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:

Performance Appraisal Reward Management Assessment

Duration
Tool Kit Tool kit approach used
1967 – 1980 Annual Confidential By Line Manager
Report (ACR)
1981- 1991 For non-management By Line Manager
staffs: Straight Ranking
Method. For management
staffs: ACR
1991- 2003 For non-management Instant Performance By Line Manager
staffs: Scoring Method. Related Payment (IPRP)
For management staffs:
ACR
2003- onwards For management staffs: Excellence Recognition 360-degree
PDP. For non- Award (ERA) feedback
management staffs:
Scoring Method
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 Rating

Appraisal
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:

Please score the appraisee's capability or knowledge in the following areas in terms of their
R current (and if applicable, next) role requirements (1-3 = poor, 4-6 = satisfactory, 7-9 = good,
e 10 = excellent). After completion of the assessment, please return the duly signed form to
wyour Functional Head.

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
 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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