|ET: You have worked with Tatas and have now turned around and successfully managed a public sector unit. What are the core differences between managing a government enterprise as against a private sector firm?
KVB: Indian Immunologicals Ltd (IIL) is not a public sector company, but by virtue of being a subsidiary of the National Dairy Development Board (NDDB) which came into existence by an Act of the Parliament of India, you can call it as a company which meets certain key national needs, in our case making vaccines affordable and accessible to the public. However, we follow systems generally practised in the public systems area in managing our company, which call for equity, transparency and accountability to the people of India.
These requirements call for greater level of diligence in carrying out our operations and we are also subject to greater amount of scrutiny, both internal and external. In order to do this, we have to put in place systems and operating procedures for all functions, bring adequate oversight of operations and be subject to periodic audits. These aspects may not be prevalent in many private organisations. We have been often criticised that this slows decision making, but this is a small price you pay when you are accountable to the public.
Our social responsibility also requires us to address making our products and services affordable, especially to the needy; meet national needs first rather than other lucrative markets; train and nurture talent from the underprivileged sections of the society; make contributions to the general welfare of the society; and not be seen as exploitative of people, environment and the markets.
ET: While many Public Sector Undertakings (PSUs) are epitomes of mismanagement, we can see some government enterprises excelling. What according to you are the key success factors for them?
KVB: There are far more private companies mis-managed than what we’ve even heard of and far less public companies in this category than what is commonly believed. The only difference is that when something happens in the public sector or public systems area, things become public. Anyway, not withstanding this, I must state that the excellent government companies are the ones which have worked without much bureaucratic interference, built a culture of performance with integrity, underscored meeting social needs into their business objectives and, above all, constantly harped on achieving all round organisational excellence.
ET: In your view should Government have a role in managing business enterprises at all? And, if yes, what should its role be?
KVB: The Government’s role in managing a business organization is sometimes necessary, especially in a developing country setting which is faced with supply side issues and inadequate entrepreneurial drive in sectors fraught with high business risks. In my view, the Government’s role should be restricted only to these situations, given the tendency of the Government run organizations to place high emphasis accountability at the cost of performance. Otherwise, the role of Government is really to set directions for a particular sector, encourage investments, put in place sound regulatory systems, provide dispute resolution mechanisms, all done while ensuring that our social objectives are met with least damage to the environment.
ET: Please share with us some of the steps you implemented to initiate the growth journey at Indian Immunologicals Ltd (IIL).
Among the most significant achievements has been bringing about a performance orientation in the company. We first corporatized the small unit of NDDB making animal vaccines in 1999, in order to make it more financially accountable and transparent as a business. We then moved all our people from the public sector type of compensation system linked to Central Pay Commission practices to a uniform fixed tenure employment system, where every employee is on a three year renewable contract, based on performance. This compensation system was linked to a Performance Management System (PMS) which looks at individual performance against objectives, the individual’s role effectiveness and overall corporate performance. The PMS scores are the basis for payment of performance incentives and the increments for the next financial year. We were probably the first company to do this in the public systems area and we are now over 12 years into it.
We also brought other HR practices which look at talent development, for example encouraging our technical people to pursue PhD programmes, marketing people to pursue MBA etc., we made management of our business more broad based giving chance to younger people to assume higher responsibilities as the business grew; we brought openness in our people processes etc. We gained productivity by abolishing all forms of overtime, work interruptions and the like; we also brought performance metrics to the work place and on the customer front of our business.
We are probably the first pharmaceutical company to introduce TQM and I must say that this changed the perspective of people. We have no employees’ trade unions or associations. We have just one common genre of employees who are part of the management.
Alongside this, we invested in our core animal vaccine business and started exporting our products. We saw profitable opportunities in the human vaccine market and entered this market in 2000. Today, we are not only the largest animal vaccine company and the third largest animal health company in India, but also the fourth largest human vaccine company. We have built strong market positions in most of the therapeutic areas that we serve.
We have grown by over 20 % compounded while the industry has grown by about 10% p.a in the last ten years. Our real growth is only ahead of us now, since the fruits of our new investments will be reaped only in the coming years.
ET: Corporate India has in recent years, in their search for new markets, taken a new interest in rural India, whereas IIL has been focussed in this segment for many years. Could you please share some of the insights your firm has gained by being active in the rural markets over many decades?
KVB: IIL’s business in animal health meant addressing the needs of the small and marginal livestock keepers in rural India. We do this not merely by promoting products to veterinarians and farmers in the villages, but by also carrying out education and information programmes, vaccination and health camps, i.e. what we term extension work. This is an important component of all our work in rural India. The other is to provide accessibility and making things available, as much as possible closer to the farmers’ door step.
I must add here that corporate India still has a lot of myths about the rural customer, especially on the price quality equation and the ‘bottom of the pyramid’ dynamics. All this is changing for the better, thanks to a more aware and informed rural customer.
In my view, the boundaries between rural India and urban India will progressively blur as communication spreads, connectivity - both physical and virtual - enlarges, education takes deeper roots and standard of living improves. However, we must seriously address infrastructure bottlenecks like power, water, road connectivity, etc., make legal redress mechanisms work and provide a big thrust to education and health delivery to our people, if we have to become one nation.
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