Tata Tea’s Munnar operations

           

             On reading the blog on ‘Participative management in KDHP’, my friend Mr Dave wanted to know as to why Tatas decided to exit the business of tea estate in first place. Was it due to losses, inefficiency, workers problems or something else? I truly don't know Tata's version. But the deal of Tatas bringing workers participation in the equity and in the operations of the tea estate, has been a win-win situation for both the parties.

            From what is being seen today, the deal brings the following two perspectives to the fore:

     i)   From Tata's perspectives, the selling of shares to the workers provided the Tatas an exit from the loss-making tea estate business. This also enables them to focus on their forte of highly valuable retail tea brands. They package and produce 'Kanan Devan' retail tea outside the town, which shows their interest in operation of consumer brands.

          The success of this model, besides becoming a vehicle for resolving the profit crisis of the tea industry, also trumpets the company's socially responsible business ethic.

    ii)   For the vulnerable workforce in a time of crisis in the industry, this deal gave them an opportunity to save for their futures, besides giving them a sense of financial commitment in the company. 

Participative Management: The inspiring turnaround of the tea estates at Munnar

   In the ET (19-10-10) I read an interesting article (by P K Krishnakumar) on workers’ participative management in the tea estates. I find it inspiring and worth sharing.

   “As per the report, in 2005, Tata Tea, the owner of Kanan Devan Hill Plantations estate in the picturesque Munnar (Kerala) decided to exit the business completely and handed over the management to its employees. Today, 98% of the 13,000 workers own around 68% of KDHP, while the remaining is owned by Tata Tea and others. Each worker has a minimum of 300 shares of Rs 10 each. In 2009-10, KDHP clocked a net profit of Rs 41 crore (as against Rs 8 crore losses in 2005). The turnaround is not only on account of buoyed tea prices, but is a testament to the change in company’s management structure and operational processes.

    Productivity has increased 58% from 33.3 kg per worker per day (in 2005) to 52.6 kg in 2009-10. The workers are a more prosperous lot, enriched by higher bonuses and dividends, besides capital appreciation of their shares. The employee-run KDHP model is making a show-case for the people intensive plantation business.

    The new management structure has also helped in a marked improvement in the physical and mental health of workers and their families. The infant mortality rate among KDHP workers has fallen, the birth rate has dropped, alcoholism is on the wane, and workers are now eager to come to work without supervisory checks. Unauthorized absence from work has also fallen.  

    Their workers today exhibit ownership in their performance. The workers are paid higher wages, if they perform above their average benchmarks, maintaining the quality of plucking.

    Apart from financial incentives, workers are motivated by that now they have a voice in the management, and being consulted in administration, welfare and other activities. The suggestions made by them for efficiency and cost savings are considered for implementation. This instills a sense of pride in them and they are encouraged to deliver more. They have also representation on the board, the selection being made on the basis of their performance. Decision –making, which was top-down under Tatas has now become bottom-up.”

    The above report outlines the evolvement of society as has been long cherished and dreamt by planners and visionaries. If you have been to Munnar, you may visualize the picture perfect setting in there.

    Skepticism would lead us to think that one sparrow does not make the summer. But the impact of changing aspirations of workers for a better life and redefining of the requisites for motivation are truly reflected in this case. It also confirms the belief in the theory ‘Y’, which advocates that the ‘employees enjoy their mental and physical work duties’. The unions being rendered redundant is a significant pay out of this management approach. But only brave hearts like Tatas would dare to be the first to tread on such untrodden path.

    Only posterity will tell how other industries / enterprises take cue from this model to cure their own ills.