Section One: Summary of the Case Study
Norvatis is a pharmaceutical company that came into existence in the late 1990’s. The company has made tremendous success in terms of increasing its global presence and increasing its profit margins. The company’s CEO, Daniel Vasella grapples with the idea of coming up with an elaborate system of performance appraisal and worker’s motivation.
Apparently, Norvatis has an organizational culture that supports hiring senior management executives outside the company’s human resource department. As such, Vasella articulates that there is the need for the company to identify employees and train them within the context of organization to enhance their managerial skills.
Although the CEO asserts that 78% of senior managers have ascended through the ranks of the company, Norvatis experiences a challenge regarding ‘pay for performance’ and other ways of motivating the employees. This implies a global talent management system.
At the outset, it is important to appreciate the role of any global talent management system. According to the CEO, the company’s ability to develop leadership skills among its employees is a critical objective of global management system. In fact, he asserts that the manager ought to establish an organizational culture by allowing the senior managers to have vast experience in the organization.
He asserts that the process of hiring managers outside the organization is expensive and it discourages a consistent organizational culture within the company. The CEO is also wary of the fact that the trained managers would need to reach to their places of work before other companies hire them and as such, it will become an expensive venture for Norvatis.
To avoid such an occurrence, it is important for the company to provide motivation for the employees. Indeed, he appreciates that money did not motivate the employees to the level that is necessary to retain them. He says that many employees do not work for money but instead seek to be a part of the company’s success.
To that end, the performance management system at Norvatis ought to reflect the organization’s values and incline the employees towards increased chances for success. Initially, Norvatis had a performance management system that it used to rate its employees in order to have a performance based method of motivation and compensation.
The company also insisted on the need to have a uniform standard of measuring performance across the world. Guided by such values as innovation and creativity, the company’s ratings would receive their respective performance ratings across the globe (Goldsmith & Carter, 2009).
It is important to notice that the initial system of rating the employees suffered a lot of criticism owing to its inability to indicate employees’ performance precisely. Hence, performance management system ought to comprehend various aspects.
Norvatis encourages a distinction of the performance by different employees. It is apparently difficult to use a rating system that does not only fail to distinguish talents in the organization but also unable to understand the raters’ discernment. In addition, Norvatis contends with an increased urge to enhance the uniformity of its global talent and performance management.
Using online surveys, the research results indicated that the company had been able to implement a largely uniform system in 90% of its outlets. Norvatis’ operating and financial results that had been exceptional in majority of the outlets could have been influenced the uniformity. Norvatis also attempts to match its ‘pay to performance’.
To achieve this objective, the employees could have interpersonal appraisals with the manager to reveal the factors enhanced or impeded achievement of goals they set priory. The manner the discussions end influences the compensation a significant way. It was necessary to come up with a uniform system that would strike a balance and match the compensation criteria in the company.
The current system created unprecedented disparities to level that some of the employees received even two folds of their base salaries as opposed to others who do not manage to get a bonus due to poor performance (Goldsmith & Carter, 2009). This would ultimately result to imbalanced levels of employee’s work commitment and job satisfaction. This could affect Norvatis in a huge way.
Moreover, the aspect of cultural differences in various global outlets had presented a big challenge for the company. In particular, in Asian countries where Confucian ideas are prevalent, the performance rating systems were also different from the rest of the mechanisms in comprehending the ratings accruing each of the employees. Above that, it is apparent that different employees have demanded equivalent pay for similar jobs making it even difficult for the ‘pay for performance’ system to penetrate the rigid culture.
To achieve the goal of ensuring that senior managers have worked for the company previously, the company designed a training program targeting potential occupants of managerial positions in the upcoming future. The employees would receive training on issues surrounding strategic planning and management of improved performance among many other programs that typified the training.
The main objective of the training was to enhance a systematic and a gradual process through which management skills will emerge at an early stage. Nevertheless, some ongoing costs sought to question the company’s ability to increase the profit margin. This was despite the company’s successful implementation of its performance management system.
Norvatis has embarked on a program that seeks to source global talent. The company has opened different talent firms in many of its outlets. It introduced a program named international assignees in which employees in different locations could switch their operations and move to other countries that Norvatis held. Nevertheless, there was huge challenge especially in ensuring that the salaries for the international assignees were uniform notwithstanding the country that the assignees would work.
Initially, the company realized that the program cost was almost twice in the labors costs and particularly, salaries and wages. The rationale was that it was ethical for the company to facilitate the employees’ ability to sustain their households located in their home countries while at the same time ensuring that they were able to transit to the new countries with ease.
Norvatis found an opportunity to expand its operations to China. Having been able to establish elaborate research and development (R&D) in various countries, it intended to make research a priority especially when operating in the Chinese market. Luckily, research had revealed a gap in the provision of pharmaceuticals that would facilitate the fight against diseases that are prevalent in the country.
The company identified cancer caused by infections as a starting point for its aggressive strategy. Besides, it controlled a substantial competitive edge in that, a huge Chinese population preferred foreign health care providers to locally established pharmaceuticals. Norvatis invested handsomely but various factors presented a challenge to its ambitions. From the onset, the costs associated with labor began to increase in an unforeseen way.
In addition, the costs could increase exponentially if the company were to employ more number of native populations. This is because the Chinese labor market is typical of young and talented laborers who possess little experience especially that which relates to multinationals. As such, the company would incur increased costs of the imminent training and on-job development.
Strategies to counter the challenges involved being able to benefit from undervalued labor in China and relocating the company’s operation to rural areas where the costs of labor would ultimately be the lowest (Goldsmith & Carter, 2009).
Labor market saturation in China has deemed some graduates to opt for informal jobs. Norvatis could also aim at unifying the labor costs with the labor compensation of other countries. That was not all, the CEO highlights that the company also pointed some strategic concerns about ways to improve the transformative change that he had implemented.
Universal systems of motivation
Apparently, Novartis makes an important decision that regard to having a uniform or universal system to motivate its employees. The company has enhanced its ability to make significant profits margins that has enabled it to operate in different countries across the globe.
To that end, the company would require uniform talent and universal performance measurement strategy has been used to enhance other appraisals. Using a universal method to motivate employees is a common aspect of multinationals. While many analysts articulate that the process of motivating employees ought to take different aspects, there are advantages that make a universal system of motivation to be reasonable (Friedman, 2005).
Scullion & Collings (2010) explicate that the system enhances an organizational culture within a company. While many companies are typical of fragmented systems of motivation, a universal system of motivation is an important tool through which the organization’s culture develops.
With a functional organizational culture, it is critical to notice that the employees can learn the values of the organization in the context of the motivation system making it to embrace change, which is unending process in all business environments (Monahan, 2000).
Besides, universal system of motivation enhances job satisfaction owing to the need for the employees to identify with people that work in similar capacities. It is clear that Norvatis noticed that employees felt a sense of inequality when some of them earned high salaries notwithstanding the same jobs that they hold.
Friedman (2005) says that it is vital for multinationals to consider the negative factors that might accompany the universal system of motivating employees. First, a multinational ought to consider that cultural difference may present a challenge when assuming such an approach of compensation. This is in appreciation of the fact that various employees draw motivation from different sources as opposed to one standardized system.
For instance, employees in Asian countries value non-tangible sources of motivation such as respect, which makes the Asians to standout from the rest of global talents that value conventional resources of motivation (Scullion & Collings, 2010). Further, it is important to realize that different employees have different skills, which cannot elicit equal motivation in the workforce.
Performance Measurement Systems
Currently, Norvatis has been able to achieve success especially in performance measurement systems but to a relatively low extent. The main challenge that has typified the company’s systems of appraising performance includes the inability to have an accurate assessment of employees. Friedman (2005) asserts that the rationale is that the current system is prone to manipulation by the managers who may not have the best intentions of some employees.
As such, the current tool may suffer from inaccuracies and inability to provide precise and reliable results. Another challenge that has been clear is inability of the system to give the right meaning of the quantitative rating systems. The ratings range from one to three with the lowest implying diminished productivity and it receives one. Even though the rating system may seem fair, it is important to recognize that a rating of two does not imply that the employee is above average in productivity (Scullion & Collings, 2010).
Norvatis should continue encouraging the use of normal/bell distribution. The rationale is that the tool has facilitated the ability of the managers to distinguish the performance of different employees. In other words, it encourages the managers to be honest when identifying and differentiating talents of all the employees.
Although the tool is largely unpopular among many multinationals, it also encourages the culture of honesty to prevail in an organization (Monahan, 2000). While the top performers may be motivated to seek adventurous and potentially beneficial innovations, it is the role of human resource department at Norvatis to encourage them and engage the rest in team working. This will ultimately motivate all the employees.
Global Talent challenges in China
Norvatis faces uphill task in China especially in meeting its seemingly uncontrollable turnover. Apparently, the cost for doing business in the country has soared in an unsurpassed way. Norvatis should be able to ensure that production of the drugs is cost-efficient by adopting the appropriate cost analysis tool and equally appropriate decision-making tool.
While we consider that the company has found over 1500 exotic elements that could act as the raw materials for the business, it is essential to realize that the company has saved such direct costs as shipping costs and inflationary pressures that could result from high costs of raw materials.
According to Scullion & Collings (2010), making the decision should entail appropriate strategies and enhancing the efficiency of the laborers. As such, the international assignee program should enhance outsourcing of labor from other Asian countries that may be experiencing surpluses in their markets.
Besides, it is important to enhance operations in China by training the newly hired employees to enhance roles break down and specialization (Swanson, 2005). Specialization of the employees will enhance their efficiency while performing their duties leading to time saving.
Swanson (2005) explains that the training ought to offer specific training to the different employees and assist the managers to understand the specific talents that the company possesses. Finally, it is imperative to embark on a project that would identify early talents and facilitate their integration of talents to the Norvatis’ organizational structures.
In sum, Norvatis is multinational Swiss company operating in over 140 countries in the world. The company considers improving its performance measurement systems, as they are tools for appraising performance and revealing the type of talents that the company possesses.
Although the company has been outstanding in increased revenues and other aspects like the organizational culture, it faces a huge business challenge especially when operating in China. The reason is the ever-increasing labor costs of operating in the country.
Friedman, T. (2005). The World Is Flat: A Brief History of the Twenty-first Century. New York: Straus & Giroux Press.
Goldsmith, M. & Carter, L. (2009). Best Practices in Talent Management. Upper Saddle River, New Jersey: Prentice Hall Publisher.
Monahan, G. (2000). Management Decision Making. Cambridge: Cambridge University Press.
Scullion, H. & Collings, D. (2010). Global Talent Management. Irwin, New York: McGraw Publishers.
Swanson, K. (2005). Coping with China’s Talent Shortage. New York: Norton Publishers.