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, 26 April 1982

ISSUES OF DECENTRALIZATION

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).

26 Apr 1982

Dear Colleagues

FACTORS AFFECTING DECISION-MAKING :


1.    Present size of L&T and the fast rate of growth


          ISSUES OF DECENTRALIZATION

2.    Locational Constants

a.        Large work force at Powai
b.        Different groups at Powai (having different cultures-different skills-different products-different work ethics-different approaches to problem solution)
BUT

c.        To deal with Common external agencies who do not recognize these differences and tend to treat L&T (especially Powai works) as one homogenous monolithic entity (which it is not )

Eg. Central & State government Municipal/Local authorities . The Union / Labour commissioner Govt. Agencies (Customs / Excise / Octroi etc) Banks, Financial Instiutions AIMO/AIEI/EFI etc.

Irrespective of the divergent needs of the groups the decisions to be conveyed to these agencies have to be consistent and conveyed by a common spokesman of the company.

As the company grows and as the institutions and the regulations proliferate (which they invariably do ), the common spokesman (eg. GM(Delhi)- GM(Powai)-GM(F)-DGM(Personnel)-DGM(Public Relations) etc etc.)  will need to know more & more of the group operations to be able to synthesize, group-views before presenting to external world.

3.    COMMUNICATION

How accurately and speedily  will the decisions  get conveyed to all of these employees for whom these decisions form a Vital imput (For their own Secondary decisions)-will be a crucial factor in the years to come.

Besides making a "Decision Inventory", it will also be necessary to make an inventory of persons (or levels) upto which these decisions will get conveyed.

Needless to add that some research on the means/methods/modes of communicating these decisions (Decision-Channels?) - will be required.

While deciding 'who to communicate', the need-to-know will of course be the major factor-but hierarchy cannot be ignored. There are instances of some Senior Manager feeling unhappy at being left-out of some meetings where their peers have been invited, even when they were in no position to contribute to the  deliberations. This even led to feet-dragging in the implementations of the decisions taken-perhaps for no other reason than that the "Sense of enlarged Participation" was missing.

A large group may mean a few "Superfluous" persons and  waste of their time but trying to form a small group, strictly on a "need-to-know" basis, could sometimes leave out an important person.

4.    THE "SERVICE-MALADY"

While talking of participation in decision-making, I cannot leave out what I consider to be the "Service-Malady". While taking any operating decision it is quite common to involve only the persons immediately concerned with the same and leave out all others.
Let us take a simple example of working-out the next months production-schedule. I would be surprised if the following persons would be invited to such a meeting.

1.      The maintenance Engineer
2.      The Quality-Control Engineer
3.      The Stores Officer
4.      The Labour Officer
5.      The Cost Accountant etc etc.

These are treated as "Peripheral" or "Service" functions. It is surprising that these functionaries do not get a "Sense-of-belonging" or being in the mainstream and therefore their commitment is very low? This is traditional Line Vs Staff  dividing line which is counter productive in the modern context.

In these days who likes to be remembered only  when things go wrong? Who wants to be a mere supplier of data/input or only a recepient of decision to be implemented ? No one likes to feel that his labor (or mental skills) are being purchased under a legal contract as a factor-of-production like machinaries or raw materials.

Such a process of "Brand Consultation"  is quite likely to further slow-down the decision-making at L&T . but will certainly improve the quality of such decisions and the speed with which these will get implemented.

To counter the slowing-down effect of the "Participative Style" of decision making, let us now turn our attention to the next factor viz.

5.    THE DELEGATION-IN-DECISION MAKING

In my Circular at. 16-4-1970, I have listed the factors which inhibitdownward delegation of decision making. These factors are as much Valid today as they were 12 years ago. To these we may add what SKB has put down on page 2(items) of his note viz.

RISK AVERSION


It is said that the publicity/propaganda machine of a U.S Presidental candidate trumps-up such a fantastic image of the man that if he gets elected, he finds it impossible to take any decision which may tarnish that image! It is as if he is standing in the middle of a room with mirrors on all sides (including floor & ceiling) and he is expected to project a perfect profile in each of the mirrors!!

L&T seems to be caught in a somewhat similar predicament. May be we have put ourselves on a pedestal (or in a fish bowl) where we are under constant scrutiny by the outside world. May be we have allowed ourselves to believe that we are infallible-we just can't make mistakes !! What would others think-the financial institutional /the banks/the competitors/the shareholders/the govt. /the public-if there was a mishap?

To us the consequences are fatal and therefore we must check and recheck the entire range of possible consequences before taking a decision. Perhaps our thinking gets stymied/Paralysed due to this fear.

Now how is any Organisation different from a human-being in

-    Its external search of "Happiness"
-    Its limited options
-    Its Constraints (internal & external)
-    Its Information-gap
-    Its capability to "alter" the environment (the limited resources)
-    Its successes and "failures" ?

There are bound to be some errors/mistakes/failures when we start delegating downward. But this is inherent to any process of learning. One new could be

"There are no mistakes in life-there are just opportunities for learning".

·              As we grow fast and

·              As we induct a lot of people form outside (we must, for cross
            pollenization) who do not know our decision-rules (only a few are
            written)

We are bound to make mistakes. But the fear of making mistakes should not / must not prevent us from delegating downwards.

What we need therefore is

-    Some more decisions-rules
-    Far more performance-Criteria
-    An atmosphere where no one will be hung for sticking-out his neck
-    No stigma attached
-    An atmosphere where an employee would own-up his mistake (and not cover it up) and come forward on his own to discuss it objectively with his boss to turn it into a truly "learning -exercise".

The next task is to decide/define what could be / should be delegated.

The scientific method to determine this would be

1.      To define the rules at each level of management hierarchy
2.      To fix the responsibility for the tasks to be performed
3.      To set performance criteria
4.      To lay-down decision-rules

Since this would be a time consuming exercise, an acceptable short-cut would be ask the secretaries of all Managers to divide all incoming papers into two sides viz.

1.  Where no decision is apparently required. This would be the papers where the sender merely wishes to keep informed. No decision is requested of you (although some senders of messages are quite subtle!) . You are merely required to store the information in your grey cells (the memory bank) for possible future use.

Some of these messages are of the nature.

"I am pursuing this particular line of action and propose to continue with the same unless you (the receiver) have some violent objection".

2.  Where the recepient is "expected"  (by the sender) to react or give a decision.

It is this second pile of papers in which we are interested. These are papers where a decision is requested. So these are the papers where delegation is possible. Even documents requiring only your signature fall in the category.  

Since signature /authorization is your approval of somebody's decision! Even a ratification means the same. It implies that you (the recepient) have an option not to approve/ratify by refusing to sign.

To each of this incoming papers requiring YOUR decision, the secretary could attach a small pink slip which could read.

I am unable to delegate this to someone because

a)---------------       8 factors listed in my circular of 16.4.70 + some more
b)---------------
c)---------------

It MSSPL was to collect just one days slips from the tables of all the managers, we would know

-    What prevents L&T Managers from delegation decision-making?

A diagnostic study of this type could possibly lead to what should be done to encourage delegation. Such a study would produce a comprehensive "inventory" of the decisions being taken/delegated by managers all over L&T. It would certainly help in categorizing the decisions such as :

-    Strategic Vs Tactical
-    Short term Vs Long term
-    Policy Vs Operational
-    Major Vs Minor (resume committed)
-    Pertaining to Physical Systems Vs Information systems
-    Restricted to group or repercussions likely to be felt in the other groups.
-    One-time or of repetitive nature.
-    Data-based or Intuitive etc etc.

If a check-list incorporating the above mentioned categorization was to be prepared and used by MSSPL study-team, it could bring into sharp focus the entire decision-making process at L&T. A better understanding of this process could lead to better decision rules.

MOTIVATIONAL CLIMATE:

I have mentioned this quite at some length, during my presentations to

-    PRC in 1980
-    OCM in Feb.81

Some 10 years ago, Managers used to earn much more than a Supervisor and considerably more than a worker. They also felt that much more responsible.

In 1982 the gap has been largely bridged with the wages of an unskilled mazdoor equally the stipend of a Diploma Engineer!- at the beginning of the grade!  On the other hand the Responsibility gap has widened!  Absolute Job-Security (thanks to our labour-laws) and militant trade-unions have taken all fear out of a workers mind, leading to rampant reverse-exploitation in the high-wage island companies like L&T.

In Singapore Prime Minister Lee has been raising workers wages on purpose so that the industries would be forced to get out of "low-technology" products-which cannot sustain the high wages-and get into "high technology' products which could compete abroad.

Our government has managed to raise the wages-without any purpose! And what is more we cannot 'fire' low-skill people and 'hire' high-skill people-even if we can continue to keep shedding low-technology products and keep getting into high-technology products-which is itself not so easy for a company like L&T.

By 1992 the income-gap would have been reduced to nil. The cases of drivers whose take-house pay exceeds that of his director-boss would no more be isolated! By 1992, I visualize that almost 50% of the persons whose names appear in the Employee's Details (persons drawing >= Rs. 3000 pm) in L&T' s. Annual Report would be "Unionised"! - and this number would be of the order of approx. 1000 persons out of a total 2000 in that years report!!

Any debate on whether this is a welcome trend or not is meaningless. Any debate on whether any intelligent boy would anymore want to spend 5 years getting B.E./MBBS/C.A. is also meaningless.

The only meaningful question is


"How do you make all the 2000 persons (the unionised and the managerial) feel and act with equal responsibility?"

With several companies granting a monthly wage increase of  Rs. 400/500 (e.g. Bajaj) in 1982 to their unionised employees, L&T will find it extremely difficult to maintain the present wage disparity (if any) between the unionised and the supervisory staff. If this is coupled with increasing worker indiscipline and union militancy there could be severe erosion of supervisory and the managerial morale and lowering of  managerial commitment.

What is a possible solution?

I have tried to provide an answer in my OCM presentation of Feb. 81.

There will have to be a complete change in the managerial attitude-from the corporate management down to the shop-floor supervisor.

No more shall we assume that we the managerial staff alone  shall decide all important matters. The union and the workman must share some of the decision-making responsibility-starting with the matters of "How" followed by Where, When, What and finally Why.

Having demonstrated that a wage-gap (and therefore a responsibility-gap) is impossible, the worker participation in management becomes inescapable!
If we wish to remain motivated (anything otherwise is suicidal ) and avoid high blood-pressure, the only sensible thing to do is to completely change our attitude.

H. C. PAREKH

FACTORS AFFECTING DECISION-MAKING :

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). 

26 April 1982

FACTORS AFFECTING DECISION-MAKING :


1.      Present size of L&T and the fast rate of growth


          ISSUES OF DECENTRALIZATION

2.      Location Constants

a.                  Large work force at Powai
b.                  Different groups at Powai (having different cultures-different skills-different products-different work ethics-different approaches to problem solution)
BUT

c.                   To deal with Common external agencies who do not recognize these differences and tend to treat L&T (especially Powai works) as one homogenous monolithic entity (which it is not )

Eg. Central & State government Municipal/Local authorities . The Union / Labour commissioner Govt. Agencies (Customs / Excise / Octroi etc) Banks, Financial Instiutions AIMO/AIEI/EFI etc.

Irrespective of the divergent needs of the groups the decisions to be conveyed to these agencies have to be consistent and conveyed by a common spokesman of the company.

As the company grows and as the institutions and the regulations proliferate (which they invariably do ), the common spokesman (eg. GM(Delhi)- GM(Powai)-GM(F)-DGM(Personnel)-DGM(Public Relations) etc etc.)  will need to know more & more of the group operations to be able to synthesize, group-views before presenting to external world.

3.      COMMUNICATION

How accurately and speedily  will the decisions  get conveyed to all of these employees for whom these decisions form a Vital imput (For their own Secondary decisions)-will be a crucial factor in the years to come.

Besides making a "Decision Inventory", it will also be necessary to make an inventory of persons (or levels) upto which these decisions will get conveyed.

Needless to add that some research on the means/methods/modes of communicating these decisions (Decision-Channels?) - will be required.

While deciding 'who to communicate', the need-to-know will of course be the major factor-but hierarchy cannot be ignored. There are instances of some Senior Manager feeling unhappy at being left-out of some meetings where their peers have been invited, even when they were in no position to contribute to the  deliberations. This even led to feet-dragging in the implementations of the decisions taken-perhaps for no other reason than that the "Sense of enlarged Participation" was missing.

A large group may mean a few "Superfluous" persons and  waste of their time but trying to form a small group, strictly on a "need-to-know" basis, could sometimes leave out an important person.

4.      THE "SERVICE-MALADY"

While talking of participation in decision-making, I cannot leave out what I consider to be the "Service-Malady". While taking any operating decision it is quite common to involve only the persons immediately concerned with the same and leave out all others.
Let us take a simple example of working-out the next months production-schedule. I would be surprised if the following persons would be invited to such a meeting.

1.          The maintenance Engineer
2.          The Quality-Control Engineer
3.          The Stores Officer
4.          The Labour Officer
5.          The Cost Accountant etc etc.

These are treated as "Peripheral" or "Service" functions. It is surprising that these functionaries do not get a "Sense-of-belonging" or being in the mainstream and therefore their commitment is very low? This is traditional Line Vs Staff  dividing line which is counter productive in the modern context.

In these days who likes to be remembered only  when things go wrong? Who wants to be a mere supplier of data/input or only a recepient of decision to be implemented ? No one likes to feel that his labor (or mental skills) are being purchased under a legal contract as a factor-of-production like machinaries or raw materials.

Such a process of "Brand Consultation"  is quite likely to further slow-down the decision-making at L&T . but will certainly improve the quality of such decisions and the speed with which these will get implemented.

To counter the slowing-down effect of the "Participative Style" of decision making, let us now turn our attention to the next factor viz.

5.      THE DELEGATION-IN-DECISION MAKING

In my Circular at. 16-4-1970, I have listed the factors which inhibitdownward delegation of decision making. These factors are as much Valid today as they were 12 years ago. To these we may add what SKB has put down on page 2(items) of his note viz.

RISK AVERSION


It is said that the publicity/propaganda machine of a U.S Presidental candidate trumps-up such a fantastic image of the man that if he gets elected, he finds it impossible to take any decision which may tarnish that image! It is as if he is standing in the middle of a room with mirrors on all sides (including floor & ceiling) and he is expected to project a perfect profile in each of the mirrors!!

L&T seems to be caught in a somewhat similar predicament. May be we have put ourselves on a pedestal (or in a fish bowl) where we are under constant scrutiny by the outside world. May be we have allowed ourselves to believe that we are infallible-we just can't make mistakes !! What would others think-the financial institutional /the banks/the competitors/the shareholders/the govt. /the public-if there was a mishap?

To us the consequences are fatal and therefore we must check and recheck the entire range of possible consequences before taking a decision. Perhaps our thinking gets stymied/Paralysed due to this fear.

Now how is any Organisation different from a human-being in

-          Its external search of "Happiness"
-          Its limited options
-          Its Constraints (internal & external)
-          Its Information-gap
-          Its capability to "alter" the environment (the limited resources)
-          Its successes and "failures" ?

There are bound to be some errors/mistakes/failures when we start delegating downward. But this is inherent to any process of learning. One new could be

"There are no mistakes in life-there are just opportunities for learning".

                     As we grow fast and

                     As we induct a lot of people form outside (we must, for cross
            pollenization) who do not know our decision-rules (only a few are
            written)

We are bound to make mistakes. But the fear of making mistakes should not / must not prevent us from delegating downwards.

What we need therefore is

-          Some more decisions-rules
-          Far more performance-Criteria
-          An atmosphere where no one will be hung for sticking-out his neck
-          No stigma attached
-          An atmosphere where an employee would own-up his mistake (and not cover it up) and come forward on his own to discuss it objectively with his boss to turn it into a truly "learning -exercise".

The next task is to decide/define what could be / should be delegated.

The scientific method to determine this would be

1.              To define the rules at each level of management hierarchy
2.              To fix the responsibility for the tasks to be performed
3.              To set performance criteria
4.              To lay-down decision-rules

Since this would be a time consuming exercise, an acceptable short-cut would be ask the secretaries of all Managers to divide all incoming papers into two sides viz.

1.      Where no decision is apparently required. This would be the papers where the sender merely wishes to keep informed. No decision is requested of you (although some senders of messages are quite subtle!) . You are merely required to store the information in your grey cells (the memory bank) for possible future use.

Some of these messages are of the nature.

"I am pursuing this particular line of action and propose to continue with the same unless you (the receiver) have some violent objection".

2.      Where the recepient is "expected"  (by the sender) to react or give a decision.

It is this second pile of papers in which we are interested. These are papers where a decision is requested. So these are the papers where delegation is possible. Even documents requiring only your signature fall in the category.  

Since signature /authorization is your approval of somebody's decision! Even a ratification means the same. It implies that you (the recepient) have an option not to approve/ratify by refusing to sign.

To each of this incoming papers requiring YOUR decision, the secretary could attach a small pink slip which could read.

I am unable to delegate this to someone because

a)---------------       8 factors listed in my circular of 16.4.70 + some more
b)---------------
c)---------------

It MSSPL was to collect just one days slips from the tables of all the managers, we would know

-          What prevents L&T Managers from delegation decision-making?

A diagnostic study of this type could possibly lead to what should be done to encourage delegation. Such a study would produce a comprehensive "inventory" of the decisions being taken/delegated by managers all over L&T. It would certainly help in categorizing the decisions such as :

-          Strategic Vs Tactical
-          Short term Vs Long term
-          Policy Vs Operational
-          Major Vs Minor (resume committed)
-          Pertaining to Physical Systems Vs Information systems
-          Restricted to group or repercussions likely to be felt in the other groups.
-          One-time or of repetitive nature.
-          Data-based or Intuitive etc etc.

If a check-list incorporating the above mentioned categorization was to be prepared and used by MSSPL study-team, it could bring into sharp focus the entire decision-making process at L&T. A better understanding of this process could lead to better decision rules.

MOTIVATIONAL CLIMATE:

I have mentioned this quite at some length, during my presentations to

-          PRC in 1980
-          OCM in Feb.81

Some 10 years ago, Managers used to earn much more than a Supervisor and considerably more than a worker. They also felt that much more responsible.

In 1982 the gap has been largely bridged with the wages of an unskilled mazdoor equally the stipend of a Diploma Engineer!- at the beginning of the grade!  On the other hand the Responsibility gap has widened!  Absolute Job-Security (thanks to our labour-laws) and militant trade-unions have taken all fear out of a workers mind, leading to rampant reverse-exploitation in the high-wage island companies like L&T.

In Singapore Prime Minister Lee has been raising workers wages on purpose so that the industries would be forced to get out of "low-technology" products-which cannot sustain the high wages-and get into "high technology' products which could compete abroad.

Our government has managed to raise the wages-without any purpose! And what is more we cannot 'fire' low-skill people and 'hire' high-skill people-even if we can continue to keep shedding low-technology products and keep getting into high-technology products-which is itself not so easy for a company like L&T.

By 1992 the income-gap would have been reduced to nil. The cases of drivers whose take-house pay exceeds that of his director-boss would no more be isolated! By 1992, I visualize that almost 50% of the persons whose names appear in the Employee's Details (persons drawing >= Rs. 3000 pm) in L&T' s. Annual Report would be "Unionised"! - and this number would be of the order of approx. 1000 persons out of a total 2000 in that years report!!

Any debate on whether this is a welcome trend or not is meaningless. Any debate on whether any intelligent boy would anymore want to spend 5 years getting B.E./MBBS/C.A. is also meaningless.

The only meaningful question is


"How do you make all the 2000 persons (the unionised and the managerial feel and act with equal responsibility?")

With several companies granting a monthly wage increase of  Rs. 400/500 (e.g. Bajaj) in 1982 to their unionised employees, L&T will find it extremely difficult to maintain the present wage disparity (if any) between the unionised and the supervisory staff. If this is coupled with increasing worker indiscipline and union militancy there could be severe erosion of supervisory and the managerial morale and lowering of  managerial commitment.

What is a possible solution?

I have tried to provide an answer in my OCM presentation of Feb. 81.

There will have to be a complete change in the managerial attitude-from the corporate management down to the shop-floor supervisor.

No more shall we assume that we the managerial staff alone  shall decide all important matters. The union and the workman must share some of the decision-making responsibility-starting with the matters of "How" followed by Where, When, What and finally Why.

Having demonstrated that a wage-gap (and therefore a responsibility-gap) is impossible, the worker participation in management becomes inescapable!
If we wish to remain motivated (anything otherwise is suicidal ) and avoid high blood-pressure, the only sensible thing to do is to completely change our attitude.

H. C. PAREKH