Workers, who make up 60 to 70 percent of employees, were looked upon as adversaries to the company owners. When workers became part of the whole production team, there was a huge increase in productivity and efficiency. Management flipped the dynamic — instead of workers and unions being opponents, they became partners. We have 97 percent attendance, unheard of in many industries. Our people work the full 8 hours minus a 15-minute tea break — 7 hours 45 minutes of actual working time. Compared to 6 hours elsewhere, that's a 20 percent improvement in production.
Hello everyone. India wants to be a developed nation by 2047. One of the sectors that really needs to fire up is manufacturing — from the current 16 percent it has to go up to 25 percent. Today we're going to discuss a counterpoint: what should individual organizations do to meet these numbers? We have with us Mr. R.C. Bhargava, Chairman of Maruti Suzuki, who has seen the auto revolution from almost nothing in the 80s to what it is today. In his latest book, Impossible to Possible, he narrates the story of Maruti and the need to change management practices, leaning towards eastern philosophy. Welcome, Mr. Bhargava. My first question is: why is there a need for change? The western philosophy of management is well researched, well documented, and looks like the best approach. Why should we change, particularly in manufacturing?
Let me put it this way, Satya. Western management practices developed when there was very little competition — protected markets, little international trade, no bilateral or multilateral trade arrangements. The system worked because there was no compulsion to maximize efficiency. The same was true of India — a very closed market guided towards self-sufficiency. All that has changed. Now we must compete strongly both within the country and internationally. If India's manufacturing growth is to reach 25 percent, international trade has to play a major part, which means competition. All the evidence from the last 40 to 50 years shows that western manufacturing practices have failed when pitted against what Japan developed. After the war, Japan realized their only advantage could be maximizing output from their human resources. The Japanese management system evolved based on this — maximizing efficiency through people.
That's a very interesting thought. The western philosophy would claim they also maximize profit. Let's get into specifics — maybe we start with the workers themselves. You have a very strong view on how workers need to be managed differently.
Yes. In any manufacturing company, about 60 to 70 percent of employees are workers. Western management has always treated them as adversaries to the owners and management — the human resources divided into two camps, with workers forming unions for bargaining strength. This leads to industrial relations problems: strikes, lockouts, violence. Workers don't feel part of the company — they work their 8 hours for their negotiated salary and that's it. They don't take initiative to work more efficiently. Quality is left to inspection departments. Attendance is typically 85 to 87 percent, and productive working hours rarely exceed 6 and a half. The Japanese realized in the 1950s that if workers became part of the production team and were convinced it would benefit them, productivity would increase hugely. Management flipped the dynamic — workers and unions became partners. When we started Maruti, we were in a similar situation. Nobody gave us a chance. We adopted the Japanese partnership approach, workers became partners, and Maruti became one of the greatest wealth creators in the country.
What you're saying makes a lot of sense. When 70 percent of your employees are not using their brain — just their muscle — you're losing opportunities for wealth creation. How do promoters make this happen? What changes are needed in the management approach?
Why did Japan and Maruti change? Because we faced situations where if we didn't change, we would go under. Most Indian industry and promoters don't feel threatened — competition isn't strong enough yet. Indian industry has always wanted protection and has been in a comfortable zone. The need for change arises from our national goal of becoming a developed country by 2047. The present government understands competitive manufacturing far better than any previous government. Many reforms have happened. Government is fully behind industry for the first time, trying to promote manufacturing. Industry has to decide whether it wants to play that role.
A lot of promoters would say they want to do it. Tell me what specific changes to make with workers — how to engage them? You talk about creating an egalitarian workspace. How do I make this transition?
The first change is the promoter must genuinely accept that workers becoming part of the team adds substantial value — not only from their brains but from eliminating the negative costs of policing and adversarial relationships. I say this because many promoters are quite happy with the money they're making, living lives comparable to industrialists in the most developed countries. There has to be a different mindset — wanting to become a major manufacturing company that contributes to national wealth. Workers must be convinced it's in their interest. Their job security depends on the company being competitive and profitable. Resources for improvements in pay, schooling, housing — these come from company surpluses. The company's health is in the worker's vital interest. But convincing them isn't enough — if profits aren't shared, motivation is lost. All management policies must first be company-focused, then show workers they'll share in growth benefits. And there must be complete transparency about the P&L — you can't be partners if you keep workers in the dark.
Complete transparency about where the company is going, the challenges, how you manage the P&L — that's a big change. What you're highlighting is wealth sharing, a win-win where workers see that as the company grows, they grow too. Many companies have bonuses — attendance bonus, productivity bonus — but with an upper cap, not truly linked to company profits. You're suggesting linking gains directly to company growth and making it transparent. In Maruti, when workers cross 25 cars per person dispatched, they start earning more, and at one point they made more than their basic salary.
The productivity scheme was originally rejected by the government — they said bonus was limited to 24 percent. Through an MOU, we proposed a company-wide productivity-linked bonus without an upper cap. The project report said maximum output would be 100,000 cars with 4,000 employees — 25 per worker. We proposed that if output exceeds 25 per worker, 75 percent of the additional labor savings would be shared by all employees. The government approved, probably thinking it would never happen. They didn't realize 25 would go to 75 and more. But ultimately the answer is profit sharing. Workers should participate in profit sharing like shareholders. Japan does that. We had to start with the output metric because profit sharing would be harder for workers to understand initially.
Profit sharing is the big deal — workers participating like shareholders. You also emphasize creating an egalitarian workspace, basic hygiene factors, removing any feeling of caste or hierarchy, making people feel equal as humans. That's very important for engagement.
Can you build a team, partnership, and trust if you treat someone as not equal to you as a human? Look at any sports team — Virat Kohli may be the captain, but on the field he's treated like anybody else. While the match is on, everybody is equal. In the workspace, ensure everybody feels equal. Management attitudes must change. We used to eat sitting at the same table as workers, eating the same food in the same utensils. That's your contribution toward growing the company. Each company must find its own way to convince workers that management is devoted to the company's growth, not their own, and is sincere about sharing benefits. Mr. Keshav Mahindra used to walk the shop floor knowing most workers by name — it creates a different feeling.
