Change Management – Tata Steel

Organizational Change and Development

Submitted to

Prof. Manish Singhal

On

30th January 2008

By:

Rahul Agrawal (B07029)

Vinay Joshi (B07049)

Table of contents

Serial No. / Content / Page No.
1 / Introduction / 3
2 / Structure / 5
3 / Culture / 6
4 / Change management program – PEP (Performance ethics program) / 6
5 / Change management philosophy / 8
6 / Nature of the change / 9
7 / Need for change / 10
8 / Desired change / 11
9 / Change agents / 12
10 / The change process / 13
11 / Measures to overcome resistance to change / 17
12 / Monitoring and controlling the change / 18
13 / Bibliography / 20

Introduction

Backed by 100 glorious years of experience in steel making, Tata Steel is the world’s 6th largest steel company with an existing annual crude steel production capacity of 30 Million Tonnes Per Annum (MTPA). Established in 1907, it is the first integrated steel plant in Asia and is now the world’s second most geographically diversified steel producer and a Fortune 500 Company.

Tata Steel has a balanced global presence in over 50 developed European and fast growing Asian markets, with manufacturing units in 26 countries.

It was the vision of the founder; Jamsetji Nusserwanji Tata., that on 27th February, 1908, the first stake was driven into the soil of Sakchi. His vision helped Tata Steel overcome several periods of adversity and strive to improve against all odds.

Tata Steel`s Jamshedpur (India) Works has a crude steel production capacity of 6.8 MTPA which is slated to increase to 10 MTPA by 2010. The Company also has proposed three Greenfield steel projects in the states of Jharkhand, Orissa and Chhattisgarh in India with additional capacity of 23 MTPA and a Greenfield project in Vietnam.

Through investments in Corus, Millennium Steel (renamed Tata Steel Thailand) and NatSteel Holdings, Singapore, Tata Steel has created a manufacturing and marketing network in Europe, South East Asia and the pacific-rim countries. Corus, which manufactured over 20 MTPA of steel in 2008, has operations in the UK, the Netherlands, Germany, France, Norway and Belgium.

Tata Steel Thailand is the largest producer of long steel products in Thailand, with a manufacturing capacity of 1.7 MTPA. Tata Steel has proposed a 0.5 MTPA mini blast furnace project in Thailand. NatSteel Holdings produces about 2 MTPA of steel products across its regional operations in seven countries.

Tata Steel, through its joint venture with Tata BlueScope Steel Limited, has also entered the steel building and construction applications market.

The iron ore mines and collieries in India give the Company a distinct advantage in raw material sourcing. Tata Steel is also striving towards raw materials security through joint ventures in Thailand, Australia, Mozambique, Ivory Coast (West Africa) and Oman. Tata Steel has signed an agreement with Steel Authority of India Limited to establish a 50:50 joint venture company for coal mining in India. Also, Tata Steel has bought 19.9% stake in New Millennium Capital Corporation, Canada for iron ore mining.

Exploration of opportunities in titanium dioxide business in Tamil Nadu, ferro-chrome plant in South Africa and setting up of a deep-sea port in coastal Orissa are integral to the Growth and Globalisation objective of Tata Steel.

Tata Steel’s vision is to be the global steel industry benchmark for Value Creation and Corporate Citizenship.

Tata Steel India is the first integrated steel company in the world, outside Japan, to be awarded the Deming Application Prize 2008 for excellence in Total Quality Management.

Products

Tata Steels Jamshedpur Works produces hot and cold rolled coils and sheets, galvanized sheets, tubes, wire rods, construction rebars and bearings. In an attempt to 'decommoditise' steel, Tata Steel has introduced brands like Tata Steelium (the world's first branded Cold Rolled Steel), Tata Shaktee (Galvanized Corrugated Sheets), Tata Tiscon (re-bars), Tata Bearings, Tata Agrico (hand tools and implements), Tata Wiron (galvanized wire products), Tata Pipes (pipes for construction) and Tata Structura (contemporary construction material).Apart from these product brands, the company also has in its folds a service brand called “steeljunction”.

Corus’ main operating divisions comprise Strip Products, Long Products and Distribution & Building Systems Division.

The NatSteel group produces construction grade steel such as rebars, ‘cut-and-bend’ cages for construction, mesh, precage bore pile, PC wires and PC strand.

Tata Steel Thailand produces round bars and deformed bars for the construction industry.

Corporate Sustainability

Regarded globally as a benchmark in corporate social responsibility, Tata Steel's commitment to the community remains the bedrock of its hundred years of sustainability. Its mammoth social outreach programme covers the company-managed city of Jamshedpur and over 800 villages in and around its manufacturing and raw materials operations through uplift initiatives in the areas of income generation, health and medical care, education, sports, and relief.

The Company, fully conscious of its responsibilities to the future generations, has always taken pro-active measures to ensure optimum utilization of natural resources. This is reflected in the ISO-14001 certification that all its operations have achieved for environment management. The SA 8000 certification for work conditions and improvements in the workplace at the steel works in Jamshedpur, along with its Ferro Alloys and Minerals Division, is a reiteration of its commitment towards the Company's employees. Tata Steel has pioneered numerous employee welfare measures such as the 8 hours working day and the three tier joint consultation system of management which have been the platform for nearly 80 years of industrial harmony in its Steel Works in Jamshedpur.

Awards and Recognitions

  • Tata Steel India awarded the Deming Application Prize 2008 for excellence in Total Quality Management. It is the first integrated steel company in the world, outside Japan to get this award.
  • World Steel Dynamics has ranked Tata Steel as the world's best steel maker (for two consecutive years) in its annual listing in February 2006.
  • Tata Steel has been conferred the Prime Minister of India's Trophy for the Best Integrated Steel Plant five times.
  • It has been awarded Asia's Most Admired Knowledge Enterprise award five times in 2003, 2004, 2006, 2007 and 2008.
  • Conferred the prestigious Global Business Coalition Award for Business Excellence in the Community in recognition of its pioneering work in the field of HIV/ AIDS awareness.
  • Tata Steel works has been conferred the prestigious social accountability (SA) 8000 certification by social. Accountability international (SAI), USA. It is the first steel company in the world to receive this certificate.
  • Corporate Sustainability Report of Tata Steel hailed by United Nation's Environment Programme (UNEP) and Standard and poor as strongest, submitted by any corporate house from emerging economies.
  • Best governed company Award 2006 for setting high standards in governance practices.
  • Tata Steel won "Award for Corporate Social Responsibility in Public health" by US- Indian Business Council (USIBC), Population Services International (PSI) and the center for Strategic and International Studies (CSIS) in 2007.

Tata steel – Structure

Present organization structure:

Tata steel – Culture

The culture at TATA steel is very open and accessible which is also evident from the flat structure they have with five hierarchical levels. The culture is also marked by high levels of transparency in decision making. This is evident from the fact that at their meet the CEO Sessions held every three months, any employee can ask him questions related to promotions or any other issue. At TATA steel relationships with employees, suppliers and customers are highly valued, which the company believe is a source of competitive advantage for the company.

Change management program – PEP(Performance ethics program)

With most of its other processes nearly fixed, Tata Steel now turned its attention to the most crucial function of them all: human resources. The key challenge, for the company was getting the company’s workforce of 48,000 aligned to the concept of taking Tata Steel further down the road of progress and excellence.

According to him, the PEP initiative is poised to become the most comprehensive and largest human resources operation in Tata Steel’s history. It’s not that the company neglected human resources before PEP happened. HR initiatives were part of the change process of the last 10 years, but nothing of this magnitude and scope has been attempted before.

According to the company officials, HR policies and changes in the past had more of a socialistic outlook. The policies being tailored under PEP are very businesslike; it is entirely competency-driven and will have a far-reaching impact in the long run. The head of PEP, concurs, adding that the programme is aimed at creating leadership through people.
The programme drew from the extensive knowledge McKinsey, the consultants, had garnered from researching outstanding companies. Having identified the key ingredients for success, common to all the best companies irrespective of the industry they belonged to, Tata Steel went about mapping its competencies against global benchmarks.

Based on these insights, the company designed a programme ideal for it. The key PEP drivers were summarised thus:

  • Enhance focus on current business and its growth;
  • Enhance profit-and-loss accountability;
  • Provide employees with exciting opportunities;
  • Build a high-performing team;
  • Redesign the organisation to match people with positions;
  • Initiate contemporary performance-appraisal and management systems;
  • Install a transparent and unambiguous governance code.

They use an analogy from cricket to compare what’s happening now with the changes initiated in years past. He says that PEP "is like a Test match; the previous changes were like one-day internationals". With consensus secured from Tata Steel’s senior management on the parameters of the programme, the focus has shifted to the critical areas of human resources management and training. While the HR team is identifying key positions, and defining the roles and competencies required for them, the training team is imparting the necessary skills to get people up to the set standard.

The first task of the programme was to appraise employees comprehensively for their competencies, so that the right person could be chosen for the right job. The new outlook revolved around three basic fundamentals:

  • Structure: clearly define the job profile and responsibility for the job; match person to job;
  • Appraisal: ensure that all performance is appraised in a fair and transparent manner;
  • Reward: ensure that, alongside monetary reward, there is adequate scope for promotions with increased responsibilities.

In collaboration with Eicher Consultancy, the team identified the key parameters for evaluating employees in the process of transforming them into leaders. Besides core competencies, employees were assessed for their capacity to think strategically, decision-making ability, achievement orientation, planning and organising capabilities, oral and written communication skills, people development and cost orientation, empathy, conflict-management and influencing abilities, and their aptitude for learning.

In the early 1920s, when there was a dearth of talent in the then nascent steel industry, Tata Steel established a technical training institute to produce high-quality steel professionals. This institute imparts top-grade training to young students and employees in various areas of engineering.

Tata Steel has also set up, in association with XLRI, a management development centre to provide need-based training for its management cadre. In the early 1990s, when the company began acquiring a global perspective, it started sending key executives to leading institutes abroad for advanced training. This helped the company to train their next generation leaders which were identified from the change process.

The excitement created by the PEP initiative is palpable. Employees are enthused by it and curious about its likely effect on them and the company. Since the training process is slowly being moved from mere functionality to giving participants an overall business perspective, its chances of succeeding are beyond doubt.

If Tata Steel does hold on to the gains, and all indications suggest it will, the programme is poised to create a string of high-energy, up-front and charged-up leaders who thrive on chaos and love challenges. The goal is to ensure that Tata Steel has the brightest and the best talent in its fold. They want to make my employees feel proud about working for Tata Steel.

The change management philosophy at Tata steel

  • Top management involvement: “I must first be the change that I wish to bring about in my world”.

Mahatma Gandhi

The above quote summarizes the change philosophy at Tata steel. They strongly believe that any change in their company would only come if there is a proper involvement of the top management. During the PEP the top management was ceaselessly involved in the process. Top management involvement made sure that the change which was intended was achieved and there is congruence in the goals of the parties involved in the change process. They followed the top down approach i.e. the MD and the board were the one who initiated and directed the change. This also brought fairness in the process.

  • Vision and mission: The Company also believes that before any change process is initiated the vision and mission of the company should be stated and communicated properly in the entire organization. This makes sure that the change which is necessitated is achieved. This also gives the organization a proper direction and states the requirement for the change. It helps the organization in achieving the goals and objectives effectively and efficiently.
  • Fairness – as people are involved: The Company understands that as people are involved in the change process fairness has to be insured. This also bounds with the values of Tata steel. The company is a very ethical, open organization. So it also believes that in any change process fairness to the people should be insured. The company understands that people are essentially emotional beings so it makes sure that their emotional anxiety is taken care of. Making the process as humane as possible had helped minimise the distress that springs from any such separation involved in the change process. An example of this is that apart from a generous severance pay, the company offered extensive outplacement services to ensure that retrenched employees were gainfully employed elsewhere.
  • Fabric of the organization: Tata steel believes that the change process should be carries out with maintaining the fabric of the organization i.e. the culture and the basic value system at Tata steel should be maintained. The culture of the organization which is essentially open, fact based, transparent should be consistent with the change process.

Nature of the change

• Revolutionary – Rapid, dramatic and broadly focused: The change process was revolutionary in nature as it was transformational in nature. It was rapid as took the company nine months to complete it. It was dramatic as it involved structural change and downsizing and also performance management systems. And it was broadly focused at it was across the entire organization i.e. organization wide. The structure of the organization was completely changed. The company wanted to quickly find new ways to be effective. They realized that their new vision which was to become an EVA positive company would only be achieved if their structure is de- layered and people become more accountable. This resulted in a radical shift in how things are done at Tata steel. The company introduced a new structure in which the departments were made accountable for the profit and loss of their department. The company uses an analogy from cricket to compare what’s happening now with the changes initiated in years past. He says that PEP "is like a Test match; the previous changes were like one-day internationals". With consensus secured from Tata Steel’s senior management on the parameters of the programme, the focus was shifted to the critical areas of human resources management and training. While the HR team was identifying key positions, and defining the roles and competencies required for them, the training team was imparting the necessary skills to get people up to the set standard.