Instructor – Ms. Deep Kiran

Group Members:

Samran Ali Malik 12285

Maheen Zubair 11449

Jahanzeb Malik 11536

Samira Noorani 13149

ABBOT PHARMACEUTICALS

Strategic Human Resource Management

IMPACT OF SHRM ON THE ORGANIZATIONAL PERFORMANCE

ACKNOWLDGEMENT

To start with, we thank Almighty Allah as without the grace of Allah our objective would have never been accomplished successfully.

Not forgotten to our family for providing everything, such as money, to buy anything that are related to this project work and their advise, which is the most needed for this project. They also supported us and encouraged us to complete this task so that we will not procrastinate in doing it. Internet, books, computers and all related stuff also helped us, as our source to complete this project.

Then, we would like to express our profound sense of heartfelt gratitude and gratefully acknowledge the encouragement and guidance we received from our faculty member Ms. Deep Kiran. We express our sincere thanks with great respect for his valuable guidance and moral support during the whole semester.

In the end, very special thanks to Ms. Mehtab Khaki (Assistant HR Manager, Abbot Pharma) for giving his precious time and also for providing essential information regarding his company without which this report would not have been possible.

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Table of Contents

ACKNOWLDGEMENT....................................................................................................................................................2

EXECUTIVE SUMMARY.................................................................................................................................................4

INTRODUCTION............................................................................................................................................................5

Abbott in Pakistan...................................................................................................................................................6

Mission....................................................................................................................................................................6

Vision...................................................................................................................................................................... 6

Core values..............................................................................................................................................................7

Products of Abbott..................................................................................................................................................7

Pharmaceutical products....................................................................................................................................8

Nutritional products...........................................................................................................................................9

CORPORATE STRUCTURE...........................................................................................................................................10

LITERATURE REVIEW..................................................................................................................................................11

1st Research - The impact of SHRM on organizational success - The public sector and multiple goals..................11

2nd 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 SummaryAbbott is a global pharmaceutical and health care organization focused on identifying,

determining and offering new cures to its consumers. In Pakistan, they started their business as

an affiliate in marketing. They possess expertise in providing its consumers with two types of

products which are pharmaceutical products and nutritional products.

The corporate strategy followed by Abbott is “Sustainability” and their business unit strategy

mainly cost leadership whereas the company is currently at maturity stage of business cycle.

Strategic Human Resource Management at Abbott Pakistan has always been a vigorous and

active process, which focuses on overall approach and includes attracting, developing, nurturing

and retaining human talent. Recruitment in the organization is done carefully through various

cost effective methods with the intention to direct employees towards successful and learning

careers.

The company maintains interest on the opportunities and makes the optimal use of it when it

arrives. They believe in open door policy and motivate their employees to actively participate so

that they could discuss their ideas. A new method called KRV has been introduced which gives

complete knowledge about recruitments and available vacancies. The company believes in

creating a culture where merit is promoted and deserving employees’ progress through the

ranks as this maintains equality among workforce.

The aim of SHRM functions in line with corporate culture is towards attracting, motivating and

retaining human capital so that there is a positive consistency in the company’s overall

performance.

Abbott strives to offer numerous training and development programs both globally and

nationally. The training need assessment is either formal or informal. Performance appraisal is

used as a controlling tool and to identify the skill that employee lacks.

The employees perceive Abbott’s total reward system as fair and based on the tasks performed

by them. However the company offer low base pay compared to their competitors but also

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provide opportunities to earn additional amount in term of bonuses and commissions. They

find this method cost effective which is also depicted in the company’s financial statements.

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 significantly 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

Artifen

Acyclovir

Abocain

Abocal

Abozole

Arinac

Becefol

Bejectal

Bevidox

Brufen

Burnol

Calcijex

Cecon

Cofcol

Citro Soda

Cremaffin

Dayalets

Daycor

Dijex

Dopamine

Enoxabid

Entamizole

Epival

Erybron

Erythrocin

Eryderm

Flexin

Forane

Froben

Ganaton Hytrin Iberet Klaricid Lucrin

Lincomycin

Loftyl

Moculator

Mospel

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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

1 st 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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2 nd 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.

Employee Retention

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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 multi-

dimensional 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.

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Planning and goal making

Midyear review

Appraisal

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-for-

performance 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-level

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

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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 improved 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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REFERENCES

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

2. http://www.shrm.org/Education/hreducation/Documents/47-1%20Akhtar%20et%20al.pdf

3. http://www.abbott.com.pk/

4. http://www.abbott.com.pk/pdf/AnnualReport2011.pdf

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