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

Now as I approach my 90th birthday ( 27 June 2023 ) , I invite you to visit my Digital Avatar ( www.hemenparekh.ai ) – and continue chatting with me , even when I am no more here physically

Friday, 26 April 1985

FREE MARKET

Synopsis: Communication For Productivity
Letters written to some 7500 Workers / Managers / Union Leaders, following a period of strike / Go slow / Murders (1979 - 1987), at Mumbai factory of Larsen & Toubro Ltd. This direct / open / honest communication led to a remarkable atmosphere of trust between Workers and Management, which, in turn, increased productivity at 3% per year (ave). 



To:

Dear Friends

In the enclosed article you will read that
1.  Political  leaders  of  Europe  are   adopting  "free-market"     policies (free imports and exports).
2.  European governments are reducing administrative expenses.                                   
3.  They are drastically reducing labour-wage increases.
In our  own country, we  see similar actions  being taken by  the new government of Rajiv Gandhi, e.g.
The new export-import policy announced by the  Government on 12th April will  permit liberal  (in many cases without  any licence!) import  of raw  materials required  to  increase production.   So that will help manufacturers like  L&T.  But the policy will also allow liberal  import of fully  manufactured items from  abroad -such as fertilizer plants,  chemical plants etc.  That would help users,  and that would also  mean L&T will have  to  compete with foreign manufacturers who are hungry for orders.!
This may mean that L&T may not  get a single order out of the six giant  fertilizer plants  which  are  to come-up  in  North India during  next 4/5  years'. The  orders  may  go to  a  European or Japanese manufacturer under the New Import Policy!
Can we  afford to  lose orders worth  Rs.80 - 100  crores in  the next 5 years?
Obviously the answer is         
"we cannot afford".'
On the  other hand, our  wages/salary have been  climbing rapidly at an average of
Rs.250 per month per employee        
EACH YEAR!

Proportion (percentage) of manpower  cost to our  total output at Powai is rising so  fast that many of our product-lines  may have to be closed down very soon!

If you have any doubt, see the following chart:

If you  do not  understand or  have any  doubts, ask  the nearest production manager  or personnel officer  and he will  explain to you.
We have 3 methods to survive:
METHOD I              :      Do not allow manpower costs to rise              
(i.e. a freeze on wages & salaries)              
but increase output.
                             

METHOD II                    :      If we cannot increase OUTPUT              
then reduce MANPOWER-COST (by              
accepting a cut in wages/salaries)
All over Europe and America, Managements
and Unions are adopting Methods I & II        
(See enclosed Article)
method III                    :      Allow Manpower cost to rise but,               
Somehow ensure that OUTPUT per employee
rises at a    faster rate. That means much higher
employee productivity - and NOW!
I am sure all of us (myself included) at Powai
would like to adopt this method - if only we
can make it work.'
And although employee productivity  has gone up between  5% - 20% in  different  shops  in   Powai  during  the   last  10  months, apparently  this increase  is  not  enough to  offset the  rising manpower costs.!
The chart is all too clear.  We can ignore it at our own risk!
There  is a  limit to  how much  of our  increasing costs  we can pass-on  to our  customers  in the  form of  increased  selling -prices.
And  I have a  feeling that  in April  1985 we have  reached that limit at Powai!
Before our  customers run away to  our competitors and  before we start losing orders, let us do some serious thinking.
Q. How can we increase our output rapidly ?
Q.  How can we decrease our Manpower cost ?
Q.  How can we decrease our manpower itself ?     
By  not  replacing   "separations"?  By  offering  "Voluntary     Retirement"  to   those  who   are  incapable  of   improving     productivity  ?   And  suppose  some   of  those  "incapable"     persons do not  accept Voluntary Retirement, then what  do we     do ?
Those who  do not  wish to  experience "Europe" in  Powai, please raise your hands !!

H.C. PAREKH

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