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By Tahseen Zakaria, PGDPM, MBA (UK), BSC
[Disclaimer: Data used in this research paper are sometimes superficial or fictional. Any resemblance with living person and/or institution is coincidental. The author does not bear any responsibility if the data are being used in any format for research, official, or analytical purpose]
Introduction to the company Being one of the largest pharmaceutical company in the world, Company-X (from henceforth referred as COMPANY-X) has operations in 140 countries around the world. One of its secondary manufacturing sites in Bangladesh is known as LMS (Local Manufacturing & Supply) Bangladesh in South Asian region. This is the only manufacturing plant in Bangladesh which produces a number of local generic medicines namely in the dosage forms of tablet, ointment, oral liquid, nasal drops, capsules etc. The site started its operation from 1967 and has gone through a number of mergers & acquisitions, thus having witnessed a number of management approaches and different number of employees. At present LMS Bangladesh employs 90 Management staffs and around 200 Non-management employees. Performance and Reward Management (P&RM) has never been an issue which the company could have effort to overlook or neglect. In fact, the company went through a number of different approaches for sustainable P&RM during different decades, and has demonstrated its success in numerous occasions in recognizing the right people for the right position and reward. Past P&RM Practices The time span for describing P&RM in LMS Bangladesh can be detailed as below: Duration 1967 – 1980 1981- 1991 Performance Appraisal Tool Kit Annual Confidential Report (ACR) For non-management staffs: Straight Ranking Method. For management staffs: ACR For non-management staffs: Scoring Method. For management staffs: ACR For management staffs: PDP. For nonmanagement staffs: Scoring Method Reward Management Tool kit Assessment approach used By Line Manager By Line Manager
Instant Performance Related Payment (IPRP)
By Line Manager
Excellence Recognition Award (ERA)
Performance Appraisal 1967-1980: The beginning of performance appraisal practice in LMS Bangladesh was marked by introducing Annual Confidential Report (ACR). ACR used to be in practice for both Management and Non-management graded employees, and used to be conducted by Line Managers alone. ACR depended on a number of factors including interpersonal relationship between employee and his supervisor. ACRs were, however, used to be authorized and finally approved by Personnel Manager and Managing Director respectively. Despite of this the method was not free from prejudice, and were challenged a number of times. The below is part of the format of a sample ACR:
PART - IV COMMENTS / RECOMMENDATION OF THE DEPARTMENTAL MANAGER ( Tick in red ink in appropriate column where your judgment differs from that of appraiser in Part III )
PART - V COMMENTS OF DEPARTMENTAL HEAD
PART - VI COMMENTS OF HUMAN RESOURCES MANAGER
PART - VII APPROVAL / COMMENTS
Almost 12,000 employees were assessed during this period under this type of performance appraisal method. No formal reward management process existed at that time. 1981-1991: Gradually the performance appraisal method started to evolve into a more scientific one. Straight ranking method was introduced to conduct performance appraisal for nonmanagement workforce. However, ACR still remained the performance appraisal method in case of Management staffs. Similar to the previous methods, Line Managers were responsible to complete appraisal function within a specified time using straight ranking method for their non-management staff. In this regard mostly observation and feedback from immediate supervisor were considered. Since performance was closely related allotting promotion or additional responsibility to an employee, the willingness to accept challenges for future positions was also been measured in the straight ranking method. The 5 primary parameters used in ranking method were: o o o o o Discipline Punctuality Leave Records Monthly Medical Visits Leave Availed (last calendar year)
In addition the following were the indicators of an employee’s skill
Section / Area of Appraisal Rating
A Knowledge of job Accuracy
Neatness Dependability Work Speed Responsibility Adaptability Attitude to others Health & Safety Awareness Leadership GENERAL RATING (Based on above) 1. Has he / she made progress since last report ? Comment briefly
2. Comments by the appraiser :
SIGNATURE : DATE
The 5 point based rating scale can be described as below: A = Very Good B = Good C = Satisfactory D = Poor E = Very Poor
ACR was still being used as performance appraisal method for Management graded staffs. Almost 8000 employees in total were evaluated during these years. 1991-2003: Scoring method was introduced during this period to facilitate performance appraisal of non-management workforce. A 10-point based scoring method is being used (1-3 =
poor, 4-6 = satisfactory, 7-9 = good, 10 = excellent) with the following parameters to judge upon: o o o o o o o o o o o o o o o o Product/technical knowledge Time management Operation Excellence (OE) Reporting and administration Communication skills Team-working Equipment/machinery skills Managing EHS Emotional intelligence problem-solving and decision-making Motivating & developing others Energy, determination and work-rate Steadiness under pressure Leadership and integrity Adaptability, flexibility, and mobility Personal appearance and image
The following format is being used in this regard: Please score the appraisee's capability or knowledge in the following areas in terms of their R current (and if applicable, next) role requirements (1-3 = poor, 4-6 = satisfactory, 7-9 = good, e 10 = excellent). After completion of the assessment, please return the duly signed form to wyour Functional Head. Criteria Product/technical knowledge Adaptability, flexibility, and mobility Personal appearance and image Time management Operation Excellence (OE) Reporting and administration Communication skills Team-working Equipment/machinery skills Score
Managing EHS Emotional intelligence Problem-solving and decision-making Motivating & developing others Energy, determination and work-rate Steadiness under pressure Leadership and integrity
Date: Clock ID: Signature: In cases of Management Staffs, Annual Conferential Report (ACR) was still being used as the method for performance evaluation. 2003-onwards: Significant breakthrough occurred when Management staff’s Performance Appraisal was realigned with Competency and Performance. Competency Matrix was introduced along with Personal Development Plan (PDP). PDP can be used for both evaluating performance and facilitating of individual development plan. The PDP format is confidential. Therefore, it can not be included in the report. Nevertheless, PDP includes specific objectives with target dates. A Management staff is required to finish his/her assigned objectives within due date. Functional Heads, with the consent of employee’s Line Manager fixes the specific objectives in line with Departmental interest. Reviews are done twice a year to monitor the progression and to assign/deduct new objectives accordingly. At the end of the year if a Management employee fails to accomplish three-fourth of the assigned task, then he/she is considered ineligible for any role change or promotion/purgation. Currently the PDP has also been linked to IPRP and ERA as described below. In cases of non-management employees, the previously discussed scoring method is still being used for performance appraisal.
Reward Management 1991-2003: The year has seen introduction of scoring method as performance appraisal technique. In the same year for the first time a reward management scheme was introduced. IPRP or Instant Performance Related Payment was directly linked with employee’s OE (Operational Excellence) activities such as Lean-Sigma functions, improved way of working, process simplification, cost saving, quality development etc. Company’s website highlights objective of the Pay for Performance (i.e. COMPANY-X’s term for IPRP) in the following way: o Ensure COMPANY-X's global pay programs support the delivery of the company's strategic priorities and deliver more value. Encourage employees to achieve exceptional personal performance within the Spirit of COMPANY-X. Improve line-of-sight between employees and the implementation of COMPANY-X's strategic priorities.
IPRP is still being used to a limited extent (mainly at Leadership Team level) at the site despite of the fact a new Reward Management scheme has been recently introduced. Even at some site’s it has been readopted. The Pay for Performance scheme has three individual components: Individual measure: o Represents 20% of bonus o Replaces the Individual Performance Multiplier (IPM) o Individual measure is a component for all employees (excludes UK negotiated staff) o Rewards individual performance even if the business fails to meet it's target Value driver measure: o Represents 20% of bonus (except R&D 60%) o Rewards the inputs contributing to the business unit's financial achievements o Provides each business with the opportunity for employees to see more clearly the priorities for their business, how they can make a difference and be rewarded as a team o Derived from annual priorities of each business and can be changed each year o More details can be found on your business website during Q1 Financial measure: o Rewards the business unit's contribution to group financial achievement o Continues to be based on operating profit o Replaces the Business Level (BL) o Pays out at 85 per cent achievement rather than 96 per cent in the previous bonus plan
2003-onwords: Excellence Recognition Award (ERA) has been introduced to facilitate Reward Management in LMS. Gradually this will take over the existing Pay for Performance Scheme for lower band employees. The LMS Excellence Recognition Awards (ERA) recognizes employees who make a contribution beyond their normal scope of work, or do something that brings about a step-change in our performance or capabilities. Formal recognitions are to be processed via ERA website. There exits three levels of formal award as detailed below. Each level reflects the scale of impact1. 2. 3. Site Level Supply Division/Central Group Level President’s Role of Honor (PROH)
Site Awards are provided to individuals or teams for excellent results with a Site impact. For reporting purpose Site awards are categorized internally in two types namely Departmental Level Award and Site Level award. Supply Division/Central Group Awards are provided to individuals or teams for excellent results with multi-site/ or divisional impact. LMS President’s Roll of Honor is awarded to individuals or teams for exceptional activities, typically with LMSwide impact. Criteria for receiving all these awards are tightly fixed and monitored. An Award Review Panel consisting of Senior Managers and all the Functional Heads decide whom to give award. The submitters of the proposals are expected to defend their viewpoint in the meeting. Therefore, the panel often calls in other employees in the meeting (which takes place three times a year) to discuss the nominated or submitted projects elaborately before allocating any reward. Both Site and Supply Division/Central Group awards comprises a fixed amount of financial token and a certificate. The suggested amount (i.e. percentage of gross salary) for each ERA recognition per employee is given below: Award Level Site Supply Division/Central Group Team Size <5 1% 2% Team Size <10 0.75% 1.5% Team Size < 15 0.5% 1%
Problems in Performance & Reward Management at the site The two most widely mentioned problems by COMPANY-X Management regarding conduction of performance appraisal & reward management are: (a) Divisive perception by Managers regarding performance appraisal method & its objective (b) Mobilization of necessary resources at a time
(a) Divisive perception by Managers: One of the reasons why performance appraisal process has always been questioned is due to the management of the data which are to be used to assess someone by respective department. For exampleTalent Management and Performance Appraisal are two separate processes. Prior to any Talent Pool meeting (which takes place once a year) data are reached to Human Resources Department by respective department. These data are later used to compare the evaluation during performance appraisal. A person identified as a ‘talent’ in a Talent Pool meeting can later be denied a promotion during Performance Appraisal despite of the fact that previously he was agreed to be a potential candidate. A number of arguments were presented by the Site to justify this paradigm. Firstly the Human Resources Department thinks that a person being identified as a talent might not necessarily need to be promoted if he/she is not ready to take challenges. Talent Management process identifies the ‘talents’ and helps to decide the course of their development path. Performance appraisal on the other hand is all about giving additional responsibility in return of better performance only when the company is confident enough about that person’s capability. Secondly, development paths as decided in the Talent Pool meetings might not always be completed or executed according to the plan. Lots of unseen factors in future might influence completion of employees’ development within the predicted time-frame. Being a Site where employee turn-around rate is pretty high (especially in cases of young fresh talents), LMS Bangladesh straggles to complete individual development plans with 100% successes. In addition lack of skilled manpower, time, and inadequate logistic are also key issues contributing in slowing down completion of individuals’ development plans. As a result in most cases identified ‘talents’ are not being developed as projected despite of the sincere willingness of Human Resources Department. This results in failure to put forward the previously identified talents as potential successors or suitable candidates for next performance appraisal. Divisive perception also exists when it comes about rewarding a person. The question often asked by many of the Managers while agreeing to reward is “What out-of-the-box achievement the employee has demonstrated beyond his/her normal work responsibility so that we might reward him/her?” On the other hand there are quite a good number of Managers who consider allocating a reward for ‘excellence in performance’. According to this type of Managers the question that should be asked while allocating a reward is “Will the award be motivating to other employees for demonstrating excellence in their performances similar to this particular employee?” Despite of HR department making the point of rewarding an employee and repeatedly explaining its objective- both the types of Managers prefer sticking with their own viewpoint. As a result when a nomination is been made to award a person, the decision for rewarding does not depend on the merit of the case but on the number of members being in favor of the reward in the awarding committee. This creates an anomaly and often people are recognized or rewarded for something, which they should not have been awarded. Or sometimes awards are denied to persons despite of them being the truly deserving ones.
(b) Mobilization of necessary resources at a time: Performance and Reward Management activity requires a consistent strategic approach and involves core HR processes such as Performance Appraisal, Talent Management, and Reword & Recognition (R&R). In the past these processes were partially implemented, error prone and cautiously avoided details although number of Management staffs working in HR department was higher comparing to present days. Greater numbers of Management staffs were available to share workload in other concerned departments as well despite of no 360degree approach being used involving respective departments in PA, TP and ERA process. Today a rigorous assessment approach is being used by implementing 360-degree feedback model in case of the said processes; unfortunately involving less number of Managers to look after, monitor, and scrutinize the processes. Apart from this, the continuity for maintaining a momentum in executing Talent Pool and Recognition & Reward meeting (in COMPANY-X’s case ERA) has been suffering due to other departments being unable to spare time. However, Performance Appraisal meetings take place timely and are normally done within April of each year. The Site is being given new stretched targets day by day in terms of productivity, environment, and quality. It is required to perform as expected despite of all the odds, which unfortunately has shifted the focus from important strategic initiatives to day to day operational activities unwillingly by many technical departments (such as Production, Quality Assurance, Engineering etc.)