Performance and Reward Management (P&RM) practice: A case of Company-X

in Bangladesh

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 Performance Appraisal

Tool Kit Reward Management

Tool kit Assessment

approach used

1967 – 1980 Annual Confidential Report (ACR)

By Line Manager

1981- 1991 For non-management staffs: Straight Ranking Method. For management staffs: ACR

By Line Manager

1991- 2003 For non-management staffs: Scoring Method. For management staffs: ACR

Instant Performance Related Payment (IPRP)

By Line Manager

2003- onwards For management staffs: PDP. For non-management staffs: Scoring Method

Excellence Recognition Award (ERA)

360-degree feedback

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 ............................................. DIRECTOR

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 non-

management 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 Discipline o Punctuality o Leave Records o Monthly Medical Visits o Leave Availed (last calendar year)

In addition the following were the indicators of an employee’s skill Section / Area of Appraisal

Rating

A B C D E

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 Product/technical knowledge o Time management o Operation Excellence (OE) o Reporting and administration o Communication skills o Team-working o Equipment/machinery skills o Managing EHS o Emotional intelligence o problem-solving and decision-making o Motivating & developing others o Energy, determination and work-rate o Steadiness under pressure o Leadership and integrity o Adaptability, flexibility, and mobility o Personal appearance and image

The following format is being used in this regard:

R

e

w

Criteria Score

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

Please score the appraisee's capability or knowledge in the following areas in terms of their

current (and if applicable, next) role requirements (1-3 = poor, 4-6 = satisfactory, 7-9 = good,

10 = excellent). After completion of the assessment, please return the duly signed form to

your Functional Head.

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.

o Encourage employees to achieve exceptional personal performance within the Spirit of

COMPANY-X.

o 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 impact-

1. Site Level

2. Supply Division/Central Group Level

3. 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 LMS-

wide 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 Team Size <5 Team Size <10 Team Size < 15

Site 1% 0.75% 0.5%

Supply Division/Central Group 2% 1.5% 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 example-

Talent 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 360-

degree 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.)

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