HR Restructuring the Dabur and The Coca-cola Way.

In 7 years 4 CEOs have changed for Coca-Cola.

Negative media reports also added to this HIGH no of changes in the
company
LOSS of US $52 million in 1999 attributed largely to heavy investments in
India and Japan
Expense on Bottlers 1500 Crores
Payment increment of bottles from Rs 3/- to Rs 8/Following these immense loss, Coca- Cola had to write of their assets
worth US $450 million in the year 2000.
This was done to cover up the losses incurred wrong estimations such as
reductions of excise duties leading to over estimations of volumes in the
Indian Market, which never happened.

The Sleeping Giant.

Dabur is a 114 year old Ayurvedi and Pharmaceutical Company.
In the year 1998 75% of Daburs turnover was in FMCG (Fast Moving
Consumer Goods) products.
The Burman Family is the major stock holder in the company.
Their vision was to become the best FMCG company by 2004 and to take
the annual turnover to 20 billion Rs.
Dabur benchmarked itself with other FMCG Majors like Nestle, Colgate
& Palmolive and P&G.
The Company was lacking in significant areas.
Price/ Earning (P/E) ratio was less than 24, For most other companys it
was 40.
Net Working Capital for Dabur was 2.2 billion Rs, this figure was far less
as compared to the other FMCG companys .
Operating profit margin of Dabur was of 12%, Where as CP had 16%, and
P&G had 18%.
Returns on Net worth for Dabur was 24%, colgate was 34%, and
Hindustan Uni liver was 52%
Restructurin The MESS, The Coca-Cola way.
1999 merger of coca-cola 4 Bottling plants Viz 1. Hindustan Coca-cola
Bottling north east, 2. Hindustan Coca-Cola, 3. Coca-Cola Bottling South
West & 4. Bharat Coca-cola bottling South East.
Human Resource Issues Gained significantly at the Company

 Two new companies, Coca-Cola India, the corporate and marketing office,
and Coca-Cola Beverages were the result of the merger. The merger
brought with it over 10,000 employees to Coca-Cola, doubling the number
of employees it had in 1998.
A massive restructuring exercise focusing on the
company's human resources to ensure a smooth
acceptance of the merger.
1st task was to put in place a new organizational structure that vested
profit and loss accounting at the area level, by renaming each plant-incharge as a profit centre head.
Country was divided into six regions as against the initial three, based on
consumer preferences.
Each region had a separate head (Regional General Manager), who had the
regional functional managers reporting to him. All the Regional General
Managers reported to VP (Operations), Sanjiv Gupta, who reported
directly to CEO Alexander Von Bohr (Bohr).
37 bottling plants of Coca-Cola, on an average six in each region.
An Area General Manager acts as the head, vested with profit-centre
responsibility.
All the functional heads reported to the Area General Manager.
Coca-Cola also declared VRS at the bottling plants, which was used by
about 1100 employees.
The merger carried forward employees from different work cultures and
different value systems. This move towards regionalization caused dilution
of several central jobs, with as many as 1500 employees retiring at the
bottling plants.
This new line of control strengthened entry and middle-level jobs at the
regions and downgraded many at the centre, which led to unrest among the
employees and about 40 junior and middle-level managers and some
senior personnel including Ravi Deoi, Head (Capability Services) and
Sunil Sawhney, Head (Northen Operations), left the company.
The company also decided not to buy or hire new cars, as it felt that the
existing fleet of cars was not being used efficiently. In the drive for
'optimum utilization of existing resources,' Coca-Cola decided against
buying a Rs 50 crore property in Gurgaon and it also surrendered a
substantial part of its rented office space in Gurgaon, near Delhi.
Officials felt that this was justified because a lot of officials had moved
out of the Delhi headquarters due to the localization. Moreover, this was
necessitated by the resignations and sackings. Salaries were also
restructured as part of this cost-reduction drive.

 Coca-Cola began benchmarking itself with other major Indian companies,

whereas it was offering pay packages in line with international standards.
Coca-Cola also realigned some jobs based on the employee's talent and
potential.
The company's problems were far from over. In March 2000, Coca-Cola
received reports of wrong doings in its North India operations.
In July 2000, Coca-Cola appointed Arthur Anderson to inspect the
accounts of the North India operations for a fee of Rs 1 crore. The team
inspected all offices, godowns, bottling plants and depots of Jammu,
Kanpur, Najibabbad, Varanasi and Jaipur.
The findings revealed that the North Indian team had violated discounting
terms and the credit policy, apart from being unfair in cash dealings. The
team was giving discounts that were five times higher than those given in
the other regions of the country. There were also unexplained cancellations
and re-appointments of dealerships.
Coca-Cola carried out a performance appraisal exercise for 560 managers.
This led to resignations en masse.
40 managers resigned between July and November 2000. Coca-Cola also
sacked some employees in its drive to overhaul the HR functioning. By
January 2001, the company had shed 70 managers, accounting for 12% of
the management.
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.
Steps to ensure a smooth relationship with the new people in the company.
Personally met the finance heads in every territory and made the
company's credit policy clear to them.
Coca-Cola also standardized the discounting limits and best practices
irrespective of market compulsions. The company launched a major IT
initiative as well, to make the functioning of the entire organization
transparent at the touch of a button.
The Dabur Way
The companys restructuring efforts began in April 1997, when the
company hired consultants McKinsey & Co. at a cost of Rs 80 million.
3-fold recommendations were: to concentrate on a few businesses; to
improve the supply chain and procurement processes and to reorganize the
appraisal and compensation systems.
Following these recommendations, many radical changes were introduced.

 Day to day management was handed over to a group of professional

managers for the first time in Dabur's history, while the promoters confined
themselves to strategic decision making.
Dabur decided to revamp the organizational structure and appoint a CEO to
head the management. All business unit heads and functional heads were to
report directly to the CEO.
November 1998, Dabur appointed Ninu Khanna as the CEO. The
appointment was the first incident of an outside professional being
appointed after the restructuring was put in place. Ninu Khanna, who had
previously worked with Procter & Gamble and Colgate-Palmolive was
roped in to give Dabur the much-needed FMCG focus.
They had also appointed Cadbury India's Deepak Sethi as Vice President Sales and Marketing - Health Care Products division; Godrej Pilsbury's
Ravi Sivaraman as Vice President - Finance and ABB's Yogi Sriram as
Vice President - HRD.
Made performance appraisals more objective by including many more
measureable criteria.
Concepts such as customer satisfaction, increased sales and reduced costs,
cycle-time efficiency, return on investment and shareholder value were all
introduced as yardsticks for performance appraisals.
employee friendly initiatives included annual sales conferences at places
like Mauritius and Kathmandu. These conferences, attended by over a
hundred sales executives of the company, combined both 'work-and-play'
aspects for better employee morale and performance. Dabur also gave cash
incentives to junior level sales officers and representatives upon successful
achievement of targets. Employees were also allowed to club their leaves
and enjoy a vacation.
To increase employee satisfaction levels, Dabur identified certain key
performance areas (KPAs) for each employee. Performance appraisal and
compensation planning were now based on KPAs.
Employee training was also given a renewed focus.
To help employees communicate effectively with each other and for better
dissemination of news and information, Dabur brought out a quarterly
newsletter 'Contact.' The interactive newsletter worked as a two-way
communication channel between the employees.
Also commissioned consultants Noble & Hewitt to formulate an Employee
Stock Option Plan (ESOP). The scheme, effective from the fiscal 2000 was
initially reserved for very senior personnel. Dabur planned to extend the
scheme throughout the organization in the future.
The After Effects

 Both Coca-Cola and Dabur had to accept the fact that a major change on
the human resources front was inevitable, although the changes in the two
were necessitated by radically different circumstances.
The restructuring seemed to have been extremely beneficial for them.
Besides improved morale and reduced employee turnover figures, the
strategic, structural and operational changes on the HR front led to an
overall 'feel-good' sentiment in the companies.
1999, Coca-Cola reported an increase in case-volume by 9% after
restructuring. Volumes increased by 14% and marketshare increased by
1% after the regionalization drive. The company's improving prospects
were further reflected with the 18% rise in sales in the second quarter of
2000.
However, in spite of all the moves, Coca-Cola's workforce was still large.
Given the scale of its investments, the future was far from 'smooth sailing'
for the company. With the new found focus and a streamlined human
resources front, Coca-Cola hoped to break even by the end of fiscal 2001.
Dabur, with the restructuring moves in place by the late 1990s, the
company's future business prospects were termed excellent by analysts.
The new structure, the performance-oriented compensation, and the new
performance appraisal system increased employee efficiency and morale.
The annual sales conferences and cash incentives to junior level sales
officers helped in meeting higher sales targets.
Dabur's sales increased to Rs 10.37 billion in 1999-00 from Rs 9.14 billion
in 1998-99 - an increase of 13.5%. Dabur's profits also increased by 53%
from 501 million to Rs 770 million.