HUMAN RESOURCE AT GOURMET FOODS

Mr. Muhammad Nawaz Chathha the CEO at Gourmet Foods rolled up his car window to block out the pungent smell as he headed

towards his head office at the Gourmet production plant at Kotlakhpat. He wondered about the phone call that he just received

from RohailChaudry the HR senior manager at Gourmet foods regarding the resignation letter of the general manager of the

production plant for mithai and bakery items. What could have gone wrong? He questioned himself as he aimlessly looked at the

guard who was having trouble keeping his gun up while he opened the gates to let his car in into the Gourmet production plant

driveway. The turnover at the production plant was already alarmingly high among the lower staff, and now the resignation of the

general manager, in the absence of a viable alternative candidate would prove to be disastrous for the production plant for mithai

and bakery items.

BACKGROUND OF THE ORGANIZATION

Gourmet Bakers and Sweets started off in the year of 1987 with a small outlet in the area of Ichra in Lahore by Mr. Muhammad

Nawaz Chathha. Earlier Nawaz Chathha used to work at Shezan bakery as a General Manager when he realized the potential of the

bakery business. He felt that he had gained enough experience and knowledge of the operations of a bakery and thus went ahead

with the idea of opening up his own bakery by the name of Gourmet Bakers and Sweets. With an investment of 20 million rupees he

started of his business and hired a lot of Shezan employees based on the strong contacts that he had developed during his time at

Shezan bakery.

The primary business that Gourmet rose to success with was that of retail of the basic food items. Along with this gourmet offered a

wide range of its bakery items such as biscuits, cakes, pastries and other confectioneries. It also offered a handsome variety of

Desisweets (mithai) that were manufactured by Gourmet itself and soon became the signature item which became the identity of

Gourmet Bakery.

Today Gourmet has expanded to a total number of ninety eight sales outlets in Lahore, five production plants and two restaurants

and still has expansion as one of its core objective, formulated by Mr. Chathha. From the time period of 1987 to 2006 Gourmet

experienced an increase of 25% in annual growth sales which rose up to 65% from 2006 to 2009. 2010 saw the unfortunate ‘rat

invasion’ at Karim Block outlet in Lahore which was caught on camera and became the source of unfavorable publicity. The video

clipping showing rats crawling over cakes displayed in the shelves of Gourmet took a viral ride over the internet and as a result the

sales of Gourmet were adversely affected. Gourmet was tagged as an unhygienic Bakery with poor quality standards due to this

incident.

Mr.Chathha knew that he had to take immediate action to undo the damage done to Gourmet’s image as a quality provider. He

actively engaged himself in rectifying the poor environmental conditions at the outlets and made each outlet hire sweepers who

made sure that the outlet remained clean. He ensures that the employees followed strict cleanliness standards so he could apply for

the ISO certification that he thought was the only solution to the wounded image of Gourmet. Mr. Chathha now at the age of 77 was

a strong man who had become used to fathering the company and seldom relied on anyone for making key decisions. He brushed

off the thought of delegation by telling himself that the junior employees lacked his experience and went ahead with what he

believed to be the best interest of Gourmet.

GOURMET BUSINESS DIVISIONS

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Gourmet with its distinctive orange promotional color has made space in almost every corner of Lahore, with 98 branches in Lahore

alone it has left the competition crumbling and has come forward as the modern face of bakery business in Lahore. Initially offering

only a limited range of bakery items and mithai gourmet gradually set up four production plants and grew into large scale bakery

business. The name Gourmet Bakery and Sweets which was suggested to Chathha by his daughter changed into ‘Gourmet Foods’ to

take into account the diversification that underwent in Gourmet within a period of five years.

Mr.Chatta believed that he needed to do more than just sell bakery items, he was determined to provide his customers with

something more that Gourmet could offer to keep them coming back. He was toying with the idea of selling mineral water for quite

some time but the fear of competition from Nestle kept him hesitant. He knew he wanted to keep the costs of production at a bare

minimum and provide the quality that Gourmet promises to provide and with that in mind he believed that he will be able to attract

enough customers from the middleclass income bracket who would want to pay less for the same amount of water. Gourmet

launched its mineral water by the name of ‘Gourmet water’ in the size of18.9 liters bottle, at a price of Rs. 60 as compared to Rs. 160

of Nestle.

Mr.Taufiq Ahmad the person heading the Gourmet water production and distribution overlooked the stacking of the gourmet

mineral water bottles outside of each branch, the strategy was to get the customer to look at the bottles as he entered to increase

the possibility of a purchase. The sales figures rose and the mineral water became a success that everyone owed to ‘Chatahhsaab’ as

they all referred to him as.

Watching the success of the mineral water business, Mr. Chathha was hungry for more. He wanted to add more products under

gourmets’ belt to stabilize its feet as a business. Within three years of the launch of the Gourmet water, Gourmet introduced its own

beverages by the name of ‘Gourmet Cola’ in competition to the giant companies of Coca Cola and Pepsi that boasted a substantial

market share in the beverage industry. The display shelves of Gourmet were cleared off of the competitors’ beverages and Gourmet

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Cola was nicely stacked up in all the Gourmet outlets. This move required a new production plant and Mr. Chathha chose Sundar

industrial estate in Raiwind as the house of the new production plant.

By now diversification and expansion was integrated as the core business objective at Gourmet. With a planning team missing,

Chathha preferred going solo with such decision making. To be able to follow the mission stating ‘Our mission is to provide quality

products at lowest prices’ cost cutting was an imperative strategy at Gourmet and thus Chattha having sufficient faith in his

experience, waived off any ideas of a thorough market research in the areas of products that he was interested in launching under

Gourmets banner, to save up extra costs.

Irrespective of the Gourmet Colas struggle with sales, Chathha wanted to further expand the ‘Daires’ line that Gourmet was already

offering. With the Gourmet ice-cream already in the product line portfolio, Gourmet Milk was introduced. With a shelf life of three

days, the Gourmet milk was free of preservatives and additives and claimed to be pure.

Gourmet also launched a line of its premium cake by the name of ‘Bon Vivant’ to break out of the image of offering poor quality

cakes and catering to the middle classes. This series was projected towards the upper classes and is set out to compete with the top

bakeries of Lahore that have mastered their cakes.

Mr. Chathha’s eldest of the four sons, Zubair wanted his own contribution into the business and came up with the idea of a catering

business under the brand name of Gourmet. Managed as a separate wing, the Gourmet restaurant along with the catering business

was started in 2009 headed by JamilChathha himself.

With the sales volume increasing based on Gourmets key items, the business expanded in the form of more outlets around Lahore

and the Faisalabad market which was on the paper for quite some time was finally tapped with two branches. Chathha was reluctant

to expand outside of Lahore due to his undivided focus on keeping the costs low. This attitude around the company encouraged low

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maintenance in all departments, especially in the production department. Often the ‘Quality’ bit of the mission statement was

overlooked in the effort to keep the costs low.

HUMAN RESOURCE DEPARTMENT

The need for a formal Human Resource Department was severely felt by Chathha when he realized that he could no longer supervise

all operations including that of the issues related to Human Resource. The general managers were facing trouble with the lower level

staff in production plants and often informed Chathha Saab about the high turnover rates.

Earlier each department hired employees itself on the discretion of the managers and supervisors. The ads for job openings were

given in newspapers and interviews were conducted by supervisors which performed the functions of HR managers in the ways they

thought best. Each department followed its distinctive procedure of recruiting and hiring employees. For the senior posts of general

managers and managers the candidates were interviewed by Mr. Chathha himself who believed qualifications can’t teach a person

what experience does, thus candidates with more experience were preferred over candidates with better qualifications.

The Human Resource Department was formed in early 2010 and the individuals managing production earlier were moved to head

the HR department with a few new hires. There were two HR managers, one HR general manager and one HR production unit

manager who were responsible for formulating HR policies regarding recruitment, selection, appraisals, benefits, hiring and firing

etc. across all Gourmet business divisions except for the catering business which had an independent HR department. In its infancy

stage the HR department attempted at formalizing the previously varying HR procedures which were a norm at Gourmet but with

the pace of growth the requirement of the performance from the HR department was very demanding thus only key areas were

formalized initially. An appraisal system was developed with an appraisal form which was standardized across all departments. Tests

were developed for the selection process and the interview structure was somewhat developed keeping in mind the requirements

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of various posts and an overall effort was made to get the HR running instead of investing time and money into the design of the HR

policies. The HR managers knew they had been doing this job for so long without the HR department in place, thus they had faith

that with just a little formal outline the HR department will be able to produce what Mr. Chathha expected out of it.

In the production plants the process of putting each lower level employee through the interviewing session, the supervisors

preferred the traditional ‘Gourmet way’ of hiring lower level staff. The supervisors each brought ten to twenty people from his

respective village and gave them jobs in the production unit. A former manager for the production unit Khalid Bhatti says ‘jo zyada

aadmi laata tha uski zyada izzat hoti thi, who apna teyka jama laita tha jis kay zyada banday hotay thay’. He further added ‘aapas ki

politics chalti rehti thi aur kaam kum hota tha’. It was a matter of number and not skill that was seen to be important among the

lower level employee candidates brought in. The General Manager of HR Abbas Ayaz also points out ‘Hamein Sahi kaam keh liyay

shi banda nahin milta, yeh bari mushkil hai is business mein, skilled log nahin miltay zyada’.

A good majority of the lower level staff was predominantly illiterate with only 2% having done their matriculation. When employed

in large numbers they were collectively given an informal briefing by the supervisor as to what was required of them and they were

sent straight to work. Training of the lower level employees is kept at bay to keep the costs at minimum instead the supervisors

help them through the processes a couple of times to ensure they get the basics of the job. Khalid Bhatti says ‘Training katoh

concept hi nahihai, bas jo supervisor sikha de who training hai’.

The lower level staff in the production plants is also prone to injuries most commonly burns which take weeks to heal and takes off

a lot of time from the working schedule of the employee. The stress of this lag is felt by the manager who has to arrange

replacements in order to keep the production smooth. In case of such shortages the managers borrow employees from other

departments to maintain their employee count. The productions manager for the bakery plant Muhammad Razzaq said ‘ humaari

aapas mein ek understanding hai, agar mujhay banday kam par jatay hein toh mein Shahid saab (outlet manager) se keh ke doh teen

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guards manga leta hun kaam ke liyay production mein’. The process of Job rotation among the lower level employees at Gourmet

had taken this form according to Mr. Razzaq.

The lower level employees took time in adjusting to the policies and understood little of what the benefits they should be expecting

from Gourmet despite a breakdown of a bonuses plan that was formulated by the new HR department. The bonuses were given

twice every year just after the two Eids. The employees were expected to work overtime according to the peak demand around Eid

which usually amounts to 72 consecutive hours (for bakery items and mithai) during the three days, and were given bonuses if they

met the demand. The bonuses were distributed at the discretion of the supervisor and manager of the respective production plant,

the chunk of which was kept by the senior employees.

The pay of the lower level employees for a 12 hour duty at the production plant was decided upon to be Rs. 5000 and for some it

was raised to Rs. 6000 depending upon the amount of work that individual is handling.

Mr. Chathha had noted that the quality of the mithai and the bakery items had seen a declining trend and a number of customer

complaints regarding poor quality were rising. This issue was earlier brought to the notice of the General Manager of the production

plant of mithai and bakery items who assured Mr. Chathha that he would take a strict action regarding this and make sure his

production employees were in line and work until they get it right! He had earlier informed Mr. Chathha that he had fired four

individuals without any warning because they were not performing well and had been the cause of disruptions among employees.

His words were ‘wardi utaaro aur niklo’. Mr. Chathha was confident about ZahidLatif’s (general manager of the production plant)

ability to resolve the labor issues but his resignation came to him as a shock.

Another problem that Mr. Chathha felt was driving his focus away from the diversification strategy was that of the alarmingly high

number of customer complaints regarding the attitude of the Gourmet sales staff at the Gourmet outlets. A majority of the

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customers felt that they did not deal with the customers politely, took too long and often appeared to be aloof of any customer

queries which rendered the Gourmet experience very frustrating. Mr. Chathha recognized the problem to be that of a lack of

training of these employees in customer care. Where should he start from with the training? And how should they be trained? These

questions rummaged for answers in his head as he struggled to multi task while going to an inauguration of a new outlet in

Faisalabad.

STEPS TO BE TAKEN

Mr. Chathha new that some things needed to be taken care of but he didn’t know where to start from, was it the HR department

that needed to formalize its policies to take care of the employee related issues such as training of the sales staff that needed

immediate attention or was it the conditions of the labor and the labor relation at the production plant that needed adjustments in

order to bring up the overall quality of products and the motivation of employees. He stood puzzled as he held the scissors in his

hand to cut the red ribbon at the doorway of the new branch. He just needed to figure out which end he should cut from.

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EXHIBIT ONE: ORGANIZATION

CHART

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ZUBAIR NAWAZ CHATTHA

Director

KHALID NAWAZ CHATTHA

Director

FAROOQ NAWAZ CHATTHA

Director

SALMAN NAWAZ CHATTHA

Director

AAMIR AHMAD

General Manager

Razzaq

Production general manager

Abbas

HR general manager

Shakeel

Finance general manager

Ali

Training and development G manager

Fareed

Marketing general manager

Khuram

Compensation and benefits G manager

Manager Manager Manager Manager Manager Manager

Assistant manager Assistant manager Assistant manager Assistant manager Assistant manager Assistant Manager

NAWAZ CHATTHACEO

EXHIBIT TWO: INCOME STATEMENT for the year ended on 31st Dec, 2010

Net sales 3000000000Cost of salesSalaries, wages and benefits 380000000Raw material 360000000Production overheads 260000000Fuel and power 140000000Depreciation 120000000

(1260000000)Gross profit 1740000000Less: ExpensesSalaries , wages 162000000Admin exp 132000000Amortization 105000000Selling & related exp 130000000Depreciation 80000000

609000000Operating profit 1131000000

Non operating expenses/ IncomeFinancial exp 68000000Other income 42000000 (110000000)Profit before tax 1021000000Tax @ 35% (306000000)Profit after tax 715000000

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EXHIBIT THREE: DIVISIONS

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GOURMET FOODS

CateringRestaurant Bakery, dairy and other products

Bon VivantJams and Marmalades

Mineral water

Tissues

Drinks

Milk

EXHIBIT FOUR: JOB ADVERTISEMENTS

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EXHIBIT FIVE: MISSION AND VISION STATEMENTS

Mission statement:-

 “Our mission is to provide quality products at lowest prices” 

 

Vision statement:-

“Leader of quality juice providers in the region by offering products enjoyed in

every home. This will be achieved from the dedication of each employee in

conjunction with supportive participation from management at all levels

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EXHIBIT SIX: BALANCE SHEET as at 31st December 2010

Fixed assetsNet book value 1753500000Preliminary & preproduction Current assetsRaw Material - 360000000Packing Material – 2500000Stores and Spares 1000000Finished goods - 4500000Trade Debtors- outside sales – 7000000Advances to suppliers – 500000Cash & Bank 4000000 -------------------------------------------Total Assets 2133000000

Financed by :Share capital 1000000000Retained earnings – 715000000

Long term loans 10000000Current liabilitiesTrade Creditors Raw Material – 70000000Packing Material – 10000000Stores and Spares 7000000Accrued & others – 15000000Provision for Taxes – 306000000 ---------------------------------------------------------Total Liabilities & Owner's Equity 2133000000

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