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).
In the enclosed article you will read that
1. Political leaders of Europe are adopting "free-market" policies (free imports and exports).
2. European governments are reducing administrative expenses.
3. They are drastically reducing labour-wage increases.
The new export-import policy announced by the Government on 12th April will permit liberal (in many cases without any licence!) import of raw materials required to increase production. So that will help manufacturers like L&T. But the policy will also allow liberal import of fully manufactured items from abroad -such as fertilizer plants, chemical plants etc. That would help users, and that would also mean L&T will have to compete with foreign manufacturers who are hungry for orders.!
This may mean that L&T may not get a single order out of the six giant fertilizer plants which are to come-up in North India during next 4/5 years'. The orders may go to a European or Japanese manufacturer under the New Import Policy!
Can we afford to lose orders worth Rs.80 - 100 crores in the next 5 years?
Obviously the answer is
"we cannot afford".'
On the other hand, our wages/salary have been climbing rapidly at an average of
Rs.250 per month per employee
Proportion (percentage) of manpower cost to our total output at Powai is rising so fast that many of our product-lines may have to be closed down very soon!
If you have any doubt, see the following chart:
If you do not understand or have any doubts, ask the nearest production manager or personnel officer and he will explain to you.
We have 3 methods to survive:
METHOD I : Do not allow manpower costs to rise
(i.e. a freeze on wages & salaries)
but increase output.
METHOD II : If we cannot increase OUTPUT
then reduce MANPOWER-COST (by
accepting a cut in wages/salaries)
All over Europe and America, Managements
and Unions are adopting Methods I & II
(See enclosed Article)
Somehow ensure that OUTPUT per employee
rises at a faster rate. That means much higher
employee productivity - and NOW!
I am sure all of us (myself included) at Powai
would like to adopt this method - if only we
can make it work.'
And although employee productivity has gone up between 5% - 20% in different shops in Powai during the last 10 months, apparently this increase is not enough to offset the rising manpower costs.!
The chart is all too clear. We can ignore it at our own risk!
There is a limit to how much of our increasing costs we can pass-on to our customers in the form of increased selling -prices.
And I have a feeling that in April 1985 we have reached that limit at Powai!
Before our customers run away to our competitors and before we start losing orders, let us do some serious thinking.
Q. How can we increase our output rapidly ?
Q. How can we decrease our Manpower cost ?
Q. How can we decrease our manpower itself ?
By not replacing "separations"? By offering "Voluntary Retirement" to those who are incapable of improving productivity ? And suppose some of those "incapable" persons do not accept Voluntary Retirement, then what do we do ?
Those who do not wish to experience "Europe" in Powai, please raise your hands !!