What came under wraps is Tata Motors move to downsize. As per latest media buzz, Tata Motors is planning to reduce their staff by offering voluntary retirement scheme (VRS) to their executives.
This was necessitated by the company as it plans to decrease its management levels from fourteen to five with effect from April 1, 2017.
This is said to be the first major resolve taken under the chairmanship of N. Chandrasekaran with the aim to go lean and agile. Also, this is observed as the biggest workforce rationalization undertaken by the company.
Prior to this, Tata Motors offered VRS in 2015 -16 to 250-odd factory workers, where it had suffered employee separation cost of Rs 10 Crore that year.
One of the country’s largest automaker has taken the crucial step again to downsize, in order to streamline its operations after losses incurred at local units.
Off late, it has been a state of upheaval for Indian startup sector as well as it witnessed massive job losses. Around half-a-dozen Startups have downsized in order to meet costs and survive in the volatile competitive environment. There was immense pressure on management to maintain costs as they look at reducing costs at all fronts including people.
Employee payroll amounts to liability on the company’s balance sheet and in turn it diminishes owners' equity. The reserved earnings are affected by the amount it pays out in payroll, and eliminating it definitely cut costs and escalates profitability.
Indeed, dramatic shift occurs when a company decides to downsize. HR professionals play a key role in ensuring that downsizing is done in an apt manner. Companies not only have to comply with legal obligations but also have to ensure that their brand reputation is not harmed in anyway. While the pain of downsizing can’t be avoided entirely, but it can definitely be mitigated. Watch People Matters recently held SME virtual conference on ‘How can organizations effectively downsize', which suggests practical ways for companies to downsize addressing both HR and legal issues.