With the new CEO Mr Butschek and his new organizational restructuring initiative, Tata Motors went through huge turbulence and had to revert some decisions made by the board.

1. Organizational restructuring: Tata Motors
In November 2015, Butschek landed in Mumbai during Diwali along with his wife
Petra and checked in a sea-facing room at the hotel Taj Mahal Palace in Mumbai. He had
a thought in mind if he should have chosen to come to India as a managing director of Tata
Motors as his predecessor, Karl Slyma
had committed suicide in 2014. Having a sound
experience with Airbus and Daimler, Butshcek was welcomed as the CEO of one of the
largest automotive manufacturers in India by Tata Sons chairman Cyrus Mistry.1
On June 16, 2016, just after few months of taking the charge, Gunter Butschek
made a surprising announcement. The announcement was all about the preparation to
introduce transformatory changes in India’s largest automobile manufacturer, Tata Motors.
He also stated that the organization would be realigning its verticals like the production
division, research and development, supply and human resources to increase the
operational efficiency and remove the bottlenecks. According to Gunter Butschek, the
major reason behind the change was lack of coordination as the verticals were functioning
independently and reporting to the Managing director of Tata motors. These changes were
considered as the ‘2019 plan’ of the CEO for putting the organization’s business on the
right track. The ‘2019 plan’ was targeted towards improvement of the market share in the
commercial vehicle and passenger vehicle segments and towards increasing the financial
profitability of the organization.
In 2015-16, the market share of Tata Motors in the passenger vehicle’s segment
declined to 5.35% from 6.22% in previous year while in the market share of the
commercial vehicle segment declined to 44.37% from 47.22% in the previous year.2
In the
same year, Tata motors had created a new performance appraisal system which was helping
to define the KPIs (Key Performance indicators) for every employee in the organization,
The initiative of the new appraisal system was taken to bring more accountability in the
system and to ensure that the target of every employee in the organization should be aligned
to the growth objectives of the organization. After the announcement of realigning the
vertical, the co-founder of Emerging Markets Automotive Advisor stated that ‘the
company seriously required an overhaul and the initiative from the new CEO looked
motivating to the company as well as the employees.’2
TATA MOTORS BACKGROUD
Tata Motors Limited is a part of Tata Group founded by Jamsetji Tata and it was
incorporated on September 1, 1945. The company’s main business consists of the
automotive products consisting of commercial as well as passenger vehicles. The products
of the organization are marketed in India, Africa, South East Asia, Middle East, Australia
a
Karl Slym was the Managing Director of Tata Motors from October 2012 to 2014. Before joining Tata Motors, he
was executive vice president of China based automotive organization SGMW Motors. He was alumnus of Stanford
University.

2. Organizational restructuring: Tata Motors
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and Russia. The operations of the company are spread across 160 countries in the World.
Along with the automotive products, the organization also provides vehicle financing.
On June 2, 2008, Tata Motors successfully completed the acquisition of Jaguar
Land Rover business from the Ford Motor Company for all-in cash transaction of USD
$2.3 billion (approximately INR 9200 Crores).3
Apart from the major the automotive
segment products, the organization further divides product portfolio across the brands, Tata
and Jaguar Land Rover. The company’s product range consists of passenger vehicles under
Tata brand: Tata Nano, Tata Indica, Tata Bolt, Tata Tiago, Tata Indigo, Tata Zest. The
company operates its Jaguar Land Rover production under the brand name of Jaguar. The
product portfolio of the company also consists of the utility vehicles under the name of
Tata brand: Tata Sumo, Tata Safari, Tata Xenon, Tata Aria, Tata Hexa and Tata Nexon
(Compact SUV). The company also manufactures a range of light commercial vehicles and
heavy commercial vehicles. The major competitors of Tata motors in India are Hyundai,
Honda, Toyota, Mahindra, Audi, BMW, Volkswagen, Nissan, Maruti Suzuki.4
THE RESTRUCTRURING ANNOUNCEMENT
On January 23, 2017, Tata Motors announced that the organization would be
shrinking its hierarchical levels of white-collar workforce from 14 to 5. This restructuring
was considered to be one of the biggest organizational restructuring in Tata Motors. The
CEO, Gunter Butschek announced that the restructuring would be taking place from April
1, 2017 and the main reason behind the restructuring was to cut down the turnaround time
of various process. The restructuring process was initiated when the chairman of Tata
Motors as Cyrus Mistry.
THE NEW STRUCTURE
The characteristics of the new structure were as follows:
1. The responsibility for execution and implementation of the strategies were given to
the top two levels of the hierarchy.
2. Strategy formulation responsibility was given to an executive committee which
comprised the managing director, function heads and business heads.
3. The 100 high performers were chosen before the implementation of the
restructuring for the first two levels of hierarchy which were L1 and L2.
The flat organization with only 5 hierarchy levels was termed as OE
(Organizational Effectiveness) by Gunter Butschek. According to him, the OE was focused
towards cutting down the time by eliminating the middle management and multiple and
repetitive reporting. Considering the decline in market share, to bring back the
competitiveness, the consulting firms Roland Berger and Accenture were also engaged in
the process. The new flat structure of the organization was based on the three principles
which were Speed, Simplicity and Agility. The managing director also stated the major

3. Organizational restructuring: Tata Motors
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objective behind the flat organization was delegation of the authority with creation of
accountable teams, elimination of the complexities with innovative processes and the flat
structure. The 100 high performers were selected for L1 and L2 positions by assessing 400
candidates by the executive committee.
Along with the flattening of the organization, salary bands were introduced at
different levels with a whole new concept ‘Total Target Income (TTI)’. The reward system
was also modified under the restructuring. The two types of developments were introduced
in the organization for rewarding the individual performance: Vertical Promotion from one
hierarchical level to the next and lateral movement within one level. The company also
developed a new Performance Management System named ‘LooP’. For aligning the
employees to the new Performance Management System, the training sessions were
planned for 3000 managers.
With the flat organization structure, the hierarchical reporting was modified.
product group and the sales and marketing function were intentionally separated so that
employees of every department would report to the business head of the respective
department and the business heads would be reporting to the Managing Director. Apart
from the restructuring of the organization, Tata motors decided to increase its supply chain
efficiency by putting an audit for the its suppliers. The audit was focused on reducing the
number of vendors to 300-400 from around 1200 to develop economies of scale for faster
introduction of new innovative products.5
THE IMPLEMENTATION
Rolling out the VRS and reduction of the managerial workforce
Tata Motors in May 2017 initiated rolling out the Voluntary Retirement
Schemes (VRS) as a part of the restructuring initiative. The major agenda behind the rolling
out the VRS system was transforming the company into leaner and flat organization. The
VRS of Tata motors conventionally included the salary for one year and other monetary
benefits.6
Also, they made an announcement that it would be reducing the managerial
workforce by up to 1500 as a part of the organization’s restructuring initiative.7
Reshuffling of the Workforce
Aligning to the agenda of becoming a leaner organization in the future, Tata Motors
set a target of saving approximately INR 400 Crores as a part of the restructuring initiative.
Along with the reduction of white-collar (managerial workforce) by 1500, the organization
in June 2017, slashed approximately 2500 positions with elimination of the formal
designations. According to Mr. Gajendra Chandel, Head of Human Resources, Tata
Motors, after reducing the managerial workforce, the company aimed towards trimming

4. Organizational restructuring: Tata Motors
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the factory workforce (Blue Collar jobs) by 10% which was approximately 3000. The
major agenda of reducing Blue Collar jobs was to build productivity with skill
development, he added. For defining the job evaluation system, Tata Motors had hired EY
for analysis of the new structure and organizational hierarchy and Aon Hewittb
to
benchmark the compensations. The recommendations from the partners resulted into
reduction of 14 level hierarchy to five and scrapped a number of designations in the
organization. Under the designation scrapping exercise, employees were only provided
new business cards mentioning only their names and functions/departmentc
. Chandel stated
that this process helped to track the performance of the employees with more transparency
and better efficiency. As the middle level designations were scrapped, a person heading a
team was designated as ‘Head’ followed by the name of the department or function he or
she was heading. This convention was implemented all over the organization irrespective
of employee’s working location or the department. Considering the recommendations from
the consulting partners, Tata motors also introduced new performance-linked pay system
for the plant workers which helped to improve the plant productivity, added Chandel.8
With the reduction of hierarchy to five, Tata motors scrapped the cabins provided
to the managers at middle-level. From the restructuring initiative, only the top to
hierarchical levels were provided the cabins. To finalize the positions of top 150 employees
of the organization, the executive committee invested on an average 4 hours. Gajendra
Chandel, explaining the process of finalizing the positions said that the selection of top
employees by the executive committee was based on the parameters like the Leadership
capability of the employee, understanding of the business, functional depth and
organizational understanding. The new performance management system ‘Loop’ helped
executives to have a clear understanding of their responsibilities and roles.9
CALLING BACK THE POLICY
The organization experienced a strong backlash from its workforce consisting more
than 14000 employees. The flat level hierarchy initiative by the new CEO faced a lot of
controversy from the internal as well as external stakeholders. Within one month of
implementation, in July 2017, the ‘No designation’ initiative was called back. After
implementation, a lot of negative feedbacks were received from employees from almost
every location.10
The policy was perceived disheartening for the senior employees who
were working with Tata motors from a long time as they were used to wear their
designations with a proud and honor on their sleeves which resulted into creation of a huge
noise in the organization.11
b
Aon Hewitt is a US headquartered Human Capital and management consulting services provider
c
An employee working in the Sales department of Heavy Commercial Vehicles got a business card with ‘NAME,
SALES-HEAVY COMMERCIAL VEHICLES’

5. Organizational restructuring: Tata Motors
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Unlike Western countries, in India, the hierarchy is perceived as a necessary
element for effective operations of the organization. After the ‘No designation’
announcement, some people were not completely convinced with the idea. According to
one employee ofTata Motors, the promotion was given to an employee every three years
and with flat hierarchy there was not any promotion opportunity for any employee. Most
of the employees were concerned about the external factors like perception of other
stakeholders in supply chain: suppliers, customers about the ‘designation-less
organization’. After calling out the ‘No designation policy’, Gunter Butschek said while
supporting the decision that the importance should be given to work on business turnaround
instead of scrapping and modifying the decisions. The decision of flattening the
organizational hierarchy was initiated to promote the creativity and synchronization in the
organization. Even though the organization had successfully managed to reduce the
workforce during the restructuring, it had to do away with the ‘No designation’ policy. For
business turnaround, the organization would be introducing a new performance
management system in the near future, added Butschek.
WHAT NEXT?
When Gunter Butschek took charge as CEO of Tata Motors in February 2016, he
faced the challenge of changing Tata Motors into a profitable business hence he decided to
restructure the operations of the company. After few months of the restructuring initiative,
in October 2016, Mistry, the chairman of Tata sons was driven out of the organization. The
demonetization in November 2016 had adverse impact on the sales and liquidity in the
market addition to which emission norms policy was changed resulting to shift in the
Passenger vehicle market from diesel to petrol.1
After the restructuring initiative was implemented and failure of ‘No designation’
policy, the organization reported a huge loss of 2800 INR in 2016-17 (Exhibit 1). The
CEO Gunter Butschek was facing a huge pressure from the stakeholders to reduce the
losses and make organization leaner along with developing products which are more
aspirational and appeal to the youth of India. The organization needed a transformational
innovation and Butschek had only one question in mind, what can be done to make Tata
Motors a profitable organization?
CASE ANALYSIS AND RECOMMENDATIONS
With the agenda of making the organization profitable, Butschek had considerably
taken a bold initiative of restructuring the organization. To making the organization leaner,
laying of the white-collar and blue-collar jobs was an effective initiative. The organization
had a success in laying of the employees without a problematic backfire. The initiative of
new performance appraisal system was a successful step aligning with the growth
objectives of Tata Motors. Rolling VRS was also one of the successful attempts towards a

6. Organizational restructuring: Tata Motors
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leaner organization. According to Butschek, rolling out VRS would not affect attracting
the new talent to the organization. To align employees with new Performance Management
System, 3000 training sessions were planned which would ensure the efficient change
management in the organization.
What went wrong?
To cut down the turnaround time, Tata Motors initiated shrinking of the hierarchy
from 14 to 5 and scrapping almost 140 designations present in the organization. The ‘No
designation’ policy was considered to one of the failures of the restructuring. The
employees who are working with the organization for a longer period perceived the policy
as a disheartening action. The people working with the organization for almost 25 years
were suddenly had the same designations as the designation of someone who joined new.
These employees used to wear their designation with an honor on their sleeves, hence after
the policy implementation, a lot of negative feedbacks were received about the policy.
One more downside of the policy was decision making dilemma while promoting
the employees. As only 5 hierarchical levels were present in the organization, everyone
had the same designation irrespective of their work experience, knowledge. It also created
a barrier in attracting the new talent from other organizations, as people moving from other
organizations are not willing to sacrifice their current superior designation and accept a
lower designation at Tata Motors.
What could have done?
HR plays an important role in the strategy implementation. Aligning to the target
of making the leaner organization, laying off the less efficient workforce was a significant
action. Instead of flattening the hierarchy of entire organization to reduce the turnaround
time, the organization could have chosen specific departments for initiation of the strategy.
Coming with technologically advanced products for youth appeal was one of the challenges
in front of the new CEO. Hence, the Research and Development department could have
been decentralized for experimentation and getting innovative and creative ideas. In Indian
context, the hierarchical levels play an important role as the designations are considered to
be attached to the social status of an employee. The ‘no designation’ policy not only created
decision dilemma in hierarchy changes but also affected the social status of the employees.
As there is always a matter of conflict between the HR managers and the business
managers, the situation could have worsened with ‘No designation’ policy. After the huge
loss in 2016-17, the organization genuinely required a turnaround plan for getting back to
business. The organization could focus on improving rewards and punishment system by
linking it with the variable pay. Rewarding and punishing the employees with application
of variable play tool may increase the productivity of the organization at initial stages and
reduce the attrition rates.

7. Organizational restructuring: Tata Motors
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EXHIBIT 1
Profit and Loss account of Tata Motors
Profit and Loss Account of Tata Motors (in Rs. Crore)
March ‘17 March ‘16 March ‘15
Total Income 45,215.95 43,756.56 38,651.22
Expenditure 42,957.97 39,888.86 38,411.04
Operating Profit 1,610.51 2,946.56 -1,237.48
PBDIT 2,257.98 3,867.70 240.18
Reported Net
Profit
-2,429.60 -62.30 -4,738.95
Source: Moneycontrol.com
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2
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3
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4
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8
GOPALAN, M. (2017). Tata Motors junks employee designations. [online] @businessline. Available at:
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9
Thakkar, K. (2017). Workforce reshuffle to help Tata Motors save Rs 400 crore. [online] The Economic Times.
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10
Moneycontrol. (2017). Under fire from employees, Tata Motors decides to return designations. [online] Available
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give-them-back-designations-2365589.html
11
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designations/article9791248.ece