Hi Friends,
                                              Even as I launch this today ( my 80th Birthday ), I realize that there is yet so much to say and do.
                                                  There is just no time to look back, no time to wonder,"Will anyone read these pages?"
                                       With regards,
                                       Hemen Parekh
                                       27 June 2013

Monday, 22 May 2084

COMMUNICATION

Synopsis: Communication For Productivity
Letters written to some 7500 Workers / Managers / Union Leaders, following a period of strike / Go slow / Murders (1979 - 1987), at Mumbai factory of Larsen & Toubro Ltd. This direct / open / honest communication led to a remarkable atmosphere of trust between Workers and Management, which, in turn, increased productivity at 3% per year (ave).

May 22, 1984

To:

Dear friend,

I am inspired to dialogue with you once again. In the months to come, you will hear from me and I do hope you will also talk to me. A dialogue is a two-way traffic !

If you are wondering why I was "silent" for the last one year or so, the obvious reason is that the Union office bearers kept me awfully busy  and you cannot blame them since they were merely following your wishes!

Coming back to what has inspired me again, someone asked me the other day in the worker Education Class.

"Sir, why have you stopped sending us "Japan Works O.K.","Britain Works O.K." etc ?"

I turned around and asked others what they thought of these write-ups.

There were several voices, all at one time, saying that they had enjoyed reading these articles  and that they really missed these! Yes, they would like me to share with them what is happening around the world in the matter of productivity and in the matter of industrial relations (to me, simply "human relations in the industrial context"). So here we go again !

This time it is a real-life report on the American car industry - all the way from the city of Detroit.

If you have an atlas at home, try this evening to locate Detroit on the map.

Way back in 1956, I spent one summer vacation in this city, working as a draftsman in a tractor manufacturing company. Every Sunday (Saturdays I used to work overtime!) I used to take a long walk on a road called "Grand River Avenue". Mile after mile after mile, on either side of this road, one could see yards filled with thousands of second hand cars -some of these hardly one or two year old models and none more than 5 years old !

The thought that used to pass my mind was - How cheaply are Americans able to manufacture brand-new cars so that they can afford to buy a new car every third year? Apparently they were able to produce them fast (in fewer man-hours than any other country) and produce them cheap (at a lesser cost than anyone else).

This was 28 years ago when many of you were not even born and I had not heard the word "Productivity".  In those old fashioned days, the Americans simply worked "hard" and worked as a "team". They just had to be "best" and the "first" and in this one matter there was no difference of opinion between the Unions and the managements.

From the enclosed article you will notice how the American car industry has completed one full circle in these 28 years - from excellent Union-Management cooperation of 1956 to total confrontation of 1970's and back to the cooperative mood of 1984.

But then it is natural to forget the internal differences and unite to protect yourself against an external enemy. Could it be that this recent show of unity and cooperation is only because the workers and the managers - both are equally concerned about saving their jobs ?

And if this is the reason, what would happen when the Japanese competition slackens? Will the Union and the Management resume their attitude of confrontation? Today, both the Union and the management regard Japan as "Enemy No. 1". When they have defeated Japan through increased productivity (brought about by increased cooperation), will they start fighting each other?

If this happens it would be indeed very sad.

Sad, because this repeating cycle (of hate and forced love) cannot go on very long before it completely destroys the industry. I hope the American managements and Unions realise this and learn to love each other naturally and permanently.

In L&T, our products are not facing any competition from abroad because imports are not allowed.

But competition from other Indian companies is getting fierce. If you wish to know how serious is this competition, request your production manager to invite the concerned Sales Manager to your next unit level Productivity Committee Meeting. He will tell you that the Indian customer today has many "options" - other than L&T.'

In L&T, can we take a lesson from Detroit, and learn to cooperate naturally while we still have time?

Hemen Parekh

Wednesday, 15 April 1987

INDIAN- METHOD

Synopsis: Communication For Productivity
Letters written to some 7500 Workers / Managers / Union Leaders, following a period of strike / Go slow / Murders (1979 - 1987), at Mumbai factory of Larsen & Toubro Ltd. This direct / open / honest communication led to a remarkable atmosphere of trust between Workers and Management, which, in turn, increased productivity at 3% per year (ave).

15 Apr 1987

To:
Dear Friends
In the last 2 circulars I told you about the novel methods being adopted by some American companies when It comes to "Sharing-Prosperity".

Now, Financial Express of April 3, 1987, has reported an INDIAN-METHOD, which I thought I should share with you (this is the right time!).

The Company              
ALLWYN LIMITED - HYDERABAD

Products:- 
Refrigerators
Buses                                                    
Wrist watches
Steel furniture

Production August 1986 - March 1987 (8 months)


Number
Rs. Crores
% Increase over previous year
Refrigerators Buses Wrist Watches Steel Furniture
56,711
737
5,00,000
22.27
3.30
16.72
1.78
+ 36 %
+ 73 %
+ 9.5 %
Total Production

44.07
+ 41 %
Total Sa1es

43.49
+ 53%

No. of Employees               ......           7500

Despite such FANTASTIC Increase in "employee-productivity", why is the company worried?

In fact what can be the problem when Mr.R.P.Agarwal - Managing Director has the following to say?

"The Company has had the distinction of forty-five years of  strikeless productive days - a rich heritage".

Well, the customer does not care!  He cannot be bothered with how good (or bad) Industrial-relations you have!

At I that he CARES for is your selling-price, and of course,
the quality of your .products                             
the after-sales service                                     
the easy availability of spare-parts                      
the speedy delivery                                                           
etc., etc.                         

And if he is not happy with one or more of these, he can (and will) create problems for you - big problem!

ALLWYN's  PROBLEM   NO. 2      
                            .              ... 
1985-86 Sale    .......... Rs. 86.820 crores                 
1985-86 Net profit .......   Rs.  0.296 
Ratio           Net Profit        =     0.3       =       0.34% !!             Sales                    86.8

THE SOLUTION    ?

Recently, the company entered Into a 3-year agreement with-the union. In this agreement. It has offered to pay each employee,

Rs.300 as  L.T.A.

If, and when ther net-profit earned by the company touches Rs.5 crores!

THE POINT?


The Prosperity  (the good-days)
and
The Adversity   (the bad -days)

of a company depends upon the combined performance of all of its employees.

And If employees are eager to share the prosperity, they must also be equally prepared to share the adversity!  People who are unwilling to make a sacrifice during the bad-days, do not deserve a share In happiness during the good-days!                              

H. C. PAREKH

Wednesday, 8 April 1987

GIVING BONUS-THE AMERICAN WAY (PART II )


Synopsis: Communication For Productivity
Letters written to some 7500 Workers / Managers / Union Leaders, following a period of strike / Go slow / Murders (1979 - 1987), at Mumbai factory of Larsen & Toubro Ltd. This direct / open / honest communication led to a remarkable atmosphere of trust between Workers and Management, which, in turn, increased productivity at 3% per year (ave).

April 08,  1987 

To:

Dear Friends
GIVING BONUS-THE AMERICAN WAY           
(PART II )

A few days ago I told you about the bonus-system of A&P Food Stores In America.

it was a simple, efficient system. The lower the employee (manpower) costs, the higher the bonus.  It Is very much like the family-planning drive of our Government.  With a fixed family-income. If you have a small family, each member of the family gets a larger share of that Income.  If you have a very large family, everybody gets a very small piece of the cake!

This is the basic economic principle.

Whereas one can try and stop adding members to the family (prevent future births), what about the children who are already born?  You cannot sell them off - or send them to an orphanage!  They are there and they must be looked after.

It is the same thing with a company. It can stop recruiting further employees (as we are trying), but what about its existing employees?  It has to look after them.

So whether it is a family or a Company, answer is the same.                      
It must Increase its Income.  It must generate more profits which can be used to look-after its large family - even if it means a small piece to everybody.

To motivate its employees to work harder to Increase the company's profits (and profitability) one American Company has tried a novel approach.

The Company:             Commodore International Ltd.

Product           :            Computers.

Problem   :    Two years of declining sales and a year of substantial losses threatened the company's survival

Solution?         :   Chief Executive Rattigan introduced an unusual bonus-plan. Each employee will receive a bonus equal to 1% of his (or her) annual salary for each point Commodore's stock (share-price) has gone above 6 1/2 (the August 15, 1986, closing price) by March 31, 1987.

A five-point gain will mean a 5% bonus, and so on.

Results     :            By March 02, 1987, the stock had already jumped to 14!            

This means all employee? will get 71/2 bonus (14 - 61/2).

But there is nothing "free" in this world.

As Julle Andrew sang in the film "Sound of Music",

"Nothing comes from Nothing 
Nothing ever could -
Sometimes In my childhood 
I must have done something good".
the employees had to pay a "price" for this bonus.

The Price

·     Wage Freeze Massive

·     Lay-off (Retrenchment)

·     Increased Work-load.

These days, when Commodore employees enter the lunch-room, the first thing they look-up is a large blackboard showing a graph of Commodore's dally share-price.

These days Commodore-employees have a better appetite!  With massive retrench-each has to do the work of two!

The Business Week (March 16, 1987) story does not tell , us,, what would happen to Commodore-employees If the share-price went below 6 ½  !

We are not concerned, since we are quite unlikely to link employee-bonus with L&T's share-price.

But from NOW ON, you should certainly be Interested in keeping-track of L&T's share-price.

A few days back, L&T employees have already received an offer from the Management for Right Convertible Debentures worth

Rs. 2.1 crores

And the 23rd March Annual General Meeting of the share-holders passed a resolution to offer to L&T Employees, Employee Convertible Debentures (stock option scheme) worth
                       
Rs. 2.5 crores (Approximately)

That makes a total of Rs .4.6 crores.'

So from next year onwards, you wilI no more be concerned with Bonus alone -you will also be concerned with the Dividends - and with  future Issues of bonus-shares.

So from now on, you must ask    

·     Will my bonus-demand neutralise my prospects for bonus-shares?

·     Can I take away with another hand  what I am giving myself with the first hand?

·     Should I allow short-term gains to upset my long-term benefits?


In our country, we do not need the Commodore-plan;  India already has a BONUS-ACT, which may give employees 18% bonus even if a company's share-price may have come down by 80%!

Hemen Parekh