This document outlines a proposed manpower strategy for an IT company facing losses due to a falling dollar and reduced outsourcing. The strategy involves 3 steps: 1) Reduce peripheral costs like food, transportation, stationary to save 167.73 lakhs monthly. 2) Cut departmental costs like electricity, travel, events to save an additional 97.95 lakhs. 3) Limit training, certifications, and paid leave to achieve the target 268 lakhs in monthly savings without major layoffs. The strategy aims to reduce costs through various efficiencies before potentially downsizing employees as a last resort.

1. Savitribai Phule Pune University
Ganeshkhind, Pune
Department of Management Sciences (PUMBA)
203 – Human Resources Management
ASSIGNMENT - 1
(Solving the first question related to manpower strategy)
By
Devesh Pandit
Roll No. 1441

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Question: Due to the fall in the dollar, the IT companies are facing losses. Out of 4440 employees, 10% are
on the bench. Due to the American policy of reducing the outsourcing business, there is a fear of 25%
becoming surplus. Jot out a Manpower Strategy.
Answer: We will solve this case from the premise that these employees belong to same company & are
working at three different locations. Current scenario looks like the following:
Total strength of the IT staff = 4440 Employees
Out of these 10 % are on the bench
This implies, the total bench strength = 10 X 4440 = 440 Employees
100
Due to loss of business there is a possibility of 25 % becoming surplus,
Assuming, the 10% bench strength is included in the surplus,
The surplus strength = 25 X 4440 = 1110 Employees
100
So the total manpower that will be added as a result of business loss = 1110 - 440 = 670 Employees
We assume the following,
Average salary per employee = Rs. 40,000 /- P.M.
The current output level = 1:2:5, i.e. hiring one employee, paying him/her salary of 2 & getting work done of 5.
Then, Average Salary Expenses per month = 4440 X 40,000 = Rs. 1776 Lakhs
Or,
12 X 1776 = Rs. 213.12 Crore per year
When the scenario of 25% staff going surplus comes, the company will be facing issue of paying non-performing
employees,
Excess payment per month = 1110 X 40000 = 444 Lakhs
Assuming that keeping 10% bench strength is legally mandatory to get new projects,
Expenses on the non-bench surplus = 670 X 40000 = 268 Lakhs P.M. or 32.16 Crores/Yr
Strategy should be to let the expenses be curtailed so that the savings go above the level of 268 Lakhs per month.

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While doing so, as company strategists, we will keep one motto in mind:
“Don’t hit where it hurts”, meaning layoffs will be discouraged & resorted to as a last option.
The progression of our strategy will be like the following figure:
Strategy 1: Reduce Peripheral Costs when output is still 1:2:5 but company apprehends the imminence of 25%
employees becoming surplus.
For this, company will do the following:
1. No free breakfasts/lunches or Sodexho coupons – Assuming that out of 4440 employees, 75% do not bring
breakfast/lunch from home but avail free breakfast/lunch facility or get Sodexho coupons. Again suppose
company has to expend:
An average of Rs. 75 /- per person per day for free breakfast & lunch
Company decides to stop the free breakfast/lunch, then in a month (Avg. 22 days) it saves,
0.75 X 4440 X 75 X 22 = Rs. 54.945 Lakhs
2. Cut on Tea/Coffee- We assume that all employees partake tea or coffee or an energy drink at least 4 times
in a day.
Let us assume that the available beverages are Assam Tea, Masala Tea, Green Tea, Cardamom Tea, Ginger
Tea, Lemon Tea, Filter Coffee, Normal Coffee, Espresso Coffee, Cappuccino Coffee, Tomato Soup, Veg Soup,
Horlicks & Boost.

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Calculating average cost of a cup of beverage:
Avg. Cost of one beverage per person per day = Rs. 10.22 /-
Monthly Cost on beverages per month =
10.22 X 4440 X 4 X 22 = 3993158.4 ≈ Rs. 39.932 Lakhs
If company makes only Assam Tea, Filter Coffee & Veg Soup available asking employees to keep their own China Cup
& Spoon for stirring, also asking employees to take tea/coffee breaks only twice, then:
Avg. cost of one beverage per person per day (Rs): 6.5
Reduced monthly cost on beverages per month =
6.5 X 4440 X 2 X 22 = 1269840 ≈ Rs. 12.699 Lakhs
Company will be able to save,
39.932 - 12.699 = Rs. 27.233 Lakhs per month
3. Rationalization of Transport Facilities – Suppose the company has an outsourced fleet of thirty 50 sitter buses
each doing up & down sorties for Normal & Flexible Timings to cater to 70% of employees who do not have their
own vehicles.

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Which means, the buses are catering to,
30 X 50 X 2 = 3000 Employees ≈ 70% of 4440
It was found that due to negligence, those employees not having bus pass were travelling, increasing the load on
buses.
Company started checking bus-pass regularly for each sortie & brought the load to normal.
Further, company re-routed 20 buses to cover about 25% longer distance, changed bus timings accordingly & thus
reduced unneeded 10 buses.
Before reduction, a single up & down sortie cost the company on an average Rs. 4000 /-.
i.e. 30 X 4000 X 22 X 2 = 5280000 or Rs. 52.80 Lakh per month
When 20 buses covered a distance longer by 25% after 10 buses were reduced, the monthly cost was,
20 X 1.25 X 4000 X 22 X 2 = 4400000 or Rs. 44 Lakh per month
Thus company was able to save Rs. 8.80 Lakhs from bus expenses.
Also the total bus expense was bore by the company itself. But now the company decides to let the 50% expense
being bore by the employee. This will not be too much a burden for him/her.
So, per employee monthly expense,
4400000 = 1415.70 ≈ Rs. 1400 /-
0.7 X 4440
If half the bus expense for employee is deducted from his/her salary, then the monthly bus savings would be,
0.7 X 4440 X 0.5 X 1400 = 2175600 or Rs. 21.756 Lakhs per month
Company had an outsourced fleet of 25 cabs doing 2 up & down sorties each night for late night home goers/night
shifters with each up & down sortie costing Rs. 5000 /-.
Total monthly expense on Cabs,
25 X 2 X 5000 X 22 = 5500000 or Rs. 55 Lakhs
Company altogether stopped the cab facility, asked employees to come only during normal & flexi timings, allowed
attending calls outside office, allowed post-office-hour work-from-home if more work was to be put in.
By this measure company saves Rs. 55 Lakhs.

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Also, company successfully negotiated with State Road Transport Corporation (SRTC) to allow one stoppage of its 30
buses going in all the areas of city during bus hours, including Railway Station & Airport, in front of its premises. Also
some buses will be starting & terminating from company stop. A detailed time table of all the available SRTC buses
was emailed to employees. Company assured the SRTC to allow pass-free entry of SRTC bus drivers & conductors in
its premises to avail breakfast & lunch. SRTC officials will be available on Friday of every week for issuing premium
bus pass to employees. This hopefully will root out any residual transportation problem from 6 AM – 11 PM.
4. Stop Advances – Company had no loan facility but it allowed once-a-year advance not exceeding twice the basic
salary. This would be recovered by 2 equal deductions to the salaries of subsequent months. Almost 25% of the
employees availed this facility each year. Although advances themselves were not a loss, but by stopping them, the
company hoped to have more cash-in-hand in trying circumstances.
Strategy 2: Reduce Departmental Costs – After applying strategy 1 the output situation will be 1:2:4.
Company failed to achieve the desired reduction in the expenses as the total savings from Strategy 1 was Rs. 167.734
Lakhs, whereas the target is to save Rs. 268 Lakhs or more. As it is falling short, company needs to quickly adopt
departmental cost cutting methods.
This will include cutting stationary costs, saving electricity, executives to travel in Economy class only, curtail
celebrations & hospitality dinners, allow work from home in the weekends and extend maternity leaves.
1. Stationary Cost Reduction – An estimate of daily stationary consumption is being laid down below:

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It was found that on an average monthly consumption of stationary per person was Rs. 87.08 /-. Which means, total
monthly consumption was,
87.08 X 4440 = 386635.2 or Rs. 3.86 Lakhs
Company asked employees to get print of A4 sized paper on both sides. Also it put a cap of using 40 pages per
person per month. Printing should also be 2-4 pages per side. Scribbling pads, pencils, sharpeners, pens, all kinds of
pins except stapler pins were stopped from being issued. Items like staplers, punching machines, markers & dusters
would be issued only on approval of admin, who would see that only one such item (except markers & dusters) was
issued to employee in a year. Company allowed 6 markers & dusters to be issued in a year. Purchasing new print
cartridges was discouraged, refilling & maintaining existing cartridges was practiced strictly.
So the cost reduced to:
Which means the cost per month now was Rs. 1.205 Lakhs
Company was able to save,
3.86 - 1.205=Rs. 2.655 Lakhs
2. Saving Electricity-In order to reduce its monthly electricity Bill of average Rs. 12.25 Crores per year i.e. Rs. 102.08
Lakhs per month for all its offices, company decided to concentrate on the areas of maximum consumption as
follows:

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It was realized that employees caused idle consumption by not shutting down their system. This was strictly
forbidden & employees were trained on energy saving. This would cause a 30% drop in the consumption under this
category.
Company decided to halve the active air conditioners & putting other half only on blower (air cool) mode thereby
expecting to keep consumption at 60% of the original & also reaching room temperature of 25°C (Ideal).
Company had already finished adopting Light Emitting Diodes (LEDs) for lighting, which has a very low consumption
almost 25% of the original tube lights lighting.
Company expected the following drop in energy bill:
By pushing down the energy bill to Rs. 61.247 Lakhs per month, the company will save,
102.08-61.247=Rs. 40.833 Lakhs per month
3. Executives/Employees to Travel in Economy Class Only – The Company had people travelling to both domestic &
international locations. The average travel rate was like the following:
Company issued a directive to all eligible travelers & travel arrangers to get only economy class tickets. Thereby, the
company hoped to keep the cost at 60% of the original flight bill. The new scenario would look like:
The company expected to save,
5531250 – 3318750 = 2212500 or Rs. 22.125 Lakhs

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4. Curtail Celebrations & Hospitality Dinners – Company liberally allowed one event-managed celebration every
year to all of its 12 verticals; each costing average Rs. 2.5 Lakh at 3 locations. Also it allowed one yearly tracking trip
for each location. Each costing average Rs. 4 Lakh per location. These two will now be stopped. Hospitality Dinners
were all 5 star. There were average 8 such lunches/dinners in a month each costing on an average Rs. 75,000 /-.
Company decided to curtail this by keeping lunch/dinner venue at its own premises’ Deluxe Dining Rooms & getting
packaged food for guests from nearby 3 start eateries. This would reduce expenses to 50% of the original.
So the above reductions per month would be:
Celebrations,
1/12 X 12 X 2.5 X 3 = Rs. 7.5 /- Lakhs
Tracking trip,
1/12 X 4 X 3 = Rs. 1 /- Lakh
Hospitality Lunches/Dinners
0.50 X 8 X 0.75 = Rs. 3 Lakhs
On Deepawali, company gave a Haldiram’s combo sweet box to each of its employees containing 1 KG Rasogulla, 200
gms of salted-roasted cashew nuts, fried-salted moong, 500 gms sweet-salty chiwda & finally a 500 gms box of a
mixed variety of sweetmeats. This whole box cost company Rs. 600 /- each.
Company decided to cut on this by slashing the weight of combo-box by half. It will now give 1 Kg of maida based
Balushahi, 100 gm salted-roased cashew nuts, 100 gms of salted-roasted peanuts & 200 gms of sweet-salty chiwda.
But the supplier will remain same. The new box was expected to cost Rs. 150 /-.
Thus extended over each month, the company expects to save,
1/12 X 4440 X (600-150) = 166500 or Rs. 1.665 Lakhs per month
So by curtailing the above total savings would be,
7.5 + 1 + 3 + 1.665 = Rs. 13.165 Lakhs
5. Allow Work-From-Home in the Weekends – Company gave Rs. 100 /- for food & Rs. 300 /- for transportation per
day to each employee who worked on the weekend. On an average a total of 600 employees worked on Saturday &
250 worked on Sunday. Company barred coming to office on weekends & issued 1 year gate-pass for laptop &
dongle to those who needed to work in the weekend. These laptops were being used by the employees inside the
premises also. Company gave a toll-free dial-in number with separate bridge code for each project to ease
conference calls in weekends. Hence without any additional expense, company was able to monthly save,
4 * [ (100+300)*600 + (100+300)*250 ] = 4 * 340000 or Rs. 13.6 Lakhs per month

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6. Extend Maternity Leaves – Company had a Male : Female ratio of 7 : 3. Hence in all there were 1332 Females. On
an average, company received 36 maternity leave requests per year. Maternity leave period was 3 months. Company
had the policy of giving only the basic salary but full medical facility (Insurance claims etc.) during leave period.
Average basic salary was Rs. 9000/-. Company decided to extend the maternity leave period from 3 to 6 months.
Thus it aimed to monthly save,
1/12 X 36 X 6 X (40000-9000) = 558000 or Rs. 5.58 Lakhs
Strategy 3: Reduce Employee Costs – After applying strategy 2 the output situation will be 1:2:3.
Company again failed to achieve the desired reduction by adopting Strategy 1 & Strategy 2 as the total savings from
these was Rs. 167.734 Lakhs + Rs. 97.958 Lakhs i.e. Rs. 265.693 Lakhs, still falling short of the target of Rs. 268 Lakhs
or more.
Company now has no option but to adopt strategy 3, which is least desirable as it will start affecting the employees
directly.
Since the company is now nearer to achieving the desired saving target, we propose to adopt the 3 following
measures which are mild & do not bruise employees much.
No outdoor trainings, stop certifications & no paid leaves
1. No outdoor trainings – Each of the 12 verticals in 3 locations on an average conducted 4 outdoor training each
year for enhancing skills. These would be attended by 30-40 employees. Each outdoor training on an average cost Rs.
1.25 Lakhs. By curtailing these, company expected to monthly save,
1/12 X 3 X 12 X 4 X 1.25 = Rs. 15 Lakhs
Seniors will be asked to mentor the juniors. Those who have the expertise will be made the member of Centers of
Excellence (COEs) for the required skills & asked to impart in-house training.
2. Stop Certifications – Each year company gives training & certification targets to its employees. Tests for some of
the certifications needed to be given through outside agencies like NIIT. Company average for number of
certifications per year was 240. Each certification on an average cost Rs. 12000 /-. By curtailing these certifications,
company hoped to monthly save,
1/12 X 240 X 12000 = 240000 or Rs. 2.4 Lakhs
3. No Paid Leaves – A total of 24 paid leaves were credited to employee’s leave balance account in PSHRMS each
year (@ 2 per month). Most of the employees rarely availed all of them. Average leaves per employee per year was
12. Average leave balance per employee per year was always more than 12.
Expenses if company paid the leaves (Avg. 1 leave per month),
12 X 1/22 X 40000 X 4440 = 96872727.27 or 968.72 Lakhs/Yr. or 80.72 Lakhs Per Month

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Company decided to withdraw paid leave facility but not the leave balances themselves. Employee still will have 2
leaves credited to his leave balance but those would not be paid; at least for further two years. By doing so, it
expected to save Rs. 80.72 Lakhs per Month.
By adopting strategy 3, company is already able to save,
Rs. 15 Lakhs + Rs. 2.4 Lakhs + 80.72 Lakhs = Rs. 98.12 Lakhs
So, the total saving from Strategies 1, 2 & 3 is:
Rs. 167.734 Lakhs + Rs. 97.958 Lakhs + Rs. 98.12 Lakhs = Rs. 363.812 Lakhs
Here, we achieve our target
But, if the situation deteriorates further in subsequent months, more people go on bench & market sees no
elevation, then company should go for the following measures in order:
1. No real promotions, incentives, bonuses or increments be given.
2. Temporarily suspend medical, telephone & car allowances.
3. Slash salary:
a. Newly confirmed – 20%
b. Middle level – 15%
c. Senior level – 10%
d. Top level – 5%
4. Layoff- Start by most recent joiners, then go upwards.
Postscript: The 10% bench strength of 444 employees should be engaged on short term in the sales activities or
imparting training or doing administrative jobs. Company should look for sales promotion in new countries. This will
give the idle resources some work in hand, new projects may be signed & utilization will be fullest.