pod - maruti

POD Assignment Prof. S. K. Ghosh

MARUTI SUZUKI INDIA

Ltd.

Prepared By,

Abhishek Shah (001EPGP2014)

Ashis Lamba (005EPGP2014)

Jagtap Deshamukh Pravin Arun (000EPGP2014)

Suman Saurabh (023EPGP2014)

INTRODUCTION

Organizational structure represents the manner in which responsibility and authority are

distributed as well as how work procedures are executed within organizational arms. There

are several variables dictating the most suitable structure, which is going to meet

organizational mission and vision at the log run. Centralization of power, hierarchy design

and horizontal incorporation are factors to consider while putting up an organizational

structure. Another factor of paramount importance in the design of optimal organizational

structure is the core processes of a firm. The structure must be able to reflect key processes

of an organization starting from source material to delivery of finished products. For any

organization to achieve optimum results possible, it is crucial to select structures, which

match predetermined objectives, features of necessary processes and means of controlling

those processes. Processes are very fundamental to every organizational structure model.

For example, information and decision process are available in almost all subsections of the

entire structure. Based on underlying roles and purposes, organizational structure can be

seen as body framework of the firm while processes represents mental capability.

Therefore there are two elements of any organizational structures namely: processes and

structure. It is therefore implicit that any structure makes sense if it is based on required

processes.

This essay is an example of a student's work

A process-‐based organizational structure as this paper is going to explore needs a number

of processes to complement one another so as to function as a unit. Despite process teams

and owners autonomy in inculcating high level of self-‐management, there has to be a

mechanism within the structure, which bring together different processes. Due to the fact

that process-‐based organizations are designed to have independent processes managed by

autonomous units, emphasis should be put in place to facilitate formulation of logical

objectives and performance parameters of every unit. These features must be obtained from

the strategy through connecting strategic options to production and consumer processes.

Semi-‐autonomous units are constructed in such a way that there would be minimal daily

coordination. This is only possible if management take upon itself to define units objectives

geared towards sustainable business control.

Global manufacturing organizations are experiencing several challenges resulting from

fluctuations in demand profiles, irregular supply profiles and high customer’s expectations.

As a result of this, there is an ever-‐rising need to develop factory performance, which is the

sole means of creating value for consumers. Among many others channels of improving

performances is the design of a structure which just fit manufacturing processes in the best

manner possible. The ultimate result of optimal structure should gather for core processes

through labor capacity maximization, reduction of run times and general minimization of

liabilities. This analysis will focus on organizational structure of Maruti Udyog Limited and

how best it fits to its conversion of raw materials to finished goods. It is a subsidiary

company of Suzuki Motor Corporation, which is one of the global leaders in automobile

manufacturing and distribution. Maruti was chosen due to its readily available information

and global market share.

For over two and half decades, Maruti Suzuki India Limited (MSIL) has led the India Car

Market with two Manufacturing facilities located at Gurgaon and Manesar, south of New

Delhi, India, Whose combined capacity is over a 1500000 vehicles annually.

BACKGROUND OF MSIL

In 1971, Prime Minister Indira Gandhi's Cabinet proposed the production of a "People's

Car"—an efficient indigenous automobile that middle-‐class Indians could afford. Though

Sanjay Gandhi had no experience, design proposals or tie-‐ups with any corporation, he was

awarded the contract and the exclusive production license. The criticism that followed this

decision was mostly directed at Indira Gandhi, but the 1971 Bangladesh liberation war and

victory over Pakistan drowned out the issue.

Indira's Gandhi's victory and the Congress's landslide victory in the 1971 Indian General

Election only left Indira Gandhi more powerful. Maruti Udyog (MSIL today), though was

founded by Sanjay Gandhi, it did not produce any vehicles during his lifetime. However a

test model put out as a showpiece of progress was criticized. Sanjay Gandhi then contacted

Volkswagen AG from West Germany for a possible collaboration, transfer of technology and

joint production of the Indian version of the "People's Car", to emulate Volkswagen's

worldwide success with the Beetle. At that time, Indian Passenger Car Manufacturing

Industry had only two players: Premier Automobiles Limited and Hindustan Motors

Limited.

A license and a Joint Venture agreement were signed with the Suzuki Motor Company of

Japan in Oct 1983, by which Suzuki acquired 26% of the equity and agreed to provide the

latest technology as well as Japanese management practices. Suzuki was preferred for the

joint venture because of its track record in manufacturing and selling small cars all over the

world. There was an option in the agreement to raise Suzuki’s equity to 40%, which it

exercised in 1987. Five years later, in 1992, Suzuki further increased its equity to 50%

turning Maruti into a non-‐government organization managed on the lines of Japanese

management practices.

Maruti created history by going into production in a record time of 13 months. Maruti is the

highest volume car manufacturer in Asia, outside Japan and Korea, having produced over 5

million vehicles by May 2005. Maruti is one of the most successful automobile joint

ventures, and has made profits every year since inception till 2000-‐01. In 2000-‐01, although

Maruti generated operating profits on an income of Rs 92.5 billion, high depreciation on new

model launches resulted in a book loss.

ORGANIZATIONAL STRUCTURE

Maruti is characterized by functional organizational structure having Horizontal linkages.

Based on automotive engineering operations, the firm’s organizational structure has several

divisions. These encompass the following functions: Engineering, Sales, Finance, Spares,

Administration, New Business, Information Technology, Human Resource Development,

Maintenance, Quality Assurance and Parts Inspection. Being a large organization it is

Maruti’s organizational chart is further subdivided in to smaller sub sections depending on

other criteria like location, plant, product etc. Maruti has a total of 29 divisions operating

under one Divisional Head who is serving as Functional post in the structure. The structure

further reveals that within these divisions are 132 departments under stewardship of one

departmental head. These Department Head are also functional posts. This structure is

designed on the same pattern as that of Japanese Suzuki Motor Company which is Maruti’s

partner. Human resource planning, plant layout and installation of production facilities are

intrinsic in nature to Suzuki Motor Company’s structure.

Organizational chart at Maruti is functionally flat. A functionally flat organizational

structure means that there are few levels of administration hierarchy. It is a desirable kind

of structure, since problems related to information delays, misinterpretations and

corruption gets minimized. This is possible because information will go through few

hierarchy levels before getting to intended recipient. There are only six functional levels in

which employees can be divided in to. It implies then that every employee must fall in either

of the following level: Division Manager, Department Manager, Section Manager, Executives,

Supervisors or Workers and Technicians. However, hierarchically, these are divided into the

following levels:

• Technicians are divided in 7 levels (L-‐1 to L-‐7)

• Supervisors in 3 levels (L-‐8 to L-‐10)

• Executives and Managers in 4 levels (L-‐11 to L-‐14)

• IDPM (In charge Department Manager)

• DPM (Department Manager)

• DDVM (Deputy Division Manager)

• DVM (Division Manager)

The Section Manager, Department Manager and Division Manager are all Functional posts,

which means anybody from levels L-‐11 to L-‐14 can be a Section Manager, an IDPM or a DPM

can head a Department, and an DDVM or DVM can head a Division. The below figure shows

a quick snapshot on how does it look currently.

HISTORY OF EVOLUTION The first phase started when Maruti rolled out its first car in December 1983. During the

initial years Maruti had 883 employees, a capital of Rs. 607 mn and profit of Rs. 17 mn

without any tax obligation. From such a modest start the company in just about a decade

(beginning of second phase in 1992) had turned itself into an automobile giant capturing

about 80% of the market share in India.

During the pre-‐liberalization period (1983-‐1992) a major source of Maruti’s strength was

the wholehearted willingness of the Government of India to subscribe to Suzuki’s

technology and the principles and practices of Japanese Management. Large number of

Indian managers, supervisors and workers were regularly sent to the Suzuki plants in Japan

for training. Batches of Japanese personnel came over to Maruti to train, supervise and

manage. Maruti’s style of management was essentially to follow Japanese management

practices. The transformation has been represented in terms of logo as shown below:

The change in logo itself is symbolic of the organizational and cultural changes that the

company had undergone with increasing share holding and then privatization. The initial

Logo of 1983 changed to include the name of both partners around 1992. This clearly

indicated the entry of Suzuki to Indian Car Market. They leveraged this recognition of

Suzuki Brand name in their 2-‐wheeler enterprise with TVS. With increasing shareholding

pattern of Suzuki, the name Maruti was decreased strategically in font size to highlight

Suzuki Brand. Also, the company chose to highlight the reliability of its service network as

well its products by choosing the tagline “Count on Us”. Quality and Service were promoted

and made an integral part of company culture.

The latest logo features both of them as partners and focuses the established Maruti Suzuki

culture of equality and excellence as a way of life. This was also the time that the japans

management principles like JIT, Kanban, 5S and localization were made an integral part of

the company culture.

A snapshot of the key events, which have happened during the tenure of Maruti, has been

listed below:

Year Milestones

1981 MARUTI UDYOG LTD was incorporated on under the INDIAN COMPANIES ACT, 1956.

1982 License and Joint Venture agreement signed between Maruti Udyog Ltd. & Suzuki Motor Corporation Japan (SMC).

1987 First lot of 500 cars exported to Hungary

1992 SMC increases its stake in Maruti to 50 percent.

2002 Maruti Finance in Mumbai with 10 Finance companies is introduced. Children’s park inaugurated in Delhi. SMC acquires majority stake in MUL (increases to 54.2%).

2003 IPO (JUNE ISSUE oversubscribed 11.2 times) Maruti gets listed on BSE and NSE

2006 New car plant and the diesel engine facility commence operations during 2006 at Manesar, Haryana. In November Maruti inaugurated a new Institute of Driving Training and Research( IDTR) set up as a collaborative project with Delhi Government at Sarai Kale Khan in South Delhi.

2007 Board of Directors gives approval to new name MUL to become Maruti Suzuki India Limited. Corporate Social Responsibility: adopts three villages in Manesar

2008 M-‐800 crosses the mark of 25-‐lakh. MSIL celebrates its Silver Jubilee. MSIL launches National Road Safety Program.

2009 A-‐STAR or Suzuki Alto debuts at Geneva Motor Show. Sales begin Capacity to manufacture expanded from 800,000 to a million units (Gurgaon plus Manesar plants) annually.

2012 Labor unrest at Manesar Plant. Violence at Manesarplant. GM HR killed. Another phase of restructuring and labor management starts.

2012 MSIL announces plans for another plan to be opened in Gujarat by 2017. To be operated solely as Suzuki Motors Company. Maruti to buy finished products.

2013 Maruti acquires Suzuki Powertrain India Ltd to consolidate its diesel engines and transmissions Portfolio.

2014 Major reorganization in MSIL,HR ,Admin and Finance divisions consolidated together as one and previous autonomy abolished.

PHASES OF EVOLUTION

1983-‐1992 LICENSE RAJ

Vehicle production was closely regulated by an industrial licensing system that controlled

output, models and prices. A license and a Joint Venture agreement were signed with the

Suzuki Motor Company of Japan in Oct 1983, by which Suzuki acquired 26% of the equity

and agreed to provide the latest technology as well as Japanese management practices.

Suzuki was preferred for the joint venture because of its track record in manufacturing and

selling small cars all over the world. Hence the journey started in an environment when the

Indian economy was closed and it was largely run in a very controlled license driven

production process. Since the country had forex problems at that point, both the export of

technology and export of components were licensed.

There was an option in the agreement to raise Suzuki’s equity to 40%, which it exercised in

1987. The scenario remained like this till 1991, after which control were gradually

withdrawn. The automobile industry became free of licenses in 1993. Ever since that

happened, there has been an influx of many global players towards the Indian automobile

industry and as a result, today we have almost every big name in the global automobile

circuit competing for the Indian market. In fact, once the regulations moved out of the

picture, the industry has witnessed a robust growth over all these years.

The delicensing has worked in favor of the consumer. The policies that are made should

always be made with a view to benefit the ultimate consumer. It has been seen in the past

that if a policy is trying to lend a helping hand to any industry, but the policy is not working

in the favour of the consumer, the results haven’t been as desired at the time of framing the

policies. The person who should benefit from government policies should always be the end

user rather than the players in the industry and it has been the case with the automobile

industry so far. The consumer today has more choices, better cars and due to the high

competition, owning a car has only become more affordable during all these years. In terms

of the structure it was more bureaucratic at the top and functional division were being built

at the lower level. Hence decision-‐making took time. Suzuki on the other hand was not yet a

big brand in Japan and was ready to provide the knowledge on technology which Maruti

needed.

1992-‐1997 LIBERALIZATION

In the liberalization era, norms on foreign Investments and stakes in domestic were relaxed

as a step towards increasing industrialization. Taking advantage of this environment, Suzuki

raised its stake to 50 % in the organization.Maruti practically became an Indian company

running under Japanese operating principles and culture. During this tenure there was an

increased focus on industrialization and hence the importance of increased Suzuki stake.

Suzuki brought latest technologies to Indian Car market and it led to strengthening of

positioning of MSIL. It was still kind of a monopoly in the passenger cars market.

However, the MD of the company was to be appointed by both the stake holders (Suzuki

Motors and Govt. of India) on a 5 year rotation basis. Suzuki Appointed Mr R C Bhargava as

its nominee MD for the period 92-‐97. This further helped the technology penetration and

new model introductions in India like the Maruti Zen. Also better and improved variants of

Maruti 800 and Maruti Omni were brought forward during this tenure.

1997-‐2002 FULL PRIVATIZATION

In 1997, Govt of India appointed Mr. Bhaskarudu as the MD of the company as part of its

turn. However this did not go down well with Suzuki as they complained that it was done

out of local politics and no consent was taken from Suzuki on the appointment.

At the heart of this controversy was the coalition politics that the UDA government had to

adhere. Suzuki also was beware of the plans of Mr. Bhaskaradu to localize critical auto

components that served as revenue sources to Suzuki Motors because of being imported

from their Japan facility.

Suzuki vehemently opposed this change in organization and a deadlock reached between

the two partners. The growth of the company stopped and the impasse provided crucial

time for Hyundai Motors to establish itself and find its market space while Maruti was busy

sorting out its own house.

Throughout this time while Suzuki had incorporated its work culture it had paid little

attention to understanding of and imbibing these culture amongst the workers. As a result

there was no clarity on the requirement and necessity of excessive controls and disciplines.

The continuous meddling by the government also did no help in spreading this organization

culture .As a result there was a slowdown by the workers many times starting from 2000 to

2001 against the Japanese controlled culture of working, incentives and other Government

related benefits that they were demanding. Suzuki doubted that the Indian Government

prompted these slowdown and strikes. This further created a divide between the two

stakeholders and it was quite clear that this partnership could not have continued further

without a total revamp of the stakeholder’s pie and subsequently the organization culture.

After a lot of deliberation the new NDA govt. went ahead with its disinvestment policy and

as a result the government stake was sold off and Suzuki was able to raise its stake in the

company to 54 % in 2002. Thus the company became a totally privatized and Suzuki Motors

Japan became the owner of the company.

This was a monumental change as the company moved now from a bureaucratic public

sector type organization structure to a private organization. The initial structure was a flat

functional structure with focus on development of skilled manpower within India on

international automotive trends.

In 2001, Maruti started an initiative known as ̳Non Stop Maruti Express Highway‘. As a part

of this initiative, Maruti developed 255 customer service outlets along with 21 highway

routes by 2001-‐02. Also with an intention to provide fast service in less time Maruti had

offered Express Service Facility. This has grown to over 3000 at this stage along with a

33000 skilled service professionals.

In 2002, the government decided to hand over management control in Maruti Udyog Ltd

(MUL) to Suzuki Motor Corporation (SMC) for a consideration of Rs 1,000 Cr. At that time

the government held 49.76 per cent equity in Maruti, with SMC holding 50 per cent and the

remaining 0.24 per cent being held by an employee’s trust. SMC acquired controlling stake

in the country's leading car manufacturer by way of the government renouncing its

subscription to a Rs. 400-‐crore rights issue of MUL. After the rights issue, SMC ended up

having a 54.20 per cent stake in the company, with the Centre's share falling to 45.54 per

cent. In June 2003, the government sold a 27.5 per cent stake in Maruti to the public at a

price of Rs 125 per share to garner Rs 993 Cr. (Rs 9.93 billion).

2002-‐2012 POST STRIKE ERA -‐ DECADES OF PROSPERITY

The major challenge Maruti faced after privatization was downsizing. It also aimed at

removing the trouble elements from the company, which had raised problems during the

early 2000s through regular slowdown and extended strikes. The company brought in Mr.

Siddiqui who was considered an expert on Industrial Relations and asked him to design the

downsizing plan. An elaborative VRS was planned and communicated to the departments.

This phase helped Maruti weed out trouble elements as well as non-‐performers and

emphasized upon all the view of the new management. The company wanted to be lean. At

the same time a slew of training activities were introduced to upgrade the staff and it was

made clear that the company was aiming at continuing and building upon its leadership in

the Indian Market and ready to expand abroad too.

The Path to Success for Maruti was as follows:

1) Teamwork and recognition that each employee’s future growth and prosperity is

totally dependent on the company’s growth and prosperity

2) Strict work discipline for individuals and the organization

3) Constant efforts to increase the productivity of labor and capital

4) Steady improvements in quality and reduction in costs

5) Customer orientation

6) Long-‐term objectives and policies with the confidence to realize the goals

7) Respect of law, ethics and human beings.

The “path to success” translated into practices that Maruti’s culture approximated from the

Japanese management practices. Maruti adopted the norm of wearing a uniform of the same

color and quality of the fabric for all its employees thus giving an identity. All the employees

ate in the same canteen. They commuted in the same buses without any discrimination in

seating arrangements. Employees reported early in shifts so that there were no time loss in-‐

between shifts. Attendance approximated around 94-‐95%. The plant had an open office

system and practiced on-‐the-‐job training, quality circles, kaizen activities, teamwork and

job-‐ rotation. Near-‐total transparency was introduced in the decision making process. There

were laid-‐down norms, principles and procedures for group decision making. These

practices were unheard of in other Indian organizations but they worked well in Maruti.

During the pre-‐ liberalization period the focus was solely on production. Employees were

handsomely rewarded with increasing bonus as Maruti produced more and sold more in a

seller’s market commanding an almost monopoly situation.

It was quite clear that the Suzuki “way of life” had finally found its way with the Indian staff

and the company was building on a culture of openness, technology up-‐gradation and

leadership development to emerge market leaders.

In 2009,Maruti had functional, hierarchical division structure, all division heads reported to

managing director. Corporate level functions such as corporate planning, communication

and corporate social responsibility reported to corporate services department which

reported to managing director.

In 2010, there were some minor change in organizational structure and it remained

unchanged till 2012. Corporate secretary and legal offers were clubbed with existing

departments and they reported to corporate services division instead of managing director.

2013-‐TILL NOW: POST LABOR UNREST

The Manesar plant witnessed three labor strikes in 2011. There was a lockout in July 2012

after the brutal murder of a General Manager (HR) at the company. The plant workers

wanted to register independent union and were demanding increase in allowance and

allowance and few other benefits.

After strike was resolved and production was restarted, plant management found that

numbers of defective parts are increased. After extensive investigation it was found that

some of the workers were sabotaging the company by producing defective components. To

increase the Quality awareness and to emphasis on Quality, Maruti started Quality division

as an independent division which will be primarily responsible for maintaining and

improving the quality.

After the unrest there was huge change in company policy of staffing and recruitment.

Company paused on the recruiting of ITI holders. All previous contracts with contract labor

providers were cancelled and new contracts were signed, new contracts were favoring

Maruti.

In 2014 Maruti created separate business units for corporate functions such as finance, IT,

HR, corporate planning. These functions resources are shared with all other functional

divisions. Before 2014 also these departments were centralized but they did not have

independent representation at the top management and they are clubbed under corporate

planning. After creating independent corporate service units, all these units had proper

representation at the top management. Also these functions were streamline and each

division would have representation from these support functions. This structure is more

like a matrix structure.

In May 2014, in a move to combat top executives’ vertical thinking, Maruti Suzuki rejigged

its management structure. The company has tried to create a system whereby there will be

cross-‐functional, cross-‐vertical flexibility. Another key step that the company has

undertaken is that they have completely done away with the administrative vertical. Earlier,

the administrative vertical had four divisions -‐ HR, legal, IT and finance. Now, they have

done away with this vertical altogether. So, the total number of verticals have come down

from 6 to 5 and HR, IT, legal and finance will henceforth operate as separate business

divisions.

However it was seen as the top management view to decentralize HR vertical as a support

function. Many saw this as a step to decrease the powers of the HR head and MEO-‐Mr.

Sidiqui in the backdrop of the inability to control the labor unrest.

Interestingly Sr MEOs (highest possible positions for Indians) of 3 verticals namely

Production, Finance and HR were converted to position of Mentors. The post MEO itself was

scrapped and the highest possible post for an Indian was fixed at EO. This move has been

seen as a clear indication of decreasing the power of Indian Board members. Not

surprisingly 2 of the MEOs from Finance and HR resigned and migrated to other companies.

It seems that there is a clear directive to increase the Japanese Management Control and

bring the Japanese culture of treating the staff and labours equally. However the company

must caution against the difference in aspirations and loyalty of the Japanese and Indian

workforce. Indians are very rarely loyal to the same company whereas in Japan it is

considered to be a norm to retire from the same company one started with. Additionally IR

issues will continue to challenge the organization culture and structure of the company and

they need to be alert of the same if they want to maintain their productivity and market lead

in the industry.

BIBLIOGRAPHY

• http://www.moneycontrol.com/news/cnbc-‐tv18-‐comments/maruti-‐suzuki-‐rejigs-‐

organizational-‐structure_1078698.html?utm_source=ref_article

• http://archive.financialexpress.com/news/maruti-‐suzuki-‐rejigs-‐management-‐structure-‐in-‐

competitive-‐drive/1246668

• www.marutisuzuki.com

• www.google.com

• www.timesofindia.indiatimes.com

• www.autocarindia.com

• http://creately.com/diagram/example/h35c8ioy1/Maruti+Suzuki+Organisational+Chart

• http://www.business-‐standard.com/article/companies/maruti-‐sets-‐up-‐a-‐special-‐group-‐to-‐

coordinate-‐projects-‐114050201034_1.html

• http://www.ukessays.com/essays/management/the-‐organizational-‐structure-‐of-‐maruti-‐

udyog-‐limited-‐management-‐essay.php