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Management Case: Deakins India Pvt. Ltd.: Human Resource Issues in a

Small-Scale Unit

Article  in  Vision-The Journal of Business Perspective · October 2006

DOI: 10.1177/097226290601000407

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MANAGEMENT CASE

DEAKINS INDIA PVT. LTD.:

HUMAN RESOURCE ISSUES IN A SMALL-SCALE UNIT*

Debi S. Saini

Deakins was a Delhi-based leather garments manufacturing small-scale enterprise (SME), which operated
exclusively in the exports sector by employing mostly piece-rated workers. The company had recently be-
gun facing severe competition from the Chinese. It noticed threats on the employee relations front too. It did
not have any system of formal training. The company’s two directors were aware of the need for change of
mindsets and professionalism even as they were diametrically opposite in their management style—while
one was considerate and paternalistic, the other believed in control and discipline. The former’s style
enabled the company to use its “loyal workers” in diluting the designs of the outsider union activists so far.
The company did not strictly follow many of the labour laws applicable to its workers. It was exploring
ways for competing with the Chinese. It noticed that some Indian competitors had established themselves in
European market where the influence of Chinese suppliers in these products was negligible. Some had
recently left for China to set up joint ventures there with the Chinese operators; some others had gone into
production of high-quality customized leather garments. The two directors were wondering what strategies
and styles should be adopted by them to continue to remain and grow in business in view of the current
crisis. They were exploring whether the company’s business model and people-management policies needed
any change. They were also asking whether there was any relationship between people management issues
and employee relations dynamics.

B
ALWANT KAIN and Rajesh Garg, the two di
rectors of Deakins India Private Limited (here in
after known as Deakins), were1 taking stock of
the achievements of their company so far and challenges
lying ahead of it. Deakins was a Delhi-based small-scale
unit, manufacturing leather garments and which oper-
ated exclusively for the exports sector. Kain and Garg
were exploring ways to deal with the new competitive
realities that the company was facing; it was having
smooth sailing till mid-2005. The increasing competi-
tion from the Chinese in recent times, has shaken their
business. The company was also exploring a new people-
management model as the directors had come to realize
that people management was becoming more critical in
managing business in the era of chaotic competition.
There were threats on the employee relations front too;
though nothing serious had actually happened recently
that should have frightened them. They were almost con-
vinced that it was time to take some radical initiatives
on more than one fronts, including people management,
if the company had to survive. They knew that Jeewan
Leather Ltd., one of their local competitors in the same
region, which employed about 170 employees, had al-
ready decided to shut down last year, due to competitive
pressures and employee relations disturbances at the
behest of the activists of the Centre of Indian Trade

*This case is real, but the name Deakins India Pvt. Ltd. is a pseudonym. The idea is to focus on issues and not on specific people or firms. Real names
of the interviewees have also been changed. The author thanks Balwant Kain, and Rajesh Garg, the two directors of Deakins, for their long interac-
tions with the author and also for permitting interviews with one of their supervisors and three workers.
The idea underlying this management case is to enable any learning group to understand people-management issues involved in a SME and in taking
decisions to grapple with them. The case is not intended to emphasize any right or wrong approaches to handling the issues involved.
88 Saini
●
Unions (CITU)––the trade union wing of the Commu-
nist Party of India (Marxist).
Kain and Garg were asking: “Should our existing
business model change? What kind of human resources,
skills and mindsets would be needed to cope with the
changed situation? Should we vigorously resist union-
ization attempt, if it comes up again, through whatever
means or allow it to come up if it cannot be prevented
through the counselling route? And, should we engage
a legal consultant to deal with the future unionization
attempts more appropriately?” The Premier India Ltd.,
a neighbouring company, had been unionized in 2005,
which had further complicated their survival crisis in the
changing business world. Unionization attempts were
being made by outside union leaders on behalf of
Deakins’ employees as well; but so far, they were not
grave enough and could be managed through support
from what Kain described as “loyal and committed”
workers, as he had done that in the past. The outsiders’
designs of unionization of Deakins had been unsuccess-
ful so far. But this could not be so, over the long run,
which necessitated a clearer thinking. The two directors
were conferring how to take on the Chinese competi-
tors; are there any serious people management issues to
be attended to so as to become more competitive in the
new scenario; and also, whether the employee relations
problems involved legal, extra-legal, inter-personal or
all or some of these issues. They were also asking
whether there was any relationship between people man-
agement issues and employee relations dynamics? And,
was their approach of managing the employee relations
front by keeping the labour department in good humour–
–that they were doing so far––the right one, or did it
need more pro-active and different types of interventions
so as to prevent further deepening of the crisis that ap-
peared to be imminently surfacing for this company on
many fronts?
Background
Deakins manufactured leather garments for mainly Rus-
sian and UAE markets. Such garments were in high de-
mand in these countries. The company was established
in 1995 in Delhi with an initial investment of Rs. 2 mil-
lion. Its sole factory had nothing to offer to the Indian
market. While 80 per cent of the raw material for the
company’s products was leather, 20 per cent included
ancillary things like lining, zip, thread, etc. Most em-
ployee issues related to recruitment, quality control, de-
termining piece-wage rates and incentives. Since the
company was in the exports sector, these issues had to
VISION—The Journal of Business Perspective Vol. 10 No. 4 October–December 2006
● ●
be dealt with carefully so as to meet the orders in time
and assure quality to the customer. Its annual turnover
was about 70 million rupees.
The company was founded mainly at the initiative
of Kain, who was held in high esteem by most of the
permanent employees for his involving and caring man-
agement style. Garg, on the other hand, had quite a dif-
ferent profile. While Kain believed in building collegial
and employee involvement values amongst the company
employees, Garg was quite authoritarian and believed
in maintaining hierarchical distance and thus in being
strict with subordinates. He also advocated strict con-
trol over the employees and making them accountable
for quality and disciplne. Fifteen of the employees were
employed on time-rate basis and 60 on piece-rate basis.
Of the 60 workers, 15 had some kind of permanency
and were so shown on the muster rolls, as they were
working for the past several years. Others were coming
in and going out as and when needed.2 But on any given
day around 60 workers were involved in garment manu-
facturing work in Deakins. However, even the 15 per-
manent workers were not issued any appointment letters.
The staff of 15 were issued appointment letters. They
included three supervisors and six inspectors. The su-
pervisors were engaged in process supervision and over-
seeing the work-in-progress to ensure smoothness and
efficiency. The inspectors examined the finished prod-
uct minutely, so as to ensure quality.
In the whole country about 90 small and medium
enterprises (SMEs) were in this type of business of ex-
clusive exports of leather garments, which included
Deakins. The labour cost in this business was about five
per cent only. There was no large Indian organization in
this sector; some big Indian companies tried to enter,
but did not succeed.
The company had been doing quite well till recently,
but since early 2005 it was confronted with some difficult
issues. Chinese manufacturers of larger size had come as
competitors, offering somewhat similar products at lower
prices. Thus Deakins came to face a torrid time. The com-
pany felt that it was not possible for it to compete with the
Chinese firms on cost; it was thinking if it could do so on
other parameters. They were wondering how to salvage
the company, through whatever means, that had been do-
ing so well since beginning.
Kain, the main promoter of the company, earlier
worked as a secretarial assistant in a central government
Indian public sector unit (PSU), the State Trading Cor-
poration of India (STC), for seven years; out of this he
●

spent three years in India and four years in Moscow. He
was sent to Moscow on a liaison assignment by the STC.
During this period, he formally learnt Russian language
and acclimatized himself with the nuances of doing
leather-garment business with Russian customers. On
returning back to India in 1983, he resigned from the
STC and took up a job with a leading company that was
in the business of leather trading. He learnt the tricks of
trade there till 1995 when he decided to set up Deakins,
with Garg as his co-director.
The values that Kain held dear were compassion for
employees, quality production, and personal relationship
with suppliers and customers. His working style was very
much liked by the employees. Garg’s main concern was
to make this organization cost effective; he was also an
expert in sourcing of raw material of the best possible
quality at minimum possible price. Kain saw Garg’s role
in this regard as very important. But almost all employees
had severe problems with his way of treating them.
Some of the prominent features that could be attrib-
uted to this small-scale industry (SSI) included: seasonal
nature of demand (though it was less so in a cold coun-
try like Russia as summer there remained only for few
weeks); keen competition from abroad especially China;
and tremendous scope for value-addition through new
designs and workmanship. Therefore, employers con-
stantly looked for recruiting employees with requisite
skills.
The company operated only in one shift of about
nine hours in its rented premises in Delhi. Its building
had three floors. Machines had been installed on each
floor, with one supervisor supervising each floor. Su-
pervisors had the additional duty of visiting the relevant
locations in Delhi where workers possessing skills in this
type of work lived. They also went to other factories to
recruit workers; which was the most usual method of
recruitment for Deakins.
Dealing with Manpower
Retention of employees was perhaps the most important
and complex manpower issue at Deakins. If somebody
offered them a little higher rate per piece made or more
work to do in a day, they tended to leave for a chance to
earn better; higher-earning possibility was the main con-
sideration for most workers. So the supervisors had to
be consistently on the look out for finding new workers.
Supervisors were also expected to ensure on-line qual-
ity; they were directed by Kain to be friendly with work-
ers. They did not have any technical qualification, but
VISION—The Journal of Business Perspective Vol. 10 No. 4 October–December 2006
Deakins India Pvt. Ltd 89●
were in a way senior workers who possessed better skills
and experience. Kain did not consider purely social-con-
nections-based recruitment as important as he thought
that “the concern in today’s era has to be with perfor-
mance and not social connections, which in relation to
work are short-lived.” He believed that in any case after
about a year or so, all workers behaved in a similar man-
ner and saw better identification with workers than with
the acquaintant employer.
Each of the six inspectors of Deakins inspected
minute details of the garments and was not involved in
any recruitment work. They were technically qualified
from institutes like the Industrial Training Institute (ITI).
While expatiating on recruitment of inspectors and su-
pervisors and other people-management issues, Kain
remarked: “Educated young graduates were totally un-
qualified for this type of work. They cannot stand on the
shop floor, nor can they perhaps understand the psyche
of the employee. So we consider it better to keep senior
workers as supervisors so that they can control the work-
ers appropriately.”
No appointment letter was ever given to any worker;
though the same was given to each of the supervisory
and managerial employees.
The company did not prefer to employ any women
workers, even as they were seen as more suitable in many
operations of the company. It earlier decided to give some
work to women workers, especially that of quilting; and
actually employed three women. But that experiment did
not quite work. Garg became critical of employing
women due to many problems that they encountered. In
this regard, he said, “We found that it disturbed the
factory’s working environment. Males were not com-
fortable working with them. There was the problem of
some workers attempting to sexually harass them. We
also discovered many cases of the use of abusive and
sexist language in front of women workers, which some-
times embarrassed even the management.”
While commenting on the absence of any system of
formal training in the company, Kain felt that their busi-
ness did not involve the necessity of any complex skills.
Workers were recruited on the basis of skills possessed
by them in doing their jobs proficiently. But he admitted
that Deakins had to encounter many problems related to
competencies and mindsets. Commenting on these is-
sues, Kain observed as follows: “In India we have piece-
rate system, whereas in Russia it is a conveyor-belt
system (i.e. division of labour under which all employ-
ees are paid salary on time-rate basis). There, all work-
● ● ●
90 Saini
●
ers are trained in technical institutes. But Indian work-
ers in such cases are mostly self-taught. They normally
think that no further improvement in work processes is
possible and generally have a closed mindset.”
Kain also admitted that the company faced many
problems of employee attitude towards work and the
company. Talking about the need for a greater degree of
professionalism on the part of the employees, he re-
marked:
People in India have no sense of responsibility about
time; they do not realize the losses that can be caused
by their lackadaisical approach. Workers are easily
misled by union leaders as they do not fully under-
stand the dynamics of the work issues in the present
era of tough competition for almost all businesses.
They also do not have a sense of ownership with the
organization. But I feel that the piece-rate system in
India is a good method of promoting their willing-
ness to work.
Management Style
While both the directors dealt with human resource is-
sues in their own sphere of activities, it was Kain who
was more keenly involved with them. Highlighting the
need for emotional management of workers in the In-
dian context, Kain observed: “I also feel that in Eu-
rope people treat workers impersonally, but in India
personal and involvement style is of great help. I also
see a good component of loyalty in India which is miss-
ing abroad.” He had been able to motivate workers by
being protective towards them, caring for their feel-
ings and being personally connected with them. In the
past 12 years, about 600 people must have worked in
the company at different points of time as labour turn-
over in the factory was high. But Kain’s approach to
people management was appreciated by most employ-
ees. Speaking about his style of motivation, Kain re-
marked:
As far as I know, in other factories the owners never
talk to labourers as they think it below their dignity
to do so. But I like to discuss issues with them; they
have almost always accepted my decisions willingly.
Our competitors are far more authoritarian in their
handling of labour issues. I also physically work with
my labour along with the quality controller, espe-
cially in physically inspecting the garments. This
has helped a great deal in enthusing the workers to
develop a concern for detail. Thus they can also not
befool me as they are aware that I know the intrica-
VISION—The Journal of Business Perspective Vol. 10 No. 4 October–December 2006
● ●
cies of the job myself. This helps me to promote
among them, an attitude of care and hard work. At
times, I even oversee the selection of the skin and
guide the selectors, which has helped ensure better
quality. My background of grass-root level work-
ing in this industry has been of help in managing
many fronts successfully.
Ramesh Tiwari, a supervisor in Deakins high-
lighted the importance of Kain’s policy of giving maxi-
mum work to workers so that they earned more and
remained with the company rather than hiring extra
hands to meet sudden rise in the number of orders. Ev-
ery Deakins worker earned about Rs. 3,000 per week,
which was an impressive amount for this kind of work.
Tiwari also noted that Kain was quite liberal in allow-
ing workers to devise ways in which they wanted to
work. The workers liked to work in groups of own ac-
quaintances and friends; and he encouraged them to do
so. Interestingly, Kain said, “our competitors strictly
discourage this as they do not want any groups to be
formed, as that becomes a fertile ground for breeding
of unionism. So most other companies had a policy to
keep the workers remain as separated from each other.”
Garg, however, saw people issues in the Indian con-
text differently. He remarked: “I am against this policy
of Kain, as becoming friendly with workers in the In-
dian context is a risky thing.”
The company did not believe in offering higher wage
rates to workers as a retention tactic for high perform-
ers. Kain justified that by arguing that “discriminatory
rates create complication and problems of perception of
internal discrimination.” They also did not openly praise
people as they thought that it was not liked by average
workers who did not have the potential to become stars.
Annual increment for time-raters was not fixed; the com-
pany tried to link it with performance. For piece-rate
workers the piece-rate system itself was considered as
motivating as earnings depended on the number of gar-
ments made by a worker.
The company had a system of performance reward
that was given on the occasion of diwali, to three top
performers among workers; these awards were of Rs.
5,100, Rs. 2,100, and Rs. 1,100 respectively. On many
occasions Deakins celebrated feats of achievement by
the company through the efforts of the employees. When
the company completed shipment of any big export or-
der, the management liked to distribute sweets to the
workers on that occasion. Also, if some groups of work-
ers worked till late hours, Kain believed in providing
them tea and snacks free as a way of motivating them to
●

work over-time and thus obtaining their cooperation in
meeting the deadlines. Garg, however, observed that the
policy of employee appeasement was not the correct one.
He felt that they were bound to work hard anyway as the
piece-rate system enabled them to earn higher by work-
ing more number of hours.
Deakins also did not have any system of training.
Workers got trained through experience. There was no
system of performance appraisal (PA) as well. For as-
sessing the performance they kept in view the rejection
level. Performance appraisal (PA) was judgemental and
did not involve any formal method.
Talking about management of discipline Tiwari re-
marked, “Kain’s way of disciplining the employees usu-
ally includes frowning and disapproval. But if he finds
two or three major defects in the garments, he makes me
sit at home for at least 15 days;3 there is no question of
any other law operating there. So I lose my wages for
that period. He has done that to me twice. But I admit it
has helped me become more careful and in remarkably
improving my performance.”
The State of Employee Relations and Labour Law
Serious threats of union formation had been faced by
Deakins twice or thrice since 1997. But somehow such
attempts could not succeed. On all such occasions Kain
used his image as a caring employer. He reminded the
employees of the importance of remaining committed
to the company for the sake of mutual benefit of the com-
pany and the employees. The company’s “loyal work-
ers” helped dilute the designs of the union activists. Kain
felt: “Most of our workers are loyal and committed; only
some are allured into mischief by outside elements.” This
was corroborated by nearly all the three workers who
were contacted by the case writer for gauging the work-
place atmosphere in the company. All of them felt that
their main motivation to stay with the company was the
care and support they received from Kain; they were
unhappy with the way Garg had been treating them. Two
of the three workers also believed that the formation of
a trade union was not necessary if the management is
committed towards promoting a grievances-free work-
place in a pro-active manner. The third advocated union
formation as the only way of getting real respect and a
fair hearing from the employers. But even this worker
spoke very high about Kain’s management style.
Deakins, or for that matter most small-scale units
in Delhi or in most other states, did not strictly follow
many of the labour laws applicable to them. For ex-
VISION—The Journal of Business Perspective Vol. 10 No. 4 October–December 2006
Deakins India Pvt. Ltd 91
●
ample, Deakins never issued any appointment letter to
any of the 60 workers whether permanent or tempo-
rary. Only the 15 staff members were issued appoint-
ment letter. However, the company was paying its
contribution towards the employees’ social security as
per the Employees’ State Insurance Act, 1948 and the
Employees’ Provident Fund (and Miscellaneous Pro-
visions) Act 1952 for 15 of the 60 workers only.4 It
had been giving bonus to its 15 time-rated workers.
However, no bonus was ever paid to any piece rate
worker.5 Expressing his disappointment with the legal
obligations entailed on all types of enterprises in the
country, Garg asked, “Where is the question of paying
any bonus to piece-rated workers when they have the
freedom to make more number of pieces and earn more?
Do you think that there is any real difference between
contract workers and piece-rated workers? Also, can
you do business in today’s era if you follow the Indian
labour laws in their true spirit?” Interestingly, the piece-
rate workers believed that “they were not entitled to
any such bonus and that there was no such law that
enabled them to get bonus.” The piece-rate workers also
felt that their position was more like that of contract
workers. Deakins never paid any gratuity to any worker
that is payable under the Payment of Gratuity Act, 1972.
Further, the company had never paid any lay-off com-
pensation6 in case any workers were told to sit at home
due to the lack of order for sufficient number of gar-
ments. It also did not have any certified standing or-
ders under the Industrial Employment (Standing
Orders) Act, 1946. Earlier, it had to regularly pay a
monthly bribe to the local labour department officials
for violating some of the labour laws; but after the re-
cent Government’s resolve to dilute the incidence of
unnecessary inspections, the amount of bribe paid to
the labour department had reduced. Garg remarked that
“the government has issued some kind of oral instruc-
tions to the labour department not to harass small-scale
industries unnecessarily.”
Looking Ahead
As things had been proceeding since 2005, Deakins was
being forced to think anew on many fronts. Its turnover
had come down and was under a threat to go down fur-
ther. Chinese manufacturers were coming into the glo-
bal market in a big way, to make their presence felt in
this sector. The Indian SMEs in this sector had been us-
ing sheep leather, which was supposed to be the best
material for making these products; the Russian consum-
ers had a great liking for Indian sheep leather. China,
● ● ●
92 Saini
●

being a big consumer of cow, had been producing con-
siderable amount of calf leather. But calf leather did not
have high demand in the global market, including Rus-
sia. Garg remarked:
Till very recently sheep leather was not used in
China; and they did not have the technology of tan-
ning sheep. Lately, they learnt this technology and
had arrived in this market in a big and more orga-
nized way, giving torrid time to Indian SMEs in-
cluding our company. Their production cost was also
lower as they did bulk-buying of material from Aus-
tralia and the UK. These developments had put con-
siderable pressure on us. Our company is going to
be out of many segments of leather clothes.
The company was therefore exploring ways for com-
peting with the Chinese. Another problem the company
encountered was that most workers in the leather gar-
ment trade were Muslims and they would not work on
pig skin, come what may. Chinese had no problem do-
ing that as they were using pig as a regular food item. So
Deakins was not able to try products made from pig
leather which could have been a viable alternative. Garg
remarked that “this is a big handicap in India.” A local
competitor of Deakins, SM Private Ltd., which employed
110 employees, was more professional and aggressive
in its approach of taking on the competition though this
firm was not employee-friendly. They already had es-
tablished themselves in the European market, where the
influence of Chinese suppliers in these products was
negligible; they could save themselves from the forth-
coming crisis that Deakins was facing. About ten Indian
manufacturers of such garments had recently shifted to
China to set up joint ventures with Chinese operators.
They had started importing sheep leather from India and
were making full use of cheaper labour there as well as
the exports incentives provided by the Chinese Govern-
ment. Many others were seen going into high quality
customized leather garments. The two directors were
wondering what strategies and styles should be adopted
by them to continue to remain and grow in business in
view of the current crisis. If quality products gave a com-
petitive advantage, how could they go about having it
implemented and also deal with the consequent human
resource issues? Kain and Garg were also wondering
how to deal with any unionization attempts that were
likely to be made in future.
NOTES
1. It is believed that all teaching cases in management should
ideally be written in the past tense as this helps using them
overtime. Therefore, past tense is being used throughout,
even as Deakins is an existing organization.
2. Under various Indian labour laws, even temporary workers
are entitled to most of the statutory benefits. But employers
invariably violate these legal provisions, often in connivance
with labour department officials. Under some laws,
however, there are conditions for working for a minimum
number of days, e.g., the Maternity Benefit Act, 1960; and
the Employees’ State Insurance Act, 1948.
3. In the Indian legal jargon this is called punitive suspension,
which is not permitted normally for more than four days; that
too after an inquiry giving right to hearing and defense as per
the standing orders.
4. Deakins was obliged under the law to pay such contribution
for most of the temporary workers.
5. It may be noted that the Payment of Bonus Act 1965 applies
equally to time- and piece-rated employees. It covers all
workers if they have worked for 30 or more days in a year. Of
course, it excludes from coverage employees who are getting
more than Rs. 3,500 per month.
6. The Industrial Disputes Act, 1947 provides for about 50 per
cent of wages to be paid as lay off compensation in all such
cases where the number of workers employed in an
establishment is 50 or more.

Debi S. Saini (debisaini@mdi.ac.in) is Professor of Human Resource Management at the Management Development Institute, Gurgaon.
The areas of his special interest for teaching and research are strategic HRM, change management, diversity management, new indus-
trial relations and employment law. He has edited/authored seven books in these areas, besides a book-size volume on “Social Secu-
rity: India” that forms part of the International Encyclopaedia of Laws: Social Security, published by Kluwer Law International, the
Netherlands. He also published several papers and management cases in both Indian and international journals of repute. From 2004
onwards, he is the editor of Vision—The Journal of Business Perspective, a quarterly management journal of MDI. He is also done
assignments for the International Labour Organization and GTZ Germany.

VISION—The Journal of Business Perspective Vol. 10 No. 4 October–December 2006

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