HR Restructuring - The Coca Cola & Dabur Way

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Restructuring the Mess Contd...

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. Company 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. However, the company's problems were far from over. In March 2000, Coca-Cola received reports of wrong doings in its North India operations. The company decided to take action after the summer season.2

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.

In light of the above findings by Arthur Anderson's team, Coca-Cola carried out a performance appraisal exercise for 560 managers. This led to resignations en masse. Around 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. Bohr said, "I had to take tough decisions because the buck stops here. We needed to weed out certain practices. That's an important message sent out - that we'll take action if we can't work on principles of integrity. The investigation was the right thing. The business is healthier now."

However, media reports revealed a different side of the picture altogether. The managers who had quit voiced their thoughts vociferously against Coca-Cola, claiming that the whole performance appraisal exercise was farcical and that the management had already decided on the people to get rid of. They termed the issue as Coca-Cola's 'witch-hunt' in India. 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 head quarters. It was also reported that the performance appraisals and the subsequent dismissals were carried out in a very 'inhuman' and 'blunt' manner.

Worried by such adverse comments about the company, Alexander decided to take steps to ensure a smooth relationship with the new people in the company. He 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. Things seemed to have stabilized to some extent after this. Justifying the decision to let go off certain personnel, Alexander said, "We don't mind those quitting who were just okay. We told them where they could hope to be, based on their performance. Some who have left may not have had a good career with Coke."

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2] Summer was the peak demand season for colas, hence Coca-Cola was hesitant to disrupt the operations in any way.