HR Restructuring Dabur
HR Restructuring Dabur
HR Restructuring Dabur
Cola took various measures to come out of the mess it had landed itself in.
itself at the crossroads. In the fiscal 1998, 75% of Dabur's turnover had come from fast
moving consumer goods (FMCGs). Buoyed by this, the Burman family (promoters and
owners of a majority stake in Dabur) formulated a new vision in 1999 with an aim to
make Dabur India's best FMCG company by 2004. In the same year, Dabur revealed
To achieveS the goal, Dabur benchmarked itself against other FMCG majors viz., Nestle
¢, Colgate-Palmolive and P&G. Dabur found itself significantly lacking in some critical
areas. While Dabur's price-to-earnings (P/E) ratio1 was less than 24, for most of the
others it was more than 40. The net working capital of Dabur was a whopping Rs 2.2
billion whereas it was less than half of this figure for the others. There were other
margins of 12% as compared to Colgate's 16% and P&G's 18%. Even the return on net
worth was around 24% for Dabur as against HLL's 52% and Colgate's 34%.
The Burmans realized that major changes were needed on all organizational fronts.
However, media reports questioned the company's capability to shake-off its family-
In 1999, following the merger of Coca-Cola's four bottling operations (Hindustan Coca-
Cola Bottling North West, Hindustan Bottling Coca-Cola Bottling South West, Bharat
Coca-Cola North East, and Bharat Coca-Cola South East), human resources issues
gained significance at the company. Two new companies, Coca-Cola India, the corporate
and marketing office, and Coca-Cola Beverages were the result of the merger. The
merger brought with it over 10,000 employees to Coca-Cola, doubling the number of
human resources to ensure a smooth acceptance of the merger. The first task was to
put in place a new organizational structure that vested profit and loss accounting at the
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 merger carried forward employees from different work cultures and different value
systems. This move towards regionalization caused dilution of several central jobs, with
as many as 1500 employees retiring at the bottling plants. The new line of control
strengthened entry and middle-level jobs at the regions and downgraded many at the
center. This led to unrest among the employees and about 40 junior and middle-level
managers and some senior personnel including Ravi Deoi, Head (Capability Services) and
As part of the restructuring plan, Coca-Cola took a strategy level decision to turn itself
system for over 530 managers in the new setup. The system included talent
recommendations were made to the HR Council. The council then approved and
implemented the process through a central HR team. Coca-Cola also decided that the
regional general managers would meet the top management twice a year to identify
fast-track people and train them for more responsible positions. Efficient management
trainees were to be sent to the overseas office for a three-week internship. To inculcate
a feeling of belonging, the company gave flowers and cards on the birthdays of the
employees and major festivals.
Coca-Cola also undertook a cost-reduction drive on the human resources front. Many
executives who were provided accommodation in farm-houses were asked to shift to less
expensive apartments.
The company also decided not to buy or hire new cars, as it felt that the existing fleet of
cars was not being used efficiently. In the drive for 'optimum utilization of existing
also surrendered a substantial part of its rented office space in Gurgaon, near Delhi.
Company officials felt that this was justified because a lot of officials had moved out of
the Delhi headquarters due to the localization. Moreover, this was necessitated by the
resignations and sackings. Salaries were also restructured as part of this cost-reduction
drive. Coca-Cola began benchmarking itself with other major Indian companies,
whereas it was offering pay packages in line with international standards. Coca-Cola
also realigned some jobs based on the employee's talent and potential. However, the
company's problems were far from over. In March 2000, Coca-Cola received reports of
wrong doings in its North India operations. The company decided to take action after
In July 2000, Coca-Cola appointed Arthur Anderson to inspect the accounts of the North
India operations for a fee of Rs 1 crore. The team inspected all offices, godowns,
bottling plants and depots of Jammu, Kanpur, Najibabbad, Varanasi and Jaipur. The
findings revealed that the North Indian team had violated discounting terms and the
credit policy, apart from being unfair in cash dealings. The team was giving discounts
that were five times higher than those given in the other regions of the country. There
In light of the above findings by Arthur Anderson's team, Coca-Cola carried out a
performance appraisal exercise for 560 managers. This led to resignations en masse.
Around 40 managers resigned between July and November 2000. Coca-Cola also sacked
some employees in its drive to overhaul the HR functioning. By January 2001, the
company had shed 70 managers, accounting for 12% of the management. Bohr said, "I
had to take tough decisions because the buck stops here. We needed to weed out
certain practices. That's an important message sent out - that we'll take action if we
can't work on principles of integrity. The investigation was the right thing. The business
is healthier now."
However, media reports revealed a different side of the picture altogether. The
managers who had quit voiced their thoughts vociferously against Coca-Cola, claiming
that the whole performance appraisal exercise was farcical and that the management
had already decided on the people to get rid of. They termed the issue as Coca-Cola's
violations, one former employee commented, "All discounts were cleared by the top
management. They always pushed for higher volumes and said profitability is not your
problem. So, we got volumes at whatever costs. Nobody told us this was an
unacceptable practice." This seemed to be substantiated by the fact that in the Delhi
region, which consumed only 6000-8000 cases per day, the sales team received a
target of pushing 25,000 cases a day. It was commented that this was done so as to
'make things look good' when the company sent its financials to the global head
quarters. It was also reported that the performance appraisals and the subsequent
Worried by such adverse comments about the company, Alexander decided to take
steps to ensure a smooth relationship with the new people in the company. He
personally met the finance heads in every territory and made the company's credit
policy clear to them. Coca-Cola also standardized the discounting limits and best
initiative as well, to make the functioning of the entire organization transparent at the
touch of a button. Things seemed to have stabilized to some extent after this. Justifying
the decision to let go off certain personnel, Alexander said, "We don't mind those
quitting who were just okay. We told them where they could hope to be, based on their
performance. Some who have left may not have had a good career with Coke." Dabur's
restructuring efforts began in April 1997, when the company hired consultants McKinsey
processes and to reorganize the appraisal and compensation systems. Following these
recommendations, many radical changes were introduced. The most important was the
Burmans' decision to take a back seat. The day to day management was handed over to
a group of professional managers for the first time in Dabur's history, while the
promoters confined themselves to strategic decision making.
Dabut decided to revamp the organizational structure and appoint a CEO to head the
management. All business unit heads and functional heads were to report directly to the
CEO.
In November 1998, Dabur appointed Ninu Khanna as the CEO. The appointment was the
first incident of an outside professional being appointed after the restructuring was put in
place. Ninu Khanna, who had previously worked with Procter & Gamble and Colgate-
Palmolive was roped in to give Dabur the much-needed FMCG focus. Dabut had also
appointed Cadbury India's Deepak Sethi as Vice President - Sales and Marketing - Health
Care Products division; Godrej Pilsbury's Ravi Sivaraman as Vice President - Finance and
reduced costs, cycle-time efficiency, return on investment and shareholder value were all
HR, Dabur remarked, "Now Dabur is working towards making compensation more
Today, performance in terms of target achievement is the main factor followed by other
criteria such as sincerity and longevity of service." The focus of appraisals thus shifted to
Dabur's employee friendly initiatives included annual sales conferences at places like
executives of the company, combined both 'work-and-play' aspects for better employee
morale and performance. Dabur also gave cash incentives to junior level sales officers
To increase employee satisfaction levels, Dabur identified certain key performance areas
(KPAs) for each employee. Performance appraisal and compensation planning were now
based on KPAs. Employee training was also given a renewed focus. To help employees
communicate effectively with each other and for better dissemination of news and
information, Dabur brought out a quarterly newsletter 'Contact.' The interactive
also commissioned consultants Noble & Hewitt to formulate an Employee Stock Option
Plan (ESOP). The scheme, effective from the fiscal 2000 was initially reserved for very
senior personnel. Dabur planned to extend the scheme throughout the organization in
the future.