employee's performance or worth to the

organization, using composite scores as the only reason for layoffs runs the risk of fostering prejudices and unjustly focusing on workers who may be disadvantaged by the appraisal process

3.2.2 Lack of Impact Analysis

Wing initially proposed laying off the lowest-performing employees based on performance ratings but did not conduct a thorough impact analysis to understand how this decision would affect protected classes

Of the 25,000 employees, 3,761 are in protected classes If the lowest 1,500

performers are laid off, 441 (29%) of them would be from protected classes, despite protected classes making up only 15% of the total workforce This is nearly double the expected proportion, indicating a disparate impact

Wing only conducted the impact assessment after MacMillan raised concerns about fairness (Page 3) The initial plan did not consider how layoffs would affect diversity, equity, and inclusion (EDI) goals, which Mopsy Superstore had publicly committed

to, especially in light of the Black Lives Matter movement (Page 2)

Exhibit 1 also shows that the percentage of protected class employees laid off varies

by territory (e.g., 55% in Territory 1 vs 15% in Territory 9) This inconsistency

suggests that the appraisal system’s application may vary across regions, further exacerbating unfairness

Likely note that similarity bias, the horns effect, and the personal dislike bias are especially likely to negatively affect performance ratings of members of protected

-minority groups identified based on race, colour, religion, national origin, sex, gender, sexual orientation, and gender identity, physical/mental disability, and veteran

status

- Horns effect some negative characteristics influence the rating of other characteristics (e.g., if this employee has poor punctuality, she must also be careless with her customer service)

- Central tendency effect everyone gets close to the same rating (all scores cluster around the mean)

- Personal dislike bias the rater is unable to separate personal feelings from the employee's job performance (liked employees get higher rating

=>Without a proper impact analysis, the layoff plan risks violating anti-discrimination

laws (e.¢., Title VII in the U.S., which prohibits employment practices that disproportionately affect protected groups unless justified by business necessity) It also undermines Mopsy’s EDI commitments, potentially leading to reputational damage and legal challenges

3.2.3 Financial ys Ethical Trade-off

The decision to lay off 1,500 employees is driven by financial necessity, but it raises

significant ethical concerns

Financial Trade-Offs:

- Because the optometry section is overstaffed, it is anticipated that cutting staff by 1,500 will result in cost savings (Page 3) According to the argument, layoffs are a straightforward method of cutting costs because workers put in less hours each week and labor prices are set

- But the case also shows that Mopsy has historically had significant turnover rates (Page 4) Employee layoffs may result in a higher turnover rate since surviving staff may feel uneasy and quit, which would raise the expense of hiring new staff and providing training Losing seasoned optometrists may also have an effect on service quality, which could have an effect on long-term income and client happiness

Ethical Trade-Offs:

- The unequal treatment of protected groups raises moral questions regarding equity and justice Particularly in an era of increased social consciousness regarding racial justice, firing a larger proportion of workers from protected groups (29% vs 15% representation) may prolong structural injustices (Page 2)

- According to the case, many optometrists already experience burnout and excessive workloads (Page 3) For the surviving staff, layoffs may make this problem worse, resulting in additional stress and possible drops in morale and output

- Mopsy Superstore has made EDI projects a public priority (Page 2) Employee trust and the company's reputation could be harmed by a layoff plan that unfairly impacts protected classes

CHAPTER 4: RECOMMENDATION & IMPLEMENTATION

4.1 Improve Performance Appraisal System

To effectively handle the shortcomings flagged in the current performance appraisal system, Mopsy Superstore is required to refurbish it to make it fair, objective, and open The recommendations that follow talk about practical steps that will help in the expansion of the

scope of the appraisal process leading to reduced bias and increased equity for all employee groups

4.1.1 Standardize Evaluation Criteria Across Departments to Reduce Inconsistency and Bias

The very first step in making the process of performance evaluation fairer is getting everyone

to agree on the criteria This means setting performance expectations and creating ratings that clearly differentiate between poor, average, and superior performance Instead of using vague terms like “leadership” or “team player,” organizations might want to use Behaviorally Anchored Rating Scales (BARS) that define what each level of performance looks like For instance, a 5-point rating scale for “working with others” should be accompanied by very specific, observable actions of the typical employee at each point Getting everyone to use the same criteria makes sure that all employees are rated on the same scale, reduces bias, allows for equal treatment of employees across different teams, and raises the performance level by leading to a review based on evidence rather than gossip

4.1.2 Provide Evaluator Training and Apply Multi-Rater Methods (e.g., 360-Degree

Feedback)

Improper evaluations can be due to unskilled managers, but companies should provide adequate training to ensure competency in applying criteria and recognizing unconscious preferences This training can help managers set and evaluate specific criteria, recognize pitfalls, and promote fairness A 360-degree performance evaluation system can help eliminate subjectivity, promote fairness, and provide a more comprehensive view of employee performance This system involves subordinates, peers, and clients evaluating their manager on the same job and organizational performance characteristics, incorporating different perspectives and increasing fairness and justice in performance ratings

4.1.3 Monitor Appraisal Outcomes Using Disparate Impact Analysis to Ensure Fairness The final checkpoint involves a continuous review of employee appraisal results using disparate impact analysis This helps identify if one category of appraisals has led to high dissatisfaction among employees from different demographic profiles The company can also

check if feedback based on gender, race, age, or other attributes is uniform, detecting

potential bias problems This data can help management make appropriate decisions, such as changing scores, offering more training, or engaging external parties for audits The review signals the company's commitment to promoting public welfare through Equity, Diversity, and Inclusion (EDI), rather than just lip service to the noble value through written policies

4.2 Restructure Layoff Decision Process

4.2.1 Reduce layoff number (e.g., 800—1,000) to balance cost-cutting and fairness

Rationale: The necessity to reduce expenses as a result of overstaffing and diminishing profitability prompted the initial decision to lay off 1,500 workers, or 6% of the

25,000-person optometry division workforce (Page 3) Even though protected classes make

up only 15% of the workforce, Exhibit 1 shows that they would be disproportionately impacted by this strategy, since 441 of the 1,500 layoffs (29%) would come from them Reducing the number of layoffs to 800—1,000 can still result in significant cost reductions while reducing this disproportionate impact

- Reducing the number of layoffs to 1,000 would result in a proportionate decrease in the number of protected class employees laid off, provided that the same percentage

of lowest performers are targeted 290 protected class employees would be laid off for every 1,000 layoffs, based on the initial 29% rate (1,000 x 0.29) Although this still exceeds the 15% representation (150 out of 1,000), the unequal impact is lessened because there are 290 impacted protected class employees instead of 441

- Although exact compensation data is not provided in the case, laying off 1,500 personnel would save $75 million yearly (1,500 « $50,000) if the average annual

income for optometry division employees is $50,000, which is a plausible estimate for retail optometrists $50 million would be saved if there were only 1,000 layoffs, and

$40 million if there were 800 Even if this falls short of the initial goal, it nevertheless

addresses fairness issues and offers significant savings

e Inreaction to the Black Lives Matter movement, Mopsy Superstore has pledged to improve equity, diversity, and inclusion (EDI) (Page 2) Because there is less chance

of offending protected groups and harming the company's reputation, fewer layoffs are more in line with these obligations

Implementation: Give top priority to cost-cutting strategies that go hand in hand with the fewer layoffs, like enacting a hiring freeze, cutting overtime, or providing voluntary unpaid leave These steps can assist close the gap between the initial savings goal of $75 million and the $40—50 million that was attained with fewer layoffs Openly discuss the updated plan with staff members, highlighting Mopsy's dedication to equity and EDI Employee trust and morale may be preserved in this way

Trade-Offs: Less immediate cost savings from fewer layoffs could postpone Mopsy's return

to profitability Nonetheless, the case mentions high past turnover rates (Page 4), indicating

that natural attrition may eventually further lower headcount, allaying this worry While

lowering layoffs shows a dedication to equity, the remaining layoffs nevertheless need to be handled carefully to prevent a disproportionate effect on protected groups

4.2.2 Target underperforming regions/departments based on data (Value Chain, BCG)

Rationale:

Exhibit 1 illustrates how the percentage of protected class workers laid off varies

significantly by territory, from 15% in Territory 9 to 55% in Territory 1 This implies that

regional differences exist in workforce makeup and performance difficulties Instead of using

a uniform layoff plan, focusing on underperforming departments or areas can maximize cost reductions while reducing unfair impact Where layoffs will have the least detrimental effect