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1. What was Novartis ́ main challenge in managing talent in China? Novartis case . Global Talent Management at Novartis I do not know how to post the PDF case? cloud you tell me how to give the case

   Sourcing Talent Globally

   The company was actively involved in sourcing talent from increasingly dispersed locations. Managers were encouraged to keep an updated list of leadership talent. In addition, the company

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   had recently expanded its hiring of HR professionals from XLRI Jamshedpur, School of Business and Human Resources, a top training source for HR talent. The company also hired marketing talent from the Indian School of Business (ISB), a business school based in Hyderabad on which Vasella served on the board of directors. Novartis sought to hire undervalued talent around the globe, but professed that these hires came at a high price. Most were being hired for global management development, which would enable them to earn a globally competitive salary for their level of responsibility.

   Moving Talent and Managing Salaries across Borders

   For a pharmaceutical company with operations across every major continent, one essential task for senior management was to design policies for moving talent sourced from around the world to the right location. This was a particular challenge when individuals were asked to leave their home country and move (often on multiple occasions) to different global locations. Given large and persistent differences in typical market salaries across locations, a managerial challenge focused on how to compensate these globally mobile talent workers. As Gijs van Bussel, the Novartis head of global compensation, noted:

   We have made a deliberate choice for a “home base” approach. People have a home base and that drives their pay. That brings up issues when you send people from Europe to the U.S., and there will be cost-of-living allowances made. But the home-country practices drive their salaries. We do have some true nomads, for whom we take Switzerland as their home base.8

   International Assignee (IA) program One program the company had was called the International Assignee (IA) program, whereby the employee continued to be paid at the (typically higher) compensation level of their home country, and a variety of additional assistance was offered (typically including local housing, education for the children, and tax advice). The idea of this program was to enable the individual to continue maintaining their house in their home country and to make an easy transition in both directions. The drawback of this program was that it typically cost the company twice the individual’s original salary to make that person an IA; thus the company had put a strict criteria in place to use IAs only when the local operation did not have the appropriate bench strength to fill the position. Also, it was typically expected that the individual IA would eventually return to her home country at a higher position. This was not always easy, given that the IA would leave and lose some connections to the home organization. Further, in the interim, the senior line manager or HR manager at the home organization might change. As a partial solution to this problem, Novartis made the individual’s home country organization more responsible for that person even after they were posted abroad. A related and newly emerging challenge for the company was what to do with people hired from India and China who were sent abroad as IAs with higher compensation to adjust for market differences, who now wanted to return to India and China with their higher, Western levels of compensation.

   Talent Management in China

   In China, the company had the emerging challenges of retention and cost control. The cost control issue was not yet severe, given that the company had clearly signaled years earlier that it was not going to save on global R&D costs by expanding its own R&D organization into China. For one thing, the company intended to focus on diseases most prevalent in the local Chinese market, in particular, cancers caused by infection. Starting in 2001, the company began partnering with the state-run Shanghai Institute of Materia Medica (SIMM) to research the institute’s trove of natural medicine agents for application to modern diseases. Novartis’ longstanding efforts to test natural

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   medicine had earlier led to the successful introduction of an anti-malaria drug based on an extract of Chinese sweet wormwood. The partnership with SIMM had further led to the identification of 1,800 compounds for possible medical use. The company invested $100 million in an expansion of its Shanghai research operation since then, and the company’s Chinese labs were examining a wide range of scientific responses based on chemistry, biology, and natural medicine agents, to combat (primarily) local diseases. Thus, the R&D activity in China was not replacing any of the rest of Novartis’ global R&D organization. In fact, the primary reason that Novartis was expanding its R&D and manufacturing in China was to access the growing local market, which had reached approximately $15 billion in total industry sales in 2007 and had been growing for the previous five years at a more than 20% compounding rate.9

   Making Salaries and Perquisites Competitive

   For the most talented R&D personnel, the company was increasingly competing in a global market for talent for which there were converging salaries. For example, the head of research at Novartis’ Institutes for Biomedical Research in Shanghai was En Li, who held a Ph.D. in biology from MIT and had spent 10 years doing research and teaching at Massachusetts General Hospital’s Center for Cancer Research. Li had been given an attractive offer to join Novartis in 2003 and return to China. The globally competitive salaries were not only for senior research managers, but also for a large number of scientists recruited from around the world to come and work in Shanghai. In fact, the first 100 out of 400 scientists hired to work in Novartis’ growing Shanghai operation were likely to be overseas Chinese citizens receiving globally competitive salaries. These Chinese returnees were known in the labor market not to accept local schooling for their children or local healthcare. Further, these talented Chinese returnees could demand and (often) expect to receive Western-style schooling and Western-style healthcare from their chosen employer. This was true for high-talented returnees in a variety of science-based or technology-based industries.

   The Turnover Challenge in China

   As Janice Gwyn, the Head of Talent Management and Organization Development for Emerging Markets in Novartis’ Pharmaceutical Division, noted:

   Whenever we are searching for talent in China, the talented applicants are often young and with little experience outside of China or in multinationals. When they join the organization, they enter into a strong learning curve. They’re eager and capable to learn, but it means that a great deal of resources is spent on teaching. During this period, productivity is lower. After approximately 12-18 months in the organization—depending on the role—productivity increases, but too often the talented employees leave the organization because they now have experience in a multinational company and are able to make career and salary progressions rapidly by moving to other companies. Then the cycle begins again.10

   Chinese local salaries for even lower-ranking R&D personnel were rising rapidly. The Chinese Ministry of Labour and Social Security, in its 2007 handbook reported that in recent years the average salary for medical R&D workers had been increasing at an annual rate of over 10% per year.11 This rapid salary inflation was a worry for some senior compensation managers at Novartis, and that worry was compounded by the fact that there was growing competition for both finding and retaining the best local talent. Novartis’ employees in China received frequent outside offers that came with large pay increases. The company also faced over 20% annual turnover for sales representatives and other occupations.

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   Strategies for Reducing Turnover in China

   The company had at least three initial choices in dealing with this problem:

2. Place more positions in second-tier cities and even rural areas where salaries were still much lower than in Shanghai.

3. Do more hiring of undervalued talent such as young university graduates or those forced because of inefficient labor markets to take temporary jobs as taxi drivers.

4. Simply keep ratcheting up its compensation to match outside offers.

   The company had attempted to deal with the challenge of turnover for scientists and senior managers by negotiating salary and stock grant programs with multi-year vesting periods as well as offering long-term educational support and flex-time for those who stayed at the company. One such program involved sending 48 Chinese employees to part-time programs at Beijing University’s business school. These courses, taught in English and focusing on diverse business subjects with particular relevance to China, could be applied as credit toward the MBA degree at Beijing University.12 The program with Beijing University was funded directly by Novartis headquarters under the direction of Jürgen Brokatzky-Geiger, Novartis’ head of human resources. Brokatzky- Geiger saw this education benefit as one of the most promising mechanisms for reducing turnover and developing talent, and in 2007 he sought to expand this program to at least one additional leading emerging economy. Also, to deal with internal concerns about a two-tier equity structure between returnees and local hires, the company had attempted to structure one companywide salary band for both returnees and local hires, and to pay educational and transitional assistance to returnees in one initial lump-sum payment. But these were ongoing challenges, given the need to attract outside talent while maintaining a cohesive, internal company culture. As Janice Gwyn, the Head of Talent Management and Organization Development for Emerging Markets in Novartis’ Pharmaceutical Division, noted:

   I believe our existing talent development programs are starting to demonstrate results. If I look at overall turnover, in China it has decreased from 20.1 percent in 2006 to 17.6 percent in 2007. An example of one of our programs is the Marketing Development Center which invites external marketing and behavioral experts to evaluate our marketing talent in small groups to assess their leadership capabilities and technical marketing expertise. We then refine each of theirindividual development plans on the program outcomes. We’ve been using this development process extensively in China and Russia. The turnover of the people who participate in this particular program has decreased. The turnover has also been reduced in the group that attends the Beijing University Corporate MBA Program. We have been able to retain the associates who have gone on international assignments to our U.S. sales organization and organizations within Novartis. Overall, these initiatives are effective and retention is improving.13

   Strategic Challenges

   As Novartis CEO Daniel Vasella, M.D., looked out the window of his Basel office, he reflected on advice that former Harvard Business School dean Kim Clark had once given him when Vasella was a division head. According to Vasella, Clark had advised him that it was tremendously difficult to change a company from the position of middle or even upper-middle management, but that dramatic change came from either the bottom or the very top of a company.14 Vasella had used his experience as a middle and upper-middle manager to see what was wrong with what the company was doing,

5. Global Talent Management at Novartis 708-486

   and to constantly brainstorm about the changes that were needed. Once Vasella became CEO, he sought to implement dramatic, transformative change. Over the previous decade, Vasella had dramatically transformed the company to align compensation around results and values, and to take on a consistent review process with a strong incentive pay-for-performance culture. He now asked himself whether there was room for recalibrating the norms and processes to achieve the desired culture of candor, performance, and accountability. He did wonder how Novartis could improve on its existing attempts to achieve performance e

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Answer 1

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What was Novartis ́ main challenge in managing talent in China?

The prospects for any organization are enormous for a country as dynamic and geographically wide as China and the pace of globalization and emerging markets at their best. Talent management challenges are something that every organization faces, but how to deal with them depends on the country's culture and demographics, the main challenge facing Novartis in managing talent in China was to retain employees. The availability and training of the right candidates was not as big a problem for Novartis as the retention of the same employees.

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