HR Restructuring - Coca Cola and Dabur Way

HR Restructuring – Coca Cola and
Dabur Way
BY:
Lubna Noor 26
Pallavi Joshi 29
Kashish Vadhera 35
Puneet Mohan 31
– “We had grown but we have not structured our growth.”
-Dabur sources in 1998

– “Three major strands have emerged in Coke’s Mistakes.
It never managed its infrastructure, it never managed its
crate of 10 brands and it never managed its people.”
-Business World in 2000
Introduction
 Coca Cola reporting a huge loss of US$ 52 Million in
1999.
 Coca Cola had spent Rs.1500 cr. for acquiring
bottlers who were paid Rs.8 per case as against the
normal Rs 3.
 Coca Cola had to write off its assets in India worth
US$ 405 million in 2000.
 Changes were required to be put in place soon.
Coca Cola Restructuring
 In 1999, Coca Cola merge four bottling operations:
 Hindustan Coca Cola bottling North West.
 Hindustan Bottling Coca Cola South West.
 Bharat Coca Cola North East.
 Bharat Coca Cola South East.
 Two new companies Coca Cola India and Coca
Cola Beverages were the result of merger.
Merger brought 10,000 employees to Coca Cola.
Coca Cola Had to go in for Restructuring process focusing
on company’s HR to ensure smooth acceptance of merger.
1st Task was to put in place a new organisational structure.
The company was divided into six regions based on
consumer preferences.
Each region had separate head(Regional General Manager).
Regional General Manger had to report
toVP(Operations),who reported directly to CEO Alexander
Vonbohr.
 37 bottling plants of Coca Cola had Area General
Manager as the Head vested with profit center
responsibility.
 Coca cola also declared VRS at bottling plants which
was used by 1100 employees.
 Move towards regionalisation caused dilution of
several central jobs.
 This led to unrest among employees and some senior
personnels left the company.
 They introduced detailed career planning system for
over 530 managers in the new setup.
 System included talent development meetings in
which recommendations were made and then council
approved and implemented the process through a
central HR team.
 Regional general managers would meet the top
management twice a year to identify fast track people
and train them for more responsible positions.
Contd…..
 To inculcate feeling of belonging company gave
flowers and cards on birthdays of employees and
major festivals.
 To reduce their cost they also asked the executives to
shift to less expensive apartments from farm houses.
 Their salaries were also restructured as part of cost
reduction.
 In March 2000,coca cola received reports of wrong
doings in its North India operations.
 In July 2000,they appointed Arthur Anderson to
inspect the accounts of north India operations for a
fee of Rs. 1 cr.
 Findings revealed that North Indian team had violated
discounting terms and credit policy apart from being
unfair in cash dealings.
 Coca cola also carried out a performance appraisal
exercise for 560 managers.
 This led to resignations.
 The managers who had quit voice their thoughts
against Coca Cola. They said that management had
already decided on the people to get rid of.
 They termed the issue as coca cola’s “Witch-Hunt”.
 Worried by such adverse comments Alexander
decided to take steps to ensure smooth relationship
with new people in the company.
 Coca cola standardised the accounting limits.
 They launched a major IT initiative as well to make
functioning of entire organization transparent at touch
of a button.
The DABUR way
 Dabur’s restructuring efforts began in April 1997

when co hired consultant McKinsey & Co. at cost of
Rs.80 million.
McKinsey’s Recommendations were:
 To concentrate on few businesses.
 To improve supply chain
 To reorganize appraisal and compensation systems
 Day to day management was handed over to group of
professional manager for first time in Dabur history.
 Dabur decided to revamp organisational structure and appoint
CEO to head the management.
 In Nov 1998 Dabur appointed Ninu Khanna as CEO (outside
professional).
 Dabur made performance appraisal’s more objective by
including concepts such as customer satisfaction, increased
sales and reduced cost, return on investment,share holder
value.
 They made compensation more performance oriented.
 Dabur employee friendly initiatives included annual sales
conferences which combined work and play aspects for better
employee morale and performance.
 Gave cash incentives to junior level sales officers upon successful
achievement of targets.
 Dabur bought out a quarterly newsletter “contact”. It worked out as a
two way communication channel b/w employees.
 They also commissioned Employee Stock Option Plan.
After Effects
 Coca cola reported an increase in case volume by 9% after
restructuring.
 Volumes increased by 14%.
 Market share increased by 1%.
 18% rise in sales in second quarter of 2000.
 Coca cola’s workforce was still large inspite of all moves.
 Dabur’s new structure performance oriented compensation
increased employee efficiency.
 Sales increased to Rs.10.37 billion in 1999-2000 from 9.14
billion in 1998-99.
 Profits increased by 53% from 501 million to 770 million.
Q1 Circumstances that led to the restructuring at the two
companies?
Four CEOs within 7 year
A huge loss of US $ 52 million in 1999
Coca-Cola had spent Rs 1500 crore for acquiring bottlers, who were paid Rs 8
per case as against the normal Rs 3
Following the loss, Coca-Cola had to write off its assets in India worth US $
405 million in 2000.
 In 1998, 75% of Dabur‟s turnover had come from fast moving consumer
goods (FMCGs).
 The Burman family (promoters and owners of a majority stake in Dabur)
formulated a new vision in 1999 with an aim to make Dabur India‟s best
FMCG company by 2004.
 In the same year, Dabur revealed plans to increase the group turnover to
Rs 20 billion by the year 2003-04.
 To achieve the goal, Dabur benchmarked itself against other FMCG majors
viz., Nestle, Colgate-Palmolive and P&G.
 Dabur found itself significantly lacking in some critical areas.
 Dabur’s price-to-earnings (P/E) ratio was less than 24, for most of the
others it was more than 40.
 Dabur’s operating profit margin of 12% as compared to colgate’s 16% and
even the return on net worth was around 24 % for dabur as against HLL ‘s
52% and colgate’s 34%
Q2 Examine the steps taken by coca cola to ensure smoother integration of bottling units in its fold. What further steps company could have taken to make merger less costly and more successful?
The first task was to put in place a new organizational structure that vested profit
and loss accounting at the area level, by renaming each plant-in-charge as a profit
center head.
The country was divided into six regions as against the initial three, based on
consumer preferences.
Coca-Cola also declared VRS at the bottling plants, which was used by about 1100
employees.
 The system included talent development meetings at regional and
functional levels, following which recommendations were made to the HR
Council. The council then approved and implemented the process through
a central HR team. Coca-Cola also decided that the regional general
managers would meet the top management twice a year to identify fast-
track people and train them for more responsible positions.
 The company also decided not to buy or hire new cars, as it felt that the
existing fleet of cars was not being used efficiently
 Salaries were also restructured as part of this cost-reduction drive.

Q3 Analyse the difference between the restructuring process of
both the companies?
Dabur Coca Cola

 Focus on performance  Focus on new organisational
appraisal culture
 Employee satisfaction  Cost reduction strategy
 Use newsletter for better  Use new IT tech.for
communication communication &
transparency
Q4 Comment on performance appraisal exercise undertaken by Coca Cola following the Arthur Anderson investigation. Were the
employees really at fault or was the exercise a really a ‘’witch hunt’’? Justify your stand with reasons.
 Reacting to the management's comments regarding discount norm

violations, one former employee commented, "All discounts were cleared
by the top management. They always pushed for higher volumes and said
profitability is not your problem.
 So, we got volumes at whatever costs. Nobody told us this was an
unacceptable practice.
 This seemed to be substantiated by the fact that in the Delhi region, which
consumed only 6000-8000 cases per day, the sales team received a target of
pushing 25,000 cases a day. It was commented that this was done so as to‘
make things look good' when the company sent its financials to the
global headquarters.
 It was also reported that the performance appraisals and the subsequent
dismissals were carried out in a very 'inhuman' and 'blunt' manner.
Our suggestions
Coca Cola
 Performance appraisal.
 Reward system
 Use of internet for better communication

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HR Restructuring – Coca Cola and

-Dabur sources in 1998

 Dabur’s restructuring efforts began in April 1997

Four CEOs within 7 year

A huge loss of US $ 52 million in 1999

functional levels, following which recommendations were made to the HR

a central HR team. Coca-Cola also decided that the regional general

track people and train them for more responsible positions.

existing fleet of cars was not being used efficiently

 Salaries were also restructured as part of this cost-reduction drive.

Dabur Coca Cola

 Reacting to the management's comments regarding discount norm

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