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).

31 Jan 1986

To:

Dear Friends                                     

KTL VS. KCL

KTL stands for Kirloskar Tractor  Limited, and KCL stands for Kirloskar Cummins  Limited.  And, when  I wrote  KTL Vs. KCL, my intention  was not  to make  it sound like  "Australia Vs. India", but I do like  to read about corporate matches (since you cannot see them on T.V.).

After reading  the enclosed articles,  you may discover  more mis-matches than I could - and if you do, please write to me.

In KTL article, I discovered mis-match between:

-      Size of market Vs. licenced capacity

-      Licenced capacity Vs. installed capacity

-      Installed capacity Vs. actual production

-      Actual production Vs. inventory level

-      Market demand (35 H.P.) Vs. product made (75 H.P.)

-      Competitor's price Vs. KTL's price

-      Competitor's material cost  (75%) Vs. KTL's material cost (85%)

The only  item in which KTL  scored over its  competitors was "salaries and  related expenses" which,  in their  case, were only   7%,   as  against   8%   of   other  reputed   tractor manufacturers.  (I have not  revealed  this figure  for L&T's Powai Works).

But, apparently' it did not help KTL - holding  just one card of Ace.   For  remaining alive,  in a  "dog-eat-dog" type  of competition,  a company  needs,  besides  an  "Ekka", several other cards  of "Raja" and  "Rani" and "Gulam".   It is never enough to  have just one "Ekka".   And it seems  that this is what KCL (Kirloskar Cummins Limited) is also discovering:

KCL's "Ekkas" seem to be their    

-      share of the diesel engine market (45%)    

and    

-      fast rising employee productivity.    

See following table.

Year	No. of employees	No.of engines manufactured	Engine per employee
1973-74	1,865	2,206	1.2
1983-84	1,865	6,400	3.4

Therefore, rise in productivity = 28.3%                          

And, Arun Kirloskar says,, "we are, perhaps, the  only diesel engine manufacturing company which has not  raised prices for the past  four years,  despite escalations  in the prices  of basic  inputs.  Rather,  we  have successfully  absorbed  the increases in input prices by improving productivity".

So,  on one  hand, we  have KCL  which, because  of  its high productivity  (this is my firm belief),  is able to  sell 22% of  its production abroad  (including to  U.S.A), and  on the other hand, we have KTL which  finds it difficult to sell its tractors even within India - with a 1.8% share of the market.

And, if  the top Manager of  the "most profitable  company in the private sector in 1983" (Economic Times) worries that,

"At this  rate, engineering companies, such  as KCL, may  not see the 21st century",

What, may we expect to happen to us?

H.C. PAREKH