Final Project Report

FINAL PROJECT OF PERFORMANCE COMPENSATION

MCOM- SECTION (B)

SUBMITTED BY Ghazal Ejaz Khulda Abbasi Hira Saif Sohaib Aslam Tahir Butt Syed Own Haider M.Ahsan-ul-haq L1F11MCOM2102 L1F11BCMH2011 L1F11BCMH0013 L1F11MCOM0107 L1F11MCOM2093 L1F11MCOM 2126 L1F11MCOM2127

SUBMITTED TO: PROF NOUMAN MAJHEED

ACKNOWLEDGEMENT We are grateful to our teacher Sir Nauman Majeed for assisting us throughout the course of Performance and Compensation Management. We have been able to gain knowledge about unique concepts of Performance and Compensation Management by the advanced teaching methodologies and versatile knowledge of Sir Nauman Majeed and we are now at the stage to evaluate about the performance of any organization. He is beyond our thoughts and much more than this acknowledgment. May ALLAH bless us with such kind of dedicated teachers in future. We have tried our best to provide you the actual facts and figures. We hope you will appreciate us. EXECUTIVE SUMMARY Nestle has been serving this world for over one hundred and thirty years. It has differentiated itself through its high quality product mix and positioned itself as health and Nutrition Company while targeting the health conscious people throughout the world. Nestle started its operations in Pakistan Back in1988, by acquiring a diary company MILKPAK LTD, when people of Pakistan actually needed it.Since Pakistan is the fifth worlds largest milk producing country therefore nestle deals mainly in dairy products. Moreover it also sells juices, chocolates, prepared food like noodles, baby food, infant formula milk and breakfast cereals in Pakistan. Nestle is a low cost leader with its efficient operations hence it provides its customers with high quality products and sells them at a premium price. Therefore it is earning good profits. Nestle has set its manufacturing plants at in Karachi, Lahore, Islamabad and Kabirwala. The milk processing plant at Kabirwala district is the Nestls world largest milk processing plant. When nestle introduced its products in Pakistan people were neither aware nor accustomed to them. Therefore nestle ran an extensive marketing campaign to educate people and create a need for its products. Pakistan is a land where fresh eatables are readily available. Nestle should sell the same quality of products in Pakistan as it sells abroad. It should also introduce more brands in Pakistani market which it offers in other markets of the world since consumers in Pakistan are becoming more demanding day by day. INTRODUCTION Nestle is the world's leading nutrition, health and wellness company today and was founded in 1866 by Henri Nestl. It has employed around 250,000 people and has factories or operations in almost every country in the world. Nestle is the world's leading nutrition, health and wellness company today. Being the world's leading bottled water company is based on a firm economic model: strong brands, global presence, innovation capacity, environmental stewardship and passionate people. Brief History Henri Nestl, a pharmacist, developed a food for babies who were unable to breastfeed. His first success was a premature infant who could not tolerate his mother's milk or any of the usual substitutes which eventually became the first Nestls customer. After Nestl's new formula saved the childs life and soon, Farine Lacte was being sold in much of Europe. After the major invention in 1874, Jules Monnet purchased Nestle and collectively they launched the condensed milk. In 1905 Nestle merged with AngloSwiss which was an condensed milk company. Soon after Nestle established its roots all over Europe to cater the need of the customers of Europe, as Nestle fame was on the top so Nestle thought to start the production function all over the world to increase the customer demand and meet or capture more markets. Decision to go multinational was a fruitful idea, so as now nestle has operations in America, India,

England, Brazil, Australia, Pakistan, Hungary, France, Belgium, Italy, Spain and various other countries around the globe. Nestle are now in all seven continents & having more than 522 factories in83 countries 1981 Production of long shelf life UHT milk begins at Milkpak Ltd. Sheikhupura factory. 1988 Nestl SA acquires 40% share in Milkpak ltd. 1990 Sheikhupura factory starts the production of Nestl Nido milk powder and cereals. Anew plant is acquired at Kabirwala in the Punjab 1992 Nestl takes over the running of the company and begins to develop its milk collection network. A Maggi noodles plant is installed at the Kabirwala factory. 1996 Milkpak Ltd. is renamed Nestl Milkpak Ltd. 1997 The Kabirwala plant becomes a fully owned unit of Nestl Pakistan Ltd. 1998 Nestl pure life bottled water is premiered in Pakistan. Within a few years it becomes one of the worlds leading brands of bottled water. Meanwhile, Nestls milk collection system in Punjab matures and the company is able to buy all its milk from farmers instead of relying on contractors. 2001 Nestl Pakistan acquires the Fontalia and AVA water companies which specialize in supplying water to homes and offices. 2004 Afghanistan becomes the fourth sale zone of Nestl Pakistan Ltd. 2005 Nestl Milkpak Ltd. is renamed Nestl Pakistan Ltd. The GLOBE project is successfully launched, and is intended to have further cooperation and information sharing with Nestl companies around the world. Nestl Pakistan responds swiftly to Octobers devastating earthquake, using its own distribution channels to bring aid to the worst affected areas.

ORGANIZATION STRUCTURE

Nature of the Business Nestle Pakistan is the FMCG company which has major industry to cater food & beverages. Which has sub industry of Diversified goods for food and its major industry is FMCG industry. Major Industry: Food & Beverages Sub Industry: Diversified food Mission Statement Nestl is dedicated to providing the best foods to people throughout their day, throughout their lives, throughout the world. With our unique experience of anticipating consumers needs and creating solutions, Nestle contributes to your well-being and enhances your quality of life. Vision Statement The Nestl global vision is to be the leading health, wellness, and Nutrition Company in the world. Nestl Pakistan subscribes fully to this vision. In particular, we envision to: Lead a dynamic motivated and professional workforce proud of its heritage and bullish about the future. Deliver shareholder value through profitable long-term growth, while continuing to play a significant and responsible role in the social, economic and environmental sectors of the country. GOALS & OBJECTIVES Goals & Objective of Nestle Pakistan is Simple & well designed with the core strategy to meet the demand of the consumers & to fulfill the needs of the customers. The goals & objectives are; To be the best & quality brand in Pakistan To meet the needs & requirements of the consumers To capture the desired market share To dwell in to the life of people & consumers To be the number one nutritious company of Pakistan To be the leading FMCG company around the world as well as in Pakistan. To be the socially responsible company & be helpful in bad times. Nestle aims to be proactive innovation and renovation culture, which is the key to Nestls success in the marketplace. Nestle aims to have fully integrated systems with suppliers & retailers so that every single market can be tapped & focused

CORE VALUES A prerequisite for dealing with people is respect and trust. Transparency and honesty in dealing with people are a sine qua non for efficient communication. This is complemented by open dialogue with the purpose of sharing competencies and boosting creativity. To communicate is not only to inform; it is also to listen and to engage in dialogue. The willingness to cooperate, to help others and to learn is a required basis for advancement and promotion within our company.

Performance Management System Definition: Performance Management is a comprehensive process Good performance Management is based on continuous, honest and constructive dialogue between supervisors and employees Goals and objectives should be SMART.

PERFORMANCE OBJECTIVES The performance Objectives is to ensure that employees list the key performance priorities in a given performance year. These objectives need to be aligned with the business and manager objectives and should be discussed and agreed with the manager. As the level of performance achievement influences the level of reward, visibility on how each employee can influence their reward via their performance. Short Term Bonus is influenced by level of performance. In order to create a complete picture of an employee's performance achievement in a given performance year, managers and employees should also compete, as achievement against these objectives will influence the overall PE Rating WHAT.

PDG (Progress and Development Guide) Keeping in mind the Nestl Career Development Model on previous page, the new PDG Form is a lifelong document which follows employees development history throughout their career in Nestle with main purposes as: To identify NLF (Nestle Leadership Framework) Strengths and Development needs To systematically identify, monitor and follow-up on Career and Development Plans for Ensuring sustainable development PERFORMANCE MANAGEMENT Formal assessment by Line Managers and HR once in a year with feedback. Subordinate can question an unfair evaluation. Specific Key Performance Indicators have been enlisted by the HR department. One of the important key performance indicators is achievement following the Nestle management and leadership principles. Remuneration structure and promotion criteria take into account individual performance.

METHODS USED FOR PERFORMANCE EVALUATION BY NESTLE Ranking Method Group Ranking Method 360 Degree evaluation Behavioral Competency Ranking Method Online TPMS (total performance management system)

Emphasis on individual achievement Nestls emphasis on individual achievement is evident from the kind of pay structure HR has designed for its employees and the company also incorporates practices like Job Enrichment and Job Enlargement, to motivate employees and to break the monotony of their job tasks. The correspondent herself works in both sales and brand management departments, which is an example of job enlargement REWARDS AND EMPLOYEE RELATIONS TEAM It consists of two expert sub-teams, each with specific responsibility for business-wide strategic and operational remits. Employee Relations sub-team provide business-wide advice and guidance to line managers and the HR community on individual employee relations matters and to HR Business Partners on broader employee relations and change management issues, as well as developing and implementing Nestls policies and procedures in this area and undertaking relevant project work. REWARDS & INCENTIVES Passion to Win awards- These quarterly awards have been institutionalized to reward those who over-achieve their targets. Long-service Awards- To recognize employees who have been with the company for more than 30 years. Nestle Idea Award- It was found from the correspondent that the company institutes Nestle Idea Award every quarter to recognize and award employees who come up with relevant and innovative ideas which have the potential of being implemented at Nestle. For all aspects of Reward Nestle apply the fundamental principles outlined below.

Reward Principles Performance Driven - The level of your Reward is linked to your performance, hence the highest performers will see the greatest Reward. There is also a direct link between the performance of the business and the Reward we're able to offer Competitive - We benchmark all aspects of Reward to ensure we offer all our employees competitive Reward package Inclusive - Our Reward programmer is designed to reflect the valuable contribution whichever employee makes, not just senior managers Flexible - We've made it our top priority to allow you to tailor the Reward you receive to your circumstances, whenever possible or practical.

Performance Evaluation Form

1. Introduction

The Performance Evaluation (PE) process is an annual cycle which aligns your individual objectives with the business priorities in a given performance year. On-going feedback discussions with your manager to make sure you are on right track is essential, as it allows you to take any required measures if needed. This will ensure you and your manager is aligned throughout the year and makes the year end evaluation as fact based and effective as possible. The PE Form enables you to structure the PE process in a quality way to increase dialogue and alignment with your manager. At the end of the year, you will receive a PE rating, which will be based on the level of your performance against your objectives. This PE rating includes an overall evaluation on "What" you have achieved and "How" you have demonstrated the 4 Nestl Behaviors (Practice What You Preach, Result Focus, Proactive Cooperation and Initiative) in the execution of your objectives. Your level of performance achievement will have a direct impact on your Salary Review and Short Term Bonus (STB) pay out (if applicable). PE has 4 phases: Objective setting (Jan-Feb): Performance objectives are agreed with the manager. Interim Review (Jun - Aug): Review progress against objectives. Calibration Meeting (Dec-Jan): Management meeting to ensure effective and equitable performance evaluation across the organization. Year End Review (Dec-Feb): PE rating - evaluation of achievement against objectives (What) and Nestl Behaviors (How).

Employee Information Last Name: First Name: Personnel Number: Position Title: Reports to: Review Information Originator:

Review Period: Due Date: 2. Objectives

The purpose of the Objectives section is to ensure that employees list the key performance priorities in a given performance year. These objectives need to be aligned with the business and manager objectives and should be discussed and agreed with the manager. As the level of performance achievement influences the level of reward, this section provides visibility on how each employee can influence their reward via their performance. Short Term Bonus is influenced by level of performance achievement of objectives listed in section a) and b). In order to create a complete picture of an employee's performance achievement in a given performance year, managers and employees should also complete section c), as achievement against these objectives will influence the overall PE Rating WHAT.

a) Collective Business objectives:

Weight as % of Target Bonus: 50%

b) Individual Business / Function Objectives:

Weight as % of Target Bonus: 50%

Translation from achievement level for Short Term Bonus (STB) to PE Rating:

> 110% = 3.0 Exceeded 90% to 110% = 2.0 Achieved < 90% = 1.0 Not Achieved Objective 1 Timing Weight Status
Achievement Level

PE Rating

Employee comments:

Manager comments:

Objective 2

Timing

Weight

Status

Achievement Level

PE Rating

Objective 3

Timing

Weight

Status

Achievement Level

PE Rating

c) Other Individual objectives not counting for Short Term Bonus (STB):
Objective 1 Timing Status PE Rating

Objective 3

Timing

Status

PE Rating

Employee comments:

Manager comments:

d) Other important achievements:

This section is to make sure that other important achievements that were not set as objectives are taken into account for the overall Performance Evaluation (PE).

3. Nestl PE Behaviors
This section shows the 4 Nestl PE Behaviors that are part of the Performance Evaluation. Use the comment boxes for the Interim Review and Year End Review to give evidence about HOW you have executed your work for the current year. PROACTIVE COOPERATION Proactive Cooperation means working collectively with others within and across organizational boundaries in service of common objectives. It is the ability to build constructive and effective relationships, and to maximize team and colleague contributions to achieve organizational goals.

INITIATIVE Initiative means to act in a proactive way by taking action and not simply thinking about the future. People with initiative react to situations but also anticipate future opportunities/problems, and act upon them well in advance.

PRACTICE WHAT YOU PREACH Practice What You Preach means acting consistently with commitments made and embodying the Nestl Management and Leadership Principles (NMLP) in personal conduct.

RESULT FOCUS Results Focus means the drive to meet or exceed ambitious performance objectives and quality standards, deliver business results and continually find sustainable improvements to methods and processes. Employee comments: All in Vain if results are not gained, Delivering the results has been most substantial KPI for trough out in my career so as delivered in 2010. Overall comments on Behaviors Manager comments: This is one of the strong area of Iqbal, he normally do not compromise of results.

4. Overall Performance Evaluation

Objectives Evaluation (WHAT): Behavior Evaluation (HOW): 1 Not Achieved 1 Does not meet Standards Standards 2 Achieved 2 Meets Standards 3 Exceeded 3 Exceeds

Place the point in the appropriate square over the rating (copy and paste).

3/3

Exceeded

3/1

3/2

Objectives = WHAT

Achieved

2/1

2/2

2/3

Not Achieved

1/1

1/2

1/3
Exceeds Standards

Does not meet Standards

Meets Standards

Nestl Behaviors = HOW

Overall Comments on Performance Evaluation

Signature Section Date: Employee: Date: Manager:

RECOMMENDATIONS
Following are the recommendations:

Performance Appraisal:
In the case of performance appraisal, management should evaluate the performance of the employees on merit and recommend their increments and promotions only on the basis of real performance. Employees should be treated unbiased and appraisal should be performance based not favoritism and likeness based.

Proper Job Rotation:

Employees should be rotated after certain periods in order to enhance their capabilities and make them able to compete in the changing environment of the market. In this way, they will feel interested during working in different departments.

Fair Benefits:
Although most of the employees are unsatisfied but even then turnover rate is low. This is due to the reason that some of them are on contractual bases so that they cannot avail market offered opportunities. On the other side they may not be getting better opportunities

Over Load of Work:

The problem, which I have noticed faced by the employees in absence of an employee, can be removed by hiring two employees in each department. In absence of any of the employee other will be able to do whole work and employee from other department has not to interfere in this department this will decrease over load of work.

Coaching:
Properly coaching provide to the employees. Supervisor provides informal feedback to employee throughout the year.

Customer Relationship
Knowing the customers and their needs is the key to business success. By attitude the manager can improve the relationship with the customers. By having the understanding, what a customer wants, the manager can improve the relationship with the customers.
CONCLUSION Nestle is the world leader in FMCG industry. People trust on the products launched by the company even the product is facing some problems. Nestle today move for new strategies to retain their customer and also want to get new customer. Nestle enhance their internal and external policies to satisfy their customers and also their employees. HR plays a major role to maintain Nestle status in the market.

CONCLUSION Nestle is the world leader in FMCG industry. People trust on the products launched by the company even the product is facing some problems. Nestle today move for new strategies to retain their customer and also want to get new customer. Nestle enhance their internal and external policies to satisfy their customers and also their employees. HR plays a major role to maintain Nestle status in the market.