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).

16 AUG 1984

To:

Dear Friends                 

'SCALA - MOBILE ESCALATOR'

In Brazil they call it "indexation"

In America they call it COLA,  (cost of Living Adjustment)

In Italy they call it Scala-Mobile Escalator.

 In India we call it D.A.  (Dearness Allowance)

But everywhere,  it means  the same  thing to  the employees. Whenever  inflation pushes  up  prices  in  the  market,  some index  published  by  the  Government  will  also  rise.   (In India, we call it Consumer Price index-C.P.I).

Whenever C.P.I, goes up, D.A.  goes up, putting more money in the hands of an employee.

The  idea is that  even though  the prices may  have gone  up, with  the  extra  D.A.  in  his  hands,  he  can  continue  to purchase the same quantity  of articles as before.

Rising prices raise the cost of living.

So the experts  thought, "Let us put  more money in the  hands of  an employee-to   take care  of  the  rising  prices  -  to neutralise the cost-of-living rise."

Fine idea!

In fact, originally this is an Indian ideal

We, in India, introduced it 40 years ago.

Americans and Italians introduced it only a few years ago.

Italians call  it "Scala-mobile escalator".   Seems like  they borrowed the  idea  from—our—own—escalator-culture  (remember Bakul Tripathi?).

Except that they  seem to have discovered  something within 5 years  (1979-1984) which we have  still not  discovered after 40 years!  Or do not wish to discover.'

And that is,

Everytime D.A. goes up, cost of production also goes up .'

And if  cost-of-production goes up,  selling-prices must also go up.   (We were forced to  raise the selling  prices of our Switchgear Standard products a few days ago).

If we do  not raise our selling prices,  our profits will  go down.

But  nobody   likes  profits   to  go  down   -  neither   the shareholders nor the employees.

So  what is  the problem  ?   Just keep  raising  the selling prices, whenever costs go up.

But the Italians are thinking.

"No that won't  work.  If we  wish to  sell fertilizer plants in India, our  selling prices must be  lower than the selling prices of the  Japanese manufacturers  (who last month gave a YEN 6 billion  loan to India, to buy  a fertilizer plant from Japan) and our  selling-prices must be lower than those of an Indian company  called L&T.  But we cannot force L&T to raise its selling  prices.   All that  we can do  is  to reduce  our costs, by slowing  down the scala-mobile escalator.—Down with D.A. !"

If our Mr. V.G.  Desai (Divisional Manager  - Chemical Divn.) could hear the  Italians thinking, he would  jump-up and say, "very dangerous thinking!"

He means  "dangerous" for us - for  L&T!  (VGD, let me  assure you, has  no love  lost for  the Italian  workmen'.) And  with all  the  affection he  has  for our  own employees  he  keeps gazing at the following chart.

     

And he wonders,-  how  the Italians  (even Japanese) would  love to  get a copy of this chart ?

Does  Indian  Industry  have  the  "Italian Option"   (of stopping or slowing down the D.A.) ? If not,

3. Can   people   of   Powai,   possibly   increase   their productivity quickly enough  to neutralize the following increases in the wages ?

		Increase/ Employee Rs ./Month
A.	Jan. 1979 Settlement   (Average)	200
B.	D.A. Increase (Jan. 1979-July 1984)	475 to 1114
C.	Apri1 1984 Settlement (Average)	550
TOTAL		1225 to 1864

How shall we respond to these questions ?

H.C. PAREKH