Haideri Case Study.docx

… On a Tuesday morning(February,2011) Human Resource managers at Haidri Beverages were struggling to reach upon a decision about a labor layoff that was imposed on the organization as a result of change in production process. HR director who was under stupendous pressure, convoked the two HR assistants as he reached his office and informed them about the strenuous scenario in the coming months. It was around 12 in the afternoon and 3 hours in the meeting that mounted up on mugs after mugs of coffee but all three managers were anguish as they could not figure a way out of the situation. It all started on the preceding Monday evening when the production department presented in the meeting with CEO and department heads on the new machinery with more automation that was going to be implanted in the factory along with the survey report that accounted for the redundancy of workers on new machines and got approval from the CEO. The botheration for HR department was that the new production architecture was more automated and less labor intensive that required less number of personnel in the process and HR director was asked to readjust their labor according to the demand as early as possible as the new machinery was going to take only 3 months from then on to be fully operational. HR management had to implement this layoff betimes for the additional labor would have been an extensive cost as the whole idea behind the installation of new machinery was to cut costs consequential to increased competition and economic condition of the industry. CEO hankered this to be done before the new production process takes over but was aware of the consequences of the layoff and the new labor structure’s implications, so he asked the HR director to go about the situation strategically. About the organization Haidri beverages Pvt. Ltd., one of the largest beverage company in Pakistan which is the franchise for Pepsi Cola (PepsiCo Inc.) in the northern region including the capital Islamabad. The company was founded in 1975 and has been serving the food and beverage industry now for more than 35 years successfully. The company is known for possessing the latest technology and equipment in the FMCG industry in the entire region. Despite of being located in an antagonistic business environment of the country, company has propitiously grown and maintained its leadership among all the franchises of PepsiCo Inc. in Pakistan. The Owner and CEO Mr. M Imran Khan is now known as an illustrious leader for driving his company flourishingly through the years. Mission and Vision as stated by company’s’ CEO ‘’To exceed our customers’ expectations in quality, delivery, and cost through continuous improvement and customer interaction"

We are the largest beverage company in Pakistan (A Franchise of PepsiCo Inc.) with a successful business history of more than 35 years. Our mission is to produce PepsiCo quality beverages, maintain market leadership by growing our sales volumes, strengthen our market share, deliver ROI to all of its stakeholders and fulfill its responsibilities in the community. We are a company with a broad vision. Our vision is to catch the speed at which the business world is progressing and to become more efficient in the Production Management, Financial Management, Supply Chain, Human Resource, Sales and distribution at all levels. Change is always a challenge however with committed and hardworking team that we have can make anything successful with its perseverance and effort.

Out of 8 franchise [Exhibit1] for PepsiCo Inc. in Pakistan, Haidri Beverages is the third(after Naubahar bottlers Gujranwala and Pakistan Beverages Karachi) in generating revenues and profits for PepsiCo Inc. in past 10 years and is on top when it comes to area coverage. Company has employed over 3000 employees (directly and indirectly) to oversee its operations and distribution from Mirpur to Abbottabad to Muzaffarabad. Though company has 6 other franchise to be compared with but more often than not it is weighed against Coca Cola Pakistan regarding its policies and operational procedures. This comparison is justified as the company has to compete with Coca Cola Pakistan as it is its direct rival in the market. Haidri Beverages is also known to possess biggest market share against Coca Cola Pakistan when compared to 6 regions of other franchise. Despite of being proven a success over all past years, Haidri Beverages has not done enough on building its reputation when it comes to employees. Company has notoriety for unsure job security and firing of employees on invariant letups has built an icky image in the view of job seekers and current employees. In presence of high competition in market and attractive job environment of Coca Cola Pakistan which provide employees with job security, company has often found itself in a situation where it is difficult for it to magnetize new employees to join. As residuum of this image, company has to offer more monetary benefits to attract the new working stiff. Though more salaries has been a successful strategy in keeping employees interested enough in the job and to retain them, but attracting new employees has always been a challenge for the HR responsible. Company strived to change this image through a numbers of managers in the past but failed majorly because of its bureaucratic culture. The reason behind this contrast among Haidri Beverages and Coca Cola Pakistan about job security policy can be concluded to be due to difference in the leadership styles from the owners. Coca Cola Pakistan operates directly under Coca Cola Turkey and is not franchised to local owners whereas Haidri Beverages operates stringently on

Pakistan’s principles of business and culture that is more of an individualistic and bureaucratic rather than employee friendly or employee centered. In defiance of such situation, Haidri Beverages has managed to dominate the beverage market in northern region through its up-to-date technology and stalwart workforce of over 5000 people and by sticking to their mission, they are a determined and committed organization that seek to lead the market in coming years.

The Difficult hour Haidri Beverages, an organization known to be the most efficient in the market, in an attempt to sustain the market leadership and become a stiffer competitor, had recently planned a redesign for its plant operations. This was supposed to be a technology driven redesign but increased competition and economic conditions of the country largely forced the management at the organization to bring in more efficient production facilities. Production engineers were on the project for the past few months had just came up with a new architecture of machinery that will be more automated and more efficient through use of less resources for the input. Before proposing the new plan to CEO, it was shared with employee relationship manager and he was asked to conduct a Time Motion study keeping the new production process in mind. This study included the head count, count of operation hours, process observations and a lot of interviews from workers involved in production process and as a result, an obvious redundancy was identified. Through this study, management tried to count the exact number of required workers on the new equipment. Results were satisfying the need of smart spending through cutting costs and proffering that 1500 workers would be enough to work (compared to 2000 on current equipment) without losing the productivity. Production department was gleeful with this aftermath and was eagerly looking forward to present in front of the CEO and top management which they did eventually, but were not aware of the fact that this all will come at a high opportunity cost. February(2011), as this plan was put forth in a meeting in which CEO and other department heads gave go ahead to the engineering department to get their hands on the redesign project, abhorrent times began for the Human Resource department[Exhibit 2] as they were asked to restructure their human resource in the production department according to new architecture. On paper, situation was quite elementary in which the company just had to get rid of 500 workers who were in surplus in the new process design, but in reality, it was lot more complicated than it appeared. On top of the list of many intricacies, there was the shortage of time. As in presentation from engineering department, they proposed the new plant to be functional in 3 months i.e. HR persons had to implement this retrenchment procedure through laying off the surplus workers as soon as the month of May starts. The major deterrent factor in this procedure was the abominable image of the company regarding the job securities of employees. There had been perpetual firing and hiring of employees not only in the sales and management departments but in the production department too. So, management was skeptical or rather indecisive regarding the implementation of the layoff. In addition to this, ‘layoff’ is mostly perceived as something

bad as company has lost the demand or is on recession or downsizing, which sends a dreary message to the stakeholders and the market, so management was yearning to give this layoff a strategic dubbing so that it does not prove to be a blow to the already spoiled image of the organization. The next hitch in line was regarding the decision about which employees are to be laid off in case it is enforced. HR managers had to establish some basis to provide as a reason behind the layoff just to circumvent the market and stakeholders and to conserve the image of the company. Problems just did not end here. HR department while restructuring their human resource also had to account for the fluctuations in demand that arises every summer and winter. Before this point, company was handling this seasonal fluctuation through seasonal labor (seasonal labor law) where they hired the labor every season to meet the extended demand i.e. in summers and let them loose in periods with low demands. Now was the time to revisit this strategy and find a permanent solution to this problem that would stop hiring processes every season that were proving be an extensive cost. As the competition had become stiffer than ever, company wanted to adopt the right strategy for the right sizing that will best serve them in every season. The HR director Mr. Ahmad Nauman[Exhibit 3] who had been with Haidri Beverages for more than 5 years, staged all these issues in front of his two HR assistants and asked them for their take on the situation. They all knew it was going to be a hard nut to crack but they had to do it in least destructive way. No one out of three had dealt with such an issue in their practical life as labor surplus is an issue that does not occur too often not only in the beverages industry but any other industry. So, no one had anything to refer to from their past as a guideline. Mr. Ahmad stated “we know we have remedial procedures for the surplus in theory, but we have a situation that is more tangled than one thinks. We have lot more things to look for than a mere layoff. There are implications that come with such practices and we have seen how badly they have affected other companies and in our case, situation is even more sensitive(image about job security) so, it is too demanding to ask us to come up with a solution abruptly. The only thing that we have on our side is that the Mr. Imran Khan understands these complications and has been quite lenient in asking us to forge the strategy out of this, but at the end of the day, we the HR managers are going to be accountable that puts a lot of pressure on us” At the end of 3 hour long meeting that resulted in nothing but agony for the managers, the director asked his assistants to perform a thorough paper work about what other organizations in the same industry are executing and what are the best practices in the market to address such issues and in addition to these, assistants were asked to come up with their ideas on what would be the effective strategy to be implemented in this hour. Solutions in this case were so limited because the scenario involved blue-collar workers, had it been for white collars, if not more, two or three additional options would have been available for the management to ponder upon.

… In meetings after meetings and hours of discussions and suggestions, consensus was not achieved as three of managers had different but relative solutions to propose. One assistant was of the view that layoff should be postponed for as long as it is possible and workers that are in surplus should be readjusted into other departments. There appeared to be a scope for this idea as those persons could be readjusted in distribution department as no specific skills are required for distribution. But the problem was that number was so big, that is 500, it was clearly insurmountable to create this much of additional vacancies in a department. To further emphasize on this idea, the assistant proposed to go with the readjustment for the time being and then layoff these employees at different times in coming months. So, whole idea was practicable as it would not hit the image of the firm as there will not be something as bad as a layoff to be seen from the outside by market and stakeholders but this solution will cause an additional cost to the company that is in the form of their salaries for the months till they are laid off that contraries with the notion of cost cutting. Other two managers were of the opinion of getting on with the layoff thing for the one last time and establish a policy for the future that will abstain them from frequent firings as well as seasonal layoffs. One thing they all agreed upon was, in case a layoff is enforced, they are going to designate it as ‘voluntary separation scheme’ in which they will be offering Provident funds and other monetary compensations to the workers to be laid off. To decide on who is to be laid off i.e. the basis of firing or retiring, they decided to refer to last 3-4 performance appraisals and to opinion of the supervisors about the employees. When all basis will be established, they will ask the workers for one month notice on their resignation[Exhibit 4]. This way will keep the fuss about this retrenchment procedure at the least level in the market that will help in conserving the image of the firm. To cater the problem of seasonal fluctuations in demand that causes seasonal surplus, they turned towards policies of other companies to seek guidelines in devising their future strategy. Through research conducted by the assistants, they had the policies from Coca Cola Pakistan and other franchise of PepsiCo Inc. in front of them. Now they only had to find the best fit for their organization. Shamin and Co. (Franchise for Multan region) and Coca Cola Pakistan were dealing with the seasonal surplus through hiring workers on daily wages whereas Riaz bottler (franchise for Lahore) was doing the same as their organization that is hiring of seasonal labor. Now they were again in a dilemma whether to go with policy of daily wage workers which quietly fit the blue collar workers or to stick to the current practice of seasonal labor. Another option that was present in front of them was to produce at a constant rate throughout the seasons and compensate from the buffer stock during periods of high demand. To practice this option, they needed to do an extensive paper work to forecast the demands for each season and to find the

right rate at which they will produce enough and exact amount of buffer stock for the seasonal demand without the stock getting expired. With all these solutions in front of them, they had to go with the effective ones. Mr. Ahmad Nauman defined this situation as between the devil and the deep blue sea as they had no going back from there. March was about to end and new plant installation had reached its middle stages which was soon going to be completed. The time was short for them and they had done all the effort to devise a best fit for the situation but were not sure which way will prove conducive in the future.

Exhibit 1 PepsiCo Inc. Franchise

PepsiCo Inc. (Pakistan) Riaz Shamin Pakistan Haidri Naubahar Northern Sakhar Punjab Bottler & Co. Beverage Beverages bottler Bottlers Beverages Beverages (Lahore) (Multan) (Karachi) (Islamabad) (Gujranwala) (Peshawar) (Faisalabad

Exhibit 4