Lessons From The Brink

Here are a few ‘googlies’ about a public sector company:

A great public sector success story despite operating from the hotbed of Indian politics-Uttar Pradesh

A very flat structure for this public sector unit

Managers could fly for business meetings and would just have to inform their superiors

First company in India to introduce a 16-bit machine.
l A work culture that attracted people from the private sector

The company was amongst the first to have the vision and focus to start computer education

Amongst the first few public sectors that figured in the DQ Top 10 league.

A few ‘bouncers’ too. Look at a few of its management mottos:

The company would not grow until it built some basic strength, namely being excellent in finance, the mainstay needed to be technology and must build good R&D in all the areas of ops

Payscales different from the government

Value system where performance is based on merit, creating an element of competition.

No dependence on government subsidies and revenues as it would imply continuous government interference.

Stumped and bowled?
Amused with disbelief? One
does not talk about public sector enterprises with such descriptions. In fact, ‘bureaucracy,’ ‘monopoly,’ ‘protectionism’ and ‘inefficiency’ are the words that come to the mind. Though public sector companies are changing, even today most of these attributes are evident in many of these set-ups.
However, most of the ‘bouncers’ and ‘googlies’ can be used only in the past tense for Uptron. As people only reminisces about Uptron with great regard and respect. Says Professor S Chakraborty, Dean of Development and Resource Mobilization at IIM Lucknow, puts it, “The company had a great culture. We used to send our students there as it was the only place in Lucknow where we felt our students could learn something.” Uptron, an icon till the late eighties, is now waging a hard battle for survival.

Perpetual birth pangs

The company which became an electronic icon in the eighties, went through its own share of birth pangs. The decision to set up electronic companies came after the numerous commissions which were set up to probe the Indian defeat in the 1962 Indo-China war pointed out at the technological weakness in the Indian army. Especially in the area of electronics and communications. To bring in self-reliance in these areas each state was to set up instrumentation and testing centers. Uptron too was a part of this drive alongwith Keltron in Kerala, Meltron in Maharashtra and the others.
The motives were no doubt noble and the activities, laudable.

The steering-cum-search committee decided that the chief executive of the project, not the government, should decide the rules and regulations for the new company. The unanimous choice to head Uptron was Col BK Rai who was serving as a chief executive with a Mumbai-based group. As Col Rai recalls, “For some strange reason, they came to a person who had no exposure of UP.” The deal offered by UP’s Chief Secretary Satish Chandra to Col Rai was a complete free hand in the company’s affair.
However, Col Rai very soon found out the frailty of the promises made to him. The new head received the first taste of it in the very first week of his arrival at Lucknow in the of August 1974. The company had not been allocated its own premises and even basic facilities like car and accommodation for the new CEO were missing.
No doubt, Col Rai had a vision for the new project, but so did the state bureaucracy.

Their idea was that since a decision had been made, somebody had to be called in to set up a few ancillary units of the Indian Telephone Industries (ITI) and the expectations of the political bigwigs would be met. In fact, someone very high up in the bureaucracy commented to Col Rai, “Kuch hoga nahin, yeh ulta pradesh hai.”
Patience is indeed a great virtue. But how about a waiting period of one-and-a-half years? It took almost a-year-and-half for Col Rai to realize the futility of jostling with the bureaucratic powers and finally put in his resignation.
Uptron would have met an untimely death, but for the timely intervention by DoE’s MGK Menon and the new Chief Minister, ND Tiwari. In a meeting organized by him between the bureaucrats and Col Rai, the latter explained his decision to resign. The reasons were not hard to fathom. “This is a feudal set-up and since I don’t belong to the IAS cadre, I am treated like a second-class citizen. These gentlemen [UP bureaucrats] sitting here block everything I say. I am not permitted to see the chief minister. Government sanction is needed for any small thing I want. As a chief executive of the project, I don’t even have the power to employ a person with salary exceeding Rs1,700. All in all I find very stiff resistance from them. So unless the whole set-up is changed, it would be useless for me to spend and waste my time,” said Col Rai. The outburst had its effect on the government, which agreed to Col Rai’s demands for 12 directors, only four from the bureaucracy. Further it was clarified that all decisions would be taken by the board.

Ingredients for success

With the bureaucracy tamed, the next important step was to decide on the nature of business to be undertaken and setting up a good work culture. Another important imperative for the management was to keep the bureaucracy continuously at bay. For the first objective, the management narrowed down its focus to the manufacture of TV sets under license from Electronics Corporation of India Ltd (ECIL). The idea was twofold. Firstly, the TV was a simple product to make and enjoyed a mass appeal, the sector was also growing. Secondly, the company could put up a manufacturing organization, recruit employees, begin its cash flows, create the right culture and then move on to other sophisticated projects. Though the relationship with ECIL did not last long, the decision to manufacture TV sets struck with the company. Uptron decided to go on its own and the rest, is history. Reminisces Col Rai, “It gave such an image for Uptron that even today people remember it as a TV company rather than an electronic company.”
Though the thrust was never on TV manufacturing, the success of this project gave the company as well as to Col Rai himself an image that kept both bureaucrats and bureaucratic hurdles at a safe distance. To further widen the gap, Col Rai created a shell company, Uptron Electronics Corporation, to deal with bureaucracy, and many subsidiaries like Uptron India, Uptron Financial Services, Shreetron India and Uptronics Powertronics, which would be the hub of all executive activities with clearly defined goals.

This became a very successful model for development and was one of the key factors for the success of the Uptron Group.
The final thrust was to create a private sector work culture. Again, the kudos go to Col Rai and his team for creating a work culture where merit got recognition, and not seniority, unlike the other public sector companies. The salary structure too was not government- defined, but based on the merit of the employees. All this created a working culture which attracted many people from private sector. Says an employee, off the record, “I quit HP and joined Uptron because I had worked in close relation with Uptron and found it to be a great company.” Unlike, many other public sector companies, recruitment too was strictly on merit basis, not based on official procedures and recommendations. Says Col Rai, “I don’t remember the count of the number of recommendations I turned down.

The idea was simple. I knew, even if I
take one peon on recommendation, he becomes a political liability
and chances of his working are
As the company’s work ethics were still in nascent stages, and others began acknowledging the same, sourcing the right manpower was no longer a issue. The company became a hot place to work in for the students of IIM Lucknow, IIT Kanpur and other such educational institutes. Remembers another employee, “We could fly or travel first-class without much problems, which was very unlike any public sector company.”
Even though the company was perceived as a consumer electronics company, internally the people and the management firmly believed it to be a technology company. Says Col Rai, “We were always an IT company with focus on sophisticated technology.” Gradually, the company moved into other areas like telecom, power systems, computers and components to realize its original mandate of spearheading the electronics culture in the state.
The company also undertook bold projects like the computerization of Air India.

The project originally had gone to a UK-based company. Uptron tied up with it as the company’s service partner and redesigned its equipments using microprocessors. During the project, Uptron set up many new service standards, which were relatively unknown among public sector companies. For example, for the Air India project, a directive issued said that all equipment-related complaints should be handled by replacing the faulty equipment. The equipment could be inspected at the factory, but the customers was not to face any delays. The result was a repeat order from Air India and new orders from Indian Airlines. Also, today’s IT giant, HCL, had its humble beginning with support-equity and others-from Uptron.
With cash flows and an image of a good work environment in place, the management began to look into its other areas of weakness, like weak marketing skills. As IITians and other top engineering colleges largely populated the R&D division of the company, there was an urgent need to lay stress on marketing the side. And so in 1981, V Bhushan, from Keltron, was brought in as the number two man to revamp the company’s marketing structure.

Cracks within management

Bhushan took several bold and aggressive measures to improve Uptron’s marketing infrastructure. Says Rai, “He gave us what we wanted, increase in turnover and high visibility.” Echoes, Ravi Challu, who headed the company’s computer division between 1981 and 1984, “Bhushan’s approach was very unpublic-sector like. He focused on growth and gave a complete free hand to people who could perform.” Unfortunately, differences began cropping up between the two top officials in the company. Here, Col Rai blames Bhushan for destroying the culture of the company and says, “Getting Bhushan in Uptron was my biggest mistake.” According to Col Rai, Bhushan started hobnobbing with the politicians, bringing political interferences in the company. Within two years of Bhushan’s joining, there were signs of disharmony. These led to a polarization of the company into two groups. As Ravi Challu puts it, “The problem among the top management became evident around 1984, and this divided the company into two groups.” Bhushan, now heading a company called IVC Communication, denies the charges and contends that he himself fought with the bureaucracy till the time he gave his resignation in 1989.

External problems

At a time when internal strife was eroding the company’s culture, external market pressures were eroding its brand name.For example, the company had very early lost out on the computer game market as PCs started proliferating in the country. Conflict of interest between the R&D division, which stuck to mainframes and minicomputers, and marketing division which wanted new screwdriver technology products, took its toll on the computer division. As Challu says “We lost in the computer segment as there were differences between R&D and marketing realities. The company could never capitalize on the PC wave as this did not strike the right chord with the R&D guys.” Agrees Divakar Nigam, MD, Newgen, who was working closely with Uptron for software development, “The R&D guys were just not prepared to listen to the marketing guys.”
The declining pattern was also evident in other business areas.

In the TV segment, the focus was clearly on target achievement. Hence, dumping became a common problem for the company. In the process, product upgradation got a backseat and in no time the company lost its image of being a quality brand. Agrees Ravi Singhal, now President, IDC India, and Ex-Regional Marketing Manager, Uptron, “Yes, we got into a vicious cycle and over a period of time our customer loyalty got eroded, affecting our turnover.”
The company had an early advantage in many areas but could not effectively capitalize on them because of management problems. Though the company was amongst the first to get into computer training business with its Uptron ACL division, it could never replicate the NIITs and the Aptechs. Again, it was the first in color TVs, but could never become another BPL. Similarly, it was the first to launch 16-bit machines in India, but lost the race long time back as other Indian players like HCL and Wipro took the market. Says an ex-Uptron employee, requesting anonymity, “Poor management is not a monopoly of the IT industry in any case.”

Adding fuel to the fire

However, the company’s biggest problem was warding off the bureaucrats who were trying to gain control in the organization. Says Challu, “One can imagine how often an IAS officer can fly off to the US for collaborations, deals, etc.” Though Col Rai did his best to dissuade the politicians/bureaucrats, at times he too found it difficult. Admits Col Rai, “With the frequent changes in the ministry, ministers wanted to use the corporation to serve their own political aims, like setting up industrial units or recruiting people of their own constituency, set up large projects in certain areas irrespective of their viability were the
common problems.” Till Col Rai was there bureaucrats found it difficult to gain a foothold in the company, but after his exit, it became simpler.

But Bhushan disagrees. According to him, till his departure he was fighting tooth and nail against the bureaucratic interference for the company. Says he, “Around 1989, a strike had taken place and I had warned that the company was going to the dogs if political interferences were not stopped.”
And so with the departure of Bhushan in 1989, it was finally an all open arena for the bureaucracy at Uptron. And in the period between 1991-1999, the company saw around nine managing directors, with KK Sinha staying for a mere two days.

Accompanied with this, was the fall in the companies fortunes. In 1989-90, though the company achieved a milestone of surpassing Rs200 crore in sales, its profitability had vanished and a loss of Rs16.63 crore was reported. By 1998, losses had increased to Rs62.52 crore and turnover dipped to Rs14.79 crore. The picture tube plants have been sold off to BPL and Videocon. During the last many months the employees have not seen their pay checks.

The revival plan

Is it all over? Nearly so when the government ordered the company’s closure and Rs171 crore-revival plan it was referred to BIFR. Moreover, the government rejected a put forward earlier. The lack of funds and Uptron being technology-oriented, thus uncompetitive, were the reasons cited. Undeterred, the new management under Arun Arya has come up with a fresh plan. The company wants to focus on what was begun under Col Rai-IT. It has tied up with IBM, Microsoft, Compaq, NIIT, HCL, Schlumberger, IIT Kanpur and C-DAC to extricate itself out of the mess. The company is planning big with things like data warehousing, medical transcription, cyber dhabas, smart city-Lucknow, apart from trading activities. (See interview)

Will Uptron’s woes end?

Of course, there are chances of the efforts getting thwarted before they get underway. And if you have guessed that such efforts may come from politicians or the bureaucracy, you are right on target.
According to a higher-ups in Uptron, “It seems that the bureaucracy, which wanted to close the company but could not, would not like to see the company reviving as it may prove it wrong.” Though Arun Arya, MD, had given a presentation in March 1999 detailing the revival plan, the government is yet to take any action on the same. Claims Arya, “We are not looking at much financial grants from the government but just some kind of commitment.”

Recently Prime Minister Vajpayee himself instructed the state government to take some quick and concrete action for the revival. The management and the employees of the company are keeping their fingers crossed on such an action.
Assuming that the government approves the plan and the company is back in black, what are the chances that politicians/bureaucrats will again not try to interfere in the affairs of the company? What will happen if the top man is given another posting before he can realize his vision? What has been the accountability of the other bureaucrats so far? Questions and more questions that have remained unanswered since independence.

So in the final analysis, it is not whether the government approves the plan or not but how it can tackle fundamental issues for an organization’s success.

in New Delhi.

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