AAYAAM

DURABLES LTD.
SCENARIO - II
By:
Hemant Kumar (232008)
Juli Gupta (232009)

Introduction

Aayaam Durables Ltd is a public company

in consumer durable sector.
In brown goods, ADL sells LED/LCD in flat
Panel Display category.
In white goods, it sells refrigerators (both
Frost free and Direct Cool Categories) and
washing machines (Top loading and Semiautomatic categories)

Organization Chart
CEO

Vice President
(HR)

Head
(Corporate HR)

Head (Sales
HR)

Vice President
(Customer
Service)
Head
Marketing

CFO

Head Sales

Vice President
(S&M)

Vice President
(R&D
Electronics)

Vice President
(R&D
Appliances)

Head FPD

Head
Refrigerator

Head Washing
Machine

Regional
Manager North

Regional
Manager South

Regional
Manager East

Regional
Manager West
3

Problem areas

Facing tough competition from global

brands.
Both top line and bottom line shrinking for
all revenue generating products.
Unable to invest in R&D and marketing
Lower brand recall value
High inventory carrying costs
Over-manned in some areas

Arguments
Product Team
only a testing team and not working on any new models
VP (S&M)

losing market share because of lack of new models.

Negligible investments in marketing resulting in low brand recall
Unhappy with Customer Service network.
CFO
20% schemes to network on higher side
Wanted more investments in accounting systems but opposed
by VP (HR)
5

Arguments Contd.
VP (R&D)
Engineers demotivated due to lack of investments in new
technology
VP (Supply chain)
Wants more investments in software systems and
warehouses to reduce inventory carrying costs
CEO
ADL top heavy and over-manned.

Scenario - II
It was felt that the industry will grow in 2015 by 15% over
2014. As penetration level in the industry was low in India
and there might be global stagnation in economy.
In the circumstances, it was felt that revenue growth for
ADL was important. The strategic objective decided was
to achieve revenue of Rs. 900 crores in 2015 and improve
the profit by -5.5% to -2.5%
To achieve the strategic objectives, it was decided to
reduce the manpower cost by 5% (of 2014 revenue level)

ADL Turnover and

Profitability
Revenue in Cr

Growth in %

Profit in Cr

Profit in %

2012

800

-8

-1

2013

882

10.00%

-44.1

-5

2014

842

-4.70%

-46.31

-5.5

2015

900

6.89%

-22.5

-2.5

Manpower cost for 2014

Band

No. of employees

Avg. CTC

Total cost

12

1,20,00,000

14,40,00,000

83

75,00,000

62,25,00,000

158

35,00,000

55,30,00,000

327

15,00,000

49,05,00,000

Total

181,00,00,000

Objective
Manpower cost to be reduced by 5% of 2014 revenue
Cost reduction
= 5% of 842 cr
= 42cr

10

Solution

Attrition of employees

Layoff due to underperformance

Reduction in hiring

Reduction in the % of salary increase

Increased manpower in R & D Department

Increased manpower in sales Department

11

Savings due to attrition

Band

Attrition
rate

Total no. of
employees

No. of
employees
leaving

Average CTC

Costs saved

10%

12

1,20,00,000

1,20,00,000

10%

83

75,00,000

6,00,00,000

15%

158

24

35,00,000

8,40,00,000

25%

327

82

15,00,000

12,30,00,000

Total

29,90,00,000

12

Firing of 2% under-performers
Band

Total no. of
employees

No. of
employees fired

Avg. CTC

Costs saved

12

1,20,00,000

83

75,00,000

1,50,00,000

158

35,00,000

1,05,00,000

327

15,00,000

1,05,00,000

Total

3,60,00,000

13

Prune manpower from low

productive areas
Band

S&M
Marketing
Corp

Sales Corp

Regional
sales

FPD

Refrigerator

Washing
machine

4(-1)= 3

4(-1)=3

15

4(-2)=2

3(-1)=2

2(-1)=1

146(-5)=141

2(-1)=1

14

Prune manpower from low

productive areas
Band

HR

CFO

Corp

General
Affairs

Regional

Corp

Regional

3(-1)=2

5(-1)=4

10(-2)=8

10(-4)=6

5(-1)=4

15(-4)=11

15(-3)=12

29(-3)=26

15

Prune manpower from low

productive areas
Band

Customer Services

Supply Chain

R&D

Corp

Region

Corp

Region

Electronics

Appliances

4(-1)=3

19(-2)=17

26

21

31

105

19

10

16

Savings due to pruning

Band

No. of employees

Avg. CTC of
employees pruned

Cost

1,20,00,000

110,00,000

9,90,00,000

16

45,00,000

7,85,00,000

20,00,000

1,80,00,000

Total

30

20,10,00,000

17

No. of employees remaining

Band

Initial
employee
count

Less
(Attrition)

Less
(Layoff of
underperformers)

Less
(Pruning from non
productive and overmanned areas)

Final
employee
count

12

11

83

64

158

24

16

114

327

82

219

18

Appraisal costs
Band

Avg.
appraisal
rate

No. of
present
employees

Avg. CTC

Salary before
appraisal

Appraised
amount

2%

11

1,20,00,000

13,20,00,000

13,46,40,000

5%

64

75,00,000

48,00,00,000

50,40,00,000

8%

114

35,00,000

39,90,00,000

43,09,55,000

8%

229

15,00,000

34,35,00,000

36,75,45,000

135,20,00,000

143,18,40,000

Total

Increase in salaries = 6,98,40,000

19

Hiring to compensate for attrition

Band

S&M

R&D

Min. CTC offered

1,00,00,000

40,00,000

20,00,000

3,50,00,000

12

5,00,000

5,00,00,000

Total

Cost incurred

8,50,00,000

20

Manpower cost
Savings:
Due to attrition

29,90,00,000

Layoff of 2% under-performers

3,60,00,000

Layoff from pruning non-productive areas 19,10,00,000

Total

52,60,00,000

Costs:
Annual appraisal

6,98,40,000

New hiring

8,50,00,000

Total

14,48,40,000

Total Savings
= Savings Costs
= 52,60,00,000 - 14,48,40,000
= 38,11,60,000
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THANK YOU!!

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