1. Novartis implemented a new performance management system (PMS) influenced by GE's pay-for-performance model to link compensation more closely to performance. 2. The PMS rated employees on a 3-point scale for results and behaviors/values and aimed to drive consistency globally, but faced issues with implementation across regions and cultural differences. 3. While the PMS aligned pay with performance and developed talent internally, the criteria were seen as too simple, reviews only twice yearly, and average ratings demotivated employees. Cultural adaptation and responding dynamically to changes could improve Novartis' global talent management.

1. THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT,
AHMEDABAD.
Assignment
ON
PMS
In
SUBMITTED
TO
Prof. Robin Thomas Sir
SUBMITTED BY: -
Pratik K.S Negi
PGP/SS/09-11/HR

2. About the company
Novartis was created in 1996 from the merger of Ciba-Geigy and Sandoz Laboratories, both Swiss
companies with long histories. Ciba-Geigy was formed in 1970 by the merger of J. R. Geigy Ltd (founded
in Basel in 1758) and Ciba (founded in Basel in 1859). Combining the histories of the merger partners
Novartis International AG is a multinational pharmaceutical company based in Basel, Switzerland,
ranking number three in sales, which accounted 36.173 billon in 2008. It is currently the 6th largest
Pharmaceutical Company in terms of revenue ($41.5 billion in 2009) with a profit margin of about 20%,
which is the same as its industry competitors. In addition to internal research and development activities
Novartis is also involved in publicly funded collaborative research projects, with other industrial and
academic partners. One example in the area of non-clinical safety assessment is the InnoMed
PredTox. The company is expanding its activities in joint research projects within the framework of
theInnovative Medicines Initiative of EFPIA and the European Commission.
Q1- Brief on the case study?
Ans- THE CEO
1. Case talks about the PMS strategy adopted by Novartis getting influenced by GE. He learned
from embraced new models of incentive pay-for-performance. He applied some strategies in US
operations.
2. He realized we didn’t have a systematic review process that focused our management on
agreed-upon objectives and linked compensation to performance.
3. Changes were brought in the company from Vasella. Linked compensation to performance.
4. Emphasis was made to manage the global talent in the organization as global standards were
changing.
Company History
1. Formed in 1996 (Ciba-Geigy and Sandoz) in all sectors (agrochemicals + consumer nutrition +
specialty chemicals) with different names.
2. Bolstered its position by acquiring Hexal and other generics producers. With low production cost
and OTC and consumer health and animal health business.
3. Research was given more of emphasis in the company with multi centers getting developed.
Leadership development
1. Internal talent pool development, culture talent and values generated from within were
better then to head hunt from outside.( 78% down to 21% in 2000)
2. Money has to be all right for engaging the talent but he also encourage commitment and
excellence through other activities.

3. PERFORMANCE MANAGEMENT SYSYTEM
1. Based on{ Results + behavior and values }( round the globe)
2. Values & behavior part constituted the following criterion
 Being results driven
 Having a customer/quality focus
 Being innovative and creative
 Demonstrating competence
 Exercising leadership
 Being fast/action-oriented
 Demonstrating empowerment and accountability
 Showing commitment and self-discipline
 Demonstrating mutual respect/candor/trust/integrity/loyalty
 Demonstrating open communication/collaboration/compassion
3. 3 point scaling was set for all the parameters.
Poor performance satisfactory performance superior performance
4. Personal goal setting and personalized tracking by supervisors. ( inputs from peers and
coworkers), mangers were asked to approve the performance scores
5. Globalised approach with 10000 employees rated on same parameters and received ratings.
6. Employee compensation =directly proportional = company performance
7. Uproar from the research department were there in the standards set for the review of the
candidates.
8. Normal distribution was used for employee and comparative analysis was done for
workforce round the globe.( implemented with high uniformity round the globe)
9. Matching Pay to performance -- Employee incentive targeting and getting compared with
the performance rating
10. Payout factors for incentives were different on divisions and business functions.
11. The idea was to try to drive consistency in the company, and that will differentiates them
from other competitors within our markets.
12. Unions and implementation of policies was done in PHASES and got a response that was
fluctuating.
13. Managers training program was incubated for better control over the organization talent
pool building.
14. OTR was used to evaluate the managers ( short term and long term goals were analyzed).
Get the employee motivated by action variables, to identify gaps in individual skills and
experience, and to devise a detailed personal action plan for filling the gaps.
15. Critical gap filing was implemented and ( internal and external talent pool was targeted)
16. Global hiring from MBA institutes.

4. 17. International Assignee (IA) program – was induced and costed twice to the company. But
this made sure that expats wanted to return with higher scales
18. Chinese expansion with local ties (SIMM ) in R&D department to penetrate the market.
19. Development of employees -- company attempted to deal with the challenge of turnover for
scientists and senior managers by negotiating salary and stock grant programs with multi-
year vesting periods as well as offering long-term educational support and flex-time for
those who stayed at the company.
Q2- what are the issues with PMS Novartis has faced?
Ans-
1. Individual ratings directly related to company performance.
2. Use of 3 point scale ( 2 considered as low) simple graphic rating scaling was used [ may be
inappropriate for such a huge firm]
3. The high performers are going to e pattern the employee are being judged.
4. No impact of double reviewing as it was thought that employee can only respond to changes in
January.
5. Normal distribution lead to managers giving low ranks to employee “{ ready for iteration}”
6. This system contributed to ( income disparity in the employees working in different locations
round the globe)
7. Global and local cultural contradictions were seen when the implementation of such PMS.
8. Average rating which was gained by majority of employees was demotivating.
9. Fluctuating response to PMS that was implemented in countries round the globe.
10. Opportunity was thrown to employees to earn Max in form of base salary and incentives but
didn’t evaluate competency level of employees.
11. Some parts of the company didn’t adopt the PMS which was proposed.
12. Acquisition and adoption of PMS by the firm.
13. No clear cut response to the managers who were performing above par.
14. IHRM issue for salary fixation. And domicile approach was preferred.
15. International Assignee (IA) program – return of expats with higher scales to be given in domicile
country. Chinese expats created problems for the company.
16. Chinese iteration after getting exposure to an MNC organization (with such a name).plus mouth
watering offers from outside.
17. Attract outside talent while maintaining a cohesive, internal company culture in china.
The big question?
Could Novartis improve on
Its existing attempts to achieve performance excellence and deal with the challenges and
Opportunities of global talent management
Q3- Kindly critically evaluates the proposed PMS by Novartis?
Ans—positives that we can take out of Novartis can be under listed
1. 2 dimensional scaling was proper and grading was done properly.
2. Pay – performance match up was proper and lead to competitive build-up.

5. 3. Feedback sessions were held for further improvements and setting objectives for next year.
4. Internal talent pool development was proper and even employee benefits were kept in mind.
5. Company growth was directly related to employee salary and wages.
Negatives that we can take out of Novartis can be under listed
1. Criterion selected were weak for a global giants
2. More precise and concrete PMS could nave been built.
3. Only 2 time reviewing was not proper. And gave target and goal setting to employee.
4. Iteration and base pay being kept variable was a lacuna.
5. The company should also improve on maintaining a consistency about ratings and remove
biasness of giving higher than expected individual performance ratings or lesser ratings and
gender biasness.
6. Responding to change from the PMS perspective was lacking.
7. No research was done for collaborating local and global strategies in fixing the PMS.
BY-
Pratik Negi
PGP-SS/ 09-011/HR