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CASE STUDY 1: WHIRLPOOL OF VOLUNTARY RETIREMENT SCHEMES (VRS)

Industry: Manufacturing

Industry: Well established, smooth running, multi-crore manufacturing giant, aspiring to be


the "No.1" on not only business fronts but political and management horizons too.
You are about to complete tenth year of service in this business house. You are happy and
expecting a second promotion.
Situation: One fine day you board the bus in the morning to notice a very special silence. All
the chirping, joking, gossiping has come to a standstill .You get to know that your company
has accepted the VRS recommendations by the central government. Your bus partner
enquires about your age and the number of years of service.
Grapevine: The company may shut down this plant possibly in the next fiscal year due to
taxation and infrastructure problems. To begin with they want to cut down the manpower,
beginning with managerial cadre, then the vendors followed by the workers
Facts: Earlier the govt did not allow job termination so easily. The recently elected govt. has
a commitment of "job creation" in their electoral "Magna charta" of promises One brainy
idea has come in the form of termination of "old, experienced but sometimes difficult"
employees under the disguise of offering "golden shake hand" or "voluntary retirement"
Contrast: On one side the country is facing grave shortage of skilled, experienced
manpower on the other they are promoting schemes like VRS!!
Challenge:
You have family of five to support.
You have to shoulder a housing loan and a car loan.
Having spent ten years in a particular industry it may not be easy to find a new job.
VRS is for the employees above forty years of age and / or have completed ten years of
service.
Maximum package of Rs Five lacs is for those having completed 15 years and above.
You can get a max. Of 2.90 Lacs. Only.
Once you accept VRS, getting a new job may not be easy.
If you do not opt for a VRS, possibility of transfer to a remote place or you may be asked
to resign , and go without any compensation being in management cadre.

Case Study Questions


Task : You have to make your choice and justify it in not more than five sentences.
CASE STUDY 2: INDIAN AIRLINES HR PROBLEMS
FLYING LOW
INDIAN Airlines (IA) Indias national carrier is a perfect example of a monopoly gone
berserk with the absolute power it had over the market.
Continual losses over the years, frequent human resource problems and gross
mismanagement were just some of the few problems plagued the company.
Frequent strikes by IA pilots reflected the adamant attitude of the pilots resulting in
increased public resentment towards the airline.
Recurring human resource problems were attributed to its lack of proper manpower
planning and underutilization of existing manpower.
The recruitment and creation of posts in IA was done without proper scientific
analysis of the manpower requirements of the organization.
Employee unions were rather infamous for resorting to industrial action on the
slightest pretext.
The Government took various steps to turn around IA and initiated talks for its
disinvestment.
Amidst strong opposition by the employees, the disinvestment plans dragged on
endlessly well into mid 2001.
This shows how poor management, especially in the human resources area, could
spell doom even for a 40 billion monopoly.

BACKGROUND NOTE
IA was formed in May 1953 with the nationalization of the airlines industry through
the Air Corporations Act.
IA and its subsidiary, Alliance Air, provided domestic air services.
IAs network ranged from Kuwait in the west to Singapore in the east, covering 75
destinations (59 within India, 16 abroad).
In 1999, the company
In 1999, it had a fleet strength of 55 aircraft - 11 Airbus A300s, 30 Airbus A320s, 11
Boeing B737s and 3 Dorniers D0228.
In 1994, the Air Corporation Act was repealed and air transport was thrown open to
private players.
Corporate houses entered the fray and IA saw a mass exodus of its pilots to private
airlines.
To counter increasing competition IA launched a new image building advertisement
campaign.
Improved its services by strictly adhering to flight schedules and providing better in-
flight and ground services.
Launched several other new aircraft, with a new, younger, and more dynamic in flight
crew.
These initiatives were soon rewarded in form of 17% increase in passenger
revenues during the year 1994.
Competitors like Sahara and Jet Airways (Jet) provided better services and network.
Unable to match the performance of these airlines IA faced severe criticism for its
inefficiency and excessive expenditure human resources.
Staff cost increased alarmingly during 1994-98.
These costs were responsible to a great extent for the companys frequent losses.

By 1999 the losses touched Rs 7.5 bn.


In the next few years, IAs market share, however continued to drop.
In 1999, while IAs market share was 47%, the share of private airlines reached 53%.
Unnecessary interference by the Ministry of Civil Aviation was a major cause of
concern for IA.
Interference ranged from deciding on the crews quality to major technical decisions
in which the ministry did not even have the necessary expertise.
IA had to operate flights in the North-East at highly subsidized fares to fulfil its social
objectives of connecting these regions with the rest of the country. These flights
contributed to the IAs losses over the years.
The carriers balance sheet heavily skewed towards debt with an equity base of Rs
1.05 bn in 1999 as against long term loans of Rs 28 bn, heavy interest outflows of Rs
1.99 bn further increased the losses.
IA was found grossly deficient in realistic assessment of the manpower needs, need-
based recruitment, optimum personnel utilization and abolition of surplus and
redundant posts.
FIGHTER PILOTS?
IAs eight unions were notorious for their defiant attitude and their use of
unscrupulous methods to force the management to agree to all their demands.
Strikes, go-slow agitations and wage negotiations were common.
Each had a different reason, but every strike was about pressurizing IA for more
money.
From November 1989 to June 1992, there were 13 agitations by different unions.
The strategies adopted by IA to overcome these problems were severely criticized by
analysts over the years.
Analysts noted that the people heading the airline were more interested in making
peace with the unions than looking at the companys long-term benefits.
Russy Mody (Mody), who joined IA as chairman in November 1994, made efforts to
appease the unions by proposing to bring their salaries on par with those of Air India
employees.
This was strongly opposed by the board of directors, in view of the mounting losses.
Mody also proposed to increase the age of retirement from 58 to 60 to control the
exodus of pilots.
Government however rejected his plans.
When Probir Sen (Sen) took over as chairman and managing director, he bought the
pilot emoluments on par with emoluments other airlines, thereby successfully
controlling the exodus.
Sen created Alliance Air, a subsidiary airline company where the re-employed people were
utilized.
He was also instrumental in effecting substantial wage hikes for the employees.
The extra financial burden on the airline caused by these measures was met by
resorting to a 10% annual hike in fares.
Sen.s efforts seemed to have positive effects with an improvement in aircraft
utilization figures.
IA also managed to cut losses and reported a Rs 140 million profit in 1997-98.
But recessionary trends in the economy and its mounting wage bill pushed IA back
into losses by 1999.
Sen and the entire board of directors were sacked by the government.
In 1990s, in yet another effort to appease its employees, IA introduced the
productivity-linked scheme.
Eventually, the PLI schemes raised an additional annual wage bill of Rs 1.8 bn for IA.
It was alleged that IA employees did not work during normal office hours; this way
they could not work overtime and earn more money.
Though experts agreed that IA had to cut its operation costs. To survive the airline
continued to add to its costs, by paying more money to its employees.
In 1998, IA tried to persuade employees to cut down on PLI and overtime to help the
airline weather a difficult period; however efforts failed.
Over the years, the number of employees at IA increased steadily.
IA had the maximum number of employees per aircraft.
It was reported that the airlines monthly wage bill was as high as of Rs 680 million,
which doubled in the next three years
The Brar committee attributed this abnormal increase in staff costs to inefficient
manpower planning, unproductive deployment of manpower and unwarranted
increase in salaries and wages of the employees.
Analysts criticized the way posts were created in IA.
In 1999, Six new posts of directors were created of which three were created by
dividing functions of existing directors.
Thus, in place of 6 directors in departments prior April 1998, there were 9 directors
by 1999 overseeing the same functions.
Analysts pointed that in the case of cabin crew, 40 posts were introduced in the
Southern Region on an ad-hoc basis, pending the assessment of their requirement
by the Staff Assessment Committee.
Another problem was that no basic educational qualifications prescribed for senior
executive posts.
Even a matriculate could become a manager, by acquiring the necessary job-related
qualifications & experience.
Illiterate IA employees drew salaries that were on par with senior civil servants.
After retirement, several employees were re-employed by the airline in an advisory
capacity.
With each strike/go-slow and subsequent wage negotiations, IAs financial woes kept
increasing.
Though at times the airline did put its foot down, by and large, it always acceded to
the demands for wage hikes and other perquisites.
TROUBLED SKIES
Frequent agitations were not the only problem that IA faced in the area of human
resources.
There were issues that had been either neglected or mismanaged.
Various allowances such as out-of-pocket expenses, experience allowance,
simulator allowances etc. were paid to those who were not strictly eligible.
Excessive expenditure was incurred on benefits given to senior executives such as
retention of company car, and room air-conditioners even after retirement. All these
problems had a negative impact on divestment procedure.
Privatization was expected to give the IA management an opportunity to make the
venture a commercially viable one.
Freed from its political and social obligations, the carrier was expected to be in a
much better position to handle its labour problems.
The biggest beneficiaries would be perhaps the passengers, who would get better
services from the airline.
QUESTION:
IAs human resource problems can largely be attributed to its poor human resource
management policies. Do you agree? Give reasons to support your stand?

ANSWER:
It is true that IAs human resources problems were due to its poor human
resource management policy.
Recurring human resource problems were attributed to its lack of proper
manpower planning and underutilization of existing manpower.
Employee unions were infamous for resorting to unscrupulous methods
on the slightest pretext and arm-twisting tactics to get their demands
accepted.
In turn, the management of the airline was more interested in making
peace with the unions rather than looking at the companys long-term
benefits.
Mounting wage bills as a result of the many employee wage friendly
schemes depicted the simplistic approach of the management.
Improper monitoring by management and abuse by employees of the
Productivity linked incentive scheme reflects the inefficient functioning.
Uncontrolled increase in the number of employees and the number of
surplus and redundant posts with maximum number of employees per
aircraft.
This abnormal increase in staff was attributed to inefficient manpower
planning, unproductive deployment of manpower and unwarranted
increase in salaries and wages of the employees.
The recruitment and creation of posts were done without proper scientific
analysis of the manpower requirements of the organization.
In place of 6 directors in departments there were 9 directors.
In total there were 30 full time directors, who in turn had their retinue of private
secretaries, drivers and orderlies. These were superfluous staff that just added to the
organizations bill.
There were no basic educational qualifications or job specification
prescribed for senior executive posts.
A matriculate also could be a manager, by acquiring necessary job-
related qualifications & experience.
Illiterate employees drew salaries that were on par with senior civil
servants.
Retired employees were re-employed by the airline in an advisory
capacity.
Frequent Dissonance between the union and the management made a
hostile environment in the organisation.
Though, the airline at times held its ground, by and large, it acceded to
the demands for wage hikes and other perquisites.
Various allowances such as out-of-pocket expenses, experience
allowance, simulator allowances etc. were paid to those who were
ineligible.
Excessive expenditure was incurred on benefits given to senior
executives such as retention of company car, and room air-conditioners
even after retirement.
CASE STUDY

ON

HUMAN RESOURCE MANAGEMENT

Submitted by:

Pier Angelo Pascua

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