Rediff On The Net, Infotech: The N Vittal Column


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August 4, 1997

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N Vittal

Cheating death: Ways to resurrect ITI

The public sector Indian Telephone Industries Limited is in a fatal financial crisis. It is ironic that ITI, which was synonymous with India's growth in the telecom sector, should be in such a sorry state at a time when the infotech industry is all set to take off.

More perturbing is the fact that ITI has a large manpower, idling away in its plants which keep waiting for orders. And even when orders were available, there had been tremendous delays in payments. Now there are reports of the 'sick' ITI being referred to the government's Board for Industrial and Financial Restructuring.

Desperate situations call for desperate remedies. The ITI management needs to look at legendary Japanese companies like Toyota, Honda and Sony. These companies rallied round themselves and climbed to the pinnacle of success after the devastation of Japan in the Second World War.

I am about to build a menu of options for the ITI. If we want to ignore the lessons which can be learnt from the Japanese or Lee Iacocca, then one of the options could be to not do anything at all. You may say this is not an option but there can be this kind of defeatism if we go on citing the limitations of the public sector and the excuse that the government's Department of Telecommunications and the government itself has not been able to help ITI. Defeatism in the face of challenge is a guarantee for failure. We must adopt a new mindset. We must examine all options.

I have suggestions for the scenario where the support of the government, particularly DoT's, is forthcoming. And I have suggestions for the unfortunate event where ITI will have to rally round itself all alone.

My former boss, S M Ghosh, who died in harness as secretary, ministry of defence, used to advocate what he called "the principle of responsible intransigence". He was talking about behaving in a responsible manner even while disobeying conventional rules and regulations. ITI will have to brace itself for a lot of 'responsible intransigence' if it is to pull out of the mire.

In fact, if the ITI management starts looking for outside support and approval of its course of action, it will be sorely disappointed.

The first of ITI's problems are payment for arrears and lack of orders from its big customer, the DoT. ITI is totally owned by the government and so is the DoT. Therefore there is no reason why the ITI cannot be treated as a DoT agent. ITI could reach an agreement with DoT, whereby it gets to implement some part of DoT's annual plan. However, there may be some resistance to the proposal because of the tender process.

As ITI is in the public sector with over 30,000 employees it will be very easy to build public opinion and convince the Parliament regarding special treatment for ITI not violating principles and procedures of the Department of Telecommunication.

ITI should put up a proposal mentioning its total capacity and the places where it would like to take up the work of building exchanges, external plants and so on.

Next, when the problem of working capital arises, with a letter of authority from DoT, it should be possible for ITI to convince bankers that as the company is actually carrying out DoT's work, there should be flexibility in the financing terms. The budget of DoT itself is well known and there should be no problems.

Also, if ITI becomes a Board for Industrial and Financial Reconstruction case, it would be interesting to calculate the concessions the financial institutions would be obliged to give it.

If necessary, the issue can be taken up at the highest levels in the finance ministry so that ITI is given a special dispensation for undertaking DoT work so as to fully utilise its installed capacity and go ahead with installing various switches and transmission systems without waiting for formal tender processes.

Of course, the DoT will insist, and rightly so, that the payment to be made to ITI be approved by the tender process in which other companies may also participate. The only advantage ITI is to get is in terms of not having to wait for the orders. There has to be an assurance about fully utilising ITI's capacity.

The large ITI manpower is an issue which has figured prominently in the past. In fact, it is part of the general criticism of the public sector being over-manned. I suggest that this manpower surplus be looked upon as more of an asset than a liability.

ITI's senior management should take into confidence all employees while chalking out strategies for recovery. A vigorous suggestion scheme could be launched so that workers at every level can contribute towards a solution to the crisis.

This will not become a case of too many cooks. I have had the experience of operating such a scheme at the Gujarat Narmada Fertiliser Corporation. The scheme there grossed 5,000 suggestions over five years and saved the corporation Rs 6.5 million per annum whereas the total awards given away to those whose suggestions were accepted was only Rs 100,000. Of the 5,000 suggestions, 450 were accepted. The promptness and transparency in the system was significant and build a lot of credibility. Every week suggestions were collected, decisions were taken within eight weeks, awards were given every four weeks and in addition to the cash awards, the names of the employees were prominently displayed in a role of honour.

The voluntary retirement scheme could also help. When I was chairman of the Telecom Commission we had managed a special dispensation for ITI's Mankapur unit. But it was not very successful. I therefore suggest, keeping in mind the principle of responsible intransigence, an alternative strategy for using ITI's manpower. ITI should permit its employees, irrespective of the levels, to maintain their lien in the ITI and go on leave without pay to work elsewhere.

Those opting for this offer should be able to retain accommodation and other benefits in the ITI's colonies. This would boost the morale. Employees would earn better and at the same time have the assurance that their lien in the ITI is being maintained.

ITI could also make use of its enormous manpower by taking up job work or work of other organisations which could be done in its idle units. As chairman of the Telecom Commission I had argued that the ITI be permitted to undertake value added services and basic telecom services.

Perhaps, it should now be possible to convince the DoT to give this permission as a means of raising resources for ITI. While this will itself provide some opportunity, the other option is for ITI to look at the existing service providers in value added services as well as basic services and see what sort of strategic alliance it can strike with them so as to make use of its plants and manpower even if on marginal costing.

The whole idea is to cover the fixed costs so that the overhead, at least, is taken care of and to that extent the financial viability of ITI is ensured.

Konosuke Matsushita, in his book Not for bread alone, explains how in the 1930s when there was a recession, they had inventories for over three months piled up. He did not think of downsizing then as other companies did but made everybody work for the marketing side. On the production side everybody was engaged only for half the day. In this manner, within a month, the whole inventory was disposed off. The ITI management will have to come to an understanding with the labour and see whether total flexibility in redeployment is possible, so that depending upon the type of market and the job opportunities that arise, appropriate manpower can be utilised.

Another example is the recent experience of Anagram Finance. Anagram Finance started initially as a financing company like others who were only financing large industries. They found the competition was very high because their cost of finance was much higher than the competitors who were already well established. They therefore went in for consumer products financing and started with car loans. This meant that they had to recruit a lot of people and they had to improve customer services. Today they are perhaps the largest players in the car and other consumer products financing business.

Such innovative opportunities must be looked into by ITI. Considering the manpower and equipment it has the company needs to seek market opportunities even beyond telecommunications. It should see if it can take up jobs in engineering or electronics or electrical industries too. Fortunately, the government's economic liberalisation process will ensure ITI's free entry into new areas.

The ITI can also branch out into a major maintenance and service industry. Some companies like SPIC have diversified into maintenance services.

At a higher level, ITI could also get into the consultancy business. Apart from providing equipment to new players in the telecom sector, ITI could undertake turnkey contracts in the telecommunications sector.

From a structural point of view, all of ITI could be redesigned into several teams, each a profit centre. Then each team could be urged to perform better by giving incentives like compensation linked to profits earned.

This means that the ITI units and the senior management will have to think in terms of new opportunities. ITI itself should act as a network of hundreds of companies. This is the concept which some of the very successful companies are adopting, especially in these days of intense global competition.

Apart from these, there are standard techniques available for redesigning the organisation and working out new strategies. The simplest is to make a SWOT analysis and then adopt the strategy of building on strengths, overcoming weaknesses, exploiting opportunities and guarding against threats. However, such regular practices may run into rough weather as a public sector like ITI has a tendency to refer to the ministry and then wait for a decision by the cabinet of ministers. This practice will have to go.

K P P Nambiar, the former ITI chairman and managing director, had gone ahead with the plans for the Palakad unit without waiting for a cabinet decision because it would have taken the government six years to pronounce its thoughts on the issue!

As finance is a major problem, cost reduction is important. Wastage needs to be identified. Here, the workers, who are at the cutting edge of operations, can be invaluable in their suggestions.

Every problem is an opportunity. The old management axiom implies that it is the mindset which converts a problem into an opportunity or the other way round.

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