Quaid-i-Azam School of Management Science

(QASMS)

A Project on

Human Resource Management System (HRMS)

Of

Sheikhupura Factory

Pakistan

Quaid-i-Azam University Islamabad

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 Acknowledgment
All praises for almighty Allah Almighty, The Creator. Whose uniqueness oneness is
unchallengeable countless thanks to He, the Lords of Lords who blessed us with the
courage and power to complete this report and all respects and regards to Holy
Prophet Hazrat Muhammad (PBUH) for giving us the faith paving us on the right path
with the essence of faith in ALLAH.

We feel great pleasure in expressing our profound and cordial gratitude to our
respected teacher and taught supervisors Professor Basharat Ahmad for his
admirable cooperation guidance for us and sympathetic attitude which enable us in the
formulation of and compilation of report.

Group members
 Abid Jameel
 Aman Nisar
 Rao Arslan Iqbal
 Umer Riaz

Project introduction
In this project, our group has studied HR department of Nestle, Sheikhupura Factory.
We have gone through all activities and functions performed in department. During
study, we have focused on those components which were defined in project description.
We have avoided irrelevant material and discussion.

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Table of contents

1. Name of the organization

I. History
II. Company vision, mission and objectives
III. Total strength of employees
IV. Head office location, branch offices, factories
V. Principal area of business
VI. Competition faced
VII. Most recent financial performance

2. Description of HR department
I. Number of managers and staff
II. Functions performed
III. Effectiveness within the organization

3. HR policies and practices and their effectiveness

4. Measures to improve the competencies and the skills of employees
5. Performance appraisal system
6. Career planning and development
7. Reward system
I. Reward principles
II. Payment method of Salary and Wages to their employees
III. Benefits
8. Employee relations
9. Analysis of organization’s policies and practices
I. Strengths to support organization objectives
II. Weaknesses

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 Name of the organization
Nestlé Pakistan is a subsidiary of Nestlé S.A. – a company of Swiss origin headquarters
in Vevey, Switzerland. It’s a food Processing company, registered on Karachi and
Lahore Stock Exchanges. For five years in a row, the company has won a place among
top 25 companies of the Karachi Stock Exchange.
Nestle has a unique ability to provide a complete range of food products, services and
well-known brands to meet the needs of consumer around the world. It is not a faceless
corporation catering to faceless consumers, but human company providing a response
to individual human needs. It respects the cultures of the countries it operates in and
organizes the need for quality of life of their people.
In line with Nestlé’s global philosophy, Nestlé Pakistan is proud of it’s commitment to
excellence in product safety, quality, to providing value and services to its consumers.
On the social front it is very responsible when it comes environmentally sound business
practices and corporate social responsibility.
Nestle factory that we consulted, is located in district Sheikhupura of Punjab province,
North-West of Lahore towards Sheikhupura at 29th Kilometer Lahore-Sheikhupura road.
Geographically the area around the factory is agricultural land.

History
Nestlé Milkpak Ltd. (NML) was established in 1988, as a result of the joint venture
between Nestlé S.A. and Milkpak Ltd. In 1992, Nestlé S.A. took over the management
of Nestlé millkpack. Besides the latter investment, it has helped Nestlé Milkpak Ltd.
acquire state of the art equipment, transferred the latest food technology, and the latest
Research & Development findings from its research center in Vevey. It has also
invested considerable resources in people, and developed a well-trained indigenous
work force.

Company vision and mission statement

Nestlé has a vision of
“Good Food, Good Life.”
That explains that they focusing to provide best, pure and good quality products to
people.
Nestlé has a mission statement of
“Deliver shareholder value through portfolio long-term growth, while continuing to play a
significant and responsible role in the social, economic and environment sector of the
country.”

Total strength of employees

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Nestlé factory Sheikhupura has total employees about 2400. These employees are
divided into 3 categories.

Management group 220

Non managerial employees (permanent 1144, contractual 134) total 1278

Labor (through 3rd party) 702

What is “Third party”?

There are two labor agencies, which providing labor force to Nestlé factory. These are

 Human resource supplier (HRS)

 Archer
Head office location, branch offices, factories
Head office
Registered & Corporate Office is in Lahore – Pakistan. Its address is given,
308 – Upper Mall, 54000
P.O. BOX: 874
TEL: (92 - 42) 35757082 – 95
FAX: (92 - 42) 35789303-4
Branch offices
 Quetta
 Karachi
 Lahore
 Multan
 Islamabad
 Faisalabad
 Gujranwala
 Peshawar

Factories
• Sheikupura
• Kabirwala
• Islamabad

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 • Karachi
Principal area of business

Main area of business for Nestlé Pakistan is “Food and Beverages” in which they deal in
followings

• Milk Dairy and Chilled Dairy

• Powder products
• Beverages
• Bottled Water
• Baby Food
• Food
• Breakfast Cereal
• Chocolate & Confectionary
They were producing 95 different products and they have recently installed two new
plants.
Competition faced

As a company vs. company, it is difficult to find out a competitor of Nestlé, because they
have too many diversified products or segments. Nestlé is facing competition in different
products with different companies.

Olper is a product by Angro foods, which is giving a shoulder to shoulder completion to

Nestlé milk pack. There is tight consumer percentage in market share between them.

Some other names are follows

Cadbury, Haleeb ltd, Angro food ltd, Shezan ltd, Gourmet, Mitchell’s, Candy land,
Aquafina, Kinley, Sufi etc

Most recent financial performance

The sales revenue recorded an increase of +28% and stood at PKR 48.9 billion,
including exports to Afghanistan which increased by +30% compared to same period
last year.

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 Description of HR department

The Department focus is on supporting business objectives by providing expertise and

specific services in targeted selection/recruitment, HR planning; training & development;
compensation and benefits planning & application, employee relations and personnel
services. Administration services which includes all Company travel, coordinating
Company visitors, expatriate services, security management, fleet management and
office services is also part of the HR Division.
Branches
The Human Resource Department is subdivided into three branches:
 Shared Services
 Centre of Expertise
 Business Partners
Shared Services
Shared Services are responsible for data and record collections of all the employees
of Nestlé Pakistan. They handle the payrolls, division of funds, medical allowances,
travel allowances, and all other administration of the employee funds.
Centre of Expertise
The Centre of Expertise is the department responsible for recruitments, remunerations
and organization development through Nestlé’s training programs, both local and
international.
Business Partners
The Business Partners form the link between different human resource activities of the
organization, and the functional departments they are working with. The Human
Resource Manager–Commercial is a Business Partner for Sales and reports to the
Head of Sales Department. He is supposed to form a link between the Human
Resource Department and the Sales Department, making sure all decisions made by
the Sales Department are in line with the Company’s goals and policies.

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Number of managers and staff

HR manager is the head of department in factory. It has one sub-ordinate for each
function preformed in hr department. These are called Hr officers. It means four hr
coordinators are there along with one additional in time office which marks attendance
and other related activities.

Functions performed

Following are important Human Resource Functions performed collaboration with the
head department.

Shared Services (SS)

As explained in the organization structure, this department is responsible for
maintaining the data and records of the employees to decide about their pays,
allowances etc. The department is also supposed to carry out the performance
appraisals (PA) with the help of the line managers. The SS sets guidelines
and provides the line managers with tools, systems and processes to
evaluate their subordinates. Based on these evaluations, pays and
remunerations are decided. (Remunerations are done by the Centre of Expertise).
The pay and compensation strategy is tied to the achievement of the
business objectives and helps them build a growth-oriented culture. Apart from
payrolls, SS is in-charge of administration of employee funds. It is supposed to decide
that which employee gets which fringe benefit, and to what extent, for example,
medical allowances, travel allowances etc. The provident funds for
employees are also calculated by SS. The SS is a vital department for
maintaining employee motivation and loyalty to Nestlé. It needs to be ensured
that all data collection and PAs are done correctly, and in line with the
procedures and guidelines set by the organization. It also needs to give enough
allowances and leverages to the employees to allow them to balance their
personal and professional life. Nestlé believes that employee’s private and
professional life should have a good balance. In the same spirit, Nestlé encourages
flexible working conditions whenever possible and encourages its employees to have
interests and motivations outside work. This not only maintains satisfaction with
the job, it also increases loyalty, productivity and provides motivation for better
performance in the future.
Centre of Expertise
The Centre of Expertise is the department in Human Resource functions which is
responsible for recruitments, organization development (training programs) and
remuneration.
 Hiring & Recruitment
Hiring and requirement is the most important task performed by Centre of Expertise. It is
the process on which the entire company’s future and performance relies upon. The
Business Partners are supposed to communicate the staff requirements of different
departments, and set the job description and requirements. Contacts with
universities and recruitment events are maintained to have good visibility of the

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Company and recruitment sources. The recruitment office looks for three key
characteristics: knowledge, personality and motivation. For managerial positions,
specific leadership qualities and business acumen is required. Even when
promoting employees from within the organization, it is their role to keep an eye on
valuable candidates. Those who meet the essential requirements are then evaluated
through a series of screening tests, interviews and group discussion sessions to
gauge their suitability for the job. It is extremely important to hire the right person, not
just for Company’s objectives, but to help integrate newcomers in the organization so
that their skills and behavior can merge smoothly with the company culture. At
Nestlé the recruitment is done keeping the objective of diversification in mind. The
organization has a global mindset which involves diversity to encourage and
foster creativity and new ideas, which forms the unique selling proposition of a
business.
Training Programs
Training is seen as an ongoing process. It doesn’t only involve training sessions
and lectures, but day-to-day interactions with the superiors and fellow
employees, absorbing their knowledge and ideas: guidance and coaching by
managers is a given. Knowledge also comes through the tasks assigned: simple
learning-by-doing and on-the-job training. Apart from that, Nestlé is committed to
enhancing employee skills and competencies through formal training programs. These
are selected according to individual requirements and the job they are working for. The
candidates are selected based on their performance, potential and personal
development goals and recommendations come from the Head of Human
Resource Department and the Business Partners of respective departments. The
Centre of Expertise is responsible for designing and providing the requisite training once
the candidate and his needs are identified.
The programs are not just limited to functional specific training, for example
sales training, but also for augmenting interpersonal skills and image building, in
short, the ‘softer skills’. The training could be local, regional or international, based on
need and performance. At the International Training Centre in Switzerland, the trainee
has the opportunity to meet managers and leaders from all over the globe, getting
training sessions from even the CEO, Peter Brabeck-Letmathe.
Remuneration
Nestlé’s remuneration is benchmarked against other organizations and surveyed
on a regular basis to ensure that it remains competitive and fair. The policy needs
to be framed keeping local market, individual performance, skills and potential for
development in mind. This is what they call the ‘Total Competitive Remuneration’.
The manager’s task is to ensure that the remuneration structure facilitates the
implementation of flat organizational structure and be flexible so as to be able to
adapt to the evolution. It is also the manager’s task to evaluate remuneration of
each staff member taking into account her/his professional performance and
her/his specific responsibilities. These specialists need to know about stock
options, and how to compare and compensate the employee payroll system. They
need to make regular changes in their strategies and find new ways of operating
to increase the efficiency of the whole organization. This helps ensure not just
the company’s growth, but motivation for individual growth as well.

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Effectiveness within the organization

HR functions performed with in the organization are very much effective according to
their objective. Effectiveness is described as follows,

Function of shared services was enabling organization to maintain a record

based reward system, which also helps them in performance appraisal.

Centre of excellence performing its role in effective selection and recruitment

according to company’s future profile.

It is also helpful in arranging different training and development programs

essentials for organizational development.

Effective remuneration system enabling organization in developing a

compensation system, which is according performance, local market and skills of
employee.

HR policies and practices and their effectiveness

The Nestlé Human Resource Policy

This policy encompasses those guidelines which constitute a sound basis for efficient
and effective HR Management in the Nestlé Group around the world.
They are in essence flexible and dynamic and may require adjustment to a variety of
Circumstances. Therefore its implementation will be inspired by sound judgment,
compliance with local market laws and common sense, taking into accounts the specific
context. Its spirit should be respected under all circumstances.
As Nestlé is operating on a worldwide basis, it is essential that local legislation and
practices be respected everywhere. Also to be considered is the degree of development
of each market and its capacity to advance in the management of their human resource.

Nestlé fully supports the United Nations Global Compact’s four guiding principles on
labor. Nestlé therefore upholds four principles:

 The effective abolition of child labor.

 The elimination of discrimination in respect of employment occupation.
 Freedom of association and the effective recognition of the right to collective
bargaining.
 The elimination of all forms of forced and compulsory labor.
Nestlé also respects the local law and regulations applicable to human resources in
each of its markets. Human Resource Policy is also set by the local markets, which
must follow local legal requirements.

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Nestlé regards its personnel as its most valuable asset. Involvement at all levels starts
with open communication, whether on specific aspects of the business, or about the
activities of the Company in general. Suggestions for changes and proposals f or
improvements of Nestlé’s practices are encouraged.
Practices
The following HR practices take place at Nestle:
 Recruitment and Training
 Performance Management
 Rewards and Incentives
 Benefits
 Employee Relations
 Change Management
 Safety and Health
The Nestle Operational Safety, Health and Risk-Management Strategy document
illustrates that:- Nestle is dedicated to safe & healthy work environment.- Regular safety
assessments & audits take place by internal & external bodies.

Measures to improve the competencies and the skills of employees

Training and development programs are used to enhance skills and development for
competences.

 On the job training

 Off the job
 Inviting foreign consultants
 Foreign training programs
Some training programs are as follows
 Behavioral Base Safety
 Accurate & In-time Loading
 Assuring Quality Transport and Safety Seal Application
 Managing shift
 Warehouse & Inventory Management
 Knowing Supply Chain & Functions
New employees are made prepared to gain experience in sales and marketing-related
activities & other areas of the business activities include:-
 Production
 Supply chain & information systems,
 Finance & control,
 Purchasing,
 Communication & Market Research.

Performance appraisal system

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Performance appraisal system is made on transparent bases. Performance appraisal
system integrates the compliances with code of conducts. It is formal assessment
method, which is done by Line managers and HR manager with feedback. Subordinate
can question an unfair evaluation. Specific Key Performance Indicators have been
enlisted by the HR department to measure performance of an individual. Remuneration
structure and promotion criteria take into account individual performance. Transparent
performance appraisal systems and the freedom given to them to question their seniors
benefit not only the employees but even the organization as a whole.

Career planning and development

The Nestlé human resource policy the long-term success of the company
depends on its capacity to attract, retain and develop employees able to ensure its
growth on a continuing basis. This is a primary responsibility for all managers. The
Nestlé policy is to hire staff with personal attitudes and professional skills enabling them
to develop a long-term relationship with the company.
Therefore the potential for professional development is an essential standard for
recruitment.
Each new member joining Nestlé is to become a participant in developing a sustainable
quality culture which implies a commitment to the organization, a sense for continuous
improvement and leaves no place for complacency.
Therefore, and in view of the importance of these nestle values, special attention will be
paid to the matching a candidate’s values and the company culture.
Hence, a clear communication of these principles and values from the very beginning of
the recruitment process is required.
Moreover, for managerial positions specific leadership qualities and business acumen
will be required. Nestlé wishes to maintain and develop its reputation as an employer of
high repute.
Even when promoting employees intensively from within the organization, it is the role
of management and hr to keep an eye on valuable candidates from outside and to
benchmark internal skills with external offers.
Whilst adequate recruitment tools may improve the hiring process, it is understood that
the decision to hire a candidate remains in the hands of the responsible manager
supported by the hr staff. Under no circumstances should the decision to hire or not to
hire be left in the hands of an outside consultant or expert. As mentioned in the Nestle
management and leadership principles, only relevant skills and experience and the
adherence to the above
principles will be considered in employing a person or promotion. No consideration will
be given to a candidate’s origin, nationality, religion, race, gender or age.

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It is as important to hire the right person as it is to integrate newcomers in the
organization so that their skills and behavior can merge smoothly with the company
culture.

Succession planning and talent management is also done in head office for career
planning and development. Through constant training and development, not only
management development is done, but it also help employees to build a bright future
and higher career here.

Reward system

Nestle reward system is based on “Reward Principles”. These are as follows,

Performance Driven - The level of your Reward is linked to your performance, hence
the highest performers will see the greatest Reward. There is also a direct
link between the performance of the business and the Reward we're able to offer

Competitive - We benchmark all aspects of Reward to ensure we offer all our

employees a competitive Reward package

Inclusive - Our Reward program is designed to reflect the valuable contribution which
every employee makes, not just senior managers

Flexible - We've made it our top priority to allow you to tailor the Reward you receive to
your circumstances, whenever possible or practical

Rewards & incentives based on

‘Passion to Win’ awards- These quarterly awards have been institutionalized to

reward those who over-achieve their targets.

Long-service Awards, to recognize employees who have been with the company
for more than 30 years.

‘Nestle Idea Award’- It was found from the correspondent that the company
institutes Nestle Idea Award every quarter to recognize and award employees who
come up with relevant and innovative ideas which have the potential of being
implemented at Nestle. For all aspects of Reward Nestle apply the fundamental
principles

Nestle strives to offer fair remuneration. Remuneration level is above the average in
industry.

The variable component of the salary is comparatively big to reward

individual performance.

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In case of higher management level, the variable part is linked to individual & team
target achievements.

Payment method of Salary and Wages to their employees

In Nestle Pakistan Limited two types of workforce is used.

 Permanent Staff
 Temporary or Daily Base Employees

Permanent Staff

That employee of the company that hired the company for the fixed time period is called
the permanent employees of the company.

Method of payment Salary to the permanent Staff

Minimum fixed salary Rs 6042

Overtime Rule.

Gross Salary/per day Salary*2*Overtime Hrs

Overtime is paid double of the Gross Salary

For example

If a person Basis Salary is Rs 5000

+cola 522

+Medical Allowance 740

+HRA 632

Gross Salary 6894

Daily Wages Employees

That employees whose wages are paid on the daily bases are called the temporary or
daily wages worker

Per day minimum Wages Rs 218.85

Per hr minimum Wages Rs 27.11

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Standard hr per day 8.00hrs

Standard days per Month 26.00days

Overtime Rule

Double of the Gross Salary 27.11*2*Overtime hrs

Benifits

The following benefits are provided to all employees, with no discrimination.

Leave-Personal & Medical (fixed no. per year), Children Education Assistance Scheme,
Provident fund, Retirement Gratuity Scheme, Group Insurance & Accidental Insurance
Scheme, Conveyance Reimbursements, Residential Accommodation- Monthly health
check-ups & free consultation for self & family etc

Other incentives include

 Health screening/on-site occupational health facilities

 Sick pay
 25 days' holiday
 Mobile phone on a business need basis
 Company bonus scheme
 Contributory final salary pension scheme
 Childcare vouchers (dependant on salary)
 Gym facilities at larger sites
 Staff shop at most sites
 Flex time at some sites

Employee relations

Nestle provides a very healthy working environment which is one of the reasons
why Nestlé’s employees state their commitment level to be very high. Employee
turnover is less than 5%., which is considered to be very low for a multinational
corporation. Nestle has an open culture & upward communication especially in case of
grievance reprisal is encouraged.
Work/Life balance is given importance, as illustrated in the Nestle Human Resource
Policy document. Nestle Family’ annual events are organized by their HR department
whereby employees along with their families are invited. Nestle provides a very flexible
working environment which is one of the reasons why Nestlé’s employees state their
commitment level to be very high.

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Relations with unions are also given considerable attention. Strong and fast
communication pattern is present between management and union representatives.
Regular meeting held to share important information and regular issues.

Analysis of organization’s policies and practices

Nestlé is the pioneer company in introducing several products in this country. It is a

leading multinational corporation. Upon studying its operating practices, we concluded
that many of the principles that we studied in class have been applied by Nestlé.
However, the efficacy of these principles is completely dependent on the way in which
they are implemented and the context in which they are applied. Nestlé managers have
carefully evaluated their environment, the challenges they are facing and the situation
they are in, and then they have chosen the practices they employ. For example, for
many companies, matrix organization presents the solution to integrating the product
departmentalization and the cost savings ensured by the functional approach.
However, Nestlé has implemented the matrix successfully by having several liaisons
and coordinating officers in between. Similarly they have also implemented the
performance appraisal system effectively to reap its full benefits. It is for this reason that
today Nestlé is the fastest growing company in Pakistan today, and more is on its way
as it aims to achieve the Rs. 100 billion mark by 2014. It can continue to expand by
employing its favorite principles of innovation, research, introducing new products,
exploring new and finer market segments, and venturing into unknown territories.
Further diversification and introduction of greater value added products will help it
realize its ambitious goals.

Points that strengthen and support organization objectives

The Company’s business policies and practices are designed to:

 Working hours, wages and overtime pay offer competitive salaries and benefits.
 Establish staff relations based on trust, integrity and honesty;
 Comply with applicable local laws and are competitive with those offered by
similar companies;
 Maintain respect for basic human values, attitudes and behavior;
 Limit overtime to a reasonable level;
 Respect employees’ privacy;
 Create a safe and healthy working environment f or each employee
 Comply with applicable data protection regulations and apply Nestlé standards.

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  Respect the right of employees to form representative organizations and to join
or not to join trade unions, provided this right is freely exercised, and establish
a constructive dialogue with these unions
 Promote a sense of integrity among all employee s all over the world, and apply
a number of common rules while at the same time adapting t he expression of
these rules to local customs and traditions
 Refrain from any action restricting the employee’s right to be, or not to be,
affiliated to a union
 Encourage continuous improvement through training, and t he improvement of
professional skills at all levels in the organization
 Treat every employee with re spec t and dignity, and not tolerate any form of
mobbing, harassment or abuse
 Forbid the use of forced labor or involuntary prison labor.
 Offer career opportunities based upon merit, irrespective of color, age, national
origin, religion, gender, disability, veteran status, or any other protected class as
defined by loc al law.
 Professional skills, experience, and the capacity and willingness to apply The
Nestlé Basic Management and Leadership Principles are the main criteria for
promotion;
 To support the differentiation strategy, Nestle practices following HR strategies to
 Extensive trainings of employees
 Equal and fair pay practices
 Rewards & incentives systems
 Recruitment of people who bring in new ideas.
 Broad career paths
 High employee participation
 Investment in R&D, and innovative products
 Flat structure and decentralized
 Diverse workforce
 Effective and efficient HR systems
 Knowledge sharing and training programs
 Effective performance appraisals
 Achievement based compensation
 Competitive remuneration benchmarked against industry
 Motivated workforce

Weaknesses

Overall, company was performing effective and flawless hr practices. Authenticity was
the performance of the company. Few down points were found which are explained as

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  The Managing Director and Head of Finance are foreigners, which hinders
effective communication between employees and managers. This was discussed
with HR manager, who told that these foreign officers and also lower level
employees feel difficult in communicating with each other.
 Many people are on contractual bases due to less turn over. This was told by one
of the employee we came across, who was on contract for 4 years. That could be
proved as a point of de-motivation and can result in dis-engagement.
 There is a difference in behavior of management is found with labor of third party.
Management show a little rigid behavior towards these third party labors and
polite towards permanent employees. We came to know about that, when we
asked from a labor.
 They have long term performance measures, which does not favor short-term
profit.
 Child labor has been noticed in area of distribution of products. This is according
to our personal experience.
 They lake in career planning especially in succession planning.
 They are too much focused on training rather than development.
 HR principles are focused on labor unions and empty from concentration on
permanent employees.
 Similarly, employee relation discusses labor mostly.
 Despite focusing on labor, they still show rigid behavior to them.
 HR functions lack planning and HRD.
 Performance appraisal system is not flexible as it is based on compliance with
business principles.
 Reward system is not good for labor and temporary employees.

We have analyzed the data taken from the management of Nestle. Actual practices may
differ from it, because have not witnessed them. Strengths and weaknesses, that we
think and analyzed, have been mentioned. Contact persons detail of Nestle will be
provided on demand.

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