Case Study on New Performance Appraisal System at Xerox
In the mid-1980s Xerox corporation was faced with a problem—its performance appraisal
system was not working. Rather than motivating the employees, its system was leaving them
discouraged and disgruntled. Xerox recognized this problem and developed a new system to
eliminate it.
Old Performance Appraisal System
The original system used by Xerox encompassed seven main principles:
The appraisal occurred once a year.
It required employees to document their accomplishments.
The manager would assess these accomplishments in writing and assign numerical
ratings.
The appraisal included a summary written appraisal and a rating from 1
(unsatisfactory) to 5 (exceptional).
The ratings were on a forced distribution, controlled at the 3 level or below.
Merit increases were tied to the summary rating level.
Merit increase information and performance appraisals occurred in one session.
This system resulted in inequitable ratings and was cited by employees as a major source of
dissatisfaction. In fact, in 1983, the Reprographic Business Group (RBG), Xerox’s main
copier division, reported that 95 percent of its employees received either a 3 or 4 on their
appraisal. Merit raises for people in these two groups only varied by 1 to 2 percent.
Essentially, across-the-board raises were being given to all employees, regardless of
performance.