Managing Change in a Large Corporate
Glaxo Jt. MD: We want you to ensure all bills are ready for payment by their P.O. due date (usually ranging from 30-45 days) and the number of employees in the Bills Payment department, which has come down from 20 to 12 after the VRS, should have a token 10% reduction.
We: Sorry, your targets are not acceptable to us.
Glaxo Jt. MD: ???
We: Firstly, we will target that ALL bills should be ready for payment within 7 days, irrespective of when they are due to be paid. And, second, we will eliminate the need for a bills payment department!
Glaxo Jt. MD: !!!
Glaxo was our first experience working for a large MNC corporate assignment. The first thing that caught our attention was the size. We were used to smaller organizations in Hyderabad, where the number of employees was not more than 300 to 400. But here we were dealing with an organisation with more than 5,000 employees and multiple divisions located in various locations across the country. Glaxo India was also an old company, established in India before Independence, and was part of large MNC having global operations headquartered in England. While the Indian operations had considerable autonomy, certain operational norms had to be aligned with global norms. This was more so in matters of managing finance and operating systems.
Being an old company, they also had legacy systems coexisting with modern practices. Glaxo India was already using Cobol-based computerised accounting systems and they were in the process of upgrading their IT infrastructure at the time we started our work. They had a full-fledged computer department with programmers well versed in legacy system programming, and they had computerised most of the financial management and accounting systems, which produced reams of paper reports as required by various departments.
Recently, they had started implementing an MRP package called MFG PRO to align their reporting systems to the requirements of their global headquarters, and when we started our work we found that they had multiple platforms of IT systems which were stand-alone and required link programming everytime data needed to be moved between the systems.
By and large, Glaxo had IT systems which had computerised the manual way of working, while the paperwork based on traditional functional silos was still the backbone of operational control. Hence, they had a large number of clerical and supporting staff in back-end functions performing work the way they were designed several decades ago. In all these, financial control was the key to their operations and hence, like any traditional organisation at that time, there was no focus on processes. Though they had been exposed to concepts of TQM recently, adopting the process mode of working was still a far cry away when we entered the scene.
Another aspect of such an old organisation was the strong sense of power the functional heads felt over their subordinates, with the concept of command and control being deep-rooted. Hence, some of these managers resented it when one of their key subordinates was pulled out from their control to work as a CFT member in our project and they used to pester these individuals for not focusing on their day-to-day work. However, since we had direct access to the MD and Joint MD, we used this to address such pin-pricks so that our team members could work unfettered.
After our first meeting over 3 days with all the VPs, the management gave us a formal appointment letter clearly spelling out goals for the project. We felt these goals were not aggressive enough and we suggested that we would work for more challenging targets -- goals which should look impossible to achieve.
The first project was taken up at their oldest plant at Worli in their pharma division and the goal set was to ensure that all bills were processed and ready for payment by their due date (based on the payment terms of the order) and the bills payment department, which already had a reduced strength from 20 to 12 after their VRS, should have a further token 10% reduction. Of course, these goals were influenced by the Ford Motor case that we had used as a reference. Our reaction is stated at the beginning of this post!
Since we were dealing with a large organisation we had to bring people across different functions and levels on the same page and had proposed 4 levels of workshops, one each for Top Management consisting of all Directors and VPs, next for all GMs and DGMs, next all middle managers and finally the front line executives covering all the functions, since bill payments affected everyone. This was spread over the first two days followed by one session with the trainers who were supposed to educate the rest of the organisation. We had also suggested that we would spend 2 days a week every week till the redesign was finalised and accepted, and subsequently visit regularly to follow up on implementation of the pilot project. During the two-day visit, the CFT would work full time with us and they had to make suitable administrative support for the team to work under our guidance for the rest of the week too, since they had to collect data from various departments and specialists.
We were provided accommodation at the company’s guest house in a block of premium flats at Malabar Hills where, in the neighbouring apartment, the MD himself resided, and we had the advantage of occasionally interacting with him in the evenings, briefing him on the progress and also addressing issues of getting some critical information. We also had a caretaker-cum-cook,Sundaram, who had worked there for long years and made sure we were at home away from home.
Every Wednesday and Thursday of every week, we were at their Worli plant working with the CFT and, over the next three months, the bills payment process redesign was finalised and presented to the management. Without going into the details of the case, it is necessary to state that, while the situation at Glaxo was no different from the Ford Motor company case or any other reengineering case being reported at that time, the main difference was that the purchase orders released by Glaxo at that time had some vague terms for payment clauses like payable as applicable for taxes and duties which used to cause major back and forth movement of bills between the accounts payable and the purchase department, requiring amendments to be issued and delaying the payments. Also, since the departments were located in different adjacent buildings or different floors in the same building, the paper trail had to move across these buildings, for which the administrative department had to provide what was popularly called “Dak” (Postal) service internally.
When the team presented their findings, there was, as expected, complete disagreement from the heads of various departments to let go of their power to control. While the top management was totally in agreement with the recommendations, we needed the buy-in from the operating departments before the implementation could happen. I remember Raghav had to intervene passionately with his observations that the current practices required heroic responses from all the employees and still no one was satisfied. What was proposed would make everyone comfortable and the control aspect would be addressed more effectively using IT systems, since now we were proposing IT as an operational tool rather than an information tool.
Around this time, Mr M H Nayak was brought in as the head of the commercial department, and, fortunately, was completely convinced that the proposed system would be far better than what they were currently following. So he took a stand that he would take personal responsibility for implementation and report the results of a pilot involving major bill payments to large suppliers, using the pilot to emphasise the usefulness of the proposed system for the rest of the bill payments.
A major problem was that the Thane factory had its own computer system, and the data from there was not compatible with the head office system. The stores' incoming quality and material acceptance reports were therefore sent to the commercial department on paper printouts, and entered again into the head office system. We therefore had to work with the computer teams of internal programmers, and the MFG PRO implementation team from outside, to develop the necessary link programmes to connect up the disjointed functions to make a seamless process from placing a good and complete purchase order, through receipt and acceptance at the Thane factory stores, to bill payment. The IT team took another few months to complete their work and M H Nayak took charge of the implementation, starting with all the old purchase orders and rectifying them to conform to the new norms, and releasing fresh purchase orders.
After six months, Nayak called for a meeting of top management and presented his report on implementation. When they had started the project, they had on average 600 high-value bills pending every month, which were overdue by more than 1 to 2 months. At the end of the first month of the project implementation, they had brought it down to less than 200. At the end of 3 months, they had brought it down to less than 50. And, by the 6th month, they had brought it down to three and these too were delayed due to problems from the vendor end.
The most important announcement Nayak made was that they were making all payments now in 3 to 4 days from the date of receiving the bill and he was able to demand discounts from all vendors for payments made ahead of the contracted due date. And the whole bill payment processing operation was being done by just two people, one from the commercial and one from the accounts, who had to arrange the cheque which was also now getting printed by the system.
There was a stunned silence for a few seconds and then the joint MD started clapping and the rest of the audience joined in. Once all the commotion subsided, the Joint MD announced that he felt that the consultants and the CFT needed to get together for one more team meeting -- but this three-day meeting would be held in a luxury resort in Goa, along with their wives! Of course, no serious work was done on this trip which made up for all the hard work put in by Naik and the CFT!
A spin-off of the project was the accounts team-member reporting that, earlier, most of the accounts personnel used to sit late every day. Now the pharma division accounts staff were going home early and the other divisions had started demanding the same system be implemented in their division too!!
While we were working on the implementation of the reengineered bills payment process, we were given one more assignment by Glaxo. They were planning to close down their branch offices located in all the major metro cities and give VRS to nearly 250 people working in these offices at the end of the year 1995. These field offices were supporting the nearly 1,300 medical representatives working in the field all over the country, apart from managing the inventories of products sold in those markets. The company had already taken a decision to appoint C&F (Carrying and Forwarding) agents for handling the inventories from factory to market to release expensive real estate in these metro cities.
The whole plan was supposed to be done secretly and announced and implemented within a very short time at the end of the year.
Since the Glaxo top management had, by then, assessed the power of BPR that we brought to the first assignment, we were asked to help them use concepts of BPR to achieve this major restructuring smoothly and effectively within the short time available.
This time we proposed that, in order to develop an effective plan within the shortest time, as well as to maintain secrecy while getting the redesign finalised, the consultants and the new CFT which was proposed should stay together in a hotel for 10 days, so that they could focus on the task without any of the routine work distractions. This was agreed to, and we had the unique experience of working 12-14 hour days, first training the CFT, which included marketing persons from outside Bombay, in the BPR principles and then getting down to really radical restructuring of the existing, cumbersome processes involved. We were empowered to request the presence at the hotel of even the senior-most managers for discussion whenever we felt it necessary.
The field offices had to deal with many administrative functions while giving logistics support to the medical representatives and field sales managers. This included both material support and financial support, apart from keeping records of personal information. Since the field offices were to be closed, we had to come up with a solution which combined a centralised cell consisting of 20 people at the head office providing these services along with outsourcing third party services to handle both logistics and money-related services. We even co-opted an MNC bank to provide money transfer services directly into the accounts of all the field representatives while speeding up the process of field management by empowering the field managers to take local decisions using BPR principles.
On December 31 evening, the VRS was completed and on January 1st morning the new system came into operation. As could be expected, there was considerable chaos across the head office where the sales managers, who had already been briefed about the changes, were getting besieged with field issues and were rushing to the central BPR cell to address their individual problems on priority. I must give full credit to the top management of Glaxo, that they stood firmly by the decision to implement the new system and informed everyone to bear with all interim problems they may face till the new system settled down. It took about a month and, by that time, the field personnel noticed that they were getting their services faster than before and the accounts settlement was happening in the same month. The management had earlier given 3 months’ imprest as advance to field personnel to deal with delays in account settlements, and they were now able to manage with just 1 month’s advance, reducing the working capital requirements. Even salary payments were getting credited directly on the due date and the field reps started expressing their happiness with the new system.
We were involved with Glaxo for close to 15 months, starting May 1995 till August 1996. During this period, we completed two assignments. We had a bonus clause in our payment terms. Glaxo not only paid us the bonus but also gave us an additional bonus of a holiday retreat at Goa with our spouses along with the CFT team!
