Change is inevitable…
Mitsubishi's transformation from a small liaison office in Delhi to a full fledged, independent entity may seem like a natural transition, but there was much more to it than meets the eye. HR played a key role in smoothing out several explicit and implicit people issues. The inside story…
Someone has rightly said that the only thing constant about change is change itself. This is inevitable - and we in Mitsubishi are no exception to the change process. In this process of change most staff have undergone new experiences to which they had never been exposed before. The reactions have been varied-at one end there has been happiness while on the other, a sense of uncertainty. It is this blend of joy and sorrow that has helped Mitsubishi see through the most difficult period of its existence in India since the past seventy years. The company is very optimistic and feels that the necessary changes will help its growth and survival in India in times to come.
Mitsubishi set up its operations way back seventy years ago in Kolkata in a small way. In 1965 it moved its head office to New Delhi and since then it has stayed put in New Delhi. Since its inception Mitsubishi has functioned in the form of liaison office of the head office which has been based at Tokyo.
As a liaison office, Mitsubishi in India enjoyed certain benefits. Being a cost center, it was only accountable for expenses incurred in its operations. Staff members were not under so much pressure to perform, because of the liaison status. Targets were qualitative and to measure the achievement was subjective. Rewards were seniority-based and salary was paid for sitting more through overtime rather than for giving results. Results were not tangible since the role of business staff was only facilitate business rather than give results. Operating costs were high. Expensive cars were maintained, five-star hotels were used for stay during business trips, expensive restaurants were used to entertain guests, air travel was the mode of travel. As long as head office bore the expenses, it didn't matter at all.
The nature of the company's operations did not require very skilled or professionally qualified staff. This was mainly because as a liaison office the main job functions involved transfer of business information to Tokyo head office. Most of the employees were graduates with skills in shorthand and typing. Their primary job was collecting data from various sources, or taking notes in shorthand and sending them through the telex machines. The company was very comfortable with such profile of staff who sat late hours to complete the work (and in the process got paid for sitting late).
The world over, the concept of profits became a key issue. Companies started to evaluate their performance using new financial tools and techniques. Mitsubishi was no exception. Working of liaison offices came under close scrutiny and finally the head office decided that such offices should be self-sustaining. The head office could not afford to maintain the operations of the liaison offices anymore. As a pilot project in 1996, it was decided that an independent entity be established in India by the name of MC International India Pvt. Ltd. which was a 100% subsidiary of the parent company. This was the first step towards establishing an independent office. The office had a staff strength of just 3. The time given to make it fully operational by the head office to this pilot project was 4 years. If it failed to be economically viable, it had to be closed down. New staff was recruited. The profile of the staff was different... they were professionally qualified in disciplines as varied as chartered accountancy, business management and foreign trade.
The new company started doing business as any other trading company and it performed fairly well achieving first a star status and further super-star and so on. The head office was keenly observing the progress and also supported it from all angles whenever required. In 2000 the term of the pilot project ended. The management requested for some more time. The head office, after considering the good performance so far, agreed to extend the tenure for a further period of two years. The old staff of the liaison office was keenly observing the new company. Most were of the opinion that it would not survive! It was quite natural for them to be pessimistic because they knew that if they had to move over to the new company, things would be different. An invisible divide was observed between the old and new company. Most talked in terms of 'we' and 'they'. Recruitment was also on in the liaison office, but now the profiles of the new recruits even in the old office was different. MBAs, from premier institutes were recruited. Likewise, professionals in the field of international marketing and trade made lateral entry into the company, things that were unheard of in the past. This intervention was done keeping in mind that the future belonged to the new company.
Other factors like cost control measures were already on. The new company did not have the concept of overtime for executives. To be more precise, it did not pay its executives for sitting late. It had limited cars, mostly Indian which was in sharp contrast to the ones owned by the liaison office. Travel was curtailed and other cost-control measures were adopted. In 2001 the new head of Indian operations joined. He had only one agenda... a 100% change from the liaison status to the subsidiary. At this juncture the staff in the liaison office could figure out that there were very little options available to them. Either they had to change or quit. The hard work for the total transformation began about 10 months in advance. Staff, although important, was only one part of the whole process; assets, finance, customers, books of accounts etc. were other crucial areas that need to be addressed. Our focus will be on people since most HR professionals would be interested in the same.
The company (liaison office) was in a dilemma on what to do with so many staff that was not required in the new subsidiary. There were a substantial number of regular drivers and office bearers, the company believed in owning a large fleet of cars and a large of peons to serve the Japanese and senior Indian staff. There was an equally large number of business and executive staff. It was decided that the new company could do without chauffeur services and peons. Going by the Japanese concept of lifetime employment, it was difficult to do away with their services.
The drivers and peons were offered an attractive VRS package which amount to two and a half month's gross salary multiplied by the years served. Those with long service were benefited. Those with lesser years had some objections. They felt that it was unjust on the part of the company to pay them less merely because of their less tenure. The company offered them alternative employment in the new company on almost same terms and conditions. However, the parting compensation offered was different-it was one and a half times gross salary for every year served. The logic was that the company was offering employment and this was a kind of parting compensation to take of his any personal needs or outstanding dues. There were severe differences of opinion between the two groups. The older employees did not want the younger ones to stay on. So they came with a suggestion that everybody should be getting two and a half times salary and re-employed in the new company. The management refused. In such a condition they refused to take the VRS. It became a stalemate situation. Finally the management had to take a decision-retrenchment. When they came to know about this, all of them (some by choice, some by coercion by peers) opted for VRS. While the settlements were a couple of drivers and peons withdrew their application and opted for re-employment. The management permitted them to do. In the process two things happened... firstly, the objective of downsizing was achieved, and secondly, some good support staff could be retained.
The biggest challenge for the management was to move the executive staff from the liaison office to the subsidiary. The easiest option would have been to en masse transfer them to the new company. This would have also meant that considerable liabilities would also move over to the fledgling company - something that it could not bear. By liabilities it meant, the gratuity, the accumulated leave, etc. which would amount to a large sum of money.
The management decided to write off all liabilities in the liaison office and start afresh in the subsidiary company. The liaison office was willing to take a one-time hit to pay off all dues to its staff as on date. For this, all staff members had to resign and obtain fresh appointment in the new company.
Staff was hesitant to do so. It was a matter of trust. What if they resigned and the company did not re-appoint them? What if the management took this opportunity to selectively do away with the services of those it did not require? It took a lot of convincing and educating them since it was a matter of survival for the new company. The management assured that all staff would be absorbed in the new company. Staff was the company's asset and the company could not afford to lose them. It was agreed that first new appointment letters would be issued before staff actually put in their papers in the liaison office. Staff also complained about losing seniority. The management explained that in private companies and in the new HR concept, seniority had no significance. Seniority mattered where there was time-bound promotion in practice and also where annual increments were based on pre-determined pay scales.
The staff also complained that the continuity of service would be broken. To this, the management explained that since it was the same company it did not matter. Past service will always be considered when deciding career plans like promotions, job assignments etc. To compensate for the break in service management decided to pay some ex-gratia in addition to the normal compensation. This amounted to half month's salary for each year of service. Staff with long years of experience were happy since the compensation received was very reasonable in addition to guaranteed job. Those having lesser years were a bit unhappy.
Service rules of the subsidiary company were also revised. This also made the staff unhappy. Certain benefits like soft loans were done away with. The management explained with facts and figures that assuming a situation where all staff was to be give loans, the financial situation of the new company would be badly affected. The new company had to borrow capital from the market at a higher rate of interest. If such money was granted to staff in the form of soft loans, the financial condition of the new company would be adversely affected. The management requested the staff to exercise patience till such time that the company could reach break-even status. The staff could understand the position of the new company and agreed to the management's request.
Some staff expressed that such changes made them feel that they were 'not wanted' by the company. They were assured that it was not so and that they had to realize the fact that the dynamics of a profit-center were very different from that of a cot-center. Even in our own home when the going gets tough, the family tightens its belt! There were a couple of staff members who still wished to resign and in their cases the management took a very generous stance and they were offered handsome compensation.
In this process of change which took almost one year (since the change was done in three phases), the HR function's role was most crucial. However, the top management aligned itself with the HR team and was always in the forefront which helped the HR team very much. Most of the communication was conveyed directly by the top and the HR function acted as a strong second-line support. Continuous explanations were made through e-mails and face-to-face talk in all the main offices of the company. It was stressful but very meaningful and a wonderful learning experience for the HR team. The task seemed all the more difficult because this exercise was quite in contrast to the traditional Japanese concept of life-time employment and the events that took place contrary to the existing culture of the company.
In the rapid world of change where organizations are changing overnight this experience is one of its own kind. HR colleagues would have experienced different kinds of experiences and would have become wiser by the day. The fact is change is unavoidable and the first communication that should go down the line is to live with it. This change in the mind-set will help ease
Mitsubishi's transformation from a small liaison office in Delhi to a full fledged, independent entity may seem like a natural transition, but there was much more to it than meets the eye. HR played a key role in smoothing out several explicit and implicit people issues. The inside story…
Someone has rightly said that the only thing constant about change is change itself. This is inevitable - and we in Mitsubishi are no exception to the change process. In this process of change most staff have undergone new experiences to which they had never been exposed before. The reactions have been varied-at one end there has been happiness while on the other, a sense of uncertainty. It is this blend of joy and sorrow that has helped Mitsubishi see through the most difficult period of its existence in India since the past seventy years. The company is very optimistic and feels that the necessary changes will help its growth and survival in India in times to come.
Mitsubishi set up its operations way back seventy years ago in Kolkata in a small way. In 1965 it moved its head office to New Delhi and since then it has stayed put in New Delhi. Since its inception Mitsubishi has functioned in the form of liaison office of the head office which has been based at Tokyo.
As a liaison office, Mitsubishi in India enjoyed certain benefits. Being a cost center, it was only accountable for expenses incurred in its operations. Staff members were not under so much pressure to perform, because of the liaison status. Targets were qualitative and to measure the achievement was subjective. Rewards were seniority-based and salary was paid for sitting more through overtime rather than for giving results. Results were not tangible since the role of business staff was only facilitate business rather than give results. Operating costs were high. Expensive cars were maintained, five-star hotels were used for stay during business trips, expensive restaurants were used to entertain guests, air travel was the mode of travel. As long as head office bore the expenses, it didn't matter at all.
The nature of the company's operations did not require very skilled or professionally qualified staff. This was mainly because as a liaison office the main job functions involved transfer of business information to Tokyo head office. Most of the employees were graduates with skills in shorthand and typing. Their primary job was collecting data from various sources, or taking notes in shorthand and sending them through the telex machines. The company was very comfortable with such profile of staff who sat late hours to complete the work (and in the process got paid for sitting late).
The world over, the concept of profits became a key issue. Companies started to evaluate their performance using new financial tools and techniques. Mitsubishi was no exception. Working of liaison offices came under close scrutiny and finally the head office decided that such offices should be self-sustaining. The head office could not afford to maintain the operations of the liaison offices anymore. As a pilot project in 1996, it was decided that an independent entity be established in India by the name of MC International India Pvt. Ltd. which was a 100% subsidiary of the parent company. This was the first step towards establishing an independent office. The office had a staff strength of just 3. The time given to make it fully operational by the head office to this pilot project was 4 years. If it failed to be economically viable, it had to be closed down. New staff was recruited. The profile of the staff was different... they were professionally qualified in disciplines as varied as chartered accountancy, business management and foreign trade.
The new company started doing business as any other trading company and it performed fairly well achieving first a star status and further super-star and so on. The head office was keenly observing the progress and also supported it from all angles whenever required. In 2000 the term of the pilot project ended. The management requested for some more time. The head office, after considering the good performance so far, agreed to extend the tenure for a further period of two years. The old staff of the liaison office was keenly observing the new company. Most were of the opinion that it would not survive! It was quite natural for them to be pessimistic because they knew that if they had to move over to the new company, things would be different. An invisible divide was observed between the old and new company. Most talked in terms of 'we' and 'they'. Recruitment was also on in the liaison office, but now the profiles of the new recruits even in the old office was different. MBAs, from premier institutes were recruited. Likewise, professionals in the field of international marketing and trade made lateral entry into the company, things that were unheard of in the past. This intervention was done keeping in mind that the future belonged to the new company.
Other factors like cost control measures were already on. The new company did not have the concept of overtime for executives. To be more precise, it did not pay its executives for sitting late. It had limited cars, mostly Indian which was in sharp contrast to the ones owned by the liaison office. Travel was curtailed and other cost-control measures were adopted. In 2001 the new head of Indian operations joined. He had only one agenda... a 100% change from the liaison status to the subsidiary. At this juncture the staff in the liaison office could figure out that there were very little options available to them. Either they had to change or quit. The hard work for the total transformation began about 10 months in advance. Staff, although important, was only one part of the whole process; assets, finance, customers, books of accounts etc. were other crucial areas that need to be addressed. Our focus will be on people since most HR professionals would be interested in the same.
The company (liaison office) was in a dilemma on what to do with so many staff that was not required in the new subsidiary. There were a substantial number of regular drivers and office bearers, the company believed in owning a large fleet of cars and a large of peons to serve the Japanese and senior Indian staff. There was an equally large number of business and executive staff. It was decided that the new company could do without chauffeur services and peons. Going by the Japanese concept of lifetime employment, it was difficult to do away with their services.
The drivers and peons were offered an attractive VRS package which amount to two and a half month's gross salary multiplied by the years served. Those with long service were benefited. Those with lesser years had some objections. They felt that it was unjust on the part of the company to pay them less merely because of their less tenure. The company offered them alternative employment in the new company on almost same terms and conditions. However, the parting compensation offered was different-it was one and a half times gross salary for every year served. The logic was that the company was offering employment and this was a kind of parting compensation to take of his any personal needs or outstanding dues. There were severe differences of opinion between the two groups. The older employees did not want the younger ones to stay on. So they came with a suggestion that everybody should be getting two and a half times salary and re-employed in the new company. The management refused. In such a condition they refused to take the VRS. It became a stalemate situation. Finally the management had to take a decision-retrenchment. When they came to know about this, all of them (some by choice, some by coercion by peers) opted for VRS. While the settlements were a couple of drivers and peons withdrew their application and opted for re-employment. The management permitted them to do. In the process two things happened... firstly, the objective of downsizing was achieved, and secondly, some good support staff could be retained.
The biggest challenge for the management was to move the executive staff from the liaison office to the subsidiary. The easiest option would have been to en masse transfer them to the new company. This would have also meant that considerable liabilities would also move over to the fledgling company - something that it could not bear. By liabilities it meant, the gratuity, the accumulated leave, etc. which would amount to a large sum of money.
The management decided to write off all liabilities in the liaison office and start afresh in the subsidiary company. The liaison office was willing to take a one-time hit to pay off all dues to its staff as on date. For this, all staff members had to resign and obtain fresh appointment in the new company.
Staff was hesitant to do so. It was a matter of trust. What if they resigned and the company did not re-appoint them? What if the management took this opportunity to selectively do away with the services of those it did not require? It took a lot of convincing and educating them since it was a matter of survival for the new company. The management assured that all staff would be absorbed in the new company. Staff was the company's asset and the company could not afford to lose them. It was agreed that first new appointment letters would be issued before staff actually put in their papers in the liaison office. Staff also complained about losing seniority. The management explained that in private companies and in the new HR concept, seniority had no significance. Seniority mattered where there was time-bound promotion in practice and also where annual increments were based on pre-determined pay scales.
The staff also complained that the continuity of service would be broken. To this, the management explained that since it was the same company it did not matter. Past service will always be considered when deciding career plans like promotions, job assignments etc. To compensate for the break in service management decided to pay some ex-gratia in addition to the normal compensation. This amounted to half month's salary for each year of service. Staff with long years of experience were happy since the compensation received was very reasonable in addition to guaranteed job. Those having lesser years were a bit unhappy.
Service rules of the subsidiary company were also revised. This also made the staff unhappy. Certain benefits like soft loans were done away with. The management explained with facts and figures that assuming a situation where all staff was to be give loans, the financial situation of the new company would be badly affected. The new company had to borrow capital from the market at a higher rate of interest. If such money was granted to staff in the form of soft loans, the financial condition of the new company would be adversely affected. The management requested the staff to exercise patience till such time that the company could reach break-even status. The staff could understand the position of the new company and agreed to the management's request.
Some staff expressed that such changes made them feel that they were 'not wanted' by the company. They were assured that it was not so and that they had to realize the fact that the dynamics of a profit-center were very different from that of a cot-center. Even in our own home when the going gets tough, the family tightens its belt! There were a couple of staff members who still wished to resign and in their cases the management took a very generous stance and they were offered handsome compensation.
In this process of change which took almost one year (since the change was done in three phases), the HR function's role was most crucial. However, the top management aligned itself with the HR team and was always in the forefront which helped the HR team very much. Most of the communication was conveyed directly by the top and the HR function acted as a strong second-line support. Continuous explanations were made through e-mails and face-to-face talk in all the main offices of the company. It was stressful but very meaningful and a wonderful learning experience for the HR team. The task seemed all the more difficult because this exercise was quite in contrast to the traditional Japanese concept of life-time employment and the events that took place contrary to the existing culture of the company.
In the rapid world of change where organizations are changing overnight this experience is one of its own kind. HR colleagues would have experienced different kinds of experiences and would have become wiser by the day. The fact is change is unavoidable and the first communication that should go down the line is to live with it. This change in the mind-set will help ease