Case Studies MERCK & Co.

MERCK & Co. A PHARMACEUTICAL COMPANY FOUNDER: FRIEDRICH JACOB MERCK COMPANY STARTING DATE HEADQUARTERS: RAHWAY NEW JERSEY U.S.A EMPLOYEES WORLDWIDE

MERCK & Co. Timeline 1668 APOTHECA RY ACQUISITI ON IN GERMANY YEARS AFTER INTER NATIO NAL REPUT ATION 1887 BRANCH OFFICE OPPENED IN NYC 1953 MERGING WITH PHILADELPHIA BASED PHARMA FIRM SHOPS & DOHM 1980 DECLINE ON RETURN ASSETS DUE TO INFLATION AND NEW PRODUCTS DISAPPOINTMEN TS TODAYS MANUFACTURE & MARKET + 80 PRESCRIPTION PHARMACETICAL AND VACCINE NATION’S LARGEST PROVIDER OF PRESCRIPTION SELECTED AMERICA’S MOST ADMIRED CORPORATION « BY FORTUNE » MAGAZINE BETWEEN FINE MANAGEMENT, ATTRACT, DEVELOPP AND KEEP TALENT PEOPLE 1955 EMPLOYEE RELATION’S REVIEW COMMITEE

INTERVIEW

ABSOLUTE RATING VS RELATIVE RATING VS FORCED RANKING ABSOLUTE YOU COULD GET AN A IF YOU CORRECTLY ANSWER 100% OF THE QUESTIONS IN THE EXAM, BUT WOULD GET A B IF YOU ANSWERED ONLY 80%. THE GRADE YOU GET DEPENDS ONLY ON YOUR PERFORMANCE WITH RESPECT TO THE OBJECTIVE CRITERIA RELATIVE YOU WOULD GET AN A IF YOU ARE ONE OF THE TOP 10% OF THE STUDENTS IN CLASS, BUT YOU WOULD GET A B IF YOU ARE BETWEEN 10% AND 20%. YOUR RATING DEPENDS ON HOW YOUR OBJECTIVE PERFORMANCE COMPARES WITH THE REST OF THE STUDENTS’ GRADES IN YOUR CLASS FORCED RANK THE EMPLOYEE DEPENDING ON THEIR INDIVIDUAL PERFORMANCE ACCORDING TO A FIXED DISTRIBUTION DECIDED IN ADVANCE. EX: 20%: EXCELLENT, 10% GOOD, 70% EFFICIENT, 10% BAD. STATISTIC GAUSS

A NEW PERFORMANCE MANAGEMENT PRINCIPLE STEP I. RELATIVE RANKING 1) EVALUATE EMPLOYEES - EACH COMPANY DEFINES ITS OWN CRITERIAS (GENERALLY DEVIDED BETWEEN PERFORMANCE AND COMPETENCES) 2) DISTRIBUTIONS - DETERMINES THE RESULTS AND THE AVERAGE STEP II. FORCE RANKING 1)DEFINE QUOTAS AND NEW AVERAGE - EXAMPLE: THE AVERAGE OF 7 BECOMES 5 2) IDENTIFY THE TOP EMPLOYEES -” IDENTIFY THE BEST AMONG THE BEST AND THE BAD AMONG THE BEST” Forced Ranking Distribution

ADVANTAGES : - THE BEST WAY TO REALLY SELECT THE BEST EMPLOYEES - A REAL INCENTIVES FOR EMPLOYEES TO GIVE - MANAGERS CAN SHARE AND AGREE ON CRITERIAS - DIFFERENCIATION AND RELEVANT KEYS TO IMPROVE - HELPS LINING CULTURAL DIFFERENCES (AMERICAN VS GERMAN) CONS: - EMPHASIZE INDIVIDUAL PERFORMANCE AT THE EXPENSE OF TEAM PERFORMANCE. - PROMOTE COMPETITION (AT THE COST OF COOPERATION) - MAYBE DETRIMENTAL TO MORALE (VERY OFTEN THE PART IN THE BOTTOM GET FIRED) Forced Ranking Distribution: PROS AND CONS