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BUSINESS: MODERN FOODS
Modern Culture
The first truly privatised company in India is fighting
its worst legacy-the PSU work culture. The early outcomes are encouraging.
By Malini Goyal
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RENEWED VIGOUR: HLL's priority right now is improving human resources
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Sitting in his dimly
lit cubicle in the Lawrence Road factory of Modern Foods Ltd (MFL) on
the outskirts of Delhi, Ranjit Singh is busy. Amid stacks of files, swarming
visitors and unruly workers, the balding middle-aged supervisor is visibly
worked up. Even while talking, his eyes are fixed on the rota register.
Keeping track of workers, particularly the PSU type, is not easy. But
Hindustan Lever Ltd, the new owners, have made his job easier. "There's
a fear in their minds-a private company can do anything. Indiscipline
will be seriously dealt with."
Some 10 km away at the company's Palika Bhavan
headquarters Z. Warsi, HLL's representative and head (employee relations)
at MFL stands at the entrance at 9:30 a.m. blowing smoke rings. He is
not there for his morning quota of nicotine. He is simply waiting to wish
all employees a good morning. Weird? Ask the employees-coming in on time
has become a habit. Instead of sauntering in at any time, they now try
to reach on time and greet Warsi in hushed tones before hurrying into
the dingy corridors of the corporate office. Without notice, without any
punishment, merely by being at the entrance in the morning, Warsi has
managed to raise the punctuality standards of the staff at the headquarters.
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See Change
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HLL is working
hard to beat Modern into shape. A 14-member integration team has
been deputed to MFL. The strategy is two-pronged-improve manufacturing
processes and intensify marketing initiatives. Close to Rs 9 crore
have gone into plant repairs, brand building and improved formulations.
HLL is also keeping a tight control over MFL's 34 franchisees and
ancillary units, which were largely independent entities in their
PSU days. Modern executives frequently inspect these now.
Utilising its network, HLL has already
increased Modern's retail reach by 50 per cent to 60,000 outlets.
Aggressive sales promotion and tinkering with the distribution margin
in response to the competition has begun. "Modern worked in
an insular fashion. Today, we are responding to the competitive
situation in the market," says Peter Selvarajan, managing director,
MFL. These moves are being supplemented by new launches like Milk
Classic, buns and sweet bread to target new segments.
HLL's initiatives have started showing
results. Sales, which dipped from Rs 159.8 crore in 1998-99 to Rs
150.7 crore in 1999-2000 have grown by 12 per cent in 2000-01.
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Beetle-stained walls, stinking toilets, idling
workers, rows of pas and scores of peons-more than a year after the sell-off,
MFL has all the trappings of a PSU intact. Its sell-off for Rs 105.45
crore to HLL has not meant much for its infrastructure. Instead, the change
is visible in the attitude, discipline and demeanour of its workers. The
country's first test case of privatisation is taking baby steps towards
professionalism.
Payments for overtime, which stood at Rs 3.5
lakh a month last year, have come down to Rs 1.5 lakh now. A place where
monthly sales figures were not easily available is now tracking sales
daily. Workers on the shop floor now make hourly entries of the production
and product details. The quality of canteen food has improved without
an additional paisa being spent. Personal use of office vehicles has stopped.
Peons no longer have to pick up their boss's lunch from his residence.
The change shows in HLL's confidence: "We will turn around the company
in two years," says an upbeat Gunendar Kapur, executive director
(Foods), HLL.
If that happens, it won't be the first time
HLL would turn around a sick company. In the past, HLL has taken over
two sick private companies-Bangalore-based Union Home Products and Rajpura-based
Stepan Chemicals-and turned them profitable. But Modern will be a different
ball game. This is the first time a private company has bought over a
public-sector company. And it comes with a huge baggage-a loss of Rs 48.23
crore in 1999-2000, More than 2,000 excess employees who cost Rs 50 crore
annually and low productivity (Rs 1.90 per standard loaf of bread vis-à-vis
industry standard of 90 paisa). Success with MFL will not only mean making
the sick company commercially viable but also changing the PSU work culture.
"We've come here to make bread and more bread. We need people for
that. But people with the right attitude," says Peter Selvarajan,
managing director, Modern Foods Ltd.
HLL is following a simple principle-go by the
rule book. "Rules were well framed. Implementation was missing,"
says Warsi. So from the number of workers per assembly line and shift
hours to reporting on time, taking permission to go out, to maintaining
quality checks, workers now need to abide by the rule book. Any disobedience
is sternly dealt with-it may mean deduction of wages or even suspension.
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