bio consolidated


2/10

Founded in Mumbai by two Danish engineers, Henning Holck-Larsen and Soren Kristian

Toubro. in 1938 Started with heavy machinery, dairy equipments, Construction and gradually moved into

engineering and construction projects

Went Public into 1950 with paid up capital of Rs. 2 million

Recently entered into IT and Financial services

Current Position

Stock

Price


3/10

PowerPower

HydrocarbonHydrocarbon

MMachineryachinery && ProductProduct

HeavyHeavy EEngineeringngineering

SSwitchgearwitchgear

InfrastructureInfrastructure

EElectricallectrical BBusinessesusinesses

MMetalsetals && MineralsMinerals

BBuildinguilding && FactoriesFactories

A. M. Naik

MD & Chairman

Engineering

and

Construction

E&C Projects Heavy IndustryConstruction

IT &

Engineering

Services

Financial

Services

Electrical &

Electronics

Machinery &

Industrial

Projects


4/10

A.M. Naik, the current managing director and chairman, is retiring next year

Why thats an issue The growth of the company in last 20 is largely attributed to him

He has been involved in setting up of every new venture for last 30 years

The company, Indias sixth largest non-PSU, is run by seven directors who are also

due to retire in next few years

Whats the big deal

In 1977 the company had nine directors and then the company was worth 1,500 crores

(inflation adjusted) and now it is worth 111,061 crores

L&T Directors Career Span 42 years (Median) & 40 years (Mean)

BHEL Directors Career Span 33 years (Median) & 33 years (Mean)

BHEL, the closest rival to L&T, is growing at a faster rate

More than fifty percent of the companys current workforce is now aged between 20-30

who are led by people twice their age

The company operates in 152 lines of business in 63 strategic business units

Bigger is better, isnt it

After CK Prahlad came up with the core competency theory in 1990, it has been proved

worldwide that diversity after a certain size leads to internal mismanagement and loss of

flexibility in competitive markets

GE, Motorola and AT&T are some of the examples (Tata is not an exception as allcompanies under Tata Sons operate as independent units)


5/10

New skills and capabilities are needed to meet current or expectedoperational requirements.

Accountability for results are not clearly communicated and measurableresulting in subjective and biased performance appraisals.

Parts of the organization are significantly over or under staffed. Organizational communications are inconsistent, fragmented, and

inefficient. Technology and/or innovation are creating changes in workflow and

production processes. Significant staffing increases or decreases are contemplated.

Personnel retention and turnover is a significant problem. Workforce productivity is stagnant or deteriorating. Morale is deteriorating.


6/10

reorganizing the legal, ownership, operational, or other structures ofa company for the purpose of making it more profitable, or betterorganized for its present needs like

Changing nature of the markets The continuous innovations in technology, product,work processes, materials, organizational culture andstructure

Various actions of work force values, globalcompetitors, demands and diversity

Ethical constraints and regulations

Individual transition and development of the business


7/10

According to A MAccording to A M NaikNaik thethe restructuring is part of an exercise torestructuring is part of an exercise to`make the job easier for his successor' by streamlining L&T's`make the job easier for his successor' by streamlining L&T's

sprawling and complex web of 64 businesses ranging from power tosprawling and complex web of 64 businesses ranging from power toroads to aerospace to switchgear. "No other company in the world isroads to aerospace to switchgear. "No other company in the world is

as complex as L&T... not even General Electric," he said. "No oneas complex as L&T... not even General Electric," he said. "No onechairman can manage such a complex operation. I was able to do itchairman can manage such a complex operation. I was able to do itbecause I have been with L&T for 46 years and have started 60% ofbecause I have been with L&T for 46 years and have started 60% of

these businesses."these businesses."


8/10

The companiesThe companies will bewill be vertically integrated, with their own internalvertically integrated, with their own internalboardsboards

The companies will work to maximize the earnings for its commonThe companies will work to maximize the earnings for its commonshareholders for the entire conglomerateshareholders for the entire conglomerate

The board will have at least three independent Directors andThe board will have at least three independent Directors andrepresentatives from the parent companyrepresentatives from the parent company

EEliminate the problem of immediate succession, as most of the CEOsliminate the problem of immediate succession, as most of the CEOswill be in the age bracket of 55will be in the age bracket of 55--59 years59 years

ThisThis will allow greater independence in functioning andwill allow greater independence in functioning and will providewill provideexternal and betterexternal and better business perspectivebusiness perspective

Will increase the accountability of each of the SBU for its ownWill increase the accountability of each of the SBU for its ownperformanceperformance


9/10

Disparity regardingDisparity regarding SalarySalary structure among different Independentstructure among different IndependentCompaniesCompanies

PProperroper AppraisalAppraisal System might be hinderedSystem might be hindered

Proper TrainingProper Training MModule might not be availableodule might not be available

Training might also become expensive, increasing the costsTraining might also become expensive, increasing the costs

Policy implementation can take a back seat withPolicy implementation can take a back seat with violations &violations &relaxationrelaxation of norms during the initial periodof norms during the initial period

Policies and procedures revisionPolicies and procedures revision may face difficultiesmay face difficulties

Grade or DesignationGrade or Designation SStructuretructure in the new companyin the new company Issues regarding Seniority and Position EntitlementsIssues regarding Seniority and Position Entitlements

Low Level of awareness among new employeesLow Level of awareness among new employees


10/10

You cannot run L&T as you did before: A.M. Naik

Larsen and Toubro - Competition

A.M. Naik: Why is this man splitting L&T?

L&T Board of Directors

BHEL Board of Directors

CAPITALINE PLUS Database

The Core Competencies of the Organization

The annual sustainability report 2009-2010

bio consolidated

Documents