Organisational Dynamics and Change Management
We (to client company CEO): As discussed last week, we are here to discuss our engagement for the next phase of our BPR intervention.
Client CEO: And I would be delighted to finalise this. Problem is, my Chairman has just sacked me!
As we were engrossed with the Glaxo assignment, we did not focus on getting a new assignment till we felt we had reached a stage where we could talk about the results from the implementation of BPR there. However, whenever we met any corporate honcho whom we knew, during our flights in and out of Bombay and at the airports, we never failed to talk about the exciting work we were doing as BPR consultants, particularly about our focus on implementation.
One of the Glaxo directors in charge of manufacturing invited us to participate in a two-day seminar on change management organised by the Organisation of Pharmaceutical Producers of India and present a talk on our experience with BPR in the pharma industry. This led to a couple of enquiries from some pharma companies. One of them was Pfizer India.
The VP Manufacturing of Pfizer met us after our talk, gave us his card and said he was a good friend of the Glaxo manufacturing head who had referred us. He was clearly impressed with our experience, and said his organisation would get in touch with us soon. We were naturally thrilled, and said we looked forward to it. Sure enough, towards the middle of 1996, as we were completing our engagement with Glaxo, we got a call from the HR department of Pfizer India asking us to come to Bombay for a meeting with senior managers of the company to discuss BPR, and they said they would arrange for our stay and pay for our travel expenses.
On the appointed day, we met with the senior managers among whom the finance director was showing a lot of interest in our work. After a series of meetings with various managers, we were asked to meet the management committee which had to make a decision. During the meeting with the MC, I noticed that the CEO was quite hands-off on this subject and told the remaining members who represented each of the key functions to take a call. I realised that this was not a good sign since, in our view, without the commitment of top management at the CEO level, no BPR could happen. Very soon, we also noticed that they were not sure why and where they needed to take the first project and there was a kind of passing the buck around going on right in our presence. Finally, they decided that they would take it up in the marketing area and the marketing chief clearly seemed not quite pleased with it. They even finalised a date and arranged for us to organise an educational workshop for a cross-section of their managers before starting the assignment. However, one day before we were to leave for the assignment, we got a call from the HR head saying that they had decided to postpone this project to a future date and they would get in touch with us later.
However, the manufacturing head who had referred us in the first place called us privately to confirm that they had no real consensus on the project, and it would not materialise. This was our first encounter with organisational dynamics and change management!!
We were also talking to a few large companies in and around Hyderabad, and we got invited to participate in a couple of workshops organised by educational institutions and professional bodies. I also presented a paper based on the Glaxo experience in these symposiums, and IIM Bangalore, my alma mater, invited me to present a case study based on the Glaxo experience of BPR to their PGP students. However, we were not getting any new assignments till the end of 1996, which was surprising as well as frustrating. The heady feeling post the Glaxo engagement started mellowing to the realisation that we had no fallback to get new work when we were busy with current work and we needed to address this in future. So we persisted with our contacts and, towards the beginning of 1997, we got a break with Nagarjuna Steels, which was part of the Nagarjuna Group in Hyderabad, and the reference came through the CEO of Nagarjuna Finance who had earlier engaged us.
While working with Glaxo we realised that the bills payment process is a subset of the procurement process and, if a major BPR exercise was undertaken in the procurement process, it would have a significant impact on the company. We therefore convinced the CEO of Nagarjuna Steels to engage us to reengineer their procurement process. We soon finalised a contract on similar lines to Glaxo, wherein we were to spend two days a week at their factory located at Patancheru about 30 km outside Hyderabad.
This project was going well and we were able to recommend, with the help of CFT, some innovative ideas for simplifying the procurement process. As and when the management approved a set of proposals, it was taken up for implementation without waiting for complete recommendations covering all the areas. This was also giving credibility to the power of BPR to change the organisation and there was full cooperation from everyone including all the key vendors who had to come on board post BPR.
But suddenly everything went out of the window, as they say, when one morning, six months after the start of our engagement, the CEO informed us that Nagarjuna Steels had been taken over by another steel company called Pennar Steels, and the new management told us that, since they had to focus on the merger issues, they had no time for this project and decided to terminate our contract. Not surprisingly, the new management also refused to pay the balance amount due to us for the work already done and implemented! We finally managed to use our contacts with some key people in the city from our IIT and IIM network who knew the senior management of Pennar and convinced them to settle our dues suitably.
Two lessons were learnt from this. When dealing with corporates, too long an engagement is not a good idea and we should focus on quick results to get our money fast. And, second, it is important to build on our network of contacts to both get assignments and, if necessary, help in getting the final payments which became an issue with some assignments later on.
Raghav Rao had been the CEO of Shriram Refrigeration in Hyderabad before he started out on his own. One day, towards the end of 1997, he was making a presentation on our BPR experiences at a CII-sponsored programme when the current CEO of the same company, now known as Tecumseh Products of India, expressed his interest in discussing how we could help him, since he had been engaged in major change management initiatives ever since Tecumseh took over Shriram Refrigeration along with the compressor division of Whirlpool at Faridabad. In addition, they were putting up a new project at nearby Ballabgarh to manufacture compressors for refrigerators on a very large scale. During our meeting with him in Hyderabad, he wanted us to work with the team at Faridabad and Ballabgarh first and finalised an assignment for us to work 2 days a week there.
As we started working, we noticed that the CEO, who had been recruited after Tecumseh took over, was working on one side and his other VPs, who came from the original Shriram Refrigeration background, were pulling in a different direction. At the same time, some expatriate managers from Tecumseh USA were assigned to help in setting up the new plant and they were pulling in one more direction. I particularly noticed that, while they were somewhat agreeable to working with Raghav, since he was their old boss, I never got their acceptance! Moreover, they also did not agree to our standard approach to implement BPR but instead made us address some of their current manufacturing problems at Ballabgarh.
During the course of our work, we identified some issues which showed the local management in very poor light, and this led to a backlash from them in the form of finding fault with us and our capability to work in their unit!!! However, the CEO, who was based at Hyderabad, was quite pleased with our work and appreciated the fact that he was made aware of issues which were otherwise being hidden from him by the local management team. We realised that we were really getting caught up in major corporate dynamics working in the background, and we completed our first contracted period, collected our payments, and did not seek any further work from them. Soon, we got news from the company that the CEO had been replaced by the VP who was based out of their Faridabad unit, and the CEO was continued as an adviser without executive responsibility!! Thus went another assignment without much value contribution despite our sincere efforts, just because of organisational dynamics.
I was focusing since 1996 on getting work from another major company based out of Hyderabad, Bakelite Hylam. I had met the previous MD a couple of times before he was replaced with a new MD in the year1997. Anand Mundkur was an IIM Calcutta alum from one of the early batches and I got to meet him through one of his business school classmates who was known to me closely. He liked the idea of using BPR in Bakelite Hylam as he had just taken over as MD and found many of the problems he was facing were linked to work practices which were decades old. Also, Bakelite Hylam, which was a pioneer in the decorative laminates business in India and had built the brand name “Hylam” as synonymous to laminates, was losing market share (and losing money!) to much smaller companies which had mushroomed across the country due to the differential excise policy benefiting small units over large companies at that time, as well as the relatively low technology involved in laminates manufacture. Anand wanted us to work in the area of improving the entire supply chain from procurement of materials to manufacturing to market, where the focus would be to respond quickly to demand at the retail end.
This was the first assignment of this kind for us and the whole CFT was very kicked to work with us in coming up with great recommendations with our guidance. After the redesign was presented to the Management Committee, we noticed the play of organisational dynamics in the MC meeting. Most of the members of the MC were old-timers in the company, while Anand was seen as an outsider; we noticed, along with Anand, a reluctance on the part of the old-timers to accept this change. Implementing the CFT’s recommendations meant that the manufacturing department, which had always held sway over other departments in the company, would have to work as per the needs of the market, thus lowering their perception of power in the company hierarchy. During the course of this meeting, after some heated discussions, the VP Manufacturing resigned and the CEO had to take the hard decision of not only accepting this but also stating to the rest that he was going ahead with the implementation and those who were not coming on board were welcome to leave too!!
The implementation involved some work practices that required workmen to come on board too. So we actually ended up spending time addressing the workmen in small groups in all the three shifts, pointing out the advantages of the new approach to the company and hence to them personally. After a few hiccups, we managed to get the new process rolling, though we could see some internal efforts to slow the progress by finding faults using old yardsticks of work.
Finally, we managed to get everyone on board and started implementing the new supply chain model based on pull, as against the old model of producing to forecast and using sales push to sell whatever stocks were generated, often giving away large discounts for cash generation. The improved results started showing up in the form of reduction in inventory across the factory, while the sales started increasing. At this point, Anand realised that the field sales operations would also have to be substantially altered, to align with the new way of working. He therefore assigned us to make this happen in the most difficult territory of Delhi and North India.
With the help of a CFT that we created at the Delhi sales office, we came up with a novel approach to field sales management. The distribution channels were increased extensively and, combined with the new supply chain management system, showed a three-fold increase in sales in the next three months, with the same manpower! The company was very pleased and decided to roll out this new method across the country.
Once this was done, we thought we had done a great job when a third assignment was given to us to reengineer one of their major industrial products called Resins, used for bonding applications, for which this company was well known.
We did not realise that, while we were showing great results, there was trouble brewing for both the CEO and us in the background. Bakelite Hylam was part of the GP Goenka group and, when we started work, one of the Unit Heads had come over and met us. He wanted us to maintain parallel communication with him directly, which we had point blank refused to do at that time, since our engagement was done by Anand. During the meetings over implementation, some of the senior managers who were old-timers even accused us of disturbing their comfort zones in their current roles, which were changing post BPR. The net result was that they were carrying tales against both the CEO and us to the group management at their head office in Calcutta.
Not surprisingly, one fine day, Anand Mundkur found he was replaced by another person and when we landed up on our routine visit that day there were two CEOs in the same office and we were told that there was a change in the top management and our services were no longer required!!! Later on, this new CEO was also replaced by a third one and, by the time he could complete six months on the job, Bakelite Hylam was going downhill very fast and was sold to a new group which eventually closed down the company and sold the real estate assets to some builders and moved on.
After three such consecutive experiences, which we considered failures despite the improvements we had created, we were a little unsettled, and felt that we should be more careful in starting work in future with any corporate, till we were sure such experiences would not get repeated. But the need to make a living out of this profession does not give you the luxury of picking and choosing, and we hoped things would improve, as times were changing, and the compulsion to implement BPR would force companies to take such change management initiatives more seriously.
And that is what happened subsequently, when we got work from some very enlightened CEOs and their companies.
