Case Game: The Case Of Effective Downsizing

CASE GAME
The Case Of Effective Downsizing
Contd.

THE DISCUSSION

SHRINIWAS NERURKAR
Consultant, PwC

One of the first tasks before Kumar and his team is to make out a compelling case for VRS. This should preferably be documented and presented to target groups like workmen, supervisors, administrative staff, and, of course, the statutory authorities whose approval is mandatory. The presentation should be made by Abhinav Kumar, his father, or a business head. The emphasis of the presentation would vary with the target group but the focus should remain uniform: the survival of the business is at stake and the management has no alternative but to launch a VRS.

The presentation should outline current and future business scenarios, highlight trends that would adversely affect the business, bring to light the unfavourable cost structure of the division's operations, and point out its weakness in the area of marketing. It should project a positive note on how the partnership with B&G would strengthen the company's business by bringing in new technology and new products. A well presented case goes a long way in not just creating the right ambiance but also securing a favourable response from target groups which are vulnerable to misguided fears.

The second step is to set in motion initiatives aimed at improving the operational effectiveness of the soaps division. This should be done simultaneously, to convey the message that VRS is one of the many steps Total is deploying to enhance its profitability. It is also important to send out signals that the management means business. A ban on buying expensive cars for executives; the CEO moving down to the economy class on flights; the withdrawal of entertainment allowances; switching off lights during recess, are steps in this direction. So is the decision taken by Kumar and his team not to replace retirees and resignees.

The HRD division at Total has a lot of groundwork to do. It should update its employee profile. As part of designing the right VRS package, it should collate data on all employees: age, qualifications, years of service completed and balance in tenure, family details in terms of number of dependents, immediate and long-term financial commitments like education and marriage of children, housing loan liabilities, details of statutory benefits accumulated in one's account like pf, gratuity, and leave encashment. This data could be used to motivate individuals to opt for VRS.

Tackling post-VRS issues is critical to the long-term well-being of Total. The relevant issues are:

Creating confidence in the minds of employees who stay on so that they remain motivated. For this purpose it is advisable to keep them informed about the overall achievements of the VRS.

Creating the necessary flexibility to re-allocate and re-deploy the remaining employees.

Devising various methods to improve the productivity of employees by exposing them to new technologies, machines, and processes.

Redistributing work between the remaining employees through promotions, and other incentives.

Identifying training-requirements at various levels.

Outsourcing routine and unskilled jobs.

VIJAY VANIKAR
Senior V-P (HR), NOCIL

The VRS should be restricted to the soaps and oils division of Total. The profit per employee of the division, Rs 0.50 lakh, can turn negative in the short run. The benchmarks provided by B&B should be used as a basis to market the VRS. Depending upon business compulsions and the success of the original scheme, the VRS can be extended to Total's other divisions with some refinements.

Abhinav Kumar should first set up a cross-functional team headed by Vinod Rao. The team should comprise senior managers in the division's manufacturing and marketing functions and include a representative from corporate finance. It should bring out the objectives of VRS in clear, unambiguous terms. It should state that restructuring is the key to the survival of the division. The team should highlight the value B&B can bring to the business, and how it can enhance profitability.

This statement of objectives should form the basis of a comprehensive communication exercise. The person best suited to lead this exercise is the Chairman, Deepak Kumar. He knows most people in the business by name and people are more likely to believe him. As someone who has been associated with Total for long, Deepak Kumar can smoothen the rough edges that are bound to surface the moment a formal announcement of the scheme is made.

The next step is to create a context. This can be done by taking a few decisions-like freezing fresh recruitments, enforcing an economy drive, and eliminating all signs of ostentation-which generate a positive orientation towards VRS. The context will encourage a number of fence-sitters to opt for VRS.

A VRS should not be driven by targets. A numerical target will create unnecessary tension. Instead, Total should decide on the optimum workforce that would be needed. It is that optimum number that should be kept in mind. This approach leaves a number of other choices open to the company: like re-deployment, job rotation, and re-definition of job roles.

There are also a number of soft issues associated with VRS. These involve coping with individual needs, structuring the package, training people for their post-VRS lives and helping them with investment counsel. Finally, it helps to handpick individuals in the division who are respected for their personal and professional qualities to act as coaches and facilitators. They could market the benefits of VRS much better.

R.C. DUTTA
Head (Personal Mgmt), TISS

VRS is the most pervasive, yet the least studied phenomenon in both business and academia. Despite a growing interest, the amount of field-based scientific literature on VRS is sparse in India. International literature on organisational downsizing has focused on three issues: the impact on those who have lost their jobs; the impact on those remaining; and on how to downsize effectively. It is noteworthy that the existing empirical evidence at the international level does not seem to support the view that downsizing can actually reduce costs or contribute to long term increases in profitability and organisational performance.

Although many Indian companies have implemented VRS and spent millions of rupees on it, there is little documented evidence on its fallout. This is a serious lacuna which, in my view, has significantly damaged the social contract at the macro level and the psychological contract held by employees with the management at the micro level. It has also resulted in endowing VRS with negative connotations.

The management of Total Industries faces a complex problem. The introduction of VRS is definitely going to change the company's psychological contract with the employees. After all, the management has created baggage instead of human assets over the years, a failure which is its responsibility.

However, Total may still achieve its objectives and continue to retain some elements of the psychological contract. For this the company should:

Conduct an analysis of the employee profile and market trends to identify the competencies required to become competitive.

Introduce innovative work practices.

Involve employees in identifying what needs to change via downsizing.

Develop an environment where everyone is held responsible for downsizing goals.

Ensure that the top management is accessible to those affected by the downsizing.

Inform every employee about the reasons for the VRS. Develop a plan of action for a series of financial and emotional support programmes.

Administer the VRS fairly so that the negative effects of the scheme are not experienced unevenly by unempowered people.

Provide opportunities for personal growth and development even during the VRS.