DOWNSIZING

Definition:
Downsizing occurs when a company permanently reduces its workforce. Corporate
downsizing is often the result of poor economic conditions and/or the companys need to cut
jobs in order to lower costs or maintain profitability.
Downsizing may occur when one company merges with another, a product or service
is cut, or the economy falters. Downsizing also occurs when employers want to streamline
a company this refers to corporate restructuring in order to increase profit and maximize
efficiency.
Downsizing results in layoffs that are often followed by other restructuring changes,
such as branch closings, departmental consolidation, and other forms of cutting pay expenses.
In some cases, employers are not fired, but instead become part-time or temporary workers
(to trim costs).
In a business enterprise, downsizing is reducing the number of employees on the operating
payroll. Some users distinguish downsizing from a layoff , with downsizing intended to be a
permanent downscaling and a layoff intended to be a temporary downscaling in which
employees may later be rehired. Businesses use several techniques in downsizing, including
providing incentives to take early retirement and transfer to subsidiary companies, but the
most common technique is to simply terminate the employment of a certain number of
people.
Rightsizing is downsizing in the belief that an enterprise really should operate with fewer
people. Dumbsizing is downsizing that, in retrospect, failed to achieve the desired effect.
DOWNSIZING IN AXIS BANK
Three years after Shikha Sharma took the corner room at Axis Bank, the country's
third-largest private sector lender is making another attempt to cut flab. The bank plans to roll
out an early retirement scheme for senior employees aged 40 or more, who have been with
the lender for 10 years or longer. This is the bank's second attempt to trim its 31,000-strong
workforce since 2009. The first attempt had received a lukewarm response, and this time the
private sector lender has tailored the scheme to target people who may be good performers
but don't have the ability to make it big.
"This time, the scheme seems to be more targeted and we hope executives will prefer
to accept it rather than be fired at a later date on the pretext of non-performance," said
an Axis Bank official, who requested anonymity.
"The management wants to reduce the number of vice-presidents and senior vice-presidents.
It wants a leaner and younger organisation," the official added.
Axis Bank is not the first private institution to offer an early retirement scheme. In its
earlier avatar as a financial institution, ICICI had introduced its first VRS in 1996-97. The
second scheme came in late-1999. Later, in 2003, the KV Kamath-led ICICI Bank announced
an early retirement offer targeted at erstwhile employees of ICICI and Bank of Madura.
Shikha Sharma, who headed ICICI Prudential before taking up the reins at Axis Bank, seems
to be following the ICICI management style in her new job.
Axis has 31,738 employees. Its staff cost was 577.90 crore at the end of September
2012, compared with 498.62 crore in the year-ago period. "The bank may face immediate
financial burden as it would have to make lump sum payments to employees. However, over
a period it would led to cost savings," said Kajal Gandhi, an analyst with ICICI Securities.
SUCCESSION PLANNING
Definition: Succession planning is a process whereby an organization ensures that employees
are recruited and developed to fill each key role within the company. Through your
succession planning process, you recruit superior employees, develop their knowledge, skills,
and abilities, and prepare them for advancement or promotion into ever more challenging
roles.
Actively pursuing succession planning ensures that employees are constantly developed to
fill each needed role. As your organization expands, loses key employees, provides
promotional opportunities, and increases sales, your succession planning guarantees that you
have employees on hand ready and waiting to fill new roles.
Effective, proactive succession planning leaves your organization well prepared for
expansion, the loss of a key employee, filling a new, needed job, employeepromotions, and
organizational redesign for opportunities. Successful succession planning builds bench
strength.
Develop Employees for Succession Planning
To develop the employees you need for your succession plan, you use such practices aslateral
moves, assignment to special projects, team leadership roles, and both internal and
external training and development opportunities.
Through your succession planning process, you also retain superior employees because they
appreciate the time, attention, and development that you are investing in them. Employees are
motivated and engaged when they can see a career path for their continued growth and
development. To effectively do succession planning in your organization, you must identify
the organizations long term goals. You must hire superior staff.
You need to identify and understand the developmental needs of your employees. You must
ensure that all key employees understand their career paths and the roles they are being
developed to fill. You need to focus resources on key employee retention. You need to be
aware of employment trends in your area to know the roles you will have a difficult time
filling externally.

SUCCESSION PLANNING: THE EXECUTIVE CONTINUITY
Succession Planning is the process of identifying internal people who can take the key leadership
positions in the organization. As a part of HR Planning, internal people who have shown promise in
the past are identified by the senior management and the human resources department. The
selected people (or a particular person in most of the cases) are trained by the leader who is about
to resign or leave the organization. Succession Planning and Replacement Planning are very similar
to each other. Replacement Planning is concerned only in preparing backups for the key people in
the organization whereas Succession Planning deals with the continuity of the mindset of the
organization along with the replacement.
But Due to the dynamic nature of the business these days both are used interchangeably. Many
companies go for external hiring to replace key positions. People who have proved themselves in
the market are recruited to produce similar results in hiring organization. Many people argue that
succession planning is the way to go as the people who are identified are not only good but also
understands the pulse of the organization as they have spent time within the organization. They
understand the challenges faced by the business as they have seen it happening. The external
candidates might be good but they might not have the same knowledge and perspective which is
required to fill in the key position.

How a firm goes about succession planning?
Most of the companies go for the process outlined below :
1. Identify the positions which are needed to be filled.
2. Analyze and discuss the skill level and job description in detail in comparison with the person
already in the key position
3. Identify the people in the organization who fulfill the criteria
4. Analyze their past performance in the organization
5. Formulate a Succession plan
6. Execute it
Many companies have proper assessment centers to aid the process like Succession Planning
where these future leaders are assessed, interviewed and groomed. E.g. Infosys has a leadership
institute (ILI) which plays that role. Many companies follow various processes and use different
tools in order to assess the candidates. Some of the tools used are group interviews, team
activities, leadership role plays, case studies, team based interviews etc.
Final steps of succession planning are actually executed by the leader who holds the current
position. It involves actual grooming by the current leader. The best example is that of
Chandrasekaran being groomed by S Ramadorai to become the CEO of TCS (TATA Consultancy
Services).
Succession Planning is a very important aspect for any company who wants their leadership to be
well aware about the company and especially the culture of the company.
More and more companies are following the suit with grooming their internal candidates to take
over the bigger roles rather than going for an external candidate who might be good but
unpredictable.

Case Study on Succession planning
Securing the future with a partnership

An entrepreneur wanted withdraw from active business for age reasons. His management staffs
were willing to take a share in the business and take over responsibility. DRICON developed a
tailored MBO model, supported the drawing up of contracts and help to complete financing.

The situation at the outset
Eberhardt Schchter GmbH manufactures special machines for met processing. The company
employs around 500 people at a location in South Germany.

The owner, Mr Eberhardt Schchter, has founded the company at the end of the 50s and had
significantly shaped the company's growth. Due to his advancing years, at 76 he intended to
withdraw from the operational business.

Earlier attempts to sell the business to a competitor had failed at various proposed prices. The
competitor had later used the information obtained during negotiations to his own advantage, thus
damaging Eberhardt Schchter GmbH.

In addition to Mr Schchter, the company was managed by Mr Schmitz (sales) and Mr Backstein
(production). Mr Schchter had agreed a success planning model with the two managers. They
would acquire a significant share of the business. This was on condition that they pay an
appropriate purchase price and acquire shares in stages. In addition, Mr Schchter wanted to
maintain a link with the company in an advisory role.

Our approach
Our task was to implement Mr Schchter's and the MBO team's proposals. This
involvedsecuring the financing for payment of the purchase price and seeing through the
operational implementation. In detail, we performed the following activities:
design of an MBO model
drawing up of business plan to cover several years
structuring the financing model
negotiations with banks and investment companies
support in drawing up contracts
formulating the advisory role

The outcome
Firstly, we developed an MBO model which was attractive to all concerned. The MBO team was
able to acquire up to a total of 40% of the shares in three stages. Purchase was in
each case linked to the management achieving clearly defined earnings targets. As it later turned
out, this performance incentive was also of great benefit to the organisation's further business
development. The purchase price was financed through a well-known investment company. The
documentation put together by DRICON served as a guideline in the decision-making. Mr
Schchter was able to withdraw fully from the operational business. In his advisory role, he was
able to manage and support the new management in major decisions.



TRAINING AND DEVELOPMENT AT GODREJ

"Many Indian companies have increased their emphasis on training tremendously. I think it is
absolutely essential to spend a lot of money on training and continuous improvement. In our
group every employee has to undergo at least five days of training a year."

- ADI GODREJ, CHAIRMAN GODREJ GROUP.

Introduction
In January 2002, Godrej Industries Ltd. (GIL) bought a 26% stake in "Personalitree Academy
Ltd." Personalitree provided interactive soft skills training programmes online to corporates.
Personalitree's training modules have since been a part of Godrej's training and development
initiatives.

It all started in 1996 with the break-up of the joint venture between Godrej Soaps Ltd (GSL)
and Proctor and Gamble (P&G). Post break-up, GSL was bereft of a distribution system and
had to start from scratch. As part of the rebuilding exercise, GSL recruited about 250 new
employees who had to be aligned with its corporate culture. In 1997, GSL conducted a Total
Quality Management (TQM) workshop for all its 5000 employees to help them connect to
their job.

Parivartan2 was launched in September 2000 in GSL to train new as well as existing
employees on various aspects of the business and to motivate them. In 2001, new initiatives
like Young Entrepreneurs Board (YEB), Red and Blue Teams, Mentoring and Reverse
Mentoring were introduced in the Godrej Group, (Godrej) to encourage the involvement of
youth in strategic decision-making.
In early 2002, a need was felt among the top brass of Godrej to instil a performance- driven
culture in the company. In addition to upgrading the talents of existing employees, Godrej
had to train new recruits.

Thus, Godrej developed a comprehensive and innovative training programme for
management trainees and named it Godrej Accelerated Learning Leadership and Orientation
Programme (GALLOP).

The objective of GALLOP was to develop a newcomer into a professional by giving him or
her exposure to various departments and inculcate in him or her, a sense of belonging.

Later, in September 2002, GIL introduced Spark, a training programme for managers to help
them become effective coaches. Towards the end of 2002, E-gyan was introduced in GIL to
increase the learning potential of employees.

In January 2003, a special HR programme on honing the interpersonal and negotiation skills
of officer- level employees was launched in GIL. Further, in October 2003, an English
language training programme was held for floor workers of Godrej and Boyce Manufacturing
Company Ltd (GBML), so that they could follow all instructions issued in that language
independently.

Background Note
The Godrej story started in 1897, when Ardeshir Burjorji Godrej (Ardeshir) gave up his legal
practice and started manufacturing locks in a small shed at Lalbaug near Mumbai. Thus was
GBML born. His brother, Phirozshah Godrej (Phirozshah), carried on the pioneering work
and in 1905 GBML built its first safe, thus entering the security equipment business.

GBML expanded its range of products by manufacturing office equipment, typewriters, tool-
room equipment, etc. In the early 1920s, GBML started making soaps from vegetable oils
and incorporated GSL in 1928.

In 1958, GBML started manufacturing refrigerators, its first home appliance product. GSL
ventured into animal feed in 1971 to help dairy and poultry farmers rear healthier livestock.
Godrej Pacific commenced operations in 1982 as the Electronic Business Equipment (EBE)
Division of GBML.

In 1985, GBML ventured into Computer Aided Designing services as part of its EBE
division. In 1990, Godrej Properties & Investments Limited (GPIL) was incorporated to
provide meticulously planned townships. In 1991, the Godrej group entered the processed
food and edible oil segment by incorporating Godrej Foods Ltd (GFL).

The animal feed division was spun off into a distinctly focused animal- feed and agricultural
input company in 1991-92 and was named Godrej Agrovet Limited (GAVL). In 1993,
GBML entered into a joint venture with General Electric (GE), US and Godrej-GE
Appliances was formed.

It went on to manufacture washing machines and air conditioners. GE exited from the joint
venture in 2001 and the appliances business became a division of GBML. In 1993, Godrej
entered into a manufacturing and marketing alliance with Proctor & Gamble (P&G). A new
company P&G-Godrej Ltd, with each company holding 50%, was incorporated.

The entire distribution network of Godrej was transferred to this company and the joint
venture was entrusted with the task of marketing both Godrej and P&G's toilet soap and
detergents brands.

The EBE division was spun off into Geometric Software Solutions Ltd in 1994 to offer
complete solutions to customers. In 1994, Godrej ventured into the insecticide market
through GSL, which bought 75% stake in Transelektra Domestic Products Pvt Ltd (TDPL),
the manufacturer of the "Good Knight" brand.

In 1995, Godrej entered into a joint venture with the US multinational, Sara Lee and the new
concern was called Godrej-Sara Lee. The venture was the world's largest manufacturer of
mosquito repellents. In August 1996, P&G-Godrej Ltd, terminated the arrangement and
Godrej re-took charge of marketing its soap & detergent brands but without a distribution
network of its own.

In 1999, GSL sold 22.5 per cent of its shareholding in Godrej-Sara Lee to the group holding
company GBML for Rs 994.7 million. Godrej Infotech Ltd was incorporated in 1999 to offer
software solutions. In March 2001, GSL got de-merged and its consumer products division
came to be known as Godrej Consumer Products Ltd (GCPL)...
EXCERPTS

Total Quality Management (TQM) Workshops
Godrej started total quality management (TQM) workshops in 1995, to inculcate a `positive
work culture' in the company. In 1997, all the 5,000 employees of GSL were put through a
three-day workshop as part of the "visioning" session of TQM...

'Parivartan'
In 2000, 'Parivartan' was launched in GSL with the objective of motivating employees as well
as imparting knowledge about the sales functions of GSL. A team of 18 senior executives
from all divisions spanning sales, logistics and HR were called on to provide necessary
inputs...

Economic Value Added (EVA) Training
In 2001, Godrej introduced Economic Value Added (EVA) in all its group companies. An
extensive training program was undertaken for various managerial and officer levels. Over
500 employees were trained to manage EVA by making appropriate decisions involving
investments and/or trade-offs between the income statement and the balance sheet. This
training programme was conducted by Stern Stewart, New York based management
consultancy who had pioneered the concept of EVA...


GALLOP
GALLOP was instituted in early 2002 as a structured and organised induction-training
programme at Godrej. GALLOP aimed at nurturing the new recruits into leaders and dynamic
performers through this one-year programme. The programme started with an induction
speech by the chairman, followed by the speeches by the CEOs of all the group companies.
The trainees were rotated in four departments other than their primary department including a
compulsory sales stint. This mandatory rotation in sales enabled the trainees to get a hands-on
experience in understanding the market...

SPARK
The objective of the Spark programme, initiated by GIL in September 2002, was to "train the
trainers". The training programme was aimed at equipping the managers to become
successful coaches. GIL, in association with a Delhi-based HR consultant, conducted a host
of workshops to enable the managers assume the role of a coach...

E-GYAN
E-Gyan was the e-learning initiative of GIL launched in the second half of 2002. It was an
attempt to move away from traditional training methods of workshops and help sharpen the
intellect of the employees by self- learning initiatives. Initially, Satyam Education Services
Ltd was the content provider and rendered the entire gamut of learning resources through its
e-learning portal -learnatsatyam.com. Internal communication measures like 'enrolment on a
first-come-first-serve basis' and 'be the first e-gyanee' were circulated...

CRITICISMS
One criticism against the training and development programs at Godrej was that there were
no measurement techniques to judge the effectiveness of the programs. For example, no
specific measures were developed to determine the extent to which the interpersonal and
negotiation skills training aided the employees to develop a more robust business concept...
Training and Development at TCS
All campus hires begin their careers with TCS at the Initial Learning Program
(ILP), a fully-paid training program designed to provide you with the
information and training necessary to succeed at TCS and excel at client
sites. Hear what some of our campus hires are saying about what its like to work for us: "They made
me realize that I had all these abilities - critical thinking and problem solving abilities, to communicate to
clients." - Bradley Dombey, System engineer, TCS



The training programs take place at our advanced facilities at our Global Delivery Center (GDC) in
Milford, OH. Software engineers attend the ILP for six weeks and all other entry-level associates, for one
week, receiving additional post-ILP training at their specific client sites.

Topics covered during the ILP include (but are not limited to) the following:
TCS orientation
Inter-cultural effectiveness
Product development lifecycle
Case studies
Technical training specific to customer requirements

After completing the training program, associates join their onsite teams to work on pre-selected
assignments with clients who offer a variety of medium- or large-sized projects. All campus hires are
assigned mentors and given project-specific on-the-job training, but the learning does not stop there!

Access to numerous web-based training courses in multiple disciplines is available 24X7, and associates
can also earn technological and professional certifications.

INFOSYS
Infosys trimming up to 5,000 staff to scissor costs;
eyeing riskier deals
Infosys has begun sacking employees at the bottom of the performance pile, returning to a practice it
adopted during the peak of the global economic crisis in 2008 and 2009, according to people familiar
with the development.
The renewed lack of tolerance for poor performance, which will affect up to 5,000 employees, is
indicative of the pressure the software company faces to curtail costs while pivoting towards a
more aggressive sales strategy. The Bangalore-based company is resorting to retrenchment by
suspending a plan crafted by co-founder NR Narayana Murthy to help underperformers come up to
scratch. Instead of giving underperforming staff up to six months for retraining, India's second-largest
software company is asking the worst performers, about 3-4% of the 1.5-lakh workforce, to leave
straightaway.
Infosys spokeswoman Sukanya Ghosh did not reply to emails, phone calls and text messages
seeking the company's comments.
This is the latest in a series of management decisions perceived as employee-unfriendly. Some
months ago, Infosys, which has been lagging the industry in growth for over a year, had frozen salary
hikes, blaming bad market conditions and insufficient visibility into near-term growth. It relented
eventually and announced increments after its main rivals revised salaries for staff.
"Earlier, companies would go the extra mile to retain them (poor performers). But lately, due to slow
business growth, they are seriously looking at downsizing," said Kris Lakshmikanth, CEO of
Headhunters India, a human resource consultancy.
With a sales growth forecast of about 5% for the year to March 2013, Infosys figures at the bottom
among India's top IT firms. Analysts expect Infosys to further lower growth guidance when it
announces earnings for the three months to December on January 11.

Infy Eyeing Riskier Deals
In a report on Tuesday, Vishal Agarwal, equities analyst at brokerage Jefferies, wrote that he expects
the forecast to be lowered to 4%, excluding contribution from Lodestone, the Swiss company that
Infosys acquired in September for $350 million. In comparison, Nasscom expects the industry to grow
at more than double the pace, or at least 11%.
Infosys, which is perceived as a conservative company, has been sending out signals that it is more
willing to take on riskier deals, some of which involve taking over assets and employees of clients.
A more aggressive customer-acquisition strategy comes with the danger of diluting margins, a prized
metric for the company.
"An additional month (of retaining a low-performer) would be an additional cost to the book," said Vijay
Sivaram, business head for recruitment solutions division at Bangalore-based HR consultancy Ikya.
In a similar move in 2009, Infosys had pink-slipped more than 2,000 employees at the bottom of the
performance heap.
Post the financial crisis, which began in 2008, work volumes haven't picked up significantly for
Infosys, resulting in increasing number of employees not working on any billable projects.
Among Indian IT companies, Infosys and Wipro have the lowest efficiency levels, with about 30% of
employees sitting idle.
"We believe cleaning out employees at the bottom of the pyramid will become the new norm across
all IT companies and will stay for this year," said Sangeeta Lala, co-founder of TeamLease.
Infosys mulls trimming staff onsite to cut costs
In an attempt to ensure cost efficiency in its operations, Infosys, India's second-largest IT services
exporter is likely to reduce its onsite operations, reported ET Now.
According to ET Now sources, Infosys is considering downsizing its onsite, which implies that a lot of
people in the support functions are likely to face the possibility of a job cut.
ET Now understands that the marketing team in the US is also on the radar. "Also, the Infosys
management is looking to cut costs in the strategic global sourcing (SGS) division," ET Now reported.
This is being seen as an attempt to restructure the sales engine in the US. "Infosys feels that the SGS
group is overlapping with what the sales function does," ET Now added.
It is believed that NR Narayana Murthy and his son Rohan Murty have been in the US for the last two
weeks to fine tune the strategy to cut costs on onsite. Infosys' onsite cost accounts for 46% of total
cost as of March 2013. The management refused to comment on any queries pertaining to 'internal
organizational matters.'
ET had earlier reported that Infosys under Chairman Murthy is centralising decision making. The
chairman's office the new power centre created after the return of retired cofounder Murthy has
to sign off on key decisions related to large technology contracts, such as pricing or the way a deal is
structured that might expose Infosys to future risks, at least three senior executives told ET on the
condition of anonymity.
"For all practical purposes, Murthy is the chairman, CEO, COO all rolled into one," said one of the
executives.
Before Murthy's return, Chief Executive Officer SD Shibulal was in the process of decentralising
decision-making, especially those related to negotiating and signing contracts.
The intention was to empower client-facing sales executives who are aware of moves by competitors
and other considerations critical in negotiating and winning large outsourcing contracts. Under that
model, a business unit head would be empowered to close large deals.
For Infosys, which gets the lion's share of its over $7-billion (Rs 42,000 crore) revenues from
corporations in the US and Europe, this could mean longer decision cycles when it comes to large
contract negotiations.