Bank manager wins case on account of flawed performance appraisal

Managing workplace performance is tricky and according to a 2013 report by research firm i4cp, only 55% of employees from high-performance organisations (HPOs) believe that their performance appraisals have a positive business impact. More alarmingly, only 28% of the HPO respondents believed that their organisations were highly effective at performance management. It is no wonder then that performance management ranks as one of the most unpopular and contentious human resource practices.

Most people, at some point in their career, can relate to a negative performance review experience and unfortunately, this proved to be costly incident for one organisation when it was brought before the Federal Circuit Court.

A senior bank manager was awarded $70,000, together with legal costs, after his former employer failed to pay his discretionary incentive bonus at the time of his redundancy, as a result of his supervisor improperly conducting his performance appraisal.

During each year of the senior manager’s employment, he was eligible to receive a discretionary bonus, referred to as a “variable rewards scheme”, along with another incentive plan linking his performance to that of the business. Prior to his redundancy, the senior manager had been receiving these bonuses – earning an additional $70,000 in the 2009/2010 financial year. In recognition of his success at work, he had even been invited to participate in the Accelerated Leadership Program, a program for employees whom the bank considered to be future leaders. This happened separately around the same time when his division was restructured in 2010.

In October 2011, shortly after the end of the bank’s financial year, the senior manager was made redundant.

The evidence disclosed during the trial indicated that the senior manager’s supervisor had not complied with the contract of employment, the Redundancy Policy and other policies. The supervisor did not apply all relevant criteria and did not adhere to the objective scorecard as a performance measure, took into account incidences that occurred outside of the performance period and failed to investigate whether actions attributed to the senior manager were actually carried out by him. The senior manager was given a ‘needs development’ rating, yet was led to believe that his overall rating was ‘effective’. As this assumption was similar to ratings that he had previously received, he trusted that he would receive a bonus.

Under the incentive plan, an employee needed to achieve a minimum ‘effective’ rating in order to be eligible for a bonus. The bank contended that the senior manager was not eligible to receive a bonus under its redundancy policy, since his supervisor had given him a low performance rating and he had been retrenched before the December 1 bonus payment date.

While the Court accepted that the senior manager’s employment contract expressly stated that workplace policies did not form part of the contract of employment, the policies were found to be relevant for determining his entitlements on redundancy. Furthermore, the bank was unable to explain how an “executive with a highly successful performance of his role” could suddenly and without explanation have been held to have “failed in all aspects of his employment.”

Such a case serves as a timely reminder to all managers, who hold performance management responsibilities, of the importance of creating a well-planned, thoughtful and consistent process for conducting performance appraisals.

iHR Australia offers a Managing Everyday Performance Program to help support a high performance culture within your workplace. Participants build up their competence and confidence to set meaningful expectations, deliver effective and regular performance feedback and take appropriate resolutions activities within legal considerations. In iHR’s Performance Management Appraisal Meetings Training, which is delivered on-site at your organisation, participants learn how to plan, prepare and conduct an effective appraisal, how to assess and deliver feedback with measurable and supporting evidence, and how to identify skill gaps and develop target developmental plans.