HR Restructuring

CASE: The Coca Cola & Dabur Way: The

Leader Humbled

As Human Resources quickly introduces new and complex HR solutions, it goes under the pressure to restructure itself to be fully aligned with the business functions and with the business strategies of todays competitive business world.

The HR Strategy should be the leading document to drive the HR restructuring.

The restructuring of Human Resources is a very difficult task, as it always includes changes in both the job profiles of HR employees as well as it includes changes in the organizational structure of Human Resources.

This affects the way, how employees do their jobs, and this impact sometimes lasts for years.

During the restructuring of HR, the entire company gets affected, as all employees are always sensitive to changes.

They can expect changes to come their way and alter their very working conditions.

HR always sets the main principles on how the employees are evaluated in a company.

Therefore changing HR will definitely lead to changes in all other functions of an organization.

Human Resources should act as a role model for Change management in the company.

Change management and restructuring are always about the people, and it is a common view that HR Professionals would be the right people for the job.

But ..

When planning the restructuring of HR, it is always important to find a strong project manager.

A strong project manager will be able to minimize the damages caused by the constant and quick changes introduced in the HR Processes and Procedures during HR Restructuring.

These project managers are able to manage and drive the process side of the HR Restructuring and are thus able to lead and manage the people aspect of the HR Restructuring.

The restructuring of Human Resources is not simple, but it can bring huge benefits to the organization that adopts it.

It can help to introduce strong and competitive Human Resources to the organization.

The benefits of the restructuring are always higher, than the costs paid during the restructuring process.

Coca-Cola

As part of the restructuring plan, Coca-Cola took a strategy level decision to turn itself into a people-driven company

Coca-Cola also undertook a cost-reduction drive on the human resources front.

Dabur

As for Dabur's restructuring efforts, they started showing, when the company hired consultants McKinsey & Co at a very high cost to deal with competitive FMCG sector.

McKinsey introduced a three-fold recommendation for Dabur.

Dabur

One of the most important changes that took place on adopting restructuring principles in the company was of Handing over all the day-to-day management to a group of professional managers for the first time in Dabur's history.

The Burman family managed to confine themselves to strategic decision making.

• Dabur began to introduce Concepts like, -customer satisfaction,

-increased sales and reduced costs, -cycle-time efficiency, -return on investment and -shareholder value were all introduced for performance appraisals

• The focus of appraisals thus shifted to what a person had achieved, as much as on what he was capable of.

• Dabur also adopted certain employee friendly initiatives

• The new structure introduced was, the performance-oriented compensation and the new performance appraisal system.

HR Restructuring benefits are-

• Both Coca-Cola and Dabur had to accept the fact that a major change on the human resources front was inevitable

• Besides improved morale and reduced employee turnover figures, the strategic, structural and operational changes on the HR front led to an overall 'feel-good' sentiment in the companies.

• Coca-Cola hoped to break even by the end of fiscal 2001 and This year was also a milestone in Dabur's history, as the company crossed the Rs 10 billion mark in sales turnover for the first time

WHAT LED TO THE ORGANIZATION RESTRUCTURING?

• Four CEOs within 7 year• A huge loss of US $ 52 million in 1999

HR Restructuring :The Coca-Cola Way

• The merger of 1999 increased the significance of the human resources at Coca-Cola– Coca-Cola India and Coca-Cola Beverages – Doubled the number of employees at Coca-Cola

• To ensure the smooth acceptance of the merger Coca-Cola went for massive restructuring.

• The restructuring was brought about by:– Creating a new organization

Structure

– Creation of more number of regions in the country

– Coca- - Cola also declared VRS at the bottling plants

CEOAlexander Von

Bohr

Vice President Operations

Sanjiv Gupta

Regional Heads1-6

Area General Manager

• The merger resulted in– Caused dilution of several central jobs– Downgrading of many jobs at the center– Resignation of junior level and middle level managers

including some senior personnel.

Strategic Restructuring Plan– Introduced a career planning system– Regional general managers would meet the top management

twice a year to identify fast-track people and train them for more responsible positions.

– Overseas internship program– Sending flowers and cards to employees on their birthdays.

• Cost reduction on the human resource front– Executives shifted to less expensive apartments.– No hiring new cars or vehicles.– Bought a new property in Gurgoan.– Salary Restructuring

• Wrong Doings in the North India Operations– Coca-Cola appointed Arthur Anderson to inspect the

accounts of the North India operations for a fee of Rs 1 crore

• Results of North India Wrong Doings– Performance appraisal exercise for 560 managers.– This led to resignations and company sacked some

employees.– The performance appraisal exercise was termed as

“witch-hunt” by the sacked employees.– Alexander personally met the finance heads in

every territory and made the company's credit policy clear to them.

– Launched a major IT initiative

Improved Results

• In 1999, Coca-Cola reported an increase in case-volume by 9% after restructuring.

• Volumes increased by 14% and market share increased by 1% after the regionalization drive.

• There was a 18% rise in sales in the second quarter of 2000.

Strategies adopted by Dabur

• Formulated a new vision• company hired consultants

concentrate on a few businesses

Improve the supply chain and

procurement processes

reorganize the appraisal and

compensation systems.

Conti…….

• Structure was redesigned .• Day to day Management was handed over to a group of

Professional Managers-

Ninu Khanna CEO

Deepak Sethi Vice President

Ravi Sivaraman

Vice President Yogi Sriram

Vice President

Appraisals more objective by including more measurable criteria-

Customer satisfaction

Reduced costs,

Cycle-time efficiency

Return on investment

Shareholder value

Conti………

• Dabur's employee friendly initiatives include –

1.'work-and-play' aspects for better employee morale and performance

2.cash incentives

3.club their leaves and enjoy a vacation.

To increase employee satisfaction levels

• KPA’s

• Employee Training • Two-way communication channel

• ESOP

New structure helped Dabur-

• Efficiency and morale

• Meeting higher sales targets

• The Rs.10 billion mark in sales turnover for the first time.

• Dabur • Focus on developing skills of

employees to become player in FMCG

Coca cola

• Emphasis on cost reduction and sacking of employees .

Improvements/changes

• Coca cola’s strategies were justified

•Dabur could look at cutting few costs

WILL THE STRATEGIES USED IN FMCG’S BE SUITABLE FOR A BANK MERGER?

Key strategies highlighted in FMCG Companies

• Revamping the organisational Structure• Cost Reduction– Internal recruiting process

• Developing a employee friendly culture• Better incentive systems and Compensation system• Hiring and Firing.

• Performance Appraisal System to be driven towards the objective of the company to be fulfilled by the employees.

• Decisions were financial/operations driven.–Coca Cola – merger of four bottling operations–Dabur- Vision of becoming an FMCG major

Will the strategies be suitable for Bank Merger?

• Yes, Some of the strategies!

Cases

• HDFC Bank Acquires Centurion Bank of Punjab (CBoP) (May '08)– For HDFC Bank, this merger provided an opportunity to

add scale, geography (northern and southern states) and management bandwidth.

– The combined entity would improve productivity levels of CBoP branches by leveraging HDFC Bank's brand name.

• Standard Chartered Acquires ANZ Grindlays Bank (November '00)– Standard Chartered aimed at becoming the world's leading

emerging markets bank and it thought that acquiring Grindlays would give it a well-established foothold in India and add strength to its management resources.

Motives behind a Bank merger

• Growth - Organic growth takes time and dynamic firms prefer acquisitions to grow quickly in size and geographical reach.

• Synergy - The merged entity, in most cases, has better ability in terms of both revenue enhancement and cost reduction.

• Managerial efficiency - Acquirer can better manage the resources of the target whose value, in turn, rises after the acquisition.

• Strategic motives - Two banks with complementary business interests can strengthen their positions in the market through merger.

• Market entry - Cash rich firms use the acquisition route to buyout an established player in a new market and then build upon the existing platform.

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