An affluent Indian economy cannot be separated from the tremendous growth being witnessed in the Indian pharmaceutical industry. And as part of this sector, employees in pharma companies play their part in sustaining the demand-supply equation. Therefore it is only fair that they receive adequate compensation. Considering that the structure of pharma companies has changed rapidly due to global pressures, new drug delivery systems, lean management, new methods of work and technology upgradation, there has been a tremendous requirement of skills and competencies to give overwhelming outcomes in these dynamic situations. Performance appraisals therefore are key to sustained performance in the face of increasing competition.

Divakar Kaza as President, HR Lupin outlines the appraisal procedure, "An effective performance appraisal emphasises individual objectives, organizational objectives and also mutual objectives. This rule holds true for companies across sectors, including pharma."

Do parameters speak?

Performance appraisal system for the pharma sector is based on principles of MBO or balanced score card just like in other companies. With the focus on company vision, strategic thrust areas and annual business plan, functional goals and all are decided at the start of the financial year. These goals are further cascaded down to teams and individuals and are reviewed periodically.

Kaza stresses on overall appraisal policy frame work in the industry, "The single most important point to note when defining a performance appraisal policy is to ensure that is defines individual objectives, organizational goals, and establishes direct synergies between the two. This will help an employee understand how his/her work is contributing to the overall growth of the company, and what he/she needs to do better to aid this growth. Once this understanding is arrived at, the appraisal becomes a much more meaningful and wholesome exercise."

Vinay M S, Manager - Human Resources, Anglo French Drugs & Industries Pharmacetuicals shares similar comments that, "The process has to be transparent and open with a reviewer present to ensure the appraisal process is followed in a fair manner. The appraisal process should be acceptable and evaluators can be trained and educated. A collaborative approach increases employee buy-in, understanding and support the process of Performance Management System (PMS)."

Surina Iyer, Assistant Vice President -HR, Inventia Healthcare emphasises the role of each wheel of the organisation saying, "Marketing, R&D and Manufacturing are the growth drivers of the business and hence the focus is more on result outcomes. For Marketing, the key focus areas include revenue generation, enhanced market reach and customer / product portfolio management. While, in manufacturing, there is emphasis on process and resource management, efficiency related to production, quality systems, technical know how, cost optimization and people management. For R&D, the focus is on product technology, development and regulatory approvals. Based on the company's vision and business plan, function head decides goals and targets for the year in consultation with the top management. The goals are further cascaded to the teams and individual. We at Inventia Healthcare follow the balanced scorecard framework for the senior management team while following MBO for the rest of the company."


Measuring objectives

The new PMS is a prime example of improvements that enhance the business: By giving managers a better way to communicate goals and expectations - along with tools that allow flexibility, in rewarding individual employees the company can attract, motivate and retain highly skilled employees.

Hora stresses that, "PMS is an important tool for all employees at all levels. The parameters, standards may differ with levels and functional areas but the fundamentals and objectives remain the same. Rather with the increase of the level, performance appraisal is more effectively used as a performance managing tool."

So what should a PMS look like in order to have a high sales figure on the financial balance sheet? Kaza suggests, "Incentives are a great way to bring out the best in people. When money is linked to performance, a positive reinforcing cycle kicks in. Positive reinforcement serves to reproduce, if not amplify, the desired effect that one seeks. However, incentives are not always monetary. Sometimes, recognition beyond cash can go a long way in sealing the loyalty of an employee and it is the role of HR to ensure that employees remain motivated and excited to do better"

Anil Kathuria - Corporate Head HRM Administration, IOL Chemicals & Pharmaceuticals observes a recent trend in the industry that, "Time reveals that companies have become more transparent in their communication with employees giving them a sense of belonging. They have also gone ahead and adopted a higher degree of professionalism in their dealings with employees as well as customers or suppliers. Another major point is that more employees are satisfied with the interest shown by their companies as well as their immediate seniors in helping them strike a work-life balance."

Quality or quantity speaks louder?

All positions in the company have been created to meet specific functional requirements. For example, positions in the finance department focus internally on the financial processes and controls of the company, while positions in sales focus externally on driving revenues for the company. Each job contributes to the overall success of the company through its functional alignment.

In fact Mangesh Joshi, General Manager HR, Plethico Pharmaceuticals informs, "An argument could be made that if the work being performed by the individual does not support these two criteria, then it should not be done."

Alok Saxena, Director, Elder Pharma, justifies the management's role in the in appraisal procedure saying, "Recognition is totally depending on the policies of the Management. The system can give you exact rating about the performance of an individual as per the set parameters. Those who are below average can be given specific time for improvement. They can be trained further to cope up with the organisation's requirements. If an employee is not performing even after giving training and all other inputs, then a decision needs to be taken, keeping in mind the organisation's interest and objective."

It has been observed that in today's competitive times it is amply clear that only those pharma companies that come up with innovative, cost effective, resource efficient and competitive processes will remain in business. Thus the performance of R&D is very crucial.

Joshi enlightens about the existing ongoing policy saying, "Most companies today, have fixed and variable components in their salary structure i.e. fixed amount of the pay is given to the individual at the end of every month and variable component will only be payable in case the person or the company is able to achieve certain milestones."

Hard to judge

PRP schemes do affect an employee's motivation levels. But the most crucial part remains assessing performance of personnel involved in R&D. Kathuria analyses the existing PRP scenario, "The challenge for PRP is to establish a pattern of pay which is seen as fair by employees, which uses reasonably objective measures of performance, which can stand the strain of change, which sustains the object of the system, is not too large a portion of the pay packet and is not too costly to administer. If a 'conventional' view of fairness is maintained in relation to PRP, the net returns may not be sufficient for the majority of employees."

He further continues, "It is much dependent on whether a new concept of fairness is emerging which accepts differential increases based on performance rather than the rate for the job. But it is generally seen that any attempt to force individualised PRP in an organisation that does not recognize the contingencies of such an action, in particular, losing the trust of other employees, is likely to prove counter-productive. Neither the theoretical justification nor the empirical evidence supporting PRP is sufficiently strong to warrant wholesale adoption. Instead, employers who wish to bring about a focus on a more performance-oriented culture would be better advised to refine performance measures and consider group-based schemes."

Empowered by position

HR divides performance appraisal parameters broadly into the two main categories. Firstly skill based - it is directly related to the job and business processes like knowledge. Secondly, behavioral based- it comprises of skills or qualities required to do the job to the best of level like leadership, motivation, time management, discipline. A typical performance appraisal procedure starts with goal setting and ends at performance discussion. Every employee of an organisation is continuously and regularly evaluated at all the levels. In some cases, parameters of the appraisal are very objective and qualifiable and in other cases it is more subjective and non-measurable but leaves an impact on objective parameters. Hora further justifies this system saying, "PMS has got parameters which differ depending on the role and responsibility of an individual. The parameters can be in the ratio of 50 percent objective and 50 percent subjective or 60 percent objective and 40 percent subjective or likewise."