Shubha Madhukar, Ashwin Tombat

Back in the 1980s, very few people could have imagined how intense the competition would get only a decade later. Not only has Chairman Ratan Tata's vision equipped the Tata Group to survive the challenges, the business excellence programme he initiated has helped Tata companies to launch themselves into the global arena.

Also see A never-ending journey… The Q word Full speed ahead On the stairway to success Winning strategies BE a winner 'The word quality carries so much baggage'

Like all great men, JRD Tata, too could have been immortalised with a brick and mortar edifice or a bigger-than-life bronze statue. Instead, the Group he nurtured prefers to remember him through something he stood for and cherished. As his successor, Ratan Tata, the current Chairman of the Tata Group, recalls, "Considering that he adored perfection to such an extent that this was an intimate part of his life, I thought an annual award, the JRD Quality Value Award, would be a good way to remember him."

Business excellence has become a buzzword in the Indian management lexicon relatively recently; but it has been a watchword for the Tata Group for as long as its senior managers can remember. From its early years, the Group embraced the concept of excellence with passion.

As chairman and mentor, JRD considered excellence a sine qua non of good business; he had utter disdain for laid-back attitudes and carelessness. He believed that, "If you don't aim for perfection, you will not achieve excellence."

Driving excellence
The need to institutionalise excellence was felt in the early 1990s. Mr Tata asked Dr J. J. Irani, then managing director of Tata Steel, to supervise the founding of a business excellence programme, which was seeded in 1995 with the institution of the JRD QV Awards and the formation of Tata Quality Management Services (TQMS). TQMS was given the mandate to drive business excellence in Tata Group companies.

It was an ambitious goal. Chairman Ratan Tata would settle for nothing less than the very best. So all major existing business excellence models were studied and the Tata Business Excellence Model, or TBEM, was created by using the Malcolm Baldrige National Quality Award model of the US as a base. Since then, TBEM has been modified to reorient it and align it better with the Group's new economy sector initiatives and with its internationalisation goals.

The results are there for all to see. At the JRD QV Awards 2005, Dr Irani, who is chairman, TQMS, and director, Tata Sons, affirmed the success of this with these words: "JRD would have been very happy to see the progress we have made on the quality front through the JRD QV programme… In ten years' time, I personally feel, the attitude towards quality has been transformed." That is putting it mildly. The fact is that even hardened sceptics have been converted to the new way of thinking and doing.

The competitive edge
And just as well. The business environment had changed dramatically since the early 1990s. With the opening up of the Indian economy, competition had intensified. Not only did the Group have to sharpen its business focus — something its present chairman had been pushing for since the early 1980s — it had to improve productivity and process efficiencies and become more customer-oriented than Indian companies had been accustomed to in the past.

That was the only way in which to survive and grow in the face of competition from some of the biggest business groups in the world. The drive for business excellence helped the Group not only to survive but also to grow rapidly in India and abroad.

The Malcolm Baldrige model is accepted universally by businessmen as a hallmark of excellence. Companies winning the Malcolm Baldrige Award are known to have routinely outperformed other Fortune 500 companies 5:1 in terms of returns to stakeholders.

The Tata decision to go for the Baldrige model has a history. Two Tata Group companies had had first hand experience with the model. Tata Honeywell (no longer a Tata company) used it; they called it the Honeywell QV process. "The QV of JRD QV comes from there," explains Sunil Sinha, CEO, TQMS. And Tata Steel had adopted the Baldrige framework for its internal award process; it was called the JN Tata Process. Mr Sinha adds, "The Group had a comfort level in adopting a framework with which two of its good companies had had positive experience earlier."

Teething troubles
Given its comprehensive coverage and robust methodology, TBEM was ideal to streamline processes in Tata companies. That didn't mean it was a cakewalk.

The initial response from managers was lukewarm. Implementing something new is never easy; and TBEM was no exception. It was a new concept, and companies were not clear about how it would help them. To many it just seemed like an additional chore, which they were not keen to take on. And there lay the rub; if enthusiasm was lacking, the whole idea could fall flat on its face — for it was not a question of 'implementation' as a formality but effective adoption of the sound and systematic processes that are the essence of TBEM.

What tipped the scales in favour of TBEM initially was the management's desire to qualify for the use of the Tata name, for which companies had to sign the Brand Equity and Business Promotion (BEBP) agreement. This agreement, a result of Mr Tata's insistence on its companies meeting the Tata quality standards, places an obligation on Group companies to implement TBEM and achieve agreed standards of excellence over a fixed period of time.

The TQMS assessment process measures the progress companies make every year. Over the years company managers have realised that TBEM actually boosted their performance. (For details of how TBEM works, see the article The Q word.)

In the first year, only 12 companies were willing to participate in the business excellence programme. Then the external environment changed, and so did the Group's focus.

The call for internationalisation required companies to meet world standards of performance in their respective businesses. The heightened awareness of the need to 'internationalise' or perish brought more companies round to the TBEM approach. Today quality concerns are uppermost in the minds of managers across the Group; and the results are visible.

Making it work
Let's begin with the example of a company that didn't quite make the grade (the score of 600 that qualifies companies for the JRD QV Award). In 1997, when Bhushen Raina took over as managing director of the Tinplate Company of India (TCIL), the company was losing Rs 5 crore a month. People had practically written it off. Then, to everyone's surprise, the company was turned around, thanks largely to outstanding leadership and hard work — but also in no small measure due to the determined implementation of TBEM, which enabled Tinplate to formulate its recipe for change and to measure how it was changing.

The Tinplate management took the TQMS assessment feedback very seriously. It invested heavily in the training and development of its people in business excellence perspectives and skills. As the understanding of TBEM grew and as skills improved the company's management found it easier to implement its strategic plan.

Mr Raina recalls, "Once we took up TBEM seriously, the organisation progressed. We achieved a massive jump of over 200 points (on the TBEM scale) in 2001." Today TCIL is a Rs 725-crore business offering the most cost-effective packaging solutions. In 2005 it missed the 600 score but it has multiplied net profit seven times in five years!

Performance: Tinplate Company of India
Rs crore
		Mar'05	Mar'01	% change
	Operating income	257.53	164.41	57
	Material consumed	71.53	23.77	201
	Manufacturing expenses	51.69	43.45	19
	Personnel expenses	35.92	26.13	37
	Selling expenses	7.625	5.26	45
	Administrative expenses	18.72	13.11	43
	Financial expenses	17.28	37.61	-54
	Reported net profit	30.48	3.8	702
In the past five years, the Tinplate Company of India has been able to improve net profit seven-fold inspite of a steep escalation in material costs. It did this by bringing all other costs, including manufacturing, personnel, selling and administrative expenses, under control. The growth in these costs was significantly less than the growth in income. Financial expenses were slashed by more than half.

And that's the whole point. If companies that came close to but did not make the grade performed so well financially, consider what the future holds for companies that cross the 600 mark, or do even better. The Group business excellence drive has converted companies that have achieved the mark into virtual powerhouses of growth and profit while remaining true to their customers.

On the roll
The success that TBEM has brought has begun to make business excellence an infectious idea. In 2005 there were as many as 42 participating companies / business units, and they had an average score close to 500. The sole winner of the JRD QV Award 2005 was the commercial vehicle business unit, or CVBU, of Tata Motors.

You realise how important its award-winning achievement is when you recall that the company had registered a loss of Rs 500 crore just five years ago. The company's performance has soared since then to a Rs 1,236 crore net profit.

Performance: Tata Motors
Rs crore
		Mar'05	Mar'01	% change
	Operating income	17,199.17	6,677.25	157.58
	Material consumed	12,101.28	4,829.16	150.59
	Manufacturing expenses	830.45	372.70	122.82
	Personnel expenses	1,039.34	608.15	70.90
	Selling expenses	598.75	311.22	92.39
	Administrative expenses	911.73	338.15	169.62
	Financial expenses	234.30	492.97	-52.47
	Reported net profit	1,236.95	-500.34	HUGE*
Note: Achieving a 2.5-times top line multiple in five years is not easy for an established company but Tata Motors has done it, as the income figures show. It has simultaneously converted a loss of Rs 500 crore to a hefty net profit of Rs 1,237 crore. It has achieved this when two of the world's three top firms are suffering haemorrhaging losses. Tata Motors has held down manufacturing, personnel and selling expenses and managed to slash financial expenses by more than half. * We can only say 'HUGE' because a net profit of Rs 1,237 crore against a loss of Rs 500 crore works out to infinite growth.

If CVBU drove away with the prize, its sister unit, the passenger car business unit, or PCBU, of Tata Motors, was not far behind. Barely a few years ago securities analysts had condemned this unit as a major mistake. They have had to eat their words.

Over the last two years, PCBU's business excellence initiative has come into its own. It was awarded the Serious Adoption Award in 2004, and now, in 2005, it has won the Active Promotion Award. Two other companies won the Active Promotion Award this year — Tata Refractories and Telco Construction Equipment. The Indian Hotels' Luxury Division got the Highest Delta Award. (See article: On the stairway to success.)

Surpassing goals
Over the years, TBEM has inspired and guided Tata companies to fulfil their highest potential. The companies have invested in quality initiatives and continuous improvement to transform organisational performance. As Mr Tata said at the JRD QV Awards 2005, "What we hoped to achieve with this award, I think we have surpassed. It commenced as an award to memorialise Jeh, but it has gone far beyond that."

The awards motivate companies to reach out to further frontiers of success. As Dr Irani puts it, "The quality movement does not really have a destination, it is a journey, and as we reach one station, we have to embark for the next one."

The way ahead lies in the international arena, where the Tata Group has been making rapid strides. Group companies now realise that to defend their businesses in India they must take the offensive outside the country. That's where the competition gets ever more intense. But there is a quiet confidence in the Group that it can scale greater heights. It's got the India advantage on its side; and it's got TBEM.

Uploaded on March 9, 2006