THE DISCUSSION

REENA RAMACHANDRAN
CEO, Hindustan Organics Chemicals

A company implementing a Voluntary Retirement Scheme (VRS) for the first time should bear 4 things in mind. First, a VRS cannot be implemented in isolation. The scheme should mesh with the management's long-term objectives. It should flow from critical business issues. It is only when the idea of a VRS is rooted in business linkages--and is not seen as a one-off need to reduce headcount--will it gain credibility within the organisation. Such a policy will do away with the need to market the scheme to the employees.

Second, the VRS should not be undertaken in one stroke; it should be implemented in a phased manner. Both the phases--and the steps within each phase--need to be prioritised in advance. I do not believe in a close-ended scheme. A one-time VRS will not deliver; it should be open-ended. Third, and most important, the scheme should be applicable in equal measure to employees across the organisation in the first round. This is necessary to ensure that nobody feels victimised. It is only in subsequent tranches that the VRS should be targeted at specific groups within the company.

Finally, the management should bear in mind that the VRS is only one of the many options that it can choose from before it makes the company's operations competitive. Too strong a focus on the VRS per se may not, often, be necessary. Maple Petrochemicals (Maple) must do a lot of groundwork before announcing its VRS. This will set the tone in sending out the right signals, which is critical in the pre-VRS phase. A detailed examination of the existing systems and processes is necessary.

Maple has taken the right decision by not replacing those who retire or resign. Such decisions send powerful signals about the management's genuineness of intent and clarity of purpose in implementing a VRS. Simultaneously, the company should set in motion a comprehensive communications strategy. This should take 2 forms:

• Open Forum, held once in 2 months, in which the President, K. Rajkumar, makes a personal presentation to groups of individuals on the company's prospects. He should address 2 vital questions: where is Maple today? And where will it be, say, 5 years hence? This should be followed by presentations by senior managers involving detailed number-crunching on costs, margins, profitability, and the competitiveness of each product and business unit.

• Apex Forum, held with greater frequency but to a much smaller audience like the union leaders and officers' associations. The focus: given the backdrop and compulsions, what do you want the management to do? During these meetings, information on the various aspects of business should be shared. Significantly, the minutes should be recorded, and copies circulated so that there are no misunderstandings.

The risk of losing the core, and getting stuck with the shell is inherent in any VRS. But the risk can be greatly minimised not only through open communication, but also by introducing a fast-track mechanism for those who are valued by the organisation. A demonstrative evidence of rewarding high-performers never fails to motivate them. It also sends a signal to those down the line that the organisation values merit. But the management shouldn't stop anybody from leaving; it must not matter if good people leave too. An unwilling employee, in my view, is worse than a redundant employee.

Another issue in managing a VRS is to ensure that it is not perceived as being handed down from the top. Suggestions for the rationalisation of numbers should come from the rank-and-file. Only then does it become a truly voluntary initiative.

R. KRISHNAMURTHY
Director, Industrial Relation Institute Of India

The problems at Maple are similar to those faced by most companies grappling with the intricacies of a VRS today. In many organisations, the problem of surplus labour is exacerbated by poor productivity-norms. The VRS leads to a double tragedy: the good and capable leave while those identified as surplus and redundant stay on. The VRS, thus, leaves the organisation impoverished at both ends. Thinking of the VRS as a means of downsizing and reducing surplus manpower does not, therefore, work so easily.

It is important for Maple to benchmark not just its numbers, but also its performance-standards against Hetty's. In organisations where abysmal norms have been prevailing, even line-managers--let alone workers--find it difficult to believe that the requisite standards can be achieved. Maple has its own union, a constituency that must be told upfront about the company's plans, the workers it plans to retain, and those it has identified as surplus. This has to be done at all levels. If the union is convinced of the management's intentions, and the employees see the sincerity and seriousness of purpose, the company can pursue its objectives. Here, the details are important.

Around 40 per cent of Maple's employees are in the 50-plus age group. Maple can frame a VRS that offers income-tax benefits. Employees on the verge of retirement are certain to find a tax-free severance-package attractive. Maple can also work out a pension package, with employees depositing the money with the company itself at attractive rates of interest.

The company's stated objective of reducing the headcount by half would mean a workforce of just 1,500. Taking an average cost of Rs 3 lakh as the tax-free benefit that an employee derives from the VRS, the exercise would cost Maple Rs 15 crore if only 500 employees opt for the VRS. Can the company afford this?

The VRS has to be implemented after identifying those workers and managers who will be needed by the organisation in future. If the workers are to take the company's intentions seriously, Maple must first set its house in order. Redundant managerial positions should be eliminated immediately. Legally, no dues are required to be paid as retrenchment-compensation to managers. The company can marginally cushion their severance with 3 to 6 months' pay, or allow them to be on the rolls till they find alternative jobs.

The scheme for the workers can then be framed. Informally, the management must have a clear idea of the individuals who will be targeted and the likely chances of success or failure. The company should also accept the fact that a few employees may accept neither the VRS nor the changes it entails. If multi-skilling is an alien concept in a company, it is unlikely that workers will accept the need to possess a range of skills and, post-VRS, work on several functions. If, however, it is likely that a large number of employees will exit the organisation through the VRS, the company should make every effort to educate and assist them in planning for their future.

The objective of the company must be articulated clearly. In Maple's case, it is to become globally competitive. And this must be pursued with vigour. A VRS fits in as part of the strategy of giving employees who do not fit in, or find the going difficult, a chance to opt out. If people opt to stay back, they have to do what it takes to achieve the company's objectives. Unfortunately, a VRS is seen as a panacea for all the ailments of an organisation. And some companies have enough money to throw around and buy their way out of their troubles.

Komal Prakash and Wilfred D' Souza have to support Rajkumar, and work out a plan to meet his requirements. And Vivek Mathur has to see if the restructuring provides him with an opportunity to improve Maple's sales performance.

VINEET KAUL
Sr General Manager (HR & Svs), Philips India

It is important to set the right context for the VRS. Defining the organisation structure that best delivers business results and in which everyone finds the right fit is the first step.

I would begin with a comprehensive review of all current business processes at Maple. The company should first identify the Key Result Areas and determine appropriate manning levels for each. The on-going OE initiatives at Maple should have highlighted the pockets of flab as well as those activities of the company that do not add value to its operations. These initiatives should now be extended across the entire supply-chain. This will enable Rajkumar and his team to arrive at an optimal organisation structure and size.

Clearly, the objective is to determine--given the over-arching vision and the strategy of the company--a flatter, leaner, and more flexible structure. Prakash is right in stressing the importance of a post-VRS skills inventory. Outsourcing some of the service functions is an option that Maple should explore seriously as part of manpower rationalisation. The benchmarking details provided by Hetty should be kept in mind, but it would be dangerous to pursue downsizing simply because "Hetty wants us to do so." True, there is considerable potential for reducing manpower at Maple. But the implications of downsizing must be understood more in the context of Maple's own strategy than as a mandate from Hetty.

Once you arrive at the optimum structure and size of the organisation, the target population for the VRS will fall into place. A list of individuals will surface. These are not just names, but real people whose identity is rooted in the jobs they do and the roles they perform at their workplace. Once you have the actual names, the list can be fine-tuned by attitude, age, experience, and skills. It is here that one should probe the possibilities for redeployment. A major mistake that Maple should avoid is the `parking-lot syndrome' wherein an individual declared redundant in a particular role is parked in another slot where he may be equally superfluous. There should be no compromises on the fact that everybody, without exception, must add value to the job.

The identification of the target group marks the beginning of the more crucial second phase in which Rajkumar must play a prominent role. A comprehensive communication package--aimed at different levels--should be designed: at line-managers as part of securing their buy-in towards implementation; high-performers to ensure their retention; and those who are likely to exit so as to assure them that their financial interests are being taken care of. The exit package should be designed with 2 criteria in mind: affordability and attractiveness.

There are 5 conceptual areas associated with the VRS as it is being contemplated at Maple, with which I have some reservations.

• It is difficult to share Maple's apprehensions about marketing the VRS. The scheme must be marketed like any other product or service. That is the only way Maple can generate the kind of numbers it expects. Without marketing, no product, however good it is, will find buyers. In the case of the VRS, of course, it is better to work on the pull factors rather than the push factors. There should be adequate incentives for people to opt for the VRS. Early-bird incentives, education assistance, and medical benefits, for instance, are a common feature of the VRSs in most companies, and it can't be denied that this is, essentially, a marketing technique.

• The management should, indeed, have the final choice in deciding who should be allowed to go. As long as the choice is exercised not as a matter of right but because of a genuine need for the person's skills in the overall scheme of things, I don't see any room for disillusionment with the scheme.

• I am not sure if the vision of the company can be used to sell the idea of the VRS. It makes martyrs of people. The perception of martyrdom must be avoided at all costs. One way of doing this is to peg the concept of the VRS to a different plane: on the "What is in it for me?" factor rather than to focus on how the company will benefit from a person's departure.

• The VRS should not be an open-ended scheme. It should be treated like a public issue. It must start and close on pre-determined dates. The absence of a time-frame leads to all kinds of complications. People sit on the fence and take their own time to decide. It creates uncertainty in the minds of people and demotivates performers. And Maple will not be seen as a good employer if the VRS is open for perpetuity.

• And, finally, one must link the manager's involvement in a VRS to his performance. The dictum that "what gets appraised gets done" is true even in a VRS. After all, reduction in numbers is one of the indicators of the success or failure of a VRS.

ABHIJIT GANGOPADHYAY
Head (Personal Mgmt & Indl Relations), TISS

Rajkumar and his team should have carefully re-examined the compulsion behind the proposed VRS. In its anxiety to finalise the joint venture, Maple seems to have made the mistake of accepting downsizing as a pre-condition. In fact, downsizing must be viewed only in the context of--and not in isolation of--Maple's own strategic intent. The design of the VRS has to be considered in its holistic perspective: the VRS certainly cannot be viewed in the light of the numerical targets proposed by the joint venture partner. Nor can one take the benchmarking parameters announced by Hetty as the starting-point of the downsizing initiative.

A VRS is, indubitably, the most convenient means of shedding surplus labour in a company and making it competitive. But, all too often, it merely reduces the numbers without either bringing in the benefits of increased efficiency or enhancing the firm's competitive position in the industry. In fact, according to a recent survey by the Society For Human Resource Management, 50 per cent of the organisations which used this technique reported a decline in productivity or no change at all after implementing the VRS. The reasons, in most cases, are three-fold: inadequate planning, faulty design, and poor implementation.

While there are considerable generic factors in planning, the other 2 reasons are usually company-specific. One integral part of planning is redeployment. Most firms do not examine this issue carefully although it is the most important exercise an organisation should conduct before initiating a VRS. A redeployment exercise invariably throws up gaps and inconsistencies in the existing organisational structure. It provides valuable clues to the management in redesigning the structure in tune with its stated strategy and vision. Most important, by identifying the right fit between an individual and her role, redeployment will also facilitate rightsizing--not just downsizing.

And, by identifying--well before the launch of the scheme--individuals whose skills are important to the company, this approach pre-empts the risk of losing the core and being left with the shell. Redeployment ensures the success of the VRS by setting the right tone for its implementation. In fact, the on-going change initiatives like Total Quality Management (TQM) should further help put the VRS on course at Maple.

The transparency that accompanies any TQM initiative would have already ensured that the employees of Maple are aware of areas where the company is inherently weak, operations are unprofitable, productivity is low, and margins are below par. Those working in such areas would not require any great persuasion to opt for a VRS as long as the package is attractive and safeguards their long-term interests. But it is in the implementation of the VRS and in the management of the post-VRS scenario that most downsizing initiatives come unstuck.

The absence of formal counselling sessions for prospective volunteers usually leaves a trail of bitterness all around. It is noteworthy that professional help should be offered both to line-managers--who have to cope with the subconscious, but very real, executioner complex--and to those opting for the VRS--who have to go through the trauma of losing their identity, something that comes with a VRS.

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