BATA INDIA'S HR PROBLEMS

Published in 2003
INTRODUCTION
For right or wrong reasons, Bata India Limited (Bata) always made the headlines in the financial
dailies and business magazines during the late 1990s !he com"any was headed by the #0 year old
managing director $illiam %eith $eston ($eston) &e was "o"ularly 'nown as a (turnaround
s"ecialist( and had successfully turned around many sic' com"anies within the Bata )hoe
*rganization (B)*) grou"
By the end of financial year 1999, Bata managed to re"ort rising "rofits for four consecuti+e years
after incurring its first e+er loss of ,s -.0 million in 199/ &owe+er, by the third 0uarter ended
)e"tember 10, .000, $eston was a worried man Bata was once again on the downward "ath !he
com"any(s nine months net "rofits of ,s 10// million in .000 was substantially lower than the ,s
.092 million recorded in 1999 Its staff costs of ,s 1.9 million (.13 of net sales) was also higher
as com"ared to ,s 112 million incurred in the "re+ious year In )e"tember .000, Bata was heading
towards a ma4or labour dis"ute as Bata 5azdoor 6nion (B56) had re0uested $est Bengal
go+ernment to inter+ene in what it considered to be a ma4or downsizing e7ercise
BACKGROUND NOTE
$ith net re+enues of ,s 8.8 billion and net "rofit of ,s 10-# million for the financial year ending
9ecember 11, 1999, Bata was India(s largest manufacturer and mar'eter of footwear "roducts :s
on February 02, .001, the com"any had a mar'et +aluation of ,s 18 billion For years, Bata(s
reasonably "riced, sturdy footwear had made it one of India(s best 'nown brands Bata sold o+er #0
million "airs "er annum in India and also e7"orted its "roducts in o+erseas mar'ets including the
6), the 6%, ;uro"e and 5iddle ;ast countries !he com"any was an im"ortant o"eration for its
!oronto, <anada based "arent, the B)* grou" run by !homas Bata, which owned /13 e0uity sta'e
!he com"any "ro+ided em"loyment to o+er 1/,000 "eo"le in its manufacturing and sales o"erations
throughout India &ead0uartered in <alcutta, the com"any manufactured o+er 11 million "airs "er
year in its fi+e "lants located in Batanagar ($est Bengal), Faridabad (&aryana), Bangalore
(%arnata'a), =atna (Bihar) and &osur (!amil >adu) !he com"any had a distribution networ' of o+er
1,/00 retail stores and .8 wholesale de"ots It outsourced o+er .1 million "airs "er year from
+arious small?scale manufacturers
!hroughout its history, Bata was "lagued by "erennial labor "roblems with fre0uent stri'es and
loc'outs at its manufacturing facilities !he com"any incurred huge em"loyee e7"enses (..3 of net
sales in 1999) <om"etitors li'e Liberty )hoes were far more cost?effecti+e with salaries of its /,000
strong wor'force com"rising 4ust /3 of its turno+er
$hen the com"any was in the red in 199/ for the first time, B)* restructured the entire board and
sent in a team headed by $eston )oon after he ste""ed in se+eral changes were made in the
management Indians who held 'ey "ositions in to" management, were re"laced with e7"atriate
$eston ta'ing o+er as managing director 5i'e 5iddleton was a""ointed as de"uty managing
director and , )enonner headed the mar'eting di+ision !hey made se+eral 'ey changes, including
a com"lete o+erhaul of the com"any(s o"erations and 'ey de"artments $ithin two months of
$eston ta'ing o+er, Bata decided to sell its head0uarter building in <alcutta for ,s 19/ million, in a
bid to stem losses !he com"any shifted wholesale, "lanning @ distribution, and the commercial
de"artment to Batanagar, des"ite o""osition from the trade unions ,obin 5a4umdar, "resident, co?
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ordination committee, Bata !rade 6nion, criticized the mo+e, sayingA B=rofits may return, but honor
is difficult to regainB
!he management team im"lemented a massi+e re+am"ing e7ercise in which more than ./0
managers and their 4uniors were as'ed to 0uit Bata decided to sto" further recruitment, and
allowed only the redundant staff to fill the ga"s created by su"erannuation and retirements !he
management offered its staff an em"loyment "olicy that was lin'ed to sales?growth "erformance
ASSAULT CASE
5ore than half of Bata(s "roduction came from the Batanagar factory in $est Bengal, a state
notorious for its militant trade unions, who deri+ed their strength from the dominant "olitical
"arties, es"ecially the left "arties >otwithstanding the giant conglomerate(s gri" on the shoe
mar'et in India, Bata(s e0ually large re"utation for corru"tion within, created the "erce"tion that
$eston would ha+e a difficult time $hen the new management team weeded out irregularities and
turned the com"any around within a cou"le of years, tac'ling the "oliticized trade unions "ro+ed to
be the hardest of all tas's
*n Culy .1, 1992, $eston was se+erely assaulted by four wor'ers at the com"any(s factory at
Batanagar, while he was attending a business meet !he incident occurred after a member of B56,
:ru" 9utta, met $eston to discuss the issue of the sus"ended em"loyees 9utta re"ortedly got into
a +erbal duel with $eston, u"on which the other wor'ers began to shout slogans $hen $eston
tried to lea+e the room the wor'ers turned +iolent and assaulted him !his was the second attac' on
an officer after $eston too' charge of the com"any, the first one being the assault on the chief
welfare officer in 199#
)oon after the incident, the management dismissed the three em"loyees who were in+ol+ed in the
+iolence !he em"loyees in+ol+ed acce"ted their dismissal letters but subse0uently "ro+o'ed other
wor'ers to go in for a stri'e to "rotest the management(s mo+e $or'ers at Batanagar went on a
stri'e for two days following the incident <ommenting on the stri'e, 5a4umdar saidA B!he issue of
Bata was much wider than that of the dismissal of three em"loyees on grounds of indisci"line
)to""age of recruitment and continuous farming out of 4obs had been causing wides"read
resentment among em"loyees for a long timeB

Following the incident, B)* decided to reconsider its in+estment "lans at Batanagar )enior +ice?
"resident and member of the e7ecuti+e committee, 5CD 5owla, saidE1FA B$e had chal'ed out a
significant in+estment "rogramme at Batanagar this year which was more than what was in+ested
last year &owe+er, that will all be "ost"onedB
!he incident had o"ened a can of worms, said the com"any insiders !he three men who were
charge?sheeted, were members of the -1?member committee of B56, which had strong "olitical
connections with the ruling <ommunist =arty of India (5ar7ist) !he trio it was alleged, had in the
"ast a good ra""ort with the senior managers, who were no longer with the organization !hese
managers had re"ortedly farmed out a large chun' of the contract o"erations to this trio
<om"any insiders said the recent +iolence was more a "olitical issue rather than an industrial
relations "roblem, since the wor'ers had had +ery little to do with it )eeing the seriousness of the
issue and the "arty(s in+ol+ement, the union, the state go+ernment tried to sol+e the "roblem by
setting u" a tri"artite meeting among com"any officials, the labor directorate and the union
re"resentati+es !he wor'ers feared a closedown as the in0uiry "roceeded
INDUSTRIAL RELATIONS
For Bata, labor had always "osed ma4or "roblems )tri'es seemed to be a "erennial "roblem 5uch
before the assault case, Bata(s chronically resti+e factory at Batanagar had always "lagued by labor
strife In 199., the factory was closed for four and a half months In 199/, Bata entered into a 1?
2
year bi"artite agreement with the wor'ers, re"resented by the then 10,000 strong B56, which also
had the $est Bengal go+ernment as a signatory
*n Culy .1, 1992, $eston was se+erely assaulted by four wor'ers at the com"any(s factory at
Batanagar, while he was attending a business meet !he incident occurred after a member of B56,
:ru" 9utta, met $eston to discuss the issue of the sus"ended em"loyees 9utta re"ortedly got into
a +erbal duel with $eston, u"on which the other wor'ers began to shout slogans $hen $eston
tried to lea+e the room the wor'ers turned +iolent and assaulted him !his was the second attac' on
an officer after $eston too' charge of the com"any, the first one being the assault on the chief
welfare officer in 199#
In February 1999, a loc'out was declared in Bata(s Faridabad 6nit 5iddleton commented that the
closure of the unit would not ha+e much im"act on the com"any(s re+enues as it was catering to
lower?end "roducts such as can+as and &awaii cha""als !he loc' out lasted for eight months In
*ctober 1999, the unit resumed "roduction when Bata signed a three?year wage agreement
*n 5arch 2, .000, a loc'out was declared at Bata(s =eenya factory in Bangalore, following a stri'e
by its em"loyee union !he new leadershi" of the union had refused to abide by the wage
agreement, which was to e7"ire in :ugust .001 Following the failure of its negotiations with the
union, the management decided to go for a loc' out Bata management was of the +iew that though
it would ha+e to bear the cost of maintaining an idle "lant (,s 1 million), the effect of the closures
on sales and "roduction would be minimal as the footwear manufactured in the factory could be
shifted to the com"any(s other factories and associate manufacturers !he factory had 100 wor'ers
on its rolls and manufactured can+as and =G< footwear
In Culy .000, Bata lifted the loc'out at the =eenya factory &owe+er, some of the wor'ers o""osed
the com"any(s mo+e to get an underta'ing from the factory em"loyees to resume wor' !he
em"loyees demanded re+ocation of sus"ension against .0 of their fellow em"loyees !hey also
demanded that conditions such as maintaining normal "roduction schedule, conforming to standing
orders and the settlement in force should not be insisted u"on
In )e"tember .000, Bata was again headed for a labour dis"ute when the B56 as'ed the $est
Bengal go+ernment to inter+ene in what it "ercei+ed to be a downsizing e7ercise being underta'en
by the management B56 4ustified this mo+e by alleging that the management has increased
outsourcing of "roducts and also due to "ercei+ed declining im"ortance of the Batanagar unit !he
union said that Bata has started outsourcing the =ower range of fully manufactured shoes from
<hina, com"ared to the earlier outsourcing of only assembly and sewing line 4ob !he com"any(s
"roduction of &awai cha""als at the Batanagar unit too had come down by /23 from the wee'ly
ca"acity of 01-- million "airs !hese ste"s had resulted in lower income for the wor'ers forcing
them to a""roach the go+ernment for sa+ing their interests
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