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Attempt Any Four Case Study
CASE – 1 Your Job and Your Passion—You Can Pursue
Both!
The 21st century offers many challenges
to every one of us. As more firms go global, as more economies interconnect,
and as the Web blasts away boundaries to communication, we become more informed
citizens. This interconnectedness means that the organizations you work for
will require you to develop both general and specialized knowledge—such as
speaking multiple languages, using various software applications, or
understanding details of financial transactions. You will have to develop
general management skills to foster your ability to be self-reliant and thrive
in a changing market-place. And here’s the exciting part: As you build both
types of knowledge, you may be able to integrate your growing expertise with
the causes or activities you care most about. Or, your career adventure may
lead you to a new passion.
Former presidents George H. W. Bush
and Bill Clinton are well known for combining their management skills—running a
country—with their passion for helping people around the world. Together they
have raised funds to assist disaster victims, those with HIV/AIDS, and others
in need. Jake Burton turned his love of snow sports into an entire industry
when he founded Burton Snowboards. Annie Withey poured her business and
marketing knowledge into her two famous business ventures: Smartfood and
Annie’s Homegrown. Both products were the result of her passion for healthful
foods made from organic ingredients.
As you enter the workforce, you may
have no idea where your career path will lead. You may be asking yourself, “How
will I fit in?” “Where will I live?” “How much will I earn?” “Where will my
business and personal careers evolve as the world continuous to change at such
a fast pace?” If you are feeling nervous because you don’t know the answers to
these questions yet, relax. A career is a journey, not a single destination.
You may have one type of career or several. It is likely you will work for
several organisations, or you may run one or more businesses of your own.
As you ask yourself what you want to
do and where you want to be, take a few minutes to review the chapter and its
main topics. Think about your personality, what you like and dislike, what you
know and what you want to learn, what you fear and what you dream. Then try the
following exercise.
Questions
1.
Create
a three-column chart in which the first column lists nonmanagement skills you
have. Are you good at travel? Do you know how to build furniture? Are you a
whiz at sports statistics? Are you an innovative cook? Do you play video games
for hours? In the second column, list the causes or activities about which you
are passionate. These may dovetail with the first list, but they might not.
2.
Once
you have you two columns complete, draw lines between entries that seem
compatible. If you are good at building furniture, you might have also listed a
concern about families who are homeless. Remember that not all entries will
find a match—the idea is to begin finding some connections.
3.
In the
third column, generate a list of firms or organizations you know about that
reflect your interests. If you are good at building furniture, you might be
interested working for the Habitat for Humanity organization, or you might find
yourself gravitating towards a furniture retailer like Ikea or Ethan Allen. You
can do further research on organizations via Internet or business
publications.
CASE –
2 Biyani – Pioneering a Retailing
Revolution in India
“I use people as hands and legs. I prefer to do thinking around here.”
─ Kishore Biyani, CEO & MD, Pantaloon Retail (India) Ltd.
Kishore Biyani (Biyani), CEO& MD of
Pantaloon Retail (India) Ltd., planned to have 30 Food Bazaar outlets, 22
outlets in Big Bazaar, 21 Pantaloons outlets, and four seamless malls under the
Central logo, by the end of 2005. He also planned to launch at least three
businesses every year and had already selected music, footwear and car
accessories as his next areas of investments. He was already the top retailer
in India followed by Raghu Pillai of RPG. As of 2004, Biyani headed a company
that had a turnover of Rs 6,500 million and operated 13 Pantaloon apparel
stores, 9 Big Bazaars, 13 Food Bazaars, and 3 seamless malls (Central), one
each located in Bangalore, Hyderabad, and Pune.
Biyani’s journey from a person who
looked after his family business to India’s top retailer in 1987, when he
launched Manz Wear Pvt. Ltd. The company launched one of the first readymade
trousers brands – ‘Pantaloon’ – in the country. The company also launched its
first jeans brand called ‘Bare’ in 1989. On September 20, 1991, Manz Wear Pvt.
Ltd. went public and on September 25, 1992, it changed its name to Pantaloon
Fashions (India) Limited (PFIL). ‘John Miller’ was the first formal shirt brand
from PFIL.
The company opened its first apparel
stores, called ‘Pantaloons’ at Kolkata in August 1997. The stores generated Rs
70 million. Biyani then realized the potential of the Indian market and started
to aggressively tap it. Accordingly, Biyani decided to expand into other
segments of retailing besides apparel. To reflect this change in focus, the
company changed its name to Pantaloon Retail (India) Limited (PRIL) in July
1999 and set itself a target of achieving Rs 10 billion in sales by June 2005.
In course of time he launched three other retail formats -- Big Bazaar, Food
Bazaar, and Central.
Biyani didn’t believe in copying
ideas from western retailers. He was critical of his peers who felt just copied
ideas form the west without making any effort to mold them to Indian
conditions. He ensured that his store formats such as Big Bazaar, Food Bazaar,
and Pantaloons were all suited to the purchasing style of Indian consumers.
Biyani was a huge risk taker and his
planning was always different from the conventional way of doing business. This
was also one of the factors that had prompted Biyani to move away from his
father’s conventional way of doing business. During the initial stages of his
success, his risk-taking attitude sometimes had the effect of turning away financiers.
The biggest risk that Biyani took was in opening Big Bazaar in Mumbai in 2001.
The company needed money to expand Big Bazaar’s operations. However, it had
profits of only Rs 40 million with a low share price at eighteen rupees.
Therefore, Biyani could not raise money through equity. In light of this
situation, Biyani took a loan of Rs 1,200 million from ICICI for launching the
operations of Big Bazaar, which increased his debt exposure. However, Big
Bazaar proved to be a resounding success with 100,000 customer visits in its
first week of operations. According to analysts, if Big Bazaar had failed,
Biyani would have landed in a severe debt crisis. The success of Big Bazaar not
only increased the company profits, it also changed the perception of investors.
Many people criticized Biyani for not
delegating authority and Biyani himself accepted the criticism. He said, “I use
people as hands and legs. I prefer to do the thinking around here.” He
preferred taking individual decision on activities like strategic planning,
ideas for other ventures, and other important issues. It was because of this
that managers like Kush Medhora of Westside were initially apprehensive about
joining Biyani’s business. However, Biyani changed his attitude gradually with
the launch of Big Bazaar, Food Bazaar, and Central and appointed different
people for managing different business units.
Biyani believed in leading a simple
life and in being simply dressed. His vision came from his diverse reading
connected to retailing and other areas. He made it a point to visit each of his
stores across the country. He aimed to spend at least seven hours a week at the
stores. In the stores, he would stand at a corner and observe people. He also
walked on streets, met common people, and talked to local leaders to plan and
put up new products in his stores. Each of his stores was set with a weekly
target, which was reviewed every Monday. Whenever a new store was opened, the
details of its operations during the first 45 days were to be sent to him.
Sometimes, he suggested remedies to some problems. Biyani believed in extensive
advertising to make more people know about the product. His decision making was
quick and devoid of unnecessary delays. Biyani was also a good learner and
learned quickly from his mistakes. He planned to improve inventory management
through responding effectively to the demands of the customers rather than
forecasting them, as he felt that forecasting would pile up the inventory in
this dynamic market.
Questions
1.
The tremendous
success of the ‘Pantaloons’, ‘Big Bazaar’ and ‘Food Bazaar’ retailing formats,
easily made PRIL the number one retailer in India by early 2004, in terms of
turnover and retail area occupied by its outlets. Explain how Biyani is further
planning to consolidate his businesses.
2.
“Our
striving toward looking at the Indian market differently and strategizing with
the evolving customer helped us perform better.” What other qualities of
Kishore Biyani do you think were instrumental in making him top retailer of
India?
CASE –
3 The New Frontier for Fresh Foods
Supermarkets
Fresh Foods Supermarket is a grocery
store chain that was established in the Southeast 20 years ago. The company is
now beginning to expand to other regions of the United States. First, the firm
opened new stores along the eastern seaboard, gradually working its way up
through Maryland and Washington, DC, then through New York and New jersey, and
on into Connecticut and Massachusetts. It has yet to reach the northern New
England states, but executives have decided to turn their attention to the
Southwest, particularly because of the growth of population there.
Vivian Noble, the manager of one of
the chain’s most successful stores in the Atlanta area, has been asked to
relocate to Phoenix, Arizona, to open and run a new Fresh Foods Supermarket.
She has decided to accept the job, but she knows it will be a challenge. As an
African American woman, she has faced some prejudice during her career, but she
refuses to be stopped by a glass ceiling or any other barrier. She understands
that she will be living and working in an area where several cultures combine
and collide, and she will be hiring and managing a diverse workforce. Noble has
the support of top management at Fresh Foods, which wants the store to reflect
the surrounding community—in both staff makeup and product selection. So she
will be looking to hire employees with Hispanic and Native American roots, as
well as older workers who can relate to the many retired residents in the area.
And she will be seeking their inputs on the selection of certain food products,
including ethnic brands, so that customers know they can buy what they need and
want a Fresh Foods.
In addition, Noble wants to make sure
that Fresh Foods provides services above and beyond those of a standard
supermarket to attract local consumers. For instance, she wants the store to
offer free delivery of groceries to home-bound customers who are either senior
citizens or physically disabled. She wants to be sure that the store has enough
bilingual employees to translate for and otherwise assist customers who speak
little or no English. Noble believes that she is a pioneer of sorts, guiding
Fresh Foods Supermarkets into a new frontier. “The sky is almost blue here,”
she says of her new home state. “And there’s no glass ceiling between me and
the sky.”
Questions
1.
What
steps can Vivian Noble take to recruit and develop her new workforce?
2.
What
other ways can Noble help her company reach out to the community?
3.
How
will Fresh Foods Supermarkets as whole benefit from successfully moving into
this new region of the country?
CASE –
4 The Law Offices of Jeter, Jackson,
Guidry, and Boyer
THE
EVOLUTION OF THE FIRM
David
Jeter and Nate Jackson started a small general law practice in 1992 near
Sacramento, California. Prior to that, the two had spent five years in the
district attorney’s office after completing their formal schooling. What began
as a small partnership—just the two attorneys and a paralegal/assistant—had now
grown into a practice that employed more than 27 people in three separated
towns. The current staff included 18 attorneys (three of whom have become
partners), three paralegals, and six secretaries.
For the first time in the firm’s
existence, the partners felt that they were losing control of their overall
operation. The firm’s current caseload, number of employees, number of clients,
travel requirements, and facilities management needs had grown far beyond anything
that the original partners had ever imagined.
Attorney Jeter called a meeting of
the partners to discuss the matter. Before the meeting, opinions about the
pressing problems of the day and proposed solutions were sought from the entire
staff. The meeting resulted in a formal decision to create a new position,
general manager of operations. The partners proceeded to compose a job
description and job announcement for recruiting purposes.
Highlights and responsibilities of
the job description include:
· Supervising day-to-day office personnel and
operations (phones, meetings, word processing, mail, billings, payroll, general
overhead, and maintenance).
· Improving customer relations (more
expeditious processing of cases and clients).
· Expanding the customer base.
· Enhancing relations with the local
communities.
· Managing the annual budget and related
incentive programs.
· Maintaining annual growth in sales of 10
percent while maintaining or exceeding the current profit margin.
The
general manager will provide an annual executive summary to the partners, along
with specific action plans for improvement and change. A search committee was
formed, and two months later the new position was offered to Brad Howser, a
longtime administrator from the insurance industry seeking a final career
change and a return to his California roots. Howser made it clear that he was
willing to make a five-year commitment to the position and would then likely
retire.
Things got off to a quiet and
uneventful start as Howser spent few months just getting to know the staff,
observing day-today operations; and reviewing and analyzing assorted client and
attorney data and history, financial spreadsheets, and so on.
About six months into the position,
Howser became more outspoken and assertive with the staff and established
several new operational rules and procedures. He began by changing the regular
working hours. The firm previously had a flex schedule in place that allowed
employees to begin and end the workday at their choosing within given
parameters. Howser did not care for such a “loose schedule” and now required
that all office personnel work from 9:00 to 5:00 each day. A few staff member
were unhappy about this and complained to Howser, who matter-of-factly informed
them that “this is the new rule that everyone is expected to follow, and anyone
who could or would not comply should probably look for another job.” Sylvia
Bronson, an administrative assistant who had been with the firm for several
years, was particularly unhappy about this change. She arranged for a private
meeting with Howser to discuss her child care circumstances and the difficulty
that the new schedule presented. Howser seemed to listen half-heartedly and at
one point told Bronson that “assistance are essentially a-dime-a-dozen and are
readily available.” Bronson was seen leaving the office in tears that day.
Howser was not happy with the average
length of time that it took to receive payments for services rendered to the
firm’s clients (accounts receivable). A closer look showed that 30 percent of
the clients paid their bills in 30 days or less, 60 percent paid in 30 to 60
days, and the remaining 10 percent stretched it out to as many as 120 days. Howser composed a letter
that was sent to all clients whose outstanding invoices exceeded 30 days. The
strongly worded letter demanded immediate payment in full and went on to
indicate that legal action might be taken against anyone who did not respond in
timely fashion. While a small number of “late” payments were received soon
after the mailing, the firm received an even larger number of letters and phone
calls from angry clients, some of whom had been with the firm since its
inception.
Howser was given an advertising and
promotion budget for purposes of expanding the client base. One of the
paralegals suggested that those expenditures should be carefully planned and
that the firm had several attorneys who knew the local markets quite well and
could probably offer some insights and ideas on the subject. Howser thought
about this briefly and then decided to go it alone, reasoning that most
attorneys know little or nothing about marketing.
In an attempt to “bring all of the
people together to form a team,” Howser established weekly staff meetings.
These mandatory, hour-long sessions were run by Howser, who presented a series
of overhead slides, handouts, and lectures about “some of the proven management
techniques that were successful in the insurance industry.” The meetings
typically ran past the allotted time frame and rarely if ever covered all of
the agenda items.
Howser spent some of his time
“enhancing community relations.” He was very generous with many local groups
such as the historical society, the garden clubs, the recreational sports
programs, the middle-and high-school band programs, and others. In less than
six months he had written checks and authorized donations totaling more than
$25,000. He was delighted about all this and was certain that such gestures of
goodwill would pay off handsomely in the future.
As for the budget, Howser carefully
reviewed each line item in search of ways to increase revenues and cut
expenses. He then proceeded to increase the expected base or quota for
attorney’s monthly billable hours, thus directly affecting their profit sharing
and bonus program. On the other side, he significantly reduced the attorneys’
annual budget for travel, meals, and entertainment. He considered these to be
frivolous and unnecessary. Howser decided that one of the two full-time
administrative assistant positions in each office should be reduced to
part-time with no benefits. He saw no reason why the current workload could not
be completed within this model. Howser wrapped up his initial financial review
and action plan by posting notices throughout each office with new rules
regarding the use of copy machines, phones, and supplies.
Howser completed the first year of
his tenure with the required executive summary report to the partners that
included his analysis of the current status of each department and his action
plan. The partners were initially impressed with both Howser’s approach to the
new job and with the changes that he made. They all seemed to make sense and
were directly in line with the key components of his job description. At the
same time, “the office rumor mill and grape vine” had “heated up” considerably.
Company morale, which had been quite high, was now clearly waning. The water
coolers and hallways became the frequent meeting places of disgruntled
employees.
As for the marketplace, while the
partner did not expect to see an immediate influx of new clients, they
certainly did not expect to see shrinkage in their existing client base. A
number of individual and corporate clients took their business elsewhere, still
fuming over the letter they had received.
The partners met with Howser to
discuss the situation. Howser urged them to “sit tight and ride out the storm.”
He had seen this happen before and had no doubt that in the long run the firm
would achieve all of its goals. Howser pointed out that people in general are
resistant to change. The partners met for drinks later that day and looked at
each other with a great sense of uncertainty. Should they ride out the storm as
Howser suggested? Had they done the right thing in creating the position and
hiring Howser? What had started as a seemingly, wise, logical, and smooth
sequence of events had now become a crisis.
Questions
1.
Do you
agree with Howser’s suggestion to “sit tight and ride out the storm,” or should
the partners take some action immediately? If so, what actions specifically?
2.
Assume
that the creation of the GM—Operation position was a good decision. What
leadership style and type of individual would you try to place in this
position?
3.
Consider
your own leadership style. What types of positions and situations should you
seek? What types of positions and situation should you seek to avoid? Why?
CASE –
5 The Grizzly Bear Lodge
Diane and Rudy Conrad own a small
lodge outside Yellowstone National Park. Their lodge has 15 rooms that can
accommodate up to 40 guests, with some rooms set up for families. Diane and
Rudy serve a continental breakfast on weekdays and a full breakfast on weekends,
included in the room they charge. Their busy season runs from May through
September, but they remain open until Thanksgiving and reopen in April for a
short spring season. They currently employ one cook and two waitpersons for the
breakfasts on weekends, handling the other breakfasts themselves. They also
have several housekeeping staff members, a groundkeeper, and a front-desk
employee. The Conrads take pride in the efficiency of their operation,
including the loyalty of their employees, which they attribute to their own
form of clan control. If a guest needs something—whether it’s a breakfast
catered to a special diet or an extra set of towels—Grizzly Bear workers are
empowered to supply it.
The Conrads are considering expanding
their business. They have been offered the opportunity to buy the property next
door, which would give them the space to build an annex containing an
additional 20 rooms. Currently, their annual sales total $300,000. With
expenses running $230,000—including mortgage, payroll, maintenance, and so
forth—the Conrads’ annual income is $70,000. They want to expand and make
improvements without cutting back on the personal service they offer to their
guests. In fact, in addition to hiring more staff to handle the larger facility,
they are considering collaborating with more local business to offer guided
rafting, fishing, hiking, and horseback riding trips. They also want to expand
their food service to include dinner during the high season, which means
renovating the restaurant area of the lodge and hiring more kitchen and wait
staff. Ultimately, the Conrads would like the lodge to open year-round,
offering guests opportunities to cross-country ski, ride snow-mobiles, or hike
in winter. They hope to offer holiday packages for Thanksgiving, Christmas, and
New Year’s celebrations in the great outdoors. The Conrads report that their
employees are enthusiastic about their plans and want to stay with them through
the expansion process. “This is our dream business,” says Rudy. “We’re only at
the beginning.”
Questions
1.
Discuss
how Rudy and Diane can use feedforward, concurrent, and feedback controls both
now and in future at the Grizzly Bear Lodge to ensure their guests’
satisfaction.
2.
What
might be some of the fundamental budgetary considerations the Conrads would
have as they plan the expansion of their logic?
3.
Describe
how the Conrads could use market controls plans and implement their
expansion.
Note: Solve
any 4 Cases Study’s
CASE: I Enterprise
Builds On People
When
most people think of car-rental firms, the names of Hertz and Avis usually come
to mind. But in the last few years, Enterprise Rent-A-Car has overtaken both of
these industry giants, and today it stands as both the largest and the most
profitable business in the car-rental industry. In 2001, for instance, the firm
had sales in excess of $6.3 billion and employed over 50,000 people.
Jack Taylor started Enterprise in St.
Louis in 1957. Taylor had a unique strategy in mind for Enterprise, and that
strategy played a key role in the firm’s initial success. Most car-rental firms
like Hertz and Avis base most of their locations in or near airports, train
stations, and other transportation hubs. These firms see their customers as
business travellers and people who fly for vacation and then need
transportation at the end of their flight. But Enterprise went after a
different customer. It sought to rent cars to individuals whose own cars are
being repaired or who are taking a driving vacation.
The firm got its start by working
with insurance companies. A standard feature in many automobile insurance
policies is the provision of a rental car when one’s personal car has been in
an accident or has been stolen. Firms like Hertz and Avis charge relatively
high daily rates because their customers need the convenience of being near an
airport and/or they are having their expenses paid by their employer. These
rates are often higher than insurance companies are willing to pay, so
customers who these firms end up paying part of the rental bills themselves. In
addition, their locations are also often inconvenient for people seeking a
replacement car while theirs is in the shop.
But Enterprise located stores in
downtown and suburban areas, where local residents actually live. The firm also
provides local pickup and delivery service in most areas. It also negotiates
exclusive contract arrangements with local insurance agents. They get the
agent’s referral business while guaranteeing lower rates that are more in line
with what insurance covers.
In recent years, Enterprise has
started to expand its market base by pursuing a two-pronged growth strategy.
First, the firm has started opening
airport locations to compete with Hertz and Avis more directly. But their
target is still the occasional renter than the frequent business traveller.
Second, the firm also began to expand into international markets and today has
rental offices in the United Kingdom, Ireland and Germany.
Another key to Enterprise’s success
has been its human resource strategy. The firm targets a certain kind of
individual to hire; its preferred new employee is a college graduate from
bottom half of graduating class, and preferably one who was an athlete or who
was otherwise actively involved in campus social activities. The rationale for
this unusual academic standard is actually quite simple. Enterprise managers do
not believe that especially high levels of achievements are necessary to
perform well in the car-rental industry, but having a college degree nevertheless
demonstrates intelligence and motivation. In addition, since interpersonal
relations are important to its business, Enterprise wants people who were
social directors or high-ranking officers of social organisations such as
fraternities or sororities. Athletes are also desirable because of their
competitiveness.
Once hired, new employees at
Enterprise are often shocked at the performance expectations placed on them by
the firm. They generally work long, grueling hours for relatively low pay.
And all Enterprise managers are
expected to jump in and help wash or vacuum cars when a rental agency gets
backed up. All Enterprise managers must wear coordinated dress shirts and ties
and can have facial hair only when “medically necessary”. And women must wear skirts
no shorter than two inches above their knees or creased pants.
So what are the incentives for
working at Enterprise? For one thing, it’s an unfortunate fact of life that
college graduates with low grades often struggle to find work. Thus, a job at
Enterprise is still better than no job at all. The firm does not hire
outsiders—every position is filled by promoting someone already inside the
company. Thus, Enterprise employees know that if they work hard and do their
best, they may very well succeed in moving higher up the corporate ladder at a
growing and successful firm.
Question:
1.
Would
Enterprise’s approach human resource management work in other industries?
2.
Does
Enterprise face any risks from its human resource strategy?
3.
Would
you want to work for Enterprise? Why or why not?
CASE: II Doing The
Dirty Work
Business magazines and newspapers
regularly publish articles about the changing nature of work in the United
States and about how many jobs are being changed. Indeed, because so much has
been made of the shift toward service-sector and professional jobs, many people
assumed that the number of unpleasant an undesirable jobs has declined.
In fact, nothing could be further
from the truth. Millions of Americans work in gleaming air-conditioned
facilities, but many others work in dirty, grimy, and unsafe settings. For
example, many jobs in the recycling industry require workers to sort through
moving conveyors of trash, pulling out those items that can be recycled. Other
relatively unattractive jobs include cleaning hospital restrooms, washing
dishes in a restaurant, and handling toxic waste.
Consider the jobs in a
chicken-processing facility. Much like a manufacturing assembly line, a
chicken-processing facility is organised around a moving conveyor system.
Workers call it the chain. In reality, it’s a steel cable with large clips that
carries dead chickens down what might be called a “disassembly line.” Standing
along this line are dozens of workers who do, in fact, take the birds apart as
they pass.
Even the titles of the jobs are
unsavory. Among the first set of jobs along the chain is the skinner. Skinners
use sharp instruments to cut and pull the skin off the dead chicken. Towards
the middle of the line are the gut pullers. These workers reach inside the
chicken carcasses and remove the intestines and other organs. At the end of the
line are the gizzard cutters, who tackle the more difficult organs attached to
the inside of the chicken’s carcass. These organs have to be individually cut
and removed for disposal.
The work is obviously distasteful,
and the pace of the work is unrelenting. On a good day the chain moves an
average of ninety chickens a minute for nine hours. And the workers are
essentially held captive by the moving chain. For example, no one can vacate a
post to use the bathroom or for other reasons without the permission of the
supervisor. In some plants, taking an unauthorised bathroom break can result in
suspension without pay. But the noise in a typical chicken-processing plant is
so loud that the supervisor can’t hear someone calling for relief unless the
person happens to be standing close by.
Jobs such as these on the
chicken-processing line are actually becoming increasingly common. Fuelled by
Americans’ growing appetites for lean, easy-to-cook meat, the number of poultry
workers has almost doubled since 1980, and today they constitute a work force
of around a quarter of a million people. Indeed, the chicken-processing
industry has become a major component of the state economies of Georgia, North
Carolina, Mississippi, Arkansas, and Alabama.
Besides being unpleasant and dirty,
many jobs in a chicken-processing plant are dangerous and unhealthy. Some
workers, for example, have to fight the live birds when they are first hung on
the chains. These workers are routinely scratched and pecked by the chickens.
And the air inside a typical chicken-processing plant is difficult to breathe.
Workers are usually supplied with paper masks, but most don’t use them because
they are hot and confining.
And the work space itself is so tight
that the workers often cut themselves—and sometimes their coworkers—with the
knives, scissors, and other instruments they use to perform their jobs. Indeed,
poultry processing ranks third among industries in the United States for
cumulative trauma injuries such as carpet tunnel syndrome. The inevitable
chicken feathers, faeces, and blood also contribute to the hazardous and
unpleasant work environment.
Question:
1.
How
relevant are the concepts of competencies to the jobs in a chicken-processing
plant?
2.
How
might you try to improve the jobs in a chicken-processing plant?
3.
Are
dirty, dangerous, and unpleasant jobs an inevitable part of any economy?
CASE: III On Pegging
Pay to Performance
“As
you are aware, the Government of India has removed the capping on salaries of
directors and has left the matter of their compensation to be decided by
shareholders. This is indeed a welcome step,” said Samuel Menezes, president
Abhayankar, Ltd., opening the meeting of the managing committee convened to
discuss the elements of the company’s new plan for middle managers.
Abhayankar was am engineering firm
with a turnover of Rs 600 crore last year and an employee strength of 18,00.
Two years ago, as a sequel to liberalisation at the macroeconomic level, the
company had restructured its operations from functional teams to product teams.
The change had helped speed up transactional times and reduce systemic
inefficiencies, leading to a healthy drive towards performance.
“I think it is only logical that
performance should hereafter be linked to pay,” continued Menezes. “A scheme in
which over 40 per cent of salary will be related to annual profits has been
evolved for executives above the vice-president’s level and it will be
implemented after getting shareholders approval. As far as the shopfloor staff
is concerned, a system of incentive-linked monthly productivity bonus has been
in place for years and it serves the purpose of rewarding good work at the
assembly line. In any case, a bulk of its salary will have to continue to be
governed by good old values like hierarchy, rank, seniority and attendance. But
it is the middle management which poses a real dilemma. How does one evaluate
its performance? More importantly, how can one ensure that managers are not
shortchanged but get what they truly deserve?”
“Our vice-president (HRD), Ravi
Narayanan, has now a plan ready in this regard. He has had personal discussions
with all the 125 middle managers individually over the last few weeks and the
plan is based on their feedback. If there are no major disagreements on the
plan, we can put it into effect from next month. Ravi, may I now ask you to
take the floor and make your presentation?”
The lights in the conference room
dimmed and the screen on the podium lit up. “The plan I am going to unfold,”
said Narayanan, pointing to the data that surfaced on the screen, “is designed
to enhance team-work and provide incentives for constant improvement and
excellence among middle-level managers. Briefly, the pay will be split into two
components. The first consists of 75 per cent of the original salary and will
be determined, as before, by factors of internal equity comprising what Sam
referred to as good old values. It will be a fixed component.”
“The second component of 25 per
cent,” he went on, “will be flexible. It will depend on the ability of each
product team as a whole to
show a minimum of 5 per cent improvement in five areas
every month—product quality, cost control, speed of delivery, financial
performance of the division to which the product belongs and, finally,
compliance with safety and environmental norms. The five areas will have rating
of 30, 25, 20, 15, and 10 per cent respectively.
“This, gentlemen, is the broad premise.
The rest is a matter of detail which will be worked out after some finetuning.
Any questions?”
As the lights reappeared, Gautam
Ghosh, vice-president (R&D), said, “I don’t like it. And I will tell you
why. Teamwork as a criterion is okay but it also has its pitfalls. The people I
take on and develop are good at what they do. Their research skills are
individualistic. Why should their pay depend on the performance of other
members of the product team? The new pay plan makes them team players first and
scientists next. It does not seem right.”
“That is a good one, Gautam,” said
Narayanan. “Any other questions? I think I will take them all together.”
“I have no problems with the scheme
and I think it is fine. But just for the sake of argument, let me take Gautam’s
point further without meaning to pick holes in the plan,” said Avinash Sarin,
vice-president (sales). “Look at my dispatch division. My people there have
reduced the shipping time from four hours to one over the last six months. But
what have they got? Nothing. Why? Because the other members of the team are not
measuring up.”
“I think that is a situation which is
bound to prevail until everyone falls in line,” intervened Vipul Desai, vice
president (finance). “There would always be temporary problems in implementing
anything new. The question is whether our long term objectives is right. To the
extend that we are trying to promote teamwork, I think we are on the right
track. However, I wish to raise a point. There are many external factors which impinge
on both individual and collective performance. For instance, the cost of a raw
material may suddenly go up in the market affecting product profitability. Why
should the concerned product team be penalised for something beyond its
control?”
“I have an observation to make too,
Ravi,” said Menezes, “You would recall the survey conducted by a business
fortnightly on ‘The ten companies Indian managers fancy most as a working
place’. Abhayankar got top billings there. We have been the trendsetters in
executive compensation in Indian industry. We have been paying the best. Will
your plan ensure that it remains that way?”
As he took the floor again, the
dominant thought in Narayanan’s mind was that if his plan were to be put into
place, Abhayankar would set another new trend in executive compensation.
Question:
But how should he see it through?
CASE: IV Crisis Blown Over
November
30, 1997 goes down in the history of a Bangalore-based electric company as the
day nobody wanting it to recur but everyone recollecting it with sense of
pride.
It was a festive day for all the
700-plus employees. Festoons were
strung all over, banners were put up; banana trunks and leaves adorned the
factory gate, instead of the usual red flags; and loud speakers were blaring
Kannada songs. It was day the employees chose to celebrate Kannada Rajyothsava,
annual feature of all Karnataka-based organisations. The function was to start
at 4 p.m. and everybody was eagerly waiting for the big event to take place.
But the event, budgeted at Rs
1,00,000 did not take place. At around 2 p.m., there was a ghastly accident in
the machine shop. Murthy was caught in the vertical turret lathe and was
wounded fatally. His end came in the ambulance on the way to hospital.
The management sought union help, and
the union leaders did respond with a positive attitude. They did not want to
fish in troubled waters.
Series of meetings were held between
the union leaders and the management. The discussions centred around two major
issues—(i) restoring normalcy, and (ii) determining the amount of compensation
to be paid to the dependants of Murthy.
Luckily for the management, the
accident took place on a Saturday. The next day was a weekly holiday and this
helped the tension to diffuse to a large extent. The funeral of the deceased
took place on Sunday without any hitch. The management hoped that things would
be normal on Monday morning.
But the hope was belied. The workers
refused to resume work. Again the management approached the union for help. Union
leaders advised the workers to resume work in al departments except in the
machine shop, and the suggestions was accepted by all.
Two weeks went by, nobody entered the
machine shop, though work in other places resumed. Union leaders came with a
new idea to the management—to perform a pooja to ward off any evil that had
befallen on the lathe. The management accepted the idea and homa was performed
in the machine shop for about five hours commencing early in the morning. This
helped to some extent. The workers started operations on all other machines in
the machine shop except on the fateful lathe. It took two full months and a lot
of persuasion from the union leaders for the workers to switch on the lathe.
The crisis was blown over, thanks to
the responsible role played by the union leaders and their fellow workers.
Neither the management nor the workers wish that such an incident should recur.
As the wages of the deceased grossed
Rs 6,500 per month, Murthy was not covered under the ESI Act. Management had to
pay compensation. Age and experience of the victim were taken into account to
arrive at Rs 1,87,000 which was the
amount to be payable to the wife of the deceased. To this was added Rs 2,50,000
at the intervention of the union leaders. In addition, the widow was paid a
gratuity and a monthly pension of Rs 4,300. And nobody’s wages were cut for the
days not worked.
Murthy’s death witnessed an unusual
behavior on the part of the workers and their leaders, and magnanimous gesture
from the management. It is a pride moment in the life of the factory.
Question:
1.
Do you
think that the Bangalore-based company had practised participative management?
2.
If
your answer is yes, with what method of participation (you have read in this
chapter) do you relate the above case?
3.
If you
were the union leader, would your behaviour have been different? If yes, what
would it be?
CASE: V A Case of
Burnout
When
Mahesh joined XYZ Bank (private sector) in 1985, he had one clear goal—to prove
his mettle. He did prove himself and has been promoted five times since his
entry into the bank. Compared to others, his progress has been fastest.
Currently, his job demands that Mahesh should work 10 hours a day with
practically no holidays. At least two day in a week, Mahesh is required to
travel.
Peers and subordinates at the bank
have appreciation for Mahesh. They don’t grudge the ascension achieved by
Mahesh, though there are some who wish they too had been promoted as well.
The post of General Manager fell
vacant. One should work as GM for a couple of years if he were to climb up to
the top of the ladder, Mahesh applied for the post along with others in the
bank. The Chairman assured Mahesh that the post would be his.
A sudden development took place which
almost wrecked Mahesh’s chances. The bank has the practice of subjecting all
its executives to medical check-up once in a year. The medical reports go
straight to the Chairman who would initiate remedials where necessary. Though
Mahesh was only 35, he too, was required to undergo the test.
The Chairman of the bank received a
copy of Mahesh’s physical examination results, along with a note from the
doctor. The note explained that Mahesh was seriously overworked, and
recommended that he be given an immediate four-week vacation. The doctor also
recommended that Mahesh’s workload must be reduced and he must take physical
exercise every day. The note warned that if Mahesh did not care for advice, he
would be in for heart trouble in another six months.
After
reading the doctor’s note, the Chairman sat back in his chair, and started
brooding over. Three issues were uppermost in his mind—(i) How would Mahesh
take this news? (ii) How many others do have similar fitness problems? (iii)
Since the environment in the bank helps create the problem, what could he do to
alleviate it? The idea of holding a stress-management programme flashed in his
mind and suddenly he instructed his secretary to set up a meeting with the
doctor and some key staff members, at the earliest.
Question:
1.
If the
news is broken to Mahesh, how would he react?
2.
If you
were giving advice to the Chairman on this matter, what would you recommend?
CASE: VI “Whose Side
are you on, Anyway?”
It
was past 4 pm and Purushottam Mahesh was still at his shopfloor office. The
small but elegant office was a perk he was entitled to after he had been
nominated to the board of Horizon Industries (P) Ltd., as workman-director six
months ago. His shift generally ended at 3 pm and he would be home by late
evening. But that day, he still had long hours ahead of him.
Kshirsagar had been with Horizon for
over twenty years. Starting off as a substitute mill-hand in the paint shop at
one of the company’s manufacturing facilities, he had been made permanent on
the job five years later. He had no formal education. He felt this was a
handicap, but he made up for it with a willingness to learn and a certain
enthusiasm on the job. He was soon marked by the works manager as someone to
watch out for. Simultaneously, Kshirsagar also came to the attention of the
president of the Horizon Employees’ Union who drafted him into union
activities.
Even while he got promoted twice
during the period to become the head colour mixer last year, Kshirsagar had
gradually moved up the union hierarchy and had been thrice elected secretary of
the union. Labour-management relations at Horizon were not always cordial. This
was largely because the company had not been recording a consistently good
performance. There were frequent cuts in production every year because of
go-slows and strikes by workmen—most of them related to wage hikes and bonus
payments. With a view to ensuring a better understanding on the part of labour,
the problems of company management, the Horizon board, led by chairman and
managing director Aninash Chaturvedi, began to toy with idea of taking on a
workman on the board. What started off as a hesitant move snowballed, after a
series of brainstorming sessions with executives and meetings with the union
leaders, into a situation in which Kshirsagar found himself catapulted to the
Horizon board as work-man-director.
It was an untested ground for the
company. But the novelty of it all excited both the management and the labour
force. The board members—all functional heads went out of their way to make
Kshirsagar comfortable and the latter also responded quite well. He got used to
the ambience of the boardroom and the sense of power it conveyed.
Significantly, he was soon at home with the perspectives of top management and
began to see each issue from both sides.
It was smooth going until the union
presented a week before the monthly board meeting, its charter of demands, one
of which was a 30 per cent across-the board hike in wages. The matter was taken
up at the board meeting as part of a special agenda.
“Look at what your people are asking
for,” said Chaturvedi, addressing Kshirsagar with a sarcasm that no one in the
board missed. “You know the precarious finances of the company. How could you
be a party to a demand that can’t be met? You better explain to them how
ridiculous the demands are,” he said.
“I don’t think they can all be
dismissed as ridiculous,” said Kshirsagar. “And the board can surely consider
the alternatives. We owe at least that much to the union.” But Chaturvedi
adjourned the meeting in a huff, mentioning, once to Kshirsagar that he should
“advise the union properly”.
When Kshirsagar told the executive
committee members of the union that the board was simply not prepared to even
consider the demands, he immediately sensed the hostility in the room. “You are
a sell out,” one of them said. “Who do you really represent—us or them?” asked
another.
“Here comes the crunch,” thought
Kshirsagar. And however hard he tried to explain, he felt he was talking to a
wall.
A victim of divided loyalities, he
himself was unable to understand whose side he was on. Perhaps the best course
would be to resign from the board. Perhaps he should resign both from the board
and the union. Or may be resign from Horizon itself and seek a job elsewhere. But,
he felt, sitting in his office a little later, “none of it could solve the
problem.”
Question:
1.
What
should he do?
Note: Solve any
4 Cases Study’s
CASE: I Managing the Guinness
brand in the face of consumers’ changing tastes
1997 saw the US$19 billion merger of Guinness and GrandMet to form Diageo, the
world’s largest drinks company. Guinness was the group’s top-selling beverage
after Smirnoff vodka, and the group’s third most profitable brand, with an
estimated global value of US$1.2 billion. More than 10 million glasses of the
popular stout were sold every day, predominantly in Guinness’s top markets:
respectively, the UK, Ireland, Nigeria, the USA and Cameroon.
However, the famous dark stout with the
white, creamy head was causing some strategic concerns for Diageo. In 1999, for
the first time in the 241-year of Guinness, sales fell. In early 2002 Diageo
CEO Paul Walsh announced to the group’s concerned shareholders that global
volume growth of Guinness was down 4 per cent in the last six months of 2001
and, more alarmingly, sales were also down 4 per cent in its home market,
Ireland. How should Diageo address falling sales in the centuries-old brand
shrouded in Irish mystique and tradition?
The changing face of
the Irish beer market
The Irish were very fond of beer and even
fonder of Guinness. With close to 200 litres per capita drunk each year—the
equivalent of one pint per person per day—Ireland ranked top in worldwide per
capita beer consumption, ahead of the Czech Republic and Germany.
Beer accounted for two-thirds of all alcohol
bought in Ireland in 2001. Stout led the way in volume sales and accounted for
40 per cent of all beer value sales. Guinness, first brewed in 1759 in Dublin
by Arthur Guinness, enjoyed legendary status in Ireland, a national symbol as
respected as the green, white and gold flag. It was by far the most popular
alcoholic drink in Ireland, accounting for nearly one of every two pints of
beer sold. Its nearest competitors were Budweiser and Heineken, which held 13
per cent and 12 per cent of the market respectively.
However, the spectacular economic growth of
the Irish economy since the mid-1990s had opened up the traditional drinking
market to new cultures and influences, and encouraged the travel-friendly Irish
to try other drinks. Beer and in particular stout were losing popularity
compared with wine or the recently launched RTDs (ready-to-drinks) or FABs
(flavoured alcoholic beverages), which the younger generation of drinkers
considered trendier and ‘healthier’. As a Euromonitor report explained: Younger
consumers consider dark beers and stout to be old fashioned drinks, with the perceived
stout or ale drinker being an old, slightly overweight man and thus not in tune
with image conscious youth culture.
Beer sales, which once accounted for 75 per
cent of all alcohol bought in Ireland, were expected to drop to close to 50 per
cent by 2006, while stout sales were forecast to decrease by 12 per cent
between 2002 and 2006.
Giving Guinness a
boost in its home market
With Guinness alone accounting for 37 per
cent of Diageo’s volume in the market, Guinness/UDV Ireland was one of the
first to feel the pain caused by the declining popularity of beer and in
particular stout. A Euromonitor report in February 2002 explained how the
profile of the Guinness drinker, typically men aged 21-plus, was affected: The
average age of Guinness drinkers is rising and this is bringing about the
worrying fact that the size of the Guinness target audience is falling. The
rate of decline is likely to quicken as the number of less brand loyal,
non-stout drinking younger consumers increases.
The report continued:
In Ireland, in particular, the consumer base
for Guinness is shrinking as the majority of 18 to 24 year olds consistently
reject stout as a product relevant to their generation, opting instead to
consume lager or spirits.
Effectively, one-third of young Irish men and
half of young Irish women had reportedly never tried Guinness. A Guinness
employee provided another explanation. Guinness is similar to coffee in that
when you’re young you drink it [coffee] with sugar, but when you’re older you
drink it without. It’s got a similar acquired taste and once you’re over the
initial hurdle, you’ll fall in love with it.
In an attempt to lure young drinkers to the
somewhat ‘acquired’ Guinness taste (40 per cent of the Irish population was
under the age of 24) Diageo had invested millions in developing product
innovations and brand building in Ireland’s 10,000 pubs, clubs and
supermarkets.
Product innovation
Until the mid-1990s most Guinness in Ireland
was drunk in a pint glass in the local pub. The launch of product innovations
in the form of a new cooling mechanism for draft Guinness and the ‘widget’
technology applied to cans and bottles attempted to modernize the brand’s image
and respond to increasing competition from other local and imported stouts and
lagers.
‘A perfect head’ for canned Guinness
In 1989, and at a cost of more than £10
million, Guinness developed an ingenious ‘widget’ device for its canned draft
stout sold in ‘off-trade’ outlets such as supermarkets and off-licences. The
widget, placed in the bottom of the can, released a gas that replicated the
draft effect.
Although over 90 per cent of beer in Ireland
was sold in ‘on-trade’ pubs and bars, sale of beer in the cheaper ‘off-trade’
channel were slowly gaining in importance. The Guinness brand manager at the
time, John O’Keeffe, explained how home drinkers could now enjoy a smoother,
creamier head similar to the one obtained in a pub thanks to the new widget
technology:
When the can is opened, the pressure causes
the nitrogen to be released as the widget moves through the beer, creating the
classic draft Guinness surge.
Nearly 10 years later, in 1997, the ‘floating
widget’ was introduced, which improved the effectiveness of the device.
A colder pint
In 1997 Guinness Draft Extra Cold was
launched in Ireland. An additional chilled tap system could be added to the
standard barrel in pubs, allowing the Guinness to be served at 4ºC rather than
the normal 6ºC. By serving Guinness at a cooler temperature, Guinness/UDV hoped
to mute the bitter taste of the stout and make it more palatable for younger
adults, who were increasingly accustomed to drinking chilled lager,
particularly in the summer
A cooler image for
Guinness
In October 1999 the widget technology was
applied to long-stemmed bottles of Guinness. The launch was supported by a US$2
million TV and outdoor board campaign. The packaging—with a clear, shiny
plastic wrap, designed to look like a pint complete with creamy head—was quite
a departure from the traditional Guinness look.
The objective was to reposition Guinness
alongside certain similarly packaged lagers and RTDs and offer younger adults a
more fashionable way to drink Guinness: straight from the bottle. It also gave
Guinness easier access to the growing number of clubs and bars that were less
likely to serve traditional draft Guinness easier access to the growing number
of clubs and bars that were less likely to serve traditional draft Guinness,
which could be kept for only six to eight weeks and took two minutes to pour.
The RTDs, by contrast, had a shelf-life of more than a year and were drunk
straight from the bottle.
However, financial analyst remained sceptical
about the Guinness product innovations, which had no significant positive
impact on sales or profitability:
The last news about the success of the
recently introduced innovations suggests that they have not had a notably
material impact on Guinness brand performance.
Brand building
Euromonitor estimates that, in 2000, Diageo
invested between US$230 and US$250 million worldwide in Guinness advertising
and promotions. However, with a cost-cutting objective, the company reduced
marketing expenses in both Ireland and the UK up to 10 per cent in 2001 and the
number of global Guinness agencies from six to two.
Nevertheless, Guinness remained one of the
most advertised brands in Ireland. It was the leading cinema advertiser and, in
terms of advertising, was second only to the national telecoms provider,
Eircom. Guinness was also heavily promoted at leading sporting and music
events, in particular those that were popular with the younger age groups.
The ultimate tribute to the brand was the
opening of the new Guinness Storehouse in Dublin in late 2000, a sort of Mecca
for all Guinness fans. The Storehouse was also a fashionable visitor centre
with an art gallery and restaurants, and regularly hosted evening events. The
company’s design brief highlighted another key objective:
To use an ultramodern facility to breathe
life into an ageing brand, to reconnect an old company with young (sceptical)
customers.
As the Storehouse’s design firm’s director,
Ralph Ardill, explained:
Guinness Storehouse had become the top
tourist destination in Ireland, attracting more than half a million people and
hosting 45,000 people for special events and training.
The Storehouse also had training facilities
for Guinness’s bartenders and 3000 Irish employees. The quality of the Guinness
pint remained a high priority for the company, which not only developed
pub-like classrooms at the Storehouse but also employed teams of draft
technicians to teach barmen how to pour a proper pint. The process involved two
steps—the pour and the top-up—and took a total of 119.5 seconds. Barmen also
needed to learn how to check that the pressure gauges were properly set and
that the proportion of nitrogen to carbon dioxide in the gas was correct.
The uncertain future
of the Guinness brand in Ireland
Despite Guinness/DUV’s attempt to appeal to
the younger generation of drinkers and boost its fading image, rumours
persisted in Ireland about the brand future. The country’s leading and
respected newspaper, the Irish times, reported in an article in July 2001:
The uncertainty over its future all adds to
the air of crisis that is building around Guinness Ireland Group four months
ago…The review is not complete and the assumption is that there is more bad
news to come.
In the pubs across Ireland, the traditional
Guinness drinkers looked on anxiously as the younger generation drank Bacardi
Breezers, Smirnoff Ices or Californian wines. Could the goliath Guinness
survive another two centuries? Was the preference for these new drinks just a
fad or fashion, or did Diageo need to seriously reconsider how it marketed
Guinness?
A quick solution?
In late February 2002, Diageo CEO Paul Walsh
revealed that the company was testing technology to cut the waiting time for a
pint of Guinness from 1 minute 59 seconds to 15-25 seconds. Ultrasound could
release bubbles in the stout and form the head instantly, making a pint of
Guinness that would be indistinguishable from one produced by the slower,
traditional method.
‘A two-minute pour is not relevant to our
customers today,’ Walsh said. A Guinness spokeswoman continued, ‘We have got to
move with the times and the brand must evolve. We must take all the opportunities
that we can. In outlets where it is really busy, if you walk in after nine
o’clock in the evening there will be a cloth over the Guinness pump because it
takes longer to pour than other drinks. Aware that some consumers might not be
attracted by the innovation, she added ‘It wouldn’t be put everywhere—only
where people want a quick pint with no effect on the quality.’
Although still being tested, the ‘quick-pour
pint’ was a popular topic of conversation in Dublin pubs, among barmen and
customers alike. There were rumours that it would be introduced in Britain
only; others thought it would be released worldwide.
Some market commentators viewed the
quick-pour pint as an innovative way to appeal to the younger, less patient
segment in which Guinness had under-performed. Others feared that the young
would be unconvinced by the introduction, and loyal customers would be turned
off by what they characterized as a ‘marketing u-turn’.
Question:
1.
From
a marketing perspective, what has Guinness done to ensure its longevity?
2.
How
would you characterize the Guinness brand?
3.
What
could Guinness do to attract younger drinkers? And to retain its older loyal
customer base? Can both be done at the same time?
CASE: II The grey market
Introduction
The over-50s market has long been ignored by
advertising and marketing firms in favour of the market. The complexity of how
to appeal to today’s mature customers, without targeting their age, has proved
just too challenging for many companies. But this preoccupation with youth runs
counter to demo-graphic changes. The over-50s represent the largest segment of
the population, across western developed countries, due largely to the
post-Second World War baby boom. The sheer size of this grey market, which will
continue to grow as birth and mortality rates fall, coupled with its phenomenal
spending power, presents enormous opportunities for business. However,
successfully unleashing its potential will depend on companies truly
understanding the attitudes, lifestyles and purchasing interests of this
post-war generation.
Demographic forces
Following the Second World War many countries
experienced a baby boom phenomenon as returning soldiers began families. This,
coupled with a more positive outlook on the future, resulted in the baby boom
generation, born between 1946 and 1964. Now beginning to enter retirement, this
affluent group globally numbers approximately 532 million. In Western Europe
they account for the largest proportion of the total population at 14.9%, followed
closely by 14.2% in North America and 13.5 % in Australia.
Table 1: Global population aged 45-54 by
region: baby boomers as a % of the total population 1990/2002
|
Baby boomers as a % total population
|
1990
|
2002
|
% point change
|
|
Western Europe
|
12.9
|
14.9
|
2.0
|
|
North America
|
9.9
|
14.2
|
4.3
|
|
Australasia
|
10.4
|
13.5
|
3.1
|
|
Eastern Europe
|
9.7
|
13.0
|
3.3
|
|
Asia-Pacific
|
7.8
|
9.8
|
2.0
|
|
Latin America
|
6.6
|
8.4
|
1.8
|
|
Africa/Middle East
|
2.6
|
2.3
|
20.3
|
|
WORLD
|
7.9
|
9.5
|
1.6
|
The grey market is
big and getting bigger. Between 1990 and 2002 the global baby boomer population
increased by 41%. The rate of growth is predicted to decrease to 35% between
2002 and 2015. Particularly noteworthy is the predicted increase in the
proportion of baby boomers in many Western European countries, such as Austria,
Spain, Germany, Italy, and the UK. In developed countries, according to the
United Nations, the percentage of elderly people (60+) is forecast to rise from
one-fifth of the population to one-third by 2050. The growth in the elderly
population
Attempt
Only 4 Case Study
CASE – 1 MANAGING HINDUSTAN UNILEVER STRATEGICALLY
Unilever
is one of the world’s oldest multinational companies. Its origin goes back to
the 19th century when a group of companies operating independently,
produced soaps and margarine. In 1930, the companies merged to form Unilever
that diversified into food products in 1940s. Through the next five decades, it
emerged as a major fast-moving consumer goods (FMCG) multinational operating in
several businesses. In 2004, the Unilever 2010 strategic plan was put into
action with the mission to ‘bring vitality to life’ and ‘to meet everyday needs
for nutrition, hygiene and personal care with brands that help people feel
good, look good, and get more out of life’. The corporate strategy is of
focusing on bore businesses of food, home care and personal care. Unilever
operates in more than 100 countries, has a turnover of € 39.6 billion and net
profit of € 3.685 billion in 2006 and derives 41 per cent of its income from
the developing and emerging economies around the world. It has 179,000
employees and is a culturally-diverse organisation with its top management
coming from 24 nations. Internationalisation is based on the principle of local
roots with global scale aimed at becoming a ‘multi-local multinational’.
The genesis of Hindustan Unilever
(HUL) in India, goes back to 1888 when Unilever exported Sunlight soap to
India. Three Indian, subsidiaries came into existence in the period 1931-1935
that merged to form Hindustan Lever in 1956. Mergers and acquisitions of Lipton
(1972), Brooke Bond (1984), Ponds (1986), TOMCO (1993), Lakme (1998) and Modern
Foods (2002) have resulted in an organisation that is a conglomerate of several
businesses that have been continually restructured over the years.
HUL is one of the largest FMCG
company in India with total sales of Rs. 12,295 crore and net profit of
1855crore in 2006. There are over 15000 employees, including more than 1300
managers. The present corporate strategy of HUL is to focus on core businesses.
These core businesses are in home and personal care and food. There are 20
different consumer categories in these two businesses. For instance, home and
personal care is made up of personal wash, laundry, skin care, hair care, oral
care, deodorants, colour cosmetics and ayurvedic
personal and health care, while food businesses have tea, coffee, ice creams
and processed food brands. Apart from the two product divisions, there are
separate departments for specialty exports and new ventures.
Strategic management at HUL is the
responsibility of the board of directors headed by a chairman. There are five
independent and five whole-time directors. The operational management is looked
after by a management committee comprising of Vice Chairman, CEO and managing
director and executive directors of the two business divisions and functional
areas. The divisions have a lot of autonomy with dedicated assets and
resources. A divisional committee having the executive director and heads of
functions of sales, commercial and manufacturing looks after the business level
decision-making. The functional-level management is the responsibility of the
functional head. For instance, a marketing manager has a team of brand managers
looking after the individual brands. Besides the decentralised divisional
structure, HUL has centralised some functions such as finance, human resource
management, research, technology, information technology and corporate and
legal affairs.
Unilever globally and HUL nationally,
operate in the highly competitive FMCG markets. The consumer markets for FMCG
products are finicky: it’s difficult to create customers and much more
difficult to retain them. Price is often the central concern in a consumer
purchase decision requiring producers to be on continual guard against cost
increases. Sales and distribution are critical functions organisationally. HUL
operates in such a milieu. It has strong competitors such as the multinationals
Procter & Gamble, Nivea or L’Oreal and formidable local companies such as,
Amul, Nirma or the Tata
FMCG companies to contend with.
Rivals have copied HUL’s strategies and tactics, especially in the area of
marketing and distribution. Its innovations such as new style packaging or
distribution through women entrepreneurs are much valued but also copied
relentlessly, hurting its competitive advantage.
HUL is identified closely with India.
There is a ring of truth to its vision statement: ‘to earn the love and respect
of India by making a real difference to every Indian’. It has an impeccable
record in corporate social responsibility. There is an element of nostalgia
associated with brands like Lifebuoy (introduced in 1895) and Dalda (1937) for
senior citizens in India. Consequently Indians have always perceived HUL as an
Indian company rather than a multinational. HUL has attempted to align its
strategies in the past to the special needs of Indian business environment. Be
it marketing or human resource management, HUL has experimented with new ideas
suited to the local context. For instance, HUL is known for its capabilities in
rural marketing, effective distribution systems and human resource development.
But this focus on India seems to be changing. This might indicate a change in
the strategic posture as well as recognition that Indian markets have matured
to the extent that they can be dealt with by the global strategies of Unilever.
At the corporate level, it could also be an attempt to leverage global scale
while retaining local responsiveness to some extent.
In line with the shift in corporate
strategy, the focus of strategic decision-making seems to have moved from the
subsidiary to the headquarters. Unilever has formulated a new global
realignment under which it will develop brands and streamline product offerings
across the world and the subsidiaries will sell the products. Other subtle
indications of the shift of decision-making authority could be the appointment
of a British CEO after nearly forty years during which there were Indian CEOs,
the changed focus on a limited number of international brands rather than a
large range of local brands developed over the years and the name-change from
Hindustan Lever to Hindustan Unilever.
The shift in the strategic
decision-making power from the subsidiary to headquarters could however, prove
to be double-edged sword. An example could be of HUL adopting Unilever’s global
strategy of focussing on a limited number of products, called the 30 power
brands in 2002. That seemed a perfectly sensible strategic decision aimed at focusing
managerial attention to a limited set of high-potential products. But one
consequence of that was the HUL’s strong position in the niche soap and
detergent markets suffering owing to neglect and the competitors were quick to
take advantage of the opportunity. Then there are the statistics to deal with:
HUL has nearly 80 per cent of sales and 85 per cent of net profits from the
home and personal care businesses. Globally, Unilever derives half its revenues
from food business. HUL does not have a strong position in the food business in
India though the food processing industry remains quite attractive both in
terms of local consumption as well as export markets. HUL’s own strategy of
offering low-price, competitive products may also suffer at the cost of
Unilever’s emphasis on premium priced, high end products sold through modern
outlets.
There are some dark clouds on the
horizon. HUL’s latest financials are not satisfactory. Net profit is down,
sales are sluggish, input costs have been rising and new food products
introduced in the market have yet to pick up. All this while, in one market
segment after another, a competitor pushes ahead. In a company of such a big
size and over-powering presence, these might still be minor events developments
in a long history that needs to be taken in stride. But, pessimistically, they
could also be pointers to what may come.
Questions:
1.
State
the strategy of Hindustan Unilever in your own words.
2.
At
what different levels is strategy formulated in HUL?
3.
Comment
on the strategic decision-making at HUL.
4.
Give
your opinion on whether the shift in strategic decision-making from India to
Unilever’s headquarters could prove to be advantageous to HUL or not.
CASE: 2 THE
STRATEGIC ASPIRATIONS OF THE RESERVE BANK OF INDIA
The
Reserve Bank of India (RBI) is India’s central bank or ‘the bank of the
bankers’. It was established on April 1, 1935 in accordance with the provisions
of the Reserve Bank of India Act, 1935. The Central Office of the RBI,
initially set up at Kolkata, is at Mumbai. The RBI is fully owned by the
Government of India.
The history of RBI is closely aligned
with the economic and financial history of India. Most central banks around the
world were established around the beginning of the twentieth century. The Bank
was established on the basis of the Hilton Young Commission. It began its
operations by taking over from the Government the functions so far being
performed by the Controller of Currency and from the Imperial Bank of India,
the management of Government accounts and public debt. After independence, RBI
gradually strengthened its institution-building capabilities and evolved in
terms of functions from central banking to that of development. There have been
several attempts at reorganisation, restructuring and creation of specialised
institutions to cater to emerging needs.
The Preamble of the RBI describes its
basic functions like this: ‘….to regulate the issue of Bank Notes and keeping
of reserves with a view to securing monetary stability in India and generally
to operate the currency and credit system of the country to its advantage.’ The
vision states that the RBI ‘….aims to be a leading central bank with credible,
transparent, proactive and contemporaneous policies and seeks to be a catalyst
for the emergence of a globally competitive financial system that helps deliver
a high quality of life to the people in the country.’ The mission states that
‘RBI seeks to develop a sound and efficient financial system with monetary
stability conductive to balanced and sustained growth of the Indian economy’.
The corporate values of underlining the mission statement include public
interest, integrity, excellence, independence of views and responsiveness and
dynamism.
The three areas in which objectives
of the RBI can be stated are as below.
1.
Monetary
policy objectives such as containing inflation and promoting economic growth,
management of foreign exchange reserves and making currency available.
2.
Objectives
set for managing financial sector developments such as supervision of systems
and information access and assisting banking and financial institutions to
become competitive globally.
3.
Organisational
development objectives such as development of economic research facilities,
creating information system for supporting economic decision-making, financial
management and human resource management.
Strategic actions taken to realise
the objectives fall under four categories:
1.
The
thrust area of monetary policy formulation and managing financial sector;
2.
Evolving
the legal framework to support the thrust area;
3.
Customer
service for providing support and creation of positive relationship; and
4.
Organisational
support such as structure, systems, human resource development and adoption of
modern technology.
The major functions performed by the
RBI are:
·
Acting
as the monetary authority
·
Acting
as the regulator and supervisor of the financial system
·
Discharging
responsibilities as the manager of foreign exchange
·
Issue
currency
·
Play
as developmental role
·
Related
functions such as acting as the banker to the government and scheduled banks
The management of the RBI is the
responsibility of the central board of directors headed by the governor and
consisting of deputy governors and other directors, all of whom are appointed
by the government. There are four local boards based at Chennai, Kolkata,
Mumbai and New Delhi. The day-to-day management of RBI is in the hands of the
executive directors, managers at various levels and the support staff. There
are about 22000 employees at RBI, working in 25 departments and training
colleges.
The RBI identified its strengths and
weaknesses as under.
·
Strengths A large body of competent officers and
staff; access to key data on the economy; wide organisational network with 22
regional offices; established infrastructure; ability to attract talent; and
financial self sufficiency.
·
Weaknesses Structural rigidity, lack of accountability
and slow decision-making; eroded specialist know-how; strong employee unions
with rigid industrial relations stance; surplus staff; and weak market
intelligence.
Over the years, the RBI has evolved
in terms of structure and functions, in response to the role assigned to it.
There have been sweeping changes in the economic, social and political
environment. The RBI has had to respond to it even in the absence of a
systematic strategic plan. In 1992, the RBI, with the assistance of a private
consultancy firm, embarked on a massive strategic planning exercise. The
objective was to establish a roadmap to redefine RBI’s role and to review
internal organisational and managerial efficacy, address the changing
expectations from external stakeholders and reposition the bank in the global
context. The strategic planning exercise was buttressed by departmental
position papers and documents on various subjects such as technology, human
resources and environmental trends. The strategic plan of the RBI emerged with
four sections dealing with the statement of mission, objectives and policy, a
review of RBI’s strengths and weaknesses and strategic actions required with an
implementation plan. The strategic plan reiterates anticipation of evolving
external environment in the medium-term; revisiting strengths and weaknesses
(evaluation of capabilities); and doing away with the outdated mandates for
enhancing efficiency in operations in furtherance of best public interests. The
results of these efforts are likely to manifest in attaining a visible focus,
reinforced proficiency, realisation of shared sense of purpose, optimising
resource use and build-up of momentum to achieve goals.
Historically, the RBI adopted the
time-tested technique of responding to external environment in a pragmatic
manner and making piecemeal changes. The dilemma in adoption of a comprehensive
strategic plan was the risk of trading off the flexibility of the pragmatic
approach to creating rigidity imposed by a set model of planning.
Questions:
1.
Consider
the vision and mission statements of the Reserve Bank of India. Comment on the
quality of both these statements.
2.
Should
the RBI go for a systematic and comprehensive strategic plan in place of its
earlier pragmatic approach of responding to environmental events as and when
they occur? Why?
CASE: 3 THE
INTERNATIONALISATION OF KALYANI GROUP
The
Kalyani Group is a large family-business group of India, employing more than
10000 employees. It has diverse businesses in engineering, steel, forgings,
auto components, non-conventional energy and specialty chemicals. The annual
turnover of the Group is over US$2.1 billion. The Group is known for its
impressive internationalisation achievements. It has nine manufacturing
locations spread over six countries. Over the years, it has established joint
ventures with many global companies such as ArvinMeritor, USA, Carpenter
Technology Corporation, USA, Hayes Lemmerz, USA and FAW Corporation, China.
The flagship company of the Group is
Bharat Forge Limited that is claimed to be the second largest forging company
in the world and the largest nationally, with about 80 per cent share in axle
and engine components. The other major companies of the Group are Kalyani
Steels, Kalyani Carpenter Special Steels, Kalyani Lemmerz, Automotive Axles,
Kalyani Thermal Systems, BF Utilities, Hikal Limited, Epicenter and Synise
Technologies
The emphasis on internationalisation
is reflected in the vision statement of the Group where two of the five points
relate to the Group trying to be a world-class organisation and achieving
growth aggressively by accessing global markets. The Group is led by Mr. B.N.
Kalyani, who is considered to be the major force behind the Group’s aggressive
internationalisation drive. Mr. Kalyani joined the Group in 1972 when it was a
small-scale diesel engine component business.
The corporate strategy of the Group
is a combination of concentration of its core competence in its business with
efforts at building, nurturing and sustaining mutually beneficial partnerships
with alliance partners and customers. The value of these partnerships essentially
lies in collaborative product development with the partners who are the
original equipment manufacturers. The foreign partners are not intended to
provide expansion in capacity, but to enable the Kalyani Group to extend its
global marketing reach.
In achieving its successful status,
the Kalyani Group has followed the path of integration, extending from the
upstream steel making to downstream machining for auto components such as
crank-shafts, front axle beams, steering knuckles, cam-shafts, connecting rods
and rocker arms. In all these products, the Group has tried to move up the
value chain instead of providing just the raw forgings. In the 1990s, it
undertook a restructuring exercise to trim its unrelated businesses such as
television and video products and concentrate on its core business of auto
components.
Four factors are supposed to have
influenced the growth of the Group over the years. These are mentioned below:
·
Focussing
on core businesses to maximise growth potential
·
Attaining
aggressive cost savings
·
Expanding
geographically to build global capacity and establishing leading positions
·
Achieving
external growth through acquisitions
The Group companies are claimed to be
positioned at either number one or two in their respective businesses. For instance,
the Group claims to be number one in forging and machined components, axle
aggregates, wheels and alloy steel. The technology used by the Group in its
mainline business of auto components and other businesses, is claimed to be
state-of-the-art. The Group invests in forging technology to enhance
efficiency, production quality and design capabilities. The Group’s emphasis on
technology can be gauged from the fact that in the 1990s, it took the risky
decision of investing Rs. 100 crore in the then latest forging technology, when
the total Group turnover was barely Rs. 230 crore. Information technology is
applied for product development, reducing production and product development
time, supply-chain management and marketing of products. The Group lays high
emphasis on research and development for providing engineering support,
advanced metallurgical analysis and latest testing equipment in tandem with its
high-class manufacturing facilities.
Being a top-driven group, the pattern
of strategic decision-making within seems to be entrepreneurial. There was an
attempt to formulate a five-year strategic plan in 1997, with the participation
of the company executives. But no much is mentioned in the business press about
that collaborative strategic decision-making after that.
Recent strategic moves include
Kalyani Steels, a Group company, entering into a joint venture agreement in may
2007, with Gerdau S.A. Brazil for installation of rolling mills. An attempt to
move out of the mainstream forging business was made when the Group
strengthened its position in the prospective business of wind energy through
100 per cent acquisition of RSBconsult GmbH (RSB) of Germany. Prior to the
acquisition, the Group was just a wind farm operator and supplier of
components.
Questions:
1.
What
is the motive for internationalisation by the Kalyani Group? Discuss.
2.
Which
type of international strategy is Kalyani Group adopting? Explain.
CASE 4: THE STORY
OF SYNERGOS UNFOLDS
Synergos
is a young management and strategy consulting firm based at Mumbai. It was
established in 1992 at a time when there were a lot of expectations among the
industry people from the liberalisation policies that were started the previous
year by the Government of India.
The consulting firm is an
entrepreneurial venture started by Urmish Patel, a dynamic person who worked
with a multinational consulting firm at the time. He left his comfortable
position there to venture into the management consultancy industry. The
motivation was to be ‘the master of his own destiny’ rather than being an
employee working for others. Urmish comes from an upper middle-class Gujarati
family, settled in a small town in Rajasthan. His father was a government
servant who retired with a meagre pension. His mother is a housewife. His other
siblings are all educated and well-settled in their respective careers and
professions. Urmish is a creative individual, uncomfortable with the
status-quo. During his student days at a college at Jaipur, he was continually
coming up with bright ideas that some of his friends found to be preposterous.
To him, however, these were perfectly achievable ideas. He studied
biotechnology and then went to the US on a scholarship to do his Masters. After
a semester at a well-known university there, he lost interest and switched to
pursue an MBA. He liked it and soon settled down to work with an American
consultancy firm and toured several countries on varied assignments during the
seven years he worked there.
In 1992 came the urge to Urmish to
chuck his job and be on his own. It was risky, yet an exciting step to take.
His accumulated capital was limited—just enough to rent office space, buy a few
computers and hire an assistant. There were no consultancy assignments for the
first three months. But an acquaintance soon came to his aid, introducing him
to the CFO of a major family business group who needed advice on a performance
improvement project they wanted to launch. The opportunity came in handy though
the returns were nothing to write home about. That project was the first step
to
many
more that came gradually. Synergos started gaining presence in the competitive
management consultancy industry and attracting attention from the people whom
they worked for. Word-of-mouth publicity led them from one project to another
for the first three years till 1995. Synergos took up whatever came its way,
delivering a cost-effective solution to its clients. A team of four had formed
by now, each member of the team specialising in services rendered to the
clients. For instance, one of the members is a specialist in engineering
projects, while another has expertise finance. The third one is a service
sector specialist, also having experience in dealing with government matters.
The phase of rapid growth started
some time in 1995 when the Synergos team decided to focus on the small and
medium enterprises (SMEs). These were firms that realised they had problems
needing specialist advice, but were apprehensive to approach the big firms on
account of their limited outlay and inexperience of dealing with such firms.
Synergos came to their aid by tailoring their services as near as possible to
their needs. Another differentiation platform Synergos offered to its client
was a fully-integrated consultancy service where it got involved right from the
stage of planning down to its implementation and monitoring.
Presently, Synergos has grown to be a
medium-sized consultancy firm, serving clients in India and abroad, working for
industries ranging from auto components to financial services and for
manufacturing organisations to service providers. Some-how, nearly half of the
assignments it has worked on have been for mid-sized, upcoming, family-owned
businesses, a niche it has served well. These organisations typically need a
boutique sort of consultancy that can offer customised services dealing with a
broad range of practices related to strategy, organisation design, mergers and
acquisitions and operational matter such as logistics and supply-chain
management. Synergos fits in with their requirements owing to its personalised
service and reasonable commission structure.
The organisational structure at
Synergos has a board at the top, consisting of seven people, including the four
founding members and three independent directors. One of the independent
directors is the chairman of the board. Urmish, as the founder CEO, also heads
an executive management committee with each of the founding members, leading
three other top-level committees dealing with business portfolio, service
management and executive recruitment.
The management team is called the
professional group. The rest of the employees are referred to as the staff. The
professional group has young women and men who are graduates from some of the
best institutions in India and abroad. They are assigned to taskforces based on
their qualifications, experience and interests. The departmentation at Synergos
is flexible, based on an interplay of the three categories: skill, service and
specialty. For instance, a professional may have IT skills, may have worked to
provide supply-chain management services and developed expertise in handling
operational assignments for medium-sized food and beverage firms. There is a
lot of multi-tasking however, to utilise the wide range of skills and special
expertise that the professionals have. For administrative matters, the
professionals are assigned to client-service departments of industry solutions,
enterprise solutions and technology solutions. The flexibility that such an
organisational arrangement affords seems to have been the major reason for the
evolution of the organisation structure at Synergos over the years.
The staff group of employees consists
of the support people who provide a variety of services to the professionals.
Among these are research assistants, industry analysts, documentation experts
and secretarial staff. There is no set pattern for assignment of staff to the
administrative departments and generally, a need-based approach is followed,
depending on the workload at a particular time.
Recruitment for professionals is
stringent. Synergos typically looks for a good combination of education and
experience and lays much emphasis on the compatibility of the prospective
employee with the shared values. Creativity, broad range of professional
interests, intellectual acumen, team-working and physical fitness to undertake
demanding tasks and work for long hours are the criteria for hiring. There are
not many training opportunities except the on-the-job learning. New
professionals are assigned to a mentor for some time till they are ready to
handle assignments autonomously. The staff members are usually recruited from
fresh graduates, with good degrees from reputed institutions, in arts, sciences
and commerce. The staff positions are also open for persons wanting to work on
part-time or project-bases. Emphasis is given to the ability of the prospective
staff to undertake multi-tasking and work with documentation and word
processing and presentation software packages.
The compensation system consists of a
base salary with commission and bonus depending on performance. There are other
usual elements such as medical reimbursement, loan facility and gratuity and
retirement benefits. the performance appraisal is informal, with at least one
of the four founding members being part of the evaluation committee for a
professional. Usually, the founding member closest to the work area of the
employee is involved in determining the rewards to be given. The time-cycle for
appraisal is one year. Management control is discreet and performance-based
rather than behaviour-based. The means for control are informal, such as direct
supervision.
Urmish is a strong proponent of the
emergent strategy and is not in favour of tying Synergos to a fixed strategic
posture. So are the other founder members, though at times they do talk about
deciding on a niche such as SME organisations as clients and enterprise
solutions as the core competence. In the highly fragmented consultancy industry
where it is possible for even one person to set up an office in a commercial
area and leverage connections to secure projects, Synergos is open to
opportunities as they emerge, while trying to maintain the flexibility that has
made it successful till now.
Questions:
1.
Identify the type of
organisation structure being used at Synergos and explain how it works. What
are the benefits of using this type of structure? What are the pitfalls?
2.
Express your opinion about
whether the structure is in line with the recruitments of the strategy that
Synergos is implementing.
3.
Based on the information
related to the information, control and reward systems available in the case,
examine whether these systems are appropriate for the type of strategy being
implemented.
CASE: 5 EXERCISING STRATEGIC AND OPERATIONAL
CONTROLS AT iGATE GLOBAL SOLUTIONS
The
Bangalore-based iGATE Global Solutions is the flagship company of iGATE
Corporation, a NASDAQ-listed US-based corporation. Known earlier as Mascot
Systems, it was set up in India in 1993, to offer staffing services. It
acquired business process outsourcing (BPO) and contact centre businesses in
2003, making it an end-to-end IT and ITES service provider. Its service
portfolio includes consulting, IT services, data analytics, enterprise systems,
BPO/BSP, contact centre and infrastructure management services. iGATE has over
100 active clients and centres based in Canada, China, Malaysia, India, the UK
and the US. Chairman, Ashok Trivedi and CEO Phaneesh Murthy, an ex-Infosys IT
professional and their partners hold a major stake, with some participation by
institutional and public investors. The revenues for 2006-2007 are over Rs. 805
crore and net profits, Rs. 49.6 crore.
The corporate strategies of iGATE are
offering integrated IT services and divesting the legacy IT staffing business
and possibly making acquisitions in the domain expertise for financial services
businesses. The business strategy is focused differentiation based on the focal
points of testing, infrastructure management and enterprise solutions. The
competitive tactic is avoiding head-on competition with the formidable larger
players in the industry by carving out a niche. The business definition is
serving large customers and staying away from sub-contracting work.
iGATE adopts a differentiation
business model based on an integrated technology and operations model which it
calls as the iTOPS model. This is an advancement over the prevalent model in
the ITES industry based on low-cost arbitrage model. iTOPS is based on
transaction-based pricing for services and supporting the clients by providing
the platform, processes and services.
The strategic evaluation and control
has both the elements of strategic as well as operational controls.
The functional and operational
implementation is aimed at achieving four sets of objectives:
(a)
Shifting
from small customers to large customer (Fortune 1000 companies)
(b)
Shifting
away from stocking to project-consulting assignments
(c)
Working
directly with clients rather than with system integrators
(d)
Moving
from a local to international markets
Some illustrations of the performance
indicators that reflect these objectives are:
1.
On-shore
versus off-shore mix of business revenues: In 2004, this ratio was 55:45 and in
2007, it has improved to 27:73, indicating a much higher revenue generation
from off-shore business.
2.
Billing
rates: Revenue charged from clients on
assignments. With project consulting assignments from off-shore clients, where
the revenues are typically higher, with lower costs and higher productivity in
India, the realisations from billing have to be higher. The industry norms for
ITES are US$18-25 per hour for off-shore and US$ 55-65 per hour for on-shore
assignments.
3.
The
number of large clients from Fortune 1000 companies: Presently, iGATE has
nearly half of its more than 100 clients from Fortune 1000 companies, of which
the top 10 account for 70 per cent of its business.
4.
Controlling
employee costs: This is an area where
concerted effort is required from the HR and finance functions. Hiring less
experienced employees lowers the compensation bill. In the IT and ITES
industry, attracting and retaining well-qualified and experienced employees is
a critical success factor. The performance indicator for this objective is the
cost per employee.
5.
Human
resource metrics such as the hiring and attrition rates: In the IT and ITES
industry, the human resource metrics such as hiring and attrition rates are
critical indicators. Increasing the number of employees and lowering the
attrition rate by retaining the employees is a big challenge. There are
presently about 5800 employees, likely to go up to 8500 in the next two years.
The attrition of 20 per cent presently at iGATE is on the higher side. But such
attrition is common in the industry where the employee mobility is high and
employee pinching a widespread trend.
The
human resource management function being critical in an industry where so many
challenges exist, needs a strong emphasis on training and development,
motivation, autonomy and attractive incentives. iGATE has an integrated people
management model focusing on developing technical, behavioural and leadership
competencies. The three metrics by which the HR function is assessed are: human
capital index, work culture and employee affective commitment. The reward
system at iGATE consists of meritorious employees across all levels being
granted restricted stock options, thus providing an incentive to remain with
the company till they become due. The company, though, is an average paymaster,
which disadvantage it tries to trade-off offering a more challenging work environment,
quicker promotions and chances for practising innovation.
Critics say that that iGATE lacks the
big-brand appeal of the larger players such as Infosys and Wipro, cannot
compete on scale and is still under the shadow of its original business of body-shopping
IT personnel.
Questions:
1.
Analyse the iGATE case to
highlight how it could apply some of the strategic controls such as premise
control, implementation control, strategic surveillance and special alert
control.
2.
Analyse and describe the process
of setting of standards at iGATE.
3.
Give your opinion on the
effectiveness of the role of reward system in exercising HR performance
management at iGATE and suggest what improvements are possible, given the
environmental conditions in the IT/ITES industry in India at present.
