A STRATEGIC JUNCTURE AT

MOMMY BEAUTY & HEALTH CO.

Human Resources Case Study – Challenge Document

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Sitting comfortably in the ergonomic chair inside her corner office, Amy
Shah, the Vice President of Human Resources for Mommy Beauty and
Health Co. (MBH) was sipping coffee and pondering over a new challenge
at MBH. “How do we grow our footprint through our new spas? What are the
critical success factors involved in setting up and running spas? How do we
build a culture of sustained high performance in this division?” – She kept
thinking.

MBH, one of India’s top 15 FMCG players in the beauty and wellness
category, had recorded primary sales of INR 3,710 crores in FY 2021. The
company, headquartered in Mumbai, was established in 2007. MBH caters
to the urban woman’s needs for maternity well-being. The company is now
serving consumers across all tier X and a few tier Y cities (refer: HRA
Classification of Indian cities, GoI) across India. MBH’s products reach their
consumers through multiple channels, including general trade, modern
trade, traditional eCommerce, social commerce, quick commerce, D2C and
alternate channels like army canteens. The net profit across MBH’s brands
for FY 2021 was INR 626 crores (16.8%). The leadership team aims to drive
MBH’s net profit margin up to 25% by 2026, within its existing portfolio of
brands. The company currently sells its products to consumers across 6
brands which have been highlighted in table 1.

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In the recent Leadership Team meeting, the top brass of the company came
up with a thought to expand their business to 2 more tier Y cities in India –
Ranchi, and Nashik, with a strategy to tap high-potential blue ocean
markets. Initial research suggested that Ranchi and Nashik have a strong
female consumer base with higher intention and ability to spend on
wellness products.

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“Consumers in our first set of cities have a different consumption behavior
as compared to consumers in these 2 cities. Our initial research shows that
consumers in Ranchi and Nashik have more time in their daily lives and
higher intent, to try out beauty and wellness products before using them.”,
said Ayan Bhattacharya, the Vice President of Consumer Insights. “I agree
with what you say. Does that mean we set up wellness clinics in Ranchi and
Nashik? These clinics will attract consumers to experience our brands and
we can then pitch our products to them”, asked Amit Shetty, the Vice
President of Go-To-Market (GTM). “Let’s do the numbers and huddle back”,
said Mahima Menon, the CEO of MBH.

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A week later, MBH’s leadership team met again and decided to set up 2
new Mommy Wellness Spas, 1 each in Ranchi and Nashik. Refer to Annexure
1 for the people demographics of Ranchi and Nashik. These clinics would
provide in-store wellness experiences to customers and have a pool of
experts who would provide signature in-home MBH wellness experiences,
on-demand. The in-home service could be booked online through MBH’s
consumer app - “Mommy and Me”, or by scheduling an appointment on
call, through the clinic. Products across multiple brands, beyond MBH,
would be available in the spas while in-house experts would only use MBH’s
products in their services.

“MBH’s purpose is to help all mothers across India have access to world-
class beauty and wellness experiences from the comfort of their homes.
Mommy Wellness Spas will be a means to help generate more demand for
our brands. Once we successfully set them up in Ranchi and Nashik, we
should set up more spas in similar markets within the next 2 years”, said
Mahima. “Precisely why we should house professionals who can deliver
wellness experiences to our consumers in their homes. Once our consumers
in Ranchi and Nashik feel the convenience and appreciate the value for
money, we should see an upsurge in the demand for our services and then
our brands”, said Garcia, Vice President of Brands and Supply Chain.

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Salman, Vice President of Finance, had some concerns and he did not hold
himself back any longer - “If the spas are meant to generate demand and
will burn cash, how will we reach our ambition of delivering 25% net profit
by 2026 within our existing portfolio? We have very little control over our
manufacturing costs because we source finished goods from 3rd party
factories who have fixed rates for our SKUs.” “Our research shows that the
demand for our Glow Layerz, Naturals, and Good Hair Day brands should
shoot up in Ranchi and Nashik in the next 12 to 18 months. The increasing
number of manufacturing and mineral industries in these 2 cities will be the
key drivers behind the growth of these 3 brands”, said Ayan. Amit then
started thinking out aloud - “Hmm, this is going to be interesting. In this
competitive landscape, it does not make sense for us to cut down on our
channel costs. We should continue pumping money at our current rates
across our existing channels. Rohan, Qasim, and Ananya have sharp and
accurate growth plans.” The splits of secondary sales, over the last 2 years,
across the channels that are managed by Rohan, Qasim, and Ananya (refer
to Annexure 2 for details) have been captured in Table 2. Mahima realized
that an executive decision from her would provide clarity to the team and
stepped in - “I think the business case is clear. Ranchi and Nashik are high
potential markets for some of our high-margin brands. Our wellness spas
should aim to drive growth by generating higher demand for our high-
margin brands as compared to our competitors. Let us take a punt and
experiment with 1 spa in each city. We will huddle again on this matter after
6 months to review our progress. All the best, team!” She continued - “Amy,
the responsibility now lies on your shoulders to ensure that we set up a new
division in MBH that has the right structure, the right people, the right
systems, and the right culture. Your leadership will be crucial in making this
plan successful.”

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Amy was sold on the plan but knew that MBH did not possess the
organizational capabilities required to set up and run wellness spas. She
realized that for the strategy to work, a new team of experienced
professionals would need to be set up and be provided with the right
environment to succeed. The 4 sets of questions on Amy’s mind, now, were –
1. What should the organizational structure of the clinics’ division be? How
should the clinics’ division be positioned in MBH’s organizational
design? (Refer to Annexures 2 and 3 to understand the organizational
hierarchy in MBH)
2. What profile of talent should MBH hire, across all levels, in the clinics’
division?
3. What should the employment model in the clinics’ division be? Should
any part of the division be outsourced?
4. What should the compensation structure be for the clinics’ division?
(Refer to Annexure 4 to understand the current compensation structure
of employees in MBH)

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 ANNEXURE 1

The demographics of the 2 cities, according to the 2011 census, were –

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 ANNEXURE 2

The leadership team at MBH –

Amit has 3 direct reportees –

1. General Manager, Sales - General Trade, Modern Trade, and Alternate
Channels (Rohan Dixit)
2. General Manager, Sales – Traditional eCommerce, qCommerce, social
commerce, D2C (Qasim Gill)
3. General Manager, Sales - Channels of the Future (Ananya Bhagat)

Ayan has 2 direct reportees –

1. General Manager, Data & Analytics
2. General Manager, Technology and Product

Amy has 3 direct reportees –

1. General Manager, HR – GTM and Marketing
2. General Manager, HR – Corporate Functions and Employee Experience
3. General Manager, HR Centre of Excellence

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 ANNEXURE 2

Garcia has 3 direct reportees –

1. General Manager – Glow Layerz, Triumph, Mommy Scrubs
2. General Manager – Good Hair Day, Naturals, Beauty and You
3. General Manager, SKU Procurement

Salman has 3 direct reportees –

1. General Manager, Finance – Taxation & Treasury, and Finance Controller
2. General Manager, Finance Business Partner – GTM & Marketing
3. General Manager, Finance Business Partner – Supply Chain and Corporate
Functions

People Costs come under the Overheads line in the company’s P&L. To derive the
net profits for each brand, the Overheads (People Cost) line for the brand
accounts for 100% of the cost of talent dedicated to the brand and the shared
cost of central talent involved with the brand. For example –

The People Cost for the Brand Manager of Triumph is fully borne by the brand,
while the People Cost for the General Manager – Glow Layerz, Triumph, Mommy
Scrubs, is equally divided between the 3 brands.

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 ANNEXURE 3

The levels of hierarchy in MBH’s structure, as per their People Practices Book,
today –

“In most parts of MBH, we aim for greater collaboration across all levels and find
a need to be low on the hierarchy. Our employee bands in most employee spans
are not about numbers or alphabets because we inherently do not wish to build
a culture with solid hierarchies in those spans. People directly associate numbers
and letters with the hierarchy as they come in a certain order… hence a 1 is
usually better than a 5 or vice-versa in a company, which becomes obvious. How
could we otherwise have a low-hierarchical model that could be modified based
on the organizational context? Colour was the answer because colors do not
come in any pre-conceived order.

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 ANNEXURE 3

In those parts of our business where we wish to build a strong hierarchy to

achieve higher output, we do so. We believe hierarchy works best in GTM, IT, and
in some GM organizations of HR and Finance. How does this work? In these
spans, we have sub-bands like Red-1, Red-2, and Red-3. Red-1 is the entry point
into the Executive band and employees get promoted up to Red-3 within this
band before they move into the next band. Similarly, in these spans, Yellow has 2
sub-bands – Yellow-1 and Yellow-2. No other band is divided into sub-bands.
Interestingly, there is no change in the Minimum-Maximum Job Values of the
larger bands anywhere in the organization”, explains Amy

Amy’s explanation gives further clarification to help understand that the levels of
hierarchy in GTM, IT, and the spans of General Manager, HR – Corporate
Functions and Employee Experience, and General Manager, Finance – Taxation &
Treasury, and Finance Controller, are –

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 ANNEXURE 4

The compensation structure of MBH employees across all bands –

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