Professional Documents
Culture Documents
ABHOY K OJHA
In keeping with the times, the consulting firm, Ernst & Young (E&Y), was hired to conduct an Employee Perception
Survey during early 2012. The results of the survey reinforced the perceptions that the top management had arrived
at by more informal means. The survey indicated very high levels of engagement among the employees, which
vindicated the effectiveness of the existing people-related practices at the company. However, it also provided early
indicators of emerging dissatisfaction in some areas suggesting the need for improvement. Based on an analysis of
the responses, and further focus group discussions, 18 improvement projects were initiated under the leadership of
senior managers and volunteers from among the employees.
Mahendra Singhi, Executive Director (ED) and Vikas Rai Bhatnagar, Chief People and Wellness Officer (CPWO)
examined the recommendations of the improvement project teams. They could see that the teams had spent
considerable amount of time and effort to develop those recommendations. However, they also realized that several
of the recommendations could improve the situation on one or two dimensions but could potentially have a negative
impact on another. They had to be careful to ensure that they took a holistic look at the implications of all the
recommendations and implement an integrative set of initiatives that re-enforced each other’s positive effects rather
than proceed with a potpourri of recommendations that could potentially undermine each other’s influences and
worsen rather than improve the existing organizational climate.
1
I would like to thank Vikas Rai Bhatnagar, CPWO for inviting me to write the case and sharing his perspective and providing information. I
would also like to thank Mahendra Singhi, ED for providing me rich insights into the people orientation at SCL. Further, I appreciate the time
Sanjay Mehta, Senior Vice President (Commercial), Arvind Khicha, Vice President (Commercial), Manmohan Rathi, Joint Vice President
(Projects) and Yogesh Mehta, Assistant Vice President (Logistics) spared from their hectic schedules to share their views.
Abhoy K Ojha, Professor of OB & HRM, prepared this case for class discussion. This case is not intended to serve as an endorsement, source of
primary data, or to show effective or inefficient handling of decision or business processes.
Copyright © 2013 by the Indian Institute of Management Bangalore. No part of the publication may be reproduced or transmitted in any form or
by any means – electronic, mechanical, photocopying, recording, or otherwise (including internet) – without the permission of Indian Institute of
Management Bangalore.
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Shree Cement Limited: Cementing the People First Agenda Page 2 of 11
state of Bihar, and an Integrated Unit in the state of Chhattisgarh. SCL had a power generation capacity of 560 MW
with plants located at Beawar and Ras in Rajasthan. This included a 300 MW (150MW × 2) thermal power plant
commissioned at Beawar during 2011-2012, and waste heat recovery power plants of 46 MW capacity, which was
the largest such capacity in the global cement industry, excluding China. The Company's Turnover and Net Profit
for 2011-2012 (15-month period) was Rs. 5,898.12 crores and Rs. 618.50 crores, respectively ($1 = Rs. 62, in
November 2013; 1 crore = 10 million). Exhibit 1 provides brief performance indicators of the company in
2011-2012.
The promoters of SCL were members of the Bangur family which had its roots in Rajasthan but were based in
Kolkata. The organization was managed professionally by a Board of Directors but members of the promoter’s
family, who were themselves professionally qualified, continued to be closely involved with the management of the
business. B. G. Bangur, a B.Com (Hons.) graduate from Calcutta University, was the Chairman of the company. His
son, H. M. Bangur, a chemical engineer from Indian Institute of Technology, Mumbai was the Managing Director
(MD). A family member from the next generation to join the board as a whole time director was Prashant Bangur, a
graduate from the Indian School of Business, Hyderabad. The operations of SCL were managed by the ED, a
chartered accountant by training, who joined the organization as President in 1995.
Shree recognizes its people as its greatest asset. It ensures that its HR initiatives employ right
systems and processes for appropriate manpower planning, recruitment, orientation, training and
development and employee benefits. These initiatives have created a workforce that is happy and
driven to continually improve upon their standard of performance. ii
It coined the slogan, “Willing People, Winning Organization” to further institutionalize its human resource
initiatives and cement the healthy practices as an integral part of the organization’s DNA with an explicit focus on
employee happiness and meaningfulness. The management had a belief that the fundamental driver behind the
success of SCL was the high level of self-motivation of its people which in turn stemmed from the high levels of
their happiness and experience of meaningfulness. As highlighted in its Annual Report of 2011-2012:
Shree recognizes… happiness as a universal and fundamental human driver and is one of the few
organizations globally that is dedicated to enhancing the happiness quotient (HQ) of its people…
Shree is leading in researching and focusing on the happiness of its people and actively employs
engagement catalysts, which ensure the organization's environment, culture and working style is
most conducive for creating and sustaining happy people, willing people. iii
Explaining the relevance of the “people first” philosophy, normally recommended for the service industry, to the
manufacturing industry, the MD of SCL indicated:
It is a widespread conception that in the service industry, high motivation of people is vital to
organization success... At the same time, it is a misconception that in the commodity industry,
machines produce the goods and people are only needed to run them. And therefore, the
willingness or engagement of people is not important. We at Shree do not agree to this notion. We
manage our business as if it were a service industry. After all, efficient willing people, irrespective
of where they work, lead to efficient processes and products. Ultimately, this means high
performance, success and growth… At Shree, we have been able to develop a unique culture
where innovations thrive, failures are not discouraged and people relish challenges. People work
willingly and with self-motivation and are thus sure to propel the growth engine of Shree to
greater heights. iv
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Shree Cement Limited: Cementing the People First Agenda Page 3 of 11
At Shree, it is quite clear to us that innovation and other such success indicators in today's
economy are all indeed the byproducts of talented, engaged and happy people at work.
Encouraging our people at every step and ensuring the right kind of support for their growth is the
key factor behind their high levels of engagement at Shree. v
The belief of the top management at SCL was that the only way they could retain the entrepreneurial spirit across
the organization was to have happy and engaged employees and provide them an organizational culture that not just
tolerated mistakes but celebrated mistakes. Arvind Khicha, Vice President (Commercial), metaphorically explained
the difference between a regular employee and an engaged happy employee. As he put it, an employee who was not
engaged was likely to behave similar to a tenant in a rented apartment who was less likely to care for the apartment
while an engaged employee was likely to behave similar to the owner of the house and ensure it was maintained for
a long time. Explaining the essence of the idea of celebrating mistakes, the CPWO indicated that there was a
perception that if failures were not reported, then innovation was probably not happening. In other words, managers
were not taking bold decisions, which was not a good indicator of the engagement of employees.
The history of SCL was full of bold decisions, some that had gone wrong but most that had succeeded, positioning
the organization as a pioneer in the industry. The decision to replace the use of coal with Petcoke had been used by
the management to drive home the importance of a culture that celebrated failure. Petcoke is a waste product of
petroleum refineries that has a very high calorific value, but with high sulfhur content and low volatility, making it
difficult to combust by conventional methods available at SCL in the 1990s. However, the availability of the product
at a price of about 30-40% cheaper than coal made it a very attractive raw material. However, no cement
manufacturer in India had experience with Petcoke and even, internationally, only a few manufacturers had
experimented with limited replacements. SCL made the bold decision to replace 30% of its coal consumption with
Petcoke but the experiment failed leading to significant challenges during 2000-2001. However, teams of SCL
engineers assisted by external experts worked on improving the processes and at the end were not only successful in
achieving the original target but also enhancing the process to replace 100% of coal with Petcoke. At the end of the
process, this bold decision had provided SCL an edge over other producers in India.
A significant outcome of the culture at SCL that celebrated mistakes was the absence of a blame game for mistakes
that occurred. Managers who had made bold decisions that had failed had no difficulty in owning the mistakes and
making corrections. They did not get into politicking and did not feel the compulsion to blame others for their
mistakes. For example, the VP (Commercial) explained how the company lost money when he attempted to re-
negotiate a long-term supply contract but had no difficulty in owning the mistake as there was an extremely high
tolerance for well-intentioned initiatives that did not produce desired results. Similarly, Manmohan Rathi, Joint Vice
President (Projects) explained how the ability to make bold decisions had allowed SCL to achieve project
completions of cement and power plants at schedules significantly below industry norms.
The culture of celebrating failure was supported by other elements. There was an effort to keep salaries of
employees, particularly those at the same level in the organization, in a narrow range. In compensation, and
increment decisions, the concept of normal distribution was not followed. Further, the organization was averse to
variable pay. The belief was that a high component of variable pay would lead to significant differences in incomes
among employees which would create problems for teamwork. The need to avoid variable pay was seen as even
more critical for SCL as most employees lived in townships close to the plants and differences in living standards
had the potential of creating conflict among families which could hurt the ‘‘joint family’’ ethos, which in turn had
the potential to hurt dynamics at work. However, individual initiative was encouraged by providing modest
increments and rewards to keep the competition healthy.
Further, to ensure that all employees took ownership and worked as a team, there was an explicit effort to take
everyone along. SCL was quite particular that it did not provide significantly lower compensation for a poor
performer or dismiss them. It made efforts to support poor performers to develop themselves or move them to other
roles to help them do better. Salary to a large extent was based on seniority, with only modest variations in
compensation linked to performance. This philosophy had its down sides and on occasions it did frustrate some
individual performers and had the potential to demoralize them. Some of the high performers occasionally did
express the view that some of the poor performers needed to do more work to justify their compensation. However,
the management was very clear that the benefits of maintaining a community feeling among all employees far
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Shree Cement Limited: Cementing the People First Agenda Page 4 of 11
outweighed the possible discomfort of some high performers. It was for this reason that even when SCL was cash-
rich, it chose to grow organically through green field projects rather than through acquisitions of existing plants and
operations as that might dilute the organization’s culture.
The “Shree Family” culture had been built gradually over a long period. Also, maintaining the culture was
particularly easy at Beawar, where most of its old employees and senior management were located, and also lived in
a self-contained housing colony, which was far from other urban settlements. Building a sense of engagement
among employees and a feeling of community among all employees and their families was feasible with several
activities involving family members particularly spouses of senior executives playing a very significant role. A
Ladies Club headed by the ED’s wife conducted several community bonding initiatives. The ED and his wife
participated in all social activities and celebrated all the festivals as a community.
A temple dedicated to Sri Hanuman on the Beawar campus was the location of a big celebration on February 26 of
every year as Foundation Day. The promoters and members of their family also made it a point to attend this
function regularly to reinforce this sense of community. This function not only included participation from all
employees and their families but also people from neighboring towns and villages in the area. As Sanjay Mehta,
Senior Vice President (Commercial) indicated, these celebrations had become very meaningful for the “Shree
Family”, including suppliers, vendors, dealers and the local community, as the establishment of the temple
corresponded with the revival of the company after a brief downturn in 2000. SCL employees also engaged in other
activities to connect to the society outside. One example was the initiative of the members of the commercial
department to spend a full day conducting a thorough cleaning of the largest government hospital in the city of
Beawar. Collectively, these initiatives allowed employees to bond among themselves, their families, as well as the
community they lived in which provided a sense of purpose and meaning not just in their jobs but also as members
of a larger community.
As the CPWO explained, capital was not a problem at SCL and there was a belief that required technology could be
acquired externally or developed internally. However, organizational and people capabilities could not be readily
acquired. They had to be groomed and developed over time. This was particularly important because gradually a
significant part of the operations were moving outside Rajasthan, with the possibility of going beyond the borders of
India for production while catering to the market in India. Exhibit 2 shows the department and location spread of
employees. Although some key employees from Beawar had been posted to the new plants both as a way of
implanting the SCL culture at the new plants but also as a means of career advancement, there would be a need to
conduct substantive hiring from the local areas. There was a possibility that the same mechanisms of bonding and
community that had worked so wonderfully for the operations located in Rajasthan, particularly Beawar, may not
work elsewhere.
In order to launch the initiative to transform the traditional people-oriented culture into more contemporary terms,
under the label “People First Initiative”, the management decided to seek the services of an external consultant,
Ernst & Young. The consultants from E&Y interacted with senior managers of SCL on a one-to-one basis, and had
group discussions to develop a survey to capture information on a variety of dimensions. Exhibit 3 illustrates the
elements that were covered in the E& Y survey. As Yogesh Mehta, Assistant Vice President (Logistics) suggested,
the idea behind the people first initiative was that satisfaction among employees would lead to greater engagement
with the work and the company, which in turn would result in high levels of happiness in the short run and
experiences of meaningfulness in the long run. The survey results showed that 78.3% of the employees were highly
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Shree Cement Limited: Cementing the People First Agenda Page 5 of 11
engaged, 15.4% were fence sitters, and 6.3% were disengaged. Figure 4 shows the levels of engagement on the key
elements. It shows that while engagement on the ‘‘big picture’’ issues such as challenge, company culture, company
image and purpose was very high, there was room for improvement on issues that affected job performance such as
performance management systems, compensation, personnel and administration, and physical working conditions.
The senior managers of SCL met at a retreat organized in Pushkar, Rajasthan on September 7, 2012. At the retreat, it
was decided that SCL should pursue 18 projects to address the issues that had emerged from the E&Y survey, and
project leaders from among the senior managers were appointed. After the retreat, the ED sent an email to all
employees indicating the list along with the project leaders for each project requesting them to volunteer to work on
the project of their choice. Exhibit 4 provides the list and details of the 18 projects.
THE DECISION
The recommendations had now been received. The ED and CPWO needed to decide on the priorities and the
milestones to implement a holistic set of initiatives to cement the “people first” agenda. Should they provide top
priority to improving the performance management system that indicated the lowest level of engagement? Or should
they begin by working on autonomy and working relations that had a direct impact on intrinsic motivation? Or
should they focus on compensation and career development that had a direct impact on extrinsic motion? Or should
they give priority to improving the physical working conditions and the personnel and administration support that
impacted the hygiene factors? Further, how should the various priorities be scheduled to facilitate smooth
implementation?
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Exhibit 1
Five Year Financial Highlights
Particulars 2007-08 2008-09 2009-10 2010-11 2011-12
(15 months)
Production (in Lac MTs)
Clinkar (in Lac MTs) 46.23 64.18 80.45 74.65 102.88
Cement (in Lac MTs) 63.37 77.65 93.72 94.28 142.02
Sales (Clinker and Cement) (in lac MTs) 66.05 84.50 102.47 102.65 148.69
Sales (Power) (in Lac Kwh) - 1171 2636 5240 13223
Energy Consumption
Power (Kwh/PT Cement) 79.35 76.72 75.25 79.26 76.86
Fuel (% of Clinker) 11.34 10.75 10.64 11.74 11.28
Sales – Gross (in Rs. Crores) 2440.32 30.91.60 4014.09 3879.45 6577.37
Other Income 76.84 39.15 75.84 125.10 162.78
Total Income 2517.16 3130.75 4089.92 4004.55 6740.15
Operating Expenses (including excise duty) 1577.91 2138.11 2511.57 2994.62 4931.61
Operating Profit 939.25 992.64 1578.35 1009.93 1808.54
Finance Cost 53.30 33.41 76.58 175.35 235.36
Profit before Depreciation and Tax 885.95 959.23 1501.77 834.58 1573.18
Less: Depreciation and Amortisation 478.76 205.39 570.43 675.76 873.09
Less: Exceptional Items 38.88 30.93 63.43 48.47 12.34
Profit before Tax 368.31 722.91 867.91 110.35 687.75
Tax (including FBT) 122.65 136.87 193.83 (39.50) 66.73
Deferred Tax (14.72) 8.07 (2.01) (59.85) 2.52
Profit after Tax 260.37 577.97 676.10 209.70 618.50
Basic and Diluted EPS (in Rupees) 74.74 165.91 194.07 60.19 177.54
Cash EPS (in Rupees) 207.94 227.18 369.77 236.99 428.88
Investment (Gross Block + CWIP) 2205.26 2734.80 3918.28 5069.90 5516.42
Net Block 759.96 626.86 751.95 1167.06 1521.06
Shareholders Fund 672.81 1210.02 1833.24 1986.18 2733.93
Total Capital Employed 2003.50 2706.17 3939.48 4241.29 4825.27
Return on Net Worth (%) 36.51 48.43 36.77 7.54 18.17
Return on Average Capital Employed (%) 24.88 32.12 28.42 5.09 14.51
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Exhibit 2
Function/Department-Wise Strength of Staff by Location as on December 31, 2012
Function/ Beawar Ras Jaipur Khush- Roor- Surat- Bihar Raipur Gulb- Other Total
Department khera kee garh arga
Management 29 10 2 2 11 54
Human 14 5 1 1 1 1 23
Resource
Administration 85 65 13 16 12 10 4 1 2 208
Project 44 31 1 1 77
Commercial
Marketing 447 447
Power Bus. 12 12
Development
Strategy 6 6
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Exhibit 3
Elements in the Ernst & Young Survey
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Exhibit 4
Details of the 18 Improvement Projects
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Figure 1
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1997-98
1998-99
2000-01
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
1999-2000
2001-2 (9 m)
2011-12 (15 m)
1996-07 (15 m )
Clinker MT Cement
Figure 2
3000
2500
2000
1500
1000
500
0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
(15 m)
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Figure 3
Attrition
(%)
10
8
6
4
2
0
Figure 4
i
Peter Cappelli, Harbir Singh, Jitendra Singh, and Michael Useem, The India Way: Lessons for the U.S., Academy of Management Perspectives,
May 2010: 6-24.
ii
Annual Report 2010-11
iii
(Annual Report 2011-12)
iv
(Annual Report 2011-12, page 12)
v
(Annual Report 2011-12, page 14)
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