Novartis – College Essay Essay
The concept of motivation has many facets, but if one were to frame the topic in terms of human resource management then a properly motivated employee would be a person who has a predisposition to behave in a manner as to achieve specific, unmet goals (Buford et al, 1995). A common, and now very antiquated method for improving employee motivation was solely to increase extrinsic benefits, a practice that was thought to yield positive results during times of greater scarcity and primarily because of the primitive understanding of the dynamics of overall job satisfaction.
While simple increases in levels of extrinsic benefits may satisfy a workers most basic need according to Maslow’s hierarchy (1943), modern studies have shown that salary level has extremely low levels of correlation with job satisfaction and overall employee motivation. This is especially true when increases in extrinsic benefits are based on predetermined time intervals and workers need only maintain a minimum level of output to retain continued employment (Judge et al, 2010).
According to Herzberg’s Two Factor Theory of Motivation, salary level alone can even act as an agent of demotivation when an employee derives no intrinsic rewards from their work and is merely performing a repetitive task for financial gain (Herzberg, 1968). A 2012 survey conducted by McKinsey Group Incorporated also showed that on average, employees placed higher value on nonfinancial incentives (See Appendix A).
Today’s global marketplace is experiencing an influx of multifaceted, transnational corporations employing people in a vast array of job skills, qualifications, and duties. The ability to motivate them all through one system requires more than simply finding the right balance between the two arms of Herzberg’s theory, but instead to find a way to make them act as a function of each other and then link that result to the employee’s overall performance.
It should be noted that this methodology could be widely applied to any type of employee in a corporation regardless of the nature of their work, although it is framed in a context that best suits western cultures. Everyone can be held to some expected standard of performance, whether it is assembly line workers meeting quotas set by their foreman, or upper managers answering to the CEO about strategic decisions.
The success of this system when implemented across numerous employment categories such as sales staff, knowledge workers, or management is how relevant and practical the expectations are to the nature of the job itself and on what criteria and timeframe a person is being measured (the expectations of a research scientists must be different than those of a salesperson, but they must both be clearly communicated to the employee). The key is to make sure that employees are aware that good work will be recognized at regular intervals and those who are motivated to perform at high levels will not only reap fiscal rewards but also the recognition from their superiors can help them to advance to more prestigious positions within the company.
This system of evaluation and compensation is inspired by Vroom’s Expectancy Theory of Motivation (1964), by directly linking the typical behaviour of a highly motivated employee to high levels of fiscal rewards while allowing said employee to be acknowledged by their superiors for outstanding achievement, thus making intrinsic benefits a function of performance as well.
While the performance evaluation system can be widely applied to many different job descriptions with minimal amounts of departmental fine tuning required, attempting to use one specific system to motivate employees across national borders and cultures is much more problematic. While the previously described strategy aligned expectations around job specific norms, the people working those jobs and receiving the rewards were all from a common culture, where the desired rewards are similar across employees (no two people are exactly the same, but from a cultural perspective they tend to rally around common preferences.
In his contribution to a 2008 article released by Routledge Group, Barry Gerhart references a 1997 study by Early & Erez that states that the way in which cultures value reward distribution differ on three criteria which are equity, equality, and need. The more that cultures vary around characteristics such as those defined in the Hawthorne (1980) and GLOBE (1999) studies (See Appendix B) the more difficult it will be to successfully implement a single motivational strategy across cultural boundaries.
Therefore employee’s from a country such as China where equality is seen as the norm (everyone gets an equal share of the rewards) would be extremely demotivated by a western style system that focused on equity (contribution based allocation of rewards). Novartis is attempting to align its global workforce around common values by embedding a corporate culture that emphasizes hard work by implementing a standardized, globally integrated system of performance management. The system holds employees from every facet of the company’s operations to the same performance appraisal system regardless of job description or geographic location, with the latter being a key driver of the systems global incompatibilities.
One of the inherent problems with a uniformly applied system such as the one Novartis uses is that its design tends to be more in step with the cultural preferences of the nation in which it was developed and may not be able to achieve to same desired results when introduced into cultures whose dimensions are much different than that of the corporations country of origin (For the sake of this response, I will the Hofestede Dimensions as a guide, please See appendix B).
While it would be tedious and beyond the limits of this exercise to examine the effect of every dimension of culture on a uniform performance appraisal system, the dimensions of power distance, uncertainty avoidance, and individualism/collectivism show the strongest evidence for dissention from the idea of effectively scaling Novartis’ plan globally.
In cultures with high power distance, subordinates are not expected to challenge authority openly or to participate in decision-making but to take orders (Munene et al., 2000), a norm that does fit into the Novartis system that requires open and honest participation by both a supervisor and their direct reports in order to be effective. Studies have also shown that in cultures with low levels of uncertainty avoidance “bonuses should be linked to performance, whereas countries with strong uncertainty avoidance are less likely to use variable performance bonuses because they create more ambiguity than the executives are willing to accept” (Mcfarlin & Sweeney, 2001, p. 75).
People in this type of culture would place higher value on steady pay, thus rendering the Novartis system (whose core concept is a variable pay scale that is determined by performance level) ineffective. Finally the level to which a certain culture is more collectivistic plays a major role in how a performance system such as that of Novartis will be received by the people within it.
The Novartis system of employee evaluation is best suited for a society that has a more individualistic orientation (much like their parent country Switzerland), where the norms of personal achievement and competition are perpetuated by directly comparing workers with desired performance and then using this scale to differentiate employees from each other. Problems will arise when Novartis attempts to bring this style of appraisal to countries such as Japan where the orientation of the people is much more collectivist.
Workers in this type of culture shy away from individual attention, (whether positive or negative) and prefer rewards to be dispensed based on equality and group efforts, a set of preferences that would not lead to a very enthusiastic adoption of the Novartis model. In addition to cultural incongruences to the way in which employee’s performance is assessed, problems also arise from the way the information is presented from a company wide perspective.
Assessing employee performance levels across an organization by comparing an individual’s position along a normally distributed curve can be very problematic. From a purely statistical standpoint there are two requirements for the use of a normal distribution, while most companies will be large enough to meet the minimum sample size requirement, the second condition that requires the sample be randomized does not tend to hold when speaking about a company’s work force.
Organizations tend not to hire or promote employees at random; instead they carefully screen, select, and then train workers after hiring in order to improve their performance over time. The way in which most companies select and hire workers would lead us to the conclusion that a more accurate portrayal of employee performance across a company would be a positively skewed distribution instead of a perfect bell shape (Grote, 2005).
The problem with using a bell curve for performance rating, or any other form of forced distribution for that matter (totem, quartile, etc. ) is that they may create problems that don’t exist by forcing workers who are performing at acceptable levels into the lower end of the curve and cause them to receive unfounded negative attention which can have a detrimental impact on motivation and overall job satisfaction (See Appendix X).
In this case using a normal distribution may have its drawbacks both culturally and statistically, but that does not mean that the practice is without its merits. Rigor and due diligence are an important part of any effective management system, and a normal distribution can allow managers to identify those employees who may be in need of attention in order to align their level of performance with company expectations.
By establishing acceptable ranges and preemptively creating a positively skewed distribution for employees (as Grote suggests, only the lowest 5% would be classed as being in need of immediate intervention), Novartis would be able to focus on those workers who are actually performing below company expectations without unjustly targeting those who are working acceptable levels but were pushed to low ends of a normal distribution. The other suggestion for Novartis would be to keep the results of the normal distribution scores confined to upper management who can then decide the best course of action for increasing the employee’s performance level without making them feel as though they are being singled out in front of their peers.
This adjustment to the system would have positive impacts across all cultural lines as people do not wish to be singled out for poor performance or even that they are simply average, and by keeping the overall results under wraps it will still utilize all the benefits of the Novartis system while eliminating some of the conflicts that could arise from global implementation.
Labour scarcity in China is a serious issue for any company attempting to do business inside the country’s borders, but even more so for large MNE’s who find themselves in tough competition for the most sought after talent. A 2005 MGI study showed that in the 2003-2008 period MNE’s operating in China had positional requirements for over 70% of all the qualified, domestic graduates during that time period (Farrell & Grant, 2005, See Appendix E). These institutional challenges place those in charge of talent management at Novartis in a complicated situation with no easy remedy.
The problem requires a two tier solution to solve both the short and long term talent shortages, but both approaches require immediate action because as more MNE’s enter the Chinese market, the harder it will be to source talent locally. There are several institutional challenges that must be addressed in order to better equip Novartis for the future, the first being that in addition to the small pool of available talent, the pools are many and geographically dispersed (See Appendix D).
In order to make sure that Novartis is communicating their desires for talent to as many candidates as possible the company needs to make concerted efforts to improve its recruitment marketing programs. These efforts must go beyond basic presence on campuses or program funding/sponsorship like Novartis has already done, but should also include an in depth look at the company and what it offers though a strong and interactive online presence in order to best reach those potential recruits who reside outside of the major cities.
Another strategy that Novartis could use to secure talent before graduation would be to devote some resources to large-scale internship programs where university students can get a feel for the company’s formal and informal culture. This early outreach opportunity will aid in the securing of young talent by giving them a taste of the real world during a time when they are anxious to put down the books and get some real world experience.
Internships may even give some students that have the required talents but no direct career plan the nudge they require and will choose to make Novartis their home after graduation. While tactics such as these may be effective in attracting young talent, it doesn’t solve the increasingly large problem of turnover once a recruit has been hired by Novartis, undergone training, and had some real world experience. In order to combat this organizational brain drain, Novartis needs to develop a more long-term orientation with its new hires on both a formal and informal level.
The company should make it a priority to market Novartis as a dominant international brand that is looking for people to start, build, and maintain long careers inside the corporation. Another HR strategy that should be introduced is a referral program for new employees hired directly from post secondary education institutions. Most recent university graduates still have large informal networks across many disciplines of study and they can be extremely effective at relaying the benefits of working for Novartis to their peers who are either actively or passively searching for employment.
In situations where the required position is either highly skilled, has a very scare supply of qualified people, or requires large investments in training then Novartis should consider including a non-compete clause in their hiring process. This stipulation will help protect Novartis from wasting time and resources developing employees who have one eye on the door from the beginning and will view the company as an occupational springboard rather than a place to build a career.
Even if a small monetary incentive is required at signing to convince a person to agree, that one time cost far outweighs the losses inflicted when employees defect to other organizations. These tactics may help Novartis establish a better talent pipeline in the long run, but it still leaves the issue of talent shortages at the current moment. While MNE’s facing this problem in other countries may simply rely heavier on expatriates to fill gaps, the rules for the amount of domestic workers employed are much more strictly enforced on foreign businesses.
This institutional liability of foreignness faced by MNE’s in China usually requires the sourcing of Chinese nationals who are working abroad to take positions back in their home country, a tactic that includes high costs for the company as the financial requirements of these returnees are much higher than those of domestic employees. In order to attempt to avoid these high costs as well as the costs associated with fixing equality conflicts that can arise between returnees and their lower paid counterparts there are two viable solutions for Novartis.
The first strategy should be to identify those positions or specific employees that have strong potential for move up to higher tier positions either inside or outside of Novartis, should have their talents developed through more internal training and career advancement programs. The second strategy should be to identify specific positions that require immediate staffing and compare the costs of poaching employees from similar industries inside the Chinese market with the costs involved in hiring returnees.
The advantages to poaching are that the potential employee is already settled in the country so there would be very few extra cost considerations other than the extrinsic rewards that must be offered in order to lure talent towards Novartis from other organizations. In any regard the talent shortages and threats of high turnover are very real issues for MNE’s operating in China and companies like Novartis will need to take undergo several proactive strategies to make sure their company can locate the level of talent required to maintain their position as a global market leader.