The problems eventually led to Coca-Cola reporting a huge loss of US $ 52 million in 1999 , attributed largely to the heavy investments in India and Japanspent Rs 1500 crore for acquiring bottlers, who were paid Rs 8 per case as against the normal Rs 3accommodation in farmhouses for executives and foreign trips for bottlers.
The first task was to put in place a new organizational structure that vested profit and loss accounting at the area level, by renaming each plant-in-charge as a profit center head.The country was divided into six regions as against the initial three, based on consumer preferences. Each region had a separate head (Regional General Manager), who had the regional functional managers reporting to him. All the Regional General Managers reported to VP (Operations), Sanjiv Gupta, who reported directly to CEO Alexander Von Bohr (Bohr). The 37 bottling plants of Coca-Cola, on an average six in each region, had an Area General Manager as the head, vested with profit-center responsibility.All the functional heads reported to the Area General Manager. Coca-Cola also declared VRS at the bottling plants, which was used by about 1100 employees.
Case on coca cola n dabur
HR Restructuring CASE:The Coca Cola & Dabur Way: The Leader Humbled
As Human Resources quickly introduces new andcomplex HR solutions, it goes under the pressure torestructure itself to be fully aligned with the businessfunctions and with the business strategies of todayscompetitive business world.The HR Strategy should be the leading document todrive the HR restructuring.
The restructuring of Human Resources is a very difficulttask, as it always includes changes in both the jobprofiles of HR employees as well as it includes changesin the organizational structure of Human Resources.This affects the way, how employees do their jobs, andthis impact sometimes lasts for years.
During the restructuring of HR, the entire company getsaffected, as all employees are always sensitive tochanges.They can expect changes to come their way and altertheir very working conditions.HR always sets the main principles on how theemployees are evaluated in a company.Therefore changing HR will definitely lead to changesin all other functions of an organization.
Human Resources should act as a role model forChange management in the company.Change management and restructuring are always aboutthe people, and it is a common view that HRProfessionals would be the right people for the job.But ..
When planning the restructuring of HR, it is alwaysimportant to find a strong project manager.A strong project manager will be able to minimize thedamages caused by the constant and quick changesintroduced in the HR Processes and Procedures duringHR Restructuring.These project managers are able to manage and drivethe process side of the HR Restructuring and are thusable to lead and manage the people aspect of the HRRestructuring.
The restructuring of Human Resources is notsimple, but it can bring huge benefits to the organizationthat adopts it.It can help to introduce strong and competitive HumanResources to the organization.The benefits of the restructuring are always higher, thanthe costs paid during the restructuring process.
Coca-ColaAs part of the restructuring plan, Coca-Cola took a strategy leveldecision to turn itself into a people-driven companyCoca-Cola also undertook a cost-reduction drive on the humanresources front.
DaburAs for Daburs restructuring efforts, they startedshowing, when the company hired consultantsMcKinsey & Co at a very high cost to deal withcompetitive FMCG sector.McKinsey introduced a three-fold recommendation forDabur.
DaburOne of the most important changes that took place onadopting restructuring principles in the company wasof Handing over all the day-to-day management to agroup of professional managers for the first time inDaburs history.The Burman family managed to confine themselves tostrategic 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 Daburs 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 CEO Alexander Von about by: Bohr – Creating a new organization Structure Vice President Operations Sanjiv Gupta – Creation of more number of regions in the country Regional Heads 1-6 – Coca- - Cola also declared VRS Area General at the bottling plants 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 companys 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 Ravi Sivaraman Yogi Sriram Vice President Vice President Vice President
Appraisals more objective by including more measurable criteria- Reduced costs, Shareholder Customer Cycle-time value satisfaction efficiency Return on investment
Conti………• Daburs employee friendly initiatives include –1.work-and-play aspects for better employee morale and performance2.cash incentives3.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 Coca cola• Focus on developing skills of • Emphasis on cost reduction employees to become and sacking of employees . player in FMCG
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 Banks brand name.
• Standard Chartered Acquires ANZ Grindlays Bank (November 00) – Standard Chartered aimed at becoming the worlds 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.