Maha Abdullatif Abutalib

A Critical Analysis of the Performance Management case study: Novartis

Introduction

Novartis is a healthcare provider that is engaged in the provision of innovative healthcare services that
address the ever-changing needs of patients and the community. As part of its corporate social
responsibility, Novartis emphasizes on efficiency in performance and utilization of its human resource.
In addition, the company is concerned about the role of its employees in the provision of quality
services and achieving the company’s performance target. Although, Novartis has promoted an
extensive performance management process, their efforts have not attained the desired levels of
expectation.

Performance management is an extremely important concept in business. The performance management

system has revolutionized how business and management of organizations is happening in today’s
society. The system is a goal oriented program that ensures objectives of an organization are met in an
effective manner (Aguinis 2005). With special focus on a department, a firm, or certain employees,
performance management provides positive results. Novartis Vaccine and Diagnostics Company
implemented the performance management system in 2006 in order to improve company operations
(Novartis Vaccines and Diagnostics 2009).

The performance management system was implemented in the vaccine and diagnostic segments. With
the company operating across 140 countries globally, the performance management system has been put
in place to check employee development, evaluate the performance of employees, and improve
communication with the company for effectively achieving the organization objectives (Novartis
Vaccines and Diagnostics 2009) it has been deemed effective in managing employees and line managers
in the company. Nonetheless, there are some gaps which should be addressed for further improvement
of the system in order to meet company objectives effectively.

The Performance Management Process Can Be Considered ‘Strategic’

Novartis PM Process is strategic since it links other HR polices such reward, talent development and
training with its performance management policies. This is a good strategy since it enables the company
to achieve its management objectives through direct approach. The pay for performance system is
strategic since it enables the company to motivate its employees by rewarding them for exceptional
performance.

Moreover, the company can evaluate values of its employees in terms of the value that they contribute
to the company. Rewarding employees for excellent performance also enable them benefits from their
initiatives and handwork (Randle, 2007).

To implement the performance program Novartis has implemented a training program to equip its staff
with the required skills. Although the PM process is rewarding in the short term, it cannot be relied onto
in the long term. This is because; employee’s performance is limited to several factors including their
ability and performance capacity.

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Moreover, the policy does not promote loyalty and skill development among the company staff. This is
because the employees are only concerned with the gains they are making out of their performance
rather than the overall performance of the company. The HR policy does not help to sharpen the skills
of individual employees since it focuses on the overall performance of the team rather than the
performance of individuals.

Line managers rather than HR staff drive the process. This is an advantage as well as a disadvantage to
the company in terms of skill development and company’s performance. Line managers are more
inclined to production and overall company’s’ performance rather than skill development. This makes
them less suitable for the job considering that the company needs to establish a long-term relation with
its customers. Alternatively, being managed by line managers is outstanding to being managed by HR
officers since they focus on the production aspect of an employee.

Components & Techniques of the Process

PM components and techniques involve employee rating and performance evaluation. The “First Steps
2006/7 was the first Novartis PM process for all V&D staff. The rating process was used to determine
and categorize employees according to their performance capacity. Throughout the PM process,
measuring or rating employees according to their performance ability is essential. However, the process
is not beneficial to members of staff since it only targets employee’s performance rather than the cause
of poor or high performance (Marketline, 2012). The process only provides a comparison on employee’s
performance rather than the cause of poor performance among employees. Consequently, the pulse
check 2008 provides a review of employee’s performance rather than strategies to improve the
performance. The survey emphasize on identifying key improvements that have led to the company’s
development. This is not a strategic move since it does not define any specific plan or activity that will
lead to the company’s success.

The main PM component that has an aspect of strategic management is handling of underperformance.
After evaluating employee’s performances, dealing with the outcomes is necessary. More so, when the
performance does not meet the requirements of the HR or line managers (Till & Karren, 2011). From
the performance rating below 1.3, require regular observation or coaching to establish the causes of their
underperformance. Although the PM process identifies criteria for identifying under performance, it
does not explicitly define under performance. Moreover, the component does not define the appropriate
cause of action in the situation that an underperforming employee is identified.

Evaluation of Performance Management Process

The company evaluates its approach by establishing the level at which the PMP are being met.
Performance management objectives are timed to correspond with appraisals once Novartis has set its
corporate objectives. The evaluation process does not capture all the factors of human resource
evaluation. For example, the evaluation process only rates employee’s performance and the level of
communication between the company employees (Tahvanainen, 2000). This does not provide an
explicit view on the level of the company’s performance. Alternatively, the evaluation process should
measure the level of job satisfaction between the company employees. Indeed, the performance of
individual employee is dependent on the level of satisfaction among the employees (Wilkinson & Fay,
2011). Thus, measuring or evaluating the level of job satisfaction among individual employee provides a
better view of employee’s performance.

Novartis PMP also evaluates the additional value resulting from the PMP process. Creation of additional
value according PMP process is determined by the financial advancements resulting from the process.

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This evaluation is not sufficient since it does not measure the performance or the benefits of the PM
process. The organization should rather evaluate the additional value or capacity enhancement on
employees rather than evaluating economic gains resulting from the process (Farris & Cordero, 2002).
There is no evidence that the PM process targeted individual performances during the evaluation
process. This is rather unrealistic since overall performance of the company cannot compensate for
individual’s performance. Moreover, the PM process is a HR evaluation and therefore its outcomes
should be based on individual performances of employees (Locke, & Latham, 2002). Therefore,
performances evaluations that do not measure the individual performance of an employee are
unnecessary and inconclusive. Such evaluations cannot be used to measure the outcomes of different
appraisal schemes as applied by the employees. Lastly, evaluating whether the process has benefited
they HR function is important but not necessary. This is because a HR process should benefit both the
HR system and the company employees. In the real sense, the process should benefit the company
employees more than it benefits the HR processes.

Recommendations to improve the PM system in Novartis

The first recommendation to improve the performance management is to improve the communication
strategy (Aubrey 2006). The company should utilize modern communication patterns, especially the
social media. Since social media has become popular, this will provide better and faster ways of
employees providing feedback. The use of annual survey is slow and somehow boring, yet it does not
provide an immediate response. Use of social media will further enhance employee attitudes and
cooperation because of convenience.

The second recommendation is to integrate all employees. The implementation of the program has not
included employees from all the regions. Those in Liverpool have been left out (Novartis Vaccines and
Diagnostics 2009). This could also affect the efficiency of the system because some employees could
develop a negative attitude. Inclusion of all employees in the performance management system is
significant in ensuring there is no resistance from any group.

The third recommendation is for the company to recognize the cultural differences that exist among its
employees. The performance management has been standardized in all countries where it has been
implemented. However, there is a need to amend the program so that it can fit the different cultures that
exists among employees. For example, employees in Italy have cultural difference from those in India
and thus, cannot be evaluated using a standard approach. The best approach is to customize the
performance management system according to different cultures, which obviously affect employee’s
attitude.

Lastly, the company should increase incentives to ensure employees are more motivated (Aubrey 2006).
This can be done through providing financial incentives as well as non-financial incentives. The
company should avoid any measure that could possibly cause negative attitude or demoralize
employees. For those employees who have repeated underperformance, one way of ensuring they are
effective is perhaps, changing them from one department to another. Terminating underperforming
employees will demoralize others and thus, this should be the very last remedy.

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Considerations that Norvatis Company should implement during the current economical situation

Well, this is an aspect that the management should seek to provide an effective solution. The current
economical situation requires a company to maximize saving and reduce spending. One of the best ways
to consider is for the company to look for cheap channels of communication or providing feedback. This
will ensure that the company is spending less. Social media could provide the ultimate solution.

The second consideration is to provide non-financial rewards for those employees whose performance is
excellent. Other forms of rewards such as holidays and leaves for employees could also act as a
motivating factor. Unlike providing financial rewards, other forms will be less costly during the tough
economical times.

References

Farris , G.F., & Cordero, R (2002). Leading your scientists and engineers 2002. Research-Technology
Management. 45(6) pp.13-25.

Locke, E.A. & Latham, G.P. (2002). Building a practically useful theory of goal setting and task
motivation: A 35-year odyssey. American Psychologist. 57 (9) 705-717.

Marketline, A. (2012). Company Profile: Novartis AG. Marketline Advantage .

Randle, K. (2007). Rewarding failure: operating a performance-related pay system in pharmaceutical

research. Personnel Review. 26(3) pp. 187-200.

Tahvanainen, M. (2000). Expatriate Performance Management: The Case of Nokia Telecommunications

Human Resource Management. 39(2) pp. 267-275.

Till, R.E., & Karren, R. (2011). Organisational justice perceptions and pay level satisfaction. Journal of
Management Psychology. 26(1) pp. 42-57

Wilkinson, A. &Fay, C (2011) – Guest editor’s note: new times for employee voice? Human Resource
Management. 50(1) - In: CIPD (2013) Social Media and Employee Voice: the current landscape.
Research Report.

Aguinis, H 2005, Performance Management. Edinburg Business School.

Aubrey, C. D. 2006, Performance Management: Changing Behavior That Drives Organizational.

Effectiveness, 4th edn. New York: Performance Management Publications, 2006.

Novartis Vaccines and Diagnostics 2009, Performance Management. Income Data Service HR Study,
886, 34-42.