Case Analysis: Oil Tanker
International Ltd
Prof Pulak Das
I.I.M. Calcutta
IIM Ranchi Lecture 2010-11
1
Background
• OTIL is an Oil Tanker Manufacturing company located in Paradeep
Port area
• Total number of employees: 1000
• Officers: 10%= 100
• Operatives: 80% of 900= 720
• Non-officer, non-operatives or staff= 180
• Officer engagement: 70% of 100=70 in production department rest
in support service areas.
• Company growth: 20% over the last four five years and it expects
the present growth would continue in coming five years also.
• Current production or value of production (VOP): 100 crores
• Purchased items in VOP (Value of production): 60% of current VOP
or 60 crores
• Strategic shift in business: Outsourced items= 75%
IIM Ranchi Lecture 2010-11
2
Nature of the problem
• OTIL is a fast growing company. To meet
its growing business requirements, it
needs new employees particularly officers
with new type of skill. It wants to prepare
an advance recruitment plan for recruiting
officers. Why?
• It also wants to introduce a few change in
its manpower acquisition policies.
IIM Ranchi Lecture 2010-11
3
Learning Objectives of the case
• To see how a company business policy changes due to
change in its business environment;
• To see how the needs for additional manpower arise in a
company;
• To see how those needs are met by fresh acquisition as
well as through change in internal HR process if need
be;
• To see how manpower acquisition process could be split
into two separate functions;
• To see how manpower acquisition process of a company
changes due to past experience, company current
business strategy as well as current change in external
HR environment;
• To see the roles of different managers at different stages
of manpower acquisition process.
IIM Ranchi Lecture 2010-11
4
Change in Business
Environment
Social
forces
Regulatory
forces
OTIL
Business
policy
Technological
forces
Competitive
forces
IIM Ranchi Lecture 2010-11
5
Change in Business Environment
and its effects on Business policy
• Company grew very fast in the past but this
growth may not be sustainable;
• Company was outsourcing 60% but now would
like to outsource more;
• It wants to increase outsourcing to 75% in five
years.
• What is forcing them to change their Business
policy?
• Standardization of production technology,
large scale production of parts and
components and lower cost of production.
IIM Ranchi Lecture 2010-11
6
Change in Business Environment
and its Effect on HR Strategy
• Old HR Strategy: Hire all under regular full time
category.
• New HR Strategy: To hire new employees
under two different categories:
– Some as regular categories:
– Some as temporary categories.
– But no officer under temporary category; Why?
• Why they decided to change their HR strategy?
– The business space was getting overcrowded. Long
term business prospects was not high.
IIM Ranchi Lecture 2010-11
7
How the needs for additional
manpower arises in OTIL?
•
•
•
•
Company growth;
Retirement of existing manpower;
Resignation of existing manpower;
Change in business strategy of the
company;
• Change in HR strategy both in HR system
as well as employee types.
IIM Ranchi Lecture 2010-11
8
Manpower need due to growth
• In terms of revenue the Company has
been growing at the rate of 20% every
year. And, management believes this rate
would continue in coming years also.
IIM Ranchi Lecture 2010-11
9
Growth related need
•
•
•
•
•
•
•
•
•
VOP in different years
2005 2006 2007
2008 2009 2010
100
120 144
172 196 240
VOP Internal
40
48
57
69
81 96
Current manpower 1000
Current productivity= 40/1000=0.04
Total manpower with current productivity
1000
1200 1425 1725 2025 2400
IIM Ranchi Lecture 2010-11
10
Growth and Strategic change
related fresh positions
• Due to higher outsourcing, 2010 target
internal VOP 25% of Rs100Cr =60 cr
• Target total employment = 1500
• Target officer requirement=150
• Phased requirements of new officers
•
2006 2007 2008 2009
2010
•
10
10
10
10
10
IIM Ranchi Lecture 2010-11
11
Retirement related needs
•
•
2006
5
2007
7
2008 2009
7
8
IIM Ranchi Lecture 2010-11
2010
9
12
Requirements due to resignation
• Nil; For officers, there was no experience
of resignation.
IIM Ranchi Lecture 2010-11
13
Total officer positions to be filled
in different years
•
•
•
•
•
•
•
•
New
2005 2006 2007 2008 2009 2010
Due to 0
10
10
10 10
10
Growth
Retirement 0
5
7
7
8
9
Related
Total
0 15
17 17 18
19
Ex. Recruit 15 10
0
0
1
Fresh Rec 7
17
18 18
IIM Ranchi Lecture 2010-11
14
Change in HR Strategy
• HR strategy has two components;
– The internal HR policies in different areas;
– Manpower types for different positions. New
positions are emerging which did not exist in
the company e.g. contract management, IT
management.
• Company HR strategy evolves from its
experience of past and the perception of
current HR environment and the way it can
affect the performance of its HR system
IIM Ranchi Lecture 2010-11
15
HR Environment
Social
forces
Regulatory
forces
HR
system
Competitive
forces
Technological
forces
IIM Ranchi Lecture 2010-11
16
Forces affecting the HR system
• In the past, it took six months to complete a recruitment
drive; Why? Was company location a problem?
• With growing pull of management education, company
may have more difficulties in completing a recruitment
drive now.
• In the past, it recruited mostly form local market. But
company was worried that it may be tough now.
• Company wanted to get a few senior managers from
open market. But was not sure if those policies would
work.
• Company is using a technology that is unique in the
industry. This means there may not be very many
companies where technical professionals required by
OTIL could be developed.
IIM Ranchi Lecture 2010-11
17
Manpower Acquisition Process of
the company: System relations
Business
strategy
HR
strategy
Acquisition
Placement &
Internal
Dev
system
IIM Ranchi Lecture 2010-11
Performance
Appraisal
system
18
Feedback from HR Strategy to
Business Policy
• Was there any effect of HR strategy on
company business policy change ?
• Why did they go for changing the
outsourcing from 60% to 75%?
– To keep the operating cost in check by buying
low cost parts and components?
– To make sure it does not end up with too
many employees with no job?
– To make sure it will be able to meet its
manpower requirements from open market?
IIM Ranchi Lecture 2010-11
19
Acquisition system
Education
Recruitment
Fresh
Grad
Selection
Exp.
professionals
IIM Ranchi Lecture 2010-11
Work
experience
Interview
20
Recruitment
• Two decisions: Choice of market and
choice of time
• Manpower market:
• Two markets:
– Fresh Graduate market
– Experience professional market
• Recruitment time: It took six months to
complete a recruitment in the past. This
time is likely to increase now. Why?
IIM Ranchi Lecture 2010-11
21
Problems of manpower from
different markets
• Fresh Graduates:
– Behavioral problem (?)
– Unstable in employment; change job quickly;
– Take two years to be useful.
• Experienced professionals:
– Low experience and expertise on OTIL integrated production
technology.
– Cultural misfits: Quality circle culture of OTIL;
– Take one year to be useful.
• Past mix of markets: 20% professionals and 80% from
fresh markets.
• New Policy:
• Increase lateral entry to 30% but make it more as a long
term steady state goal.
IIM Ranchi Lecture 2010-11
22
Selection
• Selection devices:
– Educational qualification;
– Work experience;
– Interview: Structured vs unstructured.
• Past experience: Use of unstructured interview
was not very effective.
• Suggestion: Company should develop more
structured interview tools. Avoid hiring officers
with very long experience in another company.
Why?
IIM Ranchi Lecture 2010-11
23
Company Internal Development System
and its effects on Recruitment
• Company is a production driven company:
• All employees start life in production department
and then moves up in other departments.
• Company is going to have new positions with
new types of skill in support dept. e.g. contract,
IT, supply chain management.
• Implication:
– Hiring must emphasize orientation and desire to work
in production department. This must be tested in
selection time.
– Increase number of lateral entry in the hiearchy.
IIM Ranchi Lecture 2010-11
24
Company Internal Development
System
Production
Support
Dept.
Fresh Graduates
F
r
e
s
h
IIM Ranchi Lecture 2010-11
25
Who to consult before finalizing
recruitment plan
• Since line managers are going to
supervise all the new recruits; Mr
Sashidharan should consult all the
department heads before finalizing the
year wise recruitment plan.
IIM Ranchi Lecture 2010-11
26
Evolving Roles of Managers from Different
Departments in Manpower Hiring
• Planning Stage:
– HR Manager prepares the plan in consultation with
senior managers of various departments.
• The administrative stage:
– Preparing instruments of making contact with
potential employees in different markets and for
interviewing the candidate are handled by HR
managers.
• Final Acquisition Plan Execution stage:
– Employee selection through interview process are
handled jointly by both HR manger and line
managers.
IIM Ranchi Lecture 2010-11
27
Suggested Change in company
recruitment plan
• Hiring of additional manpower is to be done under two categories;
some as regular and some as temporary employee. However, all
officers would be hired only as regular employees. Justifications?
• Mix of officer manpower between fresh and experienced
professionals would change but this new policy would be taken as a
long term goal and not in every year; Justifications?
• For officers, experienced hiring should be done along with fresh
hiring in the current year as well as next year. But from third year
onwards only fresh hiring would be done. Justifications
• Company should continue to use its own internal developmental
infrastructure to develop managers. Justifications?
• There is need for development of structured interview tools for hiring
both experienced and fresh graduates. Justifications?
IIM Ranchi Lecture 2010-11
28