Manufacturing requires stable manpower. The Manufacturing process has to be learnt by the team that is working on the shop. This includes the Workmen as well as the Staff. This team would eventually learn the process so well that they would be able to produce high quality products. Over years, the skill of these employees would become an Asset for the Company. I still remember the Shop Employees who used to just look at the Product and tell about the status of Quality of the product. They did not need any Quality instruments to check the Quality of the Product! That comes with involvement and experience. The relations among the employees was always harmonious. This is how the traditional Manufacturing used to work. Workmen used to join a company and they retire from the same company.
But in the past decade, the Companies started exercising various options of employing people that focused on keeping them for a temporary period and getting rid of them when the demand is low. The care for workmen started coming down. The Migrant labor has become a major part of the Employees for many types of organizations. Not just Manufacturing. Even if you go to a Restaurant in any City, you would see only Migrant Labor serving you. They are there in just about every industry.
The Workmen/Employees also are not having a great attachment to the Company as they know that they will be fired whenever the Market demand goes down. In many of the South Indian Companies the Supervisors / Managers do not even know the Hindi language that the Migrant Labor speak. There is no ‘relationship’ between the Company and the Workmen. Workmen go off on holiday whenever they want. They do not even care to inform their Company as there is no ‘relationship’.
Earlier even the MD of the Company would come to shop floor and be in continuous touch with the Workmen. There is always an emotional bond between the Employees and the Company. Now it is still there in some companies with permanent workmen. But almost every Company is employing temporary workmen in some form or the other. The Company does not have any relationship with these workmen. Workmen return the favor!
Our observation is that there is no winner in this game. Both sides are suffering. Let us see how.
Companies: Companies do have the option of firing the employees when the demand goes down. But they also cannot get the employees when they need. When there is huge Market demand and pressure from Customers, the Companies are not able to serve the full demand. Companies lose production for every major festival. Our observation is that Companies are losing the opportunity to do about 15-20% higher Top line just because they are not able to mobilize the people when they want. This is applicable to every industry. As the Employees do not have great attachment to the Company, the Quality of their work is not the best. Companies lose on this count too. The Quality losses due to this reason are at least to an extent of 3-5%. As there is high attrition, the Productivity of the Workmen suffers. Employees take a long time to come to 100% output level. Companies are losing about 30-40% output due to this. The nature of employment is one of the biggest reasons for the low Productivity of the Indian Manufacturing! Companies seem to simply ignore this and focus on short term gains!! Are there any gains at all? Companies are losing on Topline, Bottom line. Most of the Companies are in a hurry to show the short-term results and ignoring this elephant in the room!
Employees: Employees can jump from one company to the other at their will. They are able to find jobs. But they also lose them at the drop of a hat! When the Economy is down or when a calamity like the current one happens, the Employees are undergoing unimaginable suffering. The fate of Labor in the current COVID-19 Pandemic is pitiable and it troubles the collective conscience of the Nation. The People who are making the Country move are moving on their feet for 1000s of KMs to reach their homes! Many are losing their lives on the way! Even in the normal times the Employees do not have a longer-term idea of their status. They do not know when they would be stopped by their employer. They do not have an idea of how they will educate their children, nor they have an idea of how they will build a house of their own and so on.
So, who is winning? No one! There is a need for a larger solution that will take care of the interests of everyone involved and help India to improve the Productivity in its’ manufacturing.
Here, we are suggesting a Solution to this Problem.
We are not claiming that the Solution that we are proposing is the Best one. But we are pushing for ‘A Solution’. If the Powers that decide these Policies hear our voice, we will be happy. The current Government is having the Leadership and the mandate that are needed to take some bold steps! As a Country that is trying to step up to be a Developed Country, we need to address this area that is begging for attention. COVID highlighted many problems in the World. The issue of Temporary Labor in India is one of them.
National Employment Grid (NEG)
Today there are laws about Minimum Wages for every type of Industry. These are serving well. Government is updating them in line with inflation. So, we will not talk about how much to be paid. The Minimum Wages can definitely serve as the basis.
A National Employment Grid (NEG) for workmen should be formulated. This should be a Cloud based Grid that will allow every able person to register themselves as ‘willing to work’. To begin with this, Grid may serve the Workmen in every industry. It may cover the employees below a certain level in I.T and ITES industries too.
An Indian Citizen should be able to register himself/herself on this Grid with some documentation to prove their Citizenship. They can denote their preference for the Place of work. They may indicate their experience or Training credentials. There are several Skill Training centers across the Country. The qualifications that these Centers give and the basic Educational Qualifications that they have will be updated on to the Grid. The additional training / experience data will be automatically updated on to the Grid from the Companies / Training institutions. The Grid may use the Aadhar card and the Aadhar number as UID.
The NEG will address the following critical elements:
01. NEG is a must: Every Company wanting to engage Workmen have to go thru only the NEG. No Company can recruit Employees directly.
02. Mobility of Workmen: The Mobility of Workmen across the Companies is not discouraged. It is left to the free will of the Workmen. This will ensure that they are not tied to a Company and they will be able to choose the Company that they will work for in the region of their choice.
03. Wages: The Minimum Wages serve as the minimum Safety net from government. But beyond this, the Wages are determined by Demand and Supply in the respective regions.
04. NEG Core fund: Every Company that wants to use the Labor from the Grid will contribute a certain amount to the Grid for the Welfare of the Employees every year. This fund will be utilized for a few purposes that will be detailed later in this article. The Private Limited and Limited companies that have to spend on CSR will be encouraged to contribute to this Fund. Government may allow this as ‘spent on CSR’. The amount that a Company has to contribute will depend on their Turnover. The Companies that fire the employees most will contribute more. Those Companies that do not fire their employees will be asked to pay only a minimum amount. They will be encouraged to contribute more as it would be eligible as a CSR spend.
05. Unemployment allowance: The Companies can discontinue the employees when they do not have demand. But the Workmen will be paid a certain percentage of their Wages as ‘Unemployment allowance’. The amount of allowance will be directly related to the number of years of experience and Performance.
06. Annual Leave: The employees will be able to choose when they want to take their annual Long leave that may coincide with any festival of their choice. This will ensure that every Employees goes home, and it is not a surprise to the employer. Employer can balance their employees by taking those that have different preferences to ensure many people do not go off on leave at a time.
07. Record of Employees: The Performance record of every employee will be uploaded by the Company on to the Grid every Quarter. The performance may be measured on the basis of few indicators such as:
08. Independent Auditors: Government may appoint Independent Auditors to audit the whole system from time to time.
09. Skill Building: Government will open Skill Development Centers in partnership with Private Players to train the Workmen in various activities required in the Companies in various industries.
10. Continuous Education: Employees will be encouraged to continuously equip themselves with better qualifications. Government will subsidize the education through Skill Development Council. This will ensure that the Employees are upskilled in line with higher automation that will happen in every industry.
11. Housing and Education: The Employees will be provided with subsidized Housing and support for the education of their children wherever they are working. These benefits will be applicable to those Employees who fit certain conditions:
a. Those who have a good Performance Record across companies that they have worked for.
b. Longevity of their Service.
12. Higher wages for a Company that Is not able to retain its’ employees. A Company that is firing its employees frequently or not able to retain its employees as they feel the working conditions are not good will have to pay a higher Wage to attract employees. While partly the demand and supply will take care of Wages, the Government may penalize those companies that do not take care of their employees.
While the NEG will be supported by Government and the Industry, the critical factors of how long the employer will retain the employees, how long will an employee work at a Company will be decided by the larger forces at play. A Company will be able to retain Employees for longer time if they take care of their employees. If they are firing the employees too soon, they will have to pay higher wages, they have to contribute more to the NEG Core fund and they may not be able to attract the employees like they are able to do it now as the workmen will have a support structure to find alternate employment.
Employees will be encouraged to stay with companies and give good performance as that will decide whether the employee will be eligible for the Housing and Education benefits. Also, the next employer will take him/her only if there is good performance.
Funding: How will the NEG get funded? How will this be a feasible option? How can Millions of employees get Housing and Education for their employees? We believe the contributions from the Companies and Government can make it happen. Companies will gain from this system more than they contribute as there will be a stability in the Workmen. While workmen can leave and join another company, he will be encouraged to stay in one Company as he will become eligible for Housing and free education for his children if he puts up good performance in companies. If the Companies pay a competitive Wage, they can retain good employees.
Companies would gain in Top line, Bottom line (Productivity, Quality) by making NEG a success.
A Stability will come about for the Companies as well as the Employees. The Longer-term objectives of both parties will be addressed by a NEG.
We are sure that this suggestion can be improved in many ways. But we should look at solving this problem once and for all.
With the current situation of hiring and firing, no one is winning!
COVID-19 the Global Pandemic has presented a further toughening of the Business conditions for the Businesses across the World. Already the Businesses in most of the countries had been suffering due to slow economies. Now this Crisis is going to really push the Businesses to the brink.
Let us examine the Leadership aspects of such a situation. What type of a Leadership is required in this situation? How do you guide your Business with a Clear Head? Let us examine some aspects of it.
Indians are generally not very Rule abiding citizens. We violate rules in just about every sphere of life. From Traffic to Income Tax. The Current crisis requires People to practice Social Distancing. The Prime Minister had given a call to the Citizens to practice a Janata Curfew on 22nd March’20 from 7 am to 9 pm. So far, the response had been very good. There may be some amount of underlying fear with the Indians about the virus. But Modi’s clear communication also helped in a big way. You can only see probably 5% of the normal crowds on the roads as reported by TV Channels. This is a very good example of good Leadership in Crisis.
Support the Government
All of us have our own Political affiliations. I do not have any particular Political affiliation. I support whoever is doing good work. I do not try to be burdening myself with one Party as against another one. I do not support everything that Modi does and same is the case with any other Parties. I believe we should support the Political Leaders in the Country as they are the people who are leading us. We are electing them. I may or may not have voted for the Party that is in power now. We may not like their ideology. We should protest about that in the right forums. We should try our best to influence them. But when it comes to Nation Leading, we should support the government in Power. This is very much needed to ensure Governments have fair chance of succeeding and doing something for us.
Leadership in Crisis
Right now, the Businesses are in a deep crisis. The Order cancellations / Holds are happening as you read this article. The Businesses are scrambling to tackle the situation. Every Company requires good and Clear Leadership now.
Every Leader will have to address at least two areas:
a) Taking care of your Employees in the current situation.
b) Taking care of your Business and giving the Leadership it requires.
First things first, you need to take care of your Employees immediately.
It is quite possible that you may be confused about where to begin and what decisions to take. Most of the Companies might not have had similar situations. So, there are no precedents.
Right now, all your employees would be filled with a certain fear and uncertainty. You need to address that first.
We need to work out the revised way of working for all the employees. Do not ignore this. Do not behave as if it is work as usual. Do not wait for the employees to start protesting. Be Proactive in this and address the fears.
Some of the following decisions may have to be taken:
- How will the Employees come to work? If they are coming in their own cars / Two wheelers the risk is lesser. But if they are using Public transport, then you need to provide them with alternatives. The number of Buses is cut down in many cities. The Buses that are there may be crowded. If they can work from home, it is a good solution. If they cannot, then you need to bring them from home. Do not hesitate in spending this money. The Employees only are going to help you come out of this crisis. No one else.
- What precautions to take? Take the help of Experts in training your Employees about the precautions to be taken by them and their families. There is overload of information on the net. Everyone is an expert now on the subject of Corona! Take the information from authentic sources.
- Introduce new practices at work. On the basis of what you learn from the Experts introduce new practices and behaviors at work. These practices may involve washing the hands more frequently, using hand sanitizers before after meetings, not shaking hands, having more remote meetings than face to face and so on.
- Do not be ‘Top down’ in these decisions. While you should definitely lead the progress in the area of Employees, it is better for you to involve more employees in deciding what all specific measures to be taken. Let not HR be the only function that will decide everything. We can avoid the ‘Not invented here’ syndrome and avoid negative fallout from employees. It is after all their working conditions that we are defining. Let them participate actively.
Try and reduce the risk of exposure to your Employees to zero. You may not arrive at all the measures in one day. But keep reviewing the progress every day. You have to make the Employees comfortable again. It is very important.
Address your Business
Many Businesses are suffering now. There may be cancellations of orders / Postponements. You need to lead your Company in this area too.
The Sales of March and at least the first quarter of next year will get affected. That is for sure. But you cannot accept a meek surrender to the situation.
If one door closes, surely there will be another Door that can open. Consider some of the following:
- Right now, the Hospitals will require a lot of Products to handle the spike in the activity. There can be big business waiting in terms of the Hospital equipment like X-Ray equipment, BP Apparatus and several other equipment, Support equipment like Air Compressors, Hospital clothing, Bed linen are all required in big numbers. The Hospitals are bound to be overburdened now. So, any products that help them to set up temporary hospitals quickly will be helpful. If you are not in this area, you may not want to get into this equipment now. But if these are related to your Businesses, then you can contribute a lot to the situation by producing more of all these.
- If you do not have anything to do with the Hospitals and their equipment, still you can look for opportunities to expand into. What can be the New Products that you can launch? What are those Products that you wanted to launch but not able to due to pressing commitments? Prioritize them now and bring out a bunch of New Products that will give you additional Sales once the current crisis diminishes.
- If you had been planning to get into New Markets, it is time to do the background work now. If you have to prepare some products for these new markets, this is the time to prepare. You may not be able to get your team to the new markets right now. But all the planning and background work can happen now.
- If you had been struggling to reduce the Costs, now this is the time to make progress on certain Projects with Task forces working on Cost reduction. Create an internal competition with Cost Reduction Brainstorming Sessions. Try to make big progress in the area of Cost. You can aim at re-engineering your Costs during this period of Crisis.
- If you had been planning to implement Skill Based Training, this is the right time for it. Define skills for various functions in your Company and start taking the help of E-Learning to skill up your Employees. E-Learning is the right tool for training Employees in this situation. It will not require employees to group in to one room. Your team should be able to deliver much more by the time Business comes back. Set up the Online Training school for your Staff and Workmen.
- If you had been planning to implement Industry 4.0 to improve efficiency on your shop floor, this is the time to implement Specific projects in Safety, Productivity, Quality Improvement and so on.
It is good to reorient your Goals for the year 20-21. You can prioritize areas business other than top line alone. As earlier said, you cannot meekly accept the going down of the Turnover in the next year. You should find alternative ways of growing. You should infact discover a few more areas of growth and overall emerge as stronger company from this disaster!
When I checked with a HR Head of a Company recently about how they are handling COVID19, his response was that probably there is some amount of overreaction and Social media hype about it. But looking at the rapid spread of the Infections, maybe he changed his mind by now. COVID19 is declared as a Pandemic by WHO and India declared it as ‘Notified Disaster’. I think we need to take it seriously to ensure we stay in control.
Why a response is needed from Corporates?
COVID-19 is currently coming from People who travelled abroad. Corporates contribute to a good proportion of the Foreign travel. Foreign travel either for Business or for pleasure by the Employees of the Corporates. If we include the Children of the Corporate Executives studying abroad, the Corporates contribute to a lot of Foreign travel. Hence, Corporates can play a very important role in controlling the spread.
Indian Companies are perennially in Crisis!
If you look at the Eisenhower Time Matrix, most of the Indian Corporates are perennially spending a lot of time in the Q1. ‘Urgent and Important’. There are too many Crisis and we keep handling the issues right at the brink. Not a good thing. But we keep doing it. Indian Corporates are experts in living at the edge of the Chaos. We don’t quite get into full time Chaos. But we keep going in and out of them just like experts!
My experience with the Indian Corporates is that when a Project is taken up, we ask for a lot of time. We fight for more time for the Project with the Boss. You would think the team would really do a great job by working on it systematically over the period of time taken. But most often I start getting calls from the team two days before the Deadline agreed. They would be asking for clarifications about the Project. They work very hard over those last few days and Complete the Project. It would never be a Perfect job. But it won’t be a bad job either. I am not saying 100% of Companies and 100% of the Executives work this way. Maybe you do it much better in your Company?
Because of this dubious ‘capability’ to work well in a Crisis, I expect the Indian Corporates to do a very good job.
But what is Critical is that they should identify it as a focus area and attend to it. A Clear Leadership is required for this Pandemic / Notified Disaster. Otherwise everyone will be busy with their existing Crisis situations and wait for COVID-19 to become ‘Urgent and Important’ !!
What are the areas for focus in this Disaster?
There can be at least 4 areas that a Corporate should address.
a) Your Employees: First focus area has to be your Employees. If you take care of your Employees, you are maintaining a big group of Healthy Citizens who can do more in this situation. Even if you do not do anything for the Society directly, maintaining your Business and contributing to the National GDP in this situation is a good enough contribution. Many companies are slipping on their growth right now.
b) Your Vendors: Second focus has to be on your Vendor Partners. If you are a Big company having several small vendors, then you can contribute a lot by helping these vendor partners to face the Challenge. It would also help you to keep the Production going without supply disruptions.
c) Your Customers: Then comes your Customers. If you are able to keep your Employee flock together and healthy, have uninterrupted supplies you can take care of your Customers. You would contribute to Economic growth in this challenging time.
d) Your City / Society: Then the City in which you are operating. If each corporate can contribute to taking care of part of the city that you are operating in, it can be a great help to the Government.
There can be more angles to a Corporate’s Circle of influence. But let us start with these.
What can you do?
01. Recognize the Problem: First of all, we need to recognize this as a Serious Problem. We cannot be lost in our ‘Urgent New Product Projects’, ‘Customer Line stoppage issues’ and so on. Please look at handling the COVID-19 as in the same direction as attending to all the Business Emergencies that you have. You are only modifying your approach and attending to an underlying issue for every project in your Company. Special effort is required for Corporates to recognize it as Problem as we are used to responding in the last minute. This is one problem that you would not like to respond in the last minute.
Data says that just a month back there were just 4 cases of the Infection in Italy on 21st Feb’19. On 13th March, there were 15,000 with 1400 deaths! Containment is the critical action that you can take. There is right now no medicine for this Virus.
02. Learn about the Problem: It would help to learn about the Problem from Experts. You may not be generally in touch with these Experts. You may have to contact someone in WHO or AIIMS or any of the Private Corporate Hospitals where the knowledge may reside. Invite an Expert to your Company and let your teams understand the Problem and the precautions that we need to take.
03. Formulate Teams: Formulate teams to address the four groups of Stake holders that you want to address. Depending on the resources that you have, you can prioritize in the Stake holders. Have clear leaders for the teams and Objectives that they have to focus on.
04. What can be the Goals: Single biggest Goal is for everyone to stay healthy. But the Process goals have to be the New Behaviors that you want the Stake holders to Practice. Some of the new Behaviors can be as follows:
a. Spreading the knowledge about the Problem and the seriousness.
b. Not shaking hands. Practice Namaste instead.
c. Working in Shifts to reduce the density of the employees.
d. Using Video conference even for local meetings.
e. Maintaining some distance between you and your colleagues.
f. Avoiding non-essential travel.
There can be many more practices that you may define in your Company. This article is not meant to define a complete list of Best Practices anyway.
05. Create Champions for monitoring: Some of our Colleagues are naturally more disciplined and keen observers. Eg. Audit department colleagues, Quality Department colleagues and so on. Use their services to monitor the practices that you have defined. As these are new practices / behaviors that we are trying out, there are bound to be violations. These Champions have to identify the violations and keep talking to the Teams.
06. Quick Decisions: In a Crisis, there have to be quick decisions. There can be a small team of Senior people who can be authorized to take decisions as needed. The Teams have to be informed about this.
07. Communicate, Communicate and Communicate: Communication is another important aspect that is very critical in this situation. It would be quite okay to over communicate. Let the Problems and solutions be known to everyone in the Company. Maintain transparency. Especially in the light of Bad news. Whatever is construed as Bad news can be screened before relaying. This is to ensure spread of undue panic.
Through your efforts if you can keep your Employees healthy and also create Soldiers who can contribute to the immediate society around you, then you have done a great job!
You would have also trained your Team to handle a real Crisis before it really hits you hard!!
How are you responding to COVID-19? Please share so that Others can learn from you!
Act fast and Prevent the spreading of COVID-19!
In the past few years, I have been witnessing an aggressive approach to Customers from Companies who pride themselves as Customer focused Companies! I will be talking about few Companies specifically. But I am not saying that only these companies are adapting these aggressive approaches to customers. There may be many more. I am talking about these companies on the basis of my personal experience. Experience of others may be different.
I have been Banking with ICICI for about 25 Years. I have good amount of Deposits with them. I am a decent size Customer for them. I have Savings Accounts with them as well as Current accounts too. As I know the Bank for 25 years, I have a right to talk about them. Currently I am actively looking at shifting away from this Bank due to two reasons.
The Bank’s service is deteriorating fast. They were not helpful to me in some specific cases. They will quote their Process when I ask for help. The Staff of this Bank are remarkably unfocused on Customers’ Point of view. Most of the Staff are young and totally untrained on Customer Service.
a) In addition, they adapt a very aggressive approach towards Customers to get more business from them:
a. If I or my wife go to the Bank, the Staff will be all over us. Not to help us. But, to ask for Deposits, ask us to invest in Insurance and so on. 90% of the Visits are marked by Staff asking us to invest in some schemes.
b. If someone smiles at me, these days I am turning my face away as the second sentence would be about investing.
c. Whatever may be the agenda with which we go to Bank, they will harass us about investing. They will ask for Account numbers, look at our Deposits and then will go after us. Right now, a visit to ICICI Bank has become very unpleasant.
d. They also approach us on Phone. There are calls from their Call centers about various schemes. They also call from the Branch where we have accounts. They keep offering the same thing even though we said NO to it. They offer me Overdraft on the basis of my transactions. I said no to it. But they don’t care! They keep calling every week and offering the same! I am amazed by their insensitivity. I keep picking up the call as the number is a usual land line or Cell number. If it comes from the usual 14*** then I do not even pick up the call.
ICICI Bank may be giving their Employees a wonderful incentive to get the Business! Otherwise I can’t imagine the employees to be so proactive. Earlier it used to be the Marketing guys who have these targets. It looks like every Customer facing Executive is given Targets now! With this, they have turned every employee in to a Marketing executive. Is it good for ICICI? Whoever has taken this decision, has committed a big mistake. Now there is no Customer Service at the Bank. It is only Customer harassment! I am talking from personal experience!
I own a Volkswagen Vento. I bought this car in 2012. Since then I spent a good amount of money on this Car. Somehow my experience with Volkswagen had been very bad. But I can say I am suffering the wrong choices that I made with reference to choosing Diesel Car as well as the Brand.
But my experience with the Dealer of this Car in Coimbatore is very bad!
- The Bill for the Servicing is never small. I am suspicious of this Dealer as once they suggested changing Brake Pads when they have just changed it in the previous Service. Since then I am suspicious of their intentions! When I countered the Service Executive that the Brake Pads were just changed in the previous Service, he changed his tack. I never trust this Dealer after that.
- After Service, the Volkswagen (Being Customer Centric!!) asks for feedback. First the local Dealer will call. After that Volkswagen themselves call from Mumbai. Initially I took this seriously and gave genuine feedback. If you say you are happy, you are let go there. But if you say you had a problem, then the harassment is more. They will arbitrarily call you whenever they want and ask for more information. In the initial days, I took it seriously and gave them further feedback. For one Servicing, you have to answer 3 Calls if you told them that you were not happy with something. If you don’t pick up the call, they will go after you. I think the calls are made by a Software program. The program does not get tired of calling you till you pick up.
- Now in the initial days in all my innocence I looked for feedback or addressing my issue that is given in the feedback. There is never any action taken and there is never any feedback on my feedback.
- Since then I just stopped answering the calls. If they fool me by calling from different numbers, I just disconnect if they say ‘Volkswagen..’.
- Is this what Volkswagen wants? To harass their Customers?
With my experience of local Dealer and the Company I have decided that I will never ever buy a Volkswagen product and avoid all Companies that this Dealer represents!
I am not talking about the Dealer as he may be a Small company. I am hoping Volkswagen will learn from this case study.
I am trying to sell a Flat that I own in Coimbatore. I decided to put an advertisement in Quikr.
You can put a free advertisement in Quikr. But once you put it, you are chased by their Executives asking you to get into paid section. That is not the end.
Once you pay up, they keep bombarding you with calls to upgrade yourself!
After we suffered at their hands with the first advertisement, my wife became smart by the second one. She did not pick up the barrage of calls that they were making after inserting the second Advertisement.
Is this the way Quikr wants to treat its’ Customers? Is there no other way but to chase Customers and wear them out?
We got used to using Swiggy as many people have. Of late, there are many bad deliveries from Swiggy. When you order for Dosa it arrives without any accompaniments. Swiggy App has provision for taking feedback from Customer.
We keep giving feedback. Neither the Restaurant concerned nor Swiggy takes any action on the Feedback! Swiggy App though says ‘Aaargh !! Not acceptable !’ when you give feedback. You may fooled to think that they will really take some action!! Nothing will happen!
Swiggy thinks that we will never go away from them! We as a family are planning to prove them wrong!
There are several more examples. Ola Auto Drivers routinely ask for adding more money to what is shown by the Ola app. Otherwise they will refuse to come OR delay it so much that in a panic you accept their demand or you cancel the ride. If you cancel, sometimes you have to bear cancellation charges. We routinely rate these Drivers low. But no one acts on your feedback! More Drivers keep asking for extra money!
Is this becoming a norm in India? You aggressively go after the Customers for Business using the Technology and connectivity that is available. But you don’t use the same technology for taking care of your Customers?
You give your Executives such an aggressive target that they go after the Customer as if it is a bounty hunt!
Whoever is designing the Customer service in these companies and many more are getting it totally wrong! Customers will respond and dump these companies!
Among these bad examples, there are a few good examples too.
Anandaas Restaurant, Coimbatore
This restaurant genuinely cares about its’ customers. The whole Owner family including the 80 year old Patriarch are in their Restaurants. Talking to the Customers while they are in the restaurant. There are always enough Executives around to talk to the Customers and keep servicing them. The restaurant is always innovative with their menu. They keep bringing special items on the weekends.
As the restaurant is a good one, the crowd is always heavy. But the restaurant’s service speed is very good. With this they try to minimize the waiting time of the Customer.
They are truly focused on the Customers. They don’t harass us with the phone calls for feedback! They make sure they give good service by interacting with us while at the Restaurant.
Invest into the relationship with the Customer
Companies need to shift their focus on to medium / long term. They need to invest into their relationship with the Customers. They should not treat the Customers as Cows that should be milked continuously without taking care of them.
The Targets to employees in the Companies have to be refocused. The focus should be more on the relationship and service to the Customers and less on the immediate results. They should believe that if they maintain good relationship with the customers, they customers will keep coming back to them for all their needs.
Look at everything from Customer point of view: Companies need to learn to look at everything from Customer Point of view. Improve your service to Customers on every touch point. Eg. ICICI Bank gave us trouble on several specific services. When I wanted to pay my Brother’s travel in foreign exchange (as he had come to conduct a Training program for my company), they harassed me a lot. Finally, I had to fight with the Executive concerned to get it done. This is just one example. Companies have to understand the Customer point of view. They may respectfully disagree. But they have to understand first.
Launch more services for the Customers: Measure yourself with the number of services that you launch for your Customers and how simple are the services that you already have for Customers. Eg. ICICI Bank shows a lot of aggression in terms of following up with the customers for more Business. I cannot see the same aggression in solving my problems.
Have personal touch: Amidst all the rules of your Company, still have personal touch with the Customers. Eg. I keep asking the Volkswagen Dealer that I am having bad experience with the Vento car. If he takes out the expense that I had with the Car and tries to explain to me as to why I have spent more money on my car, It will help me a lot. Right now he never listens to me on this. He is just worried about the current bill.
In Banks, today there are Customer Relationship Managers. You would think they have your interests at their heart! This is another designation for asking for more Deposits! I was very disappointed to be fooled!!
Companies should believe that their true service will bring them the Business. They need to believe in this fact.
I have spoken about few specific companies in this article. If anyone from these companies are reading this article and stung by the criticism, they are more than welcome to engage with me. But not for more Business!! I am willing to speak to them if someone senior approaches me and proves to me that they are willing to learn! Otherwise, don’t bother to call me!
I hope Companies would Learn the true definition of Customer Service!! Otherwise they will disappear from the Business map sooner than later!
We have been hearing about Industry 4.0 elements and the amazing change that it can bring in your Company.
It is heartening to see a few companies getting into this game and trying to improve their efficiencies. Many more companies should get started with the Industry 4.0.
Among companies that are getting in to trying Ind 4.0, there are at least two types. Those who are setting up new Factories. These companies are going in for across the factory implementation of Ind 4.0 and trying to define a new level of Manufacturing efficiency in the Company. Companies who are trying to do this are few right now. I am sure once there are a few case studies of Paradigm change in the industry, the momentum will pick up and more companies would attempt change in a bigger way.
Many Companies are trying to wet their feet. They are trying to do one Project that would give them a feel for the Cost / Benefit. Many are trying out in the area of collecting more data from a Machine and trying to predict its’ Breakdown / Performance.
As we support Companies with the Industry 4.0 applications, we at IMA are able to see multiple applications and we are able to get a feel for the big change that Ind 4.0 can deliver. Can Ind 4.0 be the motivation for the Indian Manufacturing to turn to improving their Productivities and Efficiency?
I am presenting here a bunch of areas where you can make a beginning. There are very few Companies and very few People who have really done something in the area of Ind 4.0 in India. But there are some good resources that can help you start off. Everyone will learn together. The provider and the receiver of the Service.
01. Assembly Lines: Companies are looking at ‘No fault forward’ Lines. Their goal in these lines is ‘Zero PPM’. Gone are the days when we say 99 ppm is our target. Now companies are trying to achieve Zero PPM! Assembly lines are getting designed that can deliver the Zero PPM. As many of the CTQs (Critical to Quality parameters) as possible are getting checked online. The Quality data is getting captured at each station with the help of Bar codes / RFID. Assembly stations are remembering the Operators who are working at each of the stations. These Stations also capture the information related to various losses at each of the stations. The Managers review the Lines using the data that is coming from this individual equipment. The Line keeps sending updates about the Production, Quality etc to the relevant people in the Management.
02. Machine shop: The Machine Loading Plan is being done with the help of a Software. The E-Machine Kanban is scheduling the Production across the machines in the machine shop. This itself can give a huge benefit to many companies. The Machine shops keep losing a lot of capacity due to the Scheduling issues. In addition, the Companies are monitoring the Cutter life with the help of sensors to avoid Rejections before they change the cutters. Many more individual applications are being tried out.
03. Predictive Maintenance: Another area many companies are trying out is in the area of Predictive Maintenance. The existing data from a machine itself can give several insights. In addition, more sensors are put to collect data on the condition of the machines like Vibration / temp of a motor to predict the condition and act before a break down happens. Companies are striving to create Digital Twins of their machineries and predict the performance of the machines.
04. Online Quality Management: The Offline Quality Plans are getting online. Companies are trying to collect data on the Quality of the Process & the Product and act on the Quality issues online. The Data on Quality parameters may be picked up from the machines online or sometimes the Quality data may be checked by the Supervisor. The Quality checks can be made by everyone in the Factory and not just the hapless Quality Inspector! As the Data on Quality is available online, a lot of analysis is possible to understand the process / people.
05. Sub-contractor Integration: A Company that has many Sub-contractors can integrate these Sub-contracting locations as if it is one big Shop floor. Schedule the Sub-Contractors close to the Point and Time of need that goes along with the Demand Planning of the Company. The online information about the Status of the Machinery, resources in the Sub-contracting locations can be available for the Company. The rescheduling of the parts can happen online on the basis of the condition of the machines at the sub-contracting locations. You can monitor the Preventive maintenance schedules at your Sub-contracting locations. You can help your Sub-contractors to plan the Maintenance schedules. Once you treat them as one big group of machines in your Shop floor, you can do a lot more.
06. Supplier Integration: You can schedule your multiple suppliers for a Part on the basis of their Quality and Delivery on a dynamic basis. You don’t have to wait for the Supplier rating and correcting the Share of Business at the end of the year / half year. You can act in a more dynamic manner. The Dispatches from your Suppliers can be controlled online by issuing the E-Kanban Cards close to the Time of need. You can monitor the Final inspection of your Parts at the Supplier end online. You can monitor the ‘Approved Inspectors’ at your Supplier place online. Depending on the cooperation of your Suppliers and the need, you can monitor the Quality of Process at your Supplier end. You can give feedback on the Quality of their supplies to the Shop floor teams at suppliers directly from your shop floor.
07. Dealer Integration: You can go forward with your integration of Business Partners and integrate your Dealers into your network. You can have the online information about the Products that are moving in the market and keep adjusting your Production Plans. You do not have to wait for the Sales team to give you schedules. You can understand the Consumption pattern of your Customers more online using the connectivity.
08. Skill Development: You can make BIG changes in the way you train your Employees. You can train them on Micro Topics using Micro Learning modules on a continuous basis. You can use E-Learning for this. With a good E-Learning developing partner, you can improve the Skills of your Employees at a much more depth than the conventional training. Eg. If Lean implementation is your priority, you can train your Engineers on ‘Time and Method study’ after which they can carry out the projects in the shop floor. You can use the Partner to certify your employees on Skills and Results. This perhaps is one of the areas where you can get BIG results and transform the way you run business. Skills have not been at the Centre of the Business in India for too long.
09. Problem Solving: You can bring the Problem Solving in your Company online. The Problems can be allotted to the employees and the various stages of solving the problems can be brought online. The Employees can be taught to work in a systematic way for Problem Solving using an App.
10. Promoting Learning in your Manufacturing Process: Today the Quality Plans are put, and the Quality Plans are not getting updated with the learnings from the manufacturing fast enough. If you have a Process from which you are collecting a lot of data online, then you can let the Quality Plan learn from what is happening on the ground. You need to keep recording the Quality of the Product that is produced online or close to being online. Then, the Process parameters are captured as well as the result of the Process condition. From this, the Quality plan can learn using Artificial Intelligence much like how your Google maps app and several other apps learn from your usage of them.
There can be many more areas where the Ind 4.0 elements can be used. Some of them may sound like ‘Hey, we could do this earlier too’. Does it matter if you haven’t done it earlier?
Let us use this current wave of interest in Digitalization to improve Efficiency on your shop floor and that of your Partners to give better service to the Customer and improve our competitiveness in the market.
But there are a few MUSTs for you to get on to this journey.
Come to a Basic level of efficiency: If your Company has never visited the Lean principles, you have never heard of Kanban and other Best practices, then you have some work to do before you go on to the Digitalization. Many companies did not move to use the Best practices so far. If current Digitalization wave is interesting you, that is good news. You just create a Phase 1 where you implement the Best Practices. The results that you can get from the efficiency improvement can pay for your investment in the Digitalization!! Let us turn the adversity of ‘low efficiency’ into a virtue to pay for your Ind 4.0 efforts!! There are very few companies in India that can say that they are very efficient! There may be huge scope for improvement in their own shop or in the shop floor of Partners or in the Market place. Exploit this inefficiency to pay for your big efforts in Ind 4.0.
01. Have a BIG target for your Ind 4.0 efforts: Only a big target will help you adapt the Best practices using the technology. For 10% / 15% improvement in Productivity, you don’t need Technology. Aim at doubling your Productivity / efficiency. Then, there can be a challenge for you to find technology that will take you to next orbit. Disrupt your Company with technology. Don’t try to cut vegetables with Bahubali’s sword !!
02. Train your Teams: Please remember however much the Managing Director may know about Industry 4.0, you can’t implement it without an urge of your team. You need to educate your team about what the possibilities are. Current level of knowledge of the Engineers / Managers in the Industry is quite bad. Let the thinking happen across your Company and aim at making the Ind 4.0 implementation an Organization wide initiative and not just the fad of the top man/team.
When are you starting off on your Transformation journey?
In Indian Manufacturing Companies, lot of follow-up is needed to get things done. You can’t just assume that if you have agreed with your team about certain actions, all of them will just happen. You also may not get information that the actions are not happening. When you eventually check with the team, you may have a surprise!
My experience is that this is prevalent in companies where the Business Systems are not well established, and the Teams are also less trained. In addition to this, in Indian Companies the growth is higher than what happens in Companies in Western world. So, there is something new happening frequently.
I have seen many Indians who worked in Western Countries for a long time, struggle to get adjusted to the Indian environment where they just don’t get a grip on the situation. They suddenly have become less effective!
Business Reviews are a good tool that can help in getting things done in Indian Manufacturing Companies.
What is a Business Review?
The informal meetings that happen in companies to discuss one specific topic cannot be called as Business Reviews.
I would call it a Business Review if a Boss is reviewing the KPIs (Key Performance Indicators) of his team in a formal manner.
The Team should present the KPIs in a systematic manner showing the:
- Status of KPI – typically with the help of a Graph.
- Data to illustrate the details about the KPI.
- Corrective action and Preventive Action if the target is not achieved.
Only if all these are presented, I would call it as a Business Review.
When you present all this, you are reviewing the Status of your KPIs on the basis of Data, understanding the current status and then you are communicating to your Boss about the Status in detail.
This helps your Boss to understand the status of your KPIs and it helps him to understand your position on each of these KPIs. This is a formal Communication. Then, your Boss can add value as needed.
If these reviews are not there, the formal Communication is not there at all.
Managers keep following up with each other on a daily basis on various topics. A Production Manager is constantly talking to Purchase Manager for Materials and with Sales Manager about Dispatches. These are just follow-ups and cannot be considered as a Business Reviews.
Who all should Review?
In most of the Indian Manufacturing Companies, the only Review that happens is by the Managing Director once in a month.
But this is simply not enough. The Business Reviews should happen at all levels. A Production Manager should review his Team of Engineers in all shifts. The Production Manager, Quality Manager, Purchase Manager etc have to be reviewed by the Operations Head.
A Regional Sales Manager should review his team of Executives. All the Regional Managers should be reviewed by the National Sales Head.
When a Review happens at one level, people at that level are taking responsibility for their KPIs, review them and present them to their Bosses. This ensures that the Team takes responsibility for actions at their level. In the absence of these reviews all the Problems will get pushed to the meeting with the Managing Director. Then unconsciously everything gets pushed to the top.
Absence of these Reviews is one single biggest cause for why everything gets pushed to the top in Indian Companies.
How should a Business Review be conducted?
01. Formal Presentation in Power point or Excel is a must. This ensures that the presenter prepares before the Review meeting. Everyone should present Graph, Data, CAPA (Corrective action and Preventive Action) wherever the targets are not achieved.
02. Deep Data: The Presentation should have lot of Data. Data only should speak about the status of the KPI. Not emotions. Managers should be encouraged to practice Data based Decision making.
03. Communication tool: Business Review is a Communication tool and the Boss should use it as such. The Boss and subordinate should agree on the status of the KPI and what should be done to improve it.
04. Review Team or Review Individual? Is it better to have full team at the Review or should the Review be with individuals? It is preferable to conduct the meeting with the whole team. This is the occasion when everyone in the team listens to everyone else. They need to understand the problems of each other. If used well by the Leader, this is where the Team building can happen.
05. Don’t throw surprises: You should not throw surprises at your colleagues in these Review meetings. If there are any data that will surprise your colleagues or your Boss, it is better to talk to them before the meeting rather than throw a surprise at them in the meeting.
06. Don’t get technical: These Business Reviews are Management reviews. One should avoid getting too deep into the Technical issues. There can be separate Technical reviews for those issues. If performance of Promotional schemes has to be reviewed, there can be separate reviews for this. If you club this with your KPI reviews, then you spend too much time on these topics, and you will lose the Top view of the Company/ Function’s performance.
07. Don’t make it unpleasant: Even if the results are not good, do not make the Business reviews unpleasant. If you make them too critical and unpleasant, then these reviews can produce negative effect. You have to take care that your team goes out with more Motivation than what they have come in with. You need to inspire your team to go beyond their normal potential to produce a wonderful result!
08. No upward Delegation please: The Leaders should be aware of the upward delegation that can happen in these meetings. If there are problems that need to be solved, then the problems have to be with appropriate people. The Problems should not be taken over by the Boss. Boss can help the team to arrive at solutions. But, he need not take responsibility for the Solution.
09. Length of Review: The Business Reviews can get lengthy in the initial stages. But the length of review should not go beyond a point. Then it can become unpleasant. If there are too many problems that need to be solved, one should prioritize and take up the top 2 or 3 problems. One should not attempt solving everything in one Review.
10. Higher Purpose: The higher purpose of the Business Review is to help the team to work out a way in which the Targets for the KPIs can be achieved. The methodology for achieving the KPI Targets will be arrived at over a period of time. When you do that , the Business results can become more consistent.
What should happen between two reviews?
Between two Business Reviews, follow up should happen on points agreed in the Review. The follow up should be done by the Boss and in some situations, you may have a Business Excellence coordinator who will do the follow up. The actions should happen between the reviews. Otherwise you may not have any results from your Reviews.
The Teams and the Boss are required to do thorough preparation before the Review meeting. When a Team member prepares all the data for his/her KPIs and writes his/her CAPA, it means a proper review has already taken place. This is the most important aspect. Every Senior person should review his/her own KPIs formally. Then the Boss can add more value to the Subordinate’s learnings.
Skip Level Reviews
A Boss should normally review the team that reports to him directly. But sometimes the Boss may decide to do Skip Level reviews. This is perfectly alright as long as he has taken his team in to confidence.
Every Quarterly review can be with the entire team including skip level.
How to Kill / Reduce the Business Reviews?
When you start Business Reviews at all levels, the team may feel there are too many reviews. You should introduce Reviews only on the basis of need. If some results are not coming consistently, a Boss would see the need for Reviews. But the frequency of these Business Reviews should reduce over a period of time.
As the Results become more consistent, the Company should put Standard Operating Procedures for the specific Activities and then reduce the Business Review frequency.
Benefits of Business Reviews: Regular and Scientific Business Reviews should help you to ensure Business Results in a consistent manner. The motivation of the Team members can improve with this.
As a family we do not use the Ration Card much. So, we did not care to apply for it and take it. But a few months back when we decided to take the Ration card as it can be a good address proof. My memories of taking Ration card earlier many years back are not very good. We had to go through a long procedure for it and deal with many Tables in the Food and Civil Supplies department.
With all these bad memories, I set out to visit the Government Department in Coimbatore (where I live). When I reached the office, I went to the first Babu (or Samy in Coimbatore) and enquired about the procedure for Ration Card application. He looked at me funnily and told me that there was no need for me to come to the office. He said ‘I cannot do much to help you. You have to apply online’. He zipped out his Smart phone and searched for ‘How to apply for Ration card in Tamilnadu’. Then he showed me the following screen.
I felt very archaic and ignorant. He told me to call him if I get stuck with the technology! That is a definite new for me about a Government employee!
I came home and completed the Online application procedure. Within about 4-5 weeks the Ration card (Smart card) came home! Now this was a wonderful experience!! No running around the Government offices, no dealing with the ‘hungry’ Babus/Samys. You just deal everything online. Government seems to be progressing in the Digitalization agenda?
Come to think of it, there are many more facilities all of us have been enjoying. Let us talk about a few.
IRCTC: Indian Railway website which all of us use to book the Railway tickets. I know this had been around for years! But it has taken away a huge burden off our shoulders. I still remember the hours that I used to spend in the Que in the Railway stations as and when we decide to travel somewhere. We would have got used to the online booking comfort. But it saved hours for Millions of Railway travelers.
Now you can not only book tickets online, but order food from important stations on the way to your destination. Food will be delivered from those Restaurants at your Seat!
Railways made some progress. Isn’t it?
Online Tax payments: All the online Tax payments that we are doing now involved a few years back standing in the Bank, filling up challan to pay the Taxes.
You can apply for your Water connection online whether you are individual or a Company.
If you are going on a Holiday, you can book the Government Accommodations online.
Your Children can even read their Textbooks for free online!
There are more than 100 services that are listed on the Tamilnadu Government website. Each of these links actually lead to more than one service.
Government is driving Digitalization aggressively for the past decade. It is only gathering more speed now. I am sure all of you know many more examples of wonderful services that are helping the public at large.
We are also witnessing a big change in our daily lives.
Uber and Ola have revolutionized the way we look at transportation. There are many families that are relooking at the need for a second / third car in the family.
Swiggy, Zomato and others have revolutionized the way we dine. There are many more families that are depending on outside food than ever.
Google maps have revolutionized the way we go around and find places.
As we speak hundreds of Apps are changing the way all of us exercise, how we communicate with others and so on.
We are truly living in a world that is FAST changing.
How is Digitalization in your Company?
Now if we look at the extent of Digitalization in Indian Manufacturing Companies, do we see a similar drastic change happening?
May be a handful of companies have made good progress in terms of using the Technology.
But largely my observation is that Indian Manufacturing Companies seem to be too slow in adapting the Technology. Government (Both Central and State) are way ahead of the Industry. We keep saying that Government is too slow, and Ministers are ignorant of Technology and everything else! But they seem to be doing much better!!
Many companies are still dealing with age old ERPs. Most of them would not be using the features of these old ERPs itself properly. Most of the controls in the ERPs are bypassed.
Some Companies would have tried implementing an SAP in their company. But 90% of these companies have made a mess of implementing the SAP and using it very sub optimally.
Most of the Companies do not have any other software beyond the SAP / ERP. Production planning may be done manually if it is done!
Most of the Information is generated only in Excel sheets and Power points.
The Machines that have PLCs with lot of capabilities are lying unutilized.
Usage of IT
Information Technology can be used by Companies at three levels.
01. Using IT to handle routine: Basic ERP System: Every company needs to use the ERP effectively. As all of us know there are several modules that can be used to improve efficiency in the organization. The implementation of an ERP should not be treated as just a Software implementation. It is much bigger than that. It is a re-engineering of the routine in the Company. It should be treated as such and a Company should have clear number goal about what needs to improve after the Implementation of the ERP.
With the implementation of the ERP system, a Company should have a good process in:
- Budgetary Control
- Annual Budgeting
- Production Planning
- Supplier Portal
- Dealer Portal
- Sales order processing
- Quality System
And so on.
The Routine work in the Company should be controlled by the ERP and this should
Help the Company to improve its’ efficiency of doing this routine.
I would say a company has to aim at improving the White-Collar Productivity by
At least 50% after implementing the ERP. Otherwise you are not using it effectively.
If an ERP implementation is achieving this objective, I would say you are using the
ERP reasonably well. Otherwise, why bother to spend the money?
02. Using IT to improve efficiency: Companies can do very well to use several tools that are available today to improve the efficiency in the work.
They can use CRM (Customer relationship management) software to improve the efficiency of their Sales force. Many companies keep restarting the efforts of Marketing whenever a senior person leaves. There is hardly any continuity.
For identifying the Product / Parts / Raw material they can use Barcodes. Again, a small percentage of companies are using. But the scope for using Barcodes across the industry is huge! The technology has advanced beyond Barcodes and some companies are talking about using RFID technology.
Companies can use E-Learning to train their employees much more effectively and repetitively. They can cut their Costs also in a big way.
Companies can use Problem Solving software to control the Problem solving and record the Knowledge that is generated.
Companies can use Software in New Product Development to design the Product and improve the consistency and speed of Design.
IT solutions can be used in many areas and generate more efficiency. Each application should have a Target of improving the efficiency and it should deliver a measurable result to the Company.
03. Using IT to build a Competitive edge: IT is being used to build Competitive edge to the Company. Today there are many online trade apps. IT is playing a huge role in these companies. It is not just an enabler of Business. IT is the Business!
You can look for using IoT, Ind 4.0 elements to give higher value to the Customer.
Today many Capital equipment Companies are looking to use GPS tracking to give a higher value to the Customer in terms of knowing about the usage of the Capital equipment, knowing about the maintenance schedule of the Equipment and so on.
Logistics companies are getting hugely benefitted with the Online tracking of their vehicles. They are able to keep track of the ‘Most economic route’, ‘Speed of the vehicle’ , ‘Mileage of the vehicle’ and so on using the online Apps that are available.
Every company has to find their own mix of solutions that will give them a Competitive edge over their Competitor.
Companies have to start using Information Technology, Ind 4.0 etc and start re-engineering their Businesses!
Governments are doing a decent job in promoting this agenda!
Indian Manufacturing has a lot to catch up!!
Many of these companies can stop calling the Government inefficient and start improving!
Every Manufacturing Company is required to deliver good results every Quarter. Without this, the Bankers will not have confidence in the Company’s performance. In today’s Economic situation as everyone would have experienced, the Bankers are very careful in lending money. While Big Scams may happen, the Ordinary company is struggling to get their Discounting Limits expanded when there is genuinely a Turnover increase! The Ordinary Banking employee seem to have become very cautious! The Pressure is not only from the Bankers, the Investors also are watching the Companies much more carefully. No one wants to put their money in a Company that may not be looking strong.
Companies need to manage their Operations very closely to ensure they get maximum out of the Resources that they are investing.
While this is the situation of rising expectation and rising Caution on the part of Bankers, Investors regarding money and Investment, the Companies do not seem to be still managing their Profits closely.
There is always a big gap between the Seriousness with which the Board looks at the P&L Statement and how the rest of the Company looks at the Quarterly / Monthly P&L Statements. Many Companies may not be still having the Monthly P&L. Even in Companies where the Monthly P&L is prepared, Employees in these companies may not have any idea about the Profit of the Company or how the Financial situation of the Company is. Traditionally a good proportion of Indian Companies do not share the P&L with employees.
This gap between the Board of Directors and the rest of the Company is not good in following ways:
- Employees, including Senior Employees simply do not know the Financial situation of the Company.
- Operations Head may not know the effect of the Operational inefficiency on the P&L.
- Sales team may not know the effect of their Receivables Collection on the Working Capital.
- Engineering Team may not know the effect of their Capital Investments on the Debt situation of the Company and how it is affecting the Profit.
- Due to this ignorance, the Operational team may want more investment, not putting in efforts to improve the efficiency fast enough.
- While the Board of Directors are worried about the Financial situation of the Company, there is no guarantee that the actions are happening on the ground to address this situation.
- Actually, the Operational team may be pulling in the opposite direction. An Operations Head may be arguing for higher investment, he may not be focusing on the reduction of Raw Material Cost as he may see some other priority.
- A Sales head may be arguing for giving higher Credit days to the Customers.
- A Purchase head may not see the need to go for serious Cost reduction as he is busy in implementing an ERP or busy with some other priority.
This can turn the situation in to a quite serious one as the Company is in trouble. But not able to respond with agility! This is where the Companies will start going deeper into inefficiency and Losses.
Let us look at a few Best Practices with which a Company can set a System for Agile Financial Performance Management in the Company.
01. Educate the Team starting with Senior Team: My experience is that even Senior People at Functional Head level too may not be knowing how to read a P&L, Balance Sheet. They may not know how to link the Activities that they are involved into the P&L. A Sales Head may not be able to link the delay in getting Price increase from Customers (Post Raw material Price increases) to the Profit of the Company.
The Education should not be just on the General Concepts of Finance, P&L and Balance Sheet.
Every Company should identify the Critical Activities that are driving the Cost In the Company and highlight it to the Team.
Eg. A New Product Process may be ending up in higher Raw Material Cost for the New Products. This may be okay for the initial period when the volumes are low. But in many Companies, this higher price for low volumes will continue even when the Prices go up. This process may be flagged.
02. Create Focus on the Critical Processes: Every Company needs to create focus on a few major Processes in the Company that are important in determining the Profit of the Company. Some examples are as follows:
a. Sales and Production: I have seen many Companies who simply keep losing a lot of opportunities in terms of boosting their Top line. The Production team should always be at least 20% ahead of the Sales team in terms of Capacity to produce (Not just Production capacity, the ability of the Production team to hit higher Production after tackling all their Losses). If they are not ahead of the Sales team, then the Company would be losing Growth opportunities. I know quite a few companies who are losing the Top line as they are living with some problems for a long time.
b. Cost of Poor Quality: Production / Quality Teams do not realise that the Cost of Poor Quality straight away hit the P&L. The Customers returns may be high, the Export Customers may be debiting Penal charges for bad Quality, the Dispatches may be going by Premium freight as the Lot was rejected. The focus on these costs has to be sharp.
c. Premium Freight: Many Companies incur a lot of wastage in this area. If the Production is not efficient, then the Company may be spending a lot on Premium freight for dispatches. If the Sales forecasting Is not okay, the Company may spend a lot on Premium freight for getting Raw material and Parts into the Company.
d. Manpower Cost and Productivity: The recruitment of Staff has come under a lot of focus and the Indian Companies have definitely reduced the recruitment in the past few years. But still the recruitment of Blue-collar Workforce is happening without good control in many Companies. There are huge opportunities in improving Blue Collar and White-collar Productivity in Indian Manufacturing Companies. We are sitting on huge opportunity in this area.
e. Investment: The Operations teams and Engineering Teams still do not have full understanding of how the investment that they recommend is affecting the Company’s financial situation. We are again sitting on huge opportunities in improving Capital Investment Productivity.
f. Receivables: Indian Customers generally do not pay unless rigorous follow up is there from the Supplier. Of course, there are a few companies that may have good discipline in taking care of the Suppliers. But they are few. A company needs to have rigorous Receivables follow up system.
These are few areas. Companies may have more focus areas relevant to them.
03. Plant Wise/ Division wise Profitability: The Plant / Division Heads have to be made responsible for P&L. Some Companies already have it while many do not have it. The Plant Head and his team have to be held responsible for the P&L. The Plant should have a System of holding different HODs responsible for the P&L Line items.
The Annual Budgeting Process is an important one. The Teams should be involved in Planning the Expenses of the Plant. Each HOD should be clear about what expenses he is responsible for. When he does the Budgeting for the Expense, he will understand how the Expense is building up. A Good Annual Budgeting Process will ensure that the HODs and their teams understand the Expense very well.
Managing these Expenses should become a KPI for the relevant HODs.
04. Setting up a good Budgetary Control System: A Good Budgetary control system should be set up in the Company that will help the Employees to exercise the tools to control the Expenses. A Production head should have a Control for Raw Material and Parts issue at Quantity level on a daily basis. This will ensure a practical control on the Consumption. He should know how much quantity of Consumables he is consuming and what quantity is okay. A Good Budgetary Control System will take a few years to develop. But it has to start. Company has to create focus on this. The Finance team has to play a big role in making this happen.
05. Regular Reviews: Regular P&L Reviews have to take place with the teams. The Finance team should initiate them and the Leaders have to conduct them. The HODs should be asked to present the data and a Corrective Action and Preventive Action if the expense goes out of Budget. These regular reviews create a focus on the Budgetary Control.
06. Cost reduction: An Active Cost Reduction exercise should be happening in the Company and any Cost overruns have to be compensated by the Cost reduction Projects. A good Cost reduction system should be there in the Company.
This way the P&L focus can be taken deep into the Organization.
One concern that some people may have is that if there is too much of P&L focus in the Manufacturing Plants, the Plant teams may not focus on the Customer Service and they may become too money oriented.
We are doing Business with Customers to make money. To make money the Customers have to be definitely kept happy. But if we are not able to make money from the Business, then there is something seriously wrong with our approach. We have to make our Businesses profitable while making the Customers happy.
How good and deep is the system to manage Profits in your Company?