The current Prime Minister has removed many of the obstacles that made it impossible for manufacturing to become more competitive and grow faster. Despite significant reforms and the government restoring confidence in the private sector, manufacturing growth rates have not increased sufficiently. It is clear that manufacturing excellence cannot be achieved through government action. Management has both the responsibility and the means to do this. The central and state governments can help create a favorable environment.
The validity of this proposition is clear from the success of Maruti Suzuki. When this company was founded in his 1981, it faced obstacles that everyone thought were insurmountable. Achieving the goal of manufacturing and selling 100,000 cars a year seemed like a dream at the time. Maruti’s manufacturing environment was no different compared to other listed and private companies.
Management decided that they could not perform at a higher level unless they learned from the Japanese and developed management systems and practices different from those prevailing in the industry. Without producing higher quality and lower cost cars, Maruti will not be able to shake the general belief that the company will fail. This different management system had to be developed within the laws, regulations and constraints applicable to public sector enterprises. The government had no role to play in helping companies make or implement this decision.
By differentiating itself in many ways, Maruti has been able to achieve all its goals right from the beginning and now sells more than 2 million units annually. These cars are exported all over the world. All growth is funded from internal resources.The company is approximately INR50,000 billion cash reserves. It has created tremendous wealth for shareholders, millions of jobs, and fostered a large-scale, globally competitive parts manufacturing industry. There is far greater equality between workers and management.
The various practices adopted by Maruti included changes in the recruitment, training and motivation of human resources. We follow very strict ethical standards and do not conduct any cash transactions. Adopt radically customer-centric practices. Follows frugal management practices to maximize internal resources. A flat management structure and the trust of young employees.
The biggest difference, and the most valuable, was the change in industrial relations. There were several politically affiliated unions with no worker involvement, which affected the company’s growth and competitiveness and caused frequent conflicts with management. This led to a decline in productivity and quality. Manufacturing exports are limited, and foreign investment in manufacturing remains small. No one thought or believed that workers could gain knowledge and skills through shop floor experience that engineers in supervisory and managerial positions could never acquire.
If management can motivate employees and train them to identify and analyze problems in the field, their knowledge and experience can be used to suggest small but significant improvements in all aspects of manufacturing operations. It may be possible to connect. Over time, the process of continuously improving quality, productivity, and cost reduction makes a company more competitive than others. Japan’s industry has been able to achieve its pre-eminent position worldwide primarily because it has deployed this additional resource to make manufacturing most competitive. Maruti might be able to recreate that here.
In my book From impossible to possible, describes how Maruti used a combination of specific policies and practices to build trust between workers and management. Continuous communication was the key to success. Management and engineers also had to be taught to respect and trust workers and understand the benefits that come from using them to improve manufacturing practices.
The development of the component industry required the introduction of the concept of interdependence and partnership with vendors. Despite being a public sector business, we needed to support our vendors in a variety of ways, with the premise that more efficient vendors would benefit us. The contribution of this industry to the growth of the country is proof of the effectiveness of Maruti’s policies in this sector.
Cooperation between workers and management has created fairer companies and helped India become the world’s third-largest auto market. Many of Maruti’s workers became homeowners before their 30s. The percentage of workers who own their homes is probably the highest in the country. Their children benefit from education at the Delhi Public School in one of his worker-owned housing colonies. Most workers are paid and 80% of them own a car. Their income to management income ratio is probably the lowest in the country.
From impossible to possible It is not intended to promote Maruti’s achievements. The main objective is to start a discussion about the need for companies to change their management practices to make manufacturing more competitive, leading to faster growth and increased employment.
This discussion leads to the recognition of enormous growth potential that remains untapped because workers are not motivated, trained, or considered capable to contribute to the improvement of the enterprise. It should be. Management needs to create the conditions for that to happen. By doing so, promoters not only create a win-win situation for themselves and their workers, but also contribute significantly to the growth of the country.
Building trust with workers and unions is essential and can be achieved through both action and communication. Maruti’s experience shows that Indian manufacturing is more competitive than anywhere else in the world in terms of quality, productivity and cost. Corporate promoters and managers must demonstrate leadership qualities and contribute to creating the India we all want.
RC Bhargava is the former CEO and current Chairman of Maruti Suzuki. His latest work, Impossible to Possible, is scheduled for release later this month.The views expressed are personal