CREATING AND SUSTAINING THE INNOVATIVE CULTURE FOR CORPORATE TURNAROUND

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CREATING AND SUSTAINING THE INNOVATIVE CULTURE
FOR CORPORATE TURNAROUND
TAPAS KUMAR LAHIRY Chairman cum Managing
Director, Bharat Coking Coal Limited
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Industrial Sickness

• Growing incidence of sickness has been one of the
  major problems faced by the industrial sector
• Not only in Private sector, it is equally rampant
  in Public sectors.
• In India, corporate giants like Indian Railways,
  SAIL,, HEC, CCL etc were made to turnaround for
  survival.
• To tackle industrial sickness in India,
• BIFR is an apex board for taking appropriate
  measures for revival and rehabilitation of
  potentially sick undertakings and for liquidation
  of non-viable companies both under private and
  public sectors.
• BRPSE recommends revival package of sick CPSE

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Adverse Impacts of Industrial Sickness

• Resources and funds are locked up in the sick
  unit. Also increases the non-performing assets
  (NPAs) of banks and financial institutions
• Loss of production productivity in the economy
• Loss of revenue to the Government
• Setback to Employment Prospects
• Industrial Unrest
• Above all, it undermines the public confidence in
  the functioning of the organized sector in the
  country which in turn affects the overall
  investment climate of the economy.

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Sick Industrial Company as per Sick Industrial
Companies (Special Provisions) Act, 1985

• An industrial company (being a company registered
  for not less than five years) which has at the
  end of any financial year accumulated losses
  equal to or exceeding its entire net worth.

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• BUT, ACCORDING TO COMPANIES ACT,2002
• Sick industrial company means an industrial
  company which has
• Accumulated losses in any financial year which
  are equal to 50 percent or more of its average
  net worth during four year immediately preceding
  such financial year
• Failed to repay its debts within any three
  consecutive quarter on demand made in writing for
  its repayment by a creditor of such company.

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• Formed after nationalization of coking coal mines
  in India in 1972
• Became a wholly owned subsidiary company of Coal
  India Limited since 1.11.1975.
• The operations of the company are mostly in the
  Jharia Coalfield at Dhanbad and to a small extent
  at Raniganj Coalfield in West Bengal.

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A Loss Making Company since inception

• Incurring losses since inception
• Despite revenue support from the Coal Price
  Regulation Account (CPRA) to the tune of Rs. 3165
  crores over the period 1982-83 to 1995-96, the
  company suffered complete erosion of net worth by
  31.03.1995 and was referred to BIFR.
• The net worth was rendered positive by conversion
  of Rs.996 crores of loan into equity in 1997-98.
• But losses continued and net worth once again
  turned negative as on 31.03.2000 and it was
  referred to BIFR again.

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Reasons for continued losses

• To revision of Salaries wages beyond paying
  capacity,
• Insufficient investment in mining equipment,
• Non-availability of land,
• Difficult working condition etc.

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SWOT

• A SWOT analysis of the company was done with
  principal focus was on turning the weaknesses for
  positive goals instead of barely concentrating
  only on Strengths.
• This innovative approach brought about surplus
  revenues which ultimately culminated into
  companys net worth turning to positive.

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TURNAROUND SITUATION

• A turnaround situation is created in a company
• when it suffers declining economic performance
  for an extended period of time,
• such that the performance level is so low that
  the survival of the company is threatened
• unless serious efforts are made to improve its
  performance.

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TURNAROUND STRATEGY DIFFERENT PERSPECTIVE
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TURNAROUND STRATEGY

• Turnaround strategy is based on the ulterior
  motive to hold the business and cut the costs.
• In the past, turnaround was taken as efficient
  and effective use of retrenchment strategies to
  arrest the decline in financial performance.
• Retrenchment strategies used to be aimed at
  deliberate reduction in costs, products,
  product lines, assets and overhead and had a
  very restrictive view of the term
  turnaround.
• Further, the retrenchment strategies may not be
  sustainable in the long run as these may
  encounter resistance from within and outside
  the organization.

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Turnaround defined

• According to Khandwalla (1989) sickness has been
  defined as the loss of the organization's
  capacity for normal growth and
  profitability which appears to be more
  comprehensive.
• As such turnaround has been defined as regaining
  organization's capacity for normal
  growth and profitability.

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• The financial ratios of return on sales
  and return on capital employed can be
  used to measure the capacity regained.
• It is pertinent to mention here that the loss
  in the capacity may be caused by a
  combination of the factors, which may be
  external as well as internal, financial as
  well as non- financial which may be strategic
  management practices, human resource
  management practices, organizational culture and
  so on.

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MODALITIES FOR TURNAROUND

• For effective turnaround, various authors have
  suggested different modalities.
• Boyne (2006) has categorized effective strategies
  as
• Retrenchment,
• Repositioning and
• Reorganization.
• Khandwalla (1981) provides the most comprehensive
  analysis of turnaround processes after systematic
  analysis of the activities involved
• A dynamic change-agent with a strong sense of
  mission, preferably from outside the
  organization.
• Credibility building through some
  outstanding performance and/or through
  'quick-pay-off' strategies.
• Mobilization of the rank-and-file by getting them
  involved in the organization's goals and
  activities.

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• Quick pay-off projects for some immediate relief.
• Reprieve from serious external pressures,
  especially those relating to industrial
  relations, finance key inputs, stakeholders,
  etc.
• Mobilization of external resources and
  utilization of environmental opportunities.
• Strengthening of mechanisms to influence
  the environment, such as marketing and public
  relations.
• Selective changes in the product-mix,
  concentrating on high pay-off products.
• Selective strengthening of management
  functions and systems, especially the
  financial control system.

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• Motivating managers through
  participation, autonomy, challenging
  tasks, accountability, example setting, etc
• Co-ordination through regular review meetings
  and face-to-face interaction.
• Performance control through goal-setting
  and fixing of responsibility, often
  creating profit and cost centers.
• All the above strategies for turnaround have
  been tried with fair but not sure chances of long
  term success.
• It remains a fact that traditional and normal
  methodologies followed can bring about changes in
  the organization but this may not be sustainable
  in the long term.
• To create an effective and efficient
  organization, there is a need to re-look the
  subject and frame and form innovative strategies
  for transcreating the organization.

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INNOVATION KEY FOR SUSTAINED TURNAROUND

• In a technology- driven organization, innovation
  is recognized engine of growth and survival.
• Of late the word innovation was associated with
  R D and technology.
• But the new innovation has come to mean much
  more it includes any change across and beyond
  the organization, which results in high impact
  and value creation.
• R D is definitely a vital ingredient in the
  growth strategy particularly over a long period
  to cope up with the changing business scenario.
• Innovation can also stem from adapting new
  technology, new process cycle, new ways of doing
  business, or new ways of purchase and sales.

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• For innovation to take its seed, a clear guiding
  structure should be created which will facilitate
  to establish a creative chaos environment to
  liberate people and trigger accidental
  discourses, and stimulate the spirit of
  relentless growth.
• The structure has to be created through roadmaps,
  guiding principle, business process, system and
  organizational chart and strategic planning.

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SUSTAINED GROWTH FOR EFFECTIVE TURNAROUND

• It is reiterated that the high growth cannot be
  sustained unless all the aspects of business
  process, product, systems, procedures, various
  types of resources like land, workshop, power and
  transport infra-structure, scraps and above all,
  invaluable human assets are reviewed,
  restructured and re-engineered.
• Moreover, a need for re-orientation of mindset
  should be realized for mass production and rapid
  technological upgradation.

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A CULTURE OF INNOVATION

• Our managers have to instill the culture of
  innovation throughout the organization and much
  more importantly, create processes to enable and
  organize it.
• In fact they have to reinvent themselves by
  ability to evolve and constantly mutate in the
  face of change by creating a system and
  structure.
• In other words, the problems will have to be
  looked upon as opportunity turned inside out to
  transcreate an organization.

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REVIVAL PATH

• This has been done in BCCL with marvelous
  success.
• Once the company becomes sick, revival plan
  preparation and implementation is the key of
  success. The slippery path cannot be followed as
  all the inputs will turn to waste and eat away
  everything.
• Path to turnaround should be based on parameters
  in which weakness is converted to strength.

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REPOSITIONING

• The repositioning should be done in which people
  as a individual is kept in prime focus and whose
  satisfaction level should be deciding factor for
  revival.
• Trade Union has to be involved in policy
  decisions only.
• The role of other stakeholders shall be decided
  in accordance with the contribution they make and
  strengthen the organizational objectives.

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• Two things focus in the laboratory for the
  searching as every mind is laboratory for truth
  searching for every individual- is true for
  organization also.
• The results of search will be deciding factor and
  will create a success story.

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CONVERTING WEAKNESS INTO STRENGTH

• In BCCL, net worth had become negative since 2001
  and case was referred to BIFR.
• In contrast to the normal turnaround strategies
  undertaken by corporate, the strategies formed
  for turnaround of BCCL was primarily focused on
  weak points of the organization while keeping
  strength intact.
• The so called weaknesses or hurdles were not
  treated and taken as weaknesses but looked upon
  as resources which too can contribute to the
  organization.

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MULTI-SEAM COAL DEPOSITS A PROBLEM TURNED INTO
OPPORTUNITY

• BCCL operated mainly in Jharia Coalfield having
  multi-seam coal deposit with complex geological
  structure which was taken as problems and
  constraints for mining in the past.
• In a strategic plan of BCCL, these problems have
  been recognized as opportunity for high growth
  trajectory.

V/VI/VII
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STRATEGIC PLAN OF BCCL

• The strategic plan envisages to focus on opencast
  mining in available land in combined seam and
  above followed by high capacity underground
  mining for lower virgin seams with highly
  mechanized technology.
• Incidentally, Jharia Coalfield is faced with the
  problems of fire and subsidence which are mainly
  confined to combined seam and above.

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• By the above strategy, apart from increasing coal
  output through opencast mining in combined seam
  and above, problem of fire and water-logged
  working are dealt with effective liquidation of
  age old problem of mine fires without additional
  resources.
• Huge reserve of lower seams are becoming
  available for economic and easy access
  exploitation through underground methods by
  developing high capacity evacuation through
  quarry floors.

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MOTIVATING HUMAN BEING THE KEY FACTORS

• The changing scenario of social, economic and
  environmental factors affecting an organization
  calls for new and innovative ways to understand
  and respond to problems and challenges facing the
  organization.
• The first and foremost critical factor to change
  our perception about the human beings living in
  and around who are the stakeholders with direct
  and indirect bearing on the organization.

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• The points which need attention for
  understanding of human reality are
• Human beings seek survival needs and seek social
  satisfactions and freedom to exercise choices.
• Tendency to enlarge and enrich the quality of
  satisfactions.
• People want to experience a sense of their own
  worth and learn not only to accept but to seek
  responsibility
• They continuously tend to change their role
  relationship as they encounter new experiences.
• They are willing to adopt more innovative and
  risk taking behavior.

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• Amongst the stakeholders, the role of employee
  on roll are crucial and have the direct bearing
  on the performance of the company.
• Moreover, in a labor intensive industry,
  synergies of the pooled resources and talents can
  be exploited and tapped for achieving high growth
  rate.
• The creative forces of the team need to be
  constantly channeled in the right direction to
  achieve maximum benefits of the organization.
• Further it is necessary to focus on
  organizational design by bringing both positive
  and negative minded people together so that they
  work with common shared vision and values

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• With the following strategies
• The doing away with mental blockage and obsession
  with existing system and status quo
• Attitude transformation of people who are
  counter-productive and develop human potentials
  inherent in them for gainful work of organization
• Stimulating pro-active and positive attitude,
  knowledge and skill sharing for
  cross-fertilization of ideas.
• Changing mindset by knowledge, change of
  attitude, learning skills and inculcating habits.
• The control by vision, value and culture to be
  enforced by breaking down hierarchical control.
• Attitude, commitment and leadership styles of top
  management
• Receptivity to new ideas and commitment to new
  technology
• Appraisal and reward systems and practices.

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• In line with the above, BCCL formed and
  implemented the number of strategies to tap the
  potential of its employees and motivate them,
  some of them are given below.
• It was decided to convert all the piece rated
  loaders engaged in manual loading of coal to time
  rated workers. These worked who were very hard
  working were given an opportunity to perform as
  time-rated jobs which made way for mechanization
  of the mines and doing away with slow and manual
  mining in the company.
• Promotion policy was made so that all the
  eligible employees were given promotion in the
  same day i.e. 1st November, the coal india
  foundation day. This had a dramatic change over
  workers attitude and behavior resulting in
  motivation and high human performance with
  remarkable impact on companys performance.
• People living in unstable sites in coal bearing
  areas are being shifted to colonies with all
  infrastructure and amenities in non-coal bearing
  area. This has improved the quality of life and
  resulted in high satisfaction levels.
• There are large number of trade union leaders in
  the company who used to influence the management.
  Their roles were limited to policy decisions.

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BCCL MARCHING AHEAD WITH MARVELLOUS SUCCESS

• By recognizing the physiological, psychological
  and perceptual characteristics of individuals and
  their strategic orientation through knowledge,
  skill, attitude, motivation etc, human
  potentials inherent in workmen were developed for
  utilization in BCCL for its turnaround/sustained
  growth.
• Thus BCCL got not only benefitted by their
  positive efforts, but also prevented resource
  waste.

BCCL
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WASTE TO UTILISATION

• The mines of BCCL are watery and this has been
  treated as a problem for mining and crores of
  rupees were being spent for pumping.
• It has been estimated that 25 tonne of water is
  handled for producing 1 tonne of coal.
• The water pumped out were allowed to waste in
  natural drainages. Since water is a scarce
  resource and villages surrounding the coal mines
  are also facing acute shortage of water for
  drinking and agriculture purpose.

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MULTI-PURPOSE UTILISATION OF SURPLUS MINE WATER
FOR VILLAGERS

• The value and use of this resource which was
  erstwhile taken as problems or hurdle for mining
  was recognized and
• With a view to harness the surplus mine water
  discharge and to remove the persistent problem of
  water scarcity in the nearby the villages as a
  part of fulfillment of Corporate Social
  Responsibility of BCCL
• A scheme entitled Scheme for multi-purpose
  utilization of surplus mine water of Area-I,
  Block-II and Area-III of BCCL with cost estimate
  of Rs. 11.72 Crore was prepared

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• Availability of surplus mine water from the mines
  6500 GPM (out of which 3250 GPM will be
  utilized.
• Storage capacity of water 7 days_at_ 20 hrs
  pumping, 0.123 Mm3, 27.30 MG
• Total area of land for reservoir 4.65 Ha.
• Capacity to serve drinking water for population
  22,000 persons _at_ 45 gallon/ person/ day with 50
  utilization and remaining 50 capacity for
  agriculture, plantation, fishery etc.

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• The scheme which is under implementation will
  facilitate availability of water in water-scarce
  villages in the surrounding area for drinking and
  irrigation purpose.
• A NGO of SBI is taking interest for development
  of community infrastructure in which SBI will
  be facilitator as banker and BCCL as nodal
  agency.
• Similar schemes shall be taken up by BCCL as per
  the requirement of state Govt. after obtaining
  necessary NoC etc.
• This has positive impact on socio-economic status
  of surrounding villages and attitude of people
  living therein have changed to pro-BCCL who too
  have a tendency to contribute for growth and
  sustenance of BCCL.

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ECOLOGICAL RESTORATION

• The work of ecological restoration for
  establishing natural forest on mined out areas of
  degraded land has been taken up for the first
  time in Coal India on 8 ha. of OB dump located at
  Tetulmari, Sijua Area under guidance of FRI,
  Dehradun.
• Two dumps comprising of 7 ha. at Damoda Colliery
  of Barora Area have been taken up for ecological
  restoration under the expert guidance of Prof. C
  R Babu, Vice- Chairman, Expert Appraisal
  Committee, MoEF, New Delhi.
• Grass seeds have been board casted over the dumps
  as a part of ecological restoration.

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• Eco-restoration is the restoration of derelict
  landscapes based on ecological principles which
  not only cause speedy recovery of ecological
  system but also improve the socio-economic
  potential of the areas.
• Long term Plan of BCCL for eco-restoration
• Ecological restoration and environmental
  conservation
• Protection and conservation of natural resources
  for local populace
• Checking land degradation, deforestation and loss
  of biodiversity
• Improve microenvironment of the mined landscapes
  
• Capacity building of all stakeholders

Trees in the upper tier
Shrubs in the middle tier
Grasses in the lower tier
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Road map for eco-restoration of degraded lands
of BCCL

• Restoration of derelict mine spoils.
• Developing a nursery for medicinal plants.
• Soil and moisture conservation practices.
• Development of an eco-park.
• Awareness and capacity building initiative.

LOCAL SPECIES MIGRATING ON OB DUMP
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• Afforestation without eco-restoration is simply a
  green cover. As such eco-restoration is being
  done in BCCL with the broader objective of
  restoration of ecological balance and climatic
  conditions.
• Benefits of the ecological restoration are
  
• Its cheaper, costs only 10 of forestation done
  through Forest department.
• Natural forest is developed.
• NO GO area is created after extraction of the
  mineral. This can be exchanged for those NO GO
  area where mineral still exists.
• Employment for the PAPs is generated.
• Flora Fauna will be generated thus
  Environmental protection will be taken care of in
  better way.

MONO CULTURE, SINGLE-TIER SPECIES AFFORESTATION
BIRDS MIGRATING TO OB DUMP
ECO-RESTORATION
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• The waste-land created after mining is not only
  reclaimed and restored for ecological balance of
  the area but will provide income generation to
  people living nearby through medicinal plants,
  fruit bearing trees, fodders etc.
• This is again an example of how the value and use
  of waste have been innovatively recognized and
  made to work as resources

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Conclusion

• Thus the SWOT analysis of BCCL was done with
  innovative approach.
• The Strength of the company was used for
  motivation and Weaknesses were not only reduced
  but also turned to Strength with the result
  that net effect was positive.
• This was the driving force which generated the
  surplus revenues which made net worth positive
  and the company turnaround.

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THANK YOU