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Ms. Arushi
MBA(IB) Student – Full Time (Session 2018 – 20)
Indian Institute of Foreign Trade (IIFT), New Delhi
Abstract
Merit pay is a known tool for employer to differentiate between the high and low performing
employees at workplace. Merit raises, while pushing individual employees to deliver their
best and achieve more, thus padding their own paychecks as well as the company's bottom
line, also incentivize others to do better. As the name suggests, merit pay is usually linked to
remains: should only a formal performance appraisal system form the basis for disbursement
of merit pay, or can companies experiment a little and dole out meritraises based on the
hyperlocal online platform that enables customers and local merchants to discover and
engage with each other, the CEO and Cofounder, Ankur Warikoo, tinkered with company’s
meritpay system by asking employees about their salary expectations. What followed was a
series of daunting questions without an apparent answer.
Introduction
Ankur Warikoo had a bone of contention to pick with performance appraisal systems. The
young and dynamic CEO, and Cofounder, of Nearbuy.com was contemplating the results of
a recent survey he had conducted among his employees. The results had just confirmed his
organizations dealing with modern economies, consumers and employees “It reduces an
individual to a data point on an excel sheet, a rating on a 5 point scale, an increment fitting a
budget. Everything, except a human!” Warikoo[4] thought as he typed out an email to the
officials heading the divisions for Human Resources (HR) calling for a meeting within the
hour to address the survey results.
Having sent the email, Ankur sat back in his chair and thought about the points he wanted to
go over with the team. Ankur’s youth had attuned him to the expectations of young millennial
employees from their workplaces and employers in terms of job descriptions, workplace
roles, compensation as well as perceived justice. In his opinion, traditional practices were ill
equipped to deal with such expectations; which was why he had sent out an email to all his
employees on April 12, 2018[4] with one predominant question – ‘what should be your fixed
monthly salary’. The results were surprising and raised important questions which Ankur
needed to discuss with the team he would meet soon enough.
Company Background
Nearbuy.com a hyperlocal eCommerce company based out of India, allows customers to
discover and buy specifically curated deals, discounts and promotional offerings among
nearby stores/merchants. Earlier known as Groupon Inc, the company went a management
buyout and consequent merger with another rival firm through Paytm[5].
With over 300 employees and headquartered in Gurugram, Nearbuy.com is India’s first
hyperlocal online platform which operates in over 35 cities, more than 18 categories. Its
market penetration has resulted in over 50,000 merchants across 100,000+ unique locations
(Nearbuy.com, 2018). Post the merger, the resultant venture had an approximate market share
of 88 percent in the deal – discovery subsector of the O2O (online to offline) platform[6].
But Nearbuy is not just known for its market potential and ability to capture market
expectations in terms of curated promotional offerings. It is also known for the forthright and
vibrant nature of its CEO – Ankur, who believes in change, in reimagining for better
practices, and improving current processes for a better future – and is pretty vocal about his
refreshing beliefs. The company has gained traction on social media platforms in the recent
past for its unconventional HR policies. These practices reflected in bold and innovative style
of its management and same is much evident in various writeups by Ankur across pertinent
social media platforms such as Linkedin.
The Survey – Assessing performance appraisals from the employee perspective
The existing performance appraisal process at Nearbuy.com is based on a 4point rating scale
– Rating 1 for not meeting expectations, 2 for meeting some expectations, 3 for consistently
meeting all expectations and 4 for exceeding expectations. The yearly merit raise eligibility
as a percentage of fixed CTC is set at 0%, 5%, 10% and 20% respectively for the four ratings.
Merit pay or the paytoperformance component is decided based upon the performance
rating received by an individual/employee during the annual yearend review process. The
yearly bonus component combines performance assessment for two components individual
performance and organizational performance, wherein the component weightage varies for
employees across different levels (Annexure one). The company’s overall performance is
Employee, personal communication, January, 2019).
Compensation and Pay The Dilemma
HR leaders, as well as employees, admit that talent management processes suffer from
disdain from the workforce. Yet the greatest contempt is drawn by the performance appraisal
variables of millennial employees, coupled with the recent advances in the field of HRM has
brought new perspectives to longstanding concepts of equity and justice in the workplace
(Annexure 2). Armed with such knowledge, Warikoo decided to do something different
during the appraisal cycle of 2018. So, after the formal yearend appraisal process concluded,
Warikoo floated an email [3, 4] to all his employees and asked them to fill a form (Annexure 3)
while ensuring the privacy of their responses.
The subject Expected salaries after the performance appraisals.
Employee Reactions!
It was no wonder that the employees were taken by surprise after reading such an unusual
email. The reactions were as varied and mixed as Warikoo expected. While some employees
felt it was Warikoo’s way of playing an April fool’s prank, others were wonderstruck. Not
one employee had ever heard of or imagined being asked to describe what they through they
company assured employees about the seriousness of this exercise by saying, “our objectives
include making HR processes less intimidating and more useful for everyone, and act as a
change agent when there is scope for improvement as well as think big and out of the box”.
Another employee commented “I was not much surprised because I expect such mails from
Warikoo”[7]. However, when asked if this employee really thought his salary would be
adjusted on the basis of his expectation, he said “I thought it was an experiment for
sentimental analysis and to gauge how many employees actually think about their appraisal
rationally.” On the other hand, an employee with high hopes for enhanced appraisal through
the survey said, “Though I know that Ankur always likes to listen to his employees so he
would definitely consider the inputs, but I was not really sure whether it was a fun activity or
a part of the actual appraisal process”[7].
The Survey Results
Warikoo after realising that people’s salary expectation (cumulatively) was only 2.1% higher
than what the system was proposing [4]. It was surprising to note that 193 employees, forming
about 66% of the respondents, expected their salary lower than or within the range of what
the internal system initially proposed. Out of the remaining employees, 23 employees
expected a salary increment between in the range of 510%. Furthermore, 76 people i.e. 26%
of employees, expected their salary to be more than 10% of what was proposed by current
system (Annexure 4)
After compiling and analysing the survey results, Warikoo realised, “Some employees are
just "playing" on the survey (what’s the harm in asking!), while results reflect genuine faults
from our side in terms of bad pay benchmarking. But most employees are just in need of a
conversation.” [4]
Having experienced this realization, a series of questions struck Warikoo, all without an
apparent answer. Waiting for his HR team to arrive for the meeting, Ankur sat in his office
individual expectations was undoubtedly a bold move on company’s part. However, is the
hike (or even pay cut) justified without taking into consideration employees initial
performance appraisals? Can the same process be repeated next year?”
With so many complications, multiplied with uncertainty of how would employees would
react to such unconventional approach towards performance appraisals and compensation,
Ankur hoped that his own employees could lend him some perspective on the conundrum he
now faced.
References
https://drjohnsullivan.com/articles/performance-appraisal-the-most-dreaded-hr-
process-a-list-of-the-top-50-problems/
2. nearbuy.com (Nearbuy India Private Limited) Company, “About nearbuy.com,”
https://www.linkedin.com/feed/update/urn:li:activity:6367619823605768192
4. Warikoo, A. (2018b). LinkedIn post, https://www.linkedin.com/pulse/we-asked-our-
2018.
5. Paytm acquires Nearbuy and Little, to merge both apps. (2017). Retrieved from
https://www.businesstoday.in/current/economy-politics/paytm-aquires-nearbuy-little-
merge-both-apps/story/265476.html\
6. Pitchiah, V. (2019). Paytm-owned Little-Nearbuy has a turnaround plan, but can it
owned-little-nearbuy-has-a-turnaround-plan-but-can-it-stick-to-the-script
7. Excerpts from personal interviews with employees quoted with conditional
Annexure 2: Theories
1. Equity Theory
Originally proposed by psychologist John Adams in the 1960s the equity theory is a widely
acknowledged theory of motivation. The theory addresses the definition and measurement of
an employee’s relational satisfaction with what they give and consequently receive from an
organization with respect to their perception of the same for their colleagues. The theory is
based on the issue of perceived fairness of the inputs and outcomes of an employee’s
relationship with the organization. While the output may be measured in terms of hard
concepts such as salary and soft concepts such as praise or sense of achievement; the inputs
include evaluative metrics such as trust in superiors, personal sacrifices, time, and loyalty.
The Organizational justice theory (OJT) finds its roots in the equity theory and refers to an
employee’s judgment of whether he or she is being treated fairly in the workplace. The theory
refers to justice in four forms - distributive, procedural, informational, and interaction. While
traditional perspective of OJT mainly considers the decision rules and criteria that determine
considers the reasons why employees may care about fair treatment, processes involved in
faceted nature of this process which incorporates the impact of organizational climate, culture
[Note: These theories may be read from given textbooks. Additionally, the following
brand equity: conceptualizations, taxonomy and avenues for future research. Journal
been and where we are going. The Oxford handbook of justice in the workplace, 3-14.
f. Cassar, V., & Buttigieg, S. C. (2015). Psychological contract breach, organizational
This case can be used by B-school students, researchers and industry professionals pursuing
Management related courses. Though the case would be more suited to students studying
Human Resource Management (HRM) as a specialization, it may also be used for General
Course topics:
Learning objectives:
1. Should the compensation for all those who expected lesser than what the internal
Answer may discuss issues pertaining to External pay equity, Individual pay equity
and Job evaluation techniques that can help understand the job’s worth. Accordingly,
discussion can follow on how the pay can be revised and an inventive system created.
2. How should the compensation be fixed for those who had marginally higher (within
Answer may discuss issues on performance feedback and its process, how to create
emphasize here that supervisor should let each employee know his strengths,
their mind, discuss performance issues freely with the supervisor and this also allows
the supervisor to clarify his/her position in terms of why and what rating and
corresponding pay rise he/she has given to that individual. A fair discussion with
expectations remained unmet, would they ever take his emails (and him) seriously
thereafter? Alternatively, even if Warikoo decided to pay people what they expected
after the appraisals, was the 2.1% incremental cost justified from company’s
perspective?
Careful consideration can create solutions for every problems and students may be
allowed to formulate creative ideas. But answers should include the following points,
a. Cost is justified only if it rewards the performers and follows principal of equity,
b. Pay can be increased for those who are getting lesser than the prevailing market
Teaching Plan
Additional Readings