Professional Documents
Culture Documents
Management Control
System at Nestl
S.A.
Contents
Shivam Goyal
(2013PGPUAE040)
Shivam Goyal
(2013PGPUAE040)
Shivam Goyal
(2013PGPUAE040)
As shown in the figure above, Nestl Organisational structure is more of a Hybrid in nature with a
control department headed by Ms. Wan Ling Martello reporting to the CEO.
Nestl has a strict code of conduct for management and control as a part of their one of the ten
principles of business operations.
The risk management department at each global level report to the Finance and control head.
Reporting is done through Enterprise risk management system, whereas Auditing is taken care of
both by internal auditors as well as external Auditing Agency like KPMG.
Shivam Goyal
(2013PGPUAE040)
2. As a Responsibility owner, managers are encouraged with broad spans of controls along
with clear levels of responsibility to the task owner. As a principle, every team has a leader
who assumes full responsibility.
3. Proactive cooperation
4. Nurturing talent and growing the talent pool
5. Encourage knowledge sharing with cross team culture
Responsibility Centres
At Nestl , The responsibility lies with the Team Leader/ Manager as stated above.
Transfer Pricing
There are 3 main methods to determine transfer pricing
1. Market based transfer price
2. Cost based transfer price
3. Negotiated transfer price
At Nestl , the transfer pricing is generally followed is Market based transfer pricing, i.e. they choose
to price based on the similar product pricing in the market. When the external price of a service/
good is not available that negotiated transfer price is used between the departments and business
units.
Shivam Goyal
(2013PGPUAE040)
2. Variable pay
To stimulate the entrepreneurship of participating employees and to ensure they are
motivated to perform beyond expectations. The framework is decided at group level and
local market conditions. Employee could only be a part of either one of the scheme
a. Short Term Bonus
Alignment of objectives and Short term bonus payout is based on achievements against
expected collective and individual factors defined in the beginning of calendar year/
performance period.
b. Sales Incentives
Designed for sales staff and/or individuals affecting sales operations in rewarding the
achievement against sales targets. The structuring of the incentive scheme lies with local
markets/ business.
c. Other Variable Remuneration Plans
d. Special Payments
Non recurring spot bonuses to individuals with extraordinary achievements
e. Long Term Incentives
The LTI Plan is designed and driven by Corporate HR and is a key retention scheme for
top management. It includes Equity and/or Cash based programmes.
3. Benefits
a. Pension and Retirement Schemes
Benefits aim at supporting employees ensuring an adequate standard of living after
Shivam Goyal
(2013PGPUAE040)
Shivam Goyal
(2013PGPUAE040)
ERM is a system through which goals and objectives are achieved through Simple and Flexible Multi
Functional teams through self assessment and the responsibility is owned by the team leader.
The process can be defined in the following process
1. Highlighting most relevant business risks and objectives
2. Supporting cross fertilization between different businesses
3. Information hunting and finding relevant information
4. Identifying relevant risks to avoid deployment of high value resources to manage low risks
5. Keeping the process efficient and pragmatic through functional support
Shivam Goyal
(2013PGPUAE040)
Anticipate
Prevent
Plan
Finance
(identification
of risks)
(cross
fertilization)
(information
hunting)
(resource
deployment)
ERM classification
In order to achieve the following objectives
1. Identification and quantification of tangible (financial, operational, physical, human assets, etc.)
and intangible(reputation, brand image, intellectual property, etc.) risks in a transparent manner
2. Development of a common language for communicating and consolidating risk
3. Prioritisation and identification of where to focus management resources and activity.
Following Assessment processes have been identified
1. Top Down Assessment
2. Bottom Up assessment
Overall Group ERM reporting combines the total results of the "Top-Down" assessment and the
compilations of the individual "Bottom-Up" assessments. The results of the Group ERM are
presented to the Executive Board, Audit Committee and Board of Directors annually. In the case of
an individual risk assessment identifying a risk which requires action at Group level, an ad hoc
presentation is made to the Executive Board.
Budgeting
Nestl has moved away from conventional Budget to a new concept called Dynamic Forecasting
or a rolling forecasting method.
Dynamic Forecasting starts with the agreement of strategy which is discussed at the top and then
communicated down as a top down process. Once it is approved, it is translated into objectives, long
term and mid-term objectives and milestones.
These forecasts developed helps to show the gap between the target and the estimates both
positive as well as negative gaps. As a responsible manager, one is going to analyse the gap and work
Shivam Goyal
(2013PGPUAE040)
References
1. Nestl s Annual Report 2013
2. Year in Review report of 2013 of Nestl
3. Corporate Business Responsibility report 2013
4. International Journal of Research in Commerce, Economics and Management(IJRCM) May,
2011 ISSN 2231-4245
5. Nestl Total Rewards Policy November 2011
6. Beyond Budgeting - Breaking free from the annual fixed budget November 1, 2005
www.iioe.eu/fileadmin/files/conferences_seminars/bb_panel.pd
7. www.juergendaum.com/events/FW_Rolling_Forecasting_2007_short.pdf
8. Wikipedia
Shivam Goyal
(2013PGPUAE040)