Performance Management System of Nestle and its Strategic Model and Challenges

Performance Management System of Nestle and its Strategic Model and Challenges

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Nestle is a multinational packaged food company founded and headquartered in Vevey,
Switzerland. It came into being from a merger in 1905 between the Anglo-Swiss Milk Company
for milk products established by the Page Brothers in Cham, Switzerland in 1886 and the Farine
Lactee Henry Nestle Company was set up in 1867 by Henry Nestle to provide an infant food product.
The Trademark of Nestle is birds in a nest, derived from Henry Nestle’s personal coat of arms,
which suggests the values upon which he originated his company. Several of Nestle’s brands are
globally renowned, which has made the company a global market leader in many product lines
including milk, chocolate, confectionery, bottled water, and pet food. Nestle’s brands are Milk
and Nutrition, Beverages, Prepared dishes and cooking aids, Chocolates, and Confectionaries.

Objectives of My Assignment

I was keen to work on Nestle because it has contributed to most of the countries of the world
with its great goodwill and rich products. The brand of Nestle and the image of this brand are very well known and trustworthy. So, I choose Nestle as our company to be worked for.
Finally, to evaluate the performance management system of Nestle Food Company, I had to go
through the company information in a broad way. As the performance management includes
much information that is not very easy to get promptly. I had to screen out different sections of
Nestles department and compile the information such a way that fulfills the objectives of the
assignment.

Background of the Organization

With the increase in the size of Nestle Company, Nestle also has increased the variety in the
different products they offer. In Nestle’s business strategy they encourage product growth
through innovation and renovation. This strategy has allowed Nestle to develop many different products in various fields: baby foods, dairy cereals, ice creams, chocolates, and confectionery, prepared foods, beverages, food services, bottled water, and pet care.

The mission of Nestle

“Nestle is dedicated to providing the best foods to people throughout their day, throughout their
lives, throughout the world. With our unique experiences of anticipating customers’ needs and
creating solutions. Nestle contributes to your well-being and enhances your quality of life”.

The vision of Nestle

“Innovation has been at the heart of our company since its beginning. Ever since Henri Nestle
invented to alleviate infant mortality, we have been dedicated to enhancing people’s lives”.

Objectives of Nestle:
 To manufacture and market the company’s products in such a way as to create value that
can be unremitting over the long term for shareholders, employees, consumers and
business partners.
 It does not favor short-term profit at the expense of successful long-term business
development.
 It recognizes that its clients have a genuine and reasonable interest in the behavior,
beliefs, and actions of the company behind brands in which they place their trust and that
without its patrons the company would not exist.
 Nestle thinks that as a common rule, legislation is the most useful protection of
reasonable demeanor. Though in certain areas, extra supervision to staff in form of
deliberate business principles is advantageous consecutively to guarantee that the highest
standards are met all the way through the organization.
 Nestle is aware of the fact that the success of a company is the expression of
professionalism, conduct, and the conscientious attitude of its management and
employees. Consequently, recruitment of the right people and constant training and
development is essential.
 Nestle persists to preserve its dedication to follow and value all applicable laws in each of
its markets.

Core values of Nestle:
 A requirement for dealing with people is reverence and reliance.
 Integrity and transparency in dealing with people are very important for good
communication. This is balanced by open dialogue with the purpose of sharing
competencies and boosting creativity.
 To communicate is not only to notify; it is also to pay attention and to take on a
discussion.
 The eagerness to collaborate, facilitate others, and be trained is a requirement for
progression and promotion in Nestle.

Culture of Nestle:
There is a very strong organizational culture in Nestle. It believes in teamwork. The head office
provides the guidelines to the zonal managers and informs them about the budget limitation. The Zonal managers are totally independent in constructing their plans and the usage of the budget.
Likewise, the regional managers are independent in their areas. They are given in a specific
target and a certain amount of budget. The discretion is theirs to make a plan and attain the
targeted result in the certainly given budget. The internal control system of the organization is very strong and effective as well. Due to the strong check and balance, they can make eradications and amendments in their plans. If the plan does not work properly, the managers can take corrective measures. No one from the company can challenge his power. The betterment of the achievements of goals can only be done through collective commitment.

Performance Management System:
Being a remarkable company, Nestle uses some effective performance appraisal methods that alien the employee to achieve a strategic goal. Nestle is well-positioned with high-quality brands that are valued by customers. With 3,08,000 employees across the globe, Nestle has implemented a continuous performance management system to support ongoing performance coaching for its employees. Through this procedure, employees’ and managers’ performance will be assessed by conducting ongoing series of activities for bringing the improvement into their work culture. On this basis, the company can line up performance management with other HR processes. Creating shared value is a business concept that customizes the economic and social value for the products by addressing social issues. At Nestle, creating shared value is the way they do business. In 2015, Nestle is recognized as Fortune’s Magazine’s most admired Food Company in the world. The HR team of Nestle is considered as a benchmark in the team of recruiting processes. To meet the particular set of goals, the company helps the employee in improving their skills, attitudes, and behavior as well as decreasing the labor work rate.

Performance Factors:
Nestle’s seven performance factors are:
 Communication
 Customer Service
 Corporation/Teamwork
 Productivity/Core Organizational/Business Skills
 Job knowledge/Technical Proficiency
 Professionalism

The three additional Performance Factors that have been identified for employees in positions with supervisory responsibilities are:
 Performance Management
 Leadership
 Unit Achievements/Fiscal Management

Performance Development Plan:
 Open dialogue with the employees.
 Training and development are done on the job.
 External management training.
 Literacy training.
 Local and international conference.
 Education in the community.
 Transfer of scientific knowledge.
 Technology transfer to agriculture and industry.

Performance Appraisal:
Nestle HR gives the utmost priority and importance particularly in this field since it provides a
way to help identify areas for performance enhancement and to help promote professional
growth. However, it should not be considered the supervisor’s only communication tool. Open
lines of communication throughout the year help to make effective working relationships.
Each employee inside Nestle is entitled to a thoughtful and careful appraisal. The success of the
the process depends on the supervisor’s willingness to respond to constructive suggestions and to work with the supervisor to reach future goals. Reinforcement/Behavior Modification Theory:
Measurement of employee job performance:
 When negative consequences are attached directly to undesirable behavior;
 Positive Reinforcement;
 When rewards are tied direct to performances.

Performance appraisal Rating:
In this method, the performance appraisal rating is calculated and the points assigned in the
performance factors sections are totaled and then divided by the number of performance factors
to determine the overall performance appraisal rating.
Employee Self-Appraisal:
Employees’ thoughts about performance are an important part of the Performance Management
process. The Self-Appraisal in the organization provides a tool for employees to participate in
the appraisal process. The purpose of the Employee Self-Appraisal form is to obtain employees comments regarding job strengths, developmental needs, and actions that might be taken to
improve performance.

Reward and Employee Relations Team:
As a member of the Reward and Employee Relations Team, employees join one of two expert subteams, each with specific responsibility for business-wide strategic and operational remits. As part of the Employee Relations sub-team, it provides 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 policies and procedures in this area and undertaking relevant project work. As part of the Reward sub-team, on the other hand, it focuses on maximizing return on investment to deliver rewards that will motivate the employees to perform at the highest level as well as managing overall reward principles and processes including base salary, incentives, and flexible reward.

Such motivating strategies are:
Performance Driven- The level of employees reward is linked to the 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 they are able to offer. Competitive- Nestle benchmarks all aspects of Reward to ensure that it offers all its employees a competitive Reward Package.

Inclusive- Nestle Reward program is designed to reflect the valuable contribution which every
the employee makes, not just senior managers.
Flexible- They have made their top priority to allow its employees to tailor the reward they
receive to their circumstances, whenever possible or practical.
Strategic Model of Nestle:
Nestle follows the Six Sigma Model to achieve their goals:
Define- In this phase, Nestle summarizes the organization’s plan. Through this phase, Nestle
focuses on clearly specifying the problems; the goals of the process improvement project and
identifying the customers (internal and external) along with their requirements. It also focuses on the business case, problem statement, goal statement, project scope, team and broad responsibilities, time plan, estimated project benefits.
Measure- In this phase, Nestle tries to collect data that is relevant to the scope of the organization. It focuses on identifying the parameters that need to be quantified, ways to measure them, collect necessary data and carry out measurement by different techniques.
After data collection, data is analyzed to ascertain its nature through frequency distributions.
Nestle uses different tools like Process flowcharts, Benchmarking, Run charts, Gage R & R and
Process Capability.
Analyze- In this phase, Nestle tries to find the root causes of business inefficiency. It identifies
the gaps between the actual and goal performance, determines its causes and opportunities for its improvement. Nestle follows a drill drown approach to reach exact root causes from various potential causes identified initially.
Improve- In this phase, Nestle improves the process by determining potential solutions, ways to implement them, testing, and implementing them for improvement. The improvement plan is designed to mitigate the risk and include customer feedback and satisfaction. With the formation of the improvement action plan, Nestle starts the implementation phase simultaneously. During their implementation, actions are carried out, tested for effectiveness, and implemented finally.
Control- In this phase, Nestle tries to generate a detailed solution monitoring plan. This plan
ensures that the required performance is maintained. It defines and validates the monitoring
system. It defines and validates the monitoring of the system, develops standards and procedures, verifies benefits and profit growths, and communicates to businesses.
During the phase, Nestle evaluates the post-implementation results. Progress is ascertained. And
changes are incorporated- if any, correction or modification is required. Nestle uses some important tools such as Process sigma calculation, Control charts, and Control plans in this phase.

Challenges:
1. Criticism over high water usage, selling contaminated food, anti-unionism, forced child labor and using other unethical practices:
Being the largest food company in the world attracts lots of attention. Most of that attention is
criticism over the companies’ practices and Nestle is no exception to that.
Over the years, the company has been criticized for a number of its practices:
 Unethical marketing of baby formula;
 Claims that water should be privatized;
 Asking for a doubt payment from a famine struck country;
 Misleading labeling;
 Sourcing materials from suppliers using child and forced labor;
 Anti-unionism.
The latest criticism is over the company’s uncontrolled, where a prolonged drought is hurting
the state. California State has experienced water shortages over the last few years and many
restrictions have been placed on businesses and residents to reduce their water consumption.
On the other hand, Nestle, which drains the water from aquifers in reservations’ areas, isn’t
controlled by the state laws and does not have to restrict its water usage. Nestle’s inability to
address the communities needs and problems in California, but instead increase the
problems, even more, draws lots of criticism.
Negative publicity results in damaged brand reputation lost consumer confidence and declined
sales. Few of the company’s rivals receive as much criticism as Nestle.
2. Contaminated Food Recalls:
Nestle is a huge food company selling tens of thousands of different food products daily.
Even with strict quality control measures the company often has to recall its products in
various markets due to some form of contamination. In 2014, Nestle recalled and destroyed
37,000 tons of Maggi noodles in India. This resulted in hundreds of millions in lost sales and
damaged brand reputation. Recently, the company had to recall various prepared dishes in the US, which may have contained pieces of glass. The company has to recall some of its products almost monthly. Such negative publicity heavily affects Nestle’s business.
3. Using Suppliers that Violate Human Rights:
Another controversial issue faced by the company during past years as using suppliers that
violate human rights, 2009 BBC reported that Nestle buy its milk from a farm seized from
its white owners which are now owned by the wife of Zimbabwe’s President Robert Mugabe,
they supply between 10% to 15% of Nestle’s local milk supply. However, the company
denies the proclamation and claims that the only reason they purchase their milk supply from
its African supplier to meet the food needs of Zimbabwean Consumers (BBC 2009).
4. Exploiting Farmers:
In 2001, Nestle faced huge criticism for purchasing cocoa from Ivory Coast and Ghana
suppliers, which may have been produced using child slaves. An investigation by BBC
showed that hundreds of children who lived in Mali, Burkina, and Togo were being purchased
from their parents and sent to countries such as Ivory Coast and Ghana to be used in
the production of coca (BBC, 2001). Most of the children who work in cocoa farms are ranged
between 12 to 14 years old and are forced to work 80 to 100 hours each week while they are
not paid fairly, barely fed, and beaten regularly (Corporatewatch, 2003). After the widespread of these reports, Nestle Company faced huge criticism from health and labor organizations around the world to put a stop to these anti-humanities act, as a result, the company did not have any choice except to express its concern over the use of child labor in cocoa farms too, however, the company never confirmed that none of its chocolate products derived from these anti-humanities resources (Mcspolight, 2002).
5. Promoting Unhealthy Food:
Nestle was recently exposed after a report by the UK consumers association claiming that 7
out of 10 of Nestle’s breakfast cereals containing the highest level of fast, sugar, and saltwater. The company is accused of denying the role of corporate responsibility in promoting its product to the public (Corporatewatch, 2003).

Recommendations:

Nestle is quite successful in the CPG market. However, there are still some areas where it can
improve to strengthen its market standing.
Some recommendations are:
1. Bringing innovation to the company’s offerings.
2. Growing the number of start-ups in the food and beverage industry.
3. Upgrading its online services to create a unique competitive advantage in the CPG.
4. Improving its production and operational procedures.
5. Using authentic raw material to avoid an outcry from environmental and social activists.
6. Settling the media scandals and controversies to stand by with a positive reputation.
7. Participating in CSR activities and upholding its sustainability practices.

Conclusion:

Over the years, Nestle has demonstrated enviable capabilities to stay ahead in the rapidly
evolving business environment by maintaining a transparent performance management system.
For a successful organization, it is mandatory to build a healthy relationship with employees
whose majority contributions are related to satisfactory goal achievement. That is why;
employees’ and managers’ performance will be assessed by conducting ongoing series of
activities for bringing the involvement into their continuous performances. In fact, to meet the
particular set goal, Nestle helps the employee in improving their skills, attitudes, and behavior as
well as decreasing the labor work rate which is beneficial in terms of growth. To provide a
healthy work culture, Nestle offers favorable remuneration, attractive compensation packages,
rewarding occasionally employees for what they deserve. Of course, what is right for one
company may not be right for others, but this is the undeniable fact that transparent performance is a key to creating a healthy work culture for the employees.

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