Reports: Personnel Strategies for 80's

PERSONNEL CONFERENCE

October 10 — 12, 1984
Bombay

PERSONNEL STRATEGIES FOR THE ’80s

H C Parekh

TABLE OF CONTENTS

PART I – INTRODUCTION

The Metamorphosis of L&T
Quo Vadis
New Horizons
The Exploding Universe of L&T
The Big-Bang
The Causes

Pages: 1 – 7

PART II – THE ISSUES

A. The Work-ethics
B. Productivity
C. Wages of Unionised Workmen
D. Staff Expenses
E. Stagnation
F. Negative Break-even point
G. Inter-unit Wage Benefit Comparison in L&T
H. Changing skill-mix
I. Technical Professional – Obsolescence & Deadwood
J. Surplus Manpower
K. Mobility
L. Militancy
M. Pyramid of Cheops
N. Corporate culture & values

Pages: 8 – 21

PART III – THE FRAMEWORK

The Model of Enterprise
The Expectation of the New Man
The Subfunctions of Personnel

Pages: 22 – 24

PART IV – THE STRATEGY

Decentralization

1.1 At Powai
1.2 At other locations

Involvement & Employee Behaviour
Management Attitudes
Worker Education – an antidote?
Communication is the key

Pages: 25 – 26

PART I

THE NEW HORIZON

“PERSONNEL STRATEGIES FOR THE EIGHTIES”

We last met in Feb. 1979.

Considering that we are meeting again after a gap of nearly 5-1/2 years, there is a strong urge to re-title the topic:

“Personnel Strategies for the Nineties”!

But then, who can see that far? And then we still have 5 more years left in this decade. If we could guess, with reasonable accuracy, what lies ahead of us during the next 5 years, that should be good enough for the time being.

Let Personnel Pundits do the crystal-gazing into the next decade (nineties). As far as we are concerned, let us resolve to meet regularly once-a-year and review how things are shaping up against the scenario envisaged in the following pages.

Before we do crystal-gazing into the future let us see if we can place the past in proper perspective. (The advantage of hindsight is that you cannot manipulate the past!)

And since we are going to be talking about “perspective”, the months and the years of the events that have taken place are not so terribly important in themselves.

What is important to note is that, during the last 20/25 years, L&T has undergone such a basic structural change that I call it

THE METAMORPHOSIS OF L&T

1960 vs 1980

1960	1980
1. Regional Company	National Company
2. Few Products	Multi Products
3. Simple Mfg. Process	Complex Mfg. Processes
4. One location / One unit	Multi location / Multi-units
5. Parent Co + S.A. Co.s	Conglomerate
6. Engineering Industry	Engineering + Construction (Housing Sector) + Shipping (Transportation) + Cement (Housing)

I am not mentioning here the changes that have taken place in:

Sales Turnover
Assets
Employment etc. etc.

You see these figures every year in our Annual Report and I assume that you are quite familiar with those statistics. They indicate “GROWTH” – like a child growing into an adult.

What I have tried to emphasize is “Metamorphosis” – like a cocoon turning into a butterfly! A beautiful and magnificent insect – that’s right: a butterfly is not a bird!

Now that we have learned to dash from one flower to another, let us turn our attention to what future could possibly hold in store for us over the next 20 years.

We see a rapidly changing scenario and completely unknown vistas. Let us hold our breath and ask, of ourselves:

“QUO VADIS?”

(Whither Thou Goest?)

1984 – 2004

Industry vs Sector

No.	Industry	Sector
1	Fertilizer	Agriculture
2	Drill-ship charter	Exploration
3	Foot-wear	Domestic
4	Tyre – Mfg.	Transport
5	Off-shore Platform	Petroleum Exploration
6	Nuclear Power Stations Eqpt.	Energy
7	SLV / ASLV / PSLV	Space
8	Chemicals?	Domestic / Textile
9	Consultancy?	Service
10	Computer / Telecommunication	Information

This is all so bewildering! It is as though we are leaving behind us the valley of flowers and trying to climb to the top of towering mountains like an eagle! That’s right – an eagle – a bird at last!

If this dream comes true, it will be our SECOND METAMORPHOSIS! – an eagle has a much wider horizon than does a butterfly!

And what do we see on our

“NEW HORIZONS”

EXISTING GROUPS → New Factories – New Locations
NEW GROUPS → New Factories – New Locations
EXISTING GROUPS → Shift Existing Products to New Locations
MERGER OF S&A COMPANIES?

Bombay based
Outside based

Taking over of “SICK” units
Shift Branch (BRO) Office to Pune
Open New Branch Offices
Open “Overseas” offices
Joint Ventures with State Govts

The list is, by no means, comprehensive. At the end of this conference, when you go back to your work-places, try out a little brain-storming with your local colleagues and see if you can expand the horizon. I would be happy to hear from you.

Will someone tell me, what is going to happen to L&T? Don’t tell me “Che S’era, S’era – whatever will be, will be”. It all sounds fine in a song – but large corporations are not built on a song! Remember what Thomas Alva Edison said,
“Genius is one percent inspiration and ninety-nine percent perspiration”?

I will tell you what is likely to happen to L&T.

THE EXPLODING UNIVERSE OF “L&T”

(Diagram: L&T at center with radiating elements)

Multi Resource
Multi Union
Multi Location
Multi Skills
Multi Technology
Multi Product
Multi Industry
Multi Sector

The Universe of L&T is going to explode!

The “Big-Bang” theory of Universe postulates that some 10 billion years ago, when universe was rather small (relatively speaking), a giant explosion took place. Like in all explosions, pieces and fragments started flying off in all directions. Galaxies and Nebulae started running away from each other. And the further they went, the faster they ran. Some are supposedly running away at the speed of light!

I don’t know whether Lord Almighty recognises his Universe after the big bang or not, but I wonder how many of us will continue to recognise – the way we have done so far – the L&T Universe in another 5 or 10 years!

For that matter, some of us who have been around for 25 years or more, barely recognise today, the L&T of 1959! I am quite certain that the L&T of 2001 A.D. will bear no resemblance to the L&T of 1984. Quite likely, the name “L&T” will continue. (Although there is an instance of “Standard Vacuum” changing to “ESSO” changing to “EXXON”.)

It will no more be “an L&T”. It will be, quite possibly, TEN L&T’s rolled into ONE!

And to understand the consequences better, it is relevant to ask,

“And what is causing the L&T’s universe to ‘explode’? Why the big-bang?”

The “causes” are not always apparent but one can conjecture. Could it be one or more of the following?

A. SPIRIT OF “FRONTIER-MAN-SHIP”

200 years ago, in U.S.A., they used to say “Go West, young man”. Did some such spirit send us to the virgin soils of KANSBAHAL 20 years ago?

B. DON’T PUT ALL YOUR EGGS IN ONE BASKET

Is this why we set up AUDCO & LTM in MADRAS? – to escape vulnerability to Labour Union’s actions?

C. NEARNESS TO MARKET

May be this was one reason we put-up a Switchboard assy. shop in FARIDABAD.

D. SALUBRIOUS CLIMATE

This could have played an important role in setting up POCLAIN factory at BANGALORE.

E. THOU SHALL NOT GROW

It is said, when mountain Sahyadri started growing too tall, Devas requested Rishi Agatsya to do something to stop him from growing. So Rishi started travelling southward. Upon seeing him, Sahyadri fell on his knees in obeisance. The Rishi asked him to stay put in that posture till he returned from south. The Rishi never returned!

The Govt. of Maharashtra said something of that sort when switchgear factory wanted to grow in Bombay. So we went out to AHMEDNAGAR where, hopefully, sky is the limit for growth.

F. NEARNESS TO SOURCE OF RAW-MATERIALS

One could not have thought of putting up a cement factory anywhere other than where there was limestone. So AWARPUR became the appropriate choice for our cement plant.

G. SHANGRI-LA GONE SOUR

As everyone knows, the island of Bombay is no more a SHANGRI-LA! It has become a high-wage island, which pushes up product-costs so high that our competitors from the hinterland literally push us out of the market.

Could this have prompted us to put up our computer peripheral project at HEBAL, near Mysore?

H. GET OUT FROM UNDER THE SHADOW OF THE BIG-BROTHER

Is this what is prompting TENGL & EWAC to search new locations in neighbouring states?

I. NOAH’S ARK

Noah had good reason to build it on top of mount Ararat, far away from any sea. You see, the Lord had warned him of the deluge!

But no such dreams for M/s H.C. Sethi/A.M. Naik. So they would rather play safe and build their off-shore platforms at HAZIRA on the confluence of river Tapti and the Arabian Sea.

J. RAM-RAJYA IS HERE TO STAY

In the days of Lord Rama, agriculture was the only industry. In the days of RamRao (N.T. that is), it is still a major industry and if we wish to serve it by making fertilizers, it has to be in the Ram-rajya – otherwise known as ANDHRA PRADESH in modern times!

K. LOOKING BACKWARD – LOOKING FORWARD

A.F.S. Talyarkhan can almost hypnotise the listeners, but when we look for FORWARD INTEGRATION by getting into manufacture of Tyres (from Tyre-making machinery), we are fully awake and conscious!

Location? Should it not be the state with the worst roads? That’s where they will sell!

L. BEST FOOT FORWARD

Besides their contempt for each other’s political system, if there is one more thing that the Americans and the Russians have in common, it is their liking for the Indian Footwear.

Is that the reason L&T would like to get into the manufacture of foot-wear? All that you have to do is to tell the Americans that the Russians have ordered a million pairs last week!

And what’s more, for the first time L&T will have a product with which to cheer-up the otherwise depressing life of the common man. You can already imagine the TV commercial (I recommend before Sunday movie).

“The bride says she will only marry the Man-in-the-L&T shoes! He looks such a He-man – and will make such glorious Hen-pecked man”!

M. LEARN TO WALK – BEFORE YOU RUN

Many Indian companies went “International” by setting up joint ventures in South-East Asia. We are learning to walk – in SINGAPORE.

N. “Eko-Aham, Bahu-Syam”

As per our scriptures, at the beginning of TIME, there was only Lord. After a while, He got fed up being alone and said,
“Eko Aham – Bahu-Syam” (I am one – I will be many.)

So the Lord proliferated himself into millions of manifestations. As per the Christian legend, it is Adam and Eve and the Pandora’s Box and so on.

Is there a parallel here, with L&T having got tired of being an “Engineering” Company? May be it is fun to be many different things to many different people.

Surely these are not all the reasons, why the universe of L&T is exploding. May be there are many others which I am not aware of. Although it helps (in more ways than one) to know the “causes”, what is more important for us is to reflect upon the “Effects” of this explosion.

It is the effects, and the issues/trends arising therefrom which we will have to deal with. The most prominent amongst these (effects) is the all too obvious:

“Geographical Dispersal”

And what does this Geographical dispersal portend to all of us who are in the Personnel Function?

To be able to answer this question, we must first find out what would (or should) characterise the manufacturing units coming up at different locations and in what respects these “characters” differ from the “Character” of the old unit – Powai.

PART II

THE ISSUES

Having anticipated that the rate of change which L&T will experience during the next 5 years will be far more dramatic (and perhaps traumatic) than the change which we have witnessed during the past 30/35 years (ever since inception), it would be only natural to ask ourselves,

“Are we ready/prepared for the change?”

And what is that “change”?

Externally it would mean,

Manufacturing different products (or services)
at different locations
Using different technologies and employing different skills
to serve different sectors
through different marketing channels

That is how the external world would perceive us.

But if we do some introspection, what “trends” do we see developing internally? I have not conducted any opinion-poll amongst the “old-timers” in L&T, but if I did, it is quite likely that the opinions may centre around the following issues:

A. WORK ETHICS

Every generation likes to believe that they had to work “real hard” and really sweat-it-out to earn a living and that the new generation is a breed of “happy-go-lucky” fellows who want to:

shirk work
take it easy
start at the top
take “decisions” & leave implementation to others
be “leaders” (without learning how to be “followers”) etc. etc.

In short, work-ethics have already eroded and are getting worse every day. And in L&T this erosion is not confined only to the unionised category. The malaise may be deeper than we may like to believe!

B. PRODUCTIVITY

As a natural corollary of declining work-ethics, labour-productivity is also declining (no one wants to speak about managerial-productivity!). If the decline has been arrested in isolated areas, it is through technological break-throughs. (See Annex.1)

C. WAGES OF UNIONISED WORKMEN

During the last 5/6 years, the wages have sky-rocketed:

both due to rapidly rising D.A. and expensive wage-agreements, completely destroying the “PARITY” between:

Sup/Officer/Managerial salaries on one-hand and
workers’ wages on the other-hand

Given our D.A. formula and an “estimate” that CPI will reach the figure of 3600 by July 1988, it is a simple arithmetical exercise to project the Maximum DA and Minimum DA at that time. (See Annex.2)

With this kind of rise in DA you must be wondering what would be the mix of the unionised/non-unionised employees in the “Employee-details” annexed to our Annual Reports. (See Annex.3)

The questions which arise are:

Will the wages of unionised workmen “overtake” those of the Supervisory (and above) staff – if not already so?

How soon will this happen?

Can we prevent this “overtaking”? / this “negative gap”?

If yes, to what extent? and
how?

Do we foresee a situation where it would be desirable/practical to introduce some sort of DA for Supervisory and above staff to maintain a “positive gap”?
Do we foresee a situation where the “Negative Gap” is inescapable and that it will go on widening – leaving Supervisory salaries far behind?
Do we foresee a situation where manual skills will command a higher wage-level than mental skills?
Could this lead to an acceleration of (or a deliberate plan on the part of the management to accelerate):

Automation / computerisation
Gradual reduction of jobs needing Manual Skills
Recruitment freeze
Collapse of Job-classifications
(Everyone shall do whatever he is told to do – as long as he knows how to.)

Elimination of unproductive labour practices
(concessions by Union under pressure – from managements as has happened during last 4 years all over America)
Voluntary Retirement Schemes

7) Much against our desires, could it also mean that many of our “smart” professionals may leave us to set-up private businesses where the tax-man cannot get at you so easily?

8) How much will Supervisory (and above) creativity and motivation suffer due to widening “negative gap”?

9) Hereafter will any unionised employee “accept” promotion to Supervisory cadre? Surely it would be impossible to thrust-upon such a promotion!

D. STAFF EXPENSES

Staff expenses as a percentage of output have been steadily rising at Powai for the last 4 years. (See Annex.4)

It is not difficult to project this ratio for the next 4 years. By that time, would we have priced ourselves out of the market?

At the Enfield (India) factory at Ranipet this ratio is 6% – and at their German collaborator’s factory it is 40%. (P.S.: The German Co. went into “liquidation” last month!)

Which of our products will be able to bear such a high “human-input”?

How much would we need to raise our:

“Output (at constant price) per Employee”

to offset this increasing ratio?

E. STAGNATION

With each passing year, increasing number of workmen will be reaching the top-of-their respective grades (See Annex.5)

But will there be any “Economic” stagnation for them?

Chances are there would not be, if we go by what has happened in the past. (See Annex.6)

How will we address ourselves to this stagnation – real or imagined?

By adding 2/3 “steps” to each ladder every 4 years?
By creating horizontal “leakages” to MR categories (TA etc.)?
By eliminating “merit” increments?
By retraining? (evening diploma courses)

F. NEGATIVE BREAK-EVEN POINT

An issue which is closely related to stagnation is that of what I call negative breakeven. This is best explained in the following conceptual diagram:

(Graph showing relationship between age, physical output, mental output, wage line, and region of loss)

What I am trying to stress is:

1) When a worker joins at the age of 20, his physical output is already at its peak. It gradually starts to decline after the age of 35 and fairly rapidly after the age of 45.

2) At the time of joining, the worker’s mental skills are underdeveloped and of a low order. As he gets exposed to a variety of operations (if he gets exposed), these skills will rise until the age of 35 or so and thereafter the skills will remain more or less at the same level.

With the advance of “division-of-labour” and mass-production techniques, I suppose, what happens more often is that the skills reach their peak within maybe 3/5 years of joining and thereafter stagnate.

3. If we add-up these two curves, we get what we might call a “sum-total of outputs”.

4. Now compare this with the “wage-input” curve.

It would appear that during the first 15/20 years, the OUTPUT curve is ahead (above) of the INPUT curve (hopefully!) and therefore there is a NET advantage to the enterprise. The individual is taking LESS out of the enterprise (or the society) than what he is putting into it.

One can call this the:

“Era of Wealth-creation (Net)”

But soon thereafter the output curve starts declining whereas the input-curve simply keeps climbing (and perhaps at a faster rate) as a worker grows old. Very soon the input-curve overtakes the output curve at the point of negative break-even!

Beyond this point lies:

“The Era of Wealth-depletion”

where a worker takes more out of the organization than what he brings into it.

If, in the year 1950, this negative break-even point occurred at the age of 45, gradually over the years it has shifted downward – so much so that, perhaps, today it occurs at the age of 25 and before you know, it may occur on the day a 20-year-old youngster joins the Company!

Unless,

We can move the **“Mental (skill) output” curve upward drastically.
Can this be done? How?

I believe this has happened in the case of the operators operating:

NC/CNC machines in PTL & PGW

I believe, these operators are skilled enough to enter the “program” into the computer directly from a component drawing.

G. INTER-UNIT WAGE-BENEFIT COMPARISONS WITHIN L&T

Increasingly we can expect such comparisons being made, not only by the unions at the various units but even by the supervisory groups at various locations.

Historically, other units have looked-up to Powai. They may continue to do so in the years to come. But how far will it be relevant?

“THE TAIL WAGS THE DOG?”

A. SALES TURNOVER (Rs. Crores)

Year	All India	Powai	%
1982–83	500	100	35%
1992–93	1000	200	20%
2002	2500	300	12%

B. NO. OF EMPLOYEES

Year	All India	Powai	%
1982–83	12000	7500	62%
1992–93	15000	7000	47%
2002	20000	6000	30%

Is Powai going to be the “Grind-stone” around the necks of the fledgling new units which are seeking their own levels of wages/salaries/costs and productivity?

PARITY – BETWEEN WHOM?

(Graph showing relative indices of units: Powai, CPO, ORO, MRO, AUDCO, etc.)

Will other units also “sink” because of this grind-stone?
Can they break-away? How?

True, wages of unionised workmen at all these locations are different from those at Powai and are based on:

Industry-cum-region principle

But what about Supervisory / Officer / Covenanted salaries?

By and large these were identical – with minor differences. For the first time, recently, these differences have been widened.

To understand why, look at the following stages of:

“COMPENSATION EVOLUTION” (Annexure 7a)

What direction should this trend take?

If it is desirable to have a substantial difference from Powai in the matter of unionised wages at the new locations, can this be achieved while Supervisory salaries at different locations all over India continue to be identical or very close to each other?

Will not the Unions ask,

“When it comes to Supervisory and above staff, you do not differentiate between our unit and Powai – then why should you differentiate us – the unionised workmen?
You must treat us like Powai workmen, not only in the matter of wages but also in the matter of ‘ex-gratia’.”

How can you pay the same (as Powai) ex-gratia to the Supervisory staff and a different amount to us?

In the months and years to come, the units will face this question again and again.
(I understand Gr.III settled on an “ex-gratia” of Rs. 250/350 for their 30 workmen at Nagar last week.)

Will such pressures ease-up (they may never totally disappear), if each location was to adopt a distinctly separate supervisory compensation structure? – based again on “Industry-cum-region” principle in much the same way as they do for the unionised wage-structure.

As far as the matter of sharing of Company prosperity is concerned, it is quite a complicated issue and has defied a solution so far.

What makes it complicated?

Please refer to my note:

“Prosperity sharing – an unsolved issue”

But just because a problem is complex does not mean that there is no solution. There can be several solutions – none of which may be ideal – from the viewpoint of one or another group of employees – but solutions none-the-less.

As far as manufacturing units are concerned, productivity must necessarily be an important element of any prosperity sharing formula. Neither productivity nor profitability (not merely profits) by itself can be the sole determinant of any prosperity-sharing formula.

And no formula is perfect/faultless. They all have their limitations. That this is so becomes clear from the separate note on “Prosperity-sharing”.

I. CHANGING SKILL-MIX

Over the years, the skill-mix (of unionised DE workmen) has been undergoing a change at Powai.

The percentage of US/SSB population is declining and the percentage of SB/SA/HS population is increasing
(See Annex.7b)

What does this mean?

Does it mean that there is a REAL increase in the level of the inherent skills of workmen?

Or does it mean that, in Powai, it has become more or less a matter of “time-bound” promotion from one grade to the next after every so-many years?

And if the SPAN of each grade is 17/20 years (on an average), how many people actually take 17/20 years to go up to the next grade?

Is it possible that some persons manage to get promoted to the next higher grade, say:

within 10 years?
within (even) 5 years?

For that matter, how many persons ever use that portion of the ladder which is beyond the 10th step?

PROMOTION ANALYSIS (Daily-rated Workmen)

Total Cases	Promotion	% >5 yrs	% >10 yrs	% >15 yrs	% >20 yrs
1704	US → SSB	87.5	8.3	1.4	0.3
820	SSB → SSA	83.0	24.7	7.4	2.5
456	SSA → SB	79.8	27.2	7.7	3.5
662	SB → SA	64.6	31.1	4.8	0.6
59	SA → HS	50.8	50.8	37.2	13.5

Are promotion-premises making a mockery of the appropriate skill-mix?

Can we, somehow divorce the “skills” from the “grades”?
Under our present system we are unable to see one apart from the other.

And why is this necessary?

It is like this.

Take a typist or a telephone operator.

Their jobs have not undergone any change over the last 25 years.
So there has been no change (improvement) in their skills.

But they are as “human” as anyone else in the organization.
Their aspirations are no different from everyone else around.
They too would feel happy to be “promoted” and feel frustrated not to be.

But under our present system (US/SSB/SSA etc.), promotion connotes “acquisition” of higher “skill” – because the words:

un → SKILL
semi → SKILL (B)
highly → SKILL (A)

contain the “skill” element.

And so when people want promotions they claim to have acquired higher skills!

Other units may not have faced this problem so far, but if they wish to learn a lesson from Powai, let them study…

…and devise their own strategies before it is too late.

I. TECHNICAL / PROFESSIONAL OBSOLESCENCE & DEAD-WOOD

This can be expected to become a major issue in the next decade.
Technology is changing fast – both on the shop-floor and in the offices.

Around the world, companies failing to change/adapt are getting wiped out in the marketplace!

Just to hold your place in the rat-race, you have to run faster and faster.

If you don’t understand what I mean, go to a cardiologist and ask him to give you that special test where you are made to stand on a moving belt – which is made to move faster & faster!
I took it once and literally collapsed after 10 minutes!

At my age, I have only a few years before I retire.
So I may manage without learning how to query a computer through a terminal sitting on my desk.

But those of you who are below 40 would do well to go out and learn – otherwise you are going to be:

“obsolete – dead-wood!”

And it is going to be the same story if you do not know how to read a balance-sheet or interpret a discounted cash-flow chart.

And this will happen in all functions (not only personnel) and in all categories (supervisory as well as shop-floor blue-collar workers).

And as far as unionised workers are concerned, you cannot get rid of the Deadwood.
The law will not permit you to.

In the matter of life-time employment we have overtaken Japan!

So unless we constantly retrain workmen to acquire higher skills, we will accumulate a lot of dead-wood.

And since workers (under our present laws) do not have any negative incentive (fear) of losing jobs – or even their annual increment – they are not going to go out on their own and get themselves retrained.

So the onus of “retraining” will fall on the Management whose only other option would be to:

“Collect Deadwood”

J. SURPLUS MAN-POWER

In the years to come, the higher and higher wages will force us into:

greater automation
shifting of skills from shops to offices

There will be tremendous pressure to push-up productivity – both on the shop floor and in the offices.

If profitability has to improve (from an abysmal 8.2% in 82–83 to a respectable 15% or so), then:

👉 productivity must go up

But if the market-share does not go up (i.e., output volume does not increase), people will be rendered:

“SURPLUS”

as productivity rises.

This has already started happening in Powai during the last 5 months as productivity has started climbing.

Group II claims to have 70/80 surplus workmen.
Group III have declared 18/20 surplus, in addition to some 20 “loaned” to Gr. IV 6 months back. At a pinch, they can locate another 15/20, they could do without!
PGM areas have lost (separations) over 20 persons during last 1 year which are not replaced, and it is decided to continue the recruitment freeze for one more year (84–85).
Group IV (P-PACK) need some 25 operators temporarily (in addition to the 20 on loan for last 6 months). But they propose to return all the 45 as soon as their own automatic machines get installed within 12 months.

So we are talking of 120/150 people surplus – not counting 30/40 clerical persons of BRO who cannot be moved to Pune.

It is a Hobson’s choice.

If productivity goes up (but market-share does not) → we have surplus people
If productivity does not go up (and products price themselves out of the market) → we have surplus people

The dilemma does not end here…

If we start retrenching people who are rendered surplus as a result of rising productivity, there will be a terrible backlash from the Union.
Productivity will at once plummet.

Who will ever want to work harder (simple definition of productivity) if it would mean losing one’s job?

If it can happen to your colleague today, it can happen to you tomorrow!

One important reason why BKS Union has cooperated with management in raising productivity at Powai during the last 5 months is:

“an assurance that nobody will be thrown out.”

And it is virtually impossible to transfer unionised employees from one city to another.

So until the market-share improves, the issue remains:

“What do we do with the surplus people?”

And I have not even considered the people who may become surplus in the expanding universe of L&T, due to:

some operations shifting out of Bombay
some “business-lines” closing down

Could we possibly emulate HMT’s “WETAX” project? (See Annex.8)

K. MOBILITY

Elementary physics tells us that molecules are in perpetual motion – whether matter is in gaseous, liquid or solid form. They are mobile –

except
at around –273°C (Absolute Zero), all motion stops!

In L&T, we are not very far removed from such motionlessness when it comes to transfers:

Inter-unit (intra-group)
Inter-group
Inter-function
Inter-city

Sub-cultures grow and grow and grow.
There is very little cross-breeding.

With our windows shut tight, there is very little fresh air blowing in.

Our concern is largely in respect of managerial transfers.

This is an issue.

L. MILITANCY

We did not set up the Faridabad, Bangalore and Nagar factories in order to run away from worker militancy. I mean not for that reason alone, although it could have figured in our plans.

But the fact remains that the young workmen at these factories are much more militant than their counterparts at Powai.

And this story could repeat at:

Hebbal
Hazira
Awarpur

Questions raised:

Is it due to lack of mature internal leadership?
Is it due to a different kind of “expectations” that these workmen have?
Is it due to the management style adopted at these locations?
Is it due to local culture?
Could we have avoided this militancy? If yes, how?
Did it have anything to do with the kind of workmen and first-line supervisors recruited at these places? Or would it have happened in any case?

Could we possibly prepare a list of “DOs” and “DON’Ts” for the new units?
Is Powai-experience at all relevant to these new units?

Militancy is certainly going to be an issue in the years to come.

M. PYRAMID OF CHEOPS

If you ever go to Cairo, visit this pyramid a few kms away. There, for a few coins, little boys will run up the pyramid within 3/5 minutes. I do not know how high is the pyramid, but it certainly looks formidable. It took me many more minutes to climb through 1/3rd the height using a rough-cut staircase and the helping hand of the camel-driver!

We have such a pyramid nearer home – except that it is invisible. Now air is also invisible and you just walk through it all the time. But try walking through this pyramid!

PYRAMID OF CHEOPS (Organizational Hierarchy)

(Board of Directors → Chairman → Vice President → GM → DGM → Manager → Assistant Manager → Supervisors → Employees)

I like mountains with their tops hidden behind clouds and I like icebergs with their bottoms hidden under the sea – but that is when I am writing poetry – not “Personnel Procedure Manual”!

How much are our decisions getting slowed down due to this pyramid of hierarchy?
Can we speed-up things by having fewer layers of decision-makers?
(Of course, it may ruin a little game called “buck-passing”!)

As L&T explodes horizontally, will it also implode vertically?

Will someone examine if there is any real “value” being added by each succeeding layer of hierarchy?
Do decisions get “refined” as problems get pushed up?

Here is one issue we will not be able to pass-up!!

N. THREAT TO CORPORATE CULTURE AND VALUES

As L&T explodes over the next 10 years, this threat will become menacing for more than one reason, notable being:

1. Culture is hard to define (and harder to document)

Corporate culture and values are difficult to describe – even more difficult to write down.

In L&T, we have yet to see a systematic attempt at writing down policies.
Some drafts exist, e.g.:

Sub-contracting
Alcoholism
Education

But these await debate before corporate approval.

Other policies being considered:

Recruitment & Manpower Planning
Sports
Health-care

2. Culture cannot be “preached” — only practiced

Culture and values must be lived, not communicated via circulars.

While circulars can reach thousands quickly, practices spread very slowly.

Only repeated actions in local environments reinforce good practices.

Analogy:

When you throw a stone in still water, ripples fade as they travel outward.
Similarly, corporate values weaken as they spread across large organizations.

3. Culture is a “tradition” passed across generations

Like:

craftsman → sons
guru → disciples
tribal chief → followers

In these small ecosystems:

Leadership is visible
Commitment is visible
Discipline is visible

But when L&T becomes a Rs. 1000 crore company (by ~1988?), the question arises:

👉 How do we preserve culture and values?

👉 Will today’s craftsmen, gurus, and leaders pass on traditions effectively?

FINAL LINE (Powerful Ending)

“This can be the ULTIMATE ISSUE.”

Part III

The Framework

THE FRAME-WORK (OF THE NINETIES)

Having examined,

How L&T’s universe is exploding

and

What issues/trends have surfaced or are likely to crop-up in the near future,

It is time now to examine the framework within which strategies will need to be developed.

At the centre of the framework are the following questions:

Q.1

What were the main reasons behind the:

Business diversification?
Locational diversification?

Q.2

Can we possibly play the new game with old rules?

Q.3

What “model of enterprise” do we wish to adopt at the new locations?

Earlier we have already examined the “main reasons” for diversification.

As far as the next question is concerned, I don’t think I ought to emphasize that:

👉 we cannot possibly play the new game with the old rules.

That leaves us with the last question regarding the model of enterprise at the new locations.

THE MODEL OF ENTERPRISE

AT POWAI	AT NEW LOCATIONS
Labour Intensive	Capital Intensive
Obsolete Technology	New Technology
Eroded Work-ethics	Farmer’s Work-ethics
Emphasis on “Rights”	Emphasis on “Duties”
Highly Centralized decision-making	Decentralized decision-making

AT POWAI

System/Procedure oriented
Many levels of hierarchy
Impersonal Industrial Relations
Consultative style
Fat, sluggish, slow response
Input oriented

AT NEW LOCATIONS

Action/Result oriented
Few levels of hierarchy
Personalized Industrial Relations
Participative style
Lean, alert, quick-on-the-draw
Output oriented

May be I have drawn an overly depressing picture of Powai and equally over optimistic/idealistic picture of the New units. This has, to some extent, been done on purpose, to create a sharp contrast. The direction must always be sharp even though you may have to do a lot of zig-zagging before you reach your goal!

Discounting the exaggerations, one thing is obvious. In this model, the MAN is at the centre of the framework.

And since he is in the centre, the framework would be incomplete unless we anticipate and write down the expectations of the MAN.

These expectations could be:

Equal opportunities to tackle challenges
A more objective performance appraisal
A reward system that takes into account performance differentials
A more specific career planning based on Potential Appraisal
Clearly spelled-out personnel policies replacing adhocism
Greater consistency in application of policies
Speedier redressal of grievances

As far as Personnel Function is concerned, these expectations would mean,

Doing More (Quantity)
Doing Better (Quality)
Doing Faster (Delivery)

of whatever we have been doing so far.

And it will also mean,

Doing altogether NEW things

This will certainly mean taking a critical look and restructuring of the Personnel Function comprising of the entire spectrum of the following sub-functions:

Planning
Acquisition
Compensation & administration
Information/communication
Training/Development
Motivation
Retention (Health & Welfare)
Discipline
Collective Bargaining
Legislative Obligations
Industrial Relations Coordination

Such hair-splitting may seem like so much fetish and whereas I am generally against the use of too much jargon, every profession has to have its own special vocabulary and the Personnel profession is no exception!

It is also true that not all of these sub-functions are equally developed in all the L&T units. But then as the units grow, it is only a matter of time. So we must prepare ourselves in advance, before the events overtake us!

PART IV
THE STRATEGY

For the personnel function, the strategy for the eighties are:

1. THE FIRST STRATEGY – DECENTRALIZATION OF PERSONNEL FUNCTIONS

The first strategy shall concern the decentralization of the Personnel function.

Let us examine what will this mean:

1.1 AT POWAI

Decentralization of Staff Administration functions essentially consisting of:

a) Maintenance of Personnel folders
b) Routine Personnel matters such as Leave/LTA/Medical reimbursements etc.
c) Issue of annual reward letters

To begin with, Groups 2, 3, 4 and PGM group will take over these functions effective 1.1.85.

Decentralization of Supervisory/Officer/Covenanted Recruitment.
Groups 2, 3, 4 and PGM will take over this function from 1.1.85.

Decentralization of Plant Personnel Function (old Powai Labour Department).

Group 3 will take over from October 1984, whereas Group 4 is expected to take over from November 1984.

Group 2 will take over sometime by middle of 1985 when office-space becomes available.

What will be the roles and responsibilities of the plant personnel departments of the Groups and those of what will remain “central”? For this

See Annexure "9a"

Since BKS continues to be the sole Bargaining Agent for L&T at Bombay for the unionised employees, union-matters and collective bargaining issues continue to be “centralized”.

For better appreciation of who will handle what functions on an All-India basis, see Annexure 9b.

1.2 AT OTHER LOCATIONS

In the context of Powai, what has been proposed is more “tactical” than strategic. What kind of strategies/tactics can other locations explore?

In our “Model of Role-Relationship (Annex.10), we have already stated that the Group Management will be responsible for

“The business strategy/tactics”

which means, the Group Management will formulate the strategies which get developed by asking

the When
the Where, and
the How

of the Group’s business.

And amongst these is the strategy pertaining to

Human Resources

Comprising of the entire spectrum of 11 sub-functions. This would be especially true of units located outside Bombay.

And the strategies to be explored are,

(1) Should the Units let go of the apron-string? Let go of the holding hand?

Come out from under the shadow of the big-brother?

(2) If the units are already pursuing independent strategies in

Marketing
Product and
Technology

can they pursue an independent “Human Resource Strategy”?
(within the framework of Corporate HR Policy).

(3) On the other hand, if we feel that they are following reasonably independent strategies in the Human Resource function, can we expect that, before long, the units will come out with

Different Compensation structures for the Supervisory/Officer and Covenanted staff?
A structure which is more in tune with the industry/sector and the region in which they operate
A structure which is “de-linked” from whatever may happen at Powai

Different prosperity-sharing (ex-gratia) formulae which would rely

(a) heavily on unit’s own productivity gains (70%)?
(b) somewhat on Group’s contribution (20%)?
(c) only slightly on Company’s profitability (10%)?
(overlooking the “Common Balance-sheet” aspect).

instead of blindly following what happens in Powai?
(The tail to stop wagging the dog!)

4) Powai is a place with “Past” — a place with history — and it cannot shake-off the legacies so easily. It cannot break-away from the past overnight. Over a period of 30 years, it has accumulated a large number of unhealthy, unproductive practices. Powai also cannot escape the influence of the polluted industrial relations climate prevailing in Bombay.

Amongst the unionised workmen, the work-ethics are eroding fast. On the other hand the D.A. keeps climbing month-after month and rise is expected to be of the order of Rs. 800 p.m. over a period of next 4 years — i.e. an average of Rs. 200 p.m. each year! This is twice the average annual increment that an officer gets and perhaps three-times what a supervisor gets!

And what about the annual increments themselves — as far as the unionised workmen are concerned? To know how these will look under our present D.A. formula by April 1988.

See Annex.11

The consequences can be frightening!
— and the consequences cannot be wished away!

And one consequence could be demoralization and demotivation amongst the supervisory staff. Such a demotivation could become very damaging to the survival of the organization.

And what has already happened at Powai today (in the matter of unionised wage — rise outstripping the supervisory salary-rise), can be expected to happen at other locations during the course of next 5 years.

And whereas, opinions may differ about what could be done to tackle this problem at Powai,

a possible strategy with regard to the other locations can be,

introduce a well-conceived D.A. scheme for supervisory (and above) staff at other locations in such a manner that the cost-of-living neutralization for all categories of employees will rise uniformly, every month.
This will ensure that whatever is the original “gap” or “disparity” between different individuals or groups, will continue undisturbed over the years — and that the only way an individual can bridge that “gap” would be by superior skills/performance at the end of the year (e.g. Merit increment/promotion etc.)

If it is accepted that 6 years of post S.S.C. engineering education (or for that matter any professional education) obtained at a cost of Rs. 30,000/60,000, should command a certain “premium” over 2 years of post S.S.C. ITI training, then we have to express this premium in the form of a higher starting emolument.

Having established such positive “starting-gaps” (relativity) between:

Unskilled workmen
Skilled
Clerical
Technicians (Draftsmen etc.)
Diploma holders
Engineers
Chartered Accountants etc. etc.

a mechanism must be found which will enable us to maintain this relativity and not allow it to be distorted solely due to cost-of-living neutralization.

TABLE 1: EMPLOYEE COMPENSATION – A CONCEPTUAL FRAMEWORK

Criteria vs Compensation Elements

At Individual Level

Appointment Salary
Annual Increment
Appreciation Amount
Promotion
Designation

At “Management Bargaining Agent” Level

D.A. / Adhoc Revision
Bonus + Ex-Gratia
Salary Scale / Perks / Service Condition Revision
Retirement Benefit Revision
Welfare Trust Benefits

Key Criteria Covered

Individual Market Value
Performance During Year
Long Term Performance
Potential Recognition
Cost of Living Neutralization
Profit / Prosperity Sharing
Interfirm Wage Differential (Demand-Supply Factor)
“Value Added” by Group
Loyalty / Goodwill / Company Image
Paternalism

(✔ marks indicate which compensation element maps to which criterion)

TABLE 2: DETAILED COMPENSATION STRUCTURE

Criteria for Compensation

Columns:

Representing an Individual’s Basic Worth
Cost of Living Neutralisation
Allowance / Perk / Reimbursement:

Base Location Related
Grade/Level/Basic Salary Related
Facility/Amenity Related
Duty Hours Related
Length of Service Related

Performance Related:

Individual
Company Wide

Retirement Benefit

Elements of Compensation

Basic
City Compensatory Allowance
H.R.A.
Compensatory Allowance (Supervisory / Officer B)
L.T.A.
Conveyance Allowance
Medical Expenses Reimbursement
Bonus
Ex-Gratia
Washing Allowance
Night Shift Allowance
Travel/Outstation Allowance
Lunch Allowance
Provident Fund
Gratuity
Superannuation Schemes

2. THE SECOND STRATEGY – INVOLVEMENT & EMPLOYEE BEHAVIOUR

The second strategy shall address itself to the issue of the worker participation in decision-making, and the issue of the “disparity” discussed earlier.

It is not suggested that such a “disparity” by itself could resolve the issue of demoralization/demotivation amongst the Supervisory Staff. Individual motivation is a complex issue but at a collective level, perceived “differentials” in the compensation packages do exert powerful pressures on the behaviour patterns of groups. This is especially so in an industrial society which, on one hand, expects (and demands) a high degree of responsible behaviour from the Supervisory staff and on the other hand unhesitatingly tolerates (even gives in to) totally irresponsible behaviour of the unionised staff.

So that no one tries to oversimplify what I have said here, let me add this.

Continuously maintaining a compensation differential between the Supervisory and the unionised group will not automatically result into a “responsible” behaviour on the part of the Supervisors. At best it is a “hygienic” factor upon which we can build such a behaviour.

Nor can we get rid of the irresponsible behaviour on the part of the workmen and the unions by simply bringing-up their wages on par with those of the supervisors.

What will make any employee behave in a responsible manner?
How does one go about altering employee-behaviour?

Whereas there can be no simple answer to such involved questions, there is one simple premise viz:

An employee’s attitude decides his behaviour.

His attitude towards:

his colleagues
his superiors
his own work

If this attitude is corroborative, we will get responsible behaviour — if it is confrontational, we will have irresponsible behaviour.

So that is the task before us — making the employees “want” to cooperate with each other in the pursuit of organisational goals.

And what will motivate them to cooperate?

Once again, I feel, the strategy would have to be one of “Involvement” in the decision-making process.

And whereas, information sharing, which is prelude to involvement, is general and mass-based, the actual involvement in decision-making itself is specific and individual-based, depending upon an individual employee’s capacity-to-contribute to the process.

“Employee Participation in Management”

an approximate model of which can be as follows:

OF THE BUSINESS

WHY → Board of Director
WHAT → Group General Manager / Dy. General Manager
WHEN → Div. Mgr. / Mfg. Mgr.
WHERE → Engineer / Foreman / Supervisor
HOW → Worker

Under this model, we shall adopt a “bottoms-up” approach, permitting/encouraging each level of employee to participate, at first, only in taking those decisions in which they are most trained/well-versed/competent to participate.

A worker obviously knows “how” components/sub-assemblies/products are manufactured. He knows “production-process”. He has worked with the plant and equipment for long years. He knows what is hindering production and what causes poor quality. He knows why plant layout is deficient and which equipments are faulty. He knows the defective materials and inaccurate instruments. He knows what causes machinery to break-down and how much output can be expected from which equipment.

He has the KNOW-HOW. That is his forte. That is where he can contribute — if someone would ask him.

So I would envisage workmen participating in:

1. Deciding Production Resources

Manpower
Space
Machinery / Tooling

2. Setting Targets

Production targets
Quality targets
Material consumption targets
Absenteeism targets
Overtime targets
Machine down-time targets
Time standards

— and perhaps very little else.

And only after participating in the “HOW” type of decisions for many years, would he be ready to participate in the “WHERE” type of decisions — and that too, with additional educational qualifications:

But let no one think that the moment you manage to get the employees involved, you can get yourself “absolved”! You have to continue to remain involved yourself. You are not abrogating your own responsibility under the shelter of “employee-participation.” You cannot afford to take a holier-than-thou attitude and just say,

“I don’t agree — and don’t come back and tell me, I did not tell you; but if you guys think otherwise, go ahead and have it your way. It is your funeral!”

It is not a simple matter of “well, either I decide or you decide.” Employee-participation is not the same thing as delegating decision-making. It is sharing decision-making — and that is why it is far more difficult to practice than simple delegation!

Under the “Sharing” concept, you continue to remain responsible and accountable for the decision and its outcome/repercussions. You cannot wash your hands off the whole thing. You may not 100% subscribe to the decision but you are still a party to it.

And a typical managerial attitude is:

“Well, since I do not fully subscribe to the idea, I am not a party to it.”

So we must begin at the beginning — changing managerial attitudes!

THE THIRD STRATEGY – MANAGEMENT ATTITUDES

The third strategy shall concern itself with “Changing Managerial Attitudes.”

How does one go about changing managerial attitudes?
How can managers be made to “desire” employee involvement?

These questions can be answered by asking two more questions:

The manager would want to know,

Q.1 What is in it for me?
Q.2 Will it be a “happy” experience?

To answer these questions I think, managers can be made to see that their own performance as managers would vastly improve if they can get employees involved. This should not require a lot of convincing since each manager during the course of his career must have experienced this phenomenon several times and found it satisfying.

If that be so, why is managerial enthusiasm lacking?
Or is it due to lack of a direction, or at least a loosely structured framework?

Enthusiasm to a large extent, is an innate quality of an individual. Although some amount may rub in from one person to another, “wholesale” transplantation can rarely occur.

But if it is a question of providing a framework, that can certainly be done.

As far back as March 1980, I had made a presentation to FKC on what I call

“Project Warm”

(See Annex.12)

The framework presented in Project Warm, I believe does provide a general direction which our involvement-efforts can take. Although I did make specific recommendations under each of the:

Project Window
Project Attitude-change
Project Resurrection
Project Motivation

It must be said that these are not comprehensive. I am sure you can expand the list considerably if you did a “brain-storming” with your colleagues. What is more, these were drawn-up almost 4-1/2 years ago and might need re-casting depending upon specific needs of a particular location.

But what is important to remember is that a framework is available. What specific “actions” are worth initiating at a particular location and when, is a matter to be settled between the Unit Manager/the Group General Manager and the V.P. concerned.

It must be emphasized that attitude/behaviour changes cannot be legislated — (and that applies to specific recommendations under project resurrection). And this is the reason why PRC of March 1980, did not adopt project WARM as some kind of a “charter” for everyone to follow — although there was a great deal of debate and considerable “consensus”.

Attitudes can only change by change in personal beliefs. All that one can attempt is to debate the issues in an open manner. And when you try to influence someone else’s beliefs, you must be prepared to let him influence your own!

But what is the relevance of the project WARM to the issues of the eighties? Whereas one may search such a relevance (as I have tried to do in Annex.13), let there be no illusion of any kind.

Project WARM is no birth-control pill (preventing “problems” from being born), nor is it some kind of panacea for all the accumulated “ills” — whether at Powai or elsewhere. If we think of it as some kind of a gimmick which will transport us to the steps of an EL-DORADO of industrial-relations, we are going to be deeply disappointed and frustrated.

Ideal employer–employee relations and a highly motivated employee-force is not some kind of a destination — a manzil — where you will someday arrive, a place where the road ends! It is the road itself!!

Happiness is not a shirt which you can buy in a shop and become its proud owner forever thereafter. Happiness is the searching!

4. THE FOURTH STRATEGY: THE WORKER EDUCATION

In this, I would like to describe the important role that Worker Education classes can play to counter the undesirable trends — whether these be:

eroding work-ethics
declining productivity
growing militancy

It is true that the Worker Education Scheme (and syllabus) as devised by the Government some 25 years ago does lay a great emphasis on:

Trade Union Movement
Workers’ “Rights”
Labour Laws etc. etc.

But it certainly leaves enough scope for the speaker to talk about:

Responsible trade-unionism
Workers’ duties and responsibilities not only to the organization but to the society
His obligations under the law

But none of this can or will happen if Worker Education is looked-upon as one more legal obligation to be “fulfilled” — to be got over with — for filing a return.

Constructive education will certainly NOT take place if the classes are left to be conducted solely by the worker-teachers and outside guest-speakers.

But on the other hand, any group of managers, willing to make a substantial commitment of time and energy, can turn worker education into a very powerful tool for changing worker attitudes.

This is our experience at Powai.

Even if you wish to treat worker as an adversary, it is better to deal with an educated “enemy” than an “ignorant” one! He will most certainly argue more logically and forcefully but then, I think, it is anyway better than his speaking the body language: (flexing of muscles do convey unmistakable “meaning”!).

I believe that a “thinking” worker is much less likely to be misled. This is my experience at Powai — and this is not to say that the “muscle-language” is no more spoken at Powai! But over the last 5/6 years, there is a perceptible change in the workers’ attitudes.

As far the scheme itself is concerned, we are about to re-cast the entire syllabus and the course-contents. With the help of some committed managers, we have drawn-up a revised syllabus which lays greater emphasis on:

Workers duties & responsibilities
Productivity concepts
Work-ethics & Discipline etc. etc.

But before we submit this revised syllabus for approval of Regional Director of Worker Education Board (who is quite enthusiastic about the whole project and was involved from the beginning), we propose to present this to the Union Committee and INVOLVE them as well.

Once we get their cooperation, we will begin the marathon-effort of preparing detailed “Instruction-packages” for each of the 60 odd lectures, covering all the subjects.

Not only do we have commitment of a number of officers & managers in the preparation of the instruction-packages, but we are also hopeful of getting a number of them to come forward and conduct the classes themselves.

The project is being spear-headed by Mr. N.B. Vakil.
Working with him closely are Mr. Mahajan and Mr. Negandhi.
Those of you who wish to have any further information on this subject, may get in touch with NBV.

As far as I am concerned, worker-education is the foundation upon which we will have to build our:

“Pyramid of Worker Participation”

5. THE FIFTH STRATEGY: COMMUNICATION

I call this strategy:

“Communication is the Key”

As far as Indian managements are concerned, even at the cost of exaggerating, I would like to say that communicating with employees is virtually non-existent. The only times, managements have been forced into “talking” to the employees is when there is a crisis of some kind.

And usually the crisis (be it strike, lockout, go-slow or suspension of operations or closure) is centred around “bargainable” issues.

In such instances, some (bold!) managements venture into explaining the management “stand” to the employees through advertisements in newspapers (without ever having surveyed how many of their employees buy & read newspapers!) or through a series of “Circulars”, “Notices” and the like — in English!

If this nation has to find a way out of the atmosphere of confrontation prevailing in the industrial-relations climate, one thing is going to be inescapable.

Managers (— the worker has never seen or met the “management”!) will have to do some direct and plain talking to the employees (other managers and LTOSA members included), not only on bargainable issues but on ALL issues which affect the Company and therefore everyone working in it!

When things are bad (and also when things are good or looking up), employees will have to be told.

And, in no uncertain terms (please keep-out euphemisms and tongue-in-cheek phrases) they will have to be told, individually and collectively, what is expected of them.

And there will be no beating-around-the-bush! Some plain-speaking is inevitable — but it does not mean “threatening” anyone.

You must address it to “ourselves” — not to them!
Remember we are as much a part of the system as they!

Our efforts at Powai in this direction are documented in:

“COMMUNICATING FOR PRODUCTIVITY”

LIST OF ANNEXURES

Productivity Performance of PSW Std. Products
Projected D.A. growth, 1984 – 1988
Employees appearing in Annexure to Annual Report

4a. Wage Bill / Output Ratios
4b. Personnel Related Expenses / Income Ratios

Workmen Reaching End of the Grade
Growth in Gross Emoluments of Employees who have reached the top of the grade in January 1979

7a. Evolution of Compensation
7b. Powai skill mix profiles, 1971 – 1983

HMT Wetax Project

9a. Decentralisation of Powai Plant Personnel Dept. (PLA)
9b. Model of Decentralisation of Personnel Function in L&T

The Model of Role Relationship
Increase in Increment Rates
Project WARM (i–v)
Issues & the Strategies – Any Relevance?

14.i. “The Incredible Japanese” – Covering note
14.ii. Pyramid of Employee Participation

Title:

GROUP III – MANUFACTURING PERFORMANCE INDICES
(Std. Products Assembly Shops + Component Shops)

Key Benchmarks:

Agreement Level: 85%
Past Best Achieved (Feb 1977): 73.5%

Performance Index (%) Over Time:

Period	Performance Index (%)
Dec 1978	62
Jan–Jun 1979	63.2
Jul–Dec 1979	61.2
Jan–Jun 1980	64.3
Jul–Dec 1980	64.3
Jan–Jun 1981	66.7 (Peak)
Jul–Dec 1981	64.3
Jan–Jun 1982	64.3
Jul–Dec 1982	64
Jan–Jun 1983	63.3

ANNEXURE 2

Projected Dearness Allowance Growth (1984–1988)

Upper Category (Rs/month):

Apr 1984 → 2160
Aug 1984 → 2276
Aug 1985 → 2508
Aug 1986 → 2793
Aug 1987 → 3033
Apr 1988 → 3069
👉 Total Increase: +909

Lower Category (Rs/month):

Apr 1984 → 906
Aug 1984 → 976
Aug 1985 → 1074
Aug 1986 → 1176
Aug 1987 → 1279
Apr 1988 → 1296
👉 Total Increase: +390

Projected CPI:

1984 → 2571
1985 → 2970
1986 → 3260
1987 → 3552
1988 → 3600

ANNEXURE 3

Employees in High Salary Bracket (₹36,000/year)

Year	% Employees
78–79	3.0%
79–80	5.2%
80–81	6.1%
81–82	31.3% 🚀
82–83	33.5%
83–84	50% (est.)
87–88	80% (guess)

ANNEXURE 4a

Wage Bill / Output Ratios (%)

1980–81

A → 21.5
B → 25.1
C → 25.4
D → 28.7

1981–82

A → 21.8
B → 26.0
C → 26.5
D → 30.2

1982–83

A → 27.3 ⚠️
B → 31.8
C → 32.3
D → 36.3 🚨

ANNEXURE 4b

Personnel Expenses / Income Ratio

Year	Expenses (₹ Cr)	% of Income
78–79	17.14	14.0%
79–80	19.82	15.3%
80–81	24.98	16.1%
81–82	29.28	17.3%
81–82	33.20	15.8%
82–83	50.44	16.5%

DEFINITIONS PAGE (Critical — Foundation Layer)

🧠 What “Output” Means

👉 Powai + Madh output at production cost

⚠️ Important:

Not revenue
Not profit
Pure production value

💰 What “Wage Bill” Includes

👉 ALL employees:

Unionised
Non-unionised

📊 Levels A → D (VERY IMPORTANT)

This is where your analysis becomes scientific 👇

LEVEL A

👉 Core salary:

Monthly cash
PF + ESIS

LEVEL B

👉 A + Variable payouts:

Bonus
Ex-gratia
LTA

LEVEL C

👉 A + B + Welfare:

Medical reimbursement

LEVEL D (FULL COST)

👉 A + B + C + Infrastructure:

Canteen
Dispensary
Transport
Welfare facilities

💡 BIG INSIGHT (GAME-CHANGING)

👉 Wage cost is layered escalation

Level	Meaning
A	Direct salary
B	Incentives
C	Benefits
D	Full organizational cost

🚨 This explains WHY your ratios were exploding

Because:
👉 Organizations measure A
👉 But REAL cost is D

📄 NOTE SECTION (Hidden Detail)

👷 For Unionised Employees:

Basic + DA + HRA
Multiple allowances
Special payments

👔 For Supervisory:

Basic + allowances
City compensatory
Additional benefits

ANNEXURE 5

Workmen Reaching End of the Grade

Year	Total Employees at Max Grade
1986	129
1987	253
1988	686 🚀

ANNEXURE 8

Worker-entrepreneur ancillary

HMT plan to set up complex

NEW DELHI, October 8

Hindustan Machine Tools (HMT) is planning to set up a Worker Entrepreneur Tiny Ancillary Complex (WETAX) with a view to farming out the production of simple components and operations to worker-entrepreneurs while channelising its own skills in the manufacture of more complex products, UNI reports.

Designed to combat production costs and to provide skilled workers of the parent unit an opportunity to become entrepreneurs, the scheme will enable HMT to change its product mix from medium technology products to sophisticated, high technology ones.

Off-loading of production to WETAX is expected to cut the cost of operations and components by about 45 per cent and improve HMT’s profitability and competitive strength, both in the domestic and international markets.

Workers with about 20 years experience in the parent unit will be chosen to participate in WETAX.

The scheme envisages that the chosen workers will take on an entrepreneurial role and produce simple spare parts and components for HMT.

Each selected workman is to be allotted the machine on which he has been working and which he will own after ten years on payment on monthly instalments.

The premises, however, will not be owned by the worker entrepreneur, who will also be required to resign his current job with HMT.

Raw materials for production and a number of common facilities such as tools, jigs, fixtures and heat treatment and material cutting facilities will be provided to entrepreneurs by the parent company.

WETAX, which will be under the administrative control of HMT, will be headed by an officer of the parent body to plan, monitor, control and coordinate the activities of the complex.

HMT has played a pioneering role in the development of ancillaries in the country. In 1957, it set up an ancillary industrial estate in Jalahalli, Bangalore with the assistance of the National Small Industries Corporation (NSIC).

The industrial estate consists of 51 workshops. The capital construction cost of the estate was fully borne by HMT.

ANNEXURE 9a

DECENTRALISATION OF POWAI PLANT PERSONNEL DEPT. (PLA)

Central Structure

PLANT PERSONNEL DEPARTMENT
UNIT PERSONNEL DEPARTMENT

🔵 Functions under Plant Personnel Department

I.R. policies & matters of common interest including Annual Appraisals Guidelines
Interpretation of Long Term Settlement
Collective Grievances
Liaison with Govt. agencies, filing statutory returns, attending court cases, etc.
Coordination with PAC for Wage Administration & other related matters
Coordination with PCC for Wage Administration & MIS, etc.
Monitoring uniforms, safety shoes / monsoon equipment, etc.
Coordination with Works Committee re: holidays, annual social, etc.
Matters regarding regulation of contract labour

🔵 Functions under Unit Personnel Department

Implementation of Long Term Settlement
Standing Orders / domestic enquiries
Individual Grievances
Compilation & submission of information: regular & non-statutory returns
Time keeping, Wage Administration, record keeping, etc.
Personal folders and MIS inputs
Post-recruitment formalities
Issue of various certificates & separation settlements
Annual appraisals & long service awards

ANNEXURE 9a

FUNCTIONS OF POWAI CENTRAL PERSONNEL DEPARTMENT

The Powai Central Personnel Dept. will handle the following matters:

(i)

Matters regarding interpretation and implementation of Agreement and general rules & regulations;

(ii)

Issue policy guidelines / circulars, write-ups from time to time on Industrial Relations, general discipline, standing orders, etc.

(iii)

Act as catalyst between Union and Management to settle all types of collective grievances and implementation of various clauses of Agreement, in coordination with Plant Personnel Departments;

(iv)

Attend Labour Court cases and other legal matters as also matters connected with Factory Inspectorate, Labour Commissioner and other Government agencies for fulfilment of various statutory and non-statutory obligations;

(v)

Since the Plant Personnel Officers will administratively report to Group General Managers but functionally to Personnel Manager (Powai), their decisions on policy matters will be continuously guided and monitored by Central Personnel Department (CPD).

🗂️ ADMINISTRATIVE MATTERS

(i)

Printing of names on Attendance Cards & on Wage Sheets in CPD;

(ii)

Filling of pay packets, bonus packets, ex-gratia packets will be done in CPD under proper security arrangement with the help of required manpower from Plant Personnel Departments;

(iii)

Till such time the Accounts are bifurcated and made feasible to have Unit-wise reconciliation, Central Personnel Department will continue to reconcile Accounts like LIC, CTD, PF, FP, IT, PT, LTACCS, etc.
The yearly reconciliation work with Accounts Department will also be carried out by CPD;

(iv)

Co-ordination with Computer Centre (PCC) for payroll and other services will be done by CPD till such time the system stabilises and starts functioning independently Unit-wise;

(v)

Filing of Annual I.T. Returns and certificates for employees will be issued by CPD;

(vi)

Necessary data for Best Attendance Awards will be compiled and Circular regarding the same will be issued by CPD;

(vii)

Obituary Notice in case of death will be issued and Circular regarding collection of Family Relief Amount and the work related thereto will be done by CPD;

(viii)

The entire Annual Appraisal exercise will be done by Plant Personnel Departments within the guidelines provided by CPD;

(ix)

Circulars in connection with various concessions, time off, substitute holidays, yearly holidays, etc., will be issued by CPD;

(x)

All periodical returns under various legislations will be attended by CPD by collecting the required data from Plant Personnel Departments.
Renewal of Factory Licence and registration under the Contract Labour (R&A) Act will be done by CPD;

(xi)

Coverage under ESIC matters, Group Insurance Scheme, Workmen’s Compensation Act will be administered by CPD in co-ordination with Plant Personnel Departments.
Simultaneously, submission of Accident Reports and maintenance of Accident Registers will be done by CPD;

(xii)

All work connected with purchases to distribution of Uniforms, Monsoon Equipment, Safety Shoes and allied items will be handled entirely by CPD;

(xiii)

Post-recruitment activities like issue of Identity Badges, Bus Passes and other related matters will be handled by CPD.

ANNEXURE 10

THE MODEL OF ROLE RELATIONSHIP

CORPORATE MANAGEMENT vs GROUP MANAGEMENT

Corporate Management	Group Management
Originator / Fountainhead of:	Custodian of:

Core Elements (Common Reference Framework)

Corporate Values
Culture
Policies
Image
Social Responsibility

📊 Functional Roles

Corporate Management → Business Policy

WHY
WHAT

Group Management → Business Strategy / Tactics

WHEN
WHERE
HOW

(Includes):

Marketing Strategy
Product Strategy
Technology
Human Resource
Financial

🎯 Direction & Execution

Corporate Management	Group Management
DESTINY – FUTURE – VISION	GOALS – TARGETS – PLANS
ANTICIPATE CHANGE	MAKE THINGS HAPPEN

ANNEXURE 11

INCREASE IN INCREMENT RATES

1973 – 1988 (Projected)

SKILLED ‘B’ GRADE

(Pre-1984 Settlement Grade)

📊 INCREMENT RATE (BASIC + DA)

Stages	1973 (CPI 900)	1979 (CPI 1447)	1983 (CPI 2513)	1988 (CPI 3600)
1 – 2	37	58	100	142
2 – 3	36	58	99	142
3 – 4	22	33	54	75
4 – 5	22	33	54	75
5 – 6	22	33	54	75
6 – 7	22	33	54	75
7 – 8	26	38	63	87
8 – 9	26	38	63	87
9 – 10	26	38	63	87
10 – 11	26	38	63	87
11 – 12	26	38	63	87
12 – 13	26	38	63	87
13 – 14	29	43	72	100
14 – 15	23	33	52	71
15 – 16	—	27	41	55
16 – 17	—	28	41	55

ANNEXURE 12 (i)

THE NEW HORIZON – THE WARM

🔲 PROJECT WINDOW

Fresh air of “innovations” around us
Visit to other companies
Visit of other trade union leaders
Films
MRA – Panchgani

🔲 PROJECT ATTITUDE CHANGE

Getting involved with people as “persons” with human dignity
Searching fears / frustrations / joys & sharing

🔲 PROJECT RESURRECTION

Trim, fit, lean fighting force (freeze)
The entrepreneurial spirit of “50s”
The “dead wood”
The managerial discipline / visibility
The “productivity” appraisal

🔲 PROJECT MOTIVATION

Job enrichment / supervisor-less shop
The suggestions and rewards (acceptance and recognition)
The involvement of all
The binding force / the crusade

ANNEXURE 12 (ii)

SPECIFIC RECOMMENDATIONS – PROJECT WINDOW

1. Exchange of visits with other companies

A) Managers
B) Union office bearers
C) Worker education classes (new direction)

2. Exchange of

House magazines
Agreements / settlements
Manuals

3. Technical film shows

(for shop representatives / supervisors)

4. “Guest” speakers from “successful” companies

5. Worker education library

(after working hours)

6. The Window

Productivity around the world
ILO publications

ANNEXURE 12 (iii)

SPECIFIC RECOMMENDATIONS: PROJECT “ATTITUDE CHANGE”

1) GETTING INVOLVED (INDIVIDUAL LEVEL)

A. Birthday greetings
B. 15 / 20 / 25 year felicitation
C. Family visits
D. Sickness
E. Children’s education
F. Invitation to tea

2) GETTING INVOLVED (GROUP LEVEL)

A. Sports club
B. Credit society
C. Canteen society
D. One food – one hall
E. Welfare centre visits on Saturdays
F. Cultural programmes
G. Powai Pageant Correspondents’ Group
H. Supervisors’ Association (Innovation Committees)

ANNEXURE 12 (iv)

SPECIFIC RECOMMENDATIONS: PROJECT RESURRECTION

LONG TERM ACTION PLAN

1. OCM every week – Service Managers to report

2. Communication on company issues

3. Annual employee attitude survey

4. Quarterly audit of Project WARM

5. Meet Managers (Group) twice a year

6. Meet Supervisors’ Association once a year

7. Meet Union Office Bearers once a year

8. Shop floor visit twice a year

9. GGMs to spend more time at Powai

10. Meet Supervisors’ Association twice a year

11. Meet Union Office Bearers thrice a year

12. Meet Shop Representatives once a quarter

13. All managers to punch attendance cards

14. Foreman / Production Superintendent to rotate in shifts

15. Concentrate on team building

16. Communication: Company Policies on

Productivity
Discipline
Welfare
Rewards
Stagnation and Retraining

ANNEXURE 12 (v)

SPECIFIC RECOMMENDATIONS: PROJECT MOTIVATION

1) JOB ENRICHMENT

A “share” in “planning” and “controlling”

2) “ADULT-TO-ADULT” RELATIONSHIP

Less “looking over the shoulder”
Less “holier-than-thou”

3) ACCEPTANCE

Of suggestions
Of his ability to contribute

4) RECOGNITION

Of excellent performers (groups or individuals)
Through:

Citations
Public acknowledgement
Monetary rewards

ANNEXURE 14 (i)

(Copy)
18.6.1982 – Powai

Dear Mr.*,

I am happy to present to you

“The Incredible Japanese”

Although I am sure, all of you will read this book, some of you might read it again and again. This is because you may find it difficult to believe what you read. This is why Rustonji calls them “Incredible”!

When Sikorsky designed the first helicopter, nobody believed it could fly – not even the scientists. So when he built a factory to produce these by thousands, he put a notice on the gate which read:

“According to all known laws of aerodynamics, the ratio of the wing-span to the weight of a hummingbird is such that the bird cannot fly – but the hummingbird did not learn aerodynamics – so it goes ahead and flies anyway.”

If only we, at L&T, unlearn some of our attitudes (so painstakingly taught to us by the Industrial Pundits), we too can learn to fly – on the wings of trust – like the tiny fairy Tinker-bell in the children’s fairytale “Peter Pan”.

Incredible? Unbelievable??

The only way to find out is by believing and by trying out.

And for those who wish to try, there is even a design –

“Pyramid of Participation”

Let it be our very own “Mount Fuji” – our “Kailas” if you like.

And while you are trying, forget the laws of aerodynamics and the Pundits!!

Sd/-
H.C. Parekh

* (250 copies of the book “Incredible Japanese” were sent to Shop Supervisors).

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Tuesday, 29 March 2016

Personnel Strategies for 80's

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