Wednesday 20 June 2007
The turnaround of an Indian PSU – A Case Study
When the going gets tough, the tough gets going, says an old Adage.
Electronics Corporation of India Limited (ECIL) widely acknowledged as the torch-bearer of Electronics & IT revolution in India, a company which never heard of a loss went into red post the globalization scenario due to competition from the MNCs and the private sector. The problems got accentuated post the Pokhran Nuclear Tests, when ECIL was included in the Entities List by the US Department of Commerce implying total clamping of export embargoes to ECIL on all items of US origin.
ECIL, which was a profit making body in 1992-97, incurred a loss of Rs. 60 crore in 1998-99 and the net worth of the company got very badly eroded. The company was on the brink of sickness and had to be reported to BIFR (Board of Industrial and Financial Rehabilitation).
However, timely strategic initiatives by the company resulted in an incredible turnaround and this how it has happened.
Employee Communication & Transparency:
ECIL established clear channels of communication with the employees and collectives to drive home the point that the only way to survive is by performing. It was made clear to all that no external help should be expected and that the intrinsic strengths of the company should be fully brought to play in tiding over the crisis. The same was conveyed to head of trade unions and the senior managers across the organization.
The transparency in the decision making process and openness in communicating important information on issues like Voluntary Retirement Scheme and cessation of subsidies helped a great deal in facing the challenges of the company.
Empowering the Performers and Performing Divisions:
Conscious efforts were made to spot performers. Performance and competence were spelt out as the sole criteria in assigning responsibilities and elevating people.
Due to the technological changes that have been witnessed over the preceding decades, several people recruited by ECIL in the initial phase of the company to carryout various shop operations have been rendered redundant and surplus. ECIL succeeded in separating as many as 1049 employees in the period 1998-2002 mainly due to the mature understanding of the company situation by all cadres of employees brought about by the effective communication channels established between the management and the employees.
As an organization, which had its roots and strengths in the R&D domain, it is a cultural shift that had to be worked for in a very focused manner. ECIL has taken up this task in all earnestness.
Chairman & Managing Director and Directors of ECIL have taken upon themselves, as the most important and regular activity, the task of establishing direct contacts with the customers at senior levels to obtain direct feedback. The Heads of Divisions have been meeting the Heads of Customer Organizations and the actual users at the operational level. Rationality and pragmatism have been given importance over bureaucracy and adherence to procedures. These measures have given a boost to the business generation prospects through offering acceptable delivery times.
MoU and the performance of ECIL:
When the company was in deep crisis, the instrument was MoU was very effectively used to formulating its revival plan. While seeking some conditional help from the Department of Atomic Energy, the company committed minimum guaranteed performance over a period of time, which became the base line for formulating the MoUs. This proved to be a vehicle for turnaround and in the process, the company registered ‘Excellent’ rating for four consecutive years with a perfect score of ‘1’ during 2002-03.
Good Corporate Governance:
The company believed that good governance and business performance are not contradictory and if preventive and proactive approach is taken, it may facilitate business excellence.
The threats to the company are many. How they are into opportunities is a matter of challenge to the management as well as to the entire workforce. The quality of common purpose and unity of command demonstrated by the company especially in times of crisis is adequate to validate the company’s capability to combat competition and scale new peaks in performance.
Due to the mandate given and the expectations of all stakeholders, the survival and success of ECIL is not a matter of concern to the management and employees of ECIL alone, but to the entire Public Sector.