Case Analysis: Oil Tanker International Ltd

1. Case Analysis: Oil Tanker International Ltd Prof Pulak Das I.I.M. Calcutta IIM Ranchi Lecture 2010-11

2. 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

3. 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

4. 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

5. Change in Business Environment Social forces Regulatory forces OTIL Business policy Technological forces Competitive forces IIM Ranchi Lecture 2010-11

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. Retirement related needs • 2006 2007 2008 2009 2010 • 5 7 7 8 9 IIM Ranchi Lecture 2010-11

13. Requirements due to resignation • Nil; For officers, there was no experience of resignation. IIM Ranchi Lecture 2010-11

14. 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

15. 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

16. HR Environment Social forces Regulatory forces HR system Competitive forces Technological forces IIM Ranchi Lecture 2010-11

17. 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

18. Manpower Acquisition Process of the company: System relations Placement & Internal Dev system Performance Appraisal system Business strategy HR strategy Acquisition IIM Ranchi Lecture 2010-11

19. 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

20. Acquisition system Education Recruitment Selection Work experience Interview Exp. professionals Fresh Grad IIM Ranchi Lecture 2010-11

21. 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

22. 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

23. 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

24. 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

25. Company Internal Development System Support Dept. Production Fresh Graduates Fresh IIM Ranchi Lecture 2010-11

26. 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

27. 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

28. 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