Elevating Otis

Optimism is a feeling that has infected a lot of people at the Otis Elevator Company (India) Ltd. While a number of problems remain to be "fully" resolved, the company's managers believe a lot has been achieved over the past few years. The company is headed in the right direction, they say. Attitudes have changed, and efficiencies have improved over the past decade. People have responded to the top management's call for change. The catalyst in all this churning at the company has been its energetic managing director, Raj Bajaaj.

People management
In the past decade, the company's main focus has been people management. The main objectives: to induce excellence in teamwork, and initiative and performance at the individual level.

Bajaaj, who was appointed as the company's MD in 1989, believed "quality" could be the best rallying point for the company's employees, who had been accustomed to working in a protected environment in which Otis completely dominated the market. "Quality was the concept behind our Bangalore factory, which is state-of-the-art." Building the plant was easier than getting people to assure quality, he remembers. His answer was to set up an apex quality council, made up of the company’s unit heads.

Decentralisation
The council meets on the first Monday of every month -- problems, issues, solutions are discussed, action plans formulated. Accountability is high on the agenda, and anyone can raise questions to which answers have to be provided.

Not a single meeting – about 112 must have been held by now -- has been missed so far. "This forum has allowed for participation and debate. Voices have been heard, recognised," says Bajaaj. "It has brought about a change in mindset -- earlier, people had minds but did not want to take decisions." Decisions were taken unilaterally at the head office.

Business planning and decision making, and the responsibility for them, has been decentralised. "Earlier the business plan used to be made at the head office, by the managing director and the financial chief, natural enough in a protected business environment. My challenge was how to get people to do it at the unit level. The plan had to include objectives, and people accountability was a must. It took time, but the shift has happened."

Empowerment
Along with accountability, stress has been laid on initiative and excellence in work. Earlier, salary increments were regular and standard. Brilliance, teamwork and safety initiatives are now rewarded well. In all these moves, Bajaaj’s aim has been to empower people.

"Today people have become far more powerful." Empowerment goes hand in hand with consensus building. For several decisions, Bajaaj brings in people from different units and builds consensus. The company follows the kaizen system, which demands continuous improvement. "We are very keen on this; the appraisal system is also weighted in its favour."

In 1994, the Otis wrote up a strategy plan, to extend to year 2000. "Its become part of the way people work today." The ultimate objective is to change the way Otis India operates, to "change it from introspection to customer-orientation."

Tackling manpower problems
The toughest challenge for the tough managing director has been Otis’ persistent union problems. A lot of effort has gone into this area, but problems have persisted. One reason: the presence of multiple unions -- which made it difficult to arrive at a consensus on issues.

Also, the earlier management had taken the path of least resistance, which only caused problems to multiply and remain largely unresolved. "Earlier, the company had been buying peace with the unions. I didn't agree with that," says Bajaaj. "We’re demanding accountability, as per the settlement with the unions, rather than buying peace now."

The company, he adds, is talking reality, but is also talking greater participation. "We have brought the unions into our planning. There is at least some extent of consensus now. I would say we’ve managed 60-70 per cent of success in tackling our union relations. There is, at least, an appreciation of transparency down the line. We’ve managed to halve employee numbers at our factory in Kandivali, in Mumbai, and are getting twice the amount of work done."

Over-staffing problems have also been tackled gradually, though there’s much to be resolved yet. As many as 350 employees accepted a recent voluntary retirement scheme. "We had 3,700 people in 1990. Today, we’re down to 2,900," Bajaaj adds.

He’s realistic about the fact that all this has not solved Otis’ union problems totally. "But better relationships are evolving. I believe that in the current context of liberalisation, the need for cooperation and partnership is high. With this approach, along with transparency, we can hope the problem will reduce, and eventually go away."

Competitive pressures
Competition, specially at the premium end of the market, is making Otis sweat somewhat, though it still remains market leader in elevators in India. Around two years ago, Mitsubishi snatched the massive Bandra-Kurla Complex elevator project in Mumbai from under Otis's nose by quoting a lower price. Kone recently unleashed an aggressive advertising campaign, across media.

Bajaaj is conscious of such competition, and feels that it will intensify in the future. "We do have a few advantages though -- a service base, huge market coverage, skilled people. These are not easy to replicate. We’ve got 70 per cent of the installed elevator base in India. A lot of existing buildings will have to go for elevator refurbishing. That is where we’ve got strengths. New companies can do new elevators, start creating a service base. They cannot do modernisation."

Modernisation is an area where Otis sees potential for a lot of fresh business for the company. It claims to have almost Rs 50 crore worth of business in this segment. Bajaaj points to the modernisation carried out at the Taj and Oberoi hotels in Mumbai recently by Otis.

Mid-value upgrades should also happen. At the lower end of the market, local players have managed to gain strength, mostly at regional levels. Their main hook has been low pricing and lower maintenance costs.

The Otis view is that the local companies are careless about safety and maintenance -- crucial with products like elevators. But these concerns come with a price tag attached. Bajaaj believes Otis India must educate customers and build awareness about safety and maintenance. (Click here to see separate article on safety issues)

Consolidation on the cards
In the future, the company's products will come closer to global standards of quality and design. Bajaaj expects this to be expedited by Otis Elevator Company of the US taking a majority stake in the Indian company.

After Mahindra & Mahindra’s recent decision to get out of Otis India by selling its 23.89 per cent holding to Otis of the US, the American parent has applied for government approval for around a 69 per cent equity holding in Otis India, up from its current 45. Otis India will then become a subsidiary of the American company. Keshub Mahindra is expected to continue as chairman of the company. Approvals are awaited as of now.

"The parent company knows India is a massive market, and it’s not that we have not been launching global products from the group. But when you consolidate, everything comes into much sharper focus. Reaction times reduce. Interest gets sharpened. Now whatever happens worldwide will happen here much faster than it used to," says Bajaaj. Of the current Otis products in India, he adds, only the E-411 model, a microprocessor-based dispatch system, is not manufactured in the country.

The Indian company’s operations will be better integrated with Otis's global operations; and help other group operations to source equipment and materials from Otis India. Already, Otis India sells its products to group companies in Australia, the UK, US, South Africa, Japan, Malaysia, Singapore, Hong Kong, Spain, Philippines and Kuwait.