Biggest restructuring? Tata Motors shrinking structure of its white-collar workforce

MUMBAI: Tata Motors is shrinking structure of its white-collar workforce to five layers from the existing 14, in what is seen as the biggest organisational restructuring in the company’s history.

Some job losses were envisaged as part of changes, but a decision has yet to be taken, people in the know said. The new structure will take effect on April 1and is aimed at cutting down time the nation’s largest automobile company by revenue takes to react to market dynamics. The exercise was initiated when Cyrus Mistry was chairman. The management decided to go ahead with the realignment even after his exit but may take a relook at plans for job cuts, inside sources said.

Under the new structure, the top two levels of managers will be responsible for execution of strategies formulated by an executive committee, comprising the managing director and function and business heads. Tata Motors has already picked more than 100 high-performers for the L1and L2 positions.

The new flat organisation — it is called OE, or Organisational Effectiveness — aims to eliminate the middle management and multiple reporting. The company had engaged consultancy firms Accenture and Roland Berger to suggest ways to improve competitiveness, even as it steadily lost market share in India’s highly competitive and fast growing automotive market. It has already displayed some improvement in performance, overtaking Honda Cars India in 2016 to become the fourth largest passenger vehicle company by sales.

The core hinges on three buzz words — speed, simplicity and agility, managing director Guenter Butschek said. “The overall objective is delegation of authority by creating accountable teams, eliminating complexities with new processes and structure, and creating faster decision-making to become more responsive,” he told ET. The executive committee had assessed more than 400 individuals based on their leadership behaviours for placement for the L1 and L2 positions. Of these, 100-120 people were selected for the top two tiers and become growth drivers.

Selection was last week, after daylong interviews and assessment programmes conducted earlier in January. The selected executives will further undergo an orientation process on February 2. The next three levels, L3 to L5, are likely to be finalised in the next one month, before the new structure goes live on first day of the new fiscal year. If it decides to reduce headcount, it would be mostly in lower rung white-collar jobs, said one of the people ET spoke to. The company hasn’t officially made any comment on such plans.

Among the changes, Tata Motors will introduce salary bands at different levels under a concept called Total Target Income. To reward high performance and individual growth, it will allow two types of development: lateral movement within one level and vertical promotion from one level to the next. The company has also announced a new performance management system, LooP, the details of which are yet to be revealed.

The company will soon commence training sessions for more than 3,000 managers to ensure alignment on the new appraisal process. “I seek your support and involvement to turn this major change into a unique opportunity as it is the most fundamental change in our transformation journey,” Butschek had told staff at a January 16 town hall, while talking about the restructuring plan.

Earlier in September, the company had outlined a broader structure in place, where passenger vehicle and commercial vehicle business units were defined on key principles of end-to-end accountability. Product group as well as sales and marketing functions have been separated, and both will report directly to business their heads who in turn will report to the MD. Product groups are further dissected into segments and platforms.

Under the passenger vehicle business unit, the product group will have dual reporting to business heads and managing director. The product group will have to show accountability on parameters ranging from profit and loss for the product, lifecycle management and business case including strategy. Butschek told ET he is also scheduled to meet workers of the company’s Pune plant this week and will look to arrive at a wage settlement pact at the earliest.

Along with the revamping the organisation structure, Tata Motors is also putting in place a supplier audit, which aims to bring down number of vendors to 300-400 who meet its technical and financial parameters, from about 1,200. The rationalisation of the vendor base coincides with the rolling out of new-generation modular vehicle platforms. "We are driving in a lot of commonality, through modularity. Using the economies of scale coming from different top hats on same platform, we will be able to introduce products faster and at a shared cost," said Butschek.

Tata Motors has set itself a target to break into top the three car makers in India and the top three truck maker globally in the coming four years. It bounced back to the No 4 position in the local passenger vehicle industry in 2016 from the sixth position it had fallen to.

In a market that grew 8.3%, Tata Motors registered a 17% expansion last year. Thanks to the good momentum of the Tiago hatchback and with a range of new products, Tata Motors is hoping to be a podium finisher in the next few years. On the commercial vehicle front, too, it has been expanding wings globally through new products and by entering new markets.