Vittal Hanumantarao Ron: A job well done, but the challenge now is to remain nimble-footed

Thumari Ananda has lived a world of little surprises. That is, until July 13 last year, when the 48-year-old tradesman (read: cleaner) at Electronics Corporation of India Ltd (ECIL) got an hour on the blue cushion seat in the 25x30, red-carpeted boardroom in the state-owned company's headquarters near Hyderabad. Ananda had spent nearly 30 years on the same job, but this was the first time he was getting to see the inside of the boardroom-let alone attend a meeting with the chairman.

If Ananda's job got just a little more involved, it was because of two reasons. One, a man called Vittal Hanumantarao Ron, who has been ECIL's Chairman and Managing Director since September 1998. And two, the company's near-death experience five years ago, when its net worth had been wiped out and employee indiscipline touched a new high, resulting in Ron's desperate predecessor faxing his resignation to Delhi.

The "mukha-mukhi" (face-to-face) meeting of July 13, then, was just one of the rules Ron was rewriting in his bid to turnaround the 36-year-old enterprise. Says the electronics engineer and ECIL lifer: "It's no rocket science. What I have done is to implement some basic principles of good management."

The Short Circuit

The turnaround may seem simple and obvious today, but it was an altogether different story beginning the early 90s, when the company's slow descent into the spiral began. Thanks to liberalisation, ECIL-which makes a range of electronic gear for the defence, nuclear and telecom sectors-had suddenly to contend with stiffer competition from multinational and private Indian companies. While the company was trying to focus on growing its market in strategic areas and on new technologies, it was stuck with a workforce that was unwilling to make the transition. Shockingly, close to 300 workers were actually working elsewhere, while continuing on the ECIL payrolls for medical and other benefits.

Then, disaster struck. In May 1998, India conducted its nuclear tests in Pokhran and was immediately put on the "entities" list by the US. Sourcing components from the US became impossible, affecting production and customer delivery. ECIL was worse hit also because, unlike some other strategic PSUs such as Bharat Electronics Ltd, all its manufacturing is done in one facility in Hyderabad. While its production for the nuclear sector-it makes, among others, control systems-was not affected, defence production took a big hit. R.F. Filters used for communications systems for the defence sector had to be developed indigenously.

Worse for ECIL, the problems hit it when it was at its weakest. Its then Chairman and Managing Director, C. Rao Kasarabada, and Director Personnel had quit. Losses touched a record Rs 60 crore, employee morale was abysmal, customers were cancelling orders, suppliers wanted bank guarantees before they'd ship parts, and even the government was beginning to have second thoughts about the company. Requests for additional funds fell on deaf ears. Recalls Ron: "Everybody had great sympathy for us, but did not know how to help."

"We are no more emotionally attached to our products" Director (Technical) K.S. Chandrasekar (right) with Gen. Manager, G.N.V. Satyanarayana

That was when the 59-year-old Ron and his A-team-comprising Director (Technical) K.S. Chandrasekar, Director (Finance), K.R.S. Sastry (now retired), Director Personnel V.R.S. Natarajan (has now moved to Bharat Earth Movers Ltd as its CMD)-decided to do something on their own. Taking stock of the situation, Ron identified four key challenges: Working capital crunch, customer distrust, production problems, and worker indiscipline. As the team dug into the problems, it realised that the liquidity crunch was because of non-recovery of outstanding dues. ECIL had some great engineers and scientists as honchos, but unfortunately they made poor businessmen. Some outstandings were as high as Rs 200 crore. Ron introduced a simple slogan that told the managers what was expected of them. "Collect and Spend" became the new rallying cry. Within six months, cash-flow began to improve and in another six, sundry debtors as number of days of gross sales fell from 203 to 165.

With the cash flow improving, it became easier to focus on customer satisfaction. Ron, who joined Bhabha Atomic Research Centre as a trainee in 1965, and moved to Hyderabad two years later as a member of the team that set up ECIL, encouraged his men to meet the most critical customers so that all the glitches could be ironed. He himself travelled eight days a month to meet with customers and assure them of ECIL's capability and commitment.

To speed up customer response, each of the 16 divisions was given a 24-hour deadline. All customer queries and concerns had to be dealt with in that time. To streamline the process, a customer satisfaction index was devised with help from ICICI. Customers would be polled every year or at the end of the process to assess responsiveness of the divisions and to measure customer satisfaction.

Ron says the initiative has helped. The index has risen from 66 per cent in 1998-99 to 95 per cent last year.

Changing The Mindset

At the same time, Ron realised that in a public sector unit, with 6,801 employees (now it is at 5,300), the new initiatives could not be sustained unless the mindset was changed. A sense of accountability had to be brought in down the line. Employees were given greater powers to make and execute decisions. For example, in finance, heads of divisions were given the powers to buy, accept quotations and place orders without necessarily looking to the director (finance) for clearances. Competence and performance, and not seniority, became the new yardstick for promoting employees.

To enable the workers to deliver on their new roles, retraining and redeployment programmes were introduced. By 1999, one out of every four workers was undergoing training for multi-skilling and multi-tasking. Absentee workers were dismissed, but at the same time the general secretary of the employees' union and the secretary of the officers' association were allowed to take part in management committee meetings. "When employees have a higher stake and say in the well being of the company, it's easier to get their buy-in,"says Chandrasekar.

No doubt that philosophy helped in pulling ECIL's R&D up by the bootstraps. For starters, a chief technology officer was appointed, whose primary job was to keep tabs on technology trends. About 16 think tanks were created at the divisional level to encourage bottom-up product innovation. In fact, ECIL's new detect and defuse remotely controlled improvised explosive device (RCIED) has been developed due to the efforts of the think-tank in the communications division of the company. Says Chandrasekar: "We are no more emotionally attached to our products."

The rewired ECIL is working. It is now talking of competing globally. For instance, it has just quoted for an airport information system in Philippines, and within India is working on niche, hi-tech products for the defence and atomic energy sectors. Revenues are up from Rs 215 crore in 1998-99 to Rs 1,005 crore last year. Net losses of Rs 60 crore have turned into an estimated net profit of Rs 100 crore (See Strength In Numbers). Raw materials and work in progress inventory are down from 185 days to 85 days, and employee cost as a percentage of revenues is a third of what it was five years ago.

The challenge now, Ron says, is to remain nimble-footed. "The focus increasingly has to be on quick adaptability, and for this we need anticipatory intelligence and an organisation where everybody is geared to deliver this," says Ron. With just two months to go before his retirement, Ron may consider his job done. But for his successor, whose task would be to consolidate ECIL's improbable turnaround, it may have just begun.