CREATING AND SUSTAINING THE INNOVATIVE CULTURE

FOR CORPORATE TURNAROUND

TAPAS KUMAR LAHIRYChairman cum Managing Director,

Bharat Coking Coal Limited1

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 2

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. 3

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 company’s 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. 10

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 TURNAROUNDFor 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. 17

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. 21

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.

TOWN

SUBSIDENCESUBSIDENCE

FIREFIRE XIII /

XIV

XII

XI

X

IX VIII

IV

Water logged

I

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.

PIT-1PIT-2

IVB(5.46m)

(7.00m)III

I I(T+M)(7.90m)

IIB(2.75m)

I (T+M)(2.75m)

DEPTH156m.

DEPTH73.22m.

PROPOSED MULTI-SEAM EVACUATION SY STEM AT DHANSAR COLLIERY

V/VI/VII/VII I

SURFACE BUNK ER (STEEL)DIA-4.88m DIA-4.88m

STAPLE PIT-1DIA=4.8m

DEPTH-35m

DEPTH-20mDIA=4.8m

STAPLE PIT-2

DEPTH-10mDIA=4.8m

STAPLE PIT-3

DEPTH-5mDIA=4.8m

STAPLE PIT-4

BUNK ER B-1

BUNK ER B-2

BUNK ER B-3

BUNK ER B-5

2X250Te CAPACITY

60m

35m

20m

10m

QUARRY

QUARRYFILLED WITH OB

BUNK ER B-4

(18mEXCAVETED)

27m

D1

D2

D3

D4

D5

BUNK ER-B1 15m 6m 400Te

NAME DEPTH DIA CAPACITY

BUNK ER-B2 10m 4.8m 175Te

BUNK ER-B5 10m 4.8m 175Te

BUNK ER-B3 10m 4.8m 175Te

BUNK ER-B4 5m 6.8m 175Te

DETAILS OF BUNK ER

DISCHARGE POINT OF TRUNK BELT CONVEY OR

D1 IV BOT. SEAM

DISCHARGE POINT SEAM

D2 III SEAM

D5 I ( TOP. + MID) SEAM

D3 II (TOP. + MID.) SEAM

D4 II BOT. SEAM

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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.

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.

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. 30

• 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. 32

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. 1.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. 2.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 company’s performance.3.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.4.There are large number of trade union leaders in the company who used to influence the management. Their roles were limited to policy decisions. 33

• 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

BCCL MARCHING AHEAD WITH MARVELLOUS SUCCESS

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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. 35

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@ 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 @ 45 gallon/ person/ day with 50% utilization and remaining 50% capacity for agriculture, plantation, fishery etc. 37

• 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 40

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.

BIRDS MIGRATING TO OB DUMP: ECO-RESTORATION

MONO CULTURE, SINGLE-TIER SPECIES AFFORESTATION

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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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ConclusionThus 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. 44

THANK YOU

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