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TURNAROUND OF ABC

Background

ABC is a multi unit organization engaged in the production and marketing of motor cycles. The

company was set up in the year 1962 by an entrepreneurial Indian business family and over the years

benefited considerably from the protectionist policies of the Government. Within 10 years of its

inception ABC emerged as a monopoly in the domestic market with a market share of 75 per cent. It

made attempts at marketing its products overseas in late sixties but without success. Its products simply

could not match the cost and quality expectations of the overseas market.

ABC has three manufacturing units one each in North, South and Eastern part of the country. The first

plant in the north was commissioned in 1962, the second in the South in 1972 and the third in the East

in 1980. The plant in the East was in relative terms more sophisticated than the two other plants.

However, compared to the international standards, the operating technology in ABC was totally

outdated.

Due to a predictable and non-competitive environment ABC had grown into a large bureaucracy with

focus on internal efficiencies and high formalization. Its market orientation was low. It was a typical

manufacturing driven company constantly trying to meet the ever rising demand in the domestic market.

Apparently in this scenario customer had few choices and had to content himself with what was offered

both in the form of the product, price and the after sales service.

During almost four decades of its existence ABC had offered 3 products in the motor cycle category to

its customers. Its latest and currently selling product has already had a product life of 10 years.

ABC had a total manpower of 18000 workmen and 2000 executives spread in its three plants and the

corporate office located in Bombay. Compared to the International standards the manpower cost in

ABC was almost three times higher.

In the year 1996 there was a dramatic change in the business environment of ABC. As a result of

reforms initiated by the Government the hitherto protected motorcycle market was thrown open to

competition. The Government suddenly lifted all the barriers, which had prevented entry of other

players in the market. Within a period of 2 years 6 multinational companies entered the motorcycle

market. By the year 1998 as many as 10 large plants were commissioned by the multinationals in the

country with huge capacities. The overall capacity in the country exceeded demand by almost fifteen

per cent. With their inherent advantages of a global marketing network the multinationals had plans to

sell the surplus in the overseas market. They were equally optimistic about the domestic demand of the

motorcycles rising by 10-15 per cent over next 5 years.

During the year 1996 when multinationals began entering the Indian market a section of young and

forward looking middle management executives sounded the alarm bell in the hope of sensitizing the

management to the impending danger of a competitive market. Their concern was however met by

smugness and complacency. There was a general feeling within ABC that with its several advantages

such as early market entry, loyal customer base, huge and extensive infrastructure including its sales

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and service network, manpower, etc. they had no reason to fear competition. This perception was

reinforced by top management inaction.

By the end of the financial year 1997-98 when the annual accounts were closed ABC found its profits

plummeting by nearly 200 per cent. It had barely managed to break even. Its market share was down

to 35 per cent. There was a disquiet and anxiety in the company over the prospects of its future survival.

In late June 1998 the company brought in a new CEO Ashwani to turn around ABC. Ashwani was a

mechanical engineer with post-graduate qualifications in business management and had 10 years of

senior management experience in a large motorcycle company in Europe.

Immediately on his joining Ashwani took a series of initiatives to strengthen the market position of

ABC. All key functionaries were involved in this task. As head of the training function you have been

directed to prepare a training plan for the remaining part of the year 199899 to actively help ABC in

achieving its strategic objectives.

Please prepare a response to the foll:

As training manager of considerable standing and experience your task is to develop a comprehensive

needs analysis at the level of the individual, group and the total organization.

In analyzing training needs you are also aware that apart from the existing practices/systems in ABC

there were opportunities for introducing new methods/systems for getting a deeper understanding of the

training needs. As you are mulling over the task ahead of you, you know that one of your critical

responsibilities will be to ensure that the data generated by the analysis of training needs has the

ownership of all people including the line managers and the top management.

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Annexure A

Extracts from the Long Range Business Plan (1998-2003) of ABC

As a part of its strategy to globalize its operations ABC has decided, in the first instance to open offices at 6

locations overseas (Sri Lanka, Dhaka, Abu Dhabi, Mauritius, Moscow and Nigeria). The twenty odd

executives who would be posted at these offices will be responsible for locating suitable joint venture partners

in their respective regions for marketing of ABCs range of motor cycles. Along with the JV partners these

executives will take necessary steps for business development, promotion, marketing and sales of

motorcycles. It is necessary to ensure that the executives chosen for overseas assignment have requisite

competence and skills.

The combined sales target for the 6 locations in respect of the remaining part of the year 1998-99 has been

kept at 7000 units.

ABC will bring down its overall costs by 20 percent in the next 15 months. This will be done through

introduction of new technology, process improvement, manpower optisizing productivity improvement, etc.

ABC has tied up with Honda for transfer to technology. Honda has also agreed to assist ABC in setting up a

modern R&D Centre in Chandigarh to be commissioned latest by Dec. 2000.

In the next 10 months ABC will phase out the SURYA range of motorcycles and introduce three new

products in the market.

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ABC will outsource a number of components manufacturing business (seat, wheels, brakes, distributor, clutch,

chain) to vendors. A vigorous and comprehensive quality system will be established to ensure consistency

and compliance with laid down quality standards.

ABC has 1767 retail cum service centres throughout the country. These centres are manned by 6000 odd

employees including 1987 contract/casual workers. All these employees need to be reoriented to the new

environment and all aspects of customer relationship management.

Annexure B

Extracts from the report summarizing findings of the climate survey conducted in ABC on a large sample

of employees.

The brief findings of the survey are as under: -

There was inadequate collaboration amongst heads of the various functions at all the three units. Each Dept. seemed to pursue its narrow goals to the detriment of corporate objectives.

Though the company had introduced a new performance appraisal system 2 years back very little had actually changed because employees had inadequate skills in goal setting appraisal and counseling.

The overall culture in the organization was perceived by employees as bureaucratic and power based. The climate for risk taking and creativity was low.

A pervasive feeling of demotivation, alienation and hopelessness existed amongst the employees. There was a perception that work was not challenging enough to excite people.

A large number of employees felt that the senior managers of the company were narrowly focused in their vision and were lacking in key leadership skills of strategic thinking, service orientation, conceptual thinking

and information processing.

Annexure C

Summary data on training needs derived from the appraisal reports of 50 middle level executives of ABC

The following training needs were identified for the 50 executives during the course of performance review and

counseling:

The need to develop new attitudes and skills in managing customers with emphasis on customer delight and loyalty. (20 executives).

Ability to generate novel solutions to problems. (15 executives)

Improving skills in co-operatively relating to superiors, peers and subordinates and improving team membership skills. (20 executives)

Improving skills of performance review and counseling. (35 executives)

Effective selling strategies in a competitive market. (15 front line sales executives)

Ability to anticipate market needs and developing marketing strategies for retaining and also expanding market share. (For the team of 10 marketing executives in the corporate office)

Annexure D

Extracts from the Training Policy of ABC

Training to employees in ABC is administered on the basis of felt needs. These needs will be assessed from time

to time by a variety of methods and instruments.

Besides, ABC has a policy of mandatory training. This training is mandatory in the following eventualities:

On posting of an employee in the power house to operate boilers. (Training in boiler operations)

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On completion of one years service by executives who join at the lowest rung in the executive cadre. (Training in principles of management)

On entry of non finance executives into middle management cadre. (Finance for non finance programme).

On entry of executives into senior management cadre. (General management programme).

On recruitment of executives in the junior management cadre. (Induction programme)

According to the above criteria the following number will need to be trained during the year 1998-99:

Boiler operations 5

Principles of management 24

Finance for non finance 20

General management 16

Induction training 32 Annexure E

Extracts from the minutes of the meeting held between the top management and the representatives of the

recognized union of ABC

After long discussion with the union representatives the following was agreed to:

The strength of workmen will be reduced from the current level of 18000 to 10000 in the next 6 months through a voluntary separation scheme to be framed jointly by the management and the union.

The management will initiate a programme to educate employees on the benefits of the scheme in order to generate interest in the scheme.

A series of communication meetings will be held throughout the company in the next 6 months. These meetings will be attended by all the employees and addressed jointly by union leaders and senior managers

of the company. The purpose of these meetings will be to sensitize the employees to the challenges facing

ABC and secure their commitment and support to changes of far reaching consequences.

In order to enhance involvement of employees in decision making and empower them to influence changes being initiated in the company a scheme for employees participation in management will be introduced on

a pilot basis in the Production Dept. Appropriate training for employees involved in implementing the

scheme will be arranged by the Training Dept.

The management will organize training programmes for union leaders in order to help them get a better understanding of the economic environment, its impact on ABC and the leadership role they need to play in

transforming the company.

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