EXECUTIVE SUMMARY

This report the briefly examines the detail of Habib Oil Mills HR practices related to

Compensation & reward management. Habib Oil Mill is operated from 1955.Habib Oil Mills

(Pvt) Ltd is amongst the largest FMCG companies in Pakistan. Habib Oil Mill has grown from

being a family owned company to one of the most prestigious companies listed on the Pakistan

Stock Exchange. HOM was initially established as an oil expelling unit. But now, it is one of the

largest FMCG Company. Previously, they done all the procedure of compensation and reward

Management manually but now they follow green HRM practices and turned into paper less

environment. In this report we try to explain and all aspects related to compensation and reward

management of Habib Oil Mills.

Table of Contents

ACKNOWLEDGMENT.....................................................................................................................1
EXECUTIVE SUMMARY.................................................................................................................2
Introduction.........................................................................................................................................4
History.................................................................................................................................................5
Vision..............................................................................................................................................7
Mission............................................................................................................................................7
Core values......................................................................................................................................8
Nature of business...............................................................................................................................9
Company overview..............................................................................................................................9
Product portfolio..............................................................................................................................9
Marketing, sales, and distribution.................................................................................................11
Operations and quality assurance..................................................................................................11
Port Qasim project.........................................................................................................................11
Competitors...................................................................................................................................12
Culture...........................................................................................................................................12
Quality standards...........................................................................................................................13
Certification...................................................................................................................................13
Awards...........................................................................................................................................14
Integrated management systems....................................................................................................14
Corporate social responsibility......................................................................................................15
Reward and compensation plan.........................................................................................................15
GRADING STRUCTURE................................................................................................................22
Recommendations.............................................................................................................................23
Introduction

HOM's presence dates back to 1955, when it was initially established as an oil expelling unit.

The present management took over the unit in 1978 when the company was producing only 5000

metric tons of cooking oil annually. At present, Habib Oil Mills (Pvt.) Ltd. is amongst the largest

FMCG companies in Pakistan. The company operates in the vegetable oil & fats sector

producing premium brand cooking oils and hydrogenated cooking mediums, and marketing the

products through its own distribution networks, covering almost all commercially viable markets

nationwide.

HOM products enjoy vast popularity and brand loyalty, and stand amongst the top in terms of

market share in this sector nationwide. The growth rate of 500% in past ten years primarily

attributes to our consistent quality care, concerted efforts of its staff and driving successes from

application of needed marketing strategies and state of the art technologies.

The current management has carried over major expansion and modernization of the unit over

the years, and has converted into an integrated unit for edible oil refining, cooking oil blending

and production of industrial fat through fractionation plant. The unit after subsequent expansion

and modernization has now an installed capacity production of 36000 metric tons of cooking oil

and Banaspati per annum.

Pakistani edible oil industry is characterized by high competitive intensity due to fragmentation

and low barriers of entry which result in limited pricing power and inherently thin profitability.

However, several large players have been operating for a long period of time and thus enjoy

stronger brand equity in relation to other firms. Pakistan is amongst the leading importers and
consumers of edible oil. Current per capita consumption level of Pakistan stands at ~23 kg/year

for 2016 compared to global average of ~28.0 kg/year (2015-16). Over the medium to long-term,

demand is expected to increase in line with GDP growth which is further supported by positive

demographic fundamentals. Nevertheless, changes in raw material prices (resulting in inventory

losses) and foreign exchange rate fluctuations are key risk factors resulting in volatility in

margins. Ability to manage the same depends on pass through to consumers, which in turn, is

linked to degree of competition and operational efficiency.

History

Unlike many other industrial houses in Pakistan, the group has been engaged in commerce and

industry for over a century. The family business is known to have started around 1900 when a

sugar factory was setup in Ghazipur. The family shifted their business in 1920 to Calcutta, one of

the business hubs of India, under the name of Shaikh Nabi Buxsh & Company. The family

started other businesses in Calcutta including Tallow & Soap raw material. After Partition, the

family group moved to Dacca and started industrial activities under the family name of Hassan

Brothers & Company.

Under the family name, Pak Jute Mills was established in Dacca. The mill was equipped with

500 looms out of which 250 looms were for Hussein Cloth & 250 looms for sack/gunny bags.

The mills were exporting their products to a large number of countries. The plant was imported

from Britain. It was the market leader at that time and the shares of the company were floated on

the Dacca Stock Exchange.

The family group were the pioneers in establishing a Match Factory in Dacca. The Match

Factory was based on the local raw material production of East Pakistan i.e. inferior wood.
Considering its capacity, it was rated to be the country’s largest match factory of that time. It

served to provide a great impetus to the match industries of East Pakistan with latest Japanese

Machinery of that time.

Under the family name Sirco Soap & Chemical Industry was established in Dacca. This unit

produced a variety of soap and glycerin. Its capacity was rated to be highest in the country and

was based on Italian technology. The packing was done by automatic means and the quality

control was considered to be of the international level., which was approved not only by the local

buyers but also by foreign customers.

Dacca Oil Mill was setup by the family group, which was the first edible oil mill in East

Pakistan owned by a local group. It had tough competitions with the multinational companies in

which it competed on equal terms. The unit was equipped with refining, blending & packing

facilities. Soap raw material was one of its by-products.

Since its inception, the group has diversified its operations and taken under its umbrella

numerous other businesses. Today, it is continuing its heritage of milestones by operating in

following successful ventures:

 Habib Oil Mills (Pvt.) Ltd.

 Habib Quality Foods (Pvt.) Ltd.

 Habib Water (Pvt.) Ltd.

 MCR (Pvt.) Ltd. (Pizza Hut, Burger King, TGI Fridays)

 Satcomm (Pvt.) Ltd.

 Millennium Software (Pvt.) Ltd.

Vision

“To win hearts and minds by providing products for healthy lifestyles”

Mission

Together with our stakeholders, we will continuously endeavor to execute critical initiatives

required to fulfill our Vision – in line with our 6 core values. In doing so, we will strive to

achieve operational excellence coupled with superior financial performance and leading

customs.
Core values

Teamwork

HOM believes the key to superior performance is teamwork. We encourage a collaborative work

environment where employees are encouraged to bond with one another to achieve the overall

objectives of the company

Customer Focus

We believe customers are the lifeblood of HOM. We take every opportunity to get to know our

customers well and focus our culture, strategy and workforce on satisfying and pleasing those

customers

Integrity

Every activity at HOM is consistent with our words. There is open communication and

transparency in every work and every employee adhere to standards that are morally upright to

foster a positive workplace culture

Commitment

At HOM, we demonstrate dedication and commitment in everything we do. We always strive that

every employee should feel connected to the company since it makes employees more proactive

and dedicated toward their work

Innovation

Innovation is one of the building blocks of HOM. Since inception, HOM has always endeavored to

implement new methods in business practices, encourage creative thinking and challenge the status

quo to remain ahead in every domain it operates in

Quality

HOM strives to provide highest quality products and services to ensure increased revenue,

customer satisfaction and enhanced productivity

Nature of business

Company overview

Habib Oil Mills Limited (HOM) has been engaged in manufacture and sale of vegetable

banaspati, cooking oil and related products for over six decades. The company is owned and

managed by the Hassan Family, which has substantial experience in this business. Apart from

edible oil manufacturing & sale, the sponsors have investments in restaurants, fast moving

consumer goods and IT sectors. Raw oil constitutes ~90% of HOM’s cost of sales. The company

has three sources of oil: local importers, self-import and local purchase. On average, two-thirds

of oil is locally procured while remaining is imported. To manage inventory loss and rupee

depreciation risk, management passes on increase/decrease in input prices to consumers while

efficient procurement is also considered important.

Product portfolio

Major brands include Habib, Super Habib, Handi, Nayab and Fry’O. In 2016, the company

launched the Mayar brand for low-tier consumers. Within aforementioned brands, there are
variants for banaspati, cooking oil, canola oil, soybean oil and refined olein. Alongside, HOM

manufactures different types of shortening products for commercial uses. Going forward,

management envisages launch of new canola-based oil blends and margarine. The company also

plans to increase presence in the industrial segment where it is ranked among top three players in

terms of market share.

STAR

Habib Cooking Oil

These are products which have a large market share in a fast growing industry. Their sales are

consistent throughout the year. Their cash generation is also high and at the same time has a high

growth potential, therefore require larger investments.

Question Mark

Handi Cooking Oil Nayab Cooking Oil Fry’O

This product of Habib’s requires plenty of additional investment. It was acquired only a few years

ago. Right now it has a small market share in a market with a high growth rate.

Cash Cow

Super Habib Oil

This product of Habib has one of the largest potential, as it caters to premium customers therefore

the margins are high. Super Habib Canola Oil is 100 % pure Canola oil which is twice purified and

contains lowest saturated fats.

Dog
Mayar

Habib’s product has a low market share in this category, mostly due to unbranded and loose oils

being provided to customers at cheaper rates in the segment of low cost oil products.

Marketing, sales, and distribution

The company either supplies its products from 8 self-owned warehouses directly to retailers, or

through a network of third-party whole sellers and over 130 distributors covering the country at

70,000-75,000 retail outlets. The warehouses are located in Karachi, Hyderabad, Sukkur,

Multan, Lahore, Islamabad, Faisalabad and Quetta. Coordination between sales and distribution

teams is supported by a management information system which provides timely sales and stock

movement data for decision making.

Operations and quality assurance

HOM is headquartered in Karachi while its operations run through regional offices in Lahore,

Islamabad, Multan, Faisalabad, Quetta, Sukkur and Hyderabad. Manufacturing facility is in

SITE, Karachi. It comprises a refinery with cumulative production capacity of 500 metric tonnes

per day (MTPD), fractionation plant with capacity of 300 MTPD, 24 storage tanks and a filling

area. Alongside, the facility houses two gas-based generators, one standby diesel power

generator and waste heat recovery boiler catering to almost entire energy requirement. HOM

holds ISO 9001:2008 certification and its products are Pakistan Standards and Quality Control

Authority (PSQCA) certified.

Port Qasim project

The company plans to set up an oil seed crushing facility and extraction plant with capacity of

500 MTPD at Port Qasim, Karachi. As per the feasibility plan, existing manufacturing arm will

entirely be shifted to the new site. Expected date of completion is June’2019. The project is
 envisaged to improve profitability through backward integration, lower freight costs due to

closer proximity to Port Qasim and tax benefits under Section 65E of Income Tax Ordinance.

Total cost of the project is Rs. 1.5b. Phase I will be financed through loan whereas Phase II

would be financed with 70% equity and 30% debt to avail tax benefit. The company will obtain

long-term debt amounting to Rs. 900.0m which will be repayable from FY20 onwards for a

period of 5 years with 1-year grace period. Remaining cost will be funded by sponsors’ equity

injection of Rs. 600m.

Competitors

 Dalda oils

 Soya supreme oils

 Seasons Canola oils

 EVA Oils

 Meezan Oils

Culture

Innovation

HOM constantly strives to be creative and innovative in all its endeavors. All HOM employees are

encouraged to bring forth new and better ideas for improved performance, whatever our

responsibilities

Performance

HOM is performance driven. We at HOM continuously aim to improve our performance in all the

areas of services and operations

Sustainability

HOM has a vision of becoming a green company that is environmentally friendly and socially

responsible. In its efforts toward sustaining the environment for the generations to come, HOM is

committed towards adopting the best practices necessary to ensure a greener society

Employees

HOM employees are partners who work together in pursuit of the mission and strategy. We

strongly value teamwork, effort & success

Ethics

HOM demands openness and honesty throughout its operations to engender trust and integrity. We

ensure that every activity is able to pass the test of public and internal scrutiny at all times.

Quality standards

HOM has always focused on providing hygienically safe and healthy products to customers by

implementing production procedures which are in compliance with international standards.

HOM takes pride in having installed the latest and most modern European plant in Pakistan for

Edible Oil processing.

Being a part of our strategic plan and philosophy of producing quality products, HOM has

acquired various certifications over the past few years, that reflects quality consciousness &

innovative thinking of the management.

Certification

HOM has successfully achieved the following Certifications in vegetable oil & fats sector.

 Quality Management System ISO:9001

  Environment Management system ISO:14001

 Food Safety Management System ISO:22000

 HALAL Certification PS:3733 in year 2016

Awards

 Brand of the Year Award (2006-10), Oils

 Environmental Excellence Award, (2006-08) & 2010, Oils

 CSR Award 2007-09

 Peoples’ Choice Award (Oils), 2010

 Global Food Safety Award 2011, Oils

 The company also won the Export Award 2003,

 First Consumer Choice Award 2005

 Best Cooking Oil Award 2005

 Brand icon in cooking oil 2007-2010

Integrated management systems

HOM ensures increased performance, increased employee and customer satisfaction and

continuous improvement through an integrated approach where each and every function is

aligned to help efficiently and effectively deliver the overall objectives of the company.

HOM applies a range of management system standards to integrate all of the company’s

processes and systems into one complete framework, enabling all departments to work as a

single unit with unified objective. From managing quality needs to monitoring and reducing risks

and hazards, and reducing inefficiencies and maximizing resources, this integrated approach

helps achieve the overall objectives of the company.

Following are the management systems being followed:

• Quality Management System – ISO 9001

• Environmental Management System – ISO 14001

• Food Safety Management System – ISO 22000

Corporate social responsibility

Habib Oil Mills (HOM) is well known for its quality products. But its social emotions are not

hidden from any one as well. The ongoing social welfare activities of HOM indicate that the

company is fulfilling its responsibilities as a good corporate citizen, besides being so successful

in the corporate sector.

This year HOM has donated a complete operation theater in the new complex of Civil Hospital.

The name of this theater is branded under the name of (Late) Mr. Manzurul Hassan, chairman of

HOM. This operation theatre was inaugurated by Dr Seema Moidul Hassan. In the O.T.Complex,

patients are given free treatment for surgery and various other ailments. By this gesture of

humanity, HOM has contributed to the country and the Karachi City in a positive way.

City Government with the sponsorship of Habib Oil Mills has placed numerous traffic signs and

direction boards. The purpose of this activity is to create awareness among the pedestrians and

the drivers and to prevent them from accidents. The purpose of the placement

Direction/Indication boards is to give indication for the right direction and help them to reach

their destination easily.

Reward and compensation plan

Habib Oil Mills employees 500+ people in its company. Labor is about 80 to 20. The HR

department comprises of three people. There are 4 types of employees.

 Permanent

 Contractual

 Non-Management (they also have probation period, these also includes distributor, retailers,

third party etc.)

 Daily wages (Labors).

Two types of contract

Management Contract Probationary

Non-management Contract Probationary

The people more important for Habib Oils are production people. The labor who work for Habib

Oils in the factory. Administration deals with the labor. HR is not supposed to to deal with labors.

Factories and corporate office

Habib Oil Mills have one factory and one Corporate Office. In Factory, there is production

department only. While in corporate office Habib oils have other departments for support such as

HR, Marketing etc

Use of software for payroll and appraisals

There is a paperless environment in Habib Oils. Satcomm Pvt Ltd is a company which deals with

the software’s. Software deals with everything either could be leaves, attendance, appraisal etc.

Software is the property of Satcomm.Pvt Ltd the company uses Oracle based ERP with integrated

modules for its IT related needs. The process of performance appraisal first start off by setting

goals and objectives for employees. In this system first the supervisor defines the job description to

the employee and explain what is required to be done so that the goals are set according to it.

Employee sets its own goals for the next upcoming year by referring to the guidelines provided by
the supervisor. The employee goals to be fulfilled for the next year. Once the goals are selected by

the employee the approval process takes place from supervisor to manager to department head and

finally to human resource manager, if all agrees then the goals are set for the employee.

Performance appraisal process

The performance is evaluated after one year, using bell curve system. HOM uses ERP to connect

all the departments so the whole performance appraisal process is done computerized. Appraisal

is done by three entities 1. Line Manager 2. Department head 3. HR department. They give

points based on the performance of the individual and based on the score, bonus is provided. For

example if the individual lies in the 70% points then the HR checks how much bonus is provided

for that percentage. Department head collect the report from the line manager and give it to the

HR. HR asks for the justification. If the HOD justifies than its ok otherwise starts table talk.

Appraisals are based on the objectives achieved. The evaluated report is then shown to the

employee to explain which goals are fulfilled and which are not and if the employee agrees on

the report then it is signed and appraisal process is done but if the employee doesn’t agrees on

the evaluated report then the employee is given a chance to explain his point of view in written

form so that the committee can review the case.

Compensation and benefits

In HOM employees are given both financial payments and indirect financial payments which are

both mentioned on the appointment letter of the employee. Every transaction of payments to

employees are achieved through banks. HOM believes in 100% transparency.

Compensation policies

Compensation policies are developed first by looking at competitors and then by survey for

compensation which is conducted by third party. These surveys provide information about salary
levels and benefits provided in the industry.

For example, If my competitor gives 3 benefits I will also give 3 benefits. They surveys also

provide information about the benchmark of the industry. If my industry gives 10 benefits and

my company give 9 benefits. So through survey we get to know which benefit we are not

providing which is providing in the industry.

Compensation and benefits is if I give 10 allowances and 10 benefits to my employees what is

my competitor offering. It also depend on the employees .For some employees salary counts for

some employees benefits count.

Allowances

The following are the allowances provide by HOM;

Health insurance

Life Insurance

Holidays

Travelling allowance.

Marriage Allowance also provide by the company. It depends on the designation of the

employees.

Leave policy

There are two types of leave policy

 Casual leaves

 Sick leaves

Bonus

HOM give annual bonuses to its employees. This bonus is based on the score of performance
appraisal.

If someone is not working properly HOM identifies the reason may be the employee is sick

either he is less motivated. If employee is demotivated then they have job rotation

Bonuses are always given on the percentage of basic salary.

Audit

HOM is subject to annual audit in which case 15 day prior notice or some times monthy notice is

provided before official audit is conducted. There is no specific date of audits surprise audit are

also conducted to ensure check and balance.

Number of CEOs

In HOM there is no CEO's because it’s a family business. In HOM, there are MDs who are the

pioneer of this company. Every company has one MD. It depend on the no. of the companies.

There is Habib Oil Mills, Habib Masalah, Habib First Water, Pizza Hut, Satcom pvt ltd and

Millennium software.

Workforce diversity

HOM strongly believes in workforce diversity. HOM hires the best people of the market and

from the competitors. HR don’t hire people on the basis of nepotism.

Revised salary

Salary is revised only when employee get promotion and through performance appraisal.

Job rotation

Job rotation is a policy to motivate employees. If employees become low motivated and get

bored of their same routine work. So, company have the policy of job rotation. In this way,
 employees don’t lose their interest in the job and their performance also increases.

Overtime

Overtimes are only for production department not for the business support department. HOM

truly believes in work life balance. If employee ask for late sittings it means, employees didn’t

complete his/her work in 9 to 5.

Retirement

Retirement age is 60.

Fixed rates on appointments

There is no fixed rates on appointment because if HOM needs a manager under the range of

150000 but one manager is available in 200000 but he/she is competent and has the ability to

better the things in the down the line. So, HOM hire that manager because it’s in the long term

benfits of the company rather than to appoint a person in 150000. Because there is a monthly

cost of every employee such as pay, benefits etc. If a manager work 4 years and end up with

nothing to achieve. This is the loss of the company. All the money which company invest on that

manager become lost.

Exit interviews

HOM did exit interviews. In which reason to leave the job is asked. It depends on the employee

as well if employee is a valuable asset of the organization and its worthful for the organization so

how can a company loose them.

Career growth

If employees want to leave for the career growth and for the better opportunity so HOM don’t

force employees to stay. For example, if someone spent a good span of time in the organization

and now he or she wants to leave. HOM truly believes in birds should fly.
Equal Employment Opportunities

There is no gender biasness in the HOM. Equal employment opportunities provide to the all

employees.

Labor policies

Company follows the labor laws designed by the government of Pakistan. Labor laws provided

by government defines what factory workers will get

External competitiveness vs. internal equity

There is competition between companies as well as between internal employees. Same position

and same experience but different companies pay differently. Actually, it depends on the

competency of the employee. How competent the employee is.

Payroll cycle

Company pay roll cycle is 26th to 25.

COMPENSATION AND REWARD MANAGEMENT AT HABIB OIL MILLS

GRADING STRUCTURE

Managing Director

General Manager

Deputy General Manger

Senior Manager

Manager

Deputy Manager 1Deputy Manager 2

Assistant ManagerAssistant
1 Manager 2

Junior staff

Page 22
Recommendations
As far as appropriate suggestions for Habib Oil Mills is concerned, it should focus more

on dispersing the decision making among various channels rather than keeping it all

centralized and generated from a single source of authority. Moreover, it should increase

its processes and efficiency for local production of oil so that the needs for importing oil

could be as minimal as possible. This will also decrease its acquisition and operational

costs and improve the efficiency of the operation, hence grant it a strong sense of

financial and operational sustainability.

Research and development is another area where Habib Oil Mills needs to invest a heavy

amount in order to attract a larger market share. Although it has already a sustainable

customer base but that mostly belongs to the upper middle and elite classes. There are less

products available for the lower class with the same quality. It is therefore recommended

that Habib Oil mills should introduce convenient and economy pack for low level

consumers as well. The rural market is still untapped and uncattered by Habib Oil mills

and this places greater opportunities for the firm to establish its footing in the rural areas

as well.

The market and product development strategies could be effectively incorporated by

attending to the needs of rural consumers. Increasing the availability of products in the

rural regions will enhance the brand recognition and promote a high level of success

among the competing firms.