K. A. Ananthram

Being the best is just not good enough for some companies. Take Tata Steel. Recently rated the world’s top steel enterprise in a survey of the global steel industry, the flagship company of the Tata Group would have been forgiven for resting on its laurels for a while. Instead, it has embarked on a restructuring programme aimed at making it better still.

The urge to reinvent itself constantly has paid handsome dividends for Tata Steel. It has carried the company from the quagmire of stodginess and sloth to the promised land of profitability and unprecedented success. The latest round of restructuring, based on a ‘performance ethic plan’ (PEP) recommended by management consultants McKinsey & Company, is one more way in which Tata Steel is working to improve itself.

Reaching such heights has not been easy. It required major surgery, an extraordinary doctor and the contribution of each and every employee to rejuvenate the 95-year-old institution. The master surgeon was Dr J. J. Irani, who, having led Tata Steel out of the woods, stepped down as managing director on July 22 after more than a decade at the helm of the company.

The story of how Tata Steel turned the tide and then topped that by winning a host of awards for business excellence is a case study by itself. As B. Muthuraman, who took over as managing director on Dr Irani’s retirement, says, "The credit for sowing the seeds of the change process goes to Dr Irani, but I am also proud that the entire organisation backed this process to make things happen."

The quest for excellence began back in the late 1980s. Dr Irani visited Japan as part of a Confederation of Indian Industries (CII) delegation and was more than impressed by the standards being set by Japanese companies. On his return, he made it a personal mission to transform Tata Steel. The small ripple he created with his quality movement in the company soon ushered in a flood of change-management processes.

Says Sanjay Singh, chief of corporate communications: "The only thing constant in Tata Steel is change, and this is all-pervasive." He should know. Mr Singh is at the centre of a huge internal campaign that Tata Steel has mounted to push the change message across the organisation. His department has worked ceaselessly to communicate the management’s message through the length and breadth of the company. Stickers, posters, video films, face-to-face dialogues and more, all with Dr Irani as the point man, made it possible for Tata Steel to introduce the most far-reaching changes in its history.

"The quest for excellence has not been limited to between 9 am and 5 pm," says Mr Singh. "The company has sought to extend it to all spheres of the employee’s life: excellence in their own achievements and excellence in the lives of their children and spouses." Towards this end, the company conducted, with Dr Irani’s wife, Daisy, as the spearhead, a clutch of programmes — covered through the Domestic Management Programme — that embrace all aspects of the lives of the employees’ children and spouses.

An open and transparent communication process has helped Tata Steel painlessly reduce its workforce by a staggering 30,000 people. The ease with which the change programme has been implemented is, according to Mr Muthuraman, a result of the powerful vision projected by the management, which was then shared across the company in a transparent manner.

Making the process as humane as possible has also helped minimise the distress that springs from any such separation. Apart from a generous severance pay, the company offered extensive outplacement services to ensure that retrenched employees were gainfully employed elsewhere.

Tata Steel realised early that the key to sustained success lay in fixing its processes. The company identified eight key areas that needed urgent attention, among them technology, market development, customer relationships, social responsibility management, risk management and human resources.

In monetary terms, it took a staggering Rs 7,000 crore investment to transform Tata Steel into a state-of-the-art monument to industrial enterprise. The investment programme has not only made it the world’s most efficient steel-maker, but also one of the most environment-friendly. The company is today seen as a very customer-friendly organisation, a far cry from the time customer relations was conspicuous by its absence.

The ‘performance ethic programme’
With most of its other processes nearly fixed, Tata Steel has now turned its attention to the most crucial function of them all: human resources. The key challenge, as Mr Muthuraman reiterates, is getting the company’s workforce of 48,000 aligned to the concept of taking Tata Steel further down the road of progress and excellence.

According to him, the PEP initiative is poised to become the most comprehensive and largest human resources operation in Tata Steel’s history. It’s not that the company neglected human resources before PEP happened. HR initiatives were part of the change process of the last 10 years, but nothing of this magnitude and scope has been attempted before.

Says Niroop Mahanty, vice president, human resources management at Tata Steel: "HR policies and changes in the past had more of a socialistic outlook. The policies being tailored under PEP are very businesslike; it is entirely competency-driven and will have a far-reaching impact in the long run." A. N. Misra, the head of PEP, concurs, adding that the programme is aimed at creating leadership through people.

go to page 2