INTRODUCING-THE CAPITALIST EMPLOYEES

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).

25 Feb 1987

To:

Dear Friends                

INTRODUCING-THE CAPITALIST EMPLOYEES                     

What would you do If your company was making losses year after year or It's profitability was declining year after year ?

While you are thinking for an answer, I will tell you what, at least, one

company did.           

The company is Jaipur Metals & Electricals Limited (JMEL).

BACKGROUND

1.   Started            ................    1943

2.   Promoter         ................     Kamani Group

3.   Location           ................     Jaipur

4.   Product            ................     Domestic Electric Power                                           

Meter

5.   Collaborator     ................     Japanese

6.   No.of Employees       ................           1300

7.   Profitability      ................           Good (Till 1971-72)

The Headache (?)

1.  Severe competition.

2.  Rapid rise In manufacturing expanses.

3.  Accumulated losses of Rs.74 lakhs (upto 1976-77).

Self-Prescribed "ANACIN"

Got Itself declared as a "Relief Undertaking" (to avoid legal action from Creditors/Suppliers).

Temporary RELIEF

 1980-82 Profits  .................... Rs.8.4  lakhs.

But If you have TYPHOID, taking self-prescribed Anacin does not help !

Things got worse and losses in 1981-82 went-up to Rs.580-6 lakhs!

Enter the DOCTOR

Government appoints Mr. Kavadia as a Director of the Company.

The DIAGNOSIS

Mr. Kayadia diagnosed the disease as follows  :

·     High manufacturing costs     

·     Expanded Wage-structure     

·     Improper Methodology of working     

·     LOW PRODUCTIVITY

(In our own Powai context, does this all sound very familiar ?)

THE MEDICINE

The Government of Rajasthan was expecting the patient to die (the closure).

But Mr.Kavadia thought that with some pretty strong medicines the patient could still be revived !

So Mr.Kavadia did some plain-speaking (polite but blunt) to the patients - 1500 of them - all the employees of the company.

Then he administered the following medicine  :

a)  Stopped free lunch

b)  Cut-off Government benefits & subsidies

c)  Retrenched 500 employees.

d)  Increased number of working hours per day.

e)  Stopped, all overtime.

f)   Froze wages for 5 years !

g)  Froze Increments for 5 years !

h)  Linked future wage-increases with productivity.

But alongwith all the bitter medicine, he also gave them some,

TONIC

20% share In profit of the organisation to the employees. In the form of equity-shares !

Share-holding

Before 23.06.1986

* The shares are held by an employees co-operative society and cannot   '   be sold In the open market.  When an employee resigns or retires, his   share In the society is transferred to other employees.  So the   share-holding remains Intact.

  

Kavadia says,

"The main reason for the success of the organisation  is not that the employees are now participating in the management of the"affairs  of the company.  The main reason seems to be the employees' stake  in the stake  of the company. There is a feeling of ownership amongst the employees and that seems to have a much better effect than all  the talk of low productivity and economic crisis.

I offered to employees a choice between,

1)    A bright future by surrendering a few privileges for a short time

         and

2)     Complete closure without any compensation.

The employees chose the first alternative and they are proud of having made the right choice at the opportune time".

FUTURE

Seems quite bright.  Management felt confident to introduce new products like

·     Cadmium - Copper wire        (for Defence)

·     Aluminium Alloy conductors   (for Railways)

·     Sllverised Brass strips      (planned)

MORAL OF THE STORY

In order to become profitable once aqain, must companies necessarily go through cancer-like sickness and bitter medicine (or even surgery - operation)

or

Can they actually take advance action of offering tonic to its employees in the form of "shares" to prevent the sickness ?

Friends :

I am not sure that it is such a simple issue.

I am not sure that giving shares to our employees, by Itself, will  help; us to get rid of all our problems. (Remember KOOR INDUSTRY  of Israel ?)

In our own case at Powai, I am not sure that TONIC alone will work.

To cure ourselves of our "high manufacturing costs", I am afraid  some bitter medicine may have become Inevitable, and If our ECONOMY  DRIVE does not prove to bo a strong enough medicine, we must soon  think of other !                                           

H. C.PAREKH