Integrating Case for Module I-III

IndiCan Ltd.

By the fall of 2003, IndiCan had developed a sophisticated control system for use in its
plants. This control system, begun in the years following Liberalization, stressed
competition within the company as well as against other companies in the industry.
Within various divisions at IndiCan, the can manufacturing Plant at Itarsi, MP, had
become a preferred division for production management trainees as a result of its
successful use of control systems. According to a corporate training executive:

Products, Technology, and Markets

IndiCan in 2003 operated a number of plants across the country. The principal products
of the Itarsi plant were Open Top food cans, bottle caps and crowns, steel pails, and
general line containers. Of these, Open Top cans constituted the largest group. They were
manufactured for the major producers of vegetable products like pickles - mango, chilly,
ginger, and other mixed vegetables, -and for the soup manufacturers. Beer and soft drink
cans were a growing commodity, and large quantities of general line containers of many
different configurations were produced to hold solvents, paints, lighter fluids, waxes,
antifreeze, and so on. Most of the thousands of different products, varying in size, shape,
color, and decoration, were produced to order. Typical lead times between the customer's
order and shipment from the plant were two to three weeks in 2003, having been reduced
from five and one-half weeks in the early 1980s, according to Itarsi plant executives.

Quality inspection in the can manufacturing operation was critical. Costly claims could
result if the container failed in the field and the product had to be withdrawn from store
shelves.

Most of the key equipment was designed and developed by the parent organization over
many years. The Itarsi plant spends substantial sums each year to modernize and renovate
its equipment. Modernization and the implementation of new techniques to increase
speed, reduce material costs, and improve quality were a necessity as volume increased.
In spite of these changes, however, according to Kumble (a general foreman), a
production worker of the 1980s could return in 2003 and not feel entirely out of place.

All production workers below the rank of assistant foreman were unionized; however,
there had never been a strike at the plant. Wages were high compared to other similar
industries in the entire state of MP.

Adapted from a case prepared by Paul R. Lawrence & John P. Kotter (HBS Case)
This case was prepared as the basis for class discussion rather than to illustrate either
effective or ineffective handling of an administrative situation.

1
 The metal can industry was relatively stable with little product differentiation. The Itarsi
plant to some extent shipped its products throughout India, although transportation costs
limited its market primarily to central India. While some of the customers were large and
bought in huge quantities (between 300 and 500 lakhs of cans), many were relatively
small and purchased a more specialized product.

The Plant Organization

Plant Management

Raj Narayan, the plant manager at Itarsi since 2001, had risen from an hourly worker
through foreman up to plant manufacturing engineer in the maintenance end of the
business. He had developed an intimate first-hand knowledge of operations and was
frequently seen around the plant, a cigarette clenched between his teeth.

As plant manager, Narayan had no responsibility for sales or research and development
activities. In fact, both Narayan and the district sales manager in his area had separate
executives to whom they reported in the corporate headquarters, and it was in the
superior of these executives that responsibility for both sales and production first came
together.

Plant
Manager
R. Narayan

Plant Prod Control Plant IR Asst. Plant Plant Purchasing QC

Engineer Manager Controller Manager Manager Indst. Engr. Agent Manager
P. Roy S. Gunta F. Hazmi G. Rajgopal R.Anshuman J. Sharma R. Sukhdev T. Isaac

General Night General

Foreman Foreman Foreman
H. Singh M. Kartik A. Kumble

M Shop Engineer Batch Tank Forming Packing Forming Packing W’house &
Foreman Dept. Dept. Dept. Dept. Dept. Dept. Shipping

W’house W’house W’house W’house W’house W’house W’house

Shipping Shipping Shipping Shipping Shipping Shipping Shipping

Exhibit 1: Itarsi Plant (March 1, 2003)

2
 Approximate Length
of Service
Name, Position Approximate Itarsi Plant IndiCan College
Age Education
Raj Narayan, 40-45 8 18 None
Plant Manager
Ravi Anshuman, 35 3 8 Agricultural
Assistant Plant Manager engineering
F. Hazmi, 50 15 23 None
Plant Controller
S. Gunta, 45 18 18 None
Production Control Manager
G. Rajgopal, 45-50 5 29 None
Industrial Relations Manager
Joe Sharma, 30-35 1 10 Engineering
Plant Industrial Engineer
Tom Isaac, 30 5 5 Engineering
Quality Control Manager in Australia
H Singh, 45-50 25 25 None
General Foreman
A. Kumble, 50 18 18 None
General Foreman
Amarendra Kumar, 45-50 18 18 None
District Sales Manager

Exhibit 2: Information About Certain Personnel.

3
Narayan was assisted by Ravi Anshuman, the assistant plant manager. Anshuman,
promoted from quality control manager in 2001, was responsible for all manufacturing
operations within the plant. Anshuman appeared more reserved than Narayan, talked
intently, and smiled easily while working with the persons who reported to him. Fifteen
salaried supervisors reported to Anshuman and helped him control the three-shift
operation of the plant and its 500 workers. (During peak periods in the summer, the
plant employed as many as 800 people; most of the additional workers were the sons
and daughters of plant employees)

ANSHUMAN: “Our foreman have full responsibility for running their departments: quality
conditions of equipment, employee relations, production according to schedule, control of
inventory through accurate reporting of spoilage and production, and cost control. He is just
as accountable for those in his department as the plant manager is for the entire plant”.

Anshuman added that supervisory positions carried a good deal of status. Each
supervisor had a personal parking spot and office and was expected to wear white
shirts.2 Anshuman spoke of these symbols as an important aspect of the supervisor's
position of authority.

Production Control
2
Uniforms: White shirt & tie for Management staff, foreman and clerks,
S. Gunta, the production control
White shirt for manager,(worker),
union president had worked allfor
Blue shirt of other
his 18 years with IndiCan
workers
at the Itarsi plant. He was responsible for planning and controlling plant inventories and
production schedules to meet sales requirements consistent with efficient utilization of
facilities, materials, and manpower. Gunta spoke quickly and chain-smoked cigarettes.
According to him the main task of his job was ". . . to try to achieve the maximum length of
run without affecting service or exceeding inventory budgets."

Gunta was assisted by a scheduler for each major operating department and by clerks to
service the schedulers. The schedulers worked closely with the department foremen in
the plant and were in frequent telephone contact with the sales offices. Gunta
commented: "We in production control are the buffer between sales and operating people."

To facilitate their work, Gunta and Anshuman headed biweekly production control
meetings, each lasting about one hour. Narayan, the plant manager, was a frequent
observer. These meetings were attended by the two general foremen. In these meetings,
there were frequent references to specific customers, their needs, complaints, and
present attitudes toward IndiCan. Both Gunta and Anshuman tended to put instructions
and decisions in terms of what was required to satisfy some particular customer or
group of customers.

When discussing his job, Gunta frequently commented on how he thought a decision or
problem would affect someone else in the plant:

“If all you had to do was manage the nuts and bolts of production scheduling and not worry
about the customer or how people were going to react, this would be the easiest job in the
whole plant. You could just sit down with a paper and pencil and lay it out the best way.
 But because the customer is so important and because you've got to look ahead to how
people are going to react to a given kind of schedule, it makes the whole job tremendously
complicated. It isn't easy!”

Other Personnel and Functions

Hazmi, the plant accountant, reported directly to the plant manager, although he was
functionally responsible to the division controller. The major tasks for Hazmi's
department were the development and application of many thousands of individual
product costs and the coordination of the annual sales and income budget, developed by
the responsible operating and staff groups in head quarters. Explaining another of his
duties, Hazmi noted:

“We are the auditors who see that every other department is obeying rules and procedures.
It is our responsibility to know all that is in the instruction manuals. There are twelve
volumes of general instructions and lots of special manuals”.

Joe Sharma, the plant industrial engineer, explained the responsibilities of his
department:

“We're active in the fields of time study, budgetary control, job evaluation, and methods
improvement. Our company is on a standard cost system-that is, all our product costs are
based on engineered standards, accurately measuring all labor, direct and indirect, and
material that is expended in the manufacture of each and every item we make in our plants.
All the jobs in the Itarsi plant, up to and including the foremen, have been measured and
standards set. However, all our standards are forwarded to division, which checks them
against standards in use at other plants. There are companywide benchmarks for most
standards, since most of the machinery is the same in other IndiCan plants”.

Sharma noted that the budgeted savings from methods improvement was approximately
Rs. Three crores for the year, and he expected to exceed that by a substantial amount.

G. Rajgopal, the industrial relations manager, was proud that the Itarsi plant had never
experienced a strike and that formal written grievances were almost unheard of.
Rajgopal ran training programs and monitored safety, absenteeism, and turnover data.
The Itarsi plant had an outstanding record in these areas. Rajgopal attributed this to the
high wages and fringe benefits of the plant. He also maintained campaigns on
housekeeping and posted slogans and comments, in both Hindi and English, on job
security and industrial competition. Also, he was responsible for the display of a five-
foot chart near the main entrance that showed the manufacturing efficiency rating
(actual production cost versus standard cost) of the previous month for each of the
IndiCan Company plants and their standing within the division.

Regarding IndiCan's personnel policy, Rajgopal stated:

“We believe that it is important that the supervisor and the employee understand each other,
that they know what the other person thinks about business, profit, the importance of
satisfying the customer, and any other aspect of business. We also believe that rapport
 between the supervisor and the employee can be improved in the social contacts that exist
or that can be organized. For this reason, we sponsor sports and cultural events and various
religious festivals including picnics, management weekends, and many unofficial get-
togethers. Over many years we have been convinced that these activities really improve
management-labor relations. They also provide a means for union and management to work
closely together in organizing and planning these events. These opportunities help provide
a mutual respect for the other fellow's point of view”.

Managerial Practices

Managing with Budgets

Management at the Itarsi plant coordinated their activities through a number of

informal, as well as scheduled, meetings. Unplanned meetings of two or more members
of management were frequent, facilitated by the close proximity of their offices.
Among the formal meetings, the most important was the monthly discussion of
performance against the budget. This meeting was attended by all of the management
staff as well as production supervisors. Other regularly scheduled meetings included the
production control meeting (twice weekly) and the plant cost reduction committee
meetings.

In discussing the budget, Narayan explained that the manufacturing plant was
organized as a profit center. Plant income was determined by actual sales, not a transfer
price. Therefore, income was adversely affected when sales failed to come up to the
forecast on which the budget was based and when sales prices were reduced to meet
competition. Narayan also explained that sales managers also have their incentives
based on making or exceeding the budget and that their forecasts had tended to be quite
accurate. Over optimism regarding one group of products had usually been offset by
underestimation of sales of other products. However adjustment was not permitted in
budgeted profit when sales income was below forecast. The fact that sales were running
3 percent below the level budgeted for 2003 was forcing the plant to reduce expenses
substantially in order to equal or exceed the profit budgeted for the year.

When asked whether the budget was a straitjacket or if there were some accounts that
left slack for reducing expenses in case sales fell below forecast, Narayan replied:

“We never put anything in the budget that is unknown or guessed at. We have to be able to
back up every single figure in the budget. We have to budget our costs at standard,
assuming that we can operate at standard. We know we won't all the time. There will be
errors and failures, but we are never allowed to budget for them”.

Hazmi agreed with Narayan, stating.

"In this company there is very little opportunity to play footsy with the figures”.

Narayan conceded that there were some discretionary-accounts like overtime and
outside storage that involved arguments with the division. For example, "I might ask for
Rs. 20 Lakhs for overtime. The division manager will say Rs. 15 Lakhs, so we compromise
around 18 Lakhs." As far as cost-reduction projects are concerned, Narayan added that
". . . we budget for more than the expected savings. We might have 80 lakh in specific projects
and budget for One crore.”

Narayan went on to note that equipment repairs and overhauls could be delayed to
reduce expenses. But even the overhaul schedule was included as part of the budget,
and any changes had to be approved at the division level.

Ravi Anshuman complained that the budget system didn't leave much room for
imagination. He felt that overly optimistic sales estimates were caused by the sales-
people being fearful of sending a pessimistic estimate up to the division. These
estimates, according to Anshuman, were a major source of manufacturing inefficiency.

Anshuman was asked whether he was concerned about increasing production volume,
and he replied:

“We have standards. So long as we are meeting the standards, we are meeting our costs and
we do not worry about increasing production. We don't tell the foreman that he needs to get
more goods out the door. We tell him to get rid of the red in his budget. I'm content with a
100 percent performance. I'd like 105 percent, but if we want more production it is up to
industrial engineering to develop methods changes”.

Anshuman talked about the necessary skills for a foreman:

“The foreman should be good at communications and the use of available control
procedures. The foreman is expected to communicate effectively with all plant personnel,
including staff heads. Our control procedures are easy to apply. In each department there is
an engineered standard for each operation covering labor, materials, and spoilage”.

“Without waiting for a formal statement from accounting, a foreman can analyze his
performance in any area and take corrective action if necessary. Then he receives reports
from accounting to assist him in maintaining tight cost control. One is a daily report that
records labor and spoilage performance against standard. The monthly report provides a
more detailed breakdown of labor costs, materials and supplies used, and spoilage. It also
establishes the efficiency figure for the month. This report is discussed at a monthly
meeting of all my supervisors. Generally, the plant industrial engineer and a member of the
accounting staff are present. Each foreman explains his variances from standard and
submits a forecast for his next month's performance”.

The Bonus Plan

Andrew Narayan indicated that the budget was also used in rewarding employees of
IndiCan. The incentive for managers was based on performance of the plant compared
to budget. According to Narayan:

“The bonus is paid on the year's results. It is paid as a percentage of salary to all who are
eligible-the ones on the organization chart (see Exhibit 1). There are three parts to it--one part
is based on plant income, one on standards improvement or cost cutting, and the third on
 operating performance. We can make up to 20 percent by beating our plant income target and
25 percent on cost reduction and operating efficiency together. But we have to make 90
percent of our budgeted income figure to participate in any bonus at all. I think we have the
25 percent on efficiency and cost reduction pretty well' sewn up this year. If we go over our
budgeted income, we can get almost 35 percent bonus”.

In years past, Itarsi managers had made about 10 percent of their salaries from the
bonus. The improved performance was the result of a change in the design of the bonus
plan. Hazmi explained the effect of the change:

“At one time the bonus plan was based on departmental results and efficiency. Under this
there was a tendency for the' departments to work at cross-purposes, to compete rather than
cooperate with each other. For the last seven or eight years (According to previous plan),
the emphasis has been on the plant, not the department. The latest plan is geared not only to
the attainment of budgeted cost goals, but also to the attainment of budgeted income. This
is consistent with the attention we are placing on sales. I think the company was disturbed
by what they sensed was a belief that those at the plant level can't do much about sales.
Now we are trying to get the idea across that if we make better cans and give better service,
we will sell more”.

Foremen and Production Workers

General Foremen

H. Singh and A. Kumble were the general foremen on two of the three shifts. They
described their jobs as working closely with both the assistant plant manager and the
production control manager, but more with the latter. Singh and Kumble were asked
how they balanced employee satisfaction with the requirements of the budget. Singh
commented:

“Management not only asks me to meet the budget, but to do better. So you've got to make
the worker understand the importance of keeping under budget. I get them in the office and
explain that if we don't meet the budget, we'll have to cut down somewhere else. It is
mathematical. I explain all this to them; management has given me a budget to meet, I need
them for this, they need me to give them work. We work like a team. I try to understand
them. All supervisors work under tension. Myself, I ask the men to go out to have a drink
with me, or to go to a movie. It relaxes them from our preoccupations. Right now, for
example, there is this party with the foremen coming up. At these gatherings it is strictly
against the rules to talk about work. These things are necessary”.

Kumble explained that while foremen have a copy of the budget for their department,
the workers see only a machine operating standard. The standard was set so that if he
works the machine at full capacity, he achieves 110 percent of standard. Kumble told
of his way of handling workers:

“Well, there is usually some needling when a man is down below standard.” He's told, "Why
don't you get to be part of the crew?" It doesn't hurt anything. . .you only get a good day's work
out of people if they are happy. We strive to keep our people happy so they'll produce the
standard and make the budget. We try to familiarize them with what is expected of them. We
have targets set for us. The budget is reasonable, but it is not simple to attain. By explaining our
problems to the workers, we find it easier to meet the budget”.

Foremen

Most of the foremen were aware of, and accepted, the necessity of keying their
activities to the work standards and budgets. One young, and purportedly ambitious,
foreman commented about this job:

“What I like about this department is that I am in charge. I can do anything I like as long as
I meet the budget. I can have that machine moved-send it over there - as long as I have a
good reason to justify it. The department, that's me. I do all the planning and I'm
responsible for results. I'm perfectly free in the use of my time” [gives examples of his
different arrival times during the past week and the fact that he came in twice on Saturday
and once on Sunday for short periods].

While other foremen expressed dislike for some of the pressures inherent in their jobs,
there was general satisfaction. One notable exception was a foreman with many years'
service, who said:

“We have a meeting once a month upstairs. They talk to us about budgets, quality, etc.
That's all on the surface; that's b––s––. It looks good. It has to look good but it is all bull.
For example, the other day a foreman had a meeting with the workers to talk about quality.
After that an employee brought to his attention a defect in some products. He answered,
"Send it out anyway," and they had just finished talking to us about quality”.

Foremen tended to view the production worker as irresponsible and uninterested,

insofar as his job is concerned, only in his paycheck and quitting time. One foreman
said, "We do all the work; they do nothing." Even an officer of the union, speaking about
the workers, commented:

“They don't give a damn about the standards. They work nonchalantly, and they are very
happy when their work slows up. If the foreman is obliged to stop the line for two minutes,
everyone goes to the toilet. There are some workers who do their work conscientiously, but
this is not the case with the majority”.

Workers

Several of the production workers expressed feelings of pressure, although others

declared that they were accustomed to their work and that it did not bother them. One
said:

Everyone is obsessed with meeting the standards- the machine adjuster, the foreman, the
assistant foreman. They all get on my nerves.,

One old-timer clearly differentiated the company, which he considered benevolent,

from his foreman:
 “I can 1.mderstand that these men are under tension just as we are. They have meetings
every week. I don't know what they talk about up there. The foremen have their standards
to live up to. They're nervous. They don't even have a union like us. So if things go bad,
well, that's all. They make us nervous with all this. But there's a way with people. We don't
say to a man, "Do this, do that." If we said, "Would you do this?" it is not the same thing.
You know a guy like myself who has been here for 35 years knows a few tricks. If I am
mad at the foreman, I could do a few little things to the machine to prevent it from keeping
up with standards and no one would know”.

While some workers stated they would work for less money if some of the tension were
relieved, the majority were quite content with their jobs. (Itarsi plant workers ranked
highest of the 12 IndiCan plants across the country.)

Enforcing The Budget

By November 2003, sales for the year had fallen below expectations and the
management bonus was in jeopardy as a result.

One day in early November there was an unusual amount of activity in the accounting
section. Narayan came into the area frequently, and he and Hazmi from time to time
would huddle with one of the accountants over some figures. Hazmi explained that the
extra activity was in response to a report on the October results that had been issued
about a week before.

Narayan decided to schedule a joint meeting of the management staff and the line
organization to go over the October results. This was a departure from the usual
practice of having the groups in separate meetings. Prior to the meeting Narayan
outlined what he hoped to accomplish in the meeting:

“Those figures we got last week showed that some of the accounts did what they were
expected to do, some did more, and some did a good deal less. The thing we have to do
now is to kick those accounts in the pants that are not making the savings they planned to
make. What we've been doing is raising the expected savings as the time gets shorter. It
may be easy to save 10 percent on your budget when you've got six months; but with only
six weeks, it is an entirely different matter. The thing to do now is to get everybody
together and excited about the possibility of doing it. We know how it can be done. Those
decisions have already been made. It's not unattainable even though I realize we are asking
an awful lot from these men. You see, we are in a position now where just a few thousand
dollars one way or the other can make as much as 10 percent difference in the amount of
bonus the men get. There is some real money on the line. It can come either from a sales
increase or an expense decrease, but the big chunk has to come out of an expense
decrease”.

Narayan did not feel there would be a conflict in the meeting about who is right and
who is wrong:

“We never fight about the budget. It is simply a tool. All we want to know is what is going
on. There are never any disagreements about the budget itself. Our purpose this afternoon is
 to pinpoint those areas where savings can be made, where there is a little bit of slack, and
then get to work and pick up the slack”.

Narayan talked about his style of handling cost and people problems:

“When budgeted sales expenses get out of line, management automatically takes in other
accounts to make up the losses. We'll give the department that has been losing money a
certain period of time to make it up. Also, anytime anybody has a gain, I tell them I expect
them to maintain that gain”.

“The manager must make the final decisions and has to consider the overall relationships.
But there are some things I can't delegate - relations with sales, for example. The manager
and not production control, must make the final decisions”.

Amarendra Kumar, the sales manager in our district, feels that the budget gets in the
way of the customer's needs. He thinks the budget dominates the thinking and actions
around here. Maybe he's right. But I have to deal with the people and problems here.

The manager must be close to his people. I take a daily tour of the plant and talk to the
people by name. My practice as a manager is to fellow a head-on approach. I don't write
many memos. When I have something to say I go tell the person or persons right away.
That's why I'm holding a meeting this afternoon.

Ravi Anshuman commented on the methods used to pick up the projected savings:

“When you have lost money in one sector you have to look around for something else that
you can ‘milk’ to make up the difference. Those guys just have to do what we say. How
much can we save pretty much depends on how hard the man in the corner office wants to
push. If we really want to save money, we probably could do it, but it would take a
tremendous effort on everybody’s part and Narayan would really have to crack the whip.”

Because of Narayan's comments on relationships with sales, Amarendra Kumar, the

district sales manager, was asked about his feelings on working with the production
people at the Itarsi plant:

“The budget comes to dominate people's thinking and influence all their actions. I'm afraid
even my salesmen have swallowed the production line whole. They can understand the
budget so well they can't understand their customers. And the Itarsi plant boys are getting
more and more local in their thinking with this budget. They're not thinking about what the
customer needs today or may need tomorrow; they just think about their goddamned
budget”.

“If the customer will not take account of your shortcomings, and if you can't take account
of the customer's shortcomings, the two of you will eventually end up at each other's
throats. That's what this budget system has built into it. Suppose, for example, you want to
give a customer a break. Say he has originally planned for a two-week delivery date, but he
phones you and .says he really has problems and if you possibly could he would like about
four days knocked off that delivery date. So I go trotting over to the plant, and I say, "Can
we get it four days sooner?" Those guys go out of their minds, and they start hollering
about the budget and how everything is planned just right and how I'm stirring them up.
 They get so steamed up I can't go running to them all the time, but only when I really need
something in the worst way. You can't let those plant guys see your strategy, you know. It
is taking an awful lot out of a guy's life around here when he has to do everything by the
numbers”.

Special Budget Meeting

The meeting was held in the conference room at 4:00 P.M. Narayan and Hazmi sat at
the far end of the table, facing the door, with an easel bearing a flip chart near them.
The chart listed the projected savings in budgeted expenses for November and
December, account by account. The group of about 30 arranged themselves at the table
so that, with only a couple of exceptions, the management staff personnel and general
foremen sat closest to Narayan and Hazmi and the foremen and assistant foremen sat
toward the foot of the table.

Narayan opened the meeting and declared that performance against the budget for
October would first be reviewed, followed by discussion of the November and
December projections. He stated rather emphatically that he was "disappointed" in the
October performance. Although money had been saved, it represented good
performance in some areas but rather poor performance in others. Narayan declared
that the gains made in the areas where performance had been good must be maintained
and the weak areas brought up.

He then turned the meeting over to Hazmi, who reviewed the October results, reading
from the report, which everyone had in front of him. Where performance was not good,
he called on the individual responsible for that area to explain. The typical explanation
was that the original budgeted figure was unrealistic and that the actual amount
expended was as low as it could possibly be under the circumstances. Narayan
frequently broke into the explanation with a comment like, "Well, that is not good
enough" or, "Can you possibly do better for the rest of the year?" or, "I hope we have that
straightened out now." When he sat down, the person giving the explanation was
invariably thanked by Hazmi.

Next, Hazmi, followed by Gunta, commented on the sales outlook for the remainder of
the year. They indicated that for two months as whole sales were expected to be about
on budget. After asking for questions and getting one from a foreman, Narayan said:

“Well now, are there any more questions? Ask them now if you have them, Everybody sees
where we stand on the bonus, I assume. Right?”

Narayan then referred to the chart on plant expense savings and began to discuss it,
saying:

“The problem now is time. We keep compressing the time and raising the gain [the
projected savings for the year had been raised Rs. One crores above what had been
projected in October]. You can only do that so long. Time is running out, fellows. We've
got to get on the stick”.
Several times Narayan demanded better upward communication on problems as they
came up.

During the discussion of projected savings for December in the equipment maintenance
account, Hazmi commented:

“Where in the world are you fellows going to save 10 lakhs more than you originally said you
would save?”

Sharma responded:

“I'd just like to say at this point to the group that it would be a big help if you guys, would
take it easy on your machines. That's where we are going to save an extra 10 lakhs -simply
by only coming down to fix the stuff that won't run. You're really going to have to make it
go as best you can. That's the only way we can possibly save the kind of money we have to
save. You have been going along pretty well, but all I've got to say is I hope you can keep it
up and not push those machines too hard”.

Although Sharma spoke with sincerity, a number of foremen sitting near the door
exchanged sly smiles and pokes in the ribs.

Narayan concluded the meeting at about 5:30, still chewing on his cigar:

“There are just a couple of things I want to say before we break up. First, we've got to stop
making stupid errors in shipping. Reddy [foreman of shipping], you've absolutely got to get
after those people to straighten them out. Second, I think it should be clear, fellows, that we
can't break any more promises. Sales is our bread and butter. If we don't get those orders
out in time, we'll have no one but ourselves to blame for missing our budget. So I just hope
it is clear that production control is running the show for the rest of the year. Third, the big
push is on now! We sit around here expecting these problems to solve themselves, but they
don't! It ought to be clear to all of you that no problem gets solved until it's spotted. Damn
it, I just don't want any more dewy-eyed estimates about performance for the rest of the
year. If something is going sour, we want to hear about it. And there's no reason for not
hearing about it! [Pounds the table, then voice falls and, a smile begins to form.] It can
mean a nice penny in your pocket if you can keep up the good work. That's all I've got to
say. Thank you very much”.

The room cleared immediately, but Gunta lingered on. He reflected aloud on the just-
ended meeting:

“I'm afraid that little bit of advice there at the end won't make a great deal of difference in
the way things work out. You have to playoff sales against production. It's built into the
job. When I attend a meeting like that one and I see all those production people with their
assistants and see the other staff managers with their assistants, and I hear fellows refer to
corporate policy that dictates and supports their action at the plant level, I suddenly realize
that I'm all alone up there. I can't sit down and fire off a letter to my boss at the division
level like the rest of those guys can do. I haven't got any authority at all. It is all based
strictly on my own guts and strength. Now Raj is a wonderful guy - I like him and I have a
lot of respect for him-but it just so happens that 80 percent of the, time he and I disagree.
 He knows it and I know it; I mean it's nothing we run away from; we just find ourselves on
opposite sides of the question, and I'm dependent upon his tact and good judgment to keep
us from starting a war”.

“Boy, it can get you down-it really can after a while, and I've been at it for more than 20
years. But in production control you've got to accept it - you're an outcast. They tell you
you're cold, that you're inhuman, that you don't care about anything except your schedule.
And what are you going to say? You're just going to have to swallow it because basically
you haven't got the authority to back up the things you know need to be done. Four nights
out of five I am like this at the end of the day - just completely drained - and it comes from
having to fight my way through to try to get the plant running as smoothly as I can”.

“And Anshuman up there in that meeting. He stands up with his chart and he compliments
everybody about how well they are doing or efficiency. You know, he says, "Keep up the
good work," and all that sort of stuff. I just sat there-shaking my head. I was so dazed you
know; I mean I just keep saying to myself, "What's he doing? What's he saying? What's so
great about this?" You know if I could have, I'd have stood up and said, "Somebody go
down to my files in production control and pick out any five customer orders at random-
and letters-and bring them back up here and read them-at random, pick any five." You
know what they would show? Broken promises and missed delivery dates and slightly off-
standard items we've been pushing out the door here. I mean, what is an efficient operation?
Why the stress on operating efficiency? That's why I just couldn't figure out why in the
world Anshuman was getting as much mileage out of his efficiency performance as he was:
Look at all the things we sacrifice to get that efficiency. But what could I do?"

In early 2004, the report being sent by Narayan to the division would show that profits
for 2003 had exceeded the amount budgeted and that operating efficiency and cost
reduction had both exceeded the budget by a comfortable margin, despite the fact that
sales had fallen about 3 percent below budget. This enabled the mangers and
supervisors at the Itarsi plant to attain the salary bonuses for which they had been
striving.

Questions for class discussion

1. Identify the structure followed in Itarsi Plant and Indican in general.

Reasons
2. Comment on four design choices (Chapter 4) made by Itarsi plant … Do you
think these design choices as appropriate for an organization like Itarsi
plant?
3. Identify the various factors determining the vertical differentiation of Itarsi
plant… Are they adequate to coordinate and motivate the employees of Itarsi
plant?
4. Rank the problems occurring in Itarsi plant and discuss the reasons for the
same
5. Identify the key roles of Itarsi plant and their approach/contribution to the
problems
6. Go through the article “Do you have a well designed organization” (uploaded
in AIS) and conduct nine tests mentioned? How many are relevant for
Indican and how many will it qualify to pass?
7. Identify the various alternatives available to improve the situation… Which
one will you choose?