Description
Read the HBR case study (attached) Transforming Human Resources at Novartis: The Human Resources Information System (HRIS) and respond to questions 1–4. Each response per question should be a minimum of one page in length.Case study analysis assignments must follow these formatting guidelines: double spacing, 12-point Times New Roman font, one-inch margins, and discipline-appropriate citations (APA format).
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CASE: HR-22
DATE: 01/14/04
TRANSFORMING HUMAN RESOURCES
AT NOVARTIS: THE HUMAN
RESOURCES INFORMATION SYSTEM (HRIS)
Since the early days of the merger, we knew we would need a significant effort to transfer the new
company into a high-performance organization.1
—Daniel Vasella, MD, Chairman and CEO, Novartis AG
INTRODUCTION
Since the merger of Ciba-Geigy and Sandoz that created the Swiss healthcare and
pharmaceutical company of Novartis in December 1996, CEO Dan Vasella had begun the
transformation from two slow-moving, functional silos into one high-performance company.
The initial post-merger integration was successful in terms of financial performance but people
were feeling stretched, so the HR function had a daunting challenge ahead.
By 2003, the HR organization and its people had made significant progress toward the goal of
becoming a “premier talent machine by 2005.” Norman Walker, who joined in May 1998 as the
head of HR, had several priorities in his 2000 HR strategy – talent management, organizational
development and strengthening, reward and recognition, winning team spirit, and core processes
and IT support. By 2003, the first four were either in place or under way. A significant priority
remained, which was to implement a firm-wide Human Resources Information System (HRIS)
that would convert many of the transaction-based HR core processes to an Internet-based system.
The eight-member ECN (Executive Committee Novartis) had approved the CHF 78 million
(Swiss Francs) capital appropriation request for the global HRIS project in September 2002, and
the effort to create a computer-based system had begun. This change had the potential to
transform the HR function and how it related to line management. Given the fundamental
changes that would take place, the ECN wondered if the HR organization was ready for this
1
Private communication, August 5, 2003.
Irene Wang prepared this case under the supervision of Professor Charles O’Reilly as the basis for class discussion rather than to
illustrate either effective or ineffective handling of an administrative situation.
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Novartis HRIS HR-22
p. 2
transformation – and what other steps needed to be taken to ensure that the change was
successful.
NOVARTIS BACKGROUND
Headquartered in Basel, Switzerland, Novartis was a world leader in the research and
development of products to protect and improve health and well-being. It began as three major
companies: Geigy (founded in 1758), Ciba (1859), and Sandoz (1886). In December 1996,
Ciba-Geigy and Sandoz came together in the largest corporate merger of its time (USD $22
billion) to become Novartis. Dan Vasella, a medical doctor and the CEO of Sandoz
Pharmaceuticals Ltd., became the CEO (and later chairman) of the new company.
The mission of Novartis was “to discover, develop, and successfully market innovative products
to cure diseases, to ease suffering, and to enhance the quality of life” and “to provide a
shareholder return that reflects outstanding performance and to adequately reward those who
invest ideas and work in our company.”2
With 2002 sales of CHF 32.4 billion (USD $20.9 billion), the Novartis businesses were
organized into two divisions: Novartis Pharmaceuticals, with five business units (primary care,
oncology, ophthalmics, transplantation, mature products) accounting for 65 percent of group
sales; and Novartis Consumer Health, with six business units (over-the-counter, medical
nutrition, infant and baby, CIBA Vision, animal health, generics) accounting for 35 percent of
group sales. In 2002, Novartis employed approximately 73,000 employees, operating through
360 affiliates in 140 countries.
With Vasella as chief executive, a new culture of performance management and focus on results
emerged at Novartis. The name Novartis, derived from the Latin “novae artes” meaning “new
skills,” not only reflected the company’s commitment to focus on R&D in order to bring
innovative new products to the communities it served, but also reflected the need for new skills
to become a results-driven organization. Becoming results-driven, one of the ten Novartis values
and behaviors, paid off for Novartis with a history of strong financial performance (Exhibit 1).
THE NOVARTIS HR ORGANIZATION
The HR function included over 700 associates across Pharma, Consumer Health, the Novartis
Institutes for Biomedical Research (NIBR, located in Cambridge, MA), countries, and corporate.
Since the early days of the merger, a number of innovative HR programs had been implemented,
including:
x A High Performance Management System, based on General Electric’s pay-for-performance
model, combined annual objective-setting and performance reviews based on both results and
Novartis values and behaviors. At the beginning of the year, managers and associates jointly
determined performance objectives that were SMART (Specific, Measurable, Attainable,
Relevant, and Time-bound). Ongoing feedback was encouraged, but at least one mid-year
2
www.novartis.com
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Novartis HRIS HR-22
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review was required and a formal review took place at the end of the year. (Exhibits 2a-e
show the performance management appraisal form.)
x The Organization & Talent Review (OTR) Process provided a common, worldwide approach
and methodology for identifying and developing talent within Novartis to improve leadership
bench strength and organizational capability. Anish Batlaw, the head of Talent Management,
explained that the annual OTR process leveraged the Novartis “Leadership Standards,”
which consisted of eight standards that made a leader successful within Novartis (Exhibit 3)
and which were used to assess potential and plan development. Line managers were required
to rate their associates in the categories of high potential, promotable, high professional, or
essential contributor. The OTR process was considered by senior management to be an
integral component of building Novartis into a world-class company. Vasella said, “Success
in business does not just happen. The Performance Management System and Organization
and Talent Review have been designed to help us identify and develop great leaders and to
put them in the right jobs at the right time. Just as we strive to develop a pipeline of new
drugs, we also need to develop a new pipeline of leaders.”3
x The Fast Action for Results (FAR) Program was modeled after GE’s “Work-Out” program.
FAR projects were designed to rapidly address issues identified by a management sponsor. It
consisted of a two-day workshop that culminated in an agreement on actions that were to be
implemented within 90 days. For example, a FAR session in the Animal Health unit was
used to prioritize their R&D portfolio and identify low priority projects to discontinue. In the
Pharma group in Asia Pacific, a FAR session was used to reduce the number of products kept
in inventory. A FAR project in a manufacturing site in France led to a total cost reduction of
almost $5 million.
x Novartis Learning Programs covered all levels of managers within Novartis and were
dedicated to developing Novartis managers’ talents and inspiring them to grow as business
leaders. Ten distinct programs (Marketing Excellence Program, Marketing Awareness
Program, Project Management Curriculum, Novartis Leadership Program, Leading at the
Frontline, The Role of the Leader, Business Leadership Program, Finance Excellence,
Business Finance II, and HR Excellence) were offered multiple times throughout the year. In
2002, over 3000 managers attended these Novartis-specific training and development
programs.
Other new programs included MBA recruitment, share options for key associates, mentoring,
and many others that contributed to the strength of Novartis human resources.
These initiatives reflected Novartis’ strategic HR priorities, which included talent acquisition and
management, associate engagement and alignment, organization capability and functioning,
compensation and benefits, and HR infrastructure. However, a remaining gap in the
infrastructure priority was the lack of a global HR information system. With a constantly
changing workforce, managers in the company were unable to quickly and accurately know
something as simple as how many HR associates were working at Novartis.
3
Private communication, August 5, 2003.
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The Novartis Human Resources Information System (HRIS)
From one perspective, HRIS (Human Resources Information System) was an IT project designed
to standardize many of the company’s HR processes so that HR data could be consolidated into a
single, global system. The long-term goal was that employees would be able to update their own
information on a real-time basis via the Web and that managers would be able to obtain global
reports on HR activities based on current, aggregated employee data. The aim was for the global
HRIS to cover all geographical regions and all business units and global functions. A useful byproduct of this would be that more transactional aspects of the HR function would be automated,
freeing HR staff to concentrate on more strategic activities. Key members of the HR
management team – Norman Walker, Neil Anthony (head of Pharma HR), Simon Nash (head of
Consumer Health HR), and Ottmar Zimmer (head of Compensation and Benefits) – helped
determine which aspects should be included. They decided that the mission critical processes of
the performance management system, employee development (the Organization and Talent
Review process), compensation data, employee work and life events, and some internal staffing
data should be accessible through the HRIS (Exhibit 4).
Aside from being a significant IT project, the HRIS effort also represented a major
transformation in the fundamental role and responsibilities of the HR function within Novartis.
In addition to the IT challenges associated with developing the global information system, once
the HRIS was fully implemented, HR professionals would take on a very different relationship
with their business partners. Since the implementation of an automated “self-service” system
would remove many of the administrative tasks that HR associates performed, under the new
system they would be expected to play a more strategic, consultative role to the business. In this
sense, the HRIS project was an integral part of the Novartis long-term strategy for improving
overall HR service delivery to the organization that would result in a full HR transformation
(Exhibit 5). A critical outcome of this transformation would be the global standardization of key
HR programs and policies.
In more technical terms, the global HRIS involved the rollout of a number of key components:
x Supporting content – delivery of content at the point where it was required in workflow
guided processes.
x SAP R/3 – a core transaction processing system.
x SAP Business Warehouse (BW) – provided decision support, information and analysis of the
human resources data, which would make local and global reporting much easier with a
common “look and feel” for all reports.
x An enterprise HR portal solution – the HRIS would integrate information and applications, as
well as provide for personalization of data and desktop design.
x Web enabling – if implemented, would allow employees to access the portal via the Internet.
While significant technical challenges for system implementation existed, a key to the success of
the global HRIS lay in the organization’s acceptance of this new way of doing business. Trees
Segers, the Global HRIS program manager, knew that no matter how well the new HRIS was
implemented from a technical standpoint, it would not provide much value unless it was
accepted and used effectively. To facilitate this, the Global HRIS Team was composed of
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Novartis HRIS HR-22
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executives who were seasoned and knowledgeable in many critical areas – Novartis, eHR,
change management, system implementations, and SAP. Their expertise would pave the way in
leading this change effort, but it would take the buy-in, cooperation, and commitment of
everyone, beginning with the HR function.
Why HRIS?
The global HRIS project was initiated in December 2001 and had four main objectives:
x
x
x
x
To implement world-class HR processes and systems
To provide HR data in an accurate, timely manner on a global basis
To speed up HR decision-making processes
To reduce HR operating costs while upgrading performance and service
The logic driving the HRIS project was straightforward. In the competitive environment of the
time, particularly in the consolidating pharmaceutical industry, organizations had to be able to
act quickly and have good data readily available to make critical decisions. The overall success
of Novartis rested on its intellectual capital; therefore, its ability to recruit, develop, motivate,
and retain people was core to its future success. Vasella highlighted this, observing that,
“Identifying and developing talent is one of our most important priorities. Better people produce
better results.”4
In achieving these goals, the HR function needed to provide accurate and timely data on the
numbers of people available with certain skill sets and on whether there was sufficient bench
strength in the various businesses. For instance, if a key executive in Generics left suddenly and
a successor had not already been identified and groomed, who within the global Novartis
organization, not just Generics, might be a skilled and qualified candidate for the position?
Batlaw emphasized that the HR aspiration was to have two “ready now” associates for each
leadership position and to have 70 percent of leadership vacancies filled from within. In 2003,
there was only one “ready now” associate for each leadership position and only 42 percent of
leadership vacancies were filled from within. Closing this gap represented one of the central HR
challenges facing the HR leadership team.
Unfortunately, the existing IT systems within Novartis were not up to these tasks. Given the
merger of Ciba-Geigy and Sandoz and the fact that the company operated in 140 different
countries, there had been little centralization or standardization of HR data. A survey of the
existing HR information systems revealed that the company had:
x
x
x
x
x
4
No consistent standards (processes/data/structures)
No consolidated database
No ability to provide data in a form to reflect/support their matrix structure
Difficulty in supporting the businesses in identifying, moving, and tracking talent
Multiple, fragmented systems – PeopleSoft, SAP, local/other, or no system; decentralized by
country or by business unit
Private communication, August 5, 2003.
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x Exposure to many small vendors with non-integrated niche applications
x Exposure to legal/regulatory non-compliance (data protection, privacy, etc.)
Many of the existing HR systems had been developed to support individual business units that
operated within a particular country, division, or function. As a result, these disparate systems
could not be used effectively across Novartis. The new HRIS was expected to solve this
problem and allow managers and HR professionals to respond to the business challenges in the
following ways:
x Support the Organization and Talent Review (OTR) process by providing timely and
valid organizational, job, position, and associate information – Global HRIS would
support talent, skills, and knowledge management across all countries, business units, and
geographies.
x Enable globalization by providing global data definitions including multi-lingual, multicurrency information access through one HR Web tool – Global HRIS would enable
global sharing of information/collaboration, procedures and processes at all levels (local,
regional, business units, global functions, and group).
x Support growth and organizational change by providing harmonized global HR
processes via a common technical platform – Global HRIS would provide global data and
processing standards. These standards would be scalable, permitting the addition or deletion
of organizational structures, reporting relationships, jobs or positions and eliminating the
need to reinvent a process with each organization or policy change.
x Increase operational efficiency by maintaining integrated global processes and creating
an operational service structure – Global HRIS should improve customer satisfaction,
reduce HR administration, and increase standardization; provide greater support to the
business for workforce management and business strategy; offer more consistent, timely and
up-to-date information on people; reduce HRIT development, delivery cost, and HR
operational costs.
The HRIS Plan
The planned two-and-a-half year global HRIS project was to be rolled out in phases beginning in
the third quarter of 2003 (Exhibit 6) and to be led by Trees Segers and her experienced team who
would manage the Extended Organization Readiness Network. After the initial planning,
blueprint, and prototype phases, the pilot would begin in the United Kingdom in 2004, followed
by full implementation in North America and Switzerland. The implementation was scheduled
to be complete across all of Novartis by the end of 2005.
HRIS IMPLEMENTATION: LEARNING FROM OTHERS
Novartis was obviously not the first major corporation to go through this type of transformation.
A growing number of organizations had experience in implementing eHR systems, but none
started with the exact same circumstances and, therefore, adopted different approaches. In spite
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of these differences, there were lessons to be learned, both positive and negative, from other
companies’ experiences.
SAP, the system Novartis chose, provided a number of success stories to illustrate how “mySAP
HR,” its comprehensive HR solution, had helped companies around the world optimize their HR
function. These successes included the following:
x A Finnish data-security solutions provider implemented, in six weeks, an employee selfservice application for 300 users across nine global offices which allowed them to maintain a
profile of in-house and subcontractor skills so that they could quickly staff projects and target
recruitment and training.
x Swiss Post – with 2000 revenues of over ¼ ELOOLRQ (XURV DQG RYHU HPSORHHV –
started with a basic SAP system that required manual data input from many systems. They
began implementing a prototype at the end of 1999 and by early 2001 went live with a
system to allow HR to analyze six areas: employee numbers and personnel actions,
outstanding credits, remuneration data, absences, appraisals, and staff satisfaction. The
resulting system was able to display a headcount evaluation, in only five to eight seconds, in
an organization hierarchy with over 5,000 organizational units.
x Schlumberger Limited – a USD $12 billion company with 75,000 employees in over 100
countries – went from fragmented HR systems to a centralized HR and payroll process. They
created a Web-enabled Career Center for development and recruitment information with
globally accessible career profiles, the management-by-objectives process was put online,
and they could analyze global headcount. Further, in a corporate acquisition they were able
to quickly capitalize on the competencies of 20,000 new employees.
x Saudi Aramco – the world’s largest oil and gas company with 23,000 people across 50
countries – streamlined all of the company’s main functions by replacing about 75 percent of
the company’s systems infrastructure (over 170 systems) with SAP. This was done in three
stages, beginning with the HR function, then product and sales, and finally, the remaining
functions. The project was initially conceived in 1997, went live in late 1999, and was
completed in early 2003.5
These success stories illustrated how SAP HR applications were used by companies in global
firms of different size and scope. While each firm approached their HR transformation
differently, there were commonalities, including the need for a substantial change of mindset and
a need to significantly rethink existing processes. When questioned, participants involved in
HRIS efforts offered some reflections on their experiences.
Multinational Food Company. A major food company with over 100,000 employees in more
than 50 markets used SAP not only for its transactional HR processes, but took an integrated
approach to implementing an end-to-end solution that also covered finance, manufacturing, and
engineering. This was a five-year project. Halfway through, they had built a global template of
5
“Atos Origin, SAP, Sun Microsystems and Oracle Complete One World’s Biggest SAP Implementations for Saudi
Aramco,” PR Line, March 4, 2003.
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best practices and implemented their first pilot in six countries. The next part of the plan
involved rollout to more countries and enhancement of the capabilities with new processes.
Project team members reflected on some of their challenges:
x People with a global agenda, such as corporate functions or system designers, try to identify
best practices and standardize processes. They typically want solutions that can be used
across the company. However, local units usually want to maintain their specific ways of
doing things, tailored to specific market conditions. This creates an ongoing challenge to
make trade-offs between conflicting objectives.
x In the face of this opposition, project team members felt that it was important to challenge
the nay-sayers and question why something will not work in a particular market. This leads
to inevitable tensions and conflicts and requires deep functional and business insight.
x It is important for the project team not to lose momentum when determining how each
country, region, business unit, or function does things (the “as-is”). It is also important to
recognize that, at some point, this process must end and a standardized, global process must
be defined.
x To make this process work requires constant communication and the explicit sharing of
assumptions across the organization, including global, regional, and market constituents.
The overriding business value of the project must be convincingly articulated.
x While engaged in a global implementation effort, it is crucial to pay close attention to
cultural differences in communication. Getting buy-in and agreement from different
countries and cultures requires different approaches and an understanding of the responses.
The signals that constitute agreement and support can vary by country, and there is a
potential for misinterpretation of how much commitment is present.
Global Provider of Energy and Petrochemicals. This firm signed a multi-year, multi-million
dollar contract with an HR business process management services provider to assume
management, ownership, and accountability for the company’s global HR administrative and
transactional processes. Rather than designing a comprehensive HRIS, they decided to begin by
implementing a series of discrete, manageable projects, each with its own costs and benefits. An
internal cross-functional (not just HR) team worked with the outsourcer to drive the initial eHR
rollout in two of the 50+ countries where they operated. Although limited in terms of geography,
this implementation covered 60 percent of the 100,000 employees in the company. A primary
focus of the project centered on ensuring data quality and integrity and creating system
connectivity via middleware.
To build awareness, the company created global visibility for the employee and manager selfservice Web portal by starting with small, quick wins that did not involve significant back-end
development. These smaller projects were targeted at different customer bases. For example,
they developed an expatriate calculator, which was an online tool that provided policy and
benefit information to potential expatriates. It affected only 10 percent of the employee base, but
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greatly increased access to information for those affected. The tool reduced processing time
from 12 days to 12 seconds, a major benefit for those being assigned abroad.
Another example of a quick win was the online career development tool. This allowed an
employee to create a resume-type profile, and to subscribe to a service that sent a bi-weekly
electronic notification when a new job posting matched the person’s profile. This encouraged
people to consider moves across the company and increased the talent pools available for jobs.
A third example of the systems functionality was the Executive Center, a password-protected site
for use solely by the executive team that provided the career paths and succession plans for the
top managers in the company. It acted as a repository of confidential information and permitted
talent development discussions among executives. It could also be updated in real-time via the
Web.
These examples of early wins were instrumental in generating awareness and excitement about
the eHR project. These initial efforts also made it easier to implement the more sensitive HR
processes that affected employees personally, such as accessing and updating personal
information and annual salary reviews.
After the first 12 months, an internal survey revealed that 85 percent of the respondents were
satisfied or very satisfied with the site. After the company’s homepage, it was the most used site
on the company Intranet. The survey also asked, “What do you want to be able to use eHR to
do?” The top two responses were: 1) Access and update my own personal information (81
percent) and 2) Access information on performance management (63 percent).
However, in spite of these early successes, the company decided to halt implementation two
years into the rollout. A combination of unanticipated difficulties, including the acquisition of a
large company and complications with privacy laws in Germany, drove the decision to limit the
global expansion after implementation in only two countries. People involved in the project
were convinced of its benefits (e.g. simplification of processes and cost savings), but
acknowledged the complexity of operating eHR on a global scale. Specifically, when asked for
lessons learned, project leaders offered the following suggestions:
x In spite of having received initial support from HR and line managers and in spite of the
early successes, the actual implementation was still characterized by resistance.
x In retrospect, project leaders reinforced the need to simplify and standardize processes as
much as possible in the design before the rollout. Each additional complexity expanded the
difficulties with the subsequent implementation.
x In terms of internal marketing, the message to the organization should be to “under-promise
and over-deliver.” In selling the initial project, there is a risk of overselling the project
benefits to gain commitment. This can cause problems when the actual system does not
deliver the promised benefits.
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x Senior leadership in the company needs to be committed to driving the implementation, not
simply funding the project. As disagreements occur about system design, it is important that
top managers be available to keep the project on track.
x In designing the system, the advice was to stay focused on features that add value to the
business, not on those that are interesting to HR. As one project member put it, “You should
not Web-enable bad processes.”
x Be aware that it is easy to lose momentum over a long implementation process. It is
important to stick to the schedule of deliverables and not let things slip. Metrics are
important. But remember, you cannot fix everything in advance; do not let planning
substitute for action.
x End users must be involved and feel ownership of the system. This means thinking through
in advance how they will be involved, what the marketing and communication messages will
be, and how the tools will really be used.
IMPLICATIONS OF HRIS FOR NOVARTIS
In talking with others who had implemented global HRIS systems, it was clear to the HR
management team that the implementation could be a long and, at times, painful process. The
HRIS project would be a major transformation for how HR would function within Novartis. Not
only would it affect how the HR processes would work, HRIS also would put major pressures on
how HR associates would interact with others in the firm. HR needed to drive this change to
ensure that the self-service system worked for employees and contained current information.
Getting the technical aspects right was critical.
Walker’s successor, Jürgen Brokatzky-Geiger, was aware that the HRIS system was only the
technical infrastructure to enable the HR transformation. Simply removing some of the
administrative burdens from HR would not be sufficient to make them respected business
partners by their line managers. For this to happen, a more fundamental transformation in the
role of HR within the company would be required – a shift from functional expert and
transaction processor to strategic partner and change agent. Simultaneously with the technical
implementation, there needed to be an evolution of the basic role of HR within the company.
Interviews with line managers underscored the challenge of changing the basic role of HR. On
the positive side, one business unit head acknowledged that his global HR associate was already
a strategic business partner. He had meetings with her on a weekly basis and included her in
strategic discussions regarding his group. He characterized her as an asset for the following
qualities: she was multicultural and adaptable to her environment; methodical, energetic and
hardworking; able to think strategically about the entire group; and able to judge people and
think strategically about their career paths. She viewed the partnership with equal respect and
also realized that her business partner’s clear vision of HR and her role had facilitated their
dynamic from the beginning. She felt that, in general, HR associates must provide the HR basics
and be proactive in order to gain the credibility to earn a strategic seat at the table.
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On the other hand, another business head commented, “At the moment, HR is not strategic or
operationally robust. They are custodians of policies and procedures, not custodians of the talent
pipeline.”6 She had meetings with her generalist on a regular basis but did not feel that HR knew
what it meant to be a business partner. However,
