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ITCs Leaf Business Division

Organizational Structure
Analysis
By

GROUP 4
Naiya Mehta | Sachin Xalxo | Ahmer Rizvi Utkarsh| Vaishnavi S
MANAGING ORGANIZATIONS
Ms. Mukta Kulkarni

OBJECTIVE

Creating an effective organization structure is one of the most difficult challenges faced by
any top level executive1
We have analyzed the organization structure at the ITCs 100+ years old Leaf Business Division
using the Tool Kit Do you have a Well-Designed Organization as proposed by Michael Goold
and Andrew Campbell and attempted to figure out the kind of structure which will best enable
the ILTD manage its work in order to meet its strategic objectives.
The study comprised of two phases.
Phase 1: Run 4 Fit Tests as initial screening for design alternatives and to check if structure
supports strategy, talent pool, and business scenario.
Market Advantage Test
Parenting Advantage Test
The People Test
The Feasibility Test
Phase 2: Attempt to refine the current design by addressing problem areas to be identified by
using the 5 Good Design Tests.
The Specialist Cultures Test
The Difficult Link Test
The Redundant Hierarchy Test
The Accountability Test
The Feasibility Test
Considering the fact that organizational change is a long term process and has high costs
associated to it, we plan to make recommendations based on the following lines :

Modify without changing Units

Redefine Skill Requirements and Incentives

1 Adapted from Do you have a Well Defined Organization Harvard Business Review

Shape Informal Context

INDEX

Industry Overview...
3
Company Overview....................3
Methodology ..................4
Organization Structure....................6
Market Advantage Test...................9
Parenting Advantage test...................10
People Test....................12
Feasibility Test..................13
Specialist Cultures Test.................14
Difficult Links Test...................16
Redundant Hierarchy Test ............................17
Accountability Test ..........................19
Flexibility Test .................21
Recommendations ........................22
Acknowledgments ................................23
References.23
Transcript of Interview .........................................24

INDUSTRY OVERVIEW

Tobacco leaves agricultural production is an ever growing industry in the world. From 1947 to
1997, tobacco production increased by 40% from 4.2 million tons to 5.9 million tons at global
level. US, China, Brazil and India are major traders and producers of tobacco leaves. China is
largest and India is second largest producer, while India is second largest exporter too after Brazil.
Total production share are China (36.9%), India (8.3%), Brazil (7%) and US (4.6%). Tobacco crop
is cultivated in an area of 0.45 M ha (0.27% of net cultivated area) producing 750 M kg of tobacco
leaf.2
Tobacco consumption in any form is always targeted by government as a tax generating instrument.
In China, fixed market price resulted to lower income generation for farmers than some other
crops. In India, government increased tax on some of cigarettes from 11% to 72% in 2014. Excise
tax increased by 25% and 15% respectively for less than 65mm long cigarettes and for more than
65mm long cigarettes.3 This increment in tax falls majorly on consumers. This may affect the
demand. Thus government regulations are major challenges in this industry, and hence a need for
unique organization structure arises.
Major tobacco leaves cultivator in India are ILTD (ITC) and Philips Morris.
COMPANY OVERVIEW

ITC (Imperial Tobacco Company) is one of the oldest private sector companies in India with
market capitalization of 45 billion USD and turnover of 7 billion USD. Cultivation and
development of tobacco leaves in India by (ITC) dates back to 1910. The company rechristened
itself as I.T.C. Limited in 1974. ITC realized the varying needs of Indian market and forayed in to
wide range of business like FMCG, apparel, stationery, hotels, agri-business, tobacco products, and
personal care among others while enjoying the status of being one of the largest private sector
export houses in the country.

2 The Indian Mirror : http://www.indianmirror.com/indian-industries/tobacco.html

3 Hindu Business Online

ITC Limited or ITC is an Indian conglomerate headquartered in Kolkata, West Bengal. Its
diversified business includes five segments: Fast Moving Consumer Goods (FMCG), Hotels,
Paperboards & Packaging, and Agri-Business & Information Technology.4
Indian Leaf Tobacco Development (ILTD) is a subsidiary of ITC involved in procuring and
producing Agro-commodities. It revolutionized tobacco production Participative technology
transfer from lab to farms. It has export of 60Mkg across 70 destination. It has infrastructure of
combined capacity of 600 TPD. It claims to be the largest integrator of producers, suppliers and
exporters of tobacco leaves in India.

METHODOLOGY

Serial

Test to
Performed

be

Market Advantage

Parenting
Advantage

5
6

Peoples Test

Test Description

Methodology

Check if design directs


sufficient
management
attention to competitive
market advantage sources
Does the design help
corporate parent add value
to the organization

Identify sources of competitive


advantage by secondary research/
interviews
senior

Identify skills sets of key


Does the design reflect
players
strengths, weaknesses and Check if the design provides
appropriate
responsibilities
motivation of people
and reporting relationships

Study ILTDs constraints on


Identify constraints that design
Feasibility Test
may
impede government regulations
organizational design
information systems
inter-unit co-ordination
Does the design protect Identify units which have
Specialists Culture
the units that need distinct specialist culture and are at risk.
Test
culture
Recommend ways to protect them
Difficult-Links
Does the design provide Identify difficult unit linkages.
Test
coordination solution for Refinement to basic structure/

4 ITC Official Website : http://www.itc-iltd.com

Evaluate
role
of
management at ILTD

the unit-to-unit links that substantial


are problematic
suggested.

Redundant
Hierarchy Test

Accountability
Test

Flexibility Test

redesign

may

Examine parenting proposition


(each parenting level should
Does the design have too
improve reporting units
many parent levels and
performance by at least 10%).
units
Identify skills and resources
Required by parenting level.
Identify
Units
with
shared
responsibilities
Does the design support Units whose performances are
difficult to measure.
effective controls

Does the design facilitate


the development of new
strategies and provide the
flexibility required to
adapt to change

Suggest remedies for units with


blurred responsibilities or fuzzy
measures.
Interview 2-3 of ILTDs top
level managers having deep
product & market knowledge.
Identify top 5 opportunities, not
anticipated in current strategy
but are likely to be
encountered in future.
Check if current design will
support or obstruct these
opportunities.

The tests are iterative and need to be applied repetitively for further organizational changes.

be

ORGANIZATION STRUCTURE

Currently ILTD has a Hybrid Structure in place, which has been crafted over the years as the
business has grown exponentially. Like most large organizations, a pure organizational form
would be insufficient to support the needs of the business. Moreover in the real world, the growth
of large organizations is often unstructured or non-systematic. Therefore, putting in place a pure
form is practically not possible.
The hybrid structure at ILTD currently is a mix of functional, divisional & geographic structures.
Structure of Top Management/ Direct Reporting Lines into CEOs Office: The direct
reporting structure follows the Functional Form with the Spices business organized as separate
divisional unit. This is so because the spices business was recently added to the portfolio in 2004,
and is currently managed as a separate entity. Here the role of CEOs Secretary has centrality in
the network and is responsible for coordinating all of CEOs appointments.

Figure 1: Reporting Structure, CEOs office5


Structure of Exports and Supply Chain Division: We have purposely decided to illustrate the
structure of the Exports division for 2 primary reasons: First it represents the use of Geographic
Form and second, because this division represents the output dependent arm of the business,
since the local supply of tobacco is utilized internally at the ITD factories.

5 Organization Structure of ILTD Shared by HR Manager, ILTD

Figure 2: Reporting Structure, Export Division6

The ILTD organization structure has the following dimensions and contingency factors :
Dimensions
1. Centralized Structure
2. Highly specialized tasks and roles
3. Strict Hierarchy of Authority
4. Decentralized Decision Making
Contingency Factors
1. Bureaucratic Culture in most units; Adaptability Culture for Boundary Spanners
2. Stable Complex Environment; Number of Heterogeneous Factors is high, but factors
remain consistent over time

6 Organization Structure of ILTD Shared by HR Manager, ILTD

3. Large Organization Size in the Formalization Stage of its lifecycle


4. Long Linked Technology due to sequential interdependence of tasks
5. Low cost leadership strategy; Defender Status

Figure 3 : Organizational Dimensions and Contingency Factors7


FIT TEST 1: MARKET ADVANTAGE TEST

7 Understanding Theory and Design of Organizations, Richard L.Daft

The tobacco produced out of the units at ILTD is either exported to International cigarette brands
or utilized internally at the parent companys cigarette manufacturing division ITD. This
represents the market for ILTDs products. ILTD produces different blends of tobacco based on
the toasting and fermentation levels as per as the exact requirement for each brand of cigarette.
For example, low cost cigarettes such as Wills Navy Cut which are targeted at the Indian diaspora,
require a unique blend. On the other hand, premium cigarette manufacturers such as Dunhill use
only finely refined tobacco as per their blending standards.
As per our conversation with executives at ILTD, we can confirm that their Market Advantage is
Variety of Tobacco and 100 year Experience in the industry. To validate the above assertion
we looked into the following sub topics :
1. Procurement at the Factory/Unit Level - The backward integration with the farmers
forms the backbone of the procurement function. ILTD has minimized its Resource
Dependence by developing long term close relationships with farmers from different
geographic parts of India, using Collaborative Inter-organizational Linkages. They
provide seeds and fertilizers at extremely low/negligible costs to farmers and conduct free
training sessions to educate farmers on efficient methods. ILTD uses the concept of fair
dealing with its suppliers and uses local procurement teams as mechanisms for close
coordination. The procurement team often travels to farms in secluded areas to personally
assist farmers in conflicts with local authorities, often going beyond the definition of
professional relationships. This has created a loyalty factor among the farmers and has
shifted the power implications in the favor of ILTD.
Therefore ILTD has been successfully able to design its organizational structure and
linkages to provide a large variety of blends of tobacco.

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Figure 4 : Inter-Organizational Framework8


2. Export Division as part of Divisional Management Committee By reserving a place
for the Exports Division on the Divisional Management Committee, ILTD ensures that all
the latest trends, developments and requests from the international customers are
communicated effectively to the senior management and policies can be framed keeping
these requests in mind.
Test Result : 5/5
FIT TEST 2: PARENTING ADVANTAGE TEST

ILTD uses the concept of Distributed Leadership to decentralize the decision making process
at unit level and limit the role of the senior management in the day to day operations. Thus by
empowering the middle level management, the apex management Team can focus on
Organizational Policy and Effectiveness Measurement Approach.
The Divisional Management Committee forms the upper most level of hierarchy and its focus is
on establishing the organizational governing policies in the areas of Exports, HR, and Finance etc.
The Divisional management committee also acts as the Vertical Information Linkage which
passes along data to the ITC headquarters. The line director reviews the Executive Dashboard
on a monthly basis.
From our conversation with the ILTD Team, it was very apparent that the role of senior
management revolves around control and benchmarking. But according to our analysis of the
organization structure, we believe that the design does not give sufficient attention to the value
adding tasks of Reporting, Benchmarking and Business Intelligence. The lack of a central
BI/CI and Analytics Team/Manager as part of the apex management verifies our point.
The organization also has a Balanced Score-Card Control system in place which attempts to
balances financial, operational, Customer Centric and Employee Learning goals.

8 Understanding Theory and Design of Organizations, Richard L Daft

11

Figure 5: Balanced Scorecard9


From the mapping we observe that the pillars of customer, financial and internal business process
are adequately measured by ILTD. However, metrics for learning and growth are not properly
measured and tracked. In fact the parameter tracked in the learning and growth pillar is actually
productivity (which is more suited to internal business processes classification).
Therefore ILTD has only been partially successfully in clearly demarcating the value addition of
the senior management and can improve on this aspect.
Test Result : 3/5

FIT TEST 3: PEOPLES TEST

Through this test, we are trying to assess whether the organization is matched to the skills and the
attitudes of the current employees in terms of the organizations appropriateness in assigning of
responsibilities and reporting hierarchy allotted to them. Also, is the current hiring and retention
policy of the organization in line with the requirements of the respective units?
In peoples test we tried analyzing the following parameters to arrive at the conclusion of how
ILTD rates on this test :1. What is the core department or function which supports the business?
2. Do people who are hired for this position possess the appropriate skills?
3. How does the organization ensure the retention of the key players?
4. If the company has to attract people from external sources, it is able to successfully do
so?

9 Balanced Scorecard prepared as per KPIs calculated at ILTD

12

In the agriculture business which ILTD operates in, operations is generally the core part of the
business that the company heavily relies on. Technology, exports & supply chain are also key
divisions which contribute heavily to the business structure.
But, the key department which distinguishing itself from others is the procurement and marketing
as it very niche to the sector in which ILTD operates in and thus, the company relies heavily on it.

Fig 6: Core Transformation Process for a Manufacturing Company10


In recent changes people from technical background were brought into procurement function of
the organization. The prime objective of the organization strategy was that it now wants to move
towards database approach and synchronize the necessary analytics aspect into the current
procurement system. Company feels that presently people from agriculture background in the
procurement division were lacking in the analytic portion and therefore, it recruited technical
graduates to leverage upon the analytical ability they bring in to the team which in turn also
resonates with the current employees from non-technical backgrounds and upgrades their skills.
In ensuring retention, the company is very carefully in picking the right people to its organization
at first. Also, it has developed a robust career development and growth plan to match the aspiring
needs of the employees. The company strives hard to ensure a good working culture within the
organization. Based on ILTDs past two years data it was seen that the attrition rate in the
organization was 8.85% month to month.
In terms of recruiting people from outside, ILTD is able to a good job while bringing in people
with a technical background but, struggles finding proper matches for the leaf division.
Test Result : 4/5

10 Core Technology, Understanding Theory and Design of Organizations, Richard Daft

13

FIT TEST 4: FEASIBILITY TEST

Companies tend to have certain constraints which impact them in a way that they may have to
improvise in order to optimize the efficiency levels of the current processes by finding a way
around those constraints.
Analyzing ILTD in this regard brought about the constraint that Government regulations pose on
the day to day operations of ILTD and in turn upon their organizational design and structure.

Figure 7: Framework for assessing Environmental Uncertainty11


Ever since the Union Budget levied a hefty increase in excise duty on cigarettes, the ITC stock
has dropped 13%, emerging as the worst performer in the 12-member BSE FMCG Index. There
has been an over 30% decline in the analysts' buy recommendations on the stock due to this
factor. VAT increase by state governments is another challenge being faced by the company.
Analysts have estimated 5% to 10% decline in cigarette volume this year. The growth of lobbying
against the cigarette businesses is also compelling countries across the globe to step up efforts to
curb smoking. This is likely to reduce the investment appeal of the tobacco sector among
investors. At a market cap of $41.2 billion, ITC is the sixth most valuable cigarette company stock
globally after Philip Morris, British American Tobacco, Altria Group, Japan Tobacco and Imperial
Tobacco.12

11 Environmental Uncertainty Framework, Understanding Theory and Design of


Organizations, Richard Daft
12 http://articles.economictimes.indiatimes.com/2015-03-30/news/60644228_1_itcstock-cigarette-business-cigarette-volume

14

To deal with such constraints ILTD has setup a standalone Industry affairs department which
looks into the matters related to the government regulations and other extraneous factors. This has
been done in order to prepare the business react responsively and in a positive way to these
factors. Essentially the industry affairs is playing the role of a boundary spanner for ILTD in this
regard.

Fig 8: Contingency Framework for Uncertainty and Organizational Responses13


Test Result : 4/5

GOOD DESIGN TEST 1: SPECIALITY CULTURES TEST

ILTD being different to traditional companies working in ultra-competitive market places, owing
to its special product, large market share (greater than 75%) and 100 + years of experience tends
to have bureaucratic culture as a company. The environmental factors demand stability and the
strategic focus is on internal processes.
The aim of the organization is to ensure that the culture is homogenous across all the functions,
and that no department is given special priority to establish and maintain its culture. There is a
specific set of rules which each function has to follow. Even a very special function: Leaf
Procurement follows certain protocols common to all functional units.

13 Environmental Uncertainty Framework, Understanding Theory and Design of


Organizations, Richard Daft

15

But each unit of ILTD is has its own leadership and the Divisional CEOs have the freedom to run
their own show, there is change in culture of various units owing to the change in personnel
managing them and therefore a specific subculture might develop. Each unit is given some
freedom to decide its course of action and thereby setting up of certain specific rules for efficient
and viable functioning of the particular unit is inevitable. As a matured organization ILTD
realized this and thus it does not interfere in this aspect, as long as the core values are the same.
From our conversation with the HR Team at ILTD, we were able to identify the fact that the Crop
Development and Buying Team, which is a part of the Leaf Operations Function is a specialized
task within the organization which requires differentiated expertise as compared to the other
functions. This team deals with the farmers and crop management issues and therefore needs to
work and plan activities differently than the prevailing organizational norms and hence needs to
maintain an Adaptability Culture. Hence it can be classified as a Specialist Culture.

Figure 9: Organization Structure of Leaf Operations Division14


The sister unit of the Crop Development Team, Utilization and the parent unit, Leaf Operations
share the bureaucratic culture ; officials of both these units are located at the factories and interact
with blue collar officials. As the size of the crop development team is small as compared to the
sister unit, there is a possibility that the bureaucratic culture might infiltrate the Crop
Development Team. Hence the Crop Development Team is not properly insulated.

14 Organization Structure of ILTD Shared by HR Manager, ILTD

16

Concluding our analysis, we can say that ILTDs design does not pass this test, although
leadership is bestowed to each unit. At the same time, it may give certain independence to certain
functions as well, like Crop development so that it does not get dominated by operations team and
can focus on achieving long term goals.
Test Result: 3/5
GOOD DESIGN TEST 2: DIFFICULT LINKS TEST

ILTD places a lot of emphasis on reviewing their procedures and promoting cross functional and
cross unit collaboration. In almost all projects, cross functional teams are deployed. All these
measure are taken for creating a strong platform for information sharing. Talent in each team and
individually is identified and given importance to.
The company also has a Shared Discussion Place meeting where leaders of all units come
forward and discuss their progress and challenges. This is a step taken towards collaboration at
middle management level. Leaders of all the unit take collective decision over certain issues.
These decisions are taken keeping in mind benefits of each unit and after being certain that
interest of neither of the units is uncared for. In a nutshell an agreeable decision is taken for all
units without affecting each other. This is primarily the way collaboration is practiced in ILTD.
As any large scale organization, various functions tend to have inter-organizational conflicts when
participants identify with one group and perceive that other groups may block their groups goal
achievement or expectations.
From the interview we conducted with the executives from ILTD, we figured out that one of key
sources of inter-organizational conflicts is the relationship between Marketing and Procurement
Units. This is because procurement is prone to change with change in climatic conditions and
marketing is prone to change with change in economic, social and political shifts. Although an
Oracle ERP has been used as a technological horizontal linkage and cross functional teams
comprising of members from both these units are formed to promote collaboration, Goal
Incompatibility and Differentiation inhibit a smooth alignment.
Another two such difficult links arise between HR and Finance department as one is personnel
intensive whereas other is profit intensive, as well as between the Quality department and
Export department.
One way to measure the rating for this test is to know whether the processes relating to conflict
resolutions are documented and whether steps are taken to prevent conflicts from escalating.
Unfortunately as of now, standardized resolution methodologies are missing and usually
Confrontation & Negotiation and Workplace Mediation by the senior level managers is
required to come out with an amicable outcome.
ILTD have taken up certain measures to deal with this conflict. The most important tools of
solution were: clarity, priority and direction. Clear organizational goals were defined, priority was

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assigned based on this goal and direction was given to each of the conflicting unit, and they had to
work in directed manner only. But this was restricting the creativity and independence of the units
and did not present effective results. Pooled Negotiations was another strategy that was
employed recently to tackle this situation.
Test Result: 4/5
GOOD DESIGN TEST 3: REDUNDANT HIERARCHY TEST

Redundancy hierarchy of an organization is seen in two different perspectives. In one way, it is


considered as a buffer level which can be helpful to tackle uncertainties. As quoted by W. Richard
Scott, duplication serves as "a repository of needed variety and heightened responsiveness, and
provides an important safeguard against system component failure."15
The second perspective is to look at redundant hierarchy as a sign of organization ineffectiveness.
Redundancy hierarchy also means that employees are not utilized properly.
Large corporates have numerous parental units. Some of them may be quite small including only
a line manager and an executive. It is recommended to decentralize decisions to ground units and
retain decisions at upper layers only if those can add value.
It is necessary to identify if the upper layers are adding value to ground units. We need to identify
the parenting proposition of the upper layers (using parenting advantage test). The proposition of
the upper layers should not be similar to the one below. If this is the case then one of the upper
layers is redundant.
In our redundant hierarchy test, we first analyzed ILTDs decision making levels & overlapping of
levels (if any).
ILTD decision making levels are as illustrated below

15 W. Richard Scott, "Systems within Systems," American Behavioral Scientist 28


(1985): 603

18

CEO

Line
DMC
Unit
Head

Line
DMC
Unit
Head

Unit
Head

Unit
Head
Funtion
Head

Function
Head

Employee

Employee

Figure 10: Simplified Layout of Organization structure at ILTD


Each level exercise its decision making power within the boundaries. Decisions that involve more
than one function or unit are taken at a level above the functions or units.
Regarding hierarchy structure of the unit, ILTD believes in many-one reporting structure. For the
last four years, ILTD have identified and eliminated many one-one reporting levels. The
organization believes one to one relationship will not clearly identify the responsibility of
individuals.
One to one reporting structure makes the reporter always depend on his/her superior for decisions.
It is also possible that the superior delegates all the work to the reporter.
In case of many-to-one reporting structure, reporter will come to superior only for guidance &
there are many reporters for a superior to delegate the work to. By this way, both superior and
reporter are made to face situations & make decisions. Hence, ILTD consciously maintains many
to one reporting structures.

The following key points are considered to limit redundancy hierarchy

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Many to one reporting system

Clearly identified roles

Power delegation with boundaries

By clearing defining roles of each employee, measuring performance can become easy. This
structure also mitigates the managements effort to identify and recognize individuals work.
Clear role definition will also improve employees accountability.
Redundancy hierarchy test ensures that the hierarchy levels are based on knowledge and skills
of the individual. This has more importance in higher levels where major decisions are taken.
Test Result: 5/5
GOOD DESIGN TEST 4: ACCOUNTABILITY TEST

The accountability test is performed to ensure each unit of the division has specified
accountability
for performance and the units, people etc. are empowered to achieve the performance.
The managers should have clear understanding of their responsibilities.
Key performance metrics should be defined and monitored. The managers should be enabled to
achieve their targets. Course of self-correction should be available to managers through feed-back
mechanism.

Organizational
Sub-Structure

Sub-units with shared


responsibility/
unclear metrics

Remarks

CEs Office

Divisional Manager
(Stakeholder Mgmt.)

Metrics unclear

Structure for
divisional
engineering

Entire unit

Shared responsibility of
leaf & spices business

Structure for New


growth drivers

New product development

Shared responsibility
Metrics unclear

Structure for supply


chain

Manager, Strategy & Planning

Metrics unclear

Asst. Manager, Strategic planning


Asst. Manager, Operations planning

The above units of the organization have unclear metrics (based on preliminary understanding of
the organizational structure). These positions would require a clearer understanding of the key
responsibilities and performance. One of our team members who is an ex-employee of ILTD can

20

testify to the fact that some amount of fuzziness exists in definition of goals and often members
might have overlapping goals.
Test Result: 3/5

Figure 11: Example of Fuzzy Accountability Relationships16

16 Organization Structure of ILTD Shared by HR Manager, ILTD

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Figure 12: Example of Fuzzy Accountability Relationships17

GOOD DESIGN TEST 5: FLEXIBILITY TEST

Pursuing innovation requires a suitable organizational design. The design should be adaptable to
changes. This test is targetted to identify if the organizational design provides any obstacles in
hindering innovation which happens organically.
Managers from ILTD from different functions were asked about one innovation/ change ILTD
should undertake but the organizational structure hiders such an innovation.
Function

Obstacle

Sustainability (CSR) None

Desired Change
The structrue reports to VP (Leaf)
which then reports to CEO. This allows
the innovations in sustainability to be
introduced & implemented without much
hinderance.

Leaf Procurement

Several cost saving

A separate divisional projects team for

projects (for ex. ICT)

implementation of cost saving projects is

are unable to be

required

implemented due to
extreme work load on
operations team.
Supply Chain

Construction of own

Number of layers in order to ensure

Warehouses requires own

Faster approvals must be ensured.

Land which requires


Approval from DMC &
Corporate Mgmt.
Committee. The lead
time taken
For approvals is high
17 Organization Structure of ILTD Shared by HR Manager, ILTD

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enough to lead to change in


prices making the whole
deal uneconomical
Process &

R&D projects pertaining to A dedicated team to ensure faster R&D

Technology

Technology are not

Initiatives is the need of hour. This

Implemented faster due to

Should be a part of each manbufacturing

lack of dedicated teams

unit.

Test Result: 3/5

RECOMMENDATIONS

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Include a Business Intelligence Manager/Unit on the DMC. Since the role of the senior
management revolves around controlling the operations and maintaining effective
measurement techniques, this shall further clearly segregate the role of the apex
management.

For the procurement function in the leaf operations unit, recruit business graduates from
tier 2 colleges who have some experience of living and interacting with local population
nearby the concerned factory and train them further rather than hiring the crme de la
crme from the top agriculture studies institutes. This would enhance the quality of
supplier interactions. For the technical teams, try to retain the accumulated talent from
IITs by offering them accelerated growth programs. Coopt the dissenters by making them
part of the restructuring process.

Expand the role of the senior management in the industry affairs Department and
increase level of lobbying activities.

Bunch the group of Leaf Procurement Teams and assign a senior level executive, for
example the VP of Leaf operations the direct responsibilty of looking after the affairs of
this unit. This shall ensure that there is no infiltration of bureaucractic culture and the Lead
Procurement unit retains its identity.

For units facing difficulty in collaborating, create superordinate goals and link annual
bonuses to these goals. Further also try to rotate members between these units, so that
the develop a deeper understanding of the values, problems and goals of the other

department.This would ensure a slow change in the underlying attitudes. The overall aim
should be to attain Relational Coordination between the departments.

Define Measurable goals for each and every employee and link these goals to their
annual incentives. Ambigiuity in definition of goals needs to be removed. Overlapping
goals should only exist for cross functional teams.

ACKNOWLEDGEMENTS

We would like to thank the following people for their help and support:
1. Mukta Kulkarni, Professor, IIM Bangalore
2. Sanjeev Rangrass, CEO, ILTD
3. Subhashish Chakraborty, HR Head, ILTD
4. Srinath Ramakkrushnan, Leaf Operations Manager, ILTD
5. Vishal Chaudhary, Supply Chain Manager, ILTD
6. Vasant Sridhar, Sutainability Manager, Quality, ILTD

REFERENCES

The group has made a conscious effort to use only primary data obtained from telephonic
interviews with ILTD employees, ILTDs organogram etc. to analyze the organizational structure
design.
The references used are as follows:

24

Understanding Theory and Design of Organizations, Richard L.Daft

Harvard Business Review Tool Kit Do you have a well-designed Organization by


Michael Goold and Andrew Campbell

Organization Structure of ILTD Shared by HR Manager, ILTD

The Indian Mirror: http://www.indianmirror.com/indian-industries/tobacco.html

Hindu Business Online

ITC Official Website : http://www.itc-iltd.com

http://articles.economictimes.indiatimes.com/2015-03-30/news/60644228_1_itc-stockcigarette-business-cigarette-volume

W. Richard Scott, "Systems within Systems," American Behavioral Scientist 28 (1985):


603

TRANSCRIPT OF INTERVIEW

We conducted telephonic interviews with the HR Head, Leaf Operations Manager, Supply Chain
Manager and Sutainability Head to collect primary data regarding our research topic. We have
saved the audio recordings of the same and they can/will be shared in case required. We have
shared a brief summary of the interview questions below to provide an idea of the flow of the
conversation.
Questions are mentioned in BLACK.
Interviewee Responses are mentioned in BLUE.
Interviewee: Subhashish Chakrabarty, ILTD
Interviewer: Utkarsh
Market Advantage test
What are the sources of competitive advantage for ILTD?
The sources of competitive advantages are:

A large varieties of tobacco dealt


One stock shop, we deal with large varieties of tobacco - serving end-end which
no other company offers
Professionalism
100+ years of experience of dealing with tobacco

Parenting Advantage

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What are the channels via which business related information flows between ILTD & ITC HQ?
How is decision making controlled by ITC HQ?
We follow a model called Distributed leadership model. Each of the division has got its own
management committee & chief executive who are taking differentiated decision. As per the
corporate governance (for other than financial & HR issues) process procedure clearly clarifies till
what level ILTD can approve decisions & from what level, corporate has to approve decisions.
The whole process procedure is well laid down. It is the matter of putting up the requirements to
the management committee. Management committee has the discretion to approve the proposals
& after that the proposals are sent to corporate management committee for discussion. This
procedure is like formal approval method process. Apart from that, the flow of information
happens through dashboard initiated by Line director who is also representing the business in the
corporate management committee. Line director gives regular dashboard updates & this helps to
pass on the information.

People's Test
What is the core department/ function which supports the business?
At any organizational level if you look at (in ILTD), operations is the core part. Other functions
are considered as support functions. For ILTD, Processing & Technology and Exports & Supply
chain are core departments. And leaf tends to be non-rotating function & also limited to the
division. Technologically, supply chains are also functions. Procurement & marketing are niche
functions of ILTD.
Are the people hired for these positions having the appropriate skill sets?
Continued... (In recruitment) there was a shift from people with BSc Agri. background to
technical people. And they have been inducted to leaf buying and associated functions. The move
is purely a divisions call. In the light of appropriate skills set requirement, do you think that this
is a proper shift?
What you think that the skill set that the technical field has & for BSc. may need to, for leaf
functions?
Anaytical. I would say analytical skill is the difference. For a technical person, analytical skill is a
bit high, for they are into numbers, problems & analysis.
Yeah. BSc. Grads do lag in analytical skills. Initial stage guidance to be provided.
How do you ensure employee retention in the core function?

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As long as you recruit the right people, as long as they see growth & development, they would
stick around. And when they like and enjoy the work, they continue. People have stayed with us
when growth guaranteed.
Attrition rate is at one person per month for the last two years. Rate is 8.85% per yearly.
If you have to attract people from outside for these functions, will you be able to hire them?
We tried earlier (to move people from outside to these functions). For leaf functions, matching the
skill was difficult, for other functions, it is viable.
Feasibility Test (If you are trying to change org structure of company)
(i)Government regulations
(ii)

Interest of company's stakeholders

(iii)

Inter-unit coordination

(iv)

Company's information systems

Feasibility is not about hindrance, it is about possibility. Change in government regulation can
trigger a change in organizational structure. Change will be with concern on the interest of interunit coordination, to get approved. It is not on the interim's part, it is upon where it will add
efficiency. For example. In the view of a lot of activism on tobacco, we are seeking upon industry
affair cell.

Specialist culture Test


(i)
Which function of the division requires a distinct culture, different from adjacent or
reporting units?
(ii)

How does ILTD ensure protection of that culture for the particular unit?

As long as you want to have same culture or different culture in different functions, you can have
it. It all depends on leadership, at what direction the leadership wants to take the function.
Functional culture is a subset of divisional culture. Leadership decides what culture the unit gets.
Difficult -Links Test
(i)

Which are different units in ILTD?


1) Leaf Operations
2) Finance & MIS

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3) Product & Process Certification and Product Development


4) Human Resources & Administration
5) Processing & Technology
6) Exports and Supply Chain
7) New Product Development
8) Spices
9) Engineering
10) R&D
(ii)
How do they co-ordinate and share information? How these functions collaborate to take
decision for business?
Each of the unit roll upto one line DMC. There are regular reviews along with DMC across
functions or across team bases, where in these information shared. Talent is discussed in forms
(for L3 & above), like a shared discussion place. And more forums are created where these
people come together, where the leadership discuss.
(iii)

If there are disputes between units (difficult links) how are they resolved?

Generally the conflicts are between Marketing & Procurement, HR & Finance (HR seeks process,
Finance seeks individual intervention). Quality & Production within units, Cross-development
teams & Exports. Whenever there is a conflict, it is to seek clarity & set priorities.
Specialist culture & difficult links test help top management define unit responsibilities.

Redundant Hierarchy Test


(i)

What are the various layers of decision making for each function of ILTD?

.The decision making levels are individual level, HOD level, Function head level & unit level
(when hybrid functions are involved), Line DMC (when units are involved) & CEO level
(ii)

For each level above the operating core, what is the parenting proposition for that level?

Every parenting layer contributing to the function (>10%) must have appropriate skills and
resources.
To avoid redundancy hierarchy - Structurally we believe that there should be no one-to-one
reporting. In one-to-one reporting model, reporter will be dependent on his/her supervisor for
decisions and supervisor will delegate his/her work to the reporter.

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In the last three to four years, we have eliminated many one-to-one reporting structures. It has to
be many-to-one reporting structure to ensure that there is no redundancy in the hierarchy levels
Example: Assume that you are a manager and there is one employee reporting to you. Any work,
you will directly it to your subordinate. Similarly, for each and every step your subordinate will
come to you for verification. This will result in to and fro of same information. This is not
considered as a good structure.
It must be many-to- one reporting system, so that the subordinate is empowered and comes to you
only for guidance. Manager can also do other works.

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