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, 17 July 1970

THE THIN LINE

  23 Aug 2013

Dear Performance Appraisers:

In most companies , managers are required to first assess the performance of their subordinates during the course of past year – then based on that , decide annual awards (promotions/increments/salary-freeze etc )

But in most companies, most of the subordinates believe that the managers have already decided in advance whom to promote/ grant double increments etc, and then tweak the ritual of performance appraisal accordingly, in order to justify their decisions. Like first shooting and then drawing circles around the hole – a perfect bull’s eye!

If you do not believe me, get a third-party outside consultant to conduct an anonymous “Opinion Poll “in your company

Is there a way out of this, mostly “Confrontational/Denial “exercise?
My following note (some 43 year old!) addressed to the managers of L&T Switchgear Factory, might help you

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17 Jul 1970

Switchgear Division,

Powai

All Department/Section Heads

It is a thin line – the line that divides the 20 and odd student years of a man and the 30 years of his professional career.

It is indeed a thin line – about 6 months thin - the period of a man’s probation. It is somewhat like the DEW line – the Distant Early Warning line, stretching across the northern border of Canada, where radar installations keep sweeping the sky, day and night, to warn the American continent against a surprise Russian missile attack. Each and every blip on the radar-screen must be identified and acted upon.

Those of you who supervise new recruits have to keep watching the DEW line. Your constant watch may identify some undesirable blips of the man’s character – weakness which, if not given a mild mid-course correction immediately, may take him so far off-course that any latter-day correction would require the use of a massive side-thrust, which may strain the psychological components of the man’s make up beyond the breakdown point. The only other alternative would be to abandon the mission !!

The decision to write off a man, as a liability to the origanisation – a man who could very well have been an asset – is tough. It is tough for two reasons viz :

1.  If we are sacking a good man entirely due to our poor evaluation system, we may be losing an asset. We would be doing injustice to the organization.

2.  Let us suppose the man is truly below average and ought not to be confirmed. One or both of the following possibilities exist:

a.  Due to our poor evaluation system, the man’s shortcomings remain hidden. One of us would say “I think he is alright. Not excellent but average and after all, all of our people cannot be excellent. There are bound to be some average people around.”

This is quite a profound statement. If someone senior enough happens to make it, rest of us tend to nod our head and say “Yes, I think so too” and we end up confirming the man, because we would not like to admit that our evaluation system itself is in a bad shape.

b.   During the probationary period, we run into several instances of poor performance by the man and we vaguely and in a round-about manner tell him that he ought to do better but not having prescribed the standards of performance, we do not get down to tell the man what is expected of him. Nor do we make it clear that if he did not show an improvement he will not be confirmed.

Next thing we know six months are over and the confirmation papers are on our tables. By that time we have taken in a heavy dose of guilty conscience. If we decide not to confirm him, we know we will have to face him ( “But you never told me that I was not doing well and I may not be confirmed” ) and face our conscience. How much easier it is to write some such thing as “Mr. ________ has been working with us since January 1969 and is looking after the filling work of this department. His work is found to be satisfactory and we recommend that he be confirmed in the services”.

How wonderfully simply way to co-exist with your conscience ! As far as the organization is concerned, well, what damage can a sole poor performer do to the “young”, “dynamic”, “aggressive” character of L&T? 
In the appendix 1, I have tried to construct a model of the situation. The model has along its axis,

1.  The man

2.  The performance evaluation system ( PE )

3.  The feedback.

If, for the sake of simplicity, we assume for a moment that there are sharp dividing lines between

-    A good man and a poor man

-    A good evaluation system and a poor evaluation system

-    A good feedback and a poor feedback

Various combinations of these three elements may exist as shown in the appendix. The combinations can be either desirable or undesirable, from the viewpoint of both the organization and the individual concerned. I suggest you take some time out to think over the matter and fill in the columns by one of the following expressions against each combination:

a)  Excellent

b)  Good

c)  Moderate

d)  Nil

You may wonder why suddenly all this talk about performance evaluation. It is certainly not sudden but no doubt the emphasis is distinctly different. We do not have to go far to find the reason. We have in Switchgear Factory today, over 170 daily rated probationers and perhaps 10 monthly rated probationers. We expect an additional 15-20 monthly rated probationers. Besides, the level of sophistication in the area of personnel relations must necessarily keep pace with the advancement that we have made in technological sophistication.

During the probation period you would expect probationers to obtain and retain knowledge (information) pertaining to product, people, processes, procedures and their own job. In addition, we expect then to cultivate a certain attitude.

In the appendix 3, I have tried to put down the minimum specification of such knowledge that various people should obtain and retain by the end of the 6th month. We shall over the next few months make an attempt to define the various degrees of such knowledge in a measurable way. Then it should be possible to even devise written tests.

The attitude aspect is equally, if not more, important but at the same time almost impossible to define and very difficult to measure. May be some training courses could be devised. It would, however, be impossible to correct the wrong attitude of a man by announcing procedures and promulgating laws. You can compel a man to go the Church but that may or not make him religious.

I have discussed this matter with KKA ( Dr K K Anand ) and DFP ( Dannyson Pareira ), and they have agreed to help us organize a specific training programme for the department heads/section heads/supervisors in the switchgear factory. In the meantime, I suggest you also try to return to me duly filled in appendix 2 as applicable to the switchgear factory.

Hemen Parekh

THE THIN LINE - VIEW POINT

APPENDIX  1
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APENDIX -2

HUMAN RESOURCES     

OBJECTIVES FOR MANAGEMENT PERFORMANCE

When managerial personnel have goals and objectives towards which they are striving, their activities have purpose, direction, and character. Rather than simply working within the status quo or doing what they are told, they know in specific and concrete terms what they are trying to achieve. As a result, they are likely to make better contributions to the corporation and to find greater gratification from doing so. Many corporate activities can be expressed in terms of some degree of accomplishment such as rate, frequency, volume, magnitude, quality, and soundness. Whatever the particular indicator, it can be used as one basis for establishing goals and objectives. Individual performance and effectiveness can then be evaluated as amounts of the goals that are attained or of the objectives which are reached.

MANAGEMENT BY OBJECTIVE IS :-

1.Completely effective: each manager is working to achieve goals and objectives which give direction and character to his effort and are used as standards against which effectiveness is judged and evaluated; these goals and objectives are specific and concrete and set for accomplishment within a period of time which is identified; at the least, they are set between the man and his boss, though others may be involved in setting them as well.

2. Almost completely effective

3.Quite effective

4.Moderately effective

5. As effective as ineffective; specific and concrete goals and bjectives are not established as a basis for 
motivating effort or for measuring effectiveness, yet they do exist in a general sense; managers have 
an appreciation of what they should achieve.

6. Moderately ineffective

7. Quite

8. Almost completely ineffective

9. completely ineffective; specific and concrete goals and objectives are not used to give direction and purpose to individual performance is not thought of in terms of goals and objectives.

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APENDIX -3

KNOWLEDGE EXPECTED AT THE END OF 6 MONTHS


APENDIX -4

1.  OVERALL ORGANISATION:

a)  Achieve a 15 percent return on investment within 4 operating quarters.

b)  Reduce cost during the current operating year 24 percent of approved budgets prorated 6 percent per quarter.

c)  Maintain current asset to current debt ratio not less than 3.0 for the next fiscal year.

d)   Achieve a net profit average atleast 7% of sales and 11% of net worth.

e)  Increase market position for non-defense items from 15% to 30% . Maintain market position for defense items at current levels.

f)   Achieve a product line mix in which 80% of sales is made by no more than 20% of R&D customers.

g)  Complete management controls reporting systems of all operating divisions by April 1.

h)  Complete an operating and financial strategy statement for reaching objectives within 2 months for presentation to the Board of Directors at the May meeting.

i)   Obtain from research efforts two accepted improvements for 10 consecutive months to raise sales of product K 15%.

j)   Reduce plant operating costs to $54 per 100 units produced by January1.

k)  Develop technological capability to introduce two new products in market sector BB at end of 3-Year profit plan.

l)   Reduce capital expenditures; class B, from 350000 to 150000 during the coming biennial.

Hemen Parekh

THE THIN LINE - SAMPLE OBJECTIVES

17 July 1970

 1.  FINANCE OBJECTIVES :

a)  Reduce by 2 days - 6-day time lag in preparation of division cost reduction reports using an agreed upon follow-through system.

b)  Achieve an average age of accounts receivable not to exceed 25 days.

c)  Restrict bad debt losses to less than 3% of reporting non-defense sales.

d)  Improve margin by 15% with same revenues but reduced cost of 30%.

e)  Increase 15% the working cash required in each of three banks at the end of the year by holding inventory levels at 80% capacity.

f)   Complete training of three replacements for key positions in accounting section by next June.

g)  Complete study and construct index of expense trends for all departments for the past 5 years and project anticipated expense of future at annual intervals. Set 10% reduction targets from this projected expense trends.

h)  Collect ten suggested cost –reduction ideas per month from each of six operating managers.

i)   Complete write-up and acceptance of company cost-reduction manual and distribute to all members of management within 2 months.

j)   Install five suggestion boxes in five company locations to collect employee suggestions for cost reduction in their job procedures.

k)  Collect from six operating managers’ long distance telephone call analysis and recommendations for control of number, types, and cost of calls.

l)   Reduce dollar value of cost of returned material credits from an average of $20,000 per month in the preceding year to $15,000 per month in the coming year.

m)  Reduce current debt to tangible net worth position to 35% for proposed creditor portfolio.

n)  Reduce fixed assets to a level not to exceed three-quarters of the tangible net worth in the next 2 years.

o)  Improve profits to payroll margin from 5% to 10% within the next four profit sharing quarters.
  
2.  MARKETING OBJECTIVES :

a)  Implement proposed system B for processing and expediting the filling of back orders at the rate of 10 per month until 90% of back orders are filled. Reinstate system A when back –order level is reached.

b)  Increase sales revenues of a new product 15% within 12 months by concentrating existing expense levels of promotions in New England.

c)  Increase merchandise turnover in store from 4 to 6 within the current fiscal year.

d)  Hold sales expense this coming year to 5% of total sales while increasing sales manpower 10%.

e)  Secure 100% distribution in markets D,E, & F of district 3.

f)   Convince three wholesalers to introduce new merchandising under a prearranged monthly schedule.

g)  Increase occupancy ratio in hotel rooms from a yearly mean of 65 to 85% while maintaining rate structure.

h)  Complete training program A for all district representatives to assure readiness for distributing product Y at the first of the year.

i)   Reduce average handling time of customer statements by 10%.

j)   Complete painting of ten trucks with new advertising campaign within 1 month.

k)  Complete 75% follow-up calls of new inquiries within 3 days of initial inquiry.

l)   Reduce number of customer complaints on commercial business from 22% to 10% of orders billed. Dollars of settlement should not exceed 5% of total commercial billing.

m)Improve sales per employee to $ 25000 during the next 5-Year profit plan.

n)  Achieve percentages of sales to consumer, industry and government from 20, 28, 52 to 30, 35, and 35 respectively.

o)  Complete a strategy statement within 3 months for giving two new segments of the market brand X image to be introduced next session.

3.  RESEARCH & ENGINEERING OBJECTIVES:

a)  Decrease research effort ratio of feasible marketing ideas to actual marketing products from 10 to 5 within the coming fiscal year.

b)  Complete design and development of new prototype in 14 months within cost of $140,000 without farm-out work to vendors.

c)  Complete product design specification for product M within budgetary period.

d)  Supply three new products to marketing within the coming fiscal year with forecasted sales not less than Rs. 15 million.

e)  Get approval from three departments of production, plans for customer, costs, and schedule within 3 months.

f)   Complete PERT layout for contract B within the pre-budgetary planning schedule.

g)  Complete value analysis job plan for three engineering sections during operating quarter.

h)  Increase diversification program with development and introduction of 5 new products within the small product line.

i)   Complete literature and patent search by end of year for five patentable ideas useful in entering new markets K, L and M.

j)   Reduce research investment pay-out time from 3 to 2 years.

k)  Improve research know-how in section B by increasing Ph.D. Hires by 20%.

l)   Reduce the R&D budget as percent of net sales from 4.5 to 3.5 in the next 5-year profit plan while maintaining services and new product development.

m)Maintain lead competitor’s position in market with four new product introductions in the next 5 year profit plan.

4.  PRODUCTION OBJECTIVES :

a)  Reduce frequency of lost time injuries from 21 to 6 million man hours within 6 months of installation of new safety awareness program.

b)  Maintain overtime hours at the level of 5% of scheduled hours while completing emergency work program A.

c)  Reduce cost of pump and engine repairs from $10,000 to $5,000 per year per mechanic.

d)  Maintain a once-a-day contact with all subordinates at their work stations and hold a once-a-month work appraisal meeting in office with all subordinates.

e)  Complete construction of 5,000 sq. ft. 2-story approved addition to existing plan within cost of $45,000 by spring of next year.

f)   Master ten techniques in work simplification as related to machine shop operations through a 6-month by monthly cost reduction meeting for machines shop supervisors.

g)  Reduce clerical labour costs in 3 departments by $50,000 with the installation of a data-processing system whose leasing and operational costs are not to exceed 50% of the projected savings.

h)  Reduce weld rejects of Hy-80 steels from 6% to 3% of all plates in assembly S.

i)   Maintain total heat losses at 5% of total heat transferred when changing from system A to system B.

j)   Deliver 16 units per day for less than $45.00 unit cost to shipping point B.

k)  Reduce inventory lead time from 3 weeks to 2 weeks while maintaining customer services.

l)   Reduce obsolete items and all adjustments to inventory to 6% of commercial sales dollars.

m)Complete master schedule of sales and inventories for fiscal year 19xx to reduce stock –out frequency rate to 2½.

n)  Complete by next year a vendor rating system to maintain price, delivery, and reliability at or below an index established for the past 5-year record.

o)  Achieve for the machine shop a process layout by 19xx to reduce material-handling costs to 22% of manufactured costs.

5.  PERSONNEL OBJECTIVES :

a)  Select five candidates in the third quartile from 25 trainees successfully completing supervisory training, These candidates to be temporarily appointed for 6 months at the new division.

b)  Reduce cost of recruiting each engineer from Rs. 200 to Rs. 1000 while meeting requisition totals and dates.

c)  Complete preparation for labour negotiations by apprising all management personnel of needed contract changes; hold bi-monthly meetings for discussions and conduct two simulated labour bargaining sessions to gain insights on strategy.

d)  At a cost not to exceed $15,000 conduct a sampling survey of the company’s hiring image in three adjacent labour markets.

e)  Complete for distribution at the end of month x a 20-page, 10 topic industrial relations policy manual for newly hired employees.
f)   Decrease termination rate of clerical employees from 25 to 14 percent.

g)  Increase outside correspondence answered from 25 to 75 percent within 24 hours.

h)  Read 12 new books in management by the end of a year at the rate of 1 per month.

i)   Complete course in statistics within the next semester with a grade of B or better.

j)   Set up and validate 5 standards of qualifications for new hourly employees.

k)  Complete within 3 months an attitude survey of labour management relations among all employees within cost of $ 1800.

l)   Reduce frequency of grievances by the end of the year from an annual average of 35 to 20.

m)Complete planning, organization, and installation of an employee suggestion system at the start of next year’s cost-reduction program.

n)  Complete training by December 19xx of 600 supervisors in 2-day seminars on managing by objectives.

o)  Reduce absenteeism record for next year from 8 to 5 percent.

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L&T -MADH WORKS-ACCOUNT GROUP






MATERIAL PLANNING GROUP



VENDOR DEVELOPMENT GROUP


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MANUFACTURING PROCESS DEVELOPMENT GROUP



Hemen Parekh