Financial Daily from THE HINDU group of publications
Friday, Jun 14, 2002
Reforms and quality management
ONE of the biggest challenges to business management in the reform era is the changing correlation between rights and responsibilities. In the 1960s and the 970s, business only performed duties for the `national cause' and scarcely had rights. In the first decade of economic reforms, this relation was inverted due to the absence of effective regulatory mechanism, and unrestrained market forces competed for rights without accompanying duties.
In mature economic systems, it is necessary to establish balances between business rights and their co-extensive social responsibilities. The business rights to economic reforms should be complemented by corporate social responsibility for sustainable industrial development.
The Government initiated a policy of economic reforms in the early 1990s by stabilisation and structural adjustment programmes to attain macroeconomic stability and higher rates of economic growth. Export-led growth was encouraged, but has not yielded the desired results after one decade of reforms. India's share at $46 billion is less than one per cent of global exports. Exports will continue to be a residuary activity in the national economic policy framework till the important issues of labour, infrastructure and product quality are resolved.
The new export-oriented Exim Policy 2002-07 focusses on agricultural products, small-scale handicrafts and cottage industries, and newly-created Special Economic Zones. Indian industries have demanded liberal employment laws in SEZs to ensure "parity of rules and procedures in labour laws with international norms''.
The Second Generation of economic reforms also envisages eliminating protective labour legislation. First, it must be noted that labour reforms cannot be successful without management responsibility towards human resources development, legislative compliance and adequate provision of infrastructure and work environment. Further, Indian industries must democratise to allow the flow of information and communication internal and external, active, pro-active and reactive in the organisation to discourage trade unionism. This also has productivity connotations.
Japanese industries such as Matsushita may receive over six million suggestions in a year. Many are implemented on the shop floor itself. The top management awards its employees for contributing to improvements.
In Toyota, for instance, a suggestion to increase the productivity by 0.6 minutes will be implemented. Canon saved $250 million in a year by implementing an employee's suggestion of replacing imported lens cleaning paper with local one. Some management gurus have propounded the concept of zero customer complaints and have redefined customers to include not only external customers, but also employees. The International Standards Organisation, most of whose member-nations are democratic, also encourages employee participation and democratisation in management through its latest version of quality management system (ISO 9001:2000) standard.
"If you plan for one year, plant rice. If you plan for 10 years, plant trees. But if you plan for a hundred years, educate your people''. To improve productivity and gain the confidence of its employees, Indian industries must focus on induction, orientation and competency development training at all structural and functional levels. PSUs such as NTPC, GAIL and BHEL have established training institutes to upgrade the skills of their employees in technical, motivational and management spheres, but participation remains low since incentives are lacking.
Second, it must be emphasised that India possesses the advantage of a large labour force with a skilled engineering and scientific community. However, the labour market remains probably the most ineffective in the world because of deficiencies in infrastructure sector, which limits their productive capabilities. The Global Competitiveness Report 2001-02 has placed India at 69th of the 75 countries ranked for telephone lines per 100 inhabitants; 73rd on road network outside major cities; 57th on port facilities and inland waterways; and 47th on air transport infrastructure. Export-oriented manufacturing units are required to conform to international technical specifications such as British Standards (BS), German DIN, and American ANSI.
Manufacturing units require uninterrupted supply of power for producing uniform quality of products. Power supply, however, is erratic and in States such as Uttar Pradesh, industries are closing down on this account. Elsewhere, industries have their own captive power generation sources by coal, naphtha or HSD. This has ramifications on the rising air pollution since it is generally more difficult to regulate spatially dispersed pollution loads than concentrated ones. The cherished objectives of the new Exim Policy for `farm-to-port' approach will not automatically lead to increase in agro-exports without associated infrastructure such as cold storage, transportation and processing and assistance to achieve international food norms such as Hazardous Analysis of Critical Control Points (HACCP).
Finally, quality management also assumes significance in promoting economic growth, especially in export markets. The direction of India's trade in the Cold War period was skewed towards the Soviet Union and the Socialist Bloc. The rupee-rouble arrangement was essentially political in nature, and quality was not a currency of trade. The First Generation of economic reforms in India in the post-Soviet era was also the harbinger of quality movement. Globalisation, liberalisation and privatisation have implications for quality management. Export-oriented units and MNCs have strived to blend India's competitive edge (large and skilled manpower, easy access to credit, low exchange rate premium, strong IT training and education and management schools among others) with quality management tools and techniques.
Automobile giants that opened shop in India General Motors, Ford and Chrysler have enforced their suppliers to follow the rigorous quality systems QS 9000. Some of their suppliers such as Minda Industries have already achieved low rejection rates of 100 parts per million. Global electronic corporations such as Sony, Samsung and LG have established brand loyalty by manufacturing quality products. "Quality before profits'' is the underlining principle. One MNC recalled 3,000 colour television sets from the market because the R&D division discovered that the layout of a micro-component was not perfect in the design and might create quality problems at the customer's end with a probability of one-in-a-million!
Liberalisation and competition from international markets prompted manufacturers to initially protest for a `level-playing field'. Industries are now enlightened in creating a level-playing field for themselves through enhanced productivity, quality products and services, customer satisfaction, upgraded technology and skills of employees. The competition is now fierce for MNCs too. Duracell had to shutdown its loss-making unit in Manesar, and LG electronics lost one employee a day in 2001.
Indian software companies such as TCS, Wipro, Satyam and Infosys are rapidly penetrating the lucrative top-end western markets. Indian manufacturers such as the Sundaram group have imbibed quality as their guiding motto, and have been twice bestowed with the Deming's Prize, the equivalent of Nobel Prize, for quality management. However, most Indian businesses are unprofessional and are yet to attain quality consciousness.
Further, in the era of privatisation, even PSUs, banks and government organisations are increasingly cultivating a quality culture, if only out of the fear for the consequences of disinvestment. The Government is providing institutional support to industries for producing quality products through incentives and technical assistance.
Small-scale industries (SSIs) are reimbursed up to Rs 75,000 towards certification of their quality management systems. Food industries are more privileged, and are provided a grant of Rs 10 lakh to adhere to food quality and hygiene norms, to establish microbiological laboratories, and to upgrade their technology. These schemes, bound by bureaucratic redtapism and rampant corruption, are yet to gain popularity. Apart from this, the Quality Council of India has been established and is supported by CII, FICCI and Assocham to pivot the quality movement.
India's business community has claimed several rights from the Government for supporting the Second Generation economic reforms. Some of these include the right to labour reforms, to infrastructure and to quality management. When rights are erected on moral foundations, they are essentially accompanied by duties.
However, when they are demanded for economic objectives, they are accompanied by responsibilities. The failure to perform a duty may not invite punishment, but responsibility often comes with a penalty clause.
If corporates demand the right to hire-and-fire, they must also fulfill their responsibility towards the dismissed employees, and invest in developing the skills and potentials of the remaining ones.
If it is the right of business to have adequate infrastructure, it is also its responsibility to provide the same for its employees facilities and canteen, potable drinking water, clean air in the workplace, transportation, and adequate lighting conditions.
If it is the right of every industry to have access to quality inputs and imports (power, water, raw materials), it is also its responsibility to produce quality products, to achieve customer satisfaction, and to keep the environment clean.
If it is the right of every business to flourish, it is also its responsibility to assist the growth of their employees, the society and the nation!
(The author is an expert on quality management with DNV, a certification agency.)
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