HR Case Challenge

August 2019

‘The Changing Paradigm’

Instructions:

 Teams will submit a case analysis/solution document comprising of no more than 6 pages
of single spaced, 12-point font (including illustrations and excluding TOC, Cover page).
The first page of the document must comprise of an executive summary of the solution
suggested by the team. The executive summary should be limited to one page only.
 There is no pre-determined structure to analyse the case. Participants are free to use any
format which best illustrates and provides convincing arguments supporting their
solutions.
 Wherever necessary, the participants must refer to the sources of information and data.
 Case presentations will be judged based on the following criteria – the originality,
creativity and uniqueness of the idea will receive the highest weightage; the feasibility of
implementation, sustainability and scalability of the idea; its fit with ITC’s vision and the
manner in which it can leverage ITC’s strengths; the thoroughness of research, analytics
and economic logic used to defend viability and execution of the idea.
 Last date for submission of case solutions is 27 August 2019. Teams must send their entries
to the email ID provided for the campus

For full details, please refer to the Interrobang Season 9 Case Challenge Brochure available
with your Campus Point of Contact or contact interrobang@itc.in.
 ‘The Changing Paradigm’
ITC Interrobang Season 9 Case Challenge1

Context

ABC Limited is an FMCG organisation and has been engaged in its business for over a number
of decades. It has multiple manufacturing facilities, all of which are state-of-the-art deploying
the latest technology. All the manufacturing locations are unionized and the unions in the
units are decades old. The Organisation considers its Union as partners in business and not as
an adversary. It has been collaborating with its Union to enable a responsive, reliable and
disruption free manufacturing. The Unions have demonstrated the ability to be statesperson
like and facilitate changes as per the requirement of the Business. There has been nil industrial
strife in the Organisation for a number of years. In the past, the Union and the Management
have signed productivity-linked settlements, which is aligned to the requirement of the
factory while taking care of the aspiration of the workforce.

Manufacturing Scenario

While this has been the scenario in the Organisation for many years now, the manufacturing
landscape is undergoing change. After witnessing sustained volumes for a number of years,
the overall sales volume and therefore the manufacturing volumes have witnessed a decline
in the past few years. In the overall industry, regulation and competition have been drastically
increasing thereby putting a lot of stress on the industry players to respond and change
accordingly. ABC Limited has been no exception to this.

In its efforts to contain the volume decline and move towards volume growth, the
Organisation has been at the forefront of product innovation. During the past four years, there
has been a significant growth in the number of new brands and SKUs.

This change in paradigm also has implications for the manufacturing process. While earlier,
the manufacturing was quite stable with long bulk runs of the brands being the order of the
day. Due to the change in context, the number of brand changes on machines and the
consequent shorter brand production cycles have significantly increased. The type of products
has also proliferated thereby requiring set up of new machine set ups, changeovers and
conversions of machine layouts. These changes have had a significant impact on the machine
performance in terms of its efficiencies of operation.

While the above describes the day-to-day impact on the shop floor, the fluctuations in the
volumes required to be manufactured over a periodic time has increased. Daily level volumes
and monthly level volumes are witnessing significant variance between the highest and the
lowest volumes. The number of shut down days have increased. Therefore, there are

1This Case is developed by and is the sole property of ITC Limited. This is for academic purposes only and is not
intended to be copied or displayed or reproduced at any place outside the Campus.

ITC Interrobang Season 9 Case Challenge

situations when there are months of extremely low volume and months of very high volume
requirement. The difference in people required for such low volume and high volume months
is as high as 25% for some of the factories. Regular compensatory rest day runs, overtime etc.
are becoming commonplace and it is expected to continue so.

In the midst of all these changes, agility and flexibility remains a prime requirement. In all
manufacturing units of ABC limited, the long-term settlement covers a number of operational
details such as the number of workmen required to operate the machines, their roles and
responsibilities, the work procedure, operating systems and processes and so on. While such
requirements may have served the need during the steady run when efficiency was
paramount, these conditions now put restrictions on flexibility. There is now an ever-
burgeoning need to be agile and flexible so that any market requirement is met.

Therefore, the Organisation is in the midst of a major change in terms of its manufacturing
requirement and its people processes that need to be aligned to this new reality.

You have been appointed as the HR manager of this Organisation so as to address certain
people process related challenges.

Challenges – People Processes

All the factories of the Organisation currently employ a mix of permanent workforce and
contract workforce roughly in the ratio of 2:1. This means that for every two permanent
workmen, there is a contract worker. The contract workers are strictly deployed in non-core
areas of manufacturing either in unskilled job or in the non-core skilled job. The distribution
of permanent workers and contract workers is given in the exhibit at the end of the case.

The new manufacturing reality requires the ability of the Organisation to ramp up and down
its volumes as per market requirement. The difference between people requirement at the
peak volume and low volume is around 25% of the workforce. Currently, this is being
managed through off-day runs and overtime. However, going forward this appears to be a
challenge from a statutory perspective. Also, such engagement entails payment of overtime
wages. Given this context, there is a need to identify alternative methods to ensure such surges
in volumes are taken care of. Deployment of extra permanent workforce is not a solution as it
will entail huge cost escalation for the Organisation. Further, engagement of permanent
workforce and contract labour in the same job is not permitted as per the policy of the
Organisation. Therefore, to identify the mechanism in which such surges in volumes can be
addressed in a legal manner and without incurring such high costs is a challenge.

Secondly, over the years, the Organisation has ensured that the overall people cost in its
manufacturing facilities have remain well within control by doing productivity linked
settlements. Such settlements have ensured that while the organisation benefits from higher
productivity, it is able to give good wage increases to its employees thereby truly resulting in
a win-win situation. Given the current state of technology in the factory, further scope of
productivity, purely in terms of lesser number of people to do the same job, has come down.

ITC Interrobang Season 9 Case Challenge

It is estimated that in the next round of settlements, such productivity gains can be only 5%
of the current workforce, which in the past was over 10%. Given this scenario, it will be
challenging to continue to give such increase in wages lest it will impact the overall people
cost. What other avenues of productivity and cost management can be done to ensure that
good gains can be given to the employees? What can be done to align the Unions towards this
new reality and manage employee aspirations and expectations?

The third challenge is in the area of flexibility and agility in manufacturing. There is a
requirement to ensure manufacturing happens as and when required without any restrictions
in terms of numerical flexibility, functional flexibility or financial flexibility. Manufacturing
requires production to happen in single/multiple shift; employees to work across different
categories, single department working to multiple department working, step up job to step
down job, flexibility on number of employees to run a machine etc. What dimensions of
flexibility can be looked at and what mechanism can be suggested to achieve them?

Another challenge that is confronting employees is the drop in machine performance and
thereby the impact on their variable pay component. Currently, the variable pay of the
employees is linked to production volumes and machine efficiency. With drop in both
volumes and efficiency and the variation in production output from month to month, the
variable pay earnings have seen a significant dip. While it is understood that the efficiency
metric might not be most suitable, it is equally not clear what other metric can be used to
reward individual performance. It is feared that in case such variable pay mechanism is
removed, the good employees may feel demotivated to perform. In such scenario, where there
is variability in manufacturing, what should be the reward approach? What should be the
variable pay strategy adopted by the Organisation? What type of variable pay plans may work
the best in such a scenario?

While we have been talking about the changes in the manufacturing process, there has been
changes in the workforce profile in the recent past with a number of younger workers joining
the units. Their aspirations and expectations are significantly different from the previous
generations. They expect fairness in treatment, transparency in decision-making, involvement
in decision-making and are not afraid to bring about changes in the Union functioning. Unlike
in the past, where the Unions had good control over their constituents and command and
control worked well, the dynamics are very different today. The young workforce expects
similar from the management as well. Therefore, what can the management do to prepare
itself and develop the Unions to engage with such a workforce?

Lastly, to enable such large-scale changes, it is imperative to engage with the Union and bring
about appreciation of need for such changes. What should be done in the short term and the
long term of keep aligning the Union leadership towards the business requirement for smooth
transition?

Case Questions

1. Suggest appropriate methods including employment arrangement, types, working

mechanism etc. to enable scale up and scale down of operations.

ITC Interrobang Season 9 Case Challenge

 2. Devise new ways of achieving productivity, cost competitiveness and align the
employees and the Union to ensure realistic expectations.
3. Design systems and processes which enable flexibility of deployment, engagement,
operations and enable an agile manufacturing process
4. Suggest an appropriate reward mechanism keeping in mind the new manufacturing
reality.
5. Suggest methods to help connect and enable the Unions to connect better with the
younger workforce.
6. Suggest steps to align the Union to changed manufacturing requirement and industry
context.

ITC Interrobang Season 9 Case Challenge

 Annexure

Annexure 1: Volume details

Year 2014 2015 2016 2017 2018

Annual Volume
2010 1994 1856 1768 1712
(Tonnes)

Annexure 2: Efficiency details

Year 2014 2015 2016 2017 2018

Efficiency 75 72 64 61 56

Annexure 3: Variable pay details

Year 2014 2015 2016 2017 2018

Monthly Pay 5600 5400 5100 4600 4200

Annexure 4: Workforce Profile Details

Year 2014 2015 2016 2017 2018

Average Age 45 44 42 42 41
%age of People
15% 17% 19% 20% 22%
below 30

ITC Interrobang Season 9 Case Challenge