Be it a public or private enterprises, management is key. And many times it requires only some commonsense. One needn’t have an IIM, or Stanford/ Harvard background. Let us look at two stories- one from the pubic sector and the other from the private.
Lalu Prasad Yadav, Union Railways Minister in India Today’s Special Conclave Issue April 9. 2007 with the theme- ‘CHALLENGES FOR THE BRAVE NEW WORLD’ had this story of his approach that brought the turnaround.
As you all know, the railways is a big network with approximately 14 lakh workers. It runs 1,100 trains every day and carries more than 1.5 crore passengers. Till yesterday, the Railways was in a very bad shape, not even in a position to pay dividend. It was completely bankrupt. The Rakesh Mohan Committee had come up with various suggestions: dissolve the Railway Board and create a regulatory commission; decrease the staff strength; increase the railway budget every year, increase passenger and freight fares every year; privatise services.
When the UPA came to power in 2004, I wanted to become the home minister but they made me the railway minister and I said okay. I started looking into its functioning and found that accidents were a common feature in the Railways and I used to think, what if these keep happening and I had to face Parliament every day. If accidents happen every day, the MPs will keep asking for my resignation every day and one day I might have to resign too.
I got down to the job earnestly and one of the first things I told the Railway Board was that they must have honesty, commitment and vision. We felt if we increased the fare it would affect the masses. Instead, we reduced the fares. Every day, approximately, 60-70 lakh people travel in Mumbai suburban railway where the passenger fare is already low, but still we reduced the fare by a rupee. We also reduced the fare of the goods train.
I assured all 16 lakh gang men, signalmen and others that they will not be retrenched. The turnaround in the Railways is not one man’s effort, I have merely directed it. I just said we will not let anybody steal. We have to stop it. I have personally checked goods trains, weighed the goods on the weighing machine and found huge disparities in load booked and the actual load carried. Several officers have been punished. Earlier the loading and unloading used to take seven days, now it has been reduced to five days. By taking these few small steps only, we were able to save about Rs 10,000 crore. Not just that, we have reduced the expenditure and last year we had a surplus of Rs 13,000 crore and we have paid dividends. This year again we had a surplus of Rs 20,000 crore. We have money now. We are going to get new coaches designed for every class.
Lalu delegated, demanded, and perhaps facilitated too. And he got the results. I wish he would have used a similar approach in running of Bihar also. And perhaps Prime Minister should shift Lalu to power ministry where he can repeat the same performance. Sushil Shinde with a background of police department could have taken some lessons from Lalauji and brought a similar efficiency in power sector by taking ruthless steps to cut down the 30-40% losses because of theft.
And then we can go to ‘The incredible story of Tata Motors and the Rs 1-lakh car’ as told by Robyn Meredith, Forbes.
After the economy slumped in the late 1990s–just when expenses for developing the passenger car hit home–Tata truck and bus sales plunged by 40%, and Tata Motors lost $110 million in fiscal 2000. It was the first red ink seen since 1945. Executives were stunned. “It was corporate India’s biggest loss,” says Ravi Kant, managing director of Tata Motors. “The crisis changed us.”
But Tata Motors, part of India’s largest conglomerate, first had to reset its ways. Change started with a spring 2000 meeting at the Lakehouse, a bungalow across the street from the company’s main factory in Pune. Kant, then in charge of the commercial vehicle division, needed fresh ideas instead of rigid resistance, so in an experiment, he called a meeting of 20 of his most promising young managers–all under 35 years old.
“I have a problem,” he said in his matter-of-fact tone. “The company is bleeding.” He asked for ideas on how to stop the gush of red ink. Okay, they told him, trim costs.
Girish Wagh was there, just 29 then. He remembers the shock of what came next. “Ravi Kant said that 1% in cost cuts would be a rounding error. He asked for 10%!” says Wagh. “Never had we thought of such a target.”
Every single year until then costs had gone up, not down. Kant told them to present a basic plan that very afternoon, in front of him and–alarmingly–all their bosses.
They worked frantically. By the 3 p.m. meeting, their wildest ideas were on the table. Taken together, they added up to 6.5%. “A breakthrough!” Kant remembers thinking. But that’s not what he said. “Please go back and think again,” he told them. He needed 10%, not 6.5%. “You’ve got three weeks.”
The young team took some measures even as it scrounged for more. In came benchmarking, purchasing from Internet auctions, outsourcing parts to more efficient suppliers and boosting revenue by selling Tata-made dies to other companies.
The transformation of Tata Motors had begun with the searing loss in 2000, but it continued with a return to profit in the fiscal year ending March 2003. By then it was producing two car models and selling a bit abroad. Today, after buying or partnering, the company has vehicle projects around the globe and exports 11% of output, mostly to South Africa.
Efficiency is way up: It now takes between 12 and 15 minutes to change a die on the passenger car assembly line, down from two hours in 2000. The company’s break-even point for capacity utilization is one of the best in the industry worldwide.
Between 2000 and 2006 nearly 6,000 workers left the company with early-retirement deals. Meanwhile, the once radical e-sourcing idea has become routine for Tata, which ran 750 reverse auctions on Ariba in the past year to bring down purchasing prices by an average of 7% for everything from ball bearings to the milk served in the company cafeteria.
Except for a right leadership that showed determination to be globally competitive, nothing had changed at Tata Motors. Tata Motors is the only Indian company in the passenger car sector.
And that difference made Tata Motors what it is today, when the other two (HM and Premier) because of the lack of the steely management will to survive and grow got vanished from the passenger car manufacture.