Compensation and benefit strategy

Compensation and Benefits
Course number
Instructor’s Name
Name of the University
In order to ensure that compensation and benefit are fair, it is important to have a
clear definition of job descriptions and profiles in an organization. This plays a role in
evaluating the value of job in an organization. During evaluation the human resources
department have hard task in determining the impacts of compensation and benefit
strategies. An effective compensation and benefit strategies put into a consideration of
job evaluation, job market situation, business strategy as well as preferences of the
organization. This policy enables an organization to achieve a better performance.
Compensation and benefit strategies should of transparency to the employees. The
aspect of transparency gives employees opportunity to understand the basic principles of
compensation and benefit hence much of the challenges that could have risen during
implementation are overcame. However if the strategies are not fully implemented and
employees are not fully in the range of benefit and compensation strategies, it can be
dangerous to make such strategies transparent.
This paper is focusing on the Novartis principles applied in it compensation and
benefits strategy, the challenges of the strategy as well as any contingency plans that
should be considered in trying to overcome these challenges. The compensation and
benefit program concept should be based on various objectives in order for it to be of
sound criteria, application and effective implementation. They should serve all
stakeholders, simple, identify compensation need, classify the employees properly, reflect
company culture and values to ensure effective implementation and should be flexible to
accommodate changes.
Compensation and benefit strategy of Novartis
The compensation strategy of Novartis is based on the principle of meritocracy. It
is designed to align the objectives of the associates with he interests of the shareholders,
creating incentives to the associates to create sustainable value for the organization and
the stakeholders, support distinct and performance oriented customs that allows Novartis
to reward people who perform well and the organization rise to be competitive with
world class companies and industry contemporaries (Novartis Report, 2010).
Some of the concerns and problems in Novartis compensation and benefit
packages include composition of senior staff members in compensation committee of the
company. This has attracted negative attention as the board of directors who set their own
compensation in this company. Therefore, in order to overcome these problems, human
resources associates should act as advisors of the committee and should not serve in the
committee. However, compensation committee should not comprise members with
personal interests in compensation strategy.
Another concern regarding compensation and benefit is the issue of some senior
associates being paid excessively for the services they offer to the company. This
problem of too much compensation and benefit of the senior associates is indicating that
the gains on investment from these compensation and benefit packages is very poor
compared to other strategies of corporate resources (Lucian and Jesse, 2006).
These issues are of great challenge to the compensation strategies. For example, a
junior member (who is a friend) in Novartis Group was complaining and pointing out that
most of the members in the committee of compensation have their personal interest and
this normally demoralize him in his effective operation to this company. He feels
demeaned as he perceive that some members in the committee of compensation are at
advantaged position in the group as they know all the criteria that are to be applied in the
selection. This inhibits the process of creativity and innovation for the Group in long term
Novartis compensation principles include competitive compensation, pay for
performance, balance rewards to create sustainable value and equity ownership.
Competitive compensation plays a role in attracting and retaining talented and diverse
associates. The levels of compensation reflect total compensation for comparable
positions at relevant benchmark companies.
For example, an associate who obtains his performance objectives is awarded
compensation comparable to the median level of compensation given by relevant
benchmarking companies. Novartis take part in compensation benchmarking surveys
which analyzes various factors such as market trend and practice (Novartis Report, 2010).
Pay for performance, plays a role in promoting high performance culture.
Novartis employs a uniform People Performance Management process worldwide that is
based on quantitative and qualitative criteria. Performance and reports for managers
jointly determines performance measures and business objectives. Any incentive
compensation paid to key executives is subject to claw-back by Novartis.
Balance rewards to create sustainable value are important since the expectation of
Shareholders is get sustainable returns from their investment while on the other hand
ensure that risks are minimized. Novartis incentives have underlie a long-term strategic
planning that is important in addressing the challenges of innovation and the long
development and commercialization cycles that characterizes the industry. Having
appropriate objective settings coupled with incentive plan designs allow the leaders and
associates to focus on shaping the future instead of simply reacting to change. This
encourages performance, loyalty and entrepreneurship as well as creating sustainable
value which are in the interest of all stakeholders of Novartis.
On the aspect of Equity Ownership, normally investors want the leaders of the
companies in which they invest to act as owners. That configuration works best when
Board members and key executives hold meaningful equity investments in their
company. Moreover the Novartis imposes share ownership guidelines. The key
executives in Novartis are required to own at least a certain multiple of their annual base
compensation in Novartis shares. For example chief Executive officer is required to own
Novartis equity worth five times, other Executive Committee members three times and
other key executive between one to two depending on their respective base compensation
within three years of hire. In the event of a substantial drop in the share price, the board
of Directors may at its discretion extend that time period.
Compensation elements in Novartis includes, base compensation which is a fixed
annual salary, variable compensations which entails rewards for individual and business
performance and benefits which include pension, healthcare benefits and perquisites.
Base compensation in Novartis focuses on various keys areas these include areas of
responsibilities, job characteristics, seniority, experience and sets of skill. It is paid in
cash on monthly basis where by it is set according to local practice, designed to provide
the associates with fixed compensation to ensure an equitable standard of living
comparative to that offered by colleague companies. Base compensation in Novartis is
reviewed annually to ensure that competitive pay is maintained and undesired
fluctuations are minimized. They are also used as variable compensation determinant.
Variable compensation in Novartis is determined by the nature of the
business, role, level, and practice in the local market, business performance and associate
performance on individual aspect. Variable compensation is as result of the combination
of short-run and long-run incentives.
Novartis places special emphasis on long-run incentives to put in line the
interests of employee with those of shareholders. The emphasis on long-run incentives
focuses on innovation and the long development of the product as well as
commercialization cycles that characterize Novartis Company. The variable
compensation in Novartis era normally granted in cash, shares or share units.
There are three variable compensation plans in Novartis Group. These plans
include Short-run Incentive Plans, Equity Plan and Long-run Performance plan. Short-run
Incentive Plans are carried out each year in the company based on the target incentive
percentage of individual associate, and the performance rating of an individual at the end
of the year. Under Equity Plan a certain percentage of employees in the Norvartis group
worldwide. The grants are in form of shares or share options whereby in some
jurisdictions Restricted Share Units are granted instead of share. Long-run Performance
Plan rewards key executives who have a significant impact on the long-term success of
the group.
Benefits programs in Novartis are integral portion of the total compensation
policy and strategy that are design to meet challenges of increased global competition for
talent. Benefits programs support the overall business objectives and strategy of Novartis
Group. Benefits are put in line with local legislation and practices in each country and are
designed to provide a frame work of security for employees. These benefits include
pension and healthcare plans as well as perquisites. These help the associates and their
dependents in respect of age, health, disability and death by establishing the level of
Novartis provide other benefits in a specific country according to local market
practice and regulations that include long serving awards and associates who have been
transferred on international assignment. However, in implementation of these
compensation is face by various challenges and impediments. Compensation of the
Executive Committee members is linked to business performance against performance
Nevertheless, Novartis does not disclose specific objectives; this could negatively
affect some departments in the organization since it could be difficult to establish the
performance in both qualitative and quantitative aspect in some field hence the some
associate get reluctant due to perception that their situation is not put into consideration.
Some junior associates who may not be recognize by the system of selection and
have potential in innovation and long- term progress of the group feel discriminated as
their senior get the rewards of the work which these junior perceive they are the one who
have contributed. This could have long-run negative effects on the company and they end
up losing some talented associates.
Claw-back of compensation that senior executive were awarded could trigger
negative effect by resulting to some executive failing to corporate with the well laid
strategy and victimize the juniors. Requirement of the executive and some associates to
invest on share in the company so that they can embrace it as their own and also so that
they can enjoy some benefit on one side can pose danger to other shareholder while some
associated may work as insider trade and gain wealth at the cost of other shareholder
(Joseph, 2009).
Novartis Group setting up compensation and benefit packages, process involves
participating in various benching surveys that provide comprehensive information on
levels of salary, short term incentives and long term incentives. The standardizing group
of firms mostly included it competitors such as Syngen, Abbott, AstraZeneca, and Roche.
It also includes other companies outside pharmaceutical companies with size, stature,
scope and magnitude of complexity like that of Novartis.
Comparing the Novartis compensation and benefit packages with some of it
competitors such Syngen Group; like Novartis group strategy, Syngen Group
compensation strategy is based on three elements; fixed compensation, variable
compensation and benefit. Fixed compensation is inform of basic salary, variable
compensation is inform of short- term incentives and long term incentives like in the
Novartis Group. Short term incentives are based on the achievement of financial results
and individual performance in Syngen Group. This is the similar case in Novartis
The fixed compensation in Syngen is set by reference to the size and scope of the
job, skills experience and performance of the individual, level or grade to which the job is
assigned and external market value of the job (Syngen report, 2010). This is the same
ground that Norvartis group use to establish fixed compensation of the associates.
However, in the case of Syngen compensation strategy, it has a compensation strategy of
deferred share plan that is designed to reward leadership, innovation and performance of
the Executive committee and selected senior manager. The situation is different in the
case of Novartis group as there is no such element in it.
Some of the recommendations that would ensure that these compensation and
benefit is successful include compensation and befit strategy should ensure that the
program cover associates in criteria of their seniority in the company which should be
integrated with the functional unit of Novartis Group. The compensation and benefit
strategy of Novartis Group should ensure that the associates of the company invest in the
company at their own rather than a must, to ensure free entry and exit of the stakeholder.
Joseph, J., M., (2009) Strategic Compensation: A Human Resources Management
Approach 5
Lucian, B., and Jesse, F., (2006), Pay without performance: The unfulfilled promise of
executive compensation.
Matthew, G., (2009) Performance incentives. Vanderbilt University, Springer Publisher,
Michael, G., (2004) Integrating newly merged organizations.ISBN: 1-56720-316-7
Greenwood Publishing Group. USA
Novartis Group Report (2010), compensation and benefit strategies. Retrieved from
Syngen Corporate governance and compensation report, (2010). Retrieved from

Place new order. It's free, fast and safe

550 words

Our customers say

Customer Avatar
Jeff Curtis
USA, Student

"I'm fully satisfied with the essay I've just received. When I read it, I felt like it was exactly what I wanted to say, but couldn’t find the necessary words. Thank you!"

Customer Avatar
Ian McGregor
UK, Student

"I don’t know what I would do without your assistance! With your help, I met my deadline just in time and the work was very professional. I will be back in several days with another assignment!"

Customer Avatar
Shannon Williams
Canada, Student

"It was the perfect experience! I enjoyed working with my writer, he delivered my work on time and followed all the guidelines about the referencing and contents."

  • 5-paragraph Essay
  • Admission Essay
  • Annotated Bibliography
  • Argumentative Essay
  • Article Review
  • Assignment
  • Biography
  • Book/Movie Review
  • Business Plan
  • Case Study
  • Cause and Effect Essay
  • Classification Essay
  • Comparison Essay
  • Coursework
  • Creative Writing
  • Critical Thinking/Review
  • Deductive Essay
  • Definition Essay
  • Essay (Any Type)
  • Exploratory Essay
  • Expository Essay
  • Informal Essay
  • Literature Essay
  • Multiple Choice Question
  • Narrative Essay
  • Personal Essay
  • Persuasive Essay
  • Powerpoint Presentation
  • Reflective Writing
  • Research Essay
  • Response Essay
  • Scholarship Essay
  • Term Paper
We use cookies to provide you with the best possible experience. By using this website you are accepting the use of cookies mentioned in our Privacy Policy.