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

Friday, 29 August 1986

NO ESCAPE IN THE SKY !

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).

29 Aug 1986

To:
Dear Friends                  

NO ESCAPE IN THE SKY  !

If you  have problems on  earth can you  run-away in  the sky to escape?  Perhaps. But if you  have problems  in the  sky, where can you run for an escape ?

Sometime back, I wrote  to you regarding  the loss-making public-sector  (Govt) companies  which  are trying  to  cut costs.   But because the Govt. owns  these companies ( and the public owns the Govt? ), they can never become bankrupt  !
They can go on making losses forever !  - as long as you and I keep paying taxes.

But a  "private-sector" company  (owned by  share-holders) cannot afford to make a loss.  It  cannot even afford a lower profit ! -whether it is L&T or Eastern Airlines of America.

What is happening to Eastern Airlines ?     

-      12% drop in income despite 5% increase in capacity    
-      Fierce competition from other airlines    
-      Loss during Jan/Feb/March 1986  - Rs. 144 crores    
-      Loss during April/May/June 1986 - Rs. 57  crores
-      Forced  to cancel  5%  of daily  flights  due to  MAINTENANCE BACKLOG.

After reading this, any wonder that "Texas Air" (another airline company) purchased Eastern Airline ?

Although taken over by "Texas Air", Eastern Airline is fighting a bitter battle of survival.

Chief Executive Joseph Leonard has issued following orders :

1.  Freeze all expansion-plans
2.  cut operating costs by Rs. 130 crores within one year
3.  Senior managers to cut expenses
4.  Cancel Miami - London flight
5.  From Charlotte city, cut 41 flights (out of 53)
6.  Sell-off many Boeing 727 airplanes
7.  Lay-off (send home temporarily) surplus employees
8.  Within 3  months, cut  fuel-bill by  Rs. 100  crores (already     achieved)
9.  For 4600 pilots, flight attendants and non-contract workers,     cut pay and benefits by 20% (already done).

When  International Association of  Machinist - IAM  (the Labour-Union), refused  to agree for a similar  20% cut in  the wages of the 12,000 workers, the management  had no choice but to sell the company to "Texas Air" !

And this has forced Joseph Leonard to write to all employees,

"We  may have  to  consider,  however  reluctantly, a  period  of consolidation or even retrenchment ".

What Joseph is trying to tell his co-workers is that,

-      "  When a  company is  fighting  for survival,  there are  no    sides  such as  the  Union  and the  Management  (and  the    supervisors and officers ! ). There is no  escape from the    sky ! "

H.C. PAREKH

Sunday, 24 August 1986

POINT OF NO-RETURN ?

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).


24 Aug 1986

To:
Dear Friends                      

POINT OF NO-RETURN ?

Is  the American Steel  Industry about  to disappear  from the scene ?   perhaps not - atleast  not in the  near future.  But it  could  very well  happen  within  15  years  - before  the arrival of the  21st century !  May be  it is in the final act of a 3-act drama.

One  company  - LTV  -  has  already  applied for  "bankruptcy protection".  This  means, the banks  cannot recover its loans and the  company can retrench  all employees  - without paying any compensation I

But the company about  which I want to talk  to you today is a company called  USX  - the  largest steel-maker  in  America -which will  soon become  the smallest -  or may not  even make any steel before long  I

THE  USX  STORY                                (SOURCE: BUSINESS WEEK: 18.8.86)

At one  time,  USX was  known as  "U.S. Steel"  -  the largest steel manufacturer in the world.   Chairman is David Roderick. The company  had a steel-making capacity  of 379 lakh  tons of steel.

From 1978, USX  started reducing its capacity, In the last  8 years  it reduced  it to  262 lakh  tons.   It closed  down 20 factories and retrenched 27,000 workers.
During the next 4 years  (1986-1990), USX is planning to close down another  4  factories, retrench  another 7,444  employees and bring down capacity to 165 lakh tons of steel.

So USX will be bringing down

-      capacity by 57%
-      employee strength by 38%

But what is the reason behind all this chopping and chipping ?

If you want a one-word answer, it is "COMPETITION".

If you  want  a two-word  answer,  it is  "COMPETITION  & HIGH LABOUR-COSTS".


To give you a better idea -

-      In the  steel  industry, world-wide,  surplus capacity  is 2000 lakh tons of steel.

This means fierce competition.  American  steel makers are finding it difficult to sell steel at $ 400 per ton.

-      American  labour-costs are  33% higher  than  the Japanese labour-costs  and  700%  higher  than  the  South  Korean labour-costs !

So what can USX do ?

-      USX has started  sub-contracting in a big  way and reduced its  own  labour-force.   This  has  helped  it  to  boost productivity.    Earlier  USX  spent  10.8   man-hours  to produce one ton of steel.  Now  it spends only 4 man-hours (its own man-hours) to make one ton of steel.

    But this has not .helped - not enough.

Chairman Roderick says only 2 things  can help -

-      Wage and Benefit cut  (he has submitted a formal demand to the Union on July 29th).
-   Company's   right  to   assign   jobs  and   fundamentally     reorganise work
crews with no union interference.

He  calls  these  his  "last  ditch  attempts  to   restore profitability".

The Union has  responded by going on strike from 1st  August -their first strike since 1959.

The question is,

"Did the management fail to make the employees - and the  union - see the dark clouds on the horizon before reaching  the point of no-return ?"

or

Like  any  good,  Australian ostrich,  the  union  -  and  the workmen - hid their face under the sand to ignore the storm ?

As far as  Powai-works of L&T  is concerned, I do not  wish to sound  like a  pessimist but  atleast,  I do  not wish  to  be accused  of  the  single  biggest  managerial  failure  -  the failure to share the facts of life with the employees.


H.C. PAREKH

Wednesday, 20 August 1986

NOT ALONE

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).

20 Aug 1986

To:
Dear Friends                           

NOT ALONE


We are not alone.

When it comes to cutting costs and raising productivity, we have got company.

And who are they ?

It is an interesting list comprising

-      125 mills of National Textile Corporation         (NTC)
-      Hindustran Machine Tools                          (HMT)
-      Heavy Engineering Corporation                     (hec)
-      Bharat Heavy Electricals Ltd.                     (bhel)
-      Bharat Heavy Plates & Vessels                     (BHPV)
-      Burn Standard Company                             (bsc)

And what are they trying  (especially things which we have not tried yet !) ?

Central Govt. has  told General Managers of  125 textile mills that after  April  1987, Government  will not  reimburse their cash losses.

And what are NTC's problems ?

1.  Low Productivity
2.  Low Output
3.  High wages (34% - 207% of output  value)
4.  Excess Manpower (20% - 25% of workforce)
5.  Lack of discipline

How do they propose to solve these problems?

-      Economy Drive
-      Cut non-productive expenditure
-      Recruitment freeze
-      No promotion
-      No revision of wages
-      No replacement against retirement (550 in last 2 years)
-      Greater delegation of authority to GMs
-      Introduce new blended fabrics Introduce staple and blended yarn
-      Suspended 3 senior executives and a General Manager !

If all of this  sounds drastic, just remember that  during the last 3 years, these mills have incurred losses totalling
                     
Rs. 717 crores !

That is yours (and mine) tax-money !

As far  as the steps  proposed to  be taken by  the others is concerened, we are told that :-

HMT will .

-      raise  export  percentage  from 12.4%  to  20%  (including tractors & watches) modify existing products
-      introduce new products
-      do more project-consultancy etc.
-      save  2.5% of turnover  (sales) during 86-87  & 87-88  (we are ourselves aiming at about 1.5% in 86-87).

HEC will  reduce costs by Rs.  10 crores in  the current year through
  
-      saving energy (power)    
-      reducing inventory  from 7.3 months' stock  to 5.2 months'     stock    
-      reduce wastage 
-      upgrade technology    
-      stop fresh recruitment    
-      reduce surplus workforce

BHPV will try to
   
-      save  Rs.   50  lakhs  every  year   by  installing  word-    processors & micro-computers    
-      increase capacity utilisation from 66% to 75%    
-      reduce working capital need
-      improve material handling

The  newspaper does  not tell  us about  the  plans of  BHEL -whereas

SC lists the following problems (but no solutions .')

-      Lack of professional managers
-      inadequate funds for modernisation
-      high age of shop-floor management and of all things,
-      Low pay-scales ! (I wish we had that problem !)

But whereas  problems cannot  be borrowed  (these are our  own creation), solutions  can be borrowed.   I would like  to hear from  you which  of  these  solutions  we  should try  in  our company.


H.C. PAREKH