Improving Operational Efficiencies: case of ECIL

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.

Employee Morale:

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.

Organizational Improvements:

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.

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