Business Today

Nurturing the family

N. Madhavan | Print Edition: June 12, 2011

It is a 100-year old group with a unique achievement - it has never faced a serious labour problem. The first company of the group, TVS & Sons, set up in 1911, has a strike-free record. So do most of the other 30-odd companies, including Sundaram Finance (started in 1954), Wheels India (1962), Sundram Fasteners (1966) and Sundaram Brake Linings (1975). Only four companies have faced one strike each - Sundaram Clayton, Lucas TVS and Brakes India were briefly hit by a strike in 1977, while TVS Motor Co. shut down for a few days in1992. But all these strikes were triggered by external factors, such as the efforts of rival political parties - most TVS unions are affiliated to the Indian National Trade Union Congress, or INTUC, the trade union wing of the Congress party - to take control of them.

Industrial relations at TVS are indeed extraordinary. Soon after Independence, for instance, the then undivided Communist Party called a nationwide strike, shutting down production for three days. But employees at the TVS workshop in Madurai chose to lock themselves inside the premises - as travelling back and forth might have invited reprisals - and continued to work.

Harmony mantra

  • Treat employees like family
  • Put employees' interests ahead of the company's
  • Constantly communicate with employees to build trust
  • Always honour assurances given to employees
  • Involve employees while taking major decisions
  • Empower employees at work
  • Condone errors of judgement but punish dishonesty
  • Extend relationships with employees beyond work
  • Adopt an open-door policy
  • Do not pressure employees to engage in unethical acts
Nearly 60 years later, during the global financial crisis of 2008, the management at TVS & Sons sought to temporarily reduce workers' wages, but left it to them to decide how much they would forgo. Far from protesting, employees agreed; while the management had expected a five per cent reduction proposal, the employees sprang a surprise by suggesting a 15 per cent cut. "The company has always stood by us. We saw this as an opportunity to help it tide over a temporary crisis," says S Ramasamy, manager, IT Systems, TVS & Sons. When the downturn ended, the pay cut was restored.

Rules of engagement

This unique relationship with its employees has played a significant part in transforming the TVS Group from a small family business running a rural transport service in the temple town of Madurai in southern Tamil Nadu into a $4-billion (Rs 18,000-crore) conglomerate with a wide range of business interests - from auto components, scooters and auto-rickshaws, to financial services and logistics. The group, with 25,000 employees, has operations spread across India, the United States, Europe, Indonesia and China.

The relationship has been fostered by the management's conviction that its employees are not just workers, but members of its extended family. "I make it a point to directly interact with workers across all our factories at least three times a year. A frank interaction helps build enormous trust," says Suresh Krishna, Chairman and Managing Director at Sundram Fasteners. Venu Srinivasan, chief of TVS Motor - one of India's largest two-wheeler makers - too says he has been following the same practice for two decades. The interaction is followed up with concrete action in redressing workers' grievances and looking after their needs.

The group has also always been ahead of the pack in providing workers' benefits. It started a provident fund scheme in the early 1940s, before it became mandatory for private companies, after the Provident Fund Act was passed in 1952.

Similarly, it began paying gratuity to its employees from the mid-1960s though this became statutory only from 1975. It has always striven to give as much bonus as possible - much more than the legal minimum requirement of 8.33 per cent. "We have paid maximum bonus for many years, even when we did not have enough profits," says Krishna.

Other employee welfare efforts include a health food section started recently at the Sundram Fasteners factory canteen - providing only health food at subsidised prices. Indeed, all the TVS Group companies ensure their employees consume healthy food at the workplace: the choice of cooking oil, the quality of the rice used and the quantity of spices used at office canteens are all monitored closely.

Long-term relationship
The TVS Group's relationship with an employee does not end once he retires. "I worry about the employees even after they leave. They are still part of the family," says Srinivasan. Members of the top management meet employees when they retire; HR departments of the group companies help them plan their post-retirement finances, If an employee dies while in service, his dependents get not only his dues, but also the proceeds of a 'death fund' created for him, to which every employee of the company concerned contributes a day's salary and the management matches the contribution."We keep asking employees if they are happy at work," says R. Dinesh, Joint Managing Director, TVS & Sons.

Are they? "The management is very pro-active on our behalf," says S. Chinnasamy, a quality control inspector at Sundram Fasteners who was a union leader for over 20 years. "Medical costs, including that of employees' family members, however high, are borne by the company. It also offers scholarships for our children. We cannot be in safer hands."

Not surprisingly, the unions too are ready to cooperate with the management. In the early 1990s, for instance, Sundaram Clayton wanted to make major alterations in its production process which would have required a single worker to handle several machines. Unions then were committed to the principle that a worker should only specialise in handling one kind of machine. "But our union agreed to the new work process when the need for the change was explained. It did so without asking for any additional benefit for the workers," recalls Srinivasan.

Again, while most labour unions invariably protest if the management takes punitive action against unproductive or errant employees, TVS unions identify such employees on their own, and seek to correct them. If they fail, they themselves bring the worker's conduct to the notice of the management.

There are other intangible reasons as well for their happiness. "Errors of judgement are condoned while dishonesty is dealt with severely here," says T.T. Srinivasaraghavan, head of Sundaram Finance - a financial services company with over 500 branches and an asset base of Rs 12,000 crore.

Employees here enjoy rights rarely provided elsewhere: at Sundaram Finance, for instance, all executives who have worked for four years or more have the authority to sanction loans. The TVS Group also avoids lateral recruitment at senior levels, thus offering ample opportunities for career advancement within the companies.
"The last time I recruited a senior person was 15 years ago," Srinivasraghavan adds. Himself a professional recruit, the Sundaram Finance head joined the company 28 years ago from the banking sector. Keeping its labour force happy has benefited TVS in many ways. The first four Indian companies to win the Deming Prize, a prestigious international award for total quality management, were all from the TVS Group - Sundaram Clayton, Sundaram Brake Linings, Brakes India, and TVS Motor.

With cooperative employees, TVS companies have had no problems introducing modern manufacturing practices such as total quality management, total productive maintenance and lean manufacturing, enabling them to compete better. Sundram Fasteners was a consistent winner of the best global supplier of the year award from General Motors for years till a change in classification excluded it from qualifying.

Attrition levels at the group are low as well. Wheels India, for instance, has an attrition level of 10 per cent against the auto component industry's average of well over 15 per cent. Sundaram Finance's attrition is about eight per cent; the financial services sector's levels are almost twice that. Sridhar Ganesh, Director, HR, Murugappa Group, another family run conglomerate based in Chennai, acknowledges that the TVS group fosters mutual respect, dignity and transparency, "the core values for building a lasting relationship". "Very few companies have achieved this," he adds.

Future uncertain
Will the bonhomie last? Nurturing a familial relationship is getting increasingly difficult as the group grows in size and geographical spread. TVS's paternalism worked in Tamil Nadu but will it be accepted in other parts of the country or outside? "It cannot be replicated elsewhere. We have to find other ways," says Srivats Ram, Managing Director of Wheels India.

"The employees of today are different. Their loyalty is not very deep and they resent a paternalistic approach. They expect the workplace to be innovative, attractive and progressive, or else they leave," says Arathi Krishna, Joint Managing Director, Sundram Fasteners and daughter of Suresh Krishna. However, her own experience belies the fears of TVS managers. She has partially succeeded in her efforts to inculcate TVS values at the company's manufacturing facility in China's Zhejiang province. After initially grappling with large-scale attrition - private sector Chinese workers are notorious for switching jobs for a few dollars more - the company has been able to win over employees, and most of them have stayed on for more than five years now.

"Looks like there is some universality in what the TVS Group practices," says Arathi.

B. Santhanam
B. Santhanam
Role model under threat

CEOs like me have always looked up to the TVS Group as a role model, especially while setting up a greenfield factory. In fact, we closely studied the genetic blueprint of a TVS factory in 2000 when we set up the World Glass Complex at Sriperumbudur. Excellent labour relations, total employee involvement, ability to develop outstanding engineer leaders, well-directed corporate social responsibility, harmonious relationship with society and high ethical norms - all this achieved through business and financial prudence, is indeed exceptional.

I am sure the group will face challenges in the near future. Indian society has changed. People are now more aspirational. Stability is no more an issue and employees prefer an accelerated financial and career growth. This is particularly true of the junior and middle management who are in great demand and TVS companies are a fertile hunting ground. Given this scenario, the TVS model needs to be tweaked to manage aspirations and changing norms. Also, the TVS Group traditionally separated industrial relations (for union workers) and human resources development (for others). These are not separate anymore. A mindset change is required to accept this. That apart, TVS Group companies have been traditionally strong in process discipline, engineering excellence, customer centricity, cost control and conservative business judgement. Today, innovation has become central to any business and it has strong links to diversity - gender, culture, experience and age. It is here the fourth generation of family and professionals have to bring in their expertise and ensure that the group becomes a hotbed of innovation. Given that the group has for a100 years withstood many a change - Independence, socialist ideas and the liberalisation of the economy - I am sure it will overcome the present challenges and move to the next level.

B. Santhanam is President, Flat Glass, South Asia & Egypt and MD, Saint Gobain Glass India. He is also chairman, CII National Committee on Human Resources

Shekhar Arora
Shekhar Arora
Stands for trust, values

The mere mention of TVS invokes confidence and respect. You associate quality and good human relations with TVS. Most of us will easily grant that the company stands for trust, values and services. TVS is like one big family which pursues common goals, shares the good and the bad times, and stays together. The strikes in 1977 and 1992 were aberrations in an otherwise impeccable record of good human relations.

In fact, I do not always view conflicts in a negative light. When conflicts are well resolved, all stakeholders emerge stronger, have better understanding and accommodate one another better. These aberrations were possibly the stepping stones for long-lasting human relationships at TVS, based on mutual understanding and respect. Among all the right things, let us not lose sight of one principle aggressively pursued at TVS - "Efficiency and success drive all goodness". To be employees of a successful organisation gives both the TVS management and the workers a sense of pride, enhanced self esteem and status in society. They continue to do their best to live up to this status. TVS has to change gears to align itself with the new world of work and new-age employees who do not hesitate to follow the religion of the '3Ss' - surfing, searching and switching.

TVS must also recognise the fact that younger talent is moving away from the "good care" to the "great opportunities" realm. In fact, young people do not place much premium on loyalty anymore. Dinesh sums it up aptly when he says the challenge would be to "modernise our culture without losing the old values".

I am confident that given the value of experience and the youthful vibrancy of the fourth generation entrepreneurs within the TVS fold, the group will continue to add new chapters to the ongoing success story.

Shekhar Arora is Executive Director (Human Resources), Ashok Leyland Ltd

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