HR Restructuring - The Coca Cola & Dabur Way

The case study 'HR Restructuring - The Coca-Cola and Dabur Way' looks at the human resource restructuring exercises taken up Coca-Cola and Dabur in the late 1990s. The case essentially brings out the different circumstances that led to the restructuring and the repercussions of the exercise. The case is designed to make the students appreciate the diverse circumstances that led to the HR restructuring exercise at Coca-Cola and Dabur. Besides understanding the necessity of restructuring an organization's human resources, the students should understand the contrast between the restructuring at the two companies. At the end of the case-discussion, the students should have grasped the following issues:

How Coca-Cola's problems led to a massive organizational restructuring exercise, with HR as the focal point. Dabur's endeavor to become an FMCG major, which necessitated organizational restructuring with HR changes as the pivotal aspect. The details of the restructuring exercise. The case is intended for MBA/PGDBM level students for their Human Resources Elective.

It all began with Coca Cola India's (Coca-Cola) realization that something was surely amiss. Four CEOs within 7 years, arch-rival Pepsi surging ahead, heavy employee exodus and negative media reports indicated that the leader had gone wrong big time. 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 Japan. Coca-Cola had spent Rs 1500 crore for acquiring bottlers, who were paid Rs 8 per case as against the normal Rs 3. The losses were also attributed to management extravagance such as accommodation in farmhouses for executives and foreign trips for bottlers.

Following the loss, Coca-Cola had to write off its assets in India worth US $ 405 million in 2000. Apart from the mounting losses, the write-off was necessitated by Coca-Cola's over-estimation of volumes in the Indian market. This assumption was based on the expected reduction in excise duties, which eventually did not happen, which further delayed the company's break-even targets by some more years.

Changes were required to be put in place soon. With a renewed focus and energy, Coca-Cola took various measures to come out of the mess it had landed itself in.

The Coca-Cola Way

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 employees it had in 1998.

Coca-Cola had to go in for a massive restructuring exercise focusing on the company's 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 area level, by renaming each plant-in-charge as a profit center head.