Human Resources Management of Nestle Mal PDF

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INTERNATIONAL BUSINESS SCHOOL

Leading Talent in Organizations (MBSA 1623)

INDIVIDUAL PROJECT: HUMAN RESOURCES MANAGEMENT OF NESTLE MALAYSIA

NUR SYAZANA

Lecturer Dr. Ong Choon Hee

Company Introduction

Nestle Malaysia Bhd is a major food and beverage in Malaysia which has vast company portfolio selling diverse product segmentations such as ready-to-drink beverages, milk, infant foods, ice creams and many others. Nestle also sell other nutritious, health and wellness products such as baby powdered milk and Nestle Professional products such as special drinks for diabetic patient. The company headquarter operates in Petaling Jaya, Kuala Lumpur and was established in 1912. Nestle’s star products include Milo drinks, Nescafe and Maggi instant noodle which have become favourite household food and beverages. The company is a public listed company on Bursa Malaysia (previously known as Kuala Lumpur Stock Exchange, KLSE) since December 1989. The vision of the company is to be a leading, competitive, nutrition, health and wellness company delivering improved shareholder value by being a preferred corporate citizen, preferred employer, preferred supplier selling preferred products. Its mission as per quoted on Nestle’s website is “Nestlé is the world's leading nutrition, health and wellness company. Our mission of "Good Food, Good Life" is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night”. Currently, Nestle Malaysia has 8 factories include one in East Malaysia. The company employs more than 5500 people across the country and was awarded as one of the best companies to work in, voted by the Malaysia people. To date, Nestle Malaysia has been awarded Malaysia’s 100 Leading Graduate Employers Award 2016, Randstad Award 2016, Asia Recruitment Awards 2016 and many more. With excellent management, good human resources practice and positive financial position, Nestle is on par with other respectable companies in Malaysia such as Shell, Petronas, SP Setia, Intel Malaysia and many more.

Key strategic priorities and business drivers. In general, there are four key strategic priorities of the company which are cost-efficient, innovation, marketing & distribution and product diversification. 

Cost-efficient

Nestle as a manufacturing company is always cautious on its product costing. To increase and sustain a good operating profit margin, Nestle has to ensure that its operating expenses are under control. Being cost-efficient has always been one of its top priorities as to maintain a fairly low operational manufacturing cost. Key raw material showed a lower trend since early

2017 which able to decrease the production cost for Nestle. During its analysis briefing with CIMB in August 2017, Nestle said to maintain its watchful stand and heighten its effort in increasing efficiencies in order to safeguard its financial and profitability position. Nestle increased profit margin from year 2014 to 2016 were mainly because of meticulous cost management along with lower price of raw materials and increased turnover. As commented by the CEO of Nestle Malaysia, a proactive and sustainable cost management was taken along the value chain, the company able to strengthen its position in the market. 

Innovation

For Nestle, innovation is a key driver of its strategy. In the food and beverage (F&B) industry, consumer preferences and behaviour are constantly evolving from time to time. Nestle attentively observes new emerging trends of consumer in the F&B industry. As people are eating outside more often, the demand for on-the-go consumption and good-for-me products are increasing. Customer also wish to indulge better food and looking for upgrade in food products. Thus, Nestle saw the importance of innovating its products and upgrade them to provide more enjoyable indulgence for customer. The company innovated its Maggi instant noodle to offer more unique offerings like Maggi Royale Johor Seafood Laksa and Maggi Royale Penang Seafood Curry. They also invented bottled Milo called Milo Activ-Go Nutri which is categorised as on-the-go consumption. To ensure company’s sustainability, Nestle must undergo changes and innovate to satisfy consumer’s need. 

Marketing & distribution

Marketing effort played an important role in increased sales volume that contributed to revenue growth from 2014 to 2016. In the first half of year 2017 (1H17), a positive growth in domestic sales of Nestle F&B was recorded. The success was driven by effective marketing campaign of ‘Lagi Sihat, Lagi Happy’ apart from great response on new product launches. With 8 factories operated in the nation, Nestle has a huge distribution and marketing network that helped in efficient products distribution across many channels. With high usage of ecommerce among consumers, Nestle has also tapped into e-commerce by selling on popular online platform such as Lazada which helped in rose market share of 15.7% in the F&B market since end of 2016. Business drivers in a company represent the factors that help the company to grow in the area of most important to its success. In general, the factors include market conditions, key players, assets and critical information. For Nestle Malaysia, its business drivers are

employees as one of their biggest assets (intangible), machineries & factories, financial stability and market demand & growth. o Employee For Nestle, the employees or also called as the Nestle Family, are the backbone of the company. Employees act as a centre in the company. As Nestle employs more than 5,500 people around the nation, they are the critical success factor for the company as their commitment and engagement stimulate the company’s achievements. Employees play a major role in resulting current and future success of Nestle business. More than 70% of total employees work in the manufacturing process which is the core business process in the company. Nestle has been providing development opportunities and good environment to attract and retain employees because losing them meaning to lose manufacturing efficiency and shrinking in talent pool. o Machineries & factories Machineries and factories are one of the biggest drivers in terms of tangible asset. Nestle built its first factory in Petaling Jaya in 1962. Since then, Nestle has been expanding its manufacturing operations by building more factories in Shah Alam, Negeri Sembilan, Perak and Sarawak to meet the consumer demand for ready-to-drink products and many others. The company’s machineries increased over the years to speed up manufacturing process and spur manufacturing capabilities. These two related assets are undoubtedly one of Nestle core business drivers to ensure its sustainability and strengthen its establishment in Malaysia in many years to come. o Financial stability Running a manufacturing company in the F&B sector, financial stability is a factor that should be taken in account for business driver. While good financial is vital for every business, for Nestle, having a stable financial position open doors for improvement. As a nutrition and wellness company, Nestle is constantly doing research and development (R&D) activities to enhance its product to become healthier and nutritious. Apart from that, Nestle’s financial resources are used for building new factories, employees’ training and marketing campaign which are all critical in expanding sales volume that later contributed greatly to growth of revenue. Excellent financial position brings improvements to possibility for the

company in terms of better marketing, distribution expansion, employees’ development, new product offering which drive the business to success and sustainable achievements. o Market growth and demand The food and beverage industry in Malaysia keeps growing from year to year. In 2015, a statistic from the Department of Statistics Malaysia showed there were food and beverage representing an annual growth rate of 5.1% since 2010. The gross output generated by this industry had also grown since 2010 by 12.2% increase each year to a total of RM66.4bil in 2015 compared to RM29.2bil in 2010. Apart from that, more people were also employed as a result from the industry growth which makes the employment rose annually by 6.7% to 891,616 the same year. As the users in the industry is expected to grow gradually to 2.3 million in 2022, the market demand is also expected to surge, supporting an expansion in total revenue. This kind of growth and demand is crucial to sustain Nestle advancement in the market and remain as a key player and holds the biggest market share. Evaluating HRM Effectiveness a) Staffing Nestle recruitment process is done in many available channels such as through its website and offline application. One of their strategies in staffing is recruiting and developing local talent with local knowledge. In Malaysia, they employ local people to work in all manufacturing sites. Another staffing strategies implemented by Nestle is internship programme, management trainee for fresh graduate, recruiting professionals and gender balanced. Nestle provides promising career path to fresh graduate through a 2-year management trainee programme to prep them to become future leader in the organisation. Nestle takes talent retention very seriously as they appreciate the local talent by giving many benefits and provide great working environment for their employees. A gender balanced workplace is also a priority for Nestle. In 2016, they have introduced a KPIs (Key Performance Index) related to gender balance by focusing on succession planning practices and developing long-term female talent in the succession pipeline. They are ensuring to have at least one woman in the key positions in the company. They also support the government’s effort in increasing woman participation in decision-making roles and involving more women in the corporate sector workforce. By 2018, they aim to be a genderbalanced company. Nestle also provides various employee training activities and programme to improve employee engagement and heighten employee retention. Trainings include

Unconscious Bias Training, mentoring programme, Coaching Skill Pills Workshop, Nestlé Leadership Framework, Leadership & Personal Effectiveness Programme and many more. Results on staffing: The Unconscious Bias Training is designed to increase awareness on diversity importance, promote communication between genders and how these elements can affect the hiring, promoting and succession management decision-making activities. A total of 329 employees joined the training from 2015 to 2016 and it helped them recognise grey areas and ways to eliminate biases. For Leadership & Personal Effectiveness Programme (LPEP), Nestle objective is to create stronger bond between teams and leaders as to increase engagement of employees. A total of 296 middle and senior managers attended the programme and an after-programme survey, 100% of line managers have observed an increase in participants’ capability. Moreover, the relationship between staff and leader has greatly improved, as well as employees’ engagement. For the management trainee programme, 21 trainees graduated and offered a role in year 2016. In the same year, 28 new trainees joined the programme which offers a full-time position as future leader in Nestle upon completion of 2-year programme.

Employee turnover rate 2014-2015

2.22%

Employee turnover rate 2015-2016

1.33%

Based on the workforce data in Nestle corporate report as stated above, the employee turnover rate for year 2014 to 2016 is less than 3% which considered healthy. The rate even decreased by 0.89% to a low rate of 1.33% which shows the effectiveness of retention programmes.

Based on the employee data above, 35% of its employees are women, and the percentage of female managers grew from 38.2% in 2015 to 39.3% from 2015 to 2016. In year 2016, 37% of the senior leadership team were occupied by women. This result shows that Nestle is achieving their KPIs in creating a gender-balanced company and showing a promising path in reaching their aim of a gender-balanced company by 2018. b) Compensation Nestle care for their employees and treat them fairly and with respect. Nestle believes good labour condition and relations ensures sustainable growth for the company. The company provides a reference for relationships with employee representatives and also with the trade unions through Nestle Employee Relations Policy. In terms of payment for manufacturing employees, wages and compensation, Nestle established a Collective Bargaining and Freedom of Association Nestle Culture in conjunction to support the cause and also ensuring excellent and productive working environment. Irrespective of gender, the schedule of salaries and wages of non-management employees are specified in the Collective Agreements with the respective unions. Apart of that, Nestle also has its own compensation board of directors to deal with compensation matter of employees in the company. Many other initiatives were also introduced as a part of compensation when employees contribute to the company such as Nestlé Recognition Programme, Innovation Awards 2016, insurance for employees and their family members and retirement scheme. Results on compensation:

Based on the table above, 72% of Nestle employees are covered by collective bargaining agreements. In 15 August 2016, the Collective Agreement 2016-2018 official signing ceremony was held between National Union of Commercial Workers (NUCW) and Nestle Manufacturing Malaysia Sdn. Bhd. These agreements are taken to prevent labour disputes apart from other proactive measures such as open dialogue, local initiatives and training. The following table shows the relative ratio of wages for manufacturing employees according to collective agreements between Nestle and employees’ union: Collective Agreement Nestlé Manufacturing (Malaysia) Sdn. Bhd. and Food Industry Employee Union Nestlé Products Sdn. Bhd. and National Union of Commercial Workers

Wage Ratio 1:1.56 1:1.60

Wage Range From RM1,000 [for Category 1] to RM1,400 [for Category 11] From RM1,000 to RM1,600

Nestle also provides medical insurance to employees and their immediate families under assistance programme of prevention or risk control and also under treatment programme. Since working in food and beverages manufacturing industry can be risky as employees may be exposed to high-risk chemicals, Nestle has taken these measures to reduce the risk towards their workers. However, there still no serious illness cases or diseases due to chemical exposure has been reported (Souce from Chemical Health Risk Assessments).

Nestle takes its retirement scheme programme seriously as a part of compensation effort for their employees. Nestle has spent RM86,140,000 for retirement scheme for its employees. The spending rose by 6.19% from RM81,117,000 in 2015. The data below shows the retirement scheme spending amount by the company:

This shows that Nestle is not just a profit-driven company, but also prioritise employees benefit and compensation even after they leave the company. This scheme will attract people to work for the company and also as a good approach to retain the workers.

c) Benefits Total Rewards Policy Car Schemes

House Purchase Assistance Scheme (HPAS)

Emergency Loan

Wellness Benefits

Nestlé Scholarship Scheme

Uniform

Social & Recreational Facilities

Flexi Loan Scheme

Maternity Leave

Service & Retirement Award

Nestle offered many benefits through its total reward policy. The policy is generated to attracts new hires and unsure constant engagement of the current employees. Besides these listed rewards, Nestle also gives attractive benefits that are based on employee’s work performance such as bonuses, incentives and awards. Besides being attractive to new hires and sustain engagement of current employees, the company established these benefits to heighten people’s trust and instil a good value for the company for other to perceived. Sine it is a giant company, maintaining a good company image is very important in creating trust in consumer’s mind for the business to flourish in many years to come. For example, Nestle has come up with Innovation Awards to encourage employees participation in giving innovative solutions as the employees’ inking of mind as an important aspect to Nestle. Moreover, in order to encourage engagement of employees, the company has made a Nestlé Recognition

Programme to appreciate employees’ contribution in fostering an engaging working environment. Results on benefits: As benefits is given to encourage employee’s engagement, through the Innovation Awards, as many as over 400 innovative ideas submitted by 311 employees were received by Nestle in 2016. From these awards, the winners will be grabbing two business flight tickets to Switzerland and a prize money of USD10,000. A team award of RM10,000 was given to the Nestlé business function which submitted the most ideas. The competition was well received and employees were enthusiastic about submitting their ideas. With more than 1/3 of their employees participating, Kuching factory brought home the award. The Popular Choice Award for the innovation challenge had received 1,000 votes in total which means at least one in every six employees took the part in voting for the winner. This shows a good participation of employee’s engagement. Apart from that, the increase of employees’ participation and engagement can be seen through a healthy fun campaign of 100-day Weight Wellness Challenge 2.0. With a purpose of inspiring workers to lose weight and practicing a healthier lifestyle, the participation rate had escalated from 20% in 2015 to 45% in 2016 which shows the workers are becoming more involved in company’s activities. Another evidence was there are 99% of overall participation rate for the “Nestle & I” survey which considers opinion and feedback from employees. For Nestle, it was an achievement that they obtained a very high participation rate which shows their employees are taking seriously on making Nestle a better place to work and indicated their commitment to the company. d) Performance Appraisal Nestle is committed in instil and promote a lifelong learning to their employees. The company has its own guideline on employees’ development progress and by using the guideline, they will assess and measure the employee’s performance and achievement. The guideline is as the diagram below:

The highest percentage is the experience-based development which includes projects, given task and assignment. This would be the highest KPI index percentage for employee’s job performance appraisal or assessment. The employee must be able to carry out their job well and make personal development through working experience in Nestle. The second highest percentage to be taken in account is the relationship-based development that contributes to 20% of overall performance index. It means that apart from being able to execute job or task excellently, Nestle is also emphasising in networking and mentoring activities which also one of the key factor for group or team performance success rate. Employee should also contribute and actively participating in creating a harmonious working environment for other employees when they are working in a team, not only focusing on personal development but also make an impact to another employee’s performance as well. The smallest portion in the development guide is the education-based development where employees are assessed from training and conferences where in a year, employees will be given training to enhance their working skill and increase working competencies. Results on performance appraisal: All employees’ performance is very important to Nestle to improve its business e...