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The Flagship Company of the Godrej Group

FOUNDER – Mr. Ardeshir Godrej Headed by Mr. J N Godrej

Into Business since 1897, Company was incorporated with limited liability on March 3, 1932, One of the largest privately held Industrial Corporations Annual Turnover of Rs. 6656 Crores for FY 2012-13 All India presence with 21 Branches & 50 Showrooms Family of 11000 + employees

From high tech engineering solutions to world-class consumer products, Godrej is an integral part of the lives of millions of Indians. Setting quality benchmarks and redefining customer satisfaction, we have enriched lives across boundaries to higher standards. Godrej is a respected corporate known for our philanthropy, CSR, employability and initiation of labor reforms besides recognized for our values of fair, transparent and ethical values. We have built our empire on the values like as integrity, trust and respect as the corner stones. Today, for most people we are the shining example of enduring ideals in a changing world.

We have 15 Strategic business units and we operate on Multi-structure organizational structure offering

consumer, office, and industrial products and services of the highest quality to every corner of India and across

the globe.

Operating Businesses

Appliances AV Solutions (Prima) Locks Storage Solutions

Lawkim Motors Material Handling Construction Electricals &

Electronics

Process Equipment Locks Precision Engineering Furniture (Interio)

Precision Systems

Tooling Vending (Prima)

EFFACACE

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Questions for Individual Project (Part 2)

1. Explain salary determination process in your organization in terms of four design challenges discussed in chapter.

In Godrej & Boyce (Non-Listed MNC), we have a centralized Compensation and Benefits team in HR responsible for benchmarking and formulating the compensation policy for talent retention, equity, and enhanced performance. Salary is determined after by the compensation strategy proposal is approved by the Board of Directors. The compensation team works on qualitative and quantitative data, benchmarks comparison, per capita income and expenditure to design the compensation policy. The Compensation team presents the policy to HR & Senior Mgmt. After any modifications or approval, the policy is presented to BOD for approval and implementation. When the BOD summarizes the compensation details, correlates with the business growth, the proposal is approved and sanctioned for implementation.

Components of Compensation Strategy Design

-------------------------------------------------------------------------------------------------------------------------------------- After the approval of the compensation policy, the team needs to work on the hike in the salary structure of all the management employees only. The assistance is provided by the HRIS team for details of employees and remuneration package. However, how does a company with strength of 12500 employees at different organizational level decide the remuneration pay for individual employee? The answer to the query is listed in the diagram below. We would provide an elucidation about the four design challenges and their practical applicability in the organization.

HEWITT, MERCER, HAY

Executive compensation survey

Internal surveys - GALLOP

Business Units Performance in market, Revenue Generation,

Expenses and Losses.

Employee Attrition, Retention,

Talent price,

Internal stakeholders

Competition, Product life

cycle, Market stage of the

company, Demand and sale

Political, Economic,

Demographic, Business,

Social, Legal Conditions

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DESIGN ONE –

Differentiation – Is the core element used for determining the salary among the employees in different level of the organization structure. The organizations are divided into structure based on mapped designation levels and each jobholder is provided with the required tasks as per their competencies and skills. Each department is allocated a specific budget and the vertical (hierarchy-wise) and horizontal (role division) differentiation is the basic parameter for salary differentials amount. In a Manufacturing company, weightage is provided to the Strategic Business units for their technical and business competence. Generally, the tasks of achieving Annual Business Goals are achieved by the Business Heads and their business team. As the revenue generating business, the Business teams are awarded higher salary differentials and merit pay for services rendered.

Horizontal Differentiation - To narrow down, the business is divided into production, marketing, sales, customer services, International Business, divisional finance. The Compensation strategy allocates higher salary differentials to the International Business team for the overseas revenue contribution to the business. The G & B orders are routed to UAE, Netherlands, Dubai, Africa and European countries. Corporate support functions like Finance, Procurement, HRD, Personnel, and Administration are facilitators and also strategic partners to business. The salary of Finance, Procurement, HRD are at par with each other due to the role significance in organizational goals.

Vertical Differentiation – Both Corporate and Divisions in the organization work in mutual co-operation for growth and survival. The horizontal differentiation on basis of roles and divisions and sub-divisions allocates the budget for salary increase. The budget needs to be divided in accordance to the hierarchical structure. The topmost managerial authority fetches advantage of higher salary hike and as the hierarchy penetrates down the line the budget decreases. In Godrej & Boyce, the implementation of Salary hike is done mostly on the parameter of differentiation as this criterion is considered to be the most transparent and equitable. DESIGN TWO –

Linkage and Co-ordination of organizational activities – The value-chain in the strategic business is responsible to create competitive advantage and generate value for stakeholders. The organizational activities are divided as per Michael Porter’s generic value chain.

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The activities in this value chain are supported by the Support Functions through their capabilities and core competencies to create superior value. The value created to be unique, reliable and ensure efficient use of resources to create competitive intelligence for growth. The services rendered for the support strategy implementation is of paramount importance for the business growth. The Support Managers are provided additional benefits or variables pay like – EVA or PP or ESOPS for the cerebral inputs on strategy implementation. In our company, the framework of business and corporate are interconnected and linked to each other, this linkage is based on underlying principles of our Company ethics, mission, vision, policy. The managerial team responsible for the co-ordination the activities and ensuring execution of the strategic policy are eligible for a salary differential. DESIGN THREE

DECISION-MAKING – is the most crucial function of managerial function. The two core competencies of fundamental use are decision making and problem solving. We, in Godrej have a centralized corporate dept. and 17 Business units, which follows a centralized HRM approach. The business heads and Managerial staff are needed to take up quick and reliable business decisions during contingency. The decisions include their accountability and experience used to produce best results. The challenges for them are to develop alternatives for implementation of the strategy. The Business and corporate management have to blend together to gain a competitive advantage in the value chain. The decisions making rights in the value chain are to be in lines with the organizational hierarchy. The higher the position in Company, more influential is the power and position of the job holder. The Decision making power is real challenge to the top management and they often indulge in brainstorming, nominal techniques, to find accurate conclusions. The power of decision making is as per the hierarchy lines and as the mangers are responsible for this responsibility, the salary is eventually compensated better DESIGN FOUR –

Balancing Differentiation and Integration Mechanism – In our organization, tasks are allocated to resources and line of authority exists to formulate, supervise, and achieve the end results of ABP goals. We partner together with divisions to reduce the communication gap, develop subunits for better integration and facilitation to contribute effectively. We follow a 7 Integrating Mechanism for determining pay equity and internal parity.

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G&B compensation policy is also determined on the basis of 7-Integrating Mechanism; the seven important parameters are the most important pillars for pay evaluation. Divisions are integrated with the Corporate to form a taskforce that teams up into an integration dept for achieving the goals and higher deliverables. The highest hierarchy of authority is responsible for the strategy implementation. In our divisions, Business Head owns the highest position and accountability for decision-making. During the compensation package designing for each individual employee, we understand the value of employee contribution on the criterions mentioned in the integrating mechanisms. The employee contribution in the existing job profile, value-added services, and liaison role played with internal and external stakeholders, task force goals, position in the organizational structure, competencies, key role played in the integration. We are a process-driven organization and the need for corporate and businesses to work in a mutual adjustment is high. Employees need to conduct and maintain the SOPs to ensure compliance in the processes. Compensation team creates a map of the entire integrating team and list down their tasks, role, hierarchy and co-ordination for tasks. The plotter is used for creating differentiation in the employees and uses the same layer for salary determination. The compensation is a biggest challenge in G&B executed by the Compensation team. The compensation needs to be fair and equitable for ensuring appropriate salary package. To manage the compensation of 6 Support service and 17 SBU’s is indeed a heavy tasks and we need a strong structural framework to set up the process in a fair and transparent model. We have an Internal Audit team headed by the Chairman of organization to ensure compliance and fair treatment to every employee on merit and performance. The four organizational designs are the pillars of a discrimination proof model that depicts the Godrej values of integrity, trust, empathy, and respect to higher standards and ensure the employees are awarded only on their performance evaluated on stringent parameters to set higher achievements standards in the tradition of Godrej. **************************************************************************************

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2. Identify any two roles in your organization with significant variations in span of control and check

whether the existing span of control is appropriate.

SPAN OF CONTROL – Henry Faloy coined the concept of SPAN OF CONTROL – The number of sub-ordinates a

manager directly manages, supervises and monitors. The Span of control is said to be effective when the

number of subordinates are related to the thumb rule. The lesser span of control provides effective

supervision and qualitative monitoring. Fewer Spans of control works in a tall organization structure and wide

span of control is present in the flat structure. Each organization has design the organization structure in

accord to their business needs and strategy plan.

In Godrej & Boyce, we have a tall structure and the span of control is as per the business requirements and

future plans for survival. To understand the structure and how span of control is derived we can analyze two

unrelated positions in the organization and draw conclusions.

We have 17 strategic business units, and the organization structure is mapped at the beginning of financial

year with the description of tasks and responsibilities. Let us take into consideration, first a small span of

control example.

NARROW SPAN OF CONTROL (JOB ROLE ONE EXAMPLE)

POSITION – DIVISIONAL PERSONNEL HEAD OF GODREJ PRIMA (Service Division). Godrej Prima is a strategic unit of Godrej & Boyce Mfg Co Ltd; Prima was involved in typewriters business and now moved into partnership with top companies for service of AV solutions, vending services, machines and batteries. Prima uses different delivery mechanisms for each of its businesses. Prima operates from 14 branches across the country and has one manufacturing facility for manufacturing vending machines at Bhosari near Pune. We have an HR representative for monitoring and managing the workforce. Since we are in a Service functional division, we have no IR issues in the plant. The workers are less than 200 nos and are on the company rolls as management employees in the “K”. Let’s understand the management workforce in Prima Division so we can then relate the span of control of the Prima HR Head. We have total 275 management employees working in Prima division.

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ORGANIZATIONAL STRUCTURE OF PRIMA HR HEAD (DPH)

CONCLUSIONS -

The span of control is most appropriate in this job role as per the structure and the strength of the department is around 450 employees – K band and management staff.

The business revenue generated by Prima is not at par with the business divisions and hence the capital is not expended on new positions and increasing the structure.

Even though, G & B overall follows a tall structure, Prima division taking into consideration the job role for HR Head has preferred a small structure with higher responsibilities, more accountability.

The tasks of both the subordinate are complex, different and interrelated as both work for HR of same division, hence we need the AGM to supervise them closely and monitor the complex tasks.

As per the business scenario for Prima which consists of tough competitions and high expenditures for outsourced contracts, to support the divisional goals and survival, we need to have small span of

control in this division of G&B, which is followed by the Prima Business Head as evident in the above OSS Diagram.

BROAD SPAN OF CONTROL (JOB ROLE EXAMPLE TWO)

POSITION – VICE-PRESIDENT – SALES & MKTG (GODREJ INTERIO – Strategic Business Unit)

Godrej Interio is a business unit of Godrej & Boyce Mfg. Co. Ltd., one of India’s largest engineering and consumer product groups. Godrej Interio is India’s largest furniture brand.

Interio offers customers home and office furniture, along with solutions for laboratories, hospitals and healthcare establishments, education and training institutes, shipyards and navy, auditoriums and stadiums.

Span of

control -

SMALL

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Interio at present across India has 50 exclusive showrooms in 18 cities and 800 dealer outlets.

To align Interio divisional goals and become more consumer-centric, the business has been aligned to front-end to focus on the two clear segments viz. B2B and B2C and also has strengthened back-end in terms of structure in NPI and Strategic Sourcing which will help in improving our operational efficiency. While financial and non-financial goals for 2013-14 have been set by the business within view its 10 x 10 Vision and strategies have been put in place to achieve these objectives. Let us understand the organizational structure of this position and the span of control for a business job role.

ORGANIZATIONAL STRUCTURE OF VP-SALES & MARKETING (GODREJ INTERIO)

CONCLUSIONS –

VP – Sales & Mktg, a senior position of profit-making SBU of G & B has nine reportees each responsible for the most crucial and complex function of Interio division. Interio has a wide span of

functions, product portfolios, product lines and expansion would be seen further.

The position of VP – Sales & Mktg is responsible for the revenue generation and establishing market

in domestic and in international business, to create a strong sales force in the market for survival in competition.

The increasing dispersed geographic, changing demographics structure, external forces has created

need to change the regular trends of organization structure and set up a wide span of control. Godrej

Interio has a tall organizational structure but the position needs a wide span of control and fast decision making, broaden the managerial decisions.

Inspite of very broad structure, due to increased business requirements, the span of control needs to be broad so that the VP has monitoring and supervising authority over every major units operating

below his position responsible for the revenue generation.

The VP has to face job enlargement due to this structure but it is appropriate due to the contributing significance of every function – Sales, Marketing, Desking, Service, Branding, Home division, etc.

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COMPARATIVE ANALYSIS OF JOB ROLES – PERSONNEL ROLE VS BUSINESS ROLE

Every system has its own advantages and disadvantages; it is not compulsory that small SOC is good or broad

is bad for organization. We need to analyze the role, its complexities, diverse environment for that role, line of

authority, responsibilities, key result areas and then draw conclusions for the SOC needed. As in the above

examples, small SOC was applicable to a service business division like Prima with 450 manpower strength to

manage and strategize with business. But for a larger role of VP – Sales & Mktg, the broad structure was

needed for his control over the strategic business decisions and to ensure the operational capabilities with

maximum efficiency.

We have to emphasize on an optimal span of control in our organization so that the additional salaries,

training expenses, supervisory responsibilities are well-adjusted for the needed positions only. Increased span

of control does not mean that the managers have more responsibilities or power or small span of control

doesn’t mean the managers have less supervision. In the end, what matters is to achieve the business goals

and objectives for the organization and be agile in our structure to accommodate changes and development.

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3.) Relate the existing structure of your organization to any structure discussed in chapter 6. Do you consider existing structure as appropriate? Reasons? Any suggestion for improvement with rationale

Management from their ancient times created different patterns to manage companies effectively. These patterns draped in the management terms and concepts lead to the formation of our modern day’s organizational structure.

Organizational structure – defines the lines of authority and hierarchy in the organization with relevance to their tasks and responsibility in the strategic goals and mission.

Organizational chart – diagrammatic representation of these positions on plotted paper or

excel file for easy reference of the reporting structure in the organization.

Importance of Organizational structure –

Facilitates to achieve organizational goals Total view of jobs, departments, hierarchy, tasks Allocation of responsibilities Manpower data Strategy Formulation Operational Efficiency and satisfaction Internal Mapping

We would now strength our understanding of organizational structure by co-relating with an organization’s existing structure.

Godrej & Boyce Mfg. Co. Ltd.

Is a vibrant multi-business enterprise that has touched every Indian heart through its lock or store well or furniture or typewriter or the space with the Chandrayan missile. Godrej & Boyce has a wide range of products and product lines to offer with innovative solutions or unique design. The company has its 17 divisions, 15 are operating, two new divisions in process of establishment.

Strategic Business Units

Appliances

AV Solutions

Batteries

Construction

Electricals and Electronics

Furniture

Lawkim Motors

Locks

Material Handling

Precision Engineering

Precision Systems

Process Equipment Security Solutions

Storage Solutions

Tooling

Vending

OTHER ESTABLISHMENTS GODREJ UDAYANCHAL SCHOOL

GODREJ MEMORIAL HOSPITAL

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The success of this top organization is to the visionary of the leaders, skills of workforce and the spirit of the brand to touch a million lives every day. Also, the main factor is a well-established organizational structure that has utilized the operational abilities of large conglomerate and maintained the self-contained model of the divisional units. The Management of Godrej as the company moved from Locks to a wide portfolio of products, increasing its magnitude into a vast empire. To manage the operational and strategic capabilities with agility over the business our founders established the MULTI-DIVISIONAL STRUCTURE in the organization. INTRODUCTION Multi-divisional Structure: When an organization expands it span of operations and ventures into new products, product lines or services then we need a multi-divisional structure to create value in the processes. The divisions are provided with a support functions so that they can carry all the value chain activities on their own, the management would support the divisions to have flexibility in their operations and independence. The divisions in Godrej are divided on basis of their product lines / products and support services are provided to allow them freedom to operate as small entities. The divisions have wide span of control in their own activities but we have our Corporate Headquarters and office to supervise, guide, strategize the activities of the business and also develop long term business plans. The Corporate office has the responsibility to achieve the organizational mission and develop core competencies of the divisional and functional managers for profitable growth and organizational effectiveness. The Corporate stands as an umbrella to the divisions rendering all the processes, policies, benchmarks, strategy, resources for them to operate and yield results. The operational function is passed onto the self-contained units to target and corporate continue the strategy development and implementation to achieve the organizational goals. The Multi-structure is the most appropriate for a heavy engineering and manufacturing company like Godrej to achieve twin objectives of profits and growth. We have other Indian conglomerates Like ITC, L &T, M & M with Multi-structure organizational structure. Advantages –

Corporate have a control over the divisions and due to the separate operating divisions, individual divisional performance can be monitored and improvements be provided.

Economies of large scale can be harnessed with profitable strategies for each division. The brand name

would be strength in the market to the products / product line.

Strategic and operational activities are clearly divided to achieve organizational effectiveness.

Better transparency, proper utilization of resources, high mutual adjustment, total integration, accountability, internal competition.

Even if, any particular division is running into losses, the effect would be nil on other divisions.

Corporate would take the responsibility to co-ordinate with divisional managers for revival of the processes.

There evolves a feeling of unity and mutual co-operation between divisions, corporate, intra-divisional.

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The multi-structure organizational structure creates a powerful brand in the market with wide

economies of scale, diverse market, brand visibility, super profits. CONCLUSIONS – The multi-structure is responsible for developing a stronger Godrej in the market. With the market presence and product stages in the buyer’s market, we need to continue with the same structure. Every structure has some advantages and disadvantages which need to be rooted out. We need to assure that divisions and corporate both harmoniously work in achieving organizational goals.

The internal discrepancies, conflicts are reduced with the help of senior level of managers and even divisional managers are empowered to achieve the sustainable goals.

Corporate managers need to go take a leap and understand constraint of divisional managers, issues, problems provide them essential guiding force and autonomy.

This structure has enabled to create a sense of competition with in the divisions to perform better and create process improvements to win Kaizen award, CII Business Excellence award, Best Workmen award.

Businesses strive hard to perform and achieve their targeted revenue to the organization and demonstrate their performance to the Board of Directors.

The Corporate are expected to formulate high-performing strategies to enable divisions to perform better and face the competition.

Divisions are provided with decision-making authority to respond and adapt to the market changes and develop the operating efforts to align with the changes.

We at Corporate include division’s inputs and expectations in Annual Business Plan and ensure the responsibility is equally shared by them for improving organizational performance. The strategy is formulated with both parties brainstorming and decisions.

The centralization and de-centralization should be equal at both the ends. Corporate should not centralize every small process or divisions should not receive excess independence. The balancing power on both sides needs to be equal.

We as an Godrej organization have an long way to go and we need is highly successful organizational structure with wide business, operational capabilities, agility, superior performance and an role model for other organizations to incorporate in their system. ************************************************************************************************************************************************************************************