Abbott Final

 ABBOT PHARMACEUTICALS PHARMACEUTICALS

Strategic Human Resource Management  IMPACT OF SHRM ON THE ORGANIZATIONAL PERFORMANCE

Instructor – Ms. Deep Kiran

Group Members: Samran Ali Malik

12285

Maheen Zubair

11449

Jahanzeb Malik

11536

Samira Noorani

13149

ACKNOWLDGEMENT

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ACKNOWLDGEMENT

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Table of Contents ACKNOWLDGEMENT .......................... ......................................... ............................. ............................ ............................ ............................ ............................ ............................ ............................ ........................ ..........2 EXECUTIVE SUMMARY ........................... ......................................... ............................ ............................ ............................ ............................ ............................ ............................ ............................. ...................... .......4 INTRODUCTION ........................... .......................................... ............................. ............................ ............................ ............................ ............................ ............................ ............................. ............................ ................ ...5 Abbott in Pakistan .......................... ......................................... ............................. ............................ ............................ ............................ ............................ ............................ ............................ ........................ ..........6 Mission ........................... .......................................... ............................. ........................... ........................... ............................. ............................. ............................ ............................ ............................ .......................... ............6 Vision ........................... ......................................... ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................. ...............6 Core values............................ values........................................... ............................ ........................... ............................ ............................. ............................. ............................ ............................ ............................ ................... .....7 Products of Abbott............................ .......................................... ............................ ............................ ............................ ............................ ............................ ............................ ............................. ...................... .......7 Pharmaceutical products ........................... ......................................... ............................ ............................ ............................ ............................ ............................ ............................ ...................... ........8 Nutritional products ............................ .......................................... ............................ ............................ ............................ ............................ ............................ ............................ ............................. ...............9 CORPORATE STRUCTURE ........................... .......................................... ............................. ............................ ............................ ............................ ............................ ............................ ............................ ................10 LITERATURE REVIEW ........................... .......................................... ............................. ............................ ............................ ............................ ............................ ............................ ............................ ...................... ........11 st

1 Research - The impact of S HRM on organizational success - The public sector and multiple goals ............... .................. ...11 nd

2 Research – Strategic HRM Practices and their Impact on Company Performance  – From Chinese Enterprises Perspective ........................... .......................................... ............................ ........................... ............................ ............................. ............................. ............................ ............................ ............................ ................. ...13 HYPOTHESIS .......................... ......................................... ............................. ............................ ............................ ............................ ............................ ............................ ............................ ............................ ...................... ........15 FINDINGS ............................ ........................................... ............................. ........................... ........................... ............................. ............................. ............................ ............................ ............................ ........................ ..........16 Corporate & Business Strategy ............................ .......................................... ............................ ............................ ............................ ............................. ............................. ........................... ...............16 Human Resource Planning ........................... .......................................... ............................. ............................ ............................ ............................ ............................ ............................ ...................... ........17 HR Policies........................... ......................................... ............................ ............................ ............................ ............................ ............................ ............................ ............................. ............................. ................... .....18 Staffing ........................... .......................................... ............................. ........................... ........................... ............................. ............................. ............................ ............................ ............................ ........................ ..........19 Recruitment ............................ .......................................... ............................ ............................ ............................ ............................. ............................. ............................ ............................ ........................ ..........19 Selection........................... .......................................... ............................ ........................... ............................ ............................. ............................. ............................ ............................ ............................ ................. ...20 Employee Retention ........................... ......................................... ............................ ............................. ............................. ............................ ............................ ............................ ............................ ................. ...21 Training ............................ ........................................... ............................. ............................ ............................ ............................ ............................ ............................ ............................ ............................ ...................... ........22 Formal Training Need Assessment.................................. ................................................ ............................ ............................ ............................ ............................. ........................... ............23 Informal Training Need Assessment .......................... ......................................... ............................. ............................ ............................ ............................ ............................ ................. ...23 Training Need Assessment translated into a training program ....................................... ..................................................... ............................. .................... .....24 Performance Appraisal ............................ .......................................... ............................ ............................ ............................ ............................ ............................ ............................ ........................... .............25 The Reward System ............................ .......................................... ............................ ............................. ............................. ............................ ............................ ............................ ............................ ................. ...27 Succession Planning ............................ .......................................... ............................ ............................. ............................. ............................ ............................ ............................ ............................ ................. ...28 FINANCIAL STATEMENTS ........................... .......................................... ............................. ............................ ............................ ............................ ............................ ............................ ............................ ................29 ANALYSIS & CONCLUSION ............................ .......................................... ............................ ............................ ............................ ............................ ............................ ............................ ........................... .............30 REFERENCES.......................... ......................................... ............................. ............................ ............................ ............................ ............................ ............................ ............................ ............................ ...................... ........31

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EXECUTIVE SUMMARY

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 Abbott Pakistan

INTRODUCTION

Abbott is an international health care organization dedicated in identifying, discovering and providing new medicines to its customers, latest technology and innovative means to maintain and manage health care. It provides a wide array of products, from nutritional products to pharmaceutical therapies. Their broad product line encompasses life itself, by identifying important health needs throughout an individual’s life cycle. Abbott at present has over 90,000 employees across the globe (as per 2011 stats) and has a worldwide existence in above 130 countries. It is dedicated in refining the lives of people by providing them by all means cost efficient and cost effective means of nutritional and heath care products that meet the needs of the consumers.

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Abbott in Pakistan

In Pakistan, Abbott started its operation as an affiliate in marketing in the year 1948. Currently the organization has a total of 2000 employees with 1500 as permanent employees and 500 as contractual and temporary employees. Here, two manufacturing facilities are located in Landhi and Korangi industrial area which continue to serve as high tech, innovative sector producing best quality products for the individuals.

Mission “To deliver consistently superior products and services which contribute signif icantly to

improve the quality of life of the consumers.”

Vision “To be a premier healthcare company in Pakistan.”

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Core values The core values of the company are as follows: 1. Pioneering; leading-edge science and innovative execution

The company aims at providing solutions that cater to human needs by being pioneers in providing innovative products, treatments, medical devices, and innovative methods to improve health standards.

2. Achieving; customer-focused outcomes and world-class execution.

Abbott drives significant outcomes  –challenging themselves so they can significantly contribute that ultimately results in improving people’s lives. They are devoted to work in harmony by delivering resolutions that are efficient and profitable. They promise to serve in the best interest of their customers and everyone revolving them. 3. Caring; Making a difference in people’s lives.

To be caring is vital to the effort that they to do so that it may help people enjoy healthy lifestyle. They aim at contributing tremendous esteem for the lives of every person moved by their company. Their respect is validated by what they do for people around them.

4. Enduring; Commitment and purpose.

For Abbott, to endure means maintaining commitment to the future. They are constantly striving to work for the best interest of the people that they serve and keeping their promises aligned to the business goals and objectives. To them, being committed is the last resort and they continuously strive to achieve that no matter what.

Products of Abbott

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Abbott has expertise in providing its customers with two categories of products. These are: 1. Pharmaceutical products 2. Nutritional products

Pharmaceutical products Following is the list of its products in this category. A

B

C

D

E

F

G

H

I

K

L

M

Abbutol

Becefol

Calcijex

Dayalets

Enoxabid

Flexin

Ganaton

Hytrin

Iberet

Klaricid

Lucrin

Moculator

Artifen

Bejectal

Cecon

Daycor

Entamizole

Forane

Lincomycin

Mospel

Acyclovir

Bevidox

Cofcol

Dijex

Epival

Froben

Loftyl

Abocain

Brufen

Citro Soda

Dopamine

Erybron

Abocal

Burnol

Cremaffin

Abozole

Erythrocin Eryderm

Arinac

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Nutritional products The company provides food guide pyramid as shown below and then according to this it provides its customers a wide range of nutritional products.

The list of its nutritional products is as follows: 1.

Ensure

2.

Pediasure

3.

Glucerna SR

4.

Pedialyte

5.

Ensure Plus

6.

Formance

7.

Pedialyte

8.

Glucerna RTF

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CORPORATE STRUCTURE

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LITERATURE REVIEW

st

1 Research - The impact of SHRM on organizational success The public sector and multiple goals

Reference: http://www2.enap.gov.br/mesa_redonda/downloads/daley_vasu.mpsa02_PPM.pdf 

In the article started above, it clearly depicts that strategic human resource management is of  extreme importance because it aids in the overall effectiveness and efficiency of the organization. Moreover it’s also vital in achieving productivity and better results. There was a research conducted that showed that if you employ certain practices such as proper staffing, training, performance appraisal, provide proper job descriptions, employee security and performance based compensation, then goals and objectives are better achieved resulting in positive outcomes.

This research focused on 5 main things; 1. Internal Career Leaders 2. Formal Training Systems 3. Result Oriented Performance Appraisal 4. Employment Security 5. Employee Voice/Participation 6. Broadly Defined Jobs 7. Performance-Based Compensation

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The research was conducted in the North Carolina’s county for social reforms. Strategic human

resource management and outcome assessment showed a weak relationship because they were not a predominant feature of North Carolina counties. The reason of this shortcoming was that public sectors play a huge role in making social reforms, and in the North Carolina counties, the public sector had not been contributing much because of their deficiency in practicing SHRM effectively. Hence it was concluded that implementation strategic human resource management is of utmost importance in order to implement goals and objectives which in return would result in better outcomes.

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nd

2

Research – Strategic HRM Practices and their Impact on

Company Performance  – From Chinese Enterprises Perspective Ref: http://www.shrm.org/Education/hreducation/Documents/47-1%20Akhtar%20et%20al.pdf 

In the past experts have debated that human resources is important for a particular company until the competitor cannot copy them. This research article has classified seven strategic human resource practices that play a role towards the organizations performance. These functions are referred as “best practices” which are internal career opportunities, formal

training systems, results-oriented appraisals, employment security, participation, job descriptions, and profit sharing. The researcher in this article focuses on three aspects, first is to measure the validity of best practices with respect to Chinese market and can these be usefully implemented in other countries, then how effectively these practices are being applied and third is what are results in terms of product and monetary performance.

1. VALIDITY OF SHRM PRACTICES

In the past, China’s public owned companies dominated their production but later there was a

dramatic increase in foreign investment and organizations. This resulted in changes in SHRM practices such as performance based reward system, market oriented staffing, labor contracts and increased focus on social security. The validity of global strategic HRM practices to be applied in Chinese environment can be measured by recent industrial developments.

2. APPLICATION OF STRATEGIC HRM PRACTICES

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In China, training and development is considered most crucial SHRM function by the management of foreign owned companies therefore they tend to invest in it more than the state owned companies. They also strongly believe that job description need to be clearly defined as it defines the reward system for employees. Majority of companies have changed overall performance appraisal system but few companies still consider it ineffective as they do not have proper evaluation criteria and defined objectives for workers. To attract and retain young graduates, companies are now focusing on creating a learning environment and opportunities for developing careers.

3. OUTCOME OF SHRM BEST PRACTICES

The success of strategic HRM practices in foreign companies has led to reforming large state owned companies where as the small ones are seeking to be privatized. Recently, various studies have been conducted in China and they have demonstrated positive results in terms of  quality based on satisfaction of customers and innovation whereas financial performance was based on ROI, growth and profitability.

CONCLUSION

As a result, Chinese market is now concentrating on developing its human capital by considering strategic HRM as a core function to deliver knowledge culture and implementing the HRM’s functions to gain sustainable competitive advantage. The government is trying to

apply best practices across all organizations whether they are state owned, foreign companies or their subsidiaries. The aim is not only to attract effective and efficient human capital but also to establish a structure to manage, motivate, train and compensate with alignment to companies strategies.

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HYPOTHESIS

H1 – Strategic Human Resource Management Enhances Productivity and achieve overall Organizational goals and objectives

OBJECTIVES 

To find out how the functions of Human Resource Management are strategically aligned.



To see, whether, these strategic functions help organization achieve organizational goals.



To find out how these functions impact overall organizational performance.

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FINDINGS

Corporate & Business Strategy

Abbott Pakistan follows the “Sustainability” as its Corporate Strategy. Company is in its Maturity stage. Abbott Pakistan, according to their corporate strategy, uses “Cost Leadership” as its Business Unit Strategy. However, according to our interview, they said that they use a mixture of Cost Leadership and Differentiation as their business unit strategy but mainly focusing on Cost Leadership to strategically align it their Corporate Strategy

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Human Resource Planning

At Abbott, key consideration is given to innovation in almost all their business functions because the organization is in its maturity stage of lifecycle and in order to survive in the long term and to be better than their competitors, they keep an eye on the opportunities and make the best use of it. For this purpose, they plan and devise strategies with the help of cross functional teams where suggestions and recommendations are collectively taken by different divisions and departments, and the best decisions are implemented. Furthermore, an attractive strategy adopted by Abbott is that employees of HR department play dual roles. They have broad job classes. One specialized and the other one generalized. This helps their function to align strategically and become more cost effective. They formulate a plan every that what would they accomplish in the next 2-3 years. What the company does is, every department sets goals on the daily basis in inclination with the targets which they assess constantly and keeping in view the internal and external forces operating. Therefore, at Abbott, HR revolves around strategic implementation of policies reflecting staffing, talent management and acquisition, training and development, performance appraisal and compensation, etc.

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HR Policies

Abbot has quite an impressive set of HR policies. They believe in open and encouraging environment. This is the main reason that their turnover rate is quite low and below the industry average and their HR policies is helping them to maintain this rate in future as well. Their HR policies are strategically aligned with their corporate goal and as result they are continuously attracting, developing and retaining their talented workers. Their main focus while hiring is to hire such employees that ensures quality output. Therefore their policies are made in such a way that can meet long term objective. Abbott uses consultants for recruiting low level staff and also uses online web browser and print media this provides them to generate larger pool and then identifies the best talent among them. A system called KRV is introduced recently where provides complete information about recruitments and vacant positions and it works for Abbott globally. Employees are recruited both internally and externally. There will be at least 2 interviews before hiring middle and high level employees. Interview will be conducted in panel including HR representative. According to recruitment policy of Abbott all middle and high level jobs will be first announced on employees’ portal globally tries to fill it internally, the strategic aspect of internal hiring is

cost effectiveness, trust factor and such hires are well adjusted with the culture of the company. Other policies includes paid leaves, vacations, holidays, compensation for extra working, medical leaves and allowance, tea and meal breaks and equal emplacement opportunities.

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Staffing

The company and its management strongly believes that along with establishing effective and sustainable strategies, they need to recruit and select right people in order to execute those strategies to achieve organizational goals. The aim is to achieve this fit by finding the people with right attitude, experience and motivation focusing on four key objectives: 

Look for cultural diversity, skills and talent in employees, not only in Pakistan but also across global cultures with a particular level of knowledge.



The growth of human capital needs to be in line with the company’s global strategies.



Provide adequate guidance and support to their workforce in terms of development opportunities, communicating culture and values to be followed.



Reducing turnover by motivating and retaining human capital with opportunity to grow and clear cut reward system.

Recruitment Abbott Pakistan is devoted to assist its employees achieve their optimal efficiency and build long term progressive and rewarding careers. They tend to recruit their employees cautiously and direct them towards learning and long term careers. Abbott being a pharmaceutical company attracts people from medical backgrounds and has limited positions from business fields.

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The company uses various methods for recruiting employees such as 

Job posting on company’s intranet



External recruitment through online and print media



Employee referrals



Outsourcing to staffing agencies such as nRcruitment consulting, HRSI  – Human Resource Solution International and TEI Consultants



On-campus for internees



Have their own job and career board online- globally



Succession planning

Selection The selection process at Abbott Pakistan is usually a long and thorough as they tend to select carefully because they want right person for the job with right skills therefore the turnover rate of employees is considerably lower compared to their competitors. Initially for external hiring, the screening of resumes and interview is conducted by the consulting HR companies and later two interviews are taken by the management at Abbott Pakistan. Reliability of candidates in terms of consistency is checked and measured at assessment and training centers. In internal hiring employees are encouraged to apply through online portal which is maintained and monitored globally. The past performance of candidate is evaluated against job description to check his qualifications and skills. The company strictly follows merit based system so that fairness and equality is maintained throughout organization. Once the candidate is selected then management has an orientation program for them so that they become familiar with the environment and culture of Abbott Pakistan. At Abbot, they encourage internal hiring to align it with their strategy.

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Employee Retention

The average age of an employee in Abbott is 10 years which reflects that employees are highly motivated and committed towards their jobs. All functions and strategies along with corporate culture strategies motivate and help them to retain their employees. Other retention strategies include thank you cards, birthday cards and extra ordinary performance awards from HR department give them sense of belongings with company. The turnover rate is very low due to such strategic retention strategies. These strategies are effective and thus help them save cost. Managerial level vacancies are mostly filled internally though their job portal which give them chance of promotion and development and as a result they stayed in company. Timely trainings and development programs also helps in retaining employees. These strategies are timely reviewed and analyzed and chance are made according to need of  time.

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Training

Training at Abbott is fully focused on transmitting knowledge to employees to work on multidimensional areas with an aim to fulfill the strategic objectives of the company. Each employee is given a goal for the future challenges ahead and to find out any gaps between job requirement and the skills the person have and its performance. The gap is then closed by the training provided to the employee after the assessment. Abbott pledges to provide numerous training opportunities globally and nationally. They are focused on bringing the change in future and ensure employee engagement.

An individual starts on the job training from the time that person is hired with regular feedback about its performance. These trainings are conducted on a regular basis to ensure the rapid growth of the company’s business aimed at transmitting knowledge to furnish and polish

technical and soft skills of the employees. The unconditional commitment to Training and Development has been a cornerstone of Abbott’s success.

At Abbott, Talent Management is at the forefront of the company. Talent profile of all employees is updated on software which is global. Talent profile consists of vision, strategies, goals and appraisal of employees. The portal is flexible and time effective for both employees and employers. It helps in promotion and identification of skills gap for which training is provided. At Abbott, training need is regularly assessed. There exist two types of training needs assessment:

i)

Formal Training Need Assessment

ii)

Informal Training Need Assessment

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Formal Training Need Assessment Formal TNA is conducted once a year. It is done in three ways: a) Goals Setting

Organizational and individual goals are set every year. Managers analyze the competencies required to perform these goals. They assess employee’s current skills and identify the

areas in which employees are lacking and training is needed.

b) Performance Appraisal Employee’s performance is formally appraised at the end of each year. If there are any gaps

identified between the job requirement and employee performance then need for training is assessed and provided to that person.

c) Growth Plans

Every year employees are required to fill out their growth plans. Employees themselves realize identify the areas of deficiencies. They also see where training can bring efficiency in their current processes.

Informal Training Need Assessment Informal TNA is conducted on regular basis. When the particular course is happening, managers do need analysis to see if employees need training for particular course. For example currently sales tax training was conducted and finance people showed interest.

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Further, ad hoc training needs arises as new systems are implemented. Currently Abbott is implementing new talent management system for which training is required.

Training Need Assessment translated into a training program After the training needs are analyzed and training is announced, on the basis of need identified, the list is sent as request to each concerning department. Then the employees are sent for training in particular courses. 

Training Design

When they go for external training through for e.g. Narejo or Novartis, then such organizations make their own training design but if the trainings are given by Abbott themselves they chalk out their own training design. 

Training Hours

Every year training sessions are planned for more than 1500hrs. At Abbott training is not mandatory for everyone thus there is no fixed minimum number of training for any employee.

Trainings at Abbott Pakistan are given, once they assess the need. They mostly focus on internal trainings which costs them relatively less than off-the-job training. However, these trainings have helped company achieve its strategic goals and a place where employees enjoy working. The absenteeism rate is also lower and skills also up-to-date to cope up with the challenges.

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Performance Appraisal

Abbot follows the following performance appraisal cycle. 1. Planning and goal making- goals are set mutually by employee and supervisor and SMART goals are made. 2. Midyear review of goals with performance- midyear review helps them to identify the gap between goals and actual performance so that employees can take corrective measure before hand and their appraisals are not suffered. 3. Appraisal at year end- finally at year end each employees is appraised and it’s two way process. Appraisal of each employee is updated on TMS.

Appraisal

Planning and goal making

Midyear review

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Performance appraisal is done annually and results are uploaded on Talent management system portal, which is recently introduced in Pakistan and employees required training to use that. Hence these appraisals become part of their talent profile. Good performance adds value in their talent profile. Performance appraisal is used as: 

Controlling tool, &



To identify skills gap

Good performers are awarded by bonuses whereas high level employees are awarded by variable bonus plans, which motivate them to work for growth and sustainability of company. They do not carry out their performance appraisal on daily, monthly or weekly basis. To become cost leader, they have focused on mid-year performance appraisal. In this way, they are aligning its function strategically.

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The Reward System

Abbott Pakistan’s total rewards program consist of base and variable pay with a broad array of 

allowances, benefits and opportunities for growth and development in the future. Company’s compensation philosophy is to pay for performance. Their reward system is aimed to match favorably with the compensation plans of other leading health care organizations and other companies with similar financial results outside industry locally and globally. This pay-forperformance strategy, combined with internal and external reviews, surveys and analysis helps to align with organizations total compensation strategy to superior and sustainable overall performance. The total reward system is perceived competitive and fair by the employees as it is based on external equity. Incentive plans are designed to balance short-term and long-term financial and strategic objectives that build shareholder value and reward overall company and individual performance. Senior managers tend to receive large amount of variable bonuses as per their performance as their base pay is comparatively low. The company realizes the importance of  monetary and non-monetary rewards as its strategic HRM includes focus on compensation and corporate branding. The satisfaction of employees in terms of compensation can be analyzed by the low turnover rate and the average working time for a single employee at Abbott Pakistan is around ten years. The reward system is strategically aligned in the way that they are giving low base pay if  employee wants to earn additional amount they have to improve their performance and can earn bonuses to meet external equity.

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Succession Planning

Abbott started the concept of succession planning from its very inception and it is designed in accordance with knowledge, skills and abilities of employees. Key consideration is given to job rotation in the sales and marketing departments so that the employees understand the ins and outs of all the segments where they work. Currently, they have a launched a portal which started its operation in the year 2012. On this portal, all the profiles of employees are active and tasks are assigned on that portal by their supervisors. This way they keep a close check on the performance of their subordinates and hence that’s how they ensure best performance. Furthermore, Abbott believes in absolute

meritocracy therefore for this purpose the process of succession planning is carried out for top level management. At middle level positions, no succession planning exists. They are assigned tasks as mentioned above on the new portal system launched in Pakistan and a close check is kept on the employee performance. Succession Planning concentrated only to senior management and internal hiring middle-l evel management resulting to become the cost effective company. They have strategically aligned their succession planning function as well.

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FINANCIAL DATA

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ANALYSIS & CONCLUSION

By looking at the company’s financial statement, it is evident that the company has been

generating profits at the end of every year. Moreover, liquidity of the company has i mproved in 2011 as compared to existing years. Hence, after analyzing the operations of the company, it'd not be wrong to say that they been able to achieve the profitability they require. According to our findings, all the functions are almost linked to their cost leadership strategy of  the business unit. Their corporate strategy is Sustainability which they have implemented quite effectively through their business unit strategy. All the functions are strategy aligned. We can conclude from the fact that, company has been profitable due to successfully aligning its functions to the overall company strategy. Thus, we accept our Hypothesis through our findings that, Strategic Human Resource Management impacts overall Organizational performance.

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