Organisational Study: Maruti Suzuki India Ltd.

Organisational Behavior Study

Maruti Suzuki India Ltd.

A Brief About the Organisation

Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament,
to meet the growing demand of a personal mode of transport caused by the lack of an
efficient public transport system. Suzuki Motor Company was chosen from seven
prospective partners worldwide. This was due not only to their undisputed leadership in
small cars but also to their commitment to actively bring to MUL contemporary
technology and Japanese management practices (which had catapulted Japan over USA
to the status of the top auto manufacturing country in the world). A licence and a Joint
Venture agreement was signed between Govt of India and Suzuki Motor Company (now
Suzuki Motor Corporation of Japan) in Oct 1982.

The vision of the company is “to be the leader in the Indian automobile Industry, creating
customer delight and shareholders wealth. A pride of India”.

Maruti Suzuki India Ltd. has always been a leader in the Indian automobile industry &
we have studied the attitudes and behaviours that prevail within the organisation which
are a major contributor to the success of the organisation.

Understanding of the organizations parameters

Leadership

Leaders can make a difference. They have the ability to influence a group towards the
achievement of vision or a set of goals and hence are needed to create vision for the
future, and to inspire organizational members to want to achieve those visions.

Maruti started in 1983. Since inception, it has seen many ups and downs. During
recession in1999, it had to do severe layoff which saw resistance from workers. Business
operation style has remained the same except that it has become more competitive. The
strategy still remains to offer customer delight by offering new products which offer high
value.

During 1980’s under the leadership of Mr. R C Bhargawa, organization was in a growing
stage and functioned like a complacent organization as the environment was not at all
competitive. The company enjoyed leadership position where the bulk of the technical
support came from Suzuki, Japan. His leadership style was supportive and hence having
good relations with the employees resulting in high employee performance and
satisfaction.

During 1990’s, Mr. Jagdish Khattar, having directive leadership style and hence very
clear in communicating what he is expected from his employees and gives specific
guidance as to how to accomplish the tasks. He faced much competition from Hyundai
and TATA Motors, but managed well to maintain market share. The company took
measures like localization to cut costs and stay competitive. Employee lay off occurred
during his tenure.
2007 onwards under Mr. S Nakanishi, organization continues to do well and the focus on
cost cutting and process improvement remains. Employees started feeling that Suzuki is
trying to gain better control by appointing a personal from SMC as MD.

In Maruti, there is no concept of distributive leadership at any level. In all formal

occasions, only senior people in hierarchy take the role of a leader. Only in some non-
formal occasions like organizing a team building event or cultural event, other people in
the company gets a chance to show their leadership skills.

Leadership development is a part of the organizational culture here and managers are
groomed to take future leadership roles by conducting various programs which includes
mentoring, training and coaching. Maruti pays high attention to training – both behavioral
and technical. Soft-skills trainings conducted here include communication skills,
leadership skills, team building skills, presentation skills. A special training program on
leadership skills is conducted in Europe for senior executives.

As all people are different, leadership styles exhibited by different people are different.
Though, if we have to rank Manager’s leadership style according to Maruti’s Culture, it
will be Supportive, Directive, Achievement oriented, Democratic, Authoritarian and
Supportive in that order.

Organization Structure:

The study of organizations includes a focus on optimizing organizational structure. The

structure of an organization is usually dependent on their objectives and ambience.
Organizational structure allows the expressed allocation of responsibilities for different
functions and processes to different entities.

Maruti as an organization is divided into divisions based on the nature of work like R&D,
HR, finance, Sales & Service, IT, supply chain and Production. Since Maruti is a joint
venture of Indian Government with Suzuki from Japan, division of authority and power
existed. Previously each division was headed by an Indian and all directorial posts were
held by Suzuki personal. But now Indians are also included.

Organization went through restructuring when the Indian MD Mr. Jagdish Khattar retired
and the organization was taken over by Mr. Nakanishi from Suzuki. More Indians were
included in the top position which motivated employees to perform better to get good
positions.

Maruti Suzuki employs a flat organization structure. Since it is a manufacturing firm,

levels in hierarchy are inevitable but the difference in the hierarchy’s has mainly to do
with the pay scales and responsibilities and not about their stature in the organization. It’s
headed by a managing director who works in tandem with chairman and other board of
directors to take strategy decisions. Each division is headed by either a Management
Executive officer (MEO), or CGM (Chief General Manager). There are more than 16
levels of hierarchy. [pic]

Organization Structure Chart: Maruti Suzuki India Ltd.

The organization follows an open door policy and any person can approach any one.
There is a perfectly open culture; in fact there is no cabin system.
For interdepartmental coordination, there are cross functional teams for handling projects
and even routine work requires departments to coordinate. Company also organizes
family day functions at the division level.

Power and Politics

Usually individual influence or personal power is what helps to get work done from other
people in this organization. Individual influence can be either due to person’s expertise or
personal traits. This method is used in the organisation for years now. There is minimal
use of coercive power i.e. the use of position or rank to get work done is avoided at all
levels. That is why, people skills in the organization are considered to be very important.
But this will not involve any activity which is against the policies of the organization.

Rational persuasion does help but only when the person weighs his personal work at
higher priority and then only responds to the appeal. This method is particularly helpful
to convince the seniors and upper management.

Performance evaluation:

The organisation follows 360 degrees of feedback which helps in getting clearer picture
about employee behaviour and his/her performance. As in any other organization, there
are both sets of people. One who believe that the performance measuring system are fair
and transparent whereas other who doesn’t believe so. The perception varies from person
to person. But largely the evaluation process is seen as fair and just system. The
employees trust system to give them fair appraisal.

Decision making:

The decision making power remains with top management. All major decisions are taken
by senior managers or Board f directors. A rationale behind the decision is explained to
lower level and all the doubts, confusions are clarified before implementing the idea. The
lower management is empowered to take routine decisions so that daily operations are
not held up. For making any decision, rather than the availability of the resource, how
effective is the utilization is viewed.

Politics:

There are clear guidelines for use of resources. Resource allocation within a department
depends on the level in hierarchy. HR policy book is made and circulated to all the
employees and any information can be verified from HR anytime. This also minimizes
political intervention in these areas. Easy information availability and accessibility
reduces confusion among the employees which leads to increased trust in organisation.

Organisational Change

Managing change means managing people's fear. Change is natural and good, but
people's reaction to change is unpredictable and irrational. It can be managed if done
right.

Major Changes:-
• Government disinvested Maruti during 30th May,2002.Before that during recession in
2000, cost cutting, had to lay off many employees.

• After becoming the major share holder, to gain better control, a Japanese personal was
made MD.

Employees started feeling that Suzuki wants to gain better control over the operations and
therefore a Japanese MD appointed. During the layoff, much resistance from employees
came but was somehow managed. Many ppl were still with the organization and they
supported the cause of the organization.

Also, major changes happened when Indian automobile industry saw some foreign
players entering into the market like Hyundai, ford, Toyota etc. In order to maintain
competitive edge, Maruti had to undergo major changes in the way of working. It became
more dynamic in terms of response to market demands. Much focus was on cost
reduction and bringing newer products into the market. Laying off inefficient people by
giving them VRS left the organization with efficient and committed employees whose
goals were aligned with that of organisation’s goals.

Implementing change in Maruti:-

Change was implemented by the senior executives only. But the necessary inputs which
indicate that a change is required was given by consultants. They performed a company
wide survey and came up with possible solutions to problem at hand.

Though it depends on the type of change, for most changes, the direction comes from the
top and the implementation follows from there. They set examples for their juniors and
then it becomes a rule.

Understanding is also a two-way street. You want people to understand what is changing
and why. You also need to understand their reluctance.

• The top management helped people understand as to why change is required , what the
change will be and when it will happen so a lot of communication, training etc was done

• Not only this but since it is also important that they understand what is not changing the
top management also talked about the same values & culture as it was in the parent
company will be continued. Not only does this gave employees one less thing to stress
about, it also gave them an anchor, something to hold on to as they face the winds of
uncertainty and change.

Understanding the performance

On the basis of corporate scorecard we have analysed the performance of the company:-

Financial Performance

|Posting its lowest profit since September 2005, Maruti Suzuki, the country's largest
automobile company, posted a 37 per cent decline |

|in its net profit for the quarter ended September 2008. The profit fell to Rs 296.1 crore
for the second quarter this year as against |
|Rs 466 crore in the year-ago period. The reasons for this are:- |

• The drop in net profit comes on the back of a depreciation policy that took effect in the
March quarter of 2008.

• Foreign currency fluctuations as the company, which imports about 50 per cent of its
steel from South Korea and Japan, witnessed higher raw material costs shaving off about
1 per cent of its operating profit margin in the second quarter.

• Discounting on select models has also increased sales and marketing expenses to about
7 per cent in this quarter.

• Depressed market conditions which are expected to continue for the third quarter of
2008-09.

Customer Satisfaction

For a ninth consecutive year, Maruti Suzuki ranks highest in customer satisfaction with
authorized dealer service in India, according to the J.D. Power Asia Pacific 2008 India
Customer Service Index (CSI) study.

Overall satisfaction is determined by examining seven measures (listed in order of

importance): problems experienced; service quality; user-friendly service; service
advisor; service initiation; service delivery; and in-service experience.

Maruti Suzuki achieves an overall CSI score of 820 on a 1,000-point scale. Overall
customer satisfaction with dealer service for the industry improves slightly in 2008-up by
3 points since 2007, with six of the 11 ranked brands demonstrating gains.

"Maruti Suzuki has effectively implemented simple procedures that improve satisfaction
with the value of work performed and perceptions of the fairness and honesty of the
dealer, such as greeting service customers quickly upon arrival and fully explaining
charges and repairs," said Mohit Arora, senior director at J.D. Power Asia Pacific,
Singapore. "Instituting these low-effort, yet high-impact practices helps to foster trust
among customers, which is critical to building loyalty for future service and sales
opportunities."

Thus, we see customers are most important for Maruti Suzuki Ltd.

Manufacturing competence

Maruti Suzuki India Limited inaugurated its next-generation KB-series engine plant here
today. The new series engine is another significant initiative undertaken by the Company
towards offering the latest technology to its customers. The KB-series engine, while fully
complying with the prevalent BS III norms, is ready to meet the future emission norms in
the country. The Engine meets the Euro V norms for the export model of A Star. It
employs global manufacturing best practices like cold testing, 100% on line automated
checks to ensure global quality.

Ensuring Quality:-It is the first auto company in world to get ISO 9001-2000
certification. Apart from that ISO 14001 certification, information security certification.
R & D:-The company has committed to set up an R&D centre and testing ground at par
with Suzuki Motor Corporation, Japan as per schedule. Besides building capability in
designing cars, Maruti Suzuki is also focussing on enhancing R & D in engine
technology.

HR vision:-

“Lead and Facilitate continuous change towards organisational excellence; create a

learning and vibrant organisation with high sense of pride amongst its members”

Training:-Annual Training Plan is made for all levels. Following are considered in the
Plan:-

• Training is customised to meet Organisational Objectives, the topics are selected based
on Vision, Values & Departmental Feedback of Company-wide Managers

• Competency Mapping is done to identify Individual Training Needs

Appraisal & Reward System:-

Appraisal

• New Appraisal System is based on KRAs & target achievement, also the review of
targets is done at regular intervals.

• People Development is an important KRA

Reward

• Promotions are based on Performance

• Incentive is linked to Productivity & Profit.

Retention & Employee Welfare

• Residential Colonies for Employees

• Hospitalisation Reimbursement – on actuals without Ceiling

• Vehicle &Household Equipment Loans

• House Building Advance

• Proposed MUL Pension Scheme

• Learning Opportunity - Benchmark in Auto Technology

Leadership Development:-

• Vision, Value & Team Building Workshops for Top Management

• CFT (Cross Functional Teams) of Managers for Major Thrust Areas

• Managers sent to Joint Ventures to upgrade their practices to MUL standards

• Performance & Potential based Appraisals & Fast Track Option for High-performers

• Job Rotation - including Inter-functional

Inferences from the organizational parameters and there effect on the performance of the
organization

Effect of Organization structure:

Since Maruti is a joint venture of Indian Government with Suzuki from Japan, division of
authority and power existed which meant best practices of Japanese companies
implemented in Maruti that led to higher productivity and better profitability.

Previously each division was headed by an Indian and all directorial posts were held by
Suzuki personal. But now Indians are also included. Organization went through
restructuring when the Indian MD Mr. Jagdish Khattar retired and the organization was
taken over by Mr. Nakanishi from Suzuki. More Indians were included in the top position
which motivated employees to perform better to get good positions.

Effect of Organization climate :

Open climate leading to functional flexibility helps in a better environment for the
employees to work in and this coupled with high amount of trust and openness improves
the overall strength of the company. As most of the processes are taken from Japanese,
less amount of innovation in terms of technology is found. Higher emphasis on humour
and playfulness in work place, motivated the employees to contribute more with
satisfaction.

Effect of Organization culture:

High orientation towards people and team oriented structure leads to efficient
improvements on the shop floor and existing systems. Agility exhibited in terms of
reacting to competitors moves has always kept the company on top in terms of
competition. The culture originated from Japanese style of working puts more emphasis
on quality of the products and it has helped the company in achieving higher quality
standards.

Effect of Organizational politics:

Usually individual influence is what helps to get work done from other people in this
organization. That is why, people skills in the organization are considered to be very
important.

Individual influence is only used to get work done from other people. This will not
involve any activity which is against the policies of the organization. Rational persuasion
does help but only when the person weighs his personal work at higher priority and then
only responds to the appeal.

There are clear guidelines for use of resources. Resource allocation within a department
depends on the level in hierarchy. HR policy book is made and circulated to all the
employees and any information can be verified from HR anytime. This minimizes
political intervention in these areas. The company believes in a transparent methodology
so that all the stake holders are benefitted.

Effect of Leadership:

The company has prospered well under visionary leaders since its formation. There is no
concept of distributive leadership. As the leadership is developed by mentoring, training
and coaching the emphasis is on both the top management and prospective leaders to
make it a better system.

Session by eminent people from various sectors for the budding leaders ensures they
broaden their vision.

Effect of organisational change:

Change has been a continuous process at Maruti and the company has fare well in all the
situations and quite a good amount of learning as well. During recession in 2000, cost
cutting, had to lay off many employees. In 2008, Suzuki becomes major share holder, to
gain better control, a Japanese personal was made MD. Employees started feeling that
Suzuki wants to gain better control over the operations and therefore a Japanese MD
appointed. During the layoff, much resistance from employees came but was somehow
managed. Many people were still with the organization and they supported the cause of
the organization.

Common patterns of successful companies

|Parameters |Maruti |Tata |Hyundai |

|Leadership |Directive leadership style |Organized |Autocratic |

| | |Lacks the dynamism of many of its |Prefer hiring people willing to |

| | |competitors |follow leadership |

| | |Not demanding of its managers | |

|Organizational Culture |Open culture with functional |Result driven |Uncertainty

Avoidance, Long Term |

| |flexibility |Goal oriented |orientation, Collectivism, Masculine|

| |Highly bureaucratic | |Core values include creative |

| |Emphasis on growth and retention of | |thinking |

| |employees | | |

|Customer relationships |Places highest regard for customers |Increasing network of

service |Comparatively lesser number of |

| |Widest network of service stations |stations |service stations |

| |Initiatives like pickup and delivery|Lack of innovative ideas |Failure to deliver service
on time |

| |facility for servicing |24x7 Breakdown helpline support | |

| |Mobile car repair team | | |

|Organizational structure |Hierarchical (16 levels of |Hierarchical |Hierarchical,

Autocratic control, |

| |hierarchy) | |Centralized power |

|Attrition rate |Less than industry average |Less than industry average |Slightly higher
than average |

Concluding Remarks

Organisational behaviour is a field of study that investigates the impact that individuals,
groups, and structure have on behaviour within an organisation, and then it applies that
knowledge to make organisations work more effectively. Being a part of the
manufacturing sector, Maruti Suzuki is bound by some constraints which keep the
manufacturing sector going. It has achieved high levels of customer satisfaction over the
years and much of it can be attributed to human capital it has built and the confidence
which the organisation has over its stakeholders.

References

• Organisational Behavior by Stephen P Robbins & Timothy A Judge

• www.marutisuzuki.com

• Company scorecard framework as given by Prof Lata Dhir

• Sources of Primary Research

o Mr. A D Burman, General Manager, HR, MSIL

o Mrs Neha Gupta, Regional Sales Manager, RO Mumbai

• Report on Talent Management at Maruti by Richa Sachdeva, Management Trainee at

MSIL.

[pic]