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9B11C043
Professor S. Ramnarayan and Neha Gupta wrote this case solely to provide material for class discussion. The authors do not intend
to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and
other identifying information to protect confidentiality.
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of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca.
In April 2001, news reporters paced outside the headquarters of Singareni Collieries Company Limited
(SCCL). As A.P.V.N. Sarma, the chairman and managing director (CMD) of SCCL, disembarked from his
car, he was surrounded by reporters thrusting their mikes and notebooks at him. It was not the first time
SCCL made headlines, albeit this time it was for the right reasons. SCCL had achieved a net profit of
`894.1 million1 for the fourth consecutive year in 2000-01 under Sarma’s leadership. It was the same
company that was declared “sick” (bankrupt) by the Board for Industrial and Financial Reconstruction
(BIFR) twice — once in 1992 and again in 1996 — with accumulated losses of `12.19 billion. A reporter
asked, “What is the most important factor in this turnaround?” “Building trust through communication,”
replied Sarma, instinctively. Was that a fair assessment?
SCCL traced its origin to a quaint event in 1870. A group of pilgrims camping near Singareni accidently
set fire to the “stones” on which a cooking pot was placed. This strange occurrence of stones catching fire
was reported to local authorities. In 1871, Dr. William King, an eminent geologist, investigated2 this event,
discovering coal deposits in the Godavari Valley of Andhra Pradesh (AP).3. More than 100 years old,
SCCL was owned by the government of Andhra Pradesh and the government of India with shares in the
ratio of 51:49. With 10,435 million tonnes of coal reserves including 12 open cast and 55 underground
mines in 1997, it had an enormous workforce of 114,486 employees with many employees characterized
by low productivity.
1
`is the Indian rupee (INR) symbol.
2
Moid Siddiqui and RH Khwaja, The Acrobatics of Change: Concepts, Techniques, Strategies and Execution, Response
Books, New Delhi, 2008, pp 199-204.
3
Andhra Pradesh is a fourth largest state (in area) in the south-eastern coast of India. In 2011, population = 84,655,533 and
area = 275, 045 km2.
Page 2 9B11C043
Pandora’s Box
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SCCL primarily supplied coal to the power and energy sectors. In 1991, the opening of markets in India
post-liberalization put pressure on the power and energy sectors as the rates that they could charge earlier
were no longer economical. Indian companies began sourcing coal from countries such as Australia,
Indonesia and China. With increasing competition and escalating costs in the face of administered pricing,
coal prices became unprofitable for SCCL; it was referred to BIFR as a sick (bankrupt) company in 1992.
To salvage the collieries that provided direct and indirect employment to people residing in and around
SCCL facilities, the state and union government were compelled to work out a bailout package. With a
bailout package from the government, SCCL paid off its debts and came out of the BIFR purview by
March 1994.
In the early 1990s, SCCL’s name was synonymous with strikes. On average, there were about two strikes
every working day. Due to the onslaught of strikes for frivolous reasons, the number of working days
declined drastically with enormous production losses (see Exhibits 1 and 2). Moreover, the labour-
intensive underground mining was rendered unproductive by high absenteeism. It was also difficult to deal
with the mine workers who were usually illiterate, poor, and prone to social evils like alcoholism and
Poor industrial relations, numerous wildcat strikes, militant trade unions, rampant lawlessness, high
absenteeism, low productivity, administered coal pricing, and other adverse factors like a skewed debt-
equity ratio, huge inventory and high interest burden had already set a downward slide in motion. Despite
increases in labour and other costs, coal prices were not revised and continued to be unprofitable. SCCL
was again declared ‘sick’ by BIFR in 1996. By 1996-97, the accumulated losses had risen to `12.19
billion. Performance had hit rock bottom — the worst ever in SCCL’s history of more than 100 years.
In January 1997, the corridors of Singareni were abuzz with speculation about the new CMD’s ability to
save the sinking ship. APVN Sarma, who joined the Indian Administrative Service5 in 1974, had held a
series of top positions in districts and departments in Andhra Pradesh (AP). He was district magistrate in
Nalgonda, Guntur and Warangal districts. He was secretary of the AP state electricity board (1989-1992)
and secretary to government of AP in general administration department (1992-95)6. He served as secretary
to government of AP in the medical, health and family welfare department when he was deputed to SCCL.
There was a palpable anxiety when Sarma reacted to the news of transfer to Singareni. He recollected
4
Naxalites patronized the unions and engineered a large number of strikes at the coal fields, paralyzing operations at
SCCL. They were also involved in violent activities and created an environment of terror and fear for officers at SCCL.
5
Indian Administrative Service (IAS) is the administrative civil service of the executive branch of the Indian Government. It
plays an elite, highly prestigious and strategic role in the country.
6
www.indiainfoline.com/Markets/News/Gati-appoints-APVN-Sarma-as-Independent-Director/5074484723; accessed May 4,
2011.
Page 3 9B11C043
calling up N. Chandrababu Naidu, the chief minister7 (CM) of AP to tell, “I am in the middle of healthcare
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reforms in the state. Why are you taking me away from the Health Department for a place like SCCL?”
But, Naidu had made up his mind and had selected Sarma to transform SCCL into a vibrant company.
Naidu assured Sarma there was an unwavering political will to implement bold and innovative measures to
revamp the organization. He pointed out that the state government could not afford to shut down the only
coal-producing company in Andhra Pradesh.
A Reality Check
The process of turnaround began in January 1997, when Sarma took over the reins of the company. During
visits and interactions at the coal mines, Sarma was shocked to discover workers were unaware of the
company’s bleak future. His initial diagnostic pointed to a huge disconnect between management and
employees. He decided to establish immediate communication with the workers to inform them about the
grim state of SCCL. In January 1997, with the help of a local language teacher he sent a letter to all
employees in Telugu.8 He used very simple language to connect with barely literate workers who spoke
Telugu. He made no attempts to disguise the poor performance of the company. While already anticipating
The management team was skeptical about the impact, while Sarma was confident the letter in the hands of
families would yield results. He was right, but management’s joy was diluted by unions’ protests against
management communicating directly with workers. While recalling unions’ reaction to the first letter,
Sarma mentioned, “The unions contended if the management claimed to have no money, how could it
spend `500,000 in mailing letters?” Despite these protests, Sarma strove to promote direct lines of
communication between management and workers.
Sarma studied the organization and realized SCCL lacked a personnel head. During the manhunt for a
good personnel head, he requested Naidu assign Heeralal Samariya to SCCL. Samariya was transferred to
Singareni in February, 1997. Sarma mobilized support by involving the top management team in a
systematic manner. The CMD met with the operating directors every fortnight to discuss strategies for
organization development. Samariya, director personnel said, “The decisions were made collaboratively.
Technical directors sometimes did not welcome certain ideas enthusiastically, but for the organization’s
survival, they accepted and implemented the changes.”
A year later, the tenure of K. Lakshminarayana, the director of finance, came to an end, placing Sarma on
the lookout for another director. He identified and lobbied for A. Venkateswar, from Indian Railways, to
7
The chief minister (CM) is the elected head of government of a state of India. The CM enjoys almost exclusive executive
powers.
8
Telugu is the primary language spoken in the Andhra Pradesh state.
9
Interview with APVN Sarma, May 20, 2011.
10
Ugadi, the New Year’s Day according to the Hindu calendar, is a very popular festival in the Andhra Pradesh state.
Page 4 9B11C043
join SCCL. Venkateswar reminisced, “SCCL’s offer came when I was looking for a transfer to AP. I
Authorized for use only in the course Organizational Development & Change at UNITAR International University taught by Haliza Said from Feb 06, 2017 to May 31, 2017.
joined at the right time and viewed the problems from the financial management angle.”
Sarma also inducted the technical directors and chief industrial engineer into the change management team
to gain a technical perspective. To develop a holistic view, Gopalrao T (ex-director and advisor to SCCL),
KV Rao (staff officer to CMD), VV Subrahmanyam (head, communications cell), MS Venkataramaiah
(secretary, Singareni Officers Association) and Pitchaiah and Satyanarayana Reddy (in-charge of Singareni
Seva Samiti, i.e., welfare association) were involved as key change agents.
After a host of informal and formal discussions with employees, Sarma concluded “bridging the trust
deficit” was an imperative. The workers had been misinformed by the union leaders about the
management’s intent and actions. As this realization dawned upon him, Sarma invited the entire
management team to devise strategies to reconnect with workers.
SCCL’s foremost strategy was “communicate, communicate and communicate.” SCCL announced a
communication policy with a vision to “promote the spirit of Singarenism among Singarenians11.” The
policy — a unique experiment in the public sector — aimed at reaching about 100,000 workforce members
spread over 67 mines to develop a bond amongst workmen and executives. For the first time, this policy
highlighted better communications with workmen as central to corporate functions.
The aim of the communication strategy (see Exhibit 3) was to introduce transparency and plug the
information gaps. The top management knew mere transference of instructions to lower levels and
listening to employee grievances was not sufficient. They had to be proactive to undo the damage done by
the unions propagating the “us versus them” rhetoric. Two letters sent in quick succession by Sarma
marked the first step in reaching out to workers. The CMD wrote to the workers’ homes periodically on
special occasions, to keep their families abreast of the organization’s status. Samariya viewed
communication as a tool for discipline, especially to curb absenteeism. Samariya, director of personnel
shared, “The letters explained financial performance, impact of productivity, how a worker could help,
future of coal industry etc. Family members began to develop a sense of ownership and, as a result,
motivated their bread earner to work hard.”
Apart from letters, other innovative means of communication were also used. TVS Rao, the general
manager (GM) of planning who became staff officer to CMD in 1998, stated: “The general manager for
every area visited the worker colonies to understand the problems faced in the colonies. After 15 days,
another officer would go to that colony to check if the problem had been resolved.” This spoke volumes
about the management’s concern for workers.
SCCL received complaints from customers about presence of iron filings in the coal. These filings led to
wear and tear of the conveyor belt at a fast pace. Instead of reprimanding the workers for poor quality
work, Sarma felt “seeing is akin to believing.” He sent two workmen to visit the client site at Raichur and
they came back with the message: “If we don’t remove iron filings from coal, it will cut the conveyor belt.”
The message was delivered to the workers without management speaking a word.
11
“Singareni Collieries Company Limited — A Turnaround,” SCCL Internal Report, prepared by Mouli.
Page 5 9B11C043
The management organized several open house meetings with middle level managers to discuss issues
Authorized for use only in the course Organizational Development & Change at UNITAR International University taught by Haliza Said from Feb 06, 2017 to May 31, 2017.
without inhibitions. There was no specific agenda. At these meetings, Sarma would ask: “If you were in
my position, what would you do? Which areas would you like to improve?” Based on ideas shared by the
employees, the management brought about a lot of improvements. Sarma recalled one such idea.
All the underground miners carried cap-lamps. Random checks showed that the number of
cap-lamps issued and the number of people entering the mines didn’t tally. An employee
suggested that 7:30 a.m. should be the deadline for issuing cap-lamps and entering the
mines for the first shift. There was a hue and cry among the workers and hence it was
extended to 8:00 a.m. Now, the lamp room would open only at 2:30 p.m. for returning the
cap lamps. This change in issue timings helped us in ensuring that the employees were
present throughout the shift.
The GMs were instructed by CMD to issue press releases periodically regarding progress at SCCL, such as
employee achievements. SCCL also broadcasted talk shows and news features on company and its
township activities on local television channels. These shows were an instant hit with the workers and their
families as they personally knew the people on screen. Sarma shared, “Every communication channel
In March 1997, management began the formation of multi-departmental teams (MDTs). The objective of
MDTs was to bring together different functions, encourage lateral communications and develop
organizational perspective. The team members — with about 15 years of experience — were assigned to a
threefold mission: a) convey the top management’s messages down the line; b) inform employees about
the organization’s health; c) carry suggestions from workers to the top management.
The performance of the company, in terms of production, productivity and profitability, was shared by the
chief industrial engineer (CIE) with MDTs. These teams prepared presentations depicting the performance
of mines in every area. They then gave presentations to workers in mines and other employees in offices.
They even visited worker colonies in the evenings to widen their reach to families. Local media were also
invited to participate in the teams’ presentations.
In April 1997, MDTs collated suggestions from employees. Sarma deliberated with MDTs on the feedback
received from workers and implemented some of the ideas. In the second round, during August 1997, the
agenda was expanded to include improvements in production, productivity, profitability, safety and health
of workmen. A third round was held in December 1997 for executives and union leaders. The focus was on
SCCL—past, present and future of coal industry. During the fourth round in April 1998, the status of coal
industry vis-à-vis SCCL was presented to workmen and the remedial steps to sustain the company were
thrown open for discussion. These discussions created a sense of urgency among the workers. Sarma
recalled:
Unions had propagated that the management didn’t have the employee’s welfare at its
heart. SCCL is located in areas prone to extremism where many extremist leaders had
emerged from SCCL. Initially, our officers were apprehensive about being abused while
approaching the workers, but with increased involvement of workers, officers were seen as
Page 6 9B11C043
conduits of information. With honest and persistent efforts, workers started believing in
Authorized for use only in the course Organizational Development & Change at UNITAR International University taught by Haliza Said from Feb 06, 2017 to May 31, 2017.
us.
The management decided to improve the personal and professional lives of workers, who generally had
low literacy and income levels and were prone to social evils such as alcoholism and gambling. SCCL
started a literacy drive, focussed on sports and recreation, while establishing better housing and medical
facilities. It launched a scholarship program for workers’ children. It campaigned for issues like importance
of nutrition and sanitation, diabetes control, prevention of malaria, heart disease, HIV/AIDS and other
health problems. Sarma recalled, “We recognized the hardships faced by workers who were referred to
hospitals in Hyderabad. They did not have any accommodation and could not afford to pay for locally
available facilities.” SCCL acquired a choultry (guest house) near Nizam hospital in Hyderabad for the
patients’ families to stay. A clerk from Hyderabad office accompanied the workers to help them with
routes and paperwork to get admitted in the hospital.
Sarma also mandated it for his staff officer Rao to pay a visit to workers in hospitals who met with
accidents. Rao recollected, “If it was a fatal accident, I not only visited the accident site personally and
consoled the family, but also attended the funeral of the worker. My role included notifying the family,
explaining to them about the compensation, and most importantly, pacifying the workers.” The empathetic
behaviour of the management made the workers feel cared for by the company.
The management viewed literacy as the solution to multiple problems. They discovered a professor from
California had developed a module to teach Telugu in seven days. Employees were put through a training
program based on that module to enable them to read and write letters, notices and newspapers.
Venkateswar, director of finance shared:
During Independence Day celebrations at SCCL, we invited three miners to the podium to
read the newspaper. This generated a lot of excitement, but some trade union leaders were
unhappy as they feared losing control over the workers, if they became literate. Similarly,
some language teachers felt that they might lose importance and even their jobs with
increase in literacy rates.
Previously, workers had received payment in cash at the mines. They were often exploited by bogus
financial institutions offering lucrative interest rates or attractive gifts for investments in their firms, which
often later ran away with the deposits of workers. Some union leaders were also moneylenders and wine-
dealers who collected huge interest rates on debts from workers on the pay day. Management decided to
disburse the salary through banks instead. Sarma stated, “Alcoholism among workers subsided as wine-
dealers couldn’t access their money. The workers also became entitled to loans from banks which provided
them with a safety net.”
Page 7 9B11C043
SCCL set up area terminal benefit (ATB) cells to expedite the settlement of benefits on superannuation and
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death. These cells, serving as a one-stop solution for any settlement, reduced the settlement period from a
few months to a few days. SCCL also launched a group gratuity scheme in October 2000. TVS Rao shared:
Mr Sarma launched the Singareni Seva Samiti (welfare association) to train the wives of
workers vocationally and augment the family income. With the help of the army
commandant in Hyderabad, we created awareness among children of workers about jobs
in the Indian army. SCCL provided training for theoretical and endurance tests conducted
by the army. These initiatives went a long way toward winning people over.
SCCL introduced an incentive scheme to measure and reward individual performance. For every year, in
addition to the annual bonus depending on achievement of production targets by the department,
employees received an incentive based on individual performance. On January 26, 1997, SCCL introduced
an employee recognition program, including awards for Best Mining Worker and Best Non-Mining
In the first year, the employees came alone. The next year, they came with their families.
We garlanded the awardees, gave a certificate and a shawl. They also received a letter
stating, “We recognize your efforts. It will not be necessary to recognize your best efforts
a second time. In my eyes, you are always a Best Worker.” The wives often nagged their
husbands, “When our neighbour can receive the Best Worker Award, why can’t you?”
In the 1990s, when SCCL was strapped for funds, learning and development activities were frozen. Sarma
resumed these practices. He sent middle-level executives for advanced management programs (AMP)
which included training in foreign countries and industrial visits. Venkateswar mentioned, “AMP
programme was more like a reward. Transparent guidelines were created to select employees for AMP.”
To build in-house learning and development capabilities, SCCL established the Nargundkar Institute of
Management in November 2000 for management development programs.
Poor industrial relations and law and order problems had plagued SCCL for a long time. Until the late
1990s, Singareni Karmika Samakhya (SIKASA) — a militant organization — was a force to reckon with
in the coal belt. Their activities were cause of concern for both the police and SCCL.12 Rao recalled:
SIKASA controlled the unions and threatened the management with dire consequences if
their demands were not met. They killed two SCCL officers and kidnapped a few more
officers. We were given two bodyguards to escort us from home to mines. Thankfully,
with severe police crackdown backed by a strong political will, SIKASA suffered a drastic
downfall.
At the same time, the multiplicity of politically motivated trade unions created multiple communication
channels, each with a vested interest. SCCL was characterized by lack of discipline with high absenteeism,
non-adherence to shift timings and delayed shift changeover. In 1998, SCCL decided to regulate unions by
12
www.hindu.com/thehindu/2002/01/14/stories/2002011403021300.html, accessed June 13, 2011.
Page 8 9B11C043
holding trade union elections. They approached the central government, the state government, and the
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labour commissioner. The state government supported the move, but the central government feared that it
would aggravate the problems. With the help of the chief minister of state and labour commissioner,
eventually the central government also agreed. Sarma shared:
While there was little resistance from employees, the unions vehemently opposed the
elections, threatening violence. We believed that if general elections could be held in
Naxal-infested (politically unstable and violent) areas, we could definitely hold elections
at SCCL. We decided to use police force to thwart any untoward event.
For the first time in the Indian coal industry, trade union elections were held through secret ballot at SCCL
in September 1998. 13 unions contested and S.C. Workers’ Union — AITUC13 — emerged as the
company’s recognized union with the highest number of votes — 33.24 per cent. It was clearly established
that outside of the recognized union and the representative union of the area, the management would not
deal with any other union. Post elections, five out of 77 unions were recognized and discussions were held
only with the elected unions. Previously, unions had approached mine managers every day with requests
for exemptions. Now, only the recognized union could discuss issues with the management on a designated
Initially, SCCL treated strikes as a can of worms. I advised CMD to convert strikes to our
advantage. We declared that during strike, workers would lose the right to ask
management for anything, including salary. We began to negotiate with unions for hard
decisions favouring SCCL. If they didn’t agree, they were free to continue the strike with
loss of pay.
Post elections, explicit disciplinary policies were laid down to monitor employee’s performance and
attendance. With complete support from the state CM, Naidu, extremely tough policies and management
decisions were implemented for reforms. Since these policies were shared with everyone, there was an
element of transparency. Rao mentioned:
Earlier SCCL could not take strict disciplinary action against irregular employees because
of pressures from unions. We issued a circular notifying the workers being absent for more
than 100 working days will result in dismissal. Later, over 1500 employees were
dismissed on account of poor attendance. It sent out the message loud and clear.
After 18 years, August 2000 finally became a strike free calendar month at SCCL.
MANPOWER RATIONALIZATION
In the 1990s, SCCL was characterized by huge manpower and low productivity. At SCCL, dependants of
an employee were entitled to a job (even without a vacancy) if the employee died in service or became
medically unfit or retired voluntarily. Samariya explained:
A worker, before three to five years of his retirement, would get a medically unfit
certificate to enable his son to join SCCL. In some cases, the workers adopted daughters
so that their sons-in-law could enter SCCL.
13
The All India Trade Union Congress (AITUC) is the oldest trade union federation in India and one of the five largest
unions.
Page 9 9B11C043
After establishing rapport with workers, the policy was altered to give employment to dependents strictly
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against a vacancy. The wives of deceased employees were offered the alternative of ` 3500 as a monthly
pension. SCCL also introduced the voluntary retirement scheme (VRS). It decided to centralize recruitment
and transfers to ensure transparency in deployment of resources. The centralization checked arbitrary
decision-making with regard to transfers from underground mines to surface, coal fillers being engaged in
peripheral activities, inter-area transfers, etc. The rationalization of manpower from 114,486 in 1996-97 to
105,627 by 2000-01 also led to increase in productivity (see Exhibit 4).
With Sarma at the helm and unstinting support from the state government led by Naidu, SCCL posted
profits for four consecutive years. The net profit rose to `894 million in 2001. The accumulated loss had
dramatically declined by 53.6 per cent from `12.19 billion in 1996-97 in a span of four years (see Exhibit
5). The accumulated losses stood at `5.65 billion in 2001.
Sarma walked down the hallway beaming in the newfound glory of SCCL. On his way to the office, he
Exhibit 1
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NUMBER OF STRIKES AT SCCL
Exhibit 2
ANALYSIS OF STRIKES
Exhibit 3
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COMMUNICATION STRATEGIES
Exhibit 4
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TOTAL MANPOWER VERSUS PRODUCTION AT SCCL
120 31
30.274
114.486
115 29.556 30
112.146 28.941
110 28.734 29
109.419
107.817
in million tonnes
(in '000)
105 105.627 28
100 27
90 25
1996-97 1997-98 1998-99 1999-00 2000-01
Years
Tot_Manpower Production
Exhibit 5