A Critical Review of Samrith Kutco India Limited (SKIL)

SAMRITH KUTCO INDIA LIMITED (SKIL)* Samrith Kutco India Limited (SKIL) was established in 2000. It was a joint venture between Samrith Technical Services Private Limited, set up by the Government of India under the Companies Act 1956 in 1985 and Kutco, a leading consumer goods manufacturer in Japan. Kutco had taken up 50% stake in Samrith, leading to a 50-50 joint venture. It was not a smooth transition for Samrith Kutco India Limited(SKIL), now a private sector leading consumer durable maker from the Samrith Technical Services Ltd the 100% Central Public Sector Enterprise(CPSE). There were work culture clashes between the Indian work culture and the Japanese work culture existing in the Public sector. Usually the work culture in Public Sector was entirely different from Private sector in India and far more diverse while it is compared with Japanese work culture.

The Public sector offered job security resulting at times with lower productivity as compared to private sector. There is overstaffing, which leads to less work load. Even in case of loss making PSEs, companies continue provided perquisites and facilities without thinking. The workers enjoyed more opulent holidays and fringe benefits. Due to all this, the mindset of a person was entirely change when he got the job in PSE. There is every possibility that employees feel a lot of inconvenience and resistance to change time and again. The Company The SKIL had a capacity of manufacturing 560,000 ACs per annum.

Analysts calculated that if the plants were closed for a day, it costed Samrith Kutco Rs 53 crore in revenue and Rs 6 crore in operating profit. If it was closed for two weeks, the sales loss could be Rs 742 crore and operating loss of Rs 84 crore. SKIL sold 98,596 ACs in June 2012. The company reported a net profit of Rs 889 crore over net sales of Rs 25,650 crore for the year ended March 2012. The company believed and devoted to generate value all the way through novelty, inspiration, quality, alliances, candidness and erudition. Samrith Kutco alone made 1.5 million Samrith Kutco families ACs every year. That’s one AC every 12 seconds. It was AC so as to deliver low cost of operation with immense performance, competency and eco-friendly.

That’s what true value was for the company. A team of over 8500 dedicated and passionate professionals were working for SKIL. This case has been developed by. Santosh Dhar, Shiv Ranjan, and Gharima Bhardwaj. The drive was backed up by two state of the art factories, one at Sonepat, Haryana and the other at Yeshwanthpur, Bangalore, nationwide service centers straddling over 1252 cities and towns and a sales association that spreads across 1252 cities. Samrith Kutco had very dynamic R&D department that worked with consonance with team of over 500 engineers and Samrith Kutco dealers and service centers in India. Working shoulder to shoulder with Team the company had added many achievements to its portfolio. With a view to enhance their capabilities, they had thought of setting up a state-of-the-art R&D centre in Jhajjar, Haryana at an investment of Rs. 1000 crore.

Spread over an area of 200 acres, this R&D center was to be equipped to churn out not just high performing ACs, but test procedures among many other advanced facilities. Samrith Kutco believed in:

• Customer Obsession
• Fast, Flexible & First Mover
• Innovation & Creativity
• Networking & Partnership
• Openness & Learning

Policies Samrith Kutco was sensitive to clean environment and made every effort to preserve the environment by continuously improving their environmental management system. They strictly observed environmental laws and continuously reduced the exploitation of natural resources by cut down energy, water and raw materials uses,as efficiently as possible by practicing 3R. By specific environmental training, they spread awareness to all workers working with them wherever appropriate. To manage risks, they had an Occupational Health and Safety Management System and a safe working environment had maintained. They documented all working environment risks, undertaking evaluation, reviews by internal and external and also manage all the important activities to avoid and control loss, injury, damage and infirmity.

All was attained by taking after safe work carry out in operations and amid the procurement of another machine, tools & instruments and plant. Individuals and Workers of the company were consulted that can conceivably hurt wellbeing and security at the work environment. They ensured that business was administered as per pertinent industrial health and security enactments, standards and health and safety policies and procedures regarding occupation and synchronized work related health and safety procedures for every region and location. The procedures meant for taking out work related ailment and wounds to attain to the objective of Zero Harm. Health & Safety Performance was one of the parameters of assessment for every single vendors, dealers, builders and even transporters also. According to them all incidents and injuries were preventable and everyone was in charge for their own wellbeing and also that of their courses of action and more over all obligations had been unmistakably characterized for all directors, managers and supervisors.

Any hazardous demonstration or condition was highlighted by the supervisor and a brief intercession by the procedure administrator was ensured. SKIL had developed its Corporate Social Responsibility Policy in accordance with section 135 of the Companies Act. Under this policy it attempted to boost employability of deprived adolescence by quality skill training and designing innovative business models that created livelihood for them. Stakeholder engagement and shared value creation was the cornerstones of the CSR programs SKIL. For maximum positive impact, the Company had undertaken social developments in selected villages and local society, in a focused manner. The Company had designed and effectively implemented projects in areas such as drinking water, sanitation, education, rural infrastructure and vocational training with the local community consultation,. The Company was offering scholarships to the meritorious scholars from deprived and economically weaker societies to help them pursue higher education and also support for job oriented technical and occupational skill training. It was also supporting to children orphaned as a consequence of any mishap to their education and training.

Further, it had enhanced employability of the youth by partnering with Polytechnic and Industrial Training Institutes. It would also enhance the skills of youth by making them study refrigeration andair conditioning thereby enhancing their employment opportunities in the ACs service workshops. It encouraged and recognized their workers for volunteering serving society and sharing their proficiency and skillfulness. Employee Orientation Samrith Kutco recognized that people were the key to retain competitive advantage and sought to contain the best talent to achieve business results. Annual budgeting was the time at which manpower planning activity would be commenced every year. Company would like to inculcate a universal practice and ethics amongst all its employees. It ensured that all employees shared a universal vision and purpose for the prospect. A planned induction imparted to new employees to understand company’s history and culture. Company nurtured the budding talent and recognized employee contribution that was exhibited adequate ability and recital. By promoting talented employees to higher position and responsibility, they sought to build ownership and accountability.

Company valued employee’s performance in attaining the success of the company. They tacit the need of proper direction for their employees to stimulate them. Moreover they also recognized that employees should be appraised through a well developed performance appraisal system. In order to achieve this company followed a system of annual appraisal of performance. Samrith Kutco valued every employee and believed that employees provided the cutting edge of excellence. They recognized the significance of development and empowerment of employee all the way through holistic training which enabled employees to enrich their knowledge, strengthen capability and develop required abilities. They believed that people were the biggest asset to sustained competing advantage.

The compensation package was designed with other benefits like medical reimbursement, hospitalization benefits, and accident insurance. Through the policy of reimbursement of medical and hospitalization expenses, they fulfill the medical needs of employees. Company monitored closely controlled shift timings to achieve smooth production operations. Each year they made requisite public holiday calendar to facilitate its workers to partake in Religious Ceremonies, Festivals, & National Events. They also encouraged all employees to avail authorized leave and privilege leave by providing allowance which allowed employees to travel with their families. SKIL had the practice of not sparing the employee who reached duties late even by 15 minutes.

The employee had to surrender his half day leave. Moreover, if he was seen loitering around beyond stipulated lunch break, he was called and given verbal warning. A memo was issued if he continued to do the same and taken into account in the appraisal of the employee. Challenges With the advent of Global competition the challenges of running manufacturing outfits had surged. Costs and wages had increased, sales were poor & volatile. Doing profitable business was becoming difficult. Every company wants to cut down their costs with improved productivity and had contract labour to cope up with situation. SKIL was no exception. It was also feeling the brunt of the existing environment. At SKIL, 40% workers were on contract and their salary was half of the regular workers although SKIL was among the better pay masters in the Industry. In Sonepat, young blue-collar workers had seen dramatic changes around them.

Land prices had surged as Sonepat had become a commercial hub. Overnight, people had become rich and their lives had transformed simply because they had sold their lands at high prices.

Such changes had re-calibrated worker expectation that had seen their surrounding transform into metro city with all modern amenities in a decade. Workers wanted to achieve everything in less time consequently they turn out to be less tolerant and fairly aggressive in their outlook. Poor wage hikes and raging inflation had added to the anxiety, resulting in an impatient, arrogant, intolerant workforce, who believed in taking aggressive stand for their demands. SKIL had many senior Indian executives who had been the backbone of the company and had significantly contributed in giving the company the present stature. But when it came to important decisions Japanese voice counted the most and dominated the crucial decisions.

Indians and Japanese were far apart by culture. Japanese sense of discipline, punctuality, employee connect too were very different from Indians. So some loss of connect with Indians was unavoidable. In May 2004, As a part of a new human resources policy, managers and supervisors have authority to recruit trustworthy candidates in their opinion as workers to strengthening trust between management and workers. Company authorized its managers and supervisors to recruit workers they consider reliable as part of a new human resource policy aimed at building confidence between the management and workers. The workers demanded to frame a union that would take their issues to the management and resolve the conflict. But management did not allow them to frame the union in an apprehension that the workers will become all the more demanding.

The workers thought that this move of the management was biased and unfair. Workers demanded higher wages to which management did not agree. Management wanted worker’s hike in the salary should be performance based which was not acceptable to the workers. The workers in spite of repeated assurance from management that there would be higher wages if they would perform well did not agree.

This lead to high dispute between management and worker. The company sent termination notices to 300-odd workers, who had been indulging in indiscipline. Workers had dishonored the good conduct bond that was signed by them with the company. Out of 1200 workers at the Sonepat plant, more than 600 were on contractual. The company had promised to employ casual workers as permanent employees.

But no action had been taken so far. This was again a matter of dispute. The workers demanded that all terminated workers should be taken back immediately without penalizing them.

The management turned deaf ear to the demands. This resulted into high level of dissatisfaction among the workers. They did not find any outlet where they would turn for their grievances. Some Trouble mongers under the influence of certain local political leaders who in their self interest did not want the unit to continue there along with the aggrieved workers went in to rampage.

They attacked the HR manager, Ratan Bhardwaj who was thought to be close associate of the Management and seriously injured him. Bhardwaj who had a narrow escape resigned after he was discharged from the hospital. The conflict continued and management did not want to budge before the workers. In between four HR Managers joined but could not resolve the conflict between workers and management as either party did not move from their stand. The workers threatened the HR Managers of dire consequences and therefore HR managers did not want to risk their lives and left the jobs. In Jan-2006 –July 2006, there was no HR manager. The unrest had started in May 2004 and continued till 2006. In August 2006, Shantanu Kumar, aged 38 year, an MBA graduate from IIM Ahmadabad joined as HR Manager. He had been already working with this group in Yeshwanthpur, Bangalore and had been associated with CSR active projects. He had worked in UNDP, UC Anti girl trafficking of West Bengal, Bangladesh and Nepal region.

The company had full faith in him and was bestowed with the responsibility of curbing the unrest at the unit. It was a testing time for Shantanu Kumar. After joining he started observing that some people were bulling workers not to work by telling them they were highly influential and can go to any extent if workers did not adhere what they were saying. Mr. Shantanu quietly set up network with people like Superintendent of Police, District Magistrate of the local area and kept them informed about what was happening in the company. He decided to take workers into confidence but it was a risk since workers were highly volatile and even could damage him. He started getting regular threats for his life. Shantanu without getting deterred by these threats started visiting the homes of these workers and personally counseled them and told them how this company was giving them bread and butter and how important it was for them to support the company. He even went to the extent of telling them if they would not cooperate, the company can wind up its operation and set up at a new location with the result the workers will lose their livelihood and no other company would like to set up a unit in that location. So the workers and their children will be deprived of the opportunities that the company provided them by giving them better living and quality of life. After visiting each and every family he was able to convince the employees that it is in their interest that they should continue working and take care of the company. He then assured them on behalf of the company that company would take care of them and give due consideration to their demands in due course of time. Road Ahead In December 2006, the company announced that there will be hike of 10% in wages plus bonus for the employees from January 2007. Moreover the terminated employees were also reinstated with immediate effect.

This gave relief to Shantanu Kumar as he was successful in convincing the trouble mongers and thereby smoothing unrest among the workers. With the achievement of Shantanu in settling up the issue which had been troubling the management for years, Management promoted him to Sr. manager (HR &GA). Shantanu was further promoted to DGM and made head of the entire unit. It was an achievement for Shantanu Kumar but he could not enjoy it fully as he was still apprehensive about the operations of plants. Although he knew that unrest was resolved at this particular point of time but his worry was that formation of union would not be acceptable to management and workers were very particular about the union as they thought Union was the only tool to get their demands accepted. With this constraint there was every possibility that such kind of unrest among workers would recur in the company and hamper the operations of company. Questions 1. What were the issues of Samrith Kutco India Pvt Ltd? 2. Critically comment on the policies of the company. 3. If you were a consultant to the company, what would you suggest to Mr. Shantanu? 4. As part of a new human resources policy, managers and supervisors have authority to recruit trustworthy candidates as workers? Comments  

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