Riots at Maruti Suzuki halts production

August 17, 2012

Industrialisation has a bloody history of battles between workers and owners. Are the riots in an India car plant a re-run of industrial history?

At least 90 people have been arrested after violent clashes between workers and managers at a Maruti Suzuki factory near the Indian capital, Delhi. A senior factory official died and more than 85 were injured, including two Japanese nationals in the riot. Maruti, India’s biggest car maker, has halted production at the factory.

The blame game

Managers and workers blame each other for starting the clashes, which follow months of troubled labour relations. The violence at the vast factory in Haryana state is believed to have erupted after an altercation between a factory worker and a supervisor.

Workers reportedly ransacked offices and set fires at the height of the violence. It escalated when they tried to take disciplinary action against the employee as other workers protested and blocked all exit gates, preventing senior executives and managers from leaving the factory. The union denied responsibility for the violence and told local media that it was triggered by “objectionable remarks” made by the supervisor.

Leniency a reason for the riots?

The Times of india suggested leniency towards Union bosses was ‘reason for rift among staff’

it appears now that the management of the auto giant may have made a major miscalculation in handling a labour incident only weeks before violence broke out in the factory. [Union leaders were treated in a more lenient way than workers after aggression towards a supervisor].

Meanwhile, the plant remains closed. The company maintains that it is giving high priority to employee safety and is considering several initiatives to scale up safety in the Manesar plant. “In this direction, the company is exploring the best safety measures in terms of equipment, personnel and on ground training for the employees,” the company said in a statement.

The act of unprovoked violence [on July 18th 2012, but July 21st according to some news reports] started without any specific industrial relations issue.

A backdrop of financial losses

The story occurred against a backdrop of losses attributed to increased royalties to Suzuki.

The main reason for the fall was a rise in royalty payments to Japan’s Suzuki, which holds a large stake in Maruti. Analysts said the increase would also affect the carmaker’s future earnings.one observing: “Raw material costs have been easing but the effect of higher royalty payments will be there in the next few quarters”.

Outside of the increased payments to Suzuki, Maruti performed well during the quarter, “The sudden change in royalty charge overshadows an otherwise strong operating performance,” said Chirag Shah at Emkay Global Financial Services.

A similar pattern of violence

Reuters reported [6th August 2012] that other foreign owned car makers such as Hyundai, and Honda have also experienced troubles at their plants in recent years.

“This is definitely sending a wrong message. Investors will be reluctant,” P. Balendran, vice-president at General Motors’ Indian unit, said of the Manesar violence. “The need of the hour is flexible labour reforms. In 2012 you cannot afford to have a rule which is applicable … from 1956.”

A bone of contention

India’s labour laws, some dating to the 1920s, make it difficult for large companies to fire permanent workers, forcing companies to hire large numbers of contractors – a bone of contention with many unions.

“We knew that something of this sort might happen sooner or later,” said Balendran. “It happened to Suzuki today, tomorrow it could happen to us.”

Latest news

Regardless of the reported stringency of India’s labour laws, the company plans to make 500 employees redundant and will re-open the plant shortly [August 21st 2012]. The challenges to leadership are likely to continue.


Sweet and Sour? Anthony Ward shakes up the Cocoa Bean Market

August 2, 2010



Written and Analysed by Susan Moger

When asked the greatest challenge a politician can face, Harold Macmillan replied “Events, dear boy, events”. This is a comment with which senior leadership teams in the confectionery sector in Europe will no doubt identify, on learning the recent news of a raid on the world’s supply of cocoa beans.

It is unlikely that they would have anticipated the effects of the activities of Anthony Ward, a commodity trader specialising in cocoa, whose hedge fund Amajaro has bought £650m ($992m) worth of cocoa beans, 7% of the world’s supply [July 16th, 2010].

According to The Telegraph: Anthony Ward, 50, bought 241,000 tons of cocoa beans and now owns enough to manufacture 5.3 billion quarter-pound chocolate bars. Mr Ward, who is worth around £36 million, holds so much of the market he could force manufacturers to raise the price of Britain’s favourite chocolate bars. The former Chairman of the European Cocoa Association has amassed up to 15 per cent of the word’s cocoa stocks in the last ten years. The cocoa beans from his latest trade are expected to be kept in warehouses in The Netherlands, Hamburg, London, Liverpool or Humberside and are the equivalent of the entire supply of the commodity in Europe.

Ward’s acquisition may have the effect of increasing cocoa prices substantially. The next African cocoa harvest is not due until later September and October this year, and many firms are looking to source supplies for the manufacturing run leading up to the lucrative Christmas and New Year markets.

With a West European Confectionery market worth Euros 44.6 billion in 2008, and a very complex relationship with retailers in terms of products already developed and pre-sold, leadership teams face a tricky balance between delivery of products and the protection of their margins during one of the key demand and profitability-raising periods of the year.

One industrialist who is a former advisor to the UK government on restrictive practices did not feel the issue should focus on what Ward had done, commenting “I think it is too easy to blame an individual for taking advantage of a market opportunity. If he didn’t, wouldn’t someone else have done so? It’s necessary to look at the whole system, and what could and should be done about it.”

Ward’s activities have led some to dub him ‘Chocfinger’ (Financial Times, July 24th p.11) and they have invested the possibly rather prosaic world of confectionery manufacture with a new drama and intrigue. His activities certainly show all those involved in any leadership activity in any sector that external events can have an impact which isn’t anticipated and which can’t necessarily be ameliorated. Taleb called such events Black Swans in his book of the same name.

It remains to be seen whether the confectionery manufacturers’ dealings in sweet commodities will turn sour this Christmas.

Students of Leadership

What lessons might be learned from this story? What can be learned from earlier attempts to corner a market? Are there governance and ethical considerations to be taken into account? What does the story tell us about entrepreneurship?

Image

Courtesy of the Amajaro Board. Image downlaoded from the corporate website [Anthony Ward is 2nd from the right].


Toyota, Duty and Destiny

February 21, 2010

The successive bad-news stories at the start of 2010 for Toyota illustrate the effect of cultural factors on leadership and organizational behaviours. An understanding of dynastic history will help assess future prospects for the company

In considering the prospects for Toyota, I found myself reflecting on the nature of dynastic rule. Japan itself is still an example of a dynasty-based culture. The Japanese Dynasty is believed to be the oldest continuing hereditary monarchy in the world, with a bloodline stretching back nearly three millennia (660 BC – present day). The Emperor (天皇) symbolises a unity of the state with the Japanese people, and is head of the Japanese Imperial Family, and also the highest authority of its Shinto religion.

It has more recently become accepted to use the term dynasty to refer to family-owned businesses, where we also find transmission of authority and control handed down from generation to generation. Metaphors can be useful for imaginative purposes, but can also be misleading. Nevertheless, it is perhaps worth reflecting on dynastic leadership, and its implications for Toyota.

The Dynastic Principle

Western thought about dynastic power has been greatly influenced by the German social theorist Max Weber. One of his many significant contributions was his work on the nature of ancient and modern social structures. He proposed that traditional societies maintained stability by the society’s acceptance of the legitimacy of their ruler, and the power this permitted in the interests of the State.

Weber went on to suggest that overthrow of a society’s structure and traditions came about through charismatic opposition to them. For Weber, newer religious forms (aligned to state power) often were accompanied by charismatic leaders. He further argued that new form of control suited to modern industrial societies functioned through the power backed up by the legal authority expressed through rules and regulations. His terminology of bureaucratic control is still in common use. That’s how business students used to be taught about Weber’s theories.

Dynasties ancient and modern

The connections between the foundation of sociological thought, and today’s structuring of global organizations, are also being studied by researchers into institutional forms. A promising new area of work is into varieties of capitalism (VoC). The potential significance of this research can hardly be over-emphasized. It offers insights regarding the competitiveness of industrial firms globally, as much as insights into the diverse attempts to ‘civilize capitalism’ (as one researcher puts it).

Toyota, Ford, and other modern dynasties

Toyota may be seen as a modern institutional form, retaining dynastic power internally. The company was founded by Kiichiro Toyoda in 1937 as a spinoff from his father’s company Toyota Industries, and today’s President is Akio Toyoda.

It would be a great over-simplification to assume that such a family-based structure inhibits change and adjustment. Nevertheless, its response to its recent manufacturing and strategy problems appears consistent with a tendency to avoid radical actions which appear as threats to core cultural values.

Generalisations can be dangerous. In America, the history of the mighty Ford motor empire also shows the dynastic principle at work. From the days of Henry Ford until recently, power resided with the founding family, with current Executive chairman William C Ford the fifth generation (by my counting) of the family on board. Interestingly, Ford also came near to ruin with a safety crisis associated with the Ford Pinto in the 1970s. Ford survived that crisis, but has arguably been relatively slow to deal with competitive pressures. In the UK, its acquisition of the much-loved (but eventually cash-strapped) Jaguar mark was reversed by its sale to Tata, another globalising dynasty.

Born or Made Leaders?

Associated with dynastic structure of institutions or cultures, is the question raised of the fitness to lead. Are descendents of a founding entrepreneur especially equipped to lead into the future ? The evidence is less than clear-cut. At very least, the all-powerful leader acting ‘to the manner born’ is vulnerable to events that threaten the continuity of any organisation. Hereditary rulers of States and leaders of organizations exercise power mediated through advisors. At times the advisors contribute to forces which bring about the demise of the figurehead, in the wider interests of the Institution.

Toyota into the future

Jim Taggart, who writes on leadership issues, points to the manufacturing issues facing Toyota. He also cites a press story criticising Toyota’s risk-management approach . To understand Toyota’s present crisis, wider factors also need to be taken into account. Toyota-bashing in the US, as pointed out, is taking place with regard for socio-economic and political vested interests. Students of leadership will find much to consider in this, and in the ‘born or made’ dilemma of leadership.


Global Events and Hand-clapping

January 8, 2010

What’s a nursery-rhyme got to do with global events? Plenty. This little song has received nearly 20,000,000 hits on its YouTube platform. And that’s a pretty global event, and some exposure

How did I become one of the 20 million consumers of the YouTube video? Through that phenomenon of discovery by surfing around. In other words mostly by accident while looking for something else. One day we will have a better idea of how images and words impel people to ‘pass it on’. At the moment it passes for a mysterious force known as viral marketing, which operates thanks to the Internet


Peace One Day: The Adidas Puma Story

September 20, 2009

Peace One Day

The charity Peace One Day plays a part in peace initiatives around the world. On September 21st, among those symbolic actions were those taken by Puma and Adidas, two firms whose existence reflects a long-lasting family feud within a small Bavarian township

A news item this week [Sept 17th 2009] tells of the origins of the international sporting equipment firms Puma and Adidas. The point of the story was that the firms have been bitter rivals since splitting, over sixty years ago. Now, leaders of the rival firms were to make ‘a historic handshake’ as one of the Charity’s events planned for 21st Sept 2009.

Background

Peace One Day (POD) was founded by film maker Jeremy Gilley in 1999. He was to became a publicist for and then partner in peace initiatives around the world. By 2006 he and POD wereassociated with various high-profile events with world leaders such as Kofi Annan, the Dalai Lama, Shimon Peres, and Mary Robinson.

Considerable praise has been heaped on both charity and the humanitarian leadership of its founder.

The organisation has survived critical setbacks: one high profile documentary filmed at the United Nations in New York lost much momentum as it took place as the twin towers disaster was unfolding a few miles across town.

The unique marketing concept of POD is the focussing of its events on the same day [September 21st] each year. There is no specific significance of the day historically.

The Adidas/Puma event of 2009

Herzogenaurach, Germany, 17 September 2009 – It will be a historic hand shake: In support of the peace initiative PEACE ONE DAY the two sportswear companies adidas and PUMA will shake hands for the first time after six decades. As a sign of amicable cooperation, employees of both companies will play football together on Peace Day, 21st of September, and subsequently watch the movie “The Day after Peace” by Jeremy Gilley, director and founder of PEACE ONE DAY. These events will be the first joint activities of both companies since their founders Rudolf and Adi Dassler left their shared firm and established Adidas and PUMA.

The Adidas Puma story seems right for a Hollywood movie. In the 1920s, two brothers grew up and worked in the laundry shop owned by their mother in the 1920s. They stared out together in business togther with a shared idea which created the marketing of clothing exclusively for sporting activities. In the 1930s they equipped Jesse Owens for the 1936 Olympics in Berlin [a story in itself]. But the brothers rarely agreed over anything, and sibling rivalry must have contributed to the split into two firms, still operating in close proximity in a little township in Bavaria.
The family rift is said to have deepened during the war, when a remark about “the B********s returning” during an air raid was taken as cruel rejection of members by one side of the family as others scrambled for the safety of an air raid shelter. It was later claimed the remark referred to a returning flight of Allied aircraft not to family members fleeing for their lives. Whatever, the story tells of a feud which was to split family and employees in the little village of Herzogenaurach for decades afterwards. Today, the old rivalries are mostly muted and symbolic. The Day of Peace celebrations confirm existing practical realities of life in the township.

Leadership Issues

The story introduces a range of leadership issues.

What strategy is suggested which might be of interest to establishing a not-for profit organization charity?

Might founder Jeremy Gilley be an example of servant leadership?

How important is symbolic leadership in establishing such an organization, and why?

What contribution might such efforts make to wider humanitarian efforts against war and towards peace processes?


On deposing a leader

June 10, 2009

Nicolae Ceausescu

A whole industry has sprung up around leadership selection. But what do we know about the equally important business of getting rid of leaders?

Leaders in all walks of life face one unpleasant fact. At some stage in their career they are likely to face a challenge to their leadership, and the prospect of being deposed.

Resigning and being pushed?

In Shakespearean drama, the leadership struggle was a matter of life or death. Today the succession struggle is rarely as bloody as that. Tyrants may still rest uneasily but many escape the fate of a Ceausescu, although some business leaders as well as political ones chose to fall on their swords etaphorically.

Getting rid of Gordon

The current political drama in the UK has turned into attempts to oust Prime Minister Brown. His battle for survival seems to have been going on since shortly after his appointment as Prime Minister. This itself occurred after another coup which first damaged and then forced the resignation of Tony Blair, his predecessor.

Early in their careers, Blair and Brown were contemporaries, considered two rising stars of the labour movement. Brown was considered the more intellectually able, but Blair was believed to be more politically adept. Friendship turned into rivalry. Both subscribed to a belief that the labour party needed radical reform to turn the party into a credible alternative to a conservative party that had emerged more or less intact from one of the most notorious of political leadership coups which had deposed Margaret Thatcher.

Brown’s prospects were based on his intellectual abilities; Blair on a sharp political instinct and a charismatic impact on colleagues and public alike. As a matter of note, Brown was, in his student days, a dynamic and charismatic figure. Hard to believe now. He has developed a persona of ponderous gravitas. In the role of Chancellor of the Exchequer, one of his favourite words was prudence.

His eventual advancement is widely believed to have involved a deal brokered by one Peter Mandelson, a figure that was to move influentially in and out of the story thereafter.

Brown had at first considered the more likely candidate as leader, but Mandelson seems to have moved from supporting his friend Gordon Brown to Blair. Brown is believed to have seen this as a betrayal of friendship and trust.

Fast-forward in time

Blair, Mandelson and Brown all advance their careers in different but equally tumultuous ways. Mandelson overcame several damaging setbacks through a colourful personal life which made him too vulnerable to aspire to the leadership of his party. Blair became leader. Brown believed he was leader in waiting, a position which attracted support particularly from the sections of the party which had found the New Labour reforms (even if politically expedient) alien to deeply-held values embodied in the old Labour movement.

In a decade of playing leader, in waiting, Brown became increasingly suspicious that his accession was no longer guaranteed, or even backed by Blair. Former allies had reached the conclusion that whatever had been agreed earlier, Brown lacked necessary skills required to take the party forward after Blair went. In very crude terms, these tended to be ‘people skills’ which had became more obvious well before his fiscal policies as Chancellor became vulnerable to attack.

Tony Blair’s popularity declined irreversibly through foreign policy setbacks particularly through the deeply unpopular Iraq conflict and his close alliance with America’s President Bush. The New Labour project (of which Gordon Brown was a founding intellectual figure) lost momentum. Efforts were made to force Blair to stand down.

The whole messy business eventually forced Blair out, and Brown was still powerful enough to claim the accession uncontested. Later, his position as a non-elected leader was to weaken him.

Gordon survives a coup

Fast forward. That seven days known as a long time in politics may be timed as the first week on June 2009. Reporting of the accelerating events filled the newspapers and electronic media. LWD summarised the developing events which had led commentators to predict that Gordon Brown was finished.

How did he survive his longest week in politics?

There may have been figures willing to take his place. The king-makers seem to have been pushing for the popular Alan Johnson. But the would-be leaders were not prepared to make the ultimate risky move that would reveal their willingness to assist in removing the incumbent. There was no Michael Heseltine around with the courage and ambition to step from the shadows.

Brown’s support was buttressed by one Peter (now Lord) Mandelson.

Is he going to survive, then?

“Is he going to survive, then? ” my hairdresser asked , last Saturday afternoon. “It’s going to be a close shave” I muttered. “He’s got to persuade his MPs next week. But a lot of people are saying he’s finished”. I could have added that the dire results from Thursday’s elections might be making it far too risky for many MPs to support a move that would probably force an unwanted election when political instincts still leave Labour supporters hoping for at least some recovery in the economic climate before facing a disgruntled and distressed electorate.

AS it turned out, the meeting with MPs went as well as Gordon Brown might have hoped. BBC’s Nick Robinson, as so often, offered a coherent analysis:

No Prime Minister who appears to be taking his party to electoral annihilation can ever truly be considered safe. Nevertheless, Gordon Brown is safe – for now. He has seen off all the plausible plots to unseat him.
Today not enough Labour MPs were willing to sign up to a demand that would have forced a leadership election. So, instead his critics sought to shame him into resigning by saying to his face in front of their colleagues that he was leading his party to certain destruction. Privately many fear that that is true but they fear more the consequences of a divisive contest now and a general election which would, they think, have to follow soon after
In reality, the threat to Gordon Brown’s leadership began & ended on Thursday night. The shock resignation of James Purnell was meant to inspire others to follow. It was meant to lead to either his friend David Milliband or to Alan Johnson becoming leader.
It was meant to make the debate about whether to back or sack Gordon Brown unavoidable. In that sense it succeeded. Hence the curiosity that as Labour nurses its wounds from the worst election results in decades the party today decided to back the leader who took them to defeat.