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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 – PowerPoint PPT presentation

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Title: CREATING AND SUSTAINING THE INNOVATIVE CULTURE FOR CORPORATE TURNAROUND


1
CREATING AND SUSTAINING THE INNOVATIVE CULTURE
FOR CORPORATE TURNAROUND
TAPAS KUMAR LAHIRY Chairman cum Managing
Director, Bharat Coking Coal Limited
2
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

3
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.

4
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.

5
  • 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.

6
  • 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.

7
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.

8
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.

9
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.

10
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.

11
TURNAROUND STRATEGY DIFFERENT PERSPECTIVE
12
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.

13
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.

14
  • 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.

15
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.

16
  • 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.

17
  • 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.

18
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.

19
  • 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.

20
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.

21
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.

22
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.

23
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.

24
  • 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.

25
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.

26
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
27
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.

28
  • 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.

29
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.

30
  • 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.

31
  • 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

32
  • 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.

33
  • 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.

34
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
35
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.

36
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

37
  • 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.

38
  • 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.

39
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.

40
  • 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
41
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
42
  • 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
43
  • 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

44
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.

45
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