HUMAN RESOURCE MANAGEMENT AT GOURMET FOODS

Mr. Muhammad Nawaz Chathha, the CEO of Gourmet Foods, rolled up his car window to block out the
pungent smell as he headed towards his head office at the Gourmet production plant at Kot Lakhpat. He
wondered about the phone call that he just received from the HR senior manager at Gourmet Foods, Mr.
Rohail Chaudry, regarding the resignation letter of the general manager of the production plant for mithai
and bakery items. What could have gone wrong? He questioned himself as he aimlessly looked at the
guard who was having trouble keeping his gun up while he opened the gates to let his car in on the
Gourmet production plant driveway. The turnover at the production plant was already alarmingly high
among the lower staff and now the resignation of the general manager, in the absence of a viable
alternative candidate, would prove to be disastrous for the production plant for mithai and bakery items.
Background of the Organization
Gourmet Bakers and Sweets started off in 1987 with a small outlet in Ichhra in Lahore by Mr.
Muhammad Nawaz Chathha. Earlier Mr. Chathha used to work at Shezan Bakers as a general manager
when he realized the potential of the bakery business. He felt that he had gained enough experience and
knowledge of the operations of a bakery and thus went ahead with the idea of opening up his own bakery
by the name of Gourmet Bakers and Sweets. With an investment of Rs. 20 million, he started of his
business and hired a lot of Shezan employees based on the strong contacts that he had developed during
his tenure at Shezan Bakers.
The primary business that Gourmet raised to success with was that of retail of the basic food items. Along
with this, Gourmet offered a wide range of its bakery items such as biscuits, cakes, pastries and other
confectioneries. It also offered a handsome variety of Desi sweets (mithai) that were manufactured by
Gourmet itself and soon became the signature item for the identity of Gourmet Bakers.
Today Gourmet has expanded to a total number of 98 sales outlets in Lahore, 5 production plants and 2
restaurants and still has expansion as one of its core objective, formulated by Mr. Chathha. From the time
period of 1987 to 2006, Gourmet experienced an increase of 25% in annual growth sales which rose up to
65% from 2006 to 2009. 2010 saw the unfortunate rat invasion incident at Karim Block outlet in Lahore
which was caught on camera and became the source of unfavorable publicity. The video clipping showing
rats crawling over cakes displayed in the shelves of Gourmet took a viral ride over the internet and as a
result the sales of Gourmet were adversely affected. After this incident, Gourmet got the tag of an
unhygienic Bakery with poor quality standards.
Mr. Chathha knew that he had to take immediate action to undo the damage done to Gourmets image as a
quality provider. He actively engaged himself in rectifying the poor environmental conditions at the
outlets and made each outlet hire sweepers who made sure that the outlet remained clean. He ensured that
the employees follow strict cleanliness standards so he could apply for the ISO certification that he
thought was the only solution to the wounded image of Gourmet.
This case was written by the students of batch 2012 (Ms. Anam Abu Huraira, Ms. Asna Shahid, Mr. Sikandar Ali, and Ms. Ume
Laila), revised by Ms. Haadiah Qaiser, Teaching Associate under the direction of Mr. F. A. Fareedy, professor of Business
Administration, as a basis for class discussion, rather than to illustrate either effective or ineffective handling of an administrative
situation. Any resemblance to any situation will be totally co-incidental, if any.



Mr. Chathha, now at the age of 77, is a strong man and seldom relies on anyone for making key decisions.
He brushed off the thought of delegation by telling himself that the junior employees lacked his
experience and went ahead with what he believed to be in the best interest of Gourmet.
Gourmet Business Divisions
Gourmet, with its distinctive orange promotional color, made space in almost every corner of Lahore.
With 98 branches in Lahore alone, it left the competition crumbling and came forward as the modern face
of bakery business in Lahore (Exhibit 1). Initially offering only a limited range of bakery items and
mithai, Gourmet gradually set up four production plants and grew into large scale bakery business. The
name Gourmet Bakers and Sweets, which was suggested to Mr. Chathha by his daughter, changed into
Gourmet Foods taking into account the diversification that underwent in Gourmet within a period of
five years.
Mr. Chattha believed that he needed to do more than just selling bakery items. He was determined to
provide his customers with something more, that Gourmet could offer to keep them coming back. He was
toying with the idea of selling mineral water for quite some time but the fear of competition from Nestle
kept him hesitant. He knew he wanted to keep the costs of production at a bare minimum and provide the
quality that Gourmet promises to provide and with that in mind, he believed that he will be able to attract
enough customers from the middleclass income bracket who would want to pay less for the same amount
of water. Gourmet launched its mineral water by the name of Gourmet Water in the size of 18.9 liters
bottle, at a price of Rs. 60 as compared to Rs. 160 of Nestle.
Mr. Taufiq Ahmad, the person heading the Gourmet water production and distribution, overlooked the
stacking of the Gourmet mineral water bottles outside each branch. The strategy was to get the customers
to look at the bottles as they park their vehicles, to increase the possibility of a purchase. The sales figure
rose and the mineral water became a success that everyone owed to Chathha saab as they all referred to
him as.
Watching the success of the mineral water business, Mr. Chathha was hungry for more. He wanted to add
more products under Gourmets belt to stabilize its feet as a business. Within three years of the launch of
the Gourmet Water, Gourmet introduced its own beverage by the name of Gourmet Cola in competition
to the giant companies of Coca Cola and Pepsi that boosted a substantial market share in the beverage
industry. The display shelves of Gourmet were cleared off of the competitors beverages and Gourmet
Cola was nicely stacked up in all the Gourmet outlets. This move required a new production plant and Mr.
Chathha chose Sundar Industrial Estate in Raiwind as the house of the new production plant.
By now, diversification and expansion was integrated as the core business objective at Gourmet. With a
planning team missing, Mr. Chathha preferred going solo with such decision making. To be able to follow
the vision and mission (Exhibit 2), cost cutting was an imperative strategy for Gourmet and thus Mr.
Chattha, having sufficient faith in his experience, waived off any ideas of a thorough market research in
the areas of products that he was interested in launching under Gourmets banner, to save up extra costs.





Irrespective of the Gourmet Colas struggle with sales, Mr. Chathha wanted to further expand the Dairy
line that Gourmet was already offering. With the Gourmet Ice-cream already in the product line portfolio,
Gourmet Milk was introduced. With a shelf life of three days, the Gourmet milk was free of preservatives
and additives, and claimed to be pure.
Gourmet also launched a line of its premium cakes by the name of Bon Vivant to break out the image of
offering only poor quality cakes, catered to the middle classes. This series was projected towards the
upper classes and was set out to compete with the top confectioners of Lahore that have mastered their
cakes.
Mr. Chathhas eldest of the four sons, Mr. Zubair wanted his own contribution into the business and came
up with the idea of a catering business under the brand name of Gourmet. Managed as a separate wing,
the Gourmet restaurant, along with the catering business, was started in 2009 headed by Mr. Jamil
Chathha.
With the sales volume increasing based on Gourmets key items the Faisalabad market, which was on the
paper for quite some time, was finally tapped with two branches. Mr. Chathha was reluctant to expand
outside of Lahore due to his undivided focus on keeping the costs low. This attitude around the company
encouraged low maintenance in all departments, especially in the production department. Often the
Quality bit of the mission statement was overlooked in the effort to keep the costs low.
Human Resource Department at Gourmet
The need for a formal Human Resource Department was severely felt by Mr. Chathha when he realized
that he could no longer supervise all operations including that of the issues related to employees. The
general managers were facing trouble with the lower level staff in production plants and often informed
Mr. Chathha about the high turnover rates.
Earlier each department hired employees itself on the discretion of the managers and supervisors. The ads
for job openings were given in newspapers (Exhibit 3) and interviews were conducted by supervisors who
used to performed the functions of HR managers in the ways they thought best. Each department followed
its distinctive procedure of recruiting and hiring employees. For the senior posts of general managers and
managers, the candidates were interviewed by Mr. Chathha himself who believed that qualification cant
teach a person what experience does. Thus candidates with more experience were preferred over
candidates with better qualifications.
The Human Resource Department was formed in early 2010 and the individuals managing production
earlier were moved to head the HR department with a few new hires. There were two HR managers
(Exhibit 4). One HR general manager and one HR production unit manager who were responsible for
formulating HR policies regarding recruitment, selection, appraisals, benefits, hiring and firing etc. across
all Gourmet business divisions except for the catering business which had an independent HR department.
In its infancy stage, the HR department attempted at formalizing the previously varying HR procedures
which were a norm at Gourmet. But with the pace of growth, the requirement of the performance from the
HR department was very demanding, thus only key areas were formalized initially. Tests were developed
for the selection process and the interview structure was somewhat developed keeping in mind the
requirements of various posts and an overall effort was made to get the HR running instead of investing



time and money into the design of the HR policies. An appraisal system was developed with an appraisal
form which was standardized across all departments. The HR managers knew they had been doing this
job for so long without the HR department in place. Thus they had faith that with just a little formal
outline the HR department will be able to produce what Mr. Chathha expected out of it.
Role of Human Resource Department in Production Plants
In the production plants, the supervisors preferred the traditional Gourmet way of hiring lower level
staff. Each supervisor used to bring ten to twenty people from his respective village and give them jobs in
the production unit. A former manager for the production unit Mr. Khalid Bhatti said Jo zyada aadmi
laata tha uski zyada izzat hoti thi. Wo apna teyka jama laita tha jis kay zyada banday hotay thay. He
further added Aapas ki politics chalti rehti then aur kaam kum hota tha. It was a matter of number, and
not skill, that was seem to be important among the lower level employee candidates brought in. The HR
General Manager, Mr. Abbas Ayaz, also pointed out that Hamein sahi kaam key liyay sahi banda nahin
milta. Ye bari mushkil hay is business mein, skilled log nahin miltay zyada..
A good majority of the lower level staff was predominantly illiterate with only 2% having done their
matriculation. When employed in large numbers, they were collectively given an informal briefing by the
supervisor as to what was required of them and then they were sent straight to work. Training of the
lower level employees is kept at bay to keep the costs at minimum; instead the supervisors help them
through the processes a couple of times to ensure that they get the basics of the job. Mr. Bhatti said,
Training ka to concept hi nahin hay. Bas jo supervisor sikha dey wo training hay.
The lower level staff in the production plants is also prone to injuries, most commonly burns, which take
weeks to heal. So they take off a lot of time from the working schedule. The stress of this lag is felt by the
manager who has to arrange replacements in order to keep the production smooth. In case of such
shortages, the managers borrow employees from other departments to maintain their employee count. The
productions manager for the bakery plant, Mr. Muhammad Razzaq, said Humaari aapas mein ek
understanding hay. Agar mujhay banday kum parr jatay hein to mein Shahid saab (outlet manager) se
keh ke do teen guards manga leta hun kaam ke liyay production mein. The process of Job rotation among
the lower level employees at Gourmet had taken this form according to Mr. Razzaq.
The lower level employees took time in adjusting to the policies and understood little of what the benefits
they should be expecting from Gourmet despite a breakdown of a bonuses plan that was formulated by
the new HR department. The bonuses were given twice a year just after the two Eids. The employees
were expected to work overtime according to the peak demand during the three days of Eid, which
usually amounted to 72 consecutive hours (for bakery items and mithai), and were given bonuses if they
met the demand. The bonuses were distributed at the discretion of the supervisor and manager of the
respective production plant, the chunk of which was kept by the senior employees.
The pay of the lower level employees for a 12 hour duty at the production plant was decided upon to be
Rs. 6,000, and for some it was raised to Rs. 7,000 depending upon the amount of work that individual is
handling (Exhibit 5).
Mr. Chathha had noted that the quality of the mithai and bakery items had seen a declining trend and a
number of customers started complaining regarding rise in poor quality. This issue was earlier brought to



the notice of the General Manager of the production plant of mithai and bakery items who assured Mr.
Chathha that he would take a strict action regarding this and will make sure that his production employees
were in line and work until they get it right. He had earlier informed Mr. Chathha that he had fired four
individuals without any warning because they were not performing well and had been the cause of
disruptions among employees. His words were Wardi utaaro aur niklo. Mr. Chathha was confident
about Mr. Zahid Latifs (general manager of the production plant) ability to resolve the labor issues but
his resignation came to him as a shock.
Another problem that was driving Mr. Chatthas focus away from the diversification strategy was that of
the alarmingly high number of customer complaints regarding the attitude of the Gourmet sales staff at
the Gourmet outlets. A majority of the customers complained that salespeople did not deal with the
customers politely, took too long or often appeared to be aloof of any customer queries which rendered
the Gourmet experience very frustrating. Mr. Chathha recognized the problem to be that of lack of
training of these employees in customer care. Where should he start from with the training? And how
should they be trained?
These questions rummaged for answers in his head as he struggled to multi task while going to the
inauguration of a new outlet in Faisalabad. He stood puzzled as he held the scissor in his hand to cut the
red ribbon at the doorway of the new branch. He just needed to figure out which end he should cut from.




EXHIBIT 1
GOURMET BUSINESSES

Source: Employee Interview

Gourmet
Restaurant Catering
Bakery,
Dairy, &
Other
Beverages
Jams &
Marmalades
Milk
Mineral
Water
Bon Vivant




EXHIBIT 2
MISSION AND VISION STATEMENTS
Mission Statement:
To provide quality products at lowest prices.

Vision Statement:
Leader of quality juice providers in the region by offering products enjoyed in every home. This will be
achieved from the dedication of each employee in conjunction with supportive participation from
management at all levels.

Source: Gourmet Website





EXHIBIT 3
JOB ADVERTISEMENTS



Source: Newspaper Ads




EXHIBIT 4
ORGANIZATIONAL STRUCTURE


Source: Employee Interview

CEO
Directors
(4 sons)
HR Production
General
Manager
Manager
Assistant
Manager
HR General
Manager
Manager
Assistant
Manager
Finance
General
Manager
Manager
Assistant
Manager
Marketing
General
Manager
Manager
Assistant
Manager




EXHIBIT 5
INCOME STATEMENT (GOURMET BAKERS)
For the year ended 31
st
December, 2011

Items Amount (In Rupees)
Net Sales 3,000,000,000
LESS: COGS
Salaries, wages, & benefits 380,000,000
Raw material 360,000,000
Production overheads 260,000,000
Fuel and power 140,000,000
Depreciation 120,000,000 1,260,000,000
Gross profit 1,740,000,000
LESS: Expenses
Salaries and wages 162,000,000
Administrative expenses 132,000,000
Amortization 105,000,000
Selling expenses 130,000,000
Depreciation 80,000000 609,000,000
Operating profit 1,131,000,000
LESS: Non-operating
expenses/income

Financial expenses 68,000,000
Other income 42,000,000 110,000,000
Earnings before taxes 1,021,000,000
LESS: Tax @ 35% 306,000,000
Earnings after taxes 715,000,000

Source: Estimated figures from Employee Interview