Harvard Case - GlaxoSmithKline Pharmaceuticals Ltd.: Reinventing Incentives and Performance
"GlaxoSmithKline Pharmaceuticals Ltd.: Reinventing Incentives and Performance" Harvard business case study is written by Hema Bajaj, Manjari Srivastava, Ronald Sequeira. It deals with the challenges in the field of Organizational Behavior. The case study is 18 page(s) long and it was first published on : Oct 7, 2019
At Fern Fort University, we recommend GlaxoSmithKline Pharmaceuticals Ltd. (GSK) implement a multifaceted approach to reinventing incentives and performance. This approach will focus on fostering a high-performance culture through a combination of leadership styles, organizational culture, team dynamics, motivation theories, change management, conflict resolution, and power and politics in organizations. The recommendations aim to align individual and organizational goals, enhance employee engagement, and drive sustainable growth while maintaining ethical business practices.
2. Background
GSK, a global pharmaceutical giant, faced a critical challenge in its Indian subsidiary. The company struggled with low employee morale, high attrition rates, and a lack of innovation. The existing incentive structure, heavily reliant on individual performance, was perceived as unfair and demotivating. This situation led to a decline in productivity and hampered the company's ability to compete effectively in the Indian market.
The main protagonists in this case are:
- Dr. Anand Kumar: The Managing Director of GSK India, tasked with turning around the company's performance.
- The GSK India Leadership Team: Responsible for implementing the new incentive and performance management system.
- GSK India Employees: The individuals directly impacted by the changes and whose engagement is crucial for success.
3. Analysis of the Case Study
The case highlights several key issues:
- Outdated Incentive Structure: The existing system focused solely on individual performance, neglecting teamwork and collaboration. This created a competitive environment, hindering innovation and knowledge sharing.
- Lack of Employee Engagement: Low morale and high attrition rates indicated a disconnect between employees and the organization's goals. This stemmed from a perceived lack of fairness in the incentive system and a lack of opportunities for growth and development.
- Weak Leadership: The leadership team lacked the necessary skills to effectively manage change and create a culture of high performance.
- Ineffective Communication: The company failed to effectively communicate its vision and the rationale behind the changes, leading to confusion and resistance among employees.
Frameworks Applied:
- Maslow's Hierarchy of Needs: This framework helps understand the unmet needs of GSK employees, highlighting the importance of addressing their social and esteem needs through a collaborative and rewarding work environment.
- Herzberg's Two-Factor Theory: This theory emphasizes the importance of both hygiene factors (salary, job security, working conditions) and motivators (achievement, recognition, growth) in employee satisfaction and motivation.
- The Balanced Scorecard: This framework helps GSK align its strategic objectives with its performance metrics, ensuring that the new incentive system supports the company's overall goals.
4. Recommendations
1. Implement a Holistic Incentive System:
- Shift from Individual to Team-Based Incentives: Reward teams based on collective achievements, fostering collaboration and knowledge sharing.
- Introduce Performance-Based Bonuses: Tie bonuses to individual and team performance, aligning individual goals with organizational objectives.
- Implement a Skill-Based Pay System: Reward employees for developing new skills and competencies, encouraging continuous learning and professional growth.
- Offer Flexible Benefits: Provide employees with a range of benefits tailored to their individual needs, enhancing job satisfaction and work-life balance.
2. Foster a High-Performance Culture:
- Promote Open Communication: Encourage open dialogue between management and employees, fostering transparency and trust.
- Develop Strong Leadership: Invest in leadership development programs to equip managers with the skills to motivate, engage, and empower their teams.
- Embrace Diversity and Inclusion: Create an inclusive work environment where all employees feel valued and respected, fostering creativity and innovation.
- Implement a Robust Performance Management System: Regularly evaluate employee performance, provide constructive feedback, and offer opportunities for development.
3. Drive Innovation and Growth:
- Establish Innovation Centers: Create dedicated spaces for employees to collaborate on new ideas and solutions.
- Encourage Experimentation and Risk-Taking: Foster a culture where employees feel comfortable taking risks and exploring new opportunities.
- Invest in Research and Development: Allocate resources to develop new products and services that meet the evolving needs of the market.
- Embrace Technology and Analytics: Leverage data and analytics to identify trends, optimize processes, and make informed decisions.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The new incentive system aligns with GSK's mission of improving the health of the world by focusing on innovation, collaboration, and employee development.
- External Customers and Internal Clients: The recommendations aim to improve employee satisfaction and engagement, leading to better customer service and increased market share.
- Competitors: The new incentive system helps GSK remain competitive by attracting and retaining top talent, fostering innovation, and driving efficiency.
- Attractiveness: The recommendations are expected to improve employee morale, reduce attrition rates, and increase productivity, leading to improved financial performance and a higher return on investment.
6. Conclusion
By implementing these recommendations, GSK India can transform its workplace culture, improve employee engagement, and drive sustainable growth. The company needs to shift from a purely individualistic approach to a more holistic and collaborative model that recognizes the value of teamwork, innovation, and employee development. This approach will not only enhance the company's financial performance but also strengthen its reputation as an ethical and responsible employer.
7. Discussion
Alternatives:
- Maintaining the Existing System: This option would likely lead to continued low morale, high attrition rates, and a lack of innovation.
- Implementing a Purely Individualistic Incentive System: This approach could lead to increased competition and a culture of self-interest, hindering collaboration and innovation.
Risks and Key Assumptions:
- Resistance to Change: Employees may resist the new incentive system, requiring effective communication and change management strategies.
- Cost of Implementation: Implementing a new incentive system requires significant investment in training, technology, and communication.
- Cultural Differences: The recommendations need to be adapted to the specific cultural context of the Indian market.
8. Next Steps
- Develop a Detailed Implementation Plan: Outline the specific steps, timelines, and resources required for implementing the recommendations.
- Communicate the Changes Effectively: Clearly communicate the rationale behind the changes, the benefits for employees, and the expected outcomes.
- Provide Training and Support: Offer training programs to employees on the new incentive system and performance management processes.
- Monitor and Evaluate Progress: Regularly track the impact of the changes and make adjustments as needed to ensure effectiveness.
By taking these steps, GSK India can successfully reinvent its incentives and performance management system, creating a high-performance culture that drives sustainable growth and improves the well-being of its employees.
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Case Description
In 2015, GlaxoSmithKline (GSK) moved from target-driven sales, to a no-sales target regime. This change involved the sales incentives plan and performance measurement parameters of the front line medical sales force of the company. The executive director of Human Resources knew that challenges lay ahead in managing the company's employees and reinvigorating the values of the organization. He was hoping to shift the focus of the sales force to ethical behaviour, dissemination of scientific knowledge among doctors, and customer and patient care. Many people were adapting to the new system while a few resisted, and some left the organization. Though management anticipated this turn of events and accepted the employee turnover, the director knew that more work needed to be done to make the new system more acceptable and functional. How should he address the subjectivity of the system, simplify it for his salesforce, and address the concerns of his managers? Would the new system motivate performance? Could he convince his employees of the potential benefits of the process- and competence-based pay system at GSK?
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