Motial's lead role in ITI's recovery

By N. N. Sachitanand

If there is any CEO of a public sector company who deserves a fond and grateful farewell from the staff and workers upon his retirement, it should be Air Commodore (Retd.) S. S. Motial, Chairman and Managing Director of ITI Ltd., who has just laid down office.

When he took over the reins of the company in September 1996, ITI had been declared a potentially sick company with net losses totalling Rs. 317 crores during the previous two years. The opening up of the telecom hardware market to MNC vendors in the wake of the economic liberalisation policy and their quoting low ``sacrificial'' prices to gain entry into the market, saw ITI losing a sizable share of Department of Telecommunication (DoT) purchases. Its value of production had declined 35 per cent in 1994-95 and a further 29 per cent in 1995-96. The company could barely cobble together a total sales of Rs. 782 crores in 1995- 96, the lowest since 1988-89.

In contrast, Mr. Motial leaves behind today a healthy company with the largest sales turnover in its history of Rs. 2,060 crores in 1999-2000. The company turned the profits corner in 1997-98 with a positive PAT of Rs. 15.26 crores which jumped to Rs. 27 crores in 1998-99 and is expected to register an equally impressive growth for 1999-2000.

Surprisingly, when Mr. Motial took over, he had virtually no experience as a senior business manager, leave alone as a CEO. Sure, he was highly qualified, with an M. Tech from Indian Institute of Technology, Delhi, and with over three decades of service in the IAF, in the fields of electronics and aviation. But that was no preparation for handling the cut and thrust of business, much less rescuing an ageing, failing, geographically widespread public enterprise. On the other hand, he did not carry the baggage of prejudiced notions which a veteran public sector manager could have and this enabled him to adopt a fresh approach to his assignment.

Basic problems

In a recent interview with this correspondent, Mr. Motial revealed that he had identified some fundamental problems that afflicted ITI when he took over. They were:

* The morale of the officers and workers was at a low ebb as they were apprehensive about their own future as also of their company following liberalisation .

* The business group concept, introduced in 1994, had created confusion in the organisational structure of the company leading to lack of clarity of roles for the different managers and overlapping responsibility.

* There was a lack of focus in staff functions such as marketing and R & D.

* There was a gross mismatch between the skills available in the company - belonging to an electromechanical and hardwired era - and the in-demand technologies of the day involving microprocessors and software.

* The changing external environment of liberalisation had divested ITI of its protective cloak of monopoly supplier and reserved quotas which hid operational and cost inefficiencies.

Strategy to eliminate adverse effects

Accordingly, Mr. Motial mounted a strategy that would eliminate or reduce the adverse effects of these factors. A massive retraining programme was started to initiate the older workers into skills needed for producing modern equipment. A frank dialogue was undertaken with the workers of all units, informing them about the change in external circumstances, the fact that the Government was no longer in a position to come to their rescue all the time and that self-help would be the best help. Grassroots movements were launched to get the workforce involved in the fortunes of the company. Harking back to his defence days, Mr. Motial labelled these with such names as Operation Pragati, Operation Navashatabdi and Operation Navachetna. Apex meetings were held each quarter in which office-bearers of the unions , officers' associations and management sat together to thrash out the directions the company had to take and what everyone had to do to achieve the objectives.

Put this way, the workers responded with gusto, changing their work culture and habits to fit the competitive age.

``I was heartened by the workers' positive response,'' says Mr. Motial. `` The same people who, in the past, offered all sorts of excuses not to work were now accepting redeployment, rotation of shifts, a voluntary retirement scheme, display of names of those who were shirkers and the like. The attitude of the workforce changed from belligerency to understanding and finally participation.''

The old, unit-based organisation structure was reintroduced, thus reducing the number of new things the company's managers had to cope with. However, some shortcomings of the old system were removed by appointing a director of production and a director for non-DOT business.

Focus was brought to the R & D department by reducing the number of projects from an unmanageable 200 to a more practical 20, which suited the manpower and resources available.

New business profile

The company's business profile was altered to suit the new age. The new range included equipment for new technologies such as optic fibre systems and microwave systems of synchronous digital hierarchy, switch mode power supplies, point-to-multipoint multi access radio relay, large digital exchanges, wireless in local loop (code division multiple access), integrated subscriber digital network, HDSL and digital loop carrier, intelligent network, network management systems for the Internet, voice over Internet protocol, broadband access and information technology. Several joint ventures have been established with global technology leaders such as Lucent, Ericsson, Compaq and Tele Lab, the goal being that the new technology induction rate should be accelerated from 1 in 3 to 4 years rate of the past to 5 to 6 every year.

This diversifying into new technologies is going to change the revenue composition of ITI. At present 50 per cent of the sales come from telephone exchanges. This percentage will continue for the next three years, after which the new technologies will start making their presence felt in the product portfolio. The company is also transforming itself into offering total solutions instead of being just an equipment supplier. At present solutions account for just 10 per cent of the revenues. This is likely to increase sharply in future.

Along with changing work culture, improving productivity and updating product portfolio, Mr. Motial worked hard on the external environment. Political initiatives were mounted to educate parliamentarians about the crucial importance of ITI to the country's security and economy. `` Contrary to what other public sector CEOs may have experienced,'' says Mr. Motial, ``we found the parliamentary committees helpful in assisting our recovery. They leaned on the Government to restore our quotas, get the DoT, who is our main customer, to refund liquidated damages collected for delayed supplies and offer advances with orders and the like.''

At the same time, Mr. Motial also worked on the DoT to convince it that supporting ITI was vital to its own well being. The MNCs that were offering attractive market entry prices would soon change their tune once ITI was crippled and unable to compete and that would upset the profitability of the DoT. A change in tactics was employed by ITI by loading only relevant overhead costs on its quoted prices instead of all overheads as in the past. This rendered ITI's quotes so competitive in DoT tenders that MNCs were often bested. Incidentally, this renewed competitiveness of ITI has propelled MNCs to consider partnering ITI instead of trying to put it down.

These and other strategies have lifted ITI from the morass it had slid into and led it to a viable future. As Mr. Motial puts it, ``ITI can now offer world class technology, quality and manufacturing capability with cheaper prices than imports. Soon the company is going to tie up with banks and financial institutions to offer credit for projects. The only handicap is that ITI, being a public sector enterprise, cannot use the tactic of taking part in the equity of the projects it quotes for and then giving the equipment it supplies as the equity. This is what its foreign competitors do.''

While there is very little likelihood of ITI slipping back into the red, Mr. Motial feels that there still are some weaknesses that need to be addressed. One is the excess manpower. It was 25,600 when he came in and is down to 23,400 with the use of VRS and natural attrition. But he feels that the ideal manpower for the new product profile is around 15,000. (More hardheaded analysts feel that ITI's manpower should not be more than 9,000). Mr. Motial does not subscribe to the view that some of the units such as Rae Bareli and Naini ought to be fully closed down, but he concedes that the manpower in these two needs to be drastically reduced.

Mr. Motial also feels that ITI should not limit itself to reacting to technology changes and business cycle developments but should be able to anticipate them and gear up accordingly. However, such flexibility is not possible at present, because it is still a mini-Ratna and not a Navaratna. This prevents it from independently taking decisions such as acquiring companies, buying technology, taking up joint ventures and leasing or selling excess property which can enable it to be nimble and meet the competition head-on. This is an issue which the Government, as principal owner, needs to take up.

Send this article to Friends by E-Mail

Section  : Business
Previous : Inflation up to 6.26 per cent
Next     : Bearish phase persists on bourses