Management Control System

Of Tata Motors

Project Report

MCS (Section C)

Group Members:

Bikash Jaiswal

Chaitalee Kumari

Charu Attri

Chayan Jain

Cherag S Rana

Garveet Modi

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Acknowledgement

We would like to express our gratitude towards Prof. C Padmavathi for guiding us and

supporting us. She not only illuminated the way to select the apt company but also helped us

work on the appropriate sub titles in order to understand the Management Control systems being

put in to place by TATA Motors. All of us were able to understand the pros and cons of every

decision and control methodology undertaken by the company, all because of the clarity brought

in by the teachings of ma‟am. It would not have been possible to truly appreciate the significance

of having these systems in place without a well synchronized team and an encouraging faculty.

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Contents Introduction ............................................................................................................................................. 4

Code Of Conduct ..................................................................................................................................... 5

Organisational Structure .......................................................................................................................... 7

Information Management Systems Used At Tata Motors ....................................................................... 10

Quality Control and R&D ...................................................................................................................... 11

Human Capital ...................................................................................................................................... 15

Work Environment ............................................................................................................................ 16

Labour Relations ............................................................................................................................... 17

Training And Development ............................................................................................................... 17

Performance Evaluation Of Tata Motors: ........................................................................................... 19

Risk and Concerns ................................................................................................................................. 21

Internal Control Systems And Their Adequacy ...................................................................................... 22

Audit Committee ............................................................................................................................... 22

Grievance .......................................................................................................................................... 24

Investors‟ Grievance Committee ........................................................................................................ 25

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Introduction

TATA MOTORS, India‟s largest motor company was founded by Mr. JRD Tata in 1945 with its

headquarters in Mumbai. The company has shown consolidated revenues of INR 1, 65,654

crores for the financial 2011-12. It is the world's fourth largest truck and bus manufacturer. The

company's manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune

(Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Sanand (Gujarat) and

Dharwad (Karnataka). Tata Motors is also expanding its international footprint, established

through exports since 1961. The company's commercial and passenger vehicles are already being

marketed in several countries in Europe, Africa, the Middle East, South East Asia, South Asia,

CIS, Russia and South America. The company‟s vision is to be ''best in the manner in which we

operate, best in the products we deliver, and best in our value system and ethics.''

The company‟s Mission is “Leadership with trust.” and its objectives are enlisted as:

Employee Focus: Make the organization a Great Place to work

Community Focus: Be a responsible corporate citizen

Supplier Focus: Treat Suppliers as partners

Shareholders Focus: Demonstrate superior results

Customer Focus: Improve Customer Satisfaction.

Tata Motors is equally focussed on environment-friendly technologies in emissions and

alternative fuels. It has developed electric and hybrid vehicles both for personal and public

transportation. It has also been implementing several environment-friendly technologies in

manufacturing processes, significantly enhancing resource conservation.

Tata Motors is committed to improving the quality of life of communities by working on four

thrust areas employability, education, health and environment. The activities touch the lives of

more than a million citizens. The company's support on education and employability is focused

on youth and women. They range from schools to technical education institutes to actual

facilitation of income generation. In health, our intervention is in both preventive and curative

health care. The goal of environment protection is achieved through tree plantation, conserving

water and creating new water bodies and, last but not the least, by introducing appropriate

technologies in our vehicles and operations for constantly enhancing environment care.

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Code Of Conduct

Tata has 25 codes called clauses for its conduct with various parties i.e. nations in which it

operate, the public, the government, the customer, the employees, the stakeholders etc.

1. Financial reporting and records- Tata Motors shall prepare and maintain its accounts fairly and

accurately and in accordance with the accounting and financial reporting standards which

represent the generally accepted guidelines, principles, standards, laws and regulations of the

country in which the company conducts its business affairs.

2. Competition- Tata Motors shall fully support the development and operation of competitive open

markets and shall promote the liberalization of trade and investment in each country and market

in which it operates.

3. Government agencies- Tata Motors shall comply with government procurement regulations and

shall be transparent in all its dealings with government agencies.

4. Quality of products and services- A Tata company shall be committed to supply goods and

services of world class quality standards, backed by after-sales services consistent with the

requirements of its customers, while striving for their total satisfaction. The quality standards of

the company‟s goods and services shall meet applicable national and international standards.

5. Corporate citizenship- Tata Motors shall be committed to good corporate citizenship, not only in

the compliance of all relevant laws and regulations but also by actively assisting in the

improvement of quality of life of the people in the communities in which it operates.

6. Use of the Tata brand- The use of the Tata name and trademark shall be governed by manuals,

codes and agreements to be issued by Tata Sons. The use of the Tata brand is defined in and

regulated by the Tata Brand Equity and Business Promotion agreement.

7. Ethical conduct- Every employee of a Tata company, including full-time directors and the chief

executive, shall exhibit culturally appropriate deportment in the countries they operate in, and

deal on behalf of the company with professionalism, honesty and integrity, while conforming to

high moral and ethical standards. Such conduct shall be fair and transparent and be perceived to

be so by third parties.

8. Regulatory compliance- Employees of a Tata company, in their business conduct, shall comply

with all applicable laws and regulations, in letter and spirit, in all the territories in which they

operate. If the ethical and professional standards of applicable laws and regulations are below

that of the Code, then the standards of the Code shall prevail.

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9. Reporting concerns- Every employee of a Tata company shall promptly report to the

management, and / or third-party ethics helpline, when she / he becomes aware of any actual or

possible violation of the Code or an event of misconduct, act of misdemeanor or act not in the

company‟s interest. Such reporting shall be made available to suppliers and partners, too.

Environmental Policy & Culture

Tata Motors reaffirms to minimize the adverse impacts of its products, operations and services

on its environment.

Towards this end, it shall strive to:

Establish sound environmental objectives and targets and a process of reviewing them.

Comply with all legal/regulatory and other environmental requirements.

Reduce the emission levels of vehicles in full compliance with regulatory norms and

proactively work with the Government, industry, other related industries to bring in

internationally best practices.

Use the environmentally sustainable technologies and practices for prevention of pollution

and continual improvement in environmental performance.

Conserve natural resources and energy by minimizing their consumption and wastage.

Minimize waste generation, enhance recovery and recycling of material and develop eco-

friendly waste disposal practices.

Build awareness of our workforce, customers and vendors on environmental issues.

Tata Motors adopts eco-friendly technique, extensive R & D.

This 68-year old company‟s Board of Directors are all experts and experienced in their

respective fields and based on this experience & expertise they make decisions which are best for

the comapny. It also comes up many innovative products and uses the latest technology for the

customers based on the market demand. As a result, Tata Motors manufactures many types of

cars catering all segments of customers. This culture is also reflected by the numerous national

and international awards won by the company. They remain ethical in their work practices and

produce world-class cars.

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Organisational Structure

Tata Motors has a relatively flat structure, operating with less levels of organisational structure

and thus having narrow span of control. At corporate level, the span of control varies from 1:5 to

1:7. While at the middle and lower level management it varies as 1:10. This indicates that the

organisational structure is somewhere between flat and hierarchical structure. Also, there is a

very great scope of growth along with the company. On an average a normal middle level

employee is promoted every 3-5 years. An employee with exceptional record and good

performance is promoted on an average of two years.

Based on the divisions, Tata Motors has a mixed organisational structure. There are two main

divisions based on product type viz. Commercial vehicle and Passenger cars division. Both these

divisions have been subdivided as per geographical location into north, south, east, and west

zone.

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Passenger Cars Commercial Vehicles

Micro (Nano),

Compact (Indica, Indigo),

Midszie (Indigo Manza).

Small Commercial Vehicle

Pick-up Vehicle

Light Commercial Vehicle (LCV)

Utility Vehicle (Sumo, Safari, Ace)

Premium and Luxury SUV (Land, Range Rover)

Premium and Luxury Car

Vans (Winger)

Buses & Coaches

The Board of Directors along with its Committees provide leadership and guidance to the

Company‟s management and directs, supervises and controls the performance of the Company.

The Board has constituted a set of Committees with specific terms of reference/scope to focus

effectively on the issues and ensure expedient resolution of diverse matters. The Committees

operate as empowered agents of the Board as per their Charter/terms of reference.

The work distributed is based on strategic activities or operational/ routine assignments. The

strategic level activities are taken up by top management. The operational activities are

distributed to middle and lower level. This becomes the base of their yearly performance as well.

As such Tata Motors is more of a product oriented organisation.

One evolves as an ideal leader with experience. Under The Chairman Emeritus Mr Ratan N

Tata‟s able leadership, the group‟s revenues grew manifold, totalling over $100.09 billion in

2011-12, and is responsible for transforming Tata Motors Ltd. into a Group strategy think-tank.

Mr Tata joined Tata Motors‟ Board in 1981, became Executive Chairman in 1988 and Non

Executive Chairman in 2001.

Earlier Tata Motors was considered less reliable, but after a slew of successful launches and

effort to internationalise the company and focus on R&D- the company gained considerable edge

over other companies in the automobile industry.

Tata Motors follows Tata Code of Conduct & Authority Matrix which helps them to identify

different responsibilities and decision making powers of an individual both functionally and

financially.

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Coordination and Communication

One of the other dimensions is coordination. In Tata Motors, they are having newsletters and

house magazines published monthly for each division and are circulated throughout the

company. Also, regular emails and correspondence from Chairman, MD and CFO are circulated

on regular basis. The management interact with the employees on a regular basis. The higher

level management is always accessible to the lower level. This helps them to gather, share &

spread the knowledge & ideas very easily from level to level. The lower management have

meeting with employees on day to day basis. Also, there is a ManCom meeting with where all

the departments come together.

All the departments of TATA Motors are interconnected with intra networking system, as well as

all the divisions are connected with internetworking system. This facilitates the easy and fast

flow of information and communication among the various employees, vendors, suppliers and

the management. The employees remain connected to the company all the time and get all the

latest updates and happenings through the various articles about the wellbeing of employees,

promotions, deaths, etc. periodically.

Tata Motors welcomes new ideas from the employees and they are rewarded suitably. They have

suggestion boxes to invite new ideas.

Board of Directors

Mr. Cyrus P. Mistry (Chairman) Mr. Subodh Bhargava

Mr. Ravi Kant (Vice-Chairman) Mr. V. K. Jairath

Mr. Nusli N. Wadia Dr. Ralf Speth

Mr. S. M. Palia Mr Karl Slym (Managing Director)

Dr. R. A. Mashelkar Mr. R Pisharody (Executive Director)

Mr. Nasser Munjee Mr. S B Borwankar (Executive Director)

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Information Management Systems Used At Tata Motors

(1) SAP ERP

There was no real time data available between various departments. The Information flow

across the sales, finance and production planning was very cumbersome. Hence to coordinate

the information sharing need of the company within and with the dealers, ERP was

implemented.

It helped in making the order to delivery process more efficient and handle warranty claims

more efficiently, hence improving relations with the customer.

Supplier Collaboration Knowledge Management Monitoring And control

With the SAP ERP Solution in place, Tata Motors has experienced significant benefits in

productivity and cost control. The number of servers as well as the number of different

applications run on them has been greatly reduced. The disaster recovery management is

being done only for one entity rather than for every application.

Non-value-add activities have been lowered. The implementation of a single SAP instance

forced a much required change in the organization. Currently, they are exploring the

possibility of a shared services platform for HR too.

(2) SIEBEL

IBM provided TATA MOTORS with the infrastructure solution. This was a simple IT

infrastructure with low cost of ownership which helped the company in enhancing the

customer experience and better capacity planning.

Siebel Automotive, a comprehensive suite of business applications, provides a single, 360-

degree view of the customer to all who need it; facilitates coordination between Tata and its

dealers; and enables Tata to track each vehicle throughout its life cycle. Siebel Automotive

has been closely integrated with a wide array of back-office applications.

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Quality Control and R&D

One of the Company‟s principal goals is to enhance its status as a leading manufacturer of

automotive vehicles by investment in products, R&D, quality improvement and quality control.

Quality Management at TATA Motors

Tata Motors is committed to maximizing customer satisfaction and strives to achieve the goal of

excellence, by continual improvement, through ongoing going design and development,

manufacture and sale of reliable, safe, cost-effective, quality products and services of

international standards, using environmentally sustainable technologies, for improving levels of

efficiency and productivity within its premises and ancillaries.

Awards Won For Efficient Quality Control:

Lucknow plant won

- The „Greentech Environment Silver Award‟ 2011

- The „Golden Peacock National Quality Award‟ 2011

Measures Taken up to Maintain the Quality of Products:

To control the quality of its cars TATA Motors applies various stringent measures during the

pre-manufacturing stage as well as post-manufacturing stage.

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(1) During the manufacturing stage regular quality audits are held by the in-house auditors in all

the shops. All the process sheets, spot plans, control plan etc are displayed near the work place.

(2) In the post manufacturing stage once the vehicle comes out of the assembly line it passes

through stringent testing standards such as shower test, wheel balancing etc. On successful

completion of testing, the car is ready to be dispatched after Pre Delivery Inspection (PDI).

Techniques Used to implement quality control:

(1) Tata Motors is the first Indian Company to introduce the Balance Scorecard System in

automotive sector in India.The scorecard incorporates SQDCM (Safety, Quality, Delivery,

Cost and Morale)The implementation of the Balanced Scorecard has enabled greater focus on

different elements of operational performance. Defining, cascading and communicating

strategies across the organization have brought about transparency and alignment.

(2) Apart from Balance scorecard half yearly review of the employees is done on the basis of

attendance, kaizen at work place etc.

(3) Value Engineering: Continuous efforts are made to reduce the cost of service in TATA

Motors. Rejection of input parts received from vendors is very closely monitored in all the

departments. The vendors are penalised if rejection exceeds beyond the defined limits. Apart

from rejection of regular parts some stations are identified as CTQ (Critical to Quality) Stage.

Special care is taken of the components added on these stations. Any negligence on these

stations may lead to a customer claiming replacement of the vehicle. This team also works for

searching energy efficient alternatives, methods and eco-friendly technology, by adopting

effective maintenance & work. The consumption of electricity, water, LPG, Compressed air

etc is continuously monitored and steps are taken to reduce the consumption of these

resources.

Material Management: Tata Motors uses SAP Material Management (MM) module for:

Materials planning and control

purchasing,

goods receiving,

inventory management & Invoice Verification

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Research & Development

The Company is committed to continued investment in new technologies, including developing

sustainable technologies to improve fuel economy and reduce CO2 Emissions. The Company is

the largest investor in automotive R&D in United Kingdom.

The Company‟s environmental vehicle strategy focuses on new propulsion technology, weight

reduction and reducing parasitic losses through the driveline.

R&D Structure at TATA MOTORS:

For new product development, there is a separate department “Engineering Research Centre”

(ERC) which is separate from the plants R and D department. ERC develops new models, tests

them, evaluate the results, make necessary changes and hand them over to the plant for

manufacturing.

However, each of the three plants of Tata Motors have an independent R and D department

which works for improvement of the products being manufactured by that plant. In this

perspective, these in plant are more interesting.

The R&D dept. of each plant is divided into two parts. One part of R and D deals with overall

process development and the second part deals with product improvement, like improving the

design of a spare part or a sub-assembly. Its work mainly comprises of some reverse engineering

and minor alterations of the parts.

The triggers for product improvement come mainly from two places:

Dealers: The dealers are most aware about the market conditions. Sometimes they give input

to the company that one of the competitors model is doing better than Tata‟s cars in some

parameters. Then this division try to analyse the competitors model and try to pin point the

causes for its better performance.

Service Persons: They often report the recurring problem in the Tata‟s models. In that case the

product improvement team tries to find out the cause of the problem. In general the problem

could be either of two kinds: wrong usage by the end user like not using clean water in the

radiator, or there could be manufacturing flaws. In case of wrong usage the message is given

to the sales department

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The process improvement team‟s task is to improve the manufacturing process of the plant. They

either may react to the triggers mentioned above or if sometimes some process goes completely

out of control of the shop floor workers or the cost of manufacturing needs to be reduced to

retain the profitability, then process improvement team is called for rescue. So this team

generally starts working with a major problem in hand.

So, the in plant R and D of Tata Motors plants can be classified more as a reactive research than

a proactive one. The basic criteria for selecting or rejecting an idea in the in plant R and D are

effectiveness of the idea on the cause, its ease of implementation i.e. the disruption to the

manufacturing process should be minimum possible and cost effectiveness. Here an optimum

combination of Effectiveness & Ease of implementation is desired first and then cost

effectiveness is the distinguishing factor.

(3)Apart from the ideas generated by the R and D dept., Tata Motors also encourage new and

innovative ideas generated by the shop floor level employees. R and D screen these ideas and

reward the workable ones. They also hand out handsome reward to the shop floor workers up to

Rs. 30,000. The ideas generated by the shopfloor workers are also a very significant source of

improvement for the Tata Motors plants.

R&D in Tata

Motors

ERC

(Central level)

In Plant

R and D Process

Improvement

Product

Improvement

Research and Development Structure at Tata motors

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Human Capital

Tata Motors has a safety and health policy, which encompasses all regulatory norms along with

international labor orgazational recommendations. Tata Motors has a process for reporting,

recording, analysis and action on accidents and unsafe conditions. The safety issues are

addressed through the management and union arrangement. Safety has been an important

concern for Tata motors and the company is taking steps to reduce the injuries and accidents.

Tata Motors manufacturing unit at Jamshedpur and Pune have been certified social

accountability 8000 compliant. A zero accident plan was launched in 2007-08, where in area

ownership was developed by teams comprising of management and supervisory grade workers

called bay owners. These bay owners must meet twice a week and conduct audits and organized

awareness building programs.

Positive Environment & Employee Welfare

A good quality of work life is maintained through various welfare measures such as:

Canteen/transport facility for employees.

Higher education is encouraged which in turn helps employees for career progression as well.

Various loan schemes are operational for housing, car and facilities.

Safety training is compulsory to ensure a culture of safety among workers. Safety audits are

conducted to ensure the effectiveness of the process and the upkeep of the safety equipment

is regularly carried out. Personal safety and work place safety is ensured through well

defined process. The disaster recovery plan / risk mitigation plans are also in place.

Tata Motors have supported the deserving candidates by providing scholarships.

They have promoted and supported hospitals and schools.

They have also involved themselves in municipality firms.

Providing vehicle loans and also housing loans advances.

Better pension schemes.

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Work Environment

EMPLOYEE BENEFITS:-

1.) GRATUITY: - The Company has an obligation towards graduate, a defined benefit retirement

plan covering eligible employees. The plan provides for a lump sum amount for the

employees at retirement, death or while in employment or while termination of employment

of an amount equivalent to 15 to 30 days salary payable for each completed year of service.

This occurs on completion of five years of service. The company makes an annual

contribution to graduity fund established as trust. The company accounts for the liability for

graduity benefits payable in the future based on an independent actuarial valuation.

2.) SUPERANNUATION : - The company has two superannuation plans, a defined benefit plan

and a defined contribution plan. Based on the number of years of service the employees are

benefited from the schemes. The company maintains a separate irrevocable trust for

employees covered and entitled to benefits. The company recognizes such contribution as an

expense when incurred. The company has no further obligation beyond this contribution.

3.) BHAVISHYA KALYAN YOJNA (BKY) :- this is an unfunded defined benefit plan. The

benefits of the plan accrue to an eligible employee at the time of death or permanent

disablement, while in service, either as a result of an injury or as certified by the company‟s

medical board. The company accounts for the liability for BKY benefits payable in future

based on an independent actuarial valuation.

4.) POST-RETIREMENT MEDICAL SCHEME: - under this scheme, employees get medical

benefits subject to a certain limit. The limit depends on the grade and location at the time of

retirement. For the employees who have left before retirement due to some valid reasons are

also entitled to avail this facility

5.) PROVIDENT FUND: - The eligible employees of the company are entitled to receive

benefits under the provident fund, in which both employee and the company make monthly

contributions at a specific percentage of the covered employees‟ salary. The contributions as

specified under the law are paid to the provident fund and pension fund under the state‟s

pension scheme.

6.) COMPENSATED ABSENCES: - the company provides for the encashment of the leaves or

leave with pay subject to certain rules. The employees are entitled to accumulated leave

subject to certain limits, for further encashment.

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Labour Relations

Tata Motors believes in mutual growth and sustainable development of its employees and strives

to promote cordial and harmonious industrial relations by giving employees adequate platforms

to voice themselves and be a vital part o the decision making process.

Employees are encouraged to join trade unions, as they believe that the grievances can be

resolved better through bipartite forums. They believe in collaborative approach where they

resolve problems by negotiation. By this they create a win win situation.

The agreement of the employees included health and safety provisions along with compensation

structures in the form of a MOU between the management and representing union as per the

provision of the applicable labor legislations. The MOU is signed every three years after

negotiations between representing committees of the union and the management.

Training And Development

All employees are evaluated based on performance and merit. The company has customized the

performance management system for the requirements of different categories of the employees

managerial, supervisors and bargainable employees. In the performance management system,

individual performance plans are cascaded from the balance score card down to the smallest

work unit, bringing business and customer focus to all levels and team. Half yearly reviews are

held to ensure resources; targets and training are in alignment with business needs. Employees

have an opportunity to develop their own view of their performance and discuss it with their

supervisor. Formal evaluation ratings are assigned at the end of the year. They instilled a high

performance culture.

The process of training and development is reviewed periodically for status of successors and for

process improvements. In case a successor is not identified from the department and talent pool,

an internal advertisement is released. If the position cannot be filled internally, a suitable

candidate is selected through external advertisement.

All the employees have the opportunity to advance in their careers. The company administers

career progression through the PMS system for managerial employees. All employees have the

opportunity of moving to higher levels. This is based on their personal preparation and desire to

move.

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Proper training and motivation is delivered in order to keep the employees active. The policies

for female employees are also drafted and rules are made stringent regarding sexual harassment.

Tata motors follow a policy on equal opportunity and non-discrimination in employment. The

employment of candidates is solely done on the basis of merit and the growth opportunities will

be entirely based on an individual‟s merit.

Human Resource Policies And Practices of Tata Motors

Employees are the driving force that enables Tata motors to create value in the work that they do.

They understand that the most essential factor determining their success is motivated employees

and communication plays an important role in understanding their needs. They undertake

employee engagement initiatives which help them understand their needs and address their

concerns. Various formal and informal methods are employed to determine employee

satisfaction which helps them in identification of critical issues and devising action plans to

assist their workforce.

HR Practices regarding recruitment:

As a responsible organization, they prefer to hire their non management cadre employees from

local communities, thereby uplifting the economic status of the areas where they operate. They

are also guided by the respective state laws regarding local hiring of non management workforce.

They hire their management cadre employees purely based on merit. The recruitment process is

unique as it entails identifying talent from the pool through various practices. Some of them can

be enlisted as follows:

Opportunities for employee wards - domain wise written test, assessment centre, personal

interview.

They also select talent through Lateral Recruitment process which involves interview by HR,

subject matter expert and personal interviews.

Group Migration Policy for their employees, which enable the group employees to explore

opportunities to work at Tata Motors from other group companies.

They provide career opportunities for down the line people & internal job postings ensuring

that the best talent pool deserves the right opportunity in bringing the best practices in company

Campus Selection - B schools, T Schools - written test, psychometric test, personal interview.

Shadow recruitment for niche senior talent.

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Performance Evaluation Of Tata Motors:

The performance evaluation systems are aligned to the business results and identify high

performing individuals. 100 percent of management cadre employees undergo performance

evaluation and career development reviews annually. They promote equal opportunity by

employing candidates purely on the basis of merit. Remuneration is solely provided on the basis

of rank and merit. They also abide by all the legal requirements of wage payments. They are

transparent in our communications with union members and have discussions with respect to

occurrence of all operational changes.

Providing equal opportunity:

Tata Motors is proud of the fact that more than 700 women colleagues work at the shop floor

across functions and locations. At Pantnagar, women operate heavy as well as high precision

machines and components at the Pantnagar powertrain shop. The Prima (world truck) assembly

line also has a dedicated all-women section to work on the fitting and testing of electrical

components.

Rewarding union employees:

Their excellent union-management relationship is built on a foundation of mutual respect and

trust and the union shares the management‟s objective of business growth and provides

unwavering support. They have encouraged constructive and co-operative union relations

through a participative culture. Senior leaders communicate and engage with non-management

employees through approaches such as sunrise meetings and union meetings. To recognize their

contribution to the firm, they offer a medical benefit scheme for their PCBU union employees in

Pune which entitles the employees to get their medical expenses reimbursed till a period of 15

Years from retirement (inclusive of voluntary retirement on medical grounds).

Vehicle and profit linked payment Scheme

In the year 2011 the company has started the vehicle and profit linked payment scheme (VPLP)

scheme at PCBU Pune. This scheme is designed to pay the unionized employees a bonus based

on parameters like quality and productivity, company‟s performance (measured in terms of

operating profit) and the individual‟s performance. Under this scheme, the performance is

Scored for a total of 100 marks and a detailed category wise weightage is provided to each of the

employees as part of the agreement.

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Employee engagement

The company has adopted advance tool and methodology to measure employee engagement

(across all employee workgroups and segments) including enterprise level factors affecting

employee engagement, satisfaction and morale. This survey is done periodically for all non-

unionised employees and on sample basis for unionised employees. The survey helps to design

specific action plans which strike the desired balance between business needs and employee well

being. The findings are analyzed and action plans are put in place at three levels - organization,

division and HR – to assist workforce engagement. The reward and recognition process is

adopted to create desired high performance behavior. For non managerial workforce, awards like

safety award for zero accidents over a period of time coupled with regular attendance, good

attendance award and long service award are in place. Employees are also encouraged to

participate in various other award schemes run by various governmental / nongovernmental

organizations.

FURURE HR POLICIES OF TATA MOTORS:

To support the expansion of the existing facilities, we have planned the following initiatives:

Recruitment and selection: The process involves Reporting officers/ Heads of the process in

counseling and training for their colleagues

Identifying talent and working with virtual offices

Video simulations to assess the skills required for the job

Employer Branding: Employer to “brand” the organisation as a preferred employer

People centric - considering employees as customers

For our newly joined officers, we are working on a policy to ease their settling down process in

the organisation. To entertain our customers at Marketing and Sales locations, we are working on

policy on Club Membership.

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Risk and Concerns

1. Interest rates and other inflationary trends: Due to anti inflationary monetary policy

pursued by the RBI, the interest rates continued to be at higher levels and affected the growth of

EMI-driven products in India. The impact of high inflation, interest rates, rising wages and raw

material costs, coupled with suppressed aggregate demand in the economy, severely impacted

the rate of industrial growth.

2. Fuel Prices: The fuel prices or levies adversely impacts the demand of passenger vehicles in

India. Increases in fuel costs also pose a significant challenge to automobile manufacturers

worldwide, especially in the commercial and premium vehicle segments where increased fuel

prices have an impact on demand. The Company‟s product programs initiatives are aimed at

improving fuel efficiency of its products and development of alternate fuel solutions.

3. Input Costs / Supplies: While the Company continues to pursue cost reduction initiatives, an

increase in price of input materials could severely impact our profitability to the extent such

increase cannot be absorbed by the market through price increases and / or could have a negative

impact on the demand. Also, because of intense price competition and fixed costs, the Company

may not be able to adequately address changes in commodity prices even if they are foreseeable.

4. Restrictive covenants in financing agreements: Some of the Company‟s financing and debt

arrangements set limits on and/or require the Company to obtain lender consents before, among

other things, pledging assets as security. In addition, certain financial covenants may limit the

Company‟s ability to borrow additional funds or to incur additional liens.

5. Environmental Regulations: As an automobile company, the Company is subject to

extensive governmental regulations regarding vehicle emission levels, noise, safety and levels of

pollutants generated by our production facilities. These regulations are likely to become more

stringent and compliance costs may significantly impact the future results of operations.

6. Exchange and interest rate fluctuations: The Company‟s operations are subject to risk

arising from fluctuations in exchange rates with reference to countries in which it operates.

Moreover, the Company has outstanding foreign currency denominated debt and is sensitive to

fluctuations in foreign currency exchange rates. During the year, the depreciation of the Indian

Rupee against the US dollar adversely impacted the borrowing cost and consequently, the results

of operations. In order to overcome the exchange and interest rate fluctuations the company is

involved in currency hedging.

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Internal Control Systems And Their Adequacy

The Company has an adequate system of internal controls in place. It has documented

procedures covering all financial and operating functions. These controls have been designed to

provide a reasonable assurance with regard to maintaining of proper accounting controls,

monitoring of operations, protecting assets from unauthorized use or losses, compliances with

regulations and for ensuring reliability of financial reporting. The Company has continued its

efforts to align all its processes and controls with global best practices in these areas as well.

SIGNIFICANT FEATURES OF THE INTERNAL CONTROL SYSTEMS:

State-of-the-art ERP, Supplier Relations Management and Customer Relations Management,

connect its different locations, dealers and vendors for efficient and seamless information

exchange.

Preparation and monitoring of annual budgets for all operating and service functions.

An on-going program for reinforcement of the Tata Code of Conduct. The Code covers integrity

of financial reporting, ethical conduct, regulatory compliance, conflict of interests review and

reporting of concerns.

A well-established multi-disciplinary Internal Audit team, which reviews and reports to

management and the Audit Committee about the compliance with internal controls and the

efficiency and effectiveness of operations and the key process risks.

Audit Committee of the Board of Directors, comprising independent directors, which is

functional since August 1988.

Anti-fraud program.

Audit Committee

The Audit Committee functions according to its Charter that defines its composition, authority,

responsibility and reporting functions in accordance with the Act, listing requirements and US

regulations applicable to the Company and is reviewed from time to time.

A) Reviewing the quarterly financial statements before submission to the Board, focusing

primarily on:

Compliance with accounting standards and changes in accounting policies and practices;

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Major accounting entries involving estimates based on exercise of judgment by

Management;

Audit qualifications and significant adjustments arising out of audit;

Analysis of the effects of alternative GAAP methods on the financial statements;

Compliance with listing and other legal requirements concerning financial statements;

Overseeing the Company‟s financial reporting process and the disclosure of its financial

information, including earnings, press release, to ensure that the financial statements are

correct, sufficient and credible.

B). Reviewing with the management, external auditor and internal auditor, adequacy of internal

control systems and recommending improvements to the management.

C). Recommending the appointment/removal of the statutory auditor, cost auditor, fixing audit

fees and approving non audit/consulting services provided by the statutory auditors‟ firms to the

Company and its subsidiaries; evaluating auditors‟ performance, qualifications and

independence. It shall also ensure that the cost auditors are independent, have arm‟s length

relationship and are also not otherwise disqualified at the time of their appointment or during

their tenure.

D). Reviewing the adequacy of internal audit function, coverage and frequency of internal audit,

appointment, removal, performance and terms of remuneration of the chief internal auditor.

E). Discussing with the internal auditor and senior management significant internal audit

findings and follow-up thereon.

F). Discussing with the external auditor before the audit commences, the nature and scope of

audit, as well as conduct post-audit discussions to ascertain any area of concern.

G). Reviewing the functioning of the Whistle-Blower and the legal compliance mechanism.

H). Look into the reasons for any substantial defaults in payment to the depositors, debenture

holders, shareholders (in case of nonpayment of declared dividend) and creditors, if any.

I). Reviewing the effectiveness of the system for monitoring compliance with laws and

regulations.

J). Approving the appointment of CFO after assessing the qualification, experience and

background etc of the candidate.

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Grievance

Grievance is any discontent or dissatisfaction that affects organizational performance. As such it

can be stated or unvoiced, written or oral, legitimate or ridiculous. If the dissatisfaction of

employees‟ goes unattended or the conditions causing it are not corrected, the irritation is likely

to increase and lead to unfavorable attitude towards the management and unhealthy relations in

the organization.

The steps in grievance handling procedure are :-

1. Conference among the aggrieved employee, the supervisor, and the union steward.

2. Conference between middle management and middle union leadership.

3. Conference between top management and top union leadership.

4. Arbitration.

Arbitration

Arbitration is a procedure in which a neutral third party studies the bargaining situation, listens to

both the parties and gathers information, and then makes recommendations that are binding on

the parties. Arbitration has achieved a certain degree of success in resolving disputes between the

labour and the management.

Benefits of having Grievance procedure:

The grievance procedure provides a means for identifying practices, procedures, and

administrative policies that are causing employee complaints so that changes can be

considered.

They reduce costly employment suits.

A grievance procedure allows managers to establish a uniform labour policy.

A grievance system can be a reliable mechanism to learn of, and resolve employee

dissatisfaction. It can produce early settlements to disputes or provide for correction of

contested employment issues.

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Investors’ Grievance Committee

The Investors‟ Grievance Committee comprises two Independent Directors (including the

Chairman of the Committee) and one Non-Executive Director. The Investors‟ Grievance

Committee of the Board is empowered to oversee the redressal of investors‟ complaints

pertaining to share/ debenture transfers, non-receipt of annual reports, interest/ dividend

payments, issue of duplicate certificates, transmission (with and without legal representation) of

shares and debentures matters pertaining to Company‟s fixed deposit programme and other

miscellaneous complaints.

On recommendations of the Investors‟ Grievance Committee, the Company has taken various

investor friendly initiatives like organising Shareholders‟ visit to Company Works at Pune,

sending reminders to investors who have not claimed their dues, sending nominations forms etc.

On the recommendation of the Investors„ Grievance Committee, a survey on Shareholders‟

satisfaction was conducted in December 2011/January 2012 to assess service quality delivery to

its shareholders. 2287 shareholders responded to the survey. Overall the Company was rated

high on all aspects with 7 out of 10 investors expressing delightrating a perfect „5‟ on the 5 point

scale across various parameters measured in the survey. Placed below are the graphs depicting

satisfaction levels on various parameters of service/quality related to the Investor interface with

the Company.

Compliance With Regulatory Requirements And Policies

Review the effectiveness of the system for monitoring compliance with laws and

regulations and the results of management's investigation and follow-up (including

disciplinary action) of any instances of non-compliance.

Review the findings of any examinations by regulatory agencies, and any auditor

observations.

Look into the reasons for substantial defaults in the payments to the depositors, debenture

holders, shareholders (in case of non-payment of declared dividends) and creditors.

Review the process of communicating the Tata Code of Conduct to employees and the

mechanism for its adherence.

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Review the report of the Monitoring Agency appointed by the Company, to monitor the

utilization of proceeds of such public / rights issue and make appropriate

recommendations to the Board.

Obtain regular updates from management and company legal counsel regarding

compliance matters.

The Ethics And Compliance Committee:-

It was constituted to formulate policies relating to the implementation of the Tata Code of

Conduct for Prevention of Insider Trading (the Code), take on record the monthly reports on

dealings in securities by the “Specified Persons” and decide penal action in respect of violations

of the applicable regulations/the Code.

Whistle Blower Mechanism:-

The Audit Committee and the Board have adopted a Whistle-Blower Policy which provides a

formal mechanism for all employees of the Company to approach the Management of the

Company (Audit Committee in case where the concern involves the Senior Management) and

make protective disclosures to the Management about unethical behaviour, actual or suspected

fraud or violation of the Company‟s Code of Conduct or ethics policy. The disclosures reported

are addressed in the manner and within the time frames prescribed in the Policy. The Company

affirms that no employee of the Company has been denied access to the Audit Committee.

Investigation

All Protected Disclosures reported under this Policy will be thoroughly investigated by

the Ethics Counselor / Chairman of the Audit Committee of the Company who will

investigate / oversee the investigations under the authorization of the Audit Committee.

The decision to conduct an investigation taken by the Ethics Counselor / Chairman of the

Audit Committee is by itself not an accusation and is to be treated as a neutral fact-

finding process. The outcome of the investigation may not support the conclusion of the

Whistle Blower that an improper or unethical act was committed.

The identity of a Subject and the Whistle Blower will be kept confidential to the extent

possible given the legitimate needs of law and the investigation.

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Subjects will normally be informed of the allegations at the outset of a formal

investigation and have opportunities for providing their inputs during the investigation

Subjects shall have a duty to co-operate with the Ethics Counselor / Chairman of the

Audit Committee or any of the Investigators during investigation to the extent that such

co-operation will not compromise self-incrimination protections available under the

applicable laws.

Subjects have a right to consult with a person or persons of their choice, other than the

Ethics Counselor / Investigators and/or members of the Audit Committee and/or the

Whistle Blower. Subjects shall be free at any time to engage counsel at their own cost to

represent them in the investigation proceedings. However, if the allegations against the

subject are not sustainable, then the Company may see reason to reimburse such costs.

Subjects have a responsibility not to interfere with the investigation. Evidence shall not

be withheld, destroyed or tampered with, and witnesses shall not be influenced, coached,

threatened or intimidated by the Subjects.