Reference no: EM133045366

Maruti Udyog Ltd.: HR strategies, policies, and Practices

Jagdish Khattar was disturbed after his two separate interactive sessions with the top thirty senior leadership team and a randomly selected group of 70 middle and junior management teams. These were his first formal interactive sessions with different levels of managerial staff after he took over as the CEO and Managing director (MD) of Maruti Udyog Ltd. on 8^th September 1999. 

Before taking over as CEO and MD, Khattar was the supply chain director for two years. Before that, he was the Director of Sales and Marketing, the position he joined, relinquishing his job in Indian Administrative Services (IAS) in 1996. He was aware that there were several issues regarding how human resource management was being run in the company but could not earlier realize that it was such in a bad state in the eyes of managerial cadre employees in general! He has heard several casual comments often from his junior colleagues about the poor functioning of the HR department. He always wondered why it should so? Most of the HR policies and practices are approved by the then MD, and those also had been discussed in the management committee. He felt those policies were quite progressive. He used to think such undesired and sarcastic comment were possible out of jealousy because the HR department was close with the then MD.

Khattar had accompanied Ravi Vasnik, the HR Head, several times during the last three years in the elite campuses like Indian Institute on Management (IIM)- Ahmedabad, Calcutta, and Bangalore and some of the IITs like IIT -Bombay, Kharagpur, Delhi, Kanpur, and Madras.  He used to be thrilled to observe Ravi's great pride and passion in explaining the company's HR policies during the pre-placement talk on each such occasion. The students also used to be highly impressed with them. However, Khattar was not very happy about hiring those highly ambitious talents from those elite institutes. He found them leaving the company within one or two years of joining. On a few occasions, he complained to HR about the very high attrition rate of the new hires from those institutes and advised HR to consider changing the campus hiring policy.  

Mr. Khattar took over the rein in a crucial period of the company. Maruti Udyog Ltd., (MUL) was founded as a joint venture between the Government and Suzuki corporation, Japan, in 1981, with the Government of India having the majority shareholding. In 1992, the shareholding pattern was changed to 51% and 49% between Suzuki and the Indian Government, respectively, and thereby, shifting the management control towards Suzuki.  Since its inception, the company ruled the Indian passenger car market with a dominating market share of over 85%. It enjoyed a "seller's market "environment completely till 1996 when it turned to a "buyers' market" with the entry of most of the global auto companies.   After the liberalization of the Indian economy in 1991, all most all global automobile companies like Toyota, GM, Ford, Hyundai, Nishan made their entry in India, setting up their manufacturing facility.  Most of their commercial operations in India began in 1995 onwards.  Since 1996, MUL's market share started sliding down quarter after quarter every year. In the 2^nd half of 1999, it had fallen below 40%. It was a high alarming signal to the company to radically change the way they were working in the past in almost a monopolistic market that they ruled.  Khattar seemed to have an insurmountable challenge to transform MUL

During his interactions with the senior leadership team, he got a great shock when he found that hardly anyone was aware of the organization's vision and core values in totality. However, those were displayed on the wall at all departments and several other conspicuous places in the organization. The top management team last articulated the vision and core values in 1995. 

He asked for suggestions to change the current management style and policies to cope with enormous challenges. The first suggestion came from the P S Kapoor, the Chief General Manager (Division Head) of the production engineering division, to modify the prevailing merit cum seniority-based promotion policy to only merit-based promotion policy in the changed circumstances. The R&D general manager, Visistha, sarcastically commented, "the word merit is on paper; it's only seniority that determines promotion keeping legacy of PSU culture." That made Khatta a bit irritated; he asked Ravi, HR Head, to give him a copy of the prevailing promotion policy. Ravi had the policy file with him and handed over the same to Khattar. Khattar read out the relevant part loudly "We believe that service continuity and loyalty are important traits, but in the increasingly fiercer competitive market environment, we need to value an employee's performance and the leadership quality over everything. Accordingly, all future promotions in managerial positions will be based only on merit supported with consistent high performance. He or she must have consistent high-performance ratings in the immediate three years' past". 

Amitav Nandy, the Chief General Manager of production, the largest division in the company, stood up and said, "Sir, if you permit, may I ask Ravi when this policy was made and has it been communicated to all managerial staff?" Ravi reacted instantly. "Of course, it was communicated. This promotion policy was made in August 1996. Mr. A S Shrama, the departmental manager (DPM) of HR Operations, sent a mail to all managerial staff attaching an MD's approved copy of the policy". Nandy objected, "how can a DPM communicate such a critical policy change? We have more than 125 DPM in the company, who sends what mail is tough to track. I don't think even I have opened that mail?" Turning to Khattar, Nandy said, "Sir, don't you think such an important communication which has direct implications on people's career aspirations and retention of young talents should be communicated by one of the directors, if not MD. Moreover, I think HR should hold separate communication meetings to clarify such important policies to all affected staff members." Khattar replied, "Noted your suggestion, Nandy." 

But Maitra, the CGM of the R&D division, could hold himself, "Sir, would you kindly advise Ravi to get the last promotion note. I don't want to name the person who was promoted, but his promotion note would tell what the prevailing practice is." So Khattar asked Ravi to get the promotion note. In the following minutes, the office note was given to Khattar. He went through the note silently; his facial expression showed he was disturbed by reading the office note. Finally, he told "Maitra, you seemed to right, it was primarily a case of seniority-based." P S Kapoor commented, "well, I know who he is. He is so close to Joint MD." 

Mr. Khattar finding the discussion turning to be a battleground between the HR and the rest of the senior leaders, wanted to change the discussion. "We will talk about the HR policies later. However, I promise you I'll make them more accessible, transparent, and consistent between stated policies and actual practices". Despite his best attempt to shift the discussion to the business challenges, the interactive session turned to be a grievance session on HR policies and their inconsistencies with practices. The foremost concern came out about compensation & benefit and Recruitment & selection policies and procedures. Most of them were appeared to be not in sync with the vision and strategies of the company. For example, the compensation and development strategy seemed to be more oriented toward internal equity and a more democratic approach than supporting meritocracy. 

His next session with other randomly selected 70 managerial staff was also equally disturbing. Initially, no one was open to speaking out; everything looked fine and hunky-dory. It took a lot of effort for Khattar to make them speak. When one by one started talking out, it turned to a heated exchange of dialogue between the HR executives and the rest of the other managerial staff. They were up in arms against HR and some senior company leaders for the biases and favoritism in performance appraisals, work allocations, training & developmental initiatives, etc. Some line managers pointed out the inconsistencies between the compensation practices, selections & recruitments, and performance management. It further disturbed Khattar.

Immediately after the meeting, Khattar got into his car to rush to Radisson hotel, where he had another meeting with the company's dealers.  He was highly disturbed. He spoke to himself, "now I can relate why the company was having such a high rate of attrition of the young talents hired from the premium IIMs and IITs."

Questions:

1. Referring to the concept of "Three Dimensional People Strategy: Putting Human Resource Policies in Action, which category will you consider the company's HR policies in action were? and why do you think so? 
2. Was the company following strategic HRM practices? Justify your answer.
3. Referring to the concept of "Human Resource System Strength," what will you consider the strength of the prevailing Human Resource System of the company and why?