December 2004 | Shubha Madhukar

Transition equation

Change management was the key to the smoothness with which CMC and VSNL have been transformed from public sector entities to members of the Tata family

Talk of the public sector and visions of large, inefficient, overstaffed and slothful behemoths come to mind. This impression is not always fair, but the fact remains that there is a world of difference between government-run companies and their cousins in the private sector. What, then, happens when a public sector organisation crosses the privatisation Rubicon? The stories of CC and VSNL, two public sector corporations acquired in recent times by the Tata Group, show that the transition can be managed with aplomb.

CMC and VSNL have undergone a major transformation since joining the Tata family of enterprises. The cornerstone of the change management in both has been transparent and direct communications between top management and employees at all levels. The condition on the ground and the set of challenges before each was different, but the common link has been a smooth changeover where the emphasis has been on valuing and empowering the intellectual capital in the two companies.

CMC: The mechanics of change
In 2001, when the Tata Group acquired CMC, the company was not really in the league of top-notch Indian infotech enterprises. The Tata mission was to build CMC into a world-class organisation. This was a mammoth task by all accounts. There was a silver lining, though. CMC had some outstanding achievements to its credit.

No radical changes were instituted at the outset. All employees, including the top management, were retained. The Tata Group brought in just three people from outside, all from Tata Consultancy Services (TCS). R Ramanan, CMC's current chief executive officer and managing director, joined when his predecessor retired. A chief finance officer and a human resources expert were inducted in due course.

One of the first tasks was to end CMC's plain-sailing culture. Says Mr Ramanan: "The challenge we faced was how to ready the company to face competition, and to win, under the pressures of time, budget and quality. The real test was the transformation of ability to agility."

The second challenge was to move from the protected sanctuary of government-supplied contracts and build business development teams to penetrate the Indian and global markets. Three years of sound strategy and implementation has seen CMC successfully finding international clients of repute in Africa, the Middle East and the US.

Major training initiatives were launched in three key areas: business development to build up world-class marketing support, training programmes in client management for project managers, and an information-sharing programme called Laksh (learning and knowledge sharing). The three initiatives would in time cover every employee of the company.

There were a number of other parallel initiatives. PAIS (performance appraised information system) was introduced to recognise and reward good performance. High performers are formally conferred the CMC Ratna Award and interaction between CMC and other Tata companies were encouraged. One example of the latter is Synergy, the CMC-TCS joint bulletin that carries news of what's happening in the two organisations.

The Tata Business Excellence Model (TBEM) was adopted and it helped CMC build bridges with other Tata companies. Internally, there were restructuring initiatives, aligning to market needs and introducing industry verticals and practices. The SEI CMM Level 5 initiatives in TCS were replicated in CMC. This apart, infrastructure and communications were improved.

On the human resources front, to make changes tangible, policies on performance appraisal, performance recognition, the variable pay concept, etc were introduced. The earlier government pay structure, with yearly increments, gave way to a variable, qualitative compensation system based on individual, group and organisational performance. Through performance recognition CMC has arrived at industry-standard salaries for 5-7 per cent of its top employees. It hopes to cover the rest of its staff on this issue over the next two years.

Initiatives in the organisation were fast and diverse. To make employees comfortable with change, every initiative was publicly announced, and its relevance was clearly explained and communicated through a number of open forums. This transparency resulted in a greater acceptability of the changes that were happening thick and fast.

Call it proper strategising or judicious implementation, the initiatives have all been successful and have built a sense of pride and loyalty in employees. Now there is a palpable energy within the organisation to grow rapidly and soar high.

VSNL: Ringing in the new
Before it was privatised in February 2002, VSNL, though one of the public sector navratnas, or crown jewels, had problems typical of government-held enterprises. There were too many people with too little to do, the employees were mostly generalists rather than specialists, the staff had little motivation and, as if all that wasn't enough, the employees' union needed to be handled sensitively and educated about the coming changes.

Emerging from the monopoly era, VSNL was ailing and it had problems of technology too. In the event, managing technology did not require much expertise, but managing people did — loads of it.

First things first. VSNL addressed the issue of surplus manpower by introducing a voluntary retirement scheme (VRS). This wasn't as difficult as it first seemed, because people were expecting it and the union was supportive, after informal discussions were held with it to create a scheme more attractive and acceptable than the one offered by the government before privatisation.

The second initiative at VSNL was to recruit specialists for sales, marketing and customer service. Earlier, in the absence of a recruitment process, all vacancies were advertised nationally. Now, a systematic and professional recruitment process is in place at all levels, and VSNL is hiring specialised resources from other companies too.

The standard salary system of the government days was the next to go. Today high-potential performers within the organisation are identified and rewarded accordingly. The salaries of senior managers were also revised, bringing them on par with the best in the industry.

A performance-oriented culture was introduced and a transparent appraisal system was implemented. Earlier, like most public sector undertakings, no one knew the exact criteria for advancement, because of the government system of confidential reports. Employees' training needs were addressed and human resource policies were revised to match those in the private sector.

At VSNL a major positive from the past was the good relationship between the union and the management. The task at hand was convincing employees to accept major changes while retaining their goodwill. The new management dealt with the union in a sensitive manner, making the leaders understand the needs of the changing market in terms of processes and human resource management.

Improving communications between the management and the employees was a priority. The top management, including then managing director S. K. Gupta, travelled to all branches and personally spoke to employees, reassuring them about the various initiatives and their specific relevance.

In the absence of a dedicated change management team to manage the transition, the senior management and divisional managers took charge. Though the process has not been entirely successful, it has integrated various parts of the organisation, increased operational efficiency and enabled the company to function more smoothly.

With the difficult part out of the way, VSNL can look forward to a clearer connection with success.