Five years ago, the Rs 1000 crore electronics giant, Electronics Corporation of India (ECIL) was a basket case. In 1998, the company was bleeding and almost written off by even die hard supporters of public sector units in India. It suffered from a variety of problems including over staffing, product obsolescence, inventory pile up and massive receivables – a company on the brink of closure with its net worth almost wiped out. The Pokhran test invited sanctions from the US government. Sourcing electronic components was not possible affecting production and customer delivery according to a schedule. Following a loss of Rs 60 crores, the Chairman and Managing Director, resigned. Employee morale was down, orders got cancelled, suppliers demanded bank guarantees before they would ship parts and even the government was unwilling to lend a helping hand. Requests or additional funds fell on deaf years. The company was referred to BIFR and was struggling to stay afloat.
Located in Hyderabad ECIL, was incorporated in 1967 as a unit of the Department of Atomic Energy to produce and market the R&D products developed in Bhabha Atomic Research Commission. The corporation came into being in a highly regulated business environment and was seen as a model of self-reliance. ECIL was a part of the dream of building a modern India envisioned by legends like Dr Homi Bhabha and Dr Vikram Sarabhai. These pioneers were obsessively passionate about creating an indigenous base in electronics right from the tiniest components to complex system. Dr Sarabhai, along with Dr A.S. Rao conceptualized the formation of ECIL, as a key contributor to that dream . ECIL would build the country’s electronic infrastructure and serve strategic fields like power, defence, telecommunications and civil aviation.
In what may now be considered an old fashioned manner, ECIL focused on doing everything on its own, outsourcing was an alien concept. At the time most electronic technology was unavailable to Indian industries so ECIL had to perforce depend on its own development capabilities. Horizontal or backward integration was a necessity and not a choice. The country had practically no infrastructure in electronics and it was ECIL’s task to build the technology base as well as the human resources through training and on-the–job learning.
While horizontal integration may have been a sound business model four decades ago, it is no longer the case. In today’s environment, anyone setting up a corporation on the lines of ECIL would focus on a few key areas and outsource almost everything else. In ECIL’s case the reverse was true, until a few years ago. The emphasis when ECIL began its operations was on production based on indigenous capability. Like in all Public sector units, the ability to provide employment was a key factor in fact, when a project report was prepared for any product, one of the important questions posed was – how many jobs will it provide?
As a pioneer, ECIL’s strength was in the development and manufacturing of several important electronic products for the first time in India, including computers and television but it was precisely this that proved to be its ‘Achilles’ Heel’. Training and growth of high calibre technical manpower was one of the most significant contributions of ECIL to the country. Profit was not the prime motive at ECIL, though it had kept its head above water most of the time. The thought of building reserves of assets was not part of the business plan. It was technical and technological challenge rather than economic matters that motivated those who worked at ECIL. Things went on quite comfortably till the 1990s when suddenly everything began to change.
When the doors of liberalization were opened, Products from across the shores flooded the market, while ECIL’s products stayed on the shelves. As the impact of liberalization began to be felt, the ground started to move beneath ECIL’s feet, but few in the corporation believed that things were really changing. Thirty years after the first product rolled out of its factory gates, ECIL ran into a series of problems.
Rewriting the circuitry:
It was in such a dismal condition that the 59 year old V.H. Ron had to take charge of the whole situation as the Chairman and managing Director. Ron, identified four key problems that demanded immediate attention and action; working capital crunch, customer distrust, production problems and worker indiscipline. Ron and his senior managers realized that if the company was to really to turn around it would have to focus on its own strengths.
The first and most the important task was to improve the flagging employee morale. The news of the company sinking into the red had a telling effect on the employees. Like a lumbering elephant, the bad news had taken a long time to sink to the shop floor and when it did, morale took a nose dive, along with employee productivity . The top management decided to be frank with the employees about where the corporation stood.
Rebuilding began with the people processes. The development teams were strengthened top-down and decision making process and activities were made transparent to create an environment where open communication across level was encouraged. This way the employees’ union and the officers’ association began to appreciate the fact that it would need more than a quick fix job to turn things around. One of the programs was “Mukhamukhi” a face to face interaction between the management and employees to introduce an open culture. The workers contributed a lot and this kind of feedback helped in assimilating the thoughts. They began to realize that the management is doing something that will benefit the corporation and them too. People who performed well were identified and rewarded and often given key responsibilities . All this helped in improving the overall discipline and accountability. Employees were given greater powers to make and execute the decisions.
Competence and performance became the new yardstick for promoting employees.
Today, as the brass of ECIL looks back, it has every reason to feel satisfied. Today, the ECIL is lean and mean, with a slew of hi-tech products and a can-do-attitude . A turnover of Rs 1005 crores, net profit of Rs 150 crores. It is not often that this kind of a success story happens, but because it did in the way it did, it has emerged as a more confident competitive company that is poised to meet the challenges of the future as a global player functioning according to global business values.