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INTRODUCTION
THE DILEMMA
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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.
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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. |
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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.”
THE VOLUNTARY RETIREMENT SCHEME
As a part of the restructuring plan, McKinsey had advised Pande that SAIL
needed to cut the 160,000-strong labor force to 100,000 by the end of 2003,
through a voluntary retirement scheme. Pande was banking on natural attrition
to reduce the number by 45,000 within two years, but GOI's decision to increase
the retirement age to 60 further delayed the reduction. Subsequently, SAIL had
requested GOI to bail it out with a one-time assistance of Rs 15 billion and
another subsidized loan of the same size for a VRS, to achieve the McKinsey
targets.
In a bid to 'rationalize' its huge workforce, SAIL launched a VRS in mid 1998,
for employees who had put in a minimum service of 20 years or were 50 years in
age or above. The scheme provided an income that was equal to 100 per cent of
the prevailing basic pay and DA to the eligible employees. About 5,975
employees opted for the scheme. Of them, 5,317 were executives and 658
non-executives. Most of those who opted were above 55 years.
On March 31, 1999, SAIL introduced a 'sabbatical leave' scheme, under which
employees could take a break from the company for two years for
studies/employment elsewhere, with the option of rejoining the company (if they
wanted to) at the end of the period. The sabbatical allowed the younger members
of the SAIL staff to leave without pay for "self-renewal, enhancement of
expertise/knowledge and experimentation," which broadly translated into higher
studies or even new employment.
On June 01, 1999, SAIL launched another VRS for its employees. Employees who
had completed a minimum of 15 years of service or were 40 years or above could
opt for the scheme. The new VRS, which was opened to all regular, permanent
employees of the company, would be operational till 31st January 2000. Its
target groups included:
- Those who were habitual absentees, regularly ill and those who had become
surplus because of the closure of plants and mines;
- Poor performers.
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THE PERSUASION & THE RELATION
QUESTIONS
& ADDITIONAL READING
© ICMR.Global CEO •
December 2003, All Rights
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