Sujata Agrawal

Transparency and fairness have been the cornerstones of the voluntary retirement initiative implemented by Indian Hotels

Rightsizing a workforce is a painful but vitally necessary task for companies striving to stay competitive in today's fast-changing business environment. It affects not only employees but their families as well. And when a voluntary retirement scheme (VRS) is implemented for the first time in companies where several workers are loyal, second-generation employees, it can be agonising, especially in terms of human emotions.

But, as several Tata Group companies have shown, there are ways in which VRS initiatives can be implemented while causing minimal pain to employees, and without provoking industrial strife. The manner of implementation, employee perception and, most crucially, compassion are key factors in any successful VRS. The VRS journey that Indian Hotels undertook is a telling example.

When Indian Hotels decided to have its first-ever VRS, in 2000, it initially faced opposition from its employees. "More then the monetary aspect, there were issues from the psychological point of view," says Bernard Martyris, vice president, human resources. "We were a 100-year old company. We had never before announced a VRS and we needed to reduce the employee count by almost 600." The reasons were two-fold: falling performance and a profile mismatch. Indian Hotels wanted to be seen as a young and happening hotel, and it needed younger people with the right skills.

What Indian Hotels did right was communicating its vision with employees. This, according to Mr Martyris, is the most critical component of any VRS initiative. Building a rapport and an atmosphere of mutual trust with employees and their unions took quite some time. "We wanted to be transparent and fair in our dealings. Only those who were not retainable or re-deployable were offered the VRS. We ensured that all our units communicated the correct message to employees. We spoke to the unions to make them understand the need for the VRS. We got them on our side."

While the front end of the VRS was regulatory, according to the rules laid down by the Union Ministry of Finance, it was the back-end process that made the difference. "Our goal was to have a VRS with a human face," says Mr Martyris. Some innovative processes helped employees and avoided any residual anger or antipathy.

First, a headhunting firm was engaged to place the surplus employees. New groups were setting up hotels in India at the time and needed trained staff. The agency helped some 70 ex-employees of Indian Hotels get alternate jobs. This was a vital initiative, as it demonstrated that the company was not merely trying to get rid of its people but was concerned about helping them find options.

Next, the company tied up with HDFC to offer investment advice on its VRS package. Finance specialists advised employees on how to invest the money to get the best returns. On its part the company ensured that HDFC did not just push its own products but gave guidance appropriate to the circumstances.

To help employees handle any mental distress, a psychologist (who spoke the local language) was on call for counselling on managing life post-retirement. Where possible, children of employees who had opted for VRS were given scholarships to study at the Institute of Hotel Management in Aurangabad.

These initiatives paid off. Employees understood that the company was sincere in its efforts to help them. An employee satisfaction survey, carried out after the VRS, showed that the employees' perception of the company did not slip. "It was the human factor that made things work," emphasises Mr Martyris.

Though satisfied with his handling of the company's first VRS offering, Mr Martyris is not complacent. He says he would do some things differently if there were another VRS initiative. "The first time we put up the VRS notice, many people who were not eligible wanted to opt for it. There should be a developmental plan for good employees who feel their potential is not being fulfilled." Mr Martyris would also reconsider the amounts given, as peoples' needs have changed.

An interesting fallout of the VRS at Indian Hotels was the creation of entrepreneurs from among employees who had opted for it. For example, the kitchen stewarding department had 75 people instead of the 35 it needed. It is an unskilled job but it works out expensive for the company to have so many people on its rolls. Indian Hotels encouraged the head of the department to start his own business and train 35 former employees to high standards. The others could be employed in other hotels. Today the former head employs 200 people who do work for Indian Hotels as well as other hospitality establishments.

According to Mr Martyris, another potential area for outsourcing to former employees is the laundry department. Surplus chefs can also be encouraged to set up their own restaurants. Thinking along these lines has helped Indian Hotels reduce its people numbers without causing too much strife.

Indian Hotels has proved with its VRS initiative that severing the umbilical cord with employees need not mean cutting them off their lifeline.

Uploaded in March 2005