Cypress is not immune to these problems id say a

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equity both have a place in the incentive mix, but confusing the two makes for mushy logic, counterproductive results, and dissatisfied people. Cypress is not immune to these problems; I’d say a third of our vice presidents still don’t have a good feel for how to review performance and award raises. But I’m not too concerned about that. Our focal-review system, one of the most efficient systems we’ve ever developed, controls the three big problems I No Excuses Management https://hbr.org/1990/07/no-excuses-management 19 of 28 6/14/2018, 2:27 AM
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just identified. Our managers follow the system because the only way to grant raises in the company is to use the series of computer templates that walks managers through a series of review-process steps and alerts them to violations against company policy. As with all our resource-allocation systems, the focal-review system starts with policies at the top and forces middle management decisions to be consistent with that thinking. Senior management and the board of directors review our annual revenue forecasts, survey compensation trends among our competitors, and settle on a total corporate allowance for raises. The “raise budget” is not negotiable, and it drives raises throughout the company. If the corporate budget is 8%, then every department must meet a weighted-average salary increase of 8%. It’s up to managers to distribute the 8% pool, which is where the focal-review system comes in. There are four stages to the process. Everyone at Cypress is part of a “focal group” (there are 132 groups in the company) composed of peers with comparable responsibilities. For example, all vice presidents are in one focal group, all weekend night-shift assembly operators are in another, all RAM circuit designers are in a third. The ranking committee for each focal group includes the members’ supervisors as well as managers from other parts of the company in a position to judge each member’s performance and service. The ranking committee for our shipping clerks might include representatives from sales or manufacturing. The ranking committee for a group of circuit designers might include representatives from marketing or manufacturing. Before evaluations take place, we post rosters of focal groups and ranking committees to allow people to question their assignments. Much of the discussion in the ranking committee centers on the monthly reviews stemming from the goal system. This controls the proximity effect I’ve already discussed and provides an objective record of performance based on goals employees have set for themselves. The ranking procedure helps control a second problem that undermines so many performance reviews; I call it the mayonnaise effect. Suppose you’re running a food company that wants to enter the mayonnaise market. You can make your mayonnaise with olive oil, sunflower oil, or corn oil. You can use vinegar, lemon, both, or neither. You can emulsify with egg yokes, dry eggs, or whole eggs. You can use lots of salt or not much salt. If you put ten different mayonnaise formulas on a table and ask people to rate each one, chances are pretty good they’ll make some big errors. They’ll probably recall their
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