Sail's Voluntary Retirement Scheme

The Dilemma

The major worry for SAIL's CEO Arvind Pande was the company's 160,000-strong workforce. Manpower costs alone accounted for 16.69% of the company's gross sales in 1999-2000. This was the largest percentage, as compared with other steel producers such as Essar Steel (1.47%) and Ispat Industries (1.34%). An analysis of manpower costs as a percentage of the turnover for various units of SAIL showed that its raw materials division (RMD), central marketing organisation (CMO), Research & Development Centre at Ranchi and the SAIL corporate office in Delhi were the weak spots.

There was considerable excess manpower in the non-plant departments. Around 30% of SAIL's manpower, including executives, were in the non-plant departments, merely adding to the superfluous paperwork. Hindustan Steel, SAIL's predecessor, was modelled on government secretariats, with thousands of "babus" and messengers adding to the glory of feudal-oriented departmental heads.

SAIL had yet to make any visible effort to reduce surplus manpower. A senior official at SAIL remarked: "If you walk into any SAIL office anywhere, you will find people chatting, reading novels, knitting and so on. Thousands of them just do not have any work. This area has not even been considered as a focus area for the present VRS, possibly because all orders emanate from and through such superfluous offices and no one wants to think of himself as surplus."

With a manpower of around 60,000 in these offices and non-plant departments like schools, township activities etc, SAIL could well bring down to less than 10,000. Reduction of white-collar manpower required a change in the systems of office work and record keeping, and a very high degree of computerization.

Officers across the organization employed dozens of stenographers and assistants. Signing on note sheets was a status symbol for SAIL officers. Another official commented: "Systems have to be result oriented, rather than person oriented and responsibilities must match rewards and recognition. There is a need to change the mindset of the management, before specific plans can be drawn out for reduction of office staff."

From the beginning, SAIL had to contend with political intervention and pressure. Many officials held that SAIL had to overcome these objectives: "Many employees do not have sufficient orders or work on hand to justify their continuance, and yet political pressures keep them going. It is time that the top management takes a tough stand on such matters. One does not have to call in McKinsey to decide that many SAIL stockyards and branch offices are redundant."

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Case Details

Case Code : HROB002
Themes: HR Practices and Policies
Case Length : 07 Pages
Period : 1999-2001
Organization : SAIL
Pub Date : 2001
Teaching Note : Available
Countries : India
Industry : Metals & Mining

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