Human Resource Management of Bata Shoe Company - Term Paper Example

Introduction Companies the world over huge or small in their individual respects have their employees as the most important assets. Employees form the backbone of any organizations success and for this reason they need to be treated with the respect they deserve although this is not the case in many organizations (Martin 2006). Companies encounter problems in their line of operations and they more often than not turn to the human resource department for remedies (Salaman et al. 2005). These remedies are either beneficial to the employees or detrimental depending on the situation and the company. In cases where retrenchments, allowances and benefits deductions, demotions and early retirements among others are involved the employees must try to protest against it. In this respect the paper shall look at the human resource management problems that Bata Shoe Company in India has faced over the last two decades which have come to shape it to be what it is today. Bata shoe company India for many years and more so in the 1990s was marred by employee unrests that saw its market share, reputation and profitability drop to levels never seen before since its inception in the Indian market. 1995 was the worse year in its history as it recorded a loss in its books for the first time. Restructuring processes followed that saw the management staff replaced with the new comers having the task to restore the company towards the lost glory. This was not easy considering that the crisis had attracted world attention. The new team steered the company pretty quickly to profitability although it was low. On the other hand the profits seemed to sore as years went by until 2000 when the trend started following a downhill trend. By then the managing director was Weston Keith. At this time the company’s profit has reduced by a whooping 50 percent (Som 2007). The company’s costs had in turn gone up to worrying levels for example staff costs had risen to over 20 percent over its net sales. Weston and his team came up with plans to downsize in order to cater for the lower profits and rising costs especially in the realm of human resources (Losey et al. 2005). Company overview It is no doubt that Bata India limited is the leading retailer in footwear in the country since its incorporation in 1931 (Bata India Ltd 2010). The company boasts of over 1200 stores countrywide. The company has taken a large portfolio in its business operations where it is being involved in manufacturing, trading in retail outlets and the products are both footwear and non-footwear. The product range under these two sections is enormous and products range from ladies elegant designs as well as men and children footwear. The company has also received the ISO 9001 certification in many of its factories and this had enhanced its stepping and retaining its market leadership position. Bata management in the early seventies initialised the processes of making the company public and by 1973 it was (Bata India Ltd 2010). Its expansion strategies have also notably gone to increase its market share and popularity of its products. Due to the increased need for innovation and the changing global trends in the fashion industry, the company found it necessary to seek help from other companies in the Bata Shoe Organisation Group. This help came from the Canadian Bata limited which entered into a ten year contract from 2001 to provide technical support, information systems, product development and brand development among other needs that may arise within this period. In the India retail summit of 2006 the Bata scooped the Retailer of the Year Award (Bata India Ltd 2010). The following year the company also received the Images Retail Award which was quite a prestigious award. The company also during the same year received the Most Admired Brand that covered the period 2006 to 2007. 2007 was an award year as it also scooped Super Brands Award while in 2008 it received the Corporate Excellence Award. These awards mean that the company’s efforts are being recognised and that its market presence is in no doubt resounding. Industrial environment of Bata in India The Indian footwear industry is one that carries a huge potion of the entire leather sector. This leather industry in India is the second to china worldwide when it comes to particularly footwear production (Bata India Ltd 2010). It is important to note that the Indian footwear companies produce more of more footwear for gents than ladies. This is an industry that is also heavily demanding in terms of labour requirements and companies employ considerable numbers of people to cater for the various tasks. The customers for the products are both domestic and foreign and in the case of the foreign market retail chains that have gone global are a major customer base. Some of the competitors that Bata deals with in the same market and industry are: Nike, Reebok, Florsheim, Gabor and Stacy Adams among others (Davis 2006). These companies are quite popular as well as their products and are therefore form a huge competitive ground for Bata to operate in. The trend in the industry is to incorporate IT related facilities that are of modern design and those that will cater for the companies’ current IT support services as well as future ones. The industry is well supported by a huge supply of raw materials i.e. in form of hides and skins, a large pool of qualified manpower, low labour costs, a good technology base relatively big local market and large capacities in relation to footwear and finished leather production (Som 2007). Bata in this scenario only forms a large potion of the market in terms of input in relation to raw materials and labour as well as being a big producer of finished products. Considering the competitive nature of the industry and the type of competitors on board Bata has therefore done a great deal in maintaining the leading potion in manufacturing and retailing footwear. Human resource management cases As mentioned before Bata was in continual battles with its employees over various workforce issues. Taking the case of dropped profitability in the year 2000 and the rise in cost of operation, the company was in for another battle. In particular the employees’ related costs amounted to more than 20 percent of the company’s net sales. Companies which formed a huge competitive force to reckon with for example Liberty Shoes were at the same time operating at quite favourable grounds of 5 percent employees’ costs as compared to net sales. The company had an awakening where a team of management staff was deployed to monitor the situation and come up with new organisational policies and initiate strategic management decisions that were to steer the company around. The first to leave managerial positions were the people of Indian descent. The second move made by the new guard was to have many departments taken to Batanagar. Examples were planning and distribution department, wholesale and commercial ones. This second move in particular received widespread condemnation from the trade unions arguing that as much as profits are the first priority in the list, the honour the company had was even more important and these move went against this principle. Shortly after about 250 employees received letters requesting them quit the company (Davis 2006). This further aggravated the issue that was already giving rise to heated debates on the precedent Bata management were setting. When measures to lay off workers are being implemented it is a common occurrence that diverse views will emerge and the trade unions will not tap the managers’ shoulders that they have done a good job. After a period of lay offs and retirements the company did away with the process and halted any recruitment process in waiting and instead focused on the internal labour potential. What followed caused a stir in the human resource circles in India when Bata accepted to enter into an agreement that was bipartite and at the same time long-term in nature with employees (Som 2007). At this time the compensation policy was established and that which emphasised a great deal on sales performance. The bipartite agreement was signed peacefully without the usual unrests that filled such scenarios. By this time the powers of the employees and the bodies that represented them had been in a huge way curtailed over the years and this is one of the factors that maybe led to the remotely problematic long-term agreement. The employees’ numbers had also reduced drastically from about 15000 to about 6700 (Davis 2006). With the performance-linked remuneration, the company by 1996 had started showing positive signs of growth from its profitability levels from a loss to a profit of slightly over 40 million rupees. In 1997 human resource management staff had already started noticing a rising trend in motivation levels of the workers after a bonus of 17 percent was allocated to employees when the company managed 93 percent of its targets in relation to production (Bata India Ltd 2010). However, this rise did not cater for the desired reduction in costs of labour and on this realisation the unions became more vibrant in order to prevent an occurrence like in the time of restructuring. A notable failure that Weston faced was that of not striking a comprehensive deal with shop managers through their union leaders (Losey 2005). The leaders claimed that the company was to fill more than 200 vacancies in their branches but it was quite reluctance over the years to do so as it was an agreement that had been made in 1990. The managers union also became vocal in opposing the company’s move that saw the firing of cashiers who failed to hit the target of five million rupees. This strategy saw a massive 690 people lose their jobs in these outlets. The management followed these measures by reducing on town maintenance, health schemes for families of the employees and others like management subsidies. These measures were for quite some time going to stretch the unions to the limit and in the onset of 1999 a demands charter was taken to the management by union representatives. Issues highlighted included reinstatement of four already dismissed employees and many other economic propositions. The union was also demanding to a salary increment, additional allowances and the plight of migrant workers. From this time onwards the management was intensely involved in many indoor meetings with the union leaders in order to come up with a deal. The deal was struck in mid 1999 where the pay increase program was to span 3 years and bonus increases were approved. The company was also not able to be convincing enough as to the reasons of scrapping the health insurance and instead expanded on it leading to over 80 new jobs (Davis 2006). The suspension of employees whose reinstatement was being sought was taken to a tribunal which ruled in favour of the company’s decision to do so. The individuals were guilty as charged as it had been proved that they committed assault against a senior welfare officer back in 1996. Assault case Another official was assaulted, actually Weston, while attending a meeting in Batanagar factory to discuss the workers dismissal on the previous assault case. The basis of this was the growing resentment by the workers in this particular factory of the turn around strategies that he had initiated. This factory rested in an area prone to corrupt practices and huge political interference in business matter. Weston has successfully managed to weed out the people involved heavily in corrupt practices and was in the political interference issue that had proved impossible to deal with. The workers at this factory had seen that when the political drive dies their voices goes down with it and so they were willing to go an extra mile to prove that this was undoable (Davis 2006). Following this incident the three workers involved were dismissed but a strike ensued for two consecutive days in protest of the incident despite the dismissed workers’ agreement to the action taken against them. This move was analysed to be more political than it was related to industrial relations within the company. Politics from outside the organisation are more a serious challenge to weed out and for this reason the management saw it prudent to postpone investment strategies laid aside for the Batanagar factory. Industrial relations Bata’s industrial relations have always been tense and more so in the Batanagar factory which is actually one of the oldest factories (Som 2007). Workers in this particular factory have been in perennial problems and strikes and had been a thorn in the flesh of the management for decades. The said factory for example closed its doors in the early 1990s for more than four months. As stipulated earlier the situation in this factory has been made so severe by the political influence and connections the management union has had with the outside government of Bengal. There have been many agreements that were between the Bata Management Union and the Bata Shoe Company Limited. Due to the strikes and unrests at the Batanagar factory the company decided to go ahead and form other agreements in other factories. The move is a wise one as it avoids the spill over effects to the other factories. For the same reasons the factory at Faridabad was closed also for a period lasting 8 months and it was opened with another bipartite agreement on the table for a wage review that was to last for three years (Som 2007). Wages in many firms have caused these kinds of unrests and coups from within making managements of companies to enter into agreements with the workers’ unions. To prove the spill over effect of the problems, union unrests and a strike ensued in Bangalore factory in the early 2000. The union from the Peenya factory had not taken the wage agreement well and thought it needed revision. In turn the company was locked and operations halted till July that year. When companies close shop it is obvious that there will losses to be incurred and a failed chance to gain revenue (Armstrong 2006). The management did not however see the move as so much of an effect on the company’s revenues as the production was to be beefed up in other factories to cover the short fall. One of the biggest advantages of having branches spanning over a wide geographical area is that a failure in one or a number of them does not necessarily mean loss in revenue as others will offer a backup (Mital 2007). The case in Faridabad factory was not to end soon as the Bata Management Union insisted that laid off workers be reinstated as they perceived the move to be a downsizing exercise in disguise. Companies’ managements are known to use various situations as loopholes to implements policies like retrenchments, downsizing, wage reductions and the like. The cases of unending suspensions and dismissals by the Bata management were more often than not downsizing avenues since after these moves the positions left vacant were not being filled up. Bata had by 2000 entered into agreements with Chinese branches to outsource Indian fully manufactured shoes whereas the case before was outsourcing of only assembly component. Outsourcing is one of the fastest growing sectors for many firms operating in multinational levels to minimise on costs. Bata shoe limited had taken this bold step knowing it will bring problems when the BMU notices. Outsourcing is known to bear long term interests by companies to reduce the number of employees on the basis of redundancy and superfluity (Martin 2008). The case with Bata’s move was the same and the union went to the government to seek intervention. Outsourcing reduces the capacity of companies to produce more but create room to increase efficiency through specialisation (Sims 2007). The management made the outsourcing move after seeing that some its factories were becoming increasingly less efficient due to the looming strikes and union unrests (Martin 2008). The pressures that were being exerted to the management by the unions did not go well with the senior management and January 2001 saw the company’s managing director offer his resignation letter after trying so hard to turn the company around through human resource strategies. Weston had been viewed by many as a saviour of Bata companies in many countries but the Indian situation made him crumble. Pressures at some point tend to push people to the edge from both the management and employees’ side (Bohlander and Snell 2009). The company since 1996 had seen tremendous growth in profits despite the unrests but the underlying factor was that the human resource related issues were deeply entrenched in the company’s culture that they seemed routine. Companies around the world have been facing challenges as changes in the marketing environment call for the management to become innovative in dealing with issues affecting the company. The case of Bata shoe limited Indian is not a unique one and it shows how deep human resources issues if not well addressed from the onset can cripple an organisation no matter the size or influence or intellect and expertise in the management level. Bata had its unrests not well checked by the managers of the late 1980s and early 1990s and the politics of the day played a major role in the workers union. The external environment’s influence on a firm should at least be minimised to avoid too much external interference of company’s affairs. This was not the case in Bata India where the politics of the day penetrated deep into the management level and to the workers and their unions. The culture of strikes stepped to cripple the organisation and reduce its profitability. The turnaround strategies of trying to weed out the political elements also for 6 years proved futile while the level of profitability increased from the downfall of 1995. The challenge for the management from 2001 onwards has been to try and reduce the political interference that the company receives from certain regions in India. These will require an integrated policy approach that incorporates human resource strategies as well as others in relation to operations and streamlining. References Armstrong, M 2006, A handbook of human resource management practice, 10th edn, Kogan Page Publishers. Bata India Ltd 2010, company profile, viewed July 28, 2010, . Bohlander, G and Snell, S 2009, Managing human resources, 15th edn, Cengage Learning. Davis, HJ et al. 2006, Management in India: Trends and transition, Volume 2005, SAGE. Losey, MR, Meisinger, SR and Ulrich, D 2005, The future of human resource management: 64 thought leaders explore the critical HR issues of today and tomorrow, John Wiley and Sons. Martin, G, Reddington, M & Alexander, H (Eds) 2008, Technology, outsourcing and HR transformation, Oxford, Butterworth Heinemann. Martin, G 2006, Managing people and organizations in changing contexts, Oxford, Butterworth. Mital 2007, Cases in strategic management, McGraw-Hill. Salaman, G et al. 2005, Strategic human resource management: Theory and practice, 2nd edn, SAGE. Sims, RR 2007, Human resource management: contemporary issues, challenges, and opportunities, IAP. Som, A 2007, What drives adoption of innovative SHRM practices in Indian organizations. 18, 5, 808-828. Read More