Can a Finance Officer leave a mark…? YES !!!

CFOAsia is an International ‘finance happenings in Asia’ magazine from the Economist Group, published from Hong Kong. They started a Best Practices Award for CFOs in Asia in six categories in 2000, for which A. Venkateshwar (IRAS 1978 Batch) sent an entry for ‘Turnaround Management’. These are excerpts from the article published

He was given the Herculean job of turning the US$576 million-a-year mining company around without causing massive lay-offs. Firing workers is felt to be politically unfeasible in a business owned half by the national government and half by the state of Andhra Pradesh. Any cost reduction would have to come from gaining employee cooperation and simply running the mines better. He accomplished this task by using finance education to instill the will to work and reengineering operations where possible. Across Andhra Pradesh alone, there were 77 registered unions throughout the collieries. Some had been infiltrated by Marxist guerrillas, who caused frequent strikes. Further, Singareni had not been profitable for years. In late 1999, Singareni was convulsed by one of its largest strikes. In the negotiations that ensued, an important milestone was reached. Singareni's management agreed to some concessions on the condition that the 77 separate unions combine to negotiate with one voice in company-wide actions. The agreement effectively created a majority body among the union workers that rejected the communist insurgent activity in the union itself, and has since snuffed any serious terrorist attacks at the mines. The number of individual wildcat strikes has, for more than a year, dried to a trickle.

At Singareni, the process of educating the workforce opened a vital flow of information between the miners and management. "For us," says Venkateshwar, CFO of Singareni Collieries, "it has proven a blessing in disguise. In order to communicate our financial condition to the miners, we had to go into the mines." The result, he says, was that the finance team had to learn the nitty-gritty detail of the business that helped them construct an effective program of cost cutting. Venkateshwar hit upon an idea aimed at weakening the grip of the unions and improving production. He created multi-departmental teams, run by the finance department, to visit the mines and present the management's case. He wanted the teams to present a simple, concise story. The mode of presentation was important: the teams had to present their message in the local language and dialect. Group discussions would be encouraged, and local workers would be solicited to speak along with the team leaders. The meetings were held at the pitheads of the mines, and team members would tour the mines afterward. Workers were encouraged to make suggestions. Getting across the idea that the mines would be independent one day - or go out of business - became the center of the lesson. The concept of workers owning a stake in the business, and therefore being responsible for its well being, is not an easy one to grasp. To heighten the dramatic effect, Venkateshwar introduced village theatrical evenings that included skits demonstrating the effect of open markets on mining. He recalls: "That week, a British company was pressing to sell coal via the west coast of India. We presented the idea of foreign competition in broad strokes. Foreign capital smoked a pipe and wore a mackintosh."

Venkateshwar's cost cutting and operational measures have born fruit. The company turned a net profit of US$65 million for the 1999 to 2000 fiscal year, and expects a US$75 million net profit for 2000 to 2001 All this does demonstrate that in a crisis, effort by the finance department to educate workers can provide a powerful lever for change.

P.S.: Can we too not motivate ourselves in our own small way?