I. The description of the performance management system at Novartis. 1. Overview of the PM system at Novartis
An international employee PM system is a designed, implemented, and evaluated intervention of an MNE for the purpose of managing the performance of its global workforce so that performance at all levels contributes to the attainment of strategic global objectives and results in overall MNE desired performance (GHRM Performance Management & Novartis Part II, PPT, Schuler, 2013). In 1998, Novartis established a performance management system that evaluated employees and matched their compensation to both business results and certain values and behaviors (Jordan Siegel, 2008). Before 2002, most divisions at Novartis used different evaluate metrics to assess performance. While after 2002, they began to use one uniform system to conducting performance assessment around the world. The universal system graded employees on “business results” and “values and behaviors”, resulting in a nine-box matrix for assessing employee performance (Frame work for global talent management, Randall S. Schuler, Susan E. Jackson and Ibraiz Tarique)(see exhibit 1). Each of performance dimensions is evaluated with a three-point scale. For instance, “1” indicates poor performance, “2” indicates satisfactory performance, and “3” indicates superior performance (Jordan Siegel, 2008). And the business results are specific to each business unit, while the value and behaviors are constant across Novartis. These value and behaviors involves the following (Jordan Siegel, 2008): •
Being results driven
Having a customer/quality focus
Being innovative and creative
Being fast/action oriented
Demonstrating empowerment and accountability
Showing commitment and self-discipline
Through aligning performance management system with company’s values, Novartis strives to ensure that decisions taken throughout the whole value chain -- from research and manufacturing to distribution, marketing and sales – conform to the business strategy of the company.
2. Performance Review Processes
Novartis believes that pay-for-performance is only sustainable when fair performance evaluation procedures ensure integrity and fairness (Novartis Annual Report 2012). Each year, almost every Novartis employee around the world received a performance rating. According to Siegel, “this assessment process takes place within the context of the business performance cycle, which begins with the strategic plan for the firm and cascades down throughout the organization resulting in specific goals and objective for specific to each business unit” (Jordan Siegel, 2008). That means the assessment process is a long-term, ongoing process throughout a year instead of just a one-time process. For the beginning of each performance year, line managers and their direct reports get together to agree upon the personal objectives for the year of these employees. These objectives are derived from the business objectives established at the team, division, function or business area levels. Then who performance assessments—a mid-year and a year-end review-- are carried out. The mid-year review aims to see how these associates are doing. And the year-end review includes each associate in formal meetings with other coworkers and his or her line manager to evaluate the associate’s performance. Based on the year-end performance rating, line managers determine the incentive awards and the target compensation for the next year for each associate under review. The purpose of this performance evaluation process is to ensure the understanding of the job responsibilities and to encourage communications between the employee and his line manager regarding the performance. It also ensures cross-functional equality, as well as fosters trust in the organization by being open about employee’s performance (GHRM Performance Management &...
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