Crompton Greaves' Operations Overhaul

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Themes: Operational Restructuring
Period : 1990-2000
Organization : Crompton Greaves
Pub Date : 2002
Countries : India
Industry : Electrical Equipment

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Case Code : OPER003
Case Length : 05 Pages
Price: Rs. 200;

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“When I became CEO of Crompton Greaves in 1985, the company was in bad trim. The wind had abruptly changed direction, catching the management unawares. It was my job primarily to set the sails right again and correct the course.”

- Kewal K. Nohria, CEO, Crompton Greaves in 1998.

The Bluechip's Downfall

Crompton Greaves Ltd. (CGL), the flagship company of the L. M. Thapar group was one of India's leading private sector electrical engineering companies. CGL manufactured a wide range of transformers, switchgears, control equipment, motors and related products and railway signaling equipment besides consumer products.

CGL was incorporated in 1937 as a 100% subsidiary of the UK based Crompton Parkinson Ltd., (CPL), under the name of Parkinson Works Ltd. (PWL). In 1948, the L. M. Thapar group company, Greaves Cotton & Co Ltd. (GCCL), acquired a 26% stake, which was later increased to 50% in 1956. In 1966, a joint venture company (between GCCL & CPL), Greaves Cotton & Crompton Parkinson Ltd. was amalgamated with PWL. The company was renamed as Crompton Greaves Ltd.

Over the years, CGL evolved from being a single location company manufacturing ceiling fans and AC industrial motors, into a multi location, multi product company. In the late 1970s, CGL entered into various technical collaboration agreements with renowned companies from USA, UK, Europe and Japan. These activities (many undertaken as joint ventures), were in related products, supplementing the company's main business. While many of these companies were amalgamated with CGL, some of them were divested as well during the following years. In 1987, CGL began its diversification moves and entered the telecommunications and industrial electronics arena. The company also undertook turnkey engineering projects and began providing information technology services.

During the 1980s, CGL was in dire straits with profitability at all time lows. Nohria said, "In 1982 and 1983, industry in general and the electrical industry in particular was gripped by recession, and the scenario changed from a seller's market to a buyer's market. Falling demand combined with higher production capacity and employment levels resulted in declining productivity during 1982-84 at Crompton Greaves." The CGL management realized that it would have to take steps soon enough to put the company back on track. Nohria believed that operational efficiency was one of the keys to organizational effectiveness and long run profitability. Besides working towards an overall restructuring of the company, Nohria decided to focus on total quality management to improve CGL's performance.

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