Human Resource Management at Coca Cola
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Published: Tue, 17 Jul 2018
Coca-Cola the world’s largest selling soft drink manufacturer came to India for the second time in 1993 revitalizing the Indian soft drink market. Coca-Cola was India’s leading soft drink until 1977 when it was ‘kicked out’ of India after a new Janata Government ordered the company to turn over its secrets formula for Coca-Cola and dilute its stake in its Indian unit as required by the Foreign Exchange Regulation Act(FERA). The company refused to oblige the government and preferred to leave the country in 1993. After maintain the government liberalization policy they got back in late 1993. Since, 1993, Coca-Cola India has made significant investments to build and continually consolidate its business in the country including new production facilities, waste water treatment plants, distribution systems and marketing channel.
Dabur is a leading consumer goods company, having subsidiary companies and 13 manufacturing plants. It operates in nearly 50 countries, making it an Indian multinational company. The vision of Dabur is stated as’ Dedicated to health and well being of every household’. There is no specific stated mission statement but a statement of strategic intent having several elements for instance:
Developing a platform to become a global ayurvedic leader.
Synthesising knowledge of ayurvedic and herbs with modern science to develop natural solution for meeting the health and personal care needs.
Strategy is the determination of direction of the organization in which it is going in relation to its business environment. That is it is the process of defining intention and allocating and matching resources in order to obtain opportunities and needs undergoes achieve strategic fit among them. The main purpose of the business is to achieve competitive advantages. The strategic capability of the organization is the necessary elements of the effective development and implementation of strategy.
HRM practice in any organization, there are three model (High performance management, High commitment management and High involvement management) among them any one can be practiced because according to Becker et al(1997), rightly suggested that “What works well in one organization will not necessarily work well in another because it may not fit with its strategy, management style, organizational practicing culture and so on”. So the concerning organizations of HRM study of Coca Cola and Dabur in India and considering their Struggling circumstance leads to appraise “High performance Management Practice” and its rational implication.
High performance Management:
High performance working involves the development of a number of a interrelated process that together make an impact on the performance of the firm through people in such areas as productivity, quality, levels of customer service, Growth, Profits and ultimately increase the stakeholder and shareholder value. This can be achieved by:
- Increasing the Employees Skills
- Enthusiastic engagement of Employee (Stevens, 1998)
High performance management practice includes rigorous recruitment and selection procedures, extensive and relevant training and management development activities, incentive pay systems and performance management process. This strategic approach is so rational for the Coca cola and Dabur India as they suffered from low performance of the existing employees which leads their HRM to coop the recruiting fresh talent to replace the good for nothing staff(Coca cola) and to improve the existing employees offering different schemes of motivation for instance ‘Key performance Area’ to specifically effective performance appraisal in Dabur India.
Resource Based Approach:
Resource based strategic management is base on the ideas of Penrose (1995), he suggested that a firm is an administrative organization and collection of productive resources. According to Hamel and Prahalad declared in their Resource based Strategic model that competitive advantage is obtained if a firm can obtain and develop human resources that enable the organization to learn faster and apply its learning more effectively than its rival. The benefit arising from competitive advantage based on the effective management of people is that such an advantage is hard to copy by the rival companies. An organizational HR strategic policy and strategy is the blend of process, procedure, personalities of employees and employers, management style, capabilities and organizational culture. Among them on of the keys to competitive advantage is the ability to differentiate what the business supplies to its customers from what is supplied by its competitors. Such differentiation can be achieved through having aHR strategy and policy which ensure that
- The firm has higher quality of people than its competitors
- The unique intellectual capital possessed by the business is developed and nurtured
- The organization learning process is encouraged
- Organization specific value and culture exist which bind organization together and give it focus. (Purcell et al, 2003)
The purpose of the resource based HRM strategy id to improve resource capability achieving strategic fit between resources and opportunities and obtaianing added value from the effective deployment of resources.
Problems in Coca Cola:
As the coca Cola operated its business in competitive business market like in India where competitive rivalry is so highly sensitive. So that after merging with two companies Coca-Cola India and Coca-cola beverage brought 10,000 employees more which made double the number of employees it had in 1998. Though the employees are human capital but improper management of the human resource may raise the ineffective performance which had to face Coca-Cola in North India disruption in march 2000.
As the performance of any organization depends on the environment and culture of the organization where they are work with other people so that merging of two company of different culture made massively disoriented culture of work practice not necessarily reduced performance but also tends to regionalization because after merging Hierarchy of the organization was quietly changed based on the Six different regions and every Regional manager are the head of the Region. So that merging caused the dilution of several central jobs and this forced to retire about 1500 of employees at bottling plant. The new line of control strengthened entry among the employees and midd level jobs at the regions and downgraded many at the centre. This lead to unrest among the employee and about 40 junior and middle-level managers and some of them are senior personnel’s.
The aims of a resource-based approach is to improve resource capability achieving strategic fit between resources and opportunities and obtaining added value from the effective deployment of resources. In the perspective of Coca-cola case study it would be preferable to advice under the crisis moment when four companies merge together and chaos came out . In such circumstances it should be better to adopt resource base approach to better utilization of the existing huge resources as well as maintaining organization culture practical and outstanding.
In the other hand in case of Dabur india it can be said that beside the resource based strategy it would be better to emphasize on the High Performance base management strategy to improve the competency of the workforce after all to become competitive business icon . In accordance with the case it has been seen that as the Dabur India is not extensive business resource owner, so that it is so wise to cope with High Performance base management and simultaneously resource based approach as well because resource must be adopt in the strategy of the company to gain better performance.
The total concept of strategic HRM is envisage on the belief that HR strategies should be integrated with corporate or business strategies. Strategic integration is necessary to provide similarity between business and human resource strategy so that the latter supports the accomplishment of the former and indeed, helps to define it. The aim is to provide strategic fit and consistency between the policy goals of human resource management and the business. (Integrated HRM,2010)
There are numerous logical acquaintances and topic subsist stuck between corporate tactics and human resource (HR) strategies. One of the association is the portfolio theory that stand for market growth rate as a purpose alongside relative market share whilst get used to HR strategies and policies based on changing conditions. A further relationship is the value chain which encourage innovation, service quality, responsiveness, and describe the positions for precise businesses. The connection also treats human resources as a significant factor in deceiving business rivalry on an in progress basis. Themes that centred on relation between HR strategy and corporate strategy which are identity, emergence , turbulence ownership and structure as well. The corporate strategy will be found difficulty in action level unless HR strategy will not cope with the goal of the corporate strategy.
Coca-Cola and Strategic Alignment:
Coca-cola in India decided to get change as a change in corporate strategy by merging of its four bottling operations (Hindustan Coca-Cola, Bottling North west, Hindustan Bottling Coca-Cola Bottling South West, Bharat Coca-Cola North East and Bharat Coca-Cola South East) and two new companies Coca-Cola India ,the corporate and marketing office and Coca-Cola Beverages in 1998. But after merging of four companies of different region of India made massy in working culture which made a significance issue of Human Resource at the Company. The state of cultural discoordination was experienced due to the gap of corporate strategy and interpretation of HR strategy. That emerges the condition experienced after mergers “different work culture and different value system”
After merging Coca Coal had huge employees which was more than the resource operation therefore had to accept the cost reduction drive on the human resources front not only that many executives who were provided accommodation in farm house were asked to shift to less expensive apartments. Also company decided not to buy or hire new cars as it felt that the existing fleet of cars was not being used efficiently.
In Dabur India, in the fiscal 1998, 75% of Dabur’s turnover had come from fast moving consumer goods (FMCGs) and they were not progressing as they wished to.Buoyed by this , the Burman family formulated a new vision in 1999 with an aim to make Dabur India’s best FMCG company by 2004 as corporate strategy.
As the company merges its different bottling operations and obtaining huge human resources
(40,000 employees to Coca-Cola doubling the number of employees it had in 1998) under a single umbrella which reflect huge cultural disorientation in the organization as well as distribution of power in the management level felt to change. So that HR introduced hierarchy of that company and divided whole country of operation into six region and each region have got Regional general manager under him one regional functional manager who will report regional general manager. Beside that all Regional manager have to report the VP (Operation) who will report to CEO.
To mitigate the organizational cultural chaos and as part of restructure plan , Coca-cola took a strategy level decision to turn itself into a people driven company and to motivate and restore good working cultural environment to inculcate a feeling of belonging, the company gave flowers and cards on the birthdays of the employees and major festivals. All these were the sign of strategic alignment of HR and Corporate strategy (Business goal and therefore merging and cost reduction) and restructuring from HR and establishing organization culture.
Due to the problem in business profit and slow progression of Dabur India, HR recruited CEO as an advice from the company hired consultant (Mckinsey) and restructured the organizational hierarchy to meet the organizational objectives such as Customer satisfaction, increased sales and reduce cost, cycle time efficiencym return on investment and shareholder value. And Dabur India tried to makes solution by aligning corporate strategy and HR strategy to meet the organizational objectives
It has been suggested by Richardson and Thompson(1999) that strategy, whether it is an HR strategy or any other kind of management strategy must have two key elements: there must be strategic objectives, things the strategy is supposed to achieve and ther must be a plan of action,the means by which it is proposed that the objectives will be met.
- HR Strategic
- HR Implementation
The traditional believe that strategy formulation is a formal, logical, systematic and sequential process.
Figure: The sequential approach to formulating HR strategy.
A methodology for it was proposed by Dyer and Holder(1998) as follows:
Assess feasibility: From an HR point of view, feasibility depends on whether the numbers and types of key people required to make the proposal successes can be obtained on a timely basis and at a reasonable cost.
Determine desirability: Examine the implication of strategy in terms of sacrosanct HR policies.
Determine goal: These indicate the main issues to be worked on.
Decide means of achieving goals: The general rule is that the closer the external and internal fit, the better the strategy, consistent with the need to adapt flexibly to change.
Implementing HR Strategies:
Strategies tend to be expressed as abstractions but they must be translated into programmes with clearly stated objectives and deliverable. Strategy is traditionally the heart of the human resource manager’s strategic job. Top management formulate the company’s corporate and competitive strategies. Then, manager design strategies, policies and practice that make sense in term of company’s corporate and competitive strategies. Human resource management supports strategy execution in other ways. For example, Downsizing and restructuring efforts, out placing employee, cutting pay for performance plans, reducing health care cost and retraining employee.
In Coca-Cola India as they were merged among their different companies therefore that carried forward the employees from different work cultures and different value system. This move towards regionalization which caused dilution of several central jobs with as many as 1500 employees retiring at the bottling plants. Not only that the new line of control strengthened entry and middle level jobs at the regions and downgraded many at the centre. This led to unrest among the employees and about 4o junior and middle level managers and some senior personnel.
Dabur India found itself significantly lacking in some critical areas . While Dabur’s price-to-earnings (P/E) ratio was less than 24, for most of others it was more than 40. The net working capital of Dabur was awhopping Rs. 2.2 billion whereas it was less than half of this figure for the others. Even the return on net worth was round 24% for Dabur as against HLL 52% and Colgate’s 34%.
Coca-Cola introduced a strategy level decision to turn itself into people driven company to make sense of belongingness within the employees. Moreover, the company introduced a detailed career planning system for over 530 managers in the new set up. The system included talent development meeting at regional and functional levels, following which recommendation were made to the HR council. The council then approved and implemented the process through a central HR team.
In Dabur India, to comply with the organizational set objectives, HR introduced a new policy of Performance appraisal where their objective were to ‘ Get and make’ strategy based on the concept that the facts of appraisal had to shift to what a person had achievd , as much as on what he was capable of.
HR Strategy for a Merger:
To develop a successful HR strategy for a merger, the responsible HR organization require timely access to all relevant information. Ideally, HR participates in the evaluation of the potential merger candidate and has an opportunity to perform HR due diligence prior to the merger when the technologies, customers, market and finance are being evaluated. A common double handicap often arise during this phase:
- First, the HR organization of the acquiring company is often not involved in the evaluation until after a decision for merger has been made, HR is the tasked with executing the merger and handling all HR transactions.(Picot, G. 2002,)
- Second, merger candidates rarely fully disclose details personnel data, with all its strength and awareness.
HR management is therefore often faced with major challenge of developing an HR integration strategy without having a complete overview of all the facts. An effective way to address this situation is to form an HR integration team that bring together HR professionals from both companies as early as possible. This will enable the acquiring company to quickly gain a sound understanding of the HR potential for the merger. Joint HR team can also develop a joint strategy for addressing the changes that every merger inevitably produce when organizational entities are merged or eliminated to optimise responsibilities and capacities. There are two elements dominate the development of an HR strategy: Competence management and cultural management.
According to Gut-Villa (1997), describes the four main roles of HR professionals in terms of acquiring or mergers strategy:
- Strategic partner for top management
- Administrative expert for personnel administration
- Employee champion for the needs of employees
- Change agent for transformation process.
Four CEO’ s within 7 years indicating the instability on strategic level of the Coca-Cola and arch rival Pepsi being stepped forward due to organizational incofidence with their Human Resources and also their key operating strategy, not only that reputation become tarnished to the public which was revealed by the media. All of this accumulated Coca-Cola had to count huge loss $ 52 million in 1999.
Due to the merging of company’s and huge employees of different regions made the organization in a moment of crisis as the different cultures are mixed in a same place and also management needed to be change in order to have had organizational goal achievement.
The Coca-Cola in India had to go in for a massive restructuring exercise focusing on the company’s human resources to ensure a smooth acceptance of the merger and therefore launched six regional basis hierarchy topping a CEO and other motivational approach of belongingness from employees.
The most popular selection technique in practice are:
Interviewing is universally popular as aselection tool. According to Torrington et al(2002) interview as a controlled conversation with apurpose but this broad definition encompasse a wide diversity of practice.But over the years have received a relatively bad press as being overly subjective and prone to bias to interviewer aand therefore unreliable predictors of future performance and such criteria are possibly applicable for unstructured interview.
There are different type of structured interview but they have common features (Anderson and Shakleton, 1993)
- The interaction is standardised as much as possible
- All candidates are asked the same series of questions
- Replies are rated by the interviewer on preformatted rating scales
- Dimension for rating are derived from critical aspect of on-the-job behaviour.
Another two popular structured interview technique are behavioural (questions are focused on the past behaviour)and situational interview (uses the hypothetical questions like ‘what would you do if you had to deal with a team member who was uncooperative’)
The use of telephone interview ing is increasing. The CIPD recruitment survey (CIPD ,2005a) found that 30 percent of all organizations and 45 percent of organization in private sector services use telephone interview as part of these selection process. Telephone interviews used to screen out unsuitable applicants or as an integral part of the selection process (IRS, 2005)
Tests: Testing is essentially an attempt to achieve objectivity or to put it more accurately to reduce subjectivity in selection decision making (Lewis, 1985). The type of test used for selection are ability and aptitude test s, intelligence tests and personality questionnaires. Ability test s are concerned with skills and abilities already acquired by an individual where aptitude test focus on an individual potential to undertake specific tasks.
As the Coca-Cola merged, there were vast changed took place due to restructuring strategy from HR and to comply with the corporate strategy as a part of cost reduction lots of employee needed to laid off.
In Dabur, due to company’s lack of expectancy and fulfilment of strategic objectives they had to passed a critical time intervention where they felt a hire of an expert to give strategic vision and guide.
Coca-Cola introduced the laying off strategy to meet the corporate strategy.
Dabur India hired Mckinsey & Co. at a cost of Rs. 80 million. Mckinsey’s three fold recommendation were: to concentrate on a few business, to improve the supply chain and procurement process and to reorganize the appraisal and compensation systems.
And also according to the advice of Mckensey need of CEO, Dabur’s recruit a CEO which was the first incident of an outside professional being appointed after the restructuring was put in place
There are three phase of evaluation of performance appraisal as enlisted below:
- Performance Management based phase
- Improving Current Performance Phase
- Development of Individual phase
1. Performance Management based phase:
In this phase, there are two main reasons : either as system to control employees or in order to provide data about employees so that benefits(salary increment and other rewards, promotion, transfer, e.t.c.) can be awarded on a more or less systematic and equitable basis. This system emphasized on control through report generation which are often confidential and not shown to the employee being reviewed being produced annually on all employees and which was kept in their personal life.
This system relied on heavily on rating performance usually on predetermined numerical scale and used for gathering information about the potential of employees. The operation such system involved burdensome paper work, time and were often not truly representative of effective performance but which might be done to improve performance either by individual or by the organization.
2. Improving Current Performance Phase:
The primary approach in this phase so as to change the way in which employees do their jobs. The emphasis putting on:
- Reviewing previous performance and result for a given period of time against the plans and commitments generated at a previous appraisal
- Jointly identifying opportunities and needs for improved performance on the part of the employee, and increasing support for other employees and the organization
- Agreeing performance standards and the ways they will be monitored and assessed.
- Identifying significant constraints and obstacles to task implementation and planning ways of coping with these.
3. Development of Individual Phase:
This phase focused on providing an opportunity to reflect upon professional practice in a structured way, identifying the training and development needs of individual and groups and seeking to provide opportunities for job and career discussions and counselling. Typically they start by revising the role and job content of the employee and analysing what skills and abilities are needed to meet these and then identifying a=what additional or increased capabilities are required to produce an acceptable outcome.
However these system excellent interviewing and interpersonal skills for the employee and the manager.
Employee development cultivates employees in line with organization, departmental,and work group needs. According to Nadler(1979), “Employee development is concerned with preparing employees so that they can move with the organization as it develops, change and grows”. Employee development is not always directly tied to observable, behavioural change. It cultivates individuals so tat their organization and work group collectively possess the competencies essential to meet present responsibilities and prepare for future attempt of the organization by the employee.
The objectives for employee development can be achieved through following method:
Long-term, informal mentoring programs
Long-term, formal mentoring programs.
Long-term, formalized transfer or exchange programs across organizations, divisions, departments, work units.
Short-term rotation programs
Special job assignments
Action learning projects
Think tank experience. (Willium, J. 2003)
Employee Reward System:
An employee reward system consist of an organization’s integrated policies, process and practices for rewarding its employees in accordance with their contribution, skill and competence and their market worth. It is developed within the framework of the organization’s reward philosophy, strategies and policies.
There are several elements in employee reward system including Base pay,Contingent pay, Allowances, Total earnings, employee benefits, total remuneration, Non-financial rewards.
(Armstrong, M.,2004) . Decisions about pay increase are often critical ones in the relationship between employees, their managers and the organization. Individuals express expectation about their pay and about how much of an increase received by other employees. There are several ways to determine pay increase: Performance, seniority, cost of living adjustments, across the board increases and lump sum increase. These methods can be used separately or in combination.
A growing number of employers have shifted to more pay for performance philosophy and startegies. Consequently, they have adopted various means to provide employees with performance based increases. There are several types of performance related pays:
- Payment by result: payment depends on the values of the output of a group or an individual or out put of units per time basis.
- Piecework: Its depend of each unit of output. This is the oldest category of performance pay.
- Organization or Plant wide incentives: This bonus pay depends on the measured quantities or value of the overall establishment output of the plant.
- Merit Pay: It is based on the assessment of the employee’s contribution to performance.
- Performance related pay: this payment based on the performance appraisal of an employee’s against the seted objectives.
There are other form of performance related pay like competence based pay and profit related pay.
According to 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.
To be a learning organization, Coca-Cola introduced a detailed career planning over 530 managers in the new setup. This system included talent development meetings. Efficient management trainee were to be sent to the overseas office for more responsible position.
In order to motivate the employee as well as media rumour, Coca-Cola’s CEO took step 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 policy plan clear to them.
To meet the corporate objectives HR changed the performance appraisal system and to increase employee satisfaction level, Dabur identified certain key performance areas(KPAs) for each employee where performance appraisal and compensation planning were now based on KPAs and employee training was also given a renewed focus,
As a facts of motivation Dabur introduced Dabur’s employee friendly initiatives included annual sales conferences at places like Mauritius . These conferences, attended by over hundred sales executives of the company, combined both ‘work and play’ aspects for better employee morale and performance.
A learning organization is one that continually improve by rapidly creating and refining the capabilities required for future success(Wick and Leon,1995). According to Senge, Learning organization is that where people continually expand their capacity to create the result they truly desire where new and expansive pattern of thinking are nurtured where collective aspiration is set free and where people are continually learning how to learn together.
Kandola and Fullerton (1994) proposed a model which reflects the importance of the learning organization and its rational practice in business:
- Shared Vision: It enables the organization to identify, respond to and benefit from future opportunity.
- Empowering management: Empoewering the managers and employees in varied extent improve the performance.
- Enabling structure: organizational structure and its related knowledge aware the employees about their duties and responsibilities according to their hierarchy or organizational structure.
- Supportive culture : which reveals the expression of the employees, opinion ship, liberty in speech may be the practice of the organization which make the culture of the favourable working organization.
- Motivated workforce: Learning organization is to learn employess how to be knowledgeable about their right and wants to learn continuously.
- Enhanced learning: process and policies exist to encourage learning amongst all employees.
Knowledge management is any process or practice of creating, acquiring , capturing. Sharing and using knowledge, wherever it resides, to enhance learning and performance in organizations(Scarborouogh Swan and Preston,1999). Knowledge management is concern with both stock and flows of knowledge. Stock included expertise and encoded knowledge in computer system. Flows represent the ways in which knowledge is transferred from one people to another people or from one people to data base. It involves transforming knowledge resources by identifying relevant information and then disseminating it so that learning can be take place.
In practice of knowledge management the strategis promote the sharing of knowledge by linking
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