Fred Maiorino began his career at Schering-Plough in 1958 at the age of 28. He had been a successful sales representative till Jim Reed took over the position of General Sales Manager for South Jersey sales district in 1987. In 1988, Fred received his lowest ever performance evaluation of “Good” which was lower than any other sales representatives’ in the district. In fact, Fred’s salary increase at the end of the quarter was less than half of the average of other sales representatives who were at least 20 years younger to him. When Reed first came to New Jersey sales district, he turned to Fred for help and leadership. He implemented a new performance evaluation measuring system which rated salesmen according to two different measures. This new system included evaluations based on product market share gains and critical incidents of effective and ineffective salesmen actions recorded during joint calls made by district managers and sales reps.
Moreover, Reed began coaching his subordinates and providing them with medical journals to help improve sales pitches. Unfortunately, even after working at Schering-Plough for over three decades as a highly successful salesman, Fred was terminated over coffee with Jim Reed at a local diner. This paper discusses why the different initiatives taken by Schering-Plough to motivate Fred Maiorino had failed. It also examines Reed’s role in the alleged breach of psychological contract and, contributions to the injustice and discrimination against Fred. Finally, this paper will provide recommendations for alternative coaching, goal-setting and leadership approaches that Schering-Plough could have adopted instead to ensure employee retention and loyalty.
Breach of Psychological Contract
At the beginning of their relationship, Jim Reed informed Fred that he would require Fred’s help in leadership. Although Reed may have made the remark in a casual manner, Fred took it seriously as he was able to recall the conversation even after a few years. Older employees tend to enjoy collaborative tasks through social interactions more than competitive tasks (Kanfer & Ackerman, 2004, p. 441). In fact, employees in their midlife respond more positively to managerial strategies that promote cooperation instead of competition (Kanfer & Ackerman, 2004). In this case, it is fairly logical to think that Fred may have assumed that he would be promoted or provided with a salary hike if he was successful in helping Reed design a leadership plan for the district. In fact, this particular conversation with Reed may have led him to believe that Reed would acknowledge his hard work and loyalty by actually taking Fred’s advice or letting him help with the new strategy thereby, creating a psychological contract between the two parties involved. A psychological contact emerges when an employee believes that a promise of future benefit or return has been made in return for his contributions and, an obligation has been created for the employer (Robinson, Kraatz, & Rousseau, 1994).
In other words, a psychological contract refers to the belief or perception of mutual obligations of an employee (Rousseau, 1989). Unfortunately, the assigned case does not indicate that Reed lived up to his promise of taking Fred’s help in motivating, mentoring and training new employees. According to Humphrey (2003) such acts can be deflating as the motivational benefits of bottom-up empowerment are forgone or lost. Moreover, violation of psychological contracts may lead to lower motivation and increased intentions to quit (Raja, Johns & Bilgrami, 2011). Thus, breach of such emotional contracts in the workplace may give rise to distrust, dissatisfaction and in extreme cases dissolution of the relationship between an employee and his employer (Roehling, 1997). In fact, breach of the psychological contracts lead to behaviors that undermine organizational effectiveness and efficiency (Lemire & Rouillard, 2005).
Reed’s behavior increased Fred’s state of vigilance to the point where he began to actively monitor how well Schering-Plough was meeting the terms of their psychological contract. Moreover, in Fred’s eyes, Schering-Plough has breached the psychological contract with Fred. Fred had dedicated over 35 years of him life to the company only to find out it had made plans to make him retire early. Furthermore, Fred began to lose his faith in Schering-Plough when he realized that younger salespersons were being hired to replace long-term hard-working employees like him. In addition, Reed referred Fred’s decision to decline the early retirement plan as a foolish act.
According to Zagenczyk, Gibney, Kiewitz, and Restubog (2009), supervisors’ supportiveness/discouragement strengthens/weakens the relationship between employers and employees. A study that included 297 responses from 31 organizations confirmed a relationship between the existence of psychological contract and employee commitment. In fact, those with relational psychological contract exhibited more commitment to the workplace than those with transactional contracts (Chiang, Liao, Klein & Jiang, 2012).
Violation of Procedural Justice
Reed’s evaluation and spying on Fred resulted in the latter being suspended without pay for two days. This led to an increase in Fred’s feelings of injustice and violation. Additionally, Fred and Reed held different views of the measurement of Fred’s performance at work, flexibility, goal-setting and the purpose of coaching. In fact, Reed’s communication of matching market share goals and what was expected of Fred was highly complex and ambiguous. Such behavior on Reed’s part raised questions about procedural justice at Schering-Plough. Procedural justice is determined on the basis of the quality of what is being communicated an employee. In other words, procedural justice is based on the extent to which an employee feels whether his employer communicated crucial decisions in a sensitive and ethical manner (Harvey & Haines III, 2005). In other words, how a decision is made and communicated is what counts most (Harvey & Haines III, 2005). Unfortunately, Reed’s behavior implied that he regarded Fred as someone worthy of respect.
This was further attested when Reed felt that it was not important to let Fred know the dates when he saw Fred’s company car parked in his driveway during work hours. Moreover, the new performance evaluation system implemented by Reed showed that Fred was doing “very good”. However, Reed decided to focus more on the least desirable component of Fred’s evaluation and give Fred and overall “good”. The results of the evaluation were humiliating for Fred as it was his lowest ever rating and was certainly lower than all other new hires who were at least 20 years younger to him. The assigned case study does not tell us how exactly Reed communicated his evaluations of Fred’s performance to Fred, but it does tell us that he evaluated Fred the very same way the second time. This time he sent Fred a memo letting him know that he was capable of doing better. The procedures involved in decision-making and the method of communication used affect employee behavior at work (Harvey & Haines III, 2005).
Ineffective Performance Appraisals and Goal-Setting Systems Right after Reed informed Fred that he would need the latter’s help, he implemented a new appraisal system that evaluated employees based on new criteria. However, this new system seemed to worsen his relationship with Fred. Job relatedness, formalization, reliability, open communication, trained appraisers, ease of use, employee accessibility and appeal procedures are among some of the characteristics of an effective appraisal system (Caruth & Humphreys, 2008). The newly implemented system barely met any of the above categories. General guidelines instead of comprehensive policies and written instructions were used by the company. It is important to use appraisal systems that encourage improvement and are not regarded as threats to be feared by employees (Hammer, 2007).
As such, performance evaluations should be followed by accurate description and diagnosis of the ratings so that employees are able to discuss, understand and prevent future problems (Lee, 2005). This was lacking in Reed’s appraisal system. Moreover, recording and monitoring employee behavior during joint calls may have led Fred to be more cautious and nervous during client interactions. According to Gray (2002) such systems do not encourage competency or loyalty as they are distorted by evaluator bias. Fred never thought his performance rating was fair – in fact, he resisted it because older workers are more likely to avoid situations that put them at a disadvantage when compared to younger employees (Kanfer & Ackerman, 2004). The following paragraphs discuss what Reed could and should have done better to improve Fred’s situation and circumstances.
Improving Leadership Style
One of the major issues that led to Fred’s decision to take Schering-Plough to court was Reed’s ineffective leadership style. It is important for managers to know what behaviors promote achievement of results and what behaviors are plain ineffective (Lindbom, 2007). In fact, one of the most important job duties of a manager is to improve his followers’ performances. This meant, Reed should have communicated better with Fred. In fact, he should have asked Fred about his problems and listened to him instead of simply pushing him and sending him memos for poor performance. Continuous feedback and dialog would have allowed Reed to understand Fred’s needs, strengths, and weaknesses better while building a stronger bond with him. Once this bond was built, it would have been much easier for Reed to alter Fred’s behavior according to the interest of the organization. An effective manager is attuned to individual followers and takes the right decision at the right time (Buzady, 2011). This allows the manager or leader to interact and alter workloads during difficult times. Transformational leaders focus on matching behaviors and communication instead of goals and skills (Humphreys & Einstein, 2004).
Therefore, Reed could have improved Fred’s motivation and performance by communicating in a way that would have been easy for Fred to understand and relate to. Moreover, a leader must encourage and understand the ideals and values that his followers share. In order to come to a common ground with followers, an effective leader must think less about himself and more for others (Kerfoot, 2004). Congruency can only be reached when a leader looks beyond himself and more toward the opportunities for advancement of his followers. Leaders should ensure that challenging work that is valued is provided to subordinates while considering the followers ability. He should always consider the followers self-esteem and self-concept, communicate goals clearly and understand the relationship between paying attention to individual followers and job satisfaction (Isaac, Zerbe & Pitt, 2011). Moreover, it is recommended that sales leaders employ a more active style of leadership in order to improve participation and performance.
Therefore, Reed should have considered adopting transformational leadership style (Bass, 1993). Transformational leaders are those who are able to develop the ability within their subordinates to look beyond their own self interests and align their goals with that of the organization. Although transactional leadership style is more popular among sales managers and is believed to induce desired responses in employees, transformational leadership has been found to produce higher such results (Dubinsky, Yammarino, Jolson & Spanger, 2001). Transformational leader hold deep personal value systems that allow them to unite their followers while modifying their goals (Bass,1999). Moreover, transformational leader demonstrate individual consideration, charisma and inspirational motivation – all of which were lacking in Reed from Fred’s point of view.
Furthermore, Reed needed to change his way of coaching his subordinates. Reed’s concept of coaching included handing out manuals and writing memos that stated Fred was capable of doing better. Today, most organizations are determined to improve the ability of managers to coach their subordinates effectively. Many organizations shelve out millions of dollars to promote and facilitate a health coaching environment. In fact, coaching is considered a manager’s top priority in many companies. Therefore, Reed should have designed one-on-one monthly meetings with his subordinates where he could have discussed ways to improve individual sales performance. Moreover, instead of punishing Fred for products that he was selling less of, Reed should have first appreciated Fred’s top selling products. Subordinates look forward to reinforcement when they do the right things and welcome constructive criticism when they recognize their work needs improvement (Robinson & Rousseau, 1994).
Improving Reward System
. A sudden change in the reward systems is usually not well accepted among employees who perform consistently. Therefore, it was critical for Reed to first speak to his subordinates regarding changes in Reed used a highly ineffective reward system where the company ended up awarding Fred less than his expected salary increase. Instead, Reed should have made every effort to determine what rewards his subordinates valued and how much effort they were willing to make to attain the rewardsperformance and work with them to improve on it. Constant coaching, mentoring and one-on-one monthly individual performance evaluations would have given employees an idea of what rewards to expect from the new system. In fact, the unexpected and unprecedented reward might have actually de-motivated Fred to the point where he did not find it necessary to work on his weaknesses in selling the two major products of the company.
Avolio, B. J., Bass, B. M., & Jung, D. I. (1999). Re‐examining the components of transformational and transactional leadership using the Multifactor Leadership. Journal of occupational and organizational psychology, 72(4), 441-462. Bass, B. M., & Avolio, B. J. (1993). Transformational leadership: A response to critiques. Braun, C. (1997). Organizational infidelity: how violations of trust affect the employee-employer relationship. The Academy
of Management Executive, 11(4), 94-95. Buzady, Z. & Georgiu, A. (2011). Riding the waves of the motivation cycle. OD Practitioner, 43(1), p. 35-41.
Caruth, D. L. & Humphreys, J. H. (2008). Performance appraisal: essential characteristics for s strategic control. Measuring Business Excellence, 12(3), p. 24 Chiang, J. C., Liao, C., Klein, G., & Jiang, J. (2012). Consequences of psychological contract violations for IS personnel. Journal of Computer Information Systems, 52(4), 78-87. Dubinsky, A. J., Yammarino, F. J., Jolson, M. A., & Spangler, W. D. (1995). Transformational leadership: An initial investigation in sales management. The Journal of Personal Selling and Sales Management, 17-31.
Hammer, M. (2007, Spring). The 7 deadly sins of performance measurement and how to avoid them. MIT Sloan Management Review, 48(3), p. 19-28.
Harvey, S. & Haines III, V. (2005). Employer treatment of employees during a community crisis: The role of procedural and distributive justice. Journal of Business & Psychology, 20(1), p. 53-68.
Humphreys, J. H. (2003). Xenophon as leadership theorist: an early model of leader behavior and follower work motivation. Academy of Management Proceedings, D1-D6 Humphreys, J. H., & Einstein, W. O. (2004). Leadership and temperament congruence: Extending the expectancy model of work motivation. Journal of Leadership & Organizational Studies, 10(4), 58-79.
Isaac, R. G., Zerbe, W. J., & Pitt, D. C. (2001). Leadership and motivation: The effective application of expectancy theory. Journal of Managerial Issues, 212-226. Kanfer, R. & Ackerman, P. (2004, July). Aging, adult development, and work motivation. The Academy of Management Review, 29(3), p. 440-458.
Kerfoot, K. (2004, October). The shelf life of leaders. MEDSURG Nursing, 13(5), p348-350. Lee, C. D. (2005, Autumn). Rethinking the goals of your performance-management system. Employment Relations Today, 32(3), p. 53-60
Lemire, L. & Rouillard, C. (2005). An empirical exploration of psychological
contract violation and individual behaviour. Journal of Managerial Psychology, 20(2), 150-163. Lindbom, D. (2007). A culture of coaching: The challenge of managing performance for long- term results. Organization Development Journal, 25(2), pP101-P106. Raja, U., Johns, G., & Bilgrami, S. (2011). Negative consequences of felt violations: The deeper the relationship, the stronger the reaction. Applied Psychology: An International Review, 60, 397–420.
Robinson, S. L., Kraatz, M. S., & Rousseau, D. M. (1994). Changing obligations and the psychological contract: A longitudinal study. Academy of management Journal, 37(1), 137-152. Robinson, S. L., & Rousseau, D. M. (1994). Violating the psychological contract: Not the exception but the norm. Journal of organizational behavior,15(3), 245-259. Roehling, M. V. (1997). The origins and early development of the psychological contract construct. Journal of Management History (Archive), 3(2), 204-217. Rousseau, D. M. (1989). Psychological and implied contracts in organizations. Employee Responsibilities and Rights Journal, 2, 121–139.
Zagenczyk, T. J., Gibney, R., Kiewitz, C., & Restubog, S. L. D. (2009). Mentors, supervisors and role models: Do they reduce the effects of psychological contract breach? Human Resource Management Journal, 19(3), p. 237-259.