Executive Interviews: Interview with Tapan Mitra on Managing Downturn without Downsizing
September 2009 - By Dr. Nagendra V Chowdary

Tapan Mitra
Tapan Mitra,
Chief of Human Resources, Apollo Tyres

• As financial meltdown has turned into global economic crisis, the human cost in terms of lost jobs and displaced workers is growing at a terrifying pace. The International Labor Organization (ILO) predicts that 38 million people around the world could lose their jobs this year alone, sending unemployment rates in Europe and the US into double digits for the first time in years and slowing – or in some places reversing – the massive jobs growth of recent years in Asia. What would be the political and social consequences? How should governments, companies and labor unions in countries across the globe address this issue?
  As we can see in hindsight this was a cycle that was waiting to happen, given the high growth rates and the over extending of nearly all financial and economic facilities that had taken place since the early 1990s. This is a correction; yes an unfortunate one, but a correction that needed to take place to ensure sustainable growth across economies. While the implication of this on jobs could be dramatic, especially in the developed nations, what this downturn would also do is weed out the companies which had not managed themselves well during the good times. Going by the past few months, I do not expect massive political or social unrest due to this. Governments across the world have been taking proactive action to try and minimise the pain on the average workers. The steps taken by each government are intrinsically linked to their governance policy and therefore the way we have been addressing this in India is going to be quite different from say how the US or Chinese governments tackle them. These are times when all parties have to come together to take collective decisions and a time when labor unions need to keep long term interests in mind.

• What is your assessment of impact of US financial crisis (global financial crisis) on India? Which sectors/industries do you think are affected most and what are your perspectives on the way Indian companies are managing this unprecedented downturn?
  Given that the US is the world’s largest economy and closely linked to economics across the world, an upheaval in the US has far-reaching consequences. In countries like India, the strengthening of the dollar has had an immediate impact. Also the sectors that have been most impacted are those which have a high exposure to the US economy like IT services. However, others like the hospitality businesses, infrastructure development, high-end or export-oriented businesses like gems and jewelry will suffer more than others. In terms of Indian business, we have once again surprised ourselves with our ability to be agile and adjust quickly. Majority of our businesses had taken on themselves efficiency enhancing and cost cutting drives at an early stage, preparing themselves well for the tougher days ahead. However, I do have to say that in India, we are blessed with a large, diverse and growing domestic market which creates a certain buffer for us during a global downturn.

• As Chief of HR at Apollo Tyres, what’s the plan of action to manage through the crisis? Any layoffs?
  Our people have voluntarily taken lower perks for two quarters to ensure that the company remains profitable. It has been difficult, but as Chief HR my and my team’s role becomes easier when people themselves are willing to take collective decisions to ensure a better future. At Apollo the culture of teamwork and looking out for the greater good is very high, which has always worked in the company’s favor. I feel, in many respects, this gives us an edge over other companies. No we have not had any layoff, however the normal practice of non-performers being weeded out of the system continued to take place. Our focus has actually been on redeployment and production management to keep manpower costs low, rather than layoffs.

• Recently, when the UK arm of accounting firm KPMG asked its staff if they would be willing to reduce their workweek – and thereby save jobs – in the event that business dried up, an overwhelming 85% signed on. Probably, the deal is a first for a British financial services firm. It’s unlikely to be the last. A recent survey by Watson Wyatt finds that almost one employer in ten intends to shorten the work week in coming months. What are the merits and demerits of this job saving scheme?
  This is the best way forward. Layoffs do not always work in a company’s favor. It might seem easy to ask people to leave but even that has a short term cost in terms of financial outgo. Also, often in the process of layoffs, a certain number of the best performers tend to depart which is not desirable. Also, remember bad times are not going to last forever. So when the economy begins to pick-up, we will all need those who left. At that point to get back the trained manpower, who had been aligned with company goals and philosophy is difficult. There is then a high cost that we would need to pay for hiring and training. Job saving schemes, like what we did at Apollo Tyres, is the best way forward, wherever possible.

• Two countries standout as having the most developed and systematic approach: Japan and Germany, which both provide government subsidies to companies who keep on workers even though there’s little or no work for them to do. Both have recently extended their schemes. What is your assessment of such a tacit support from government? Do you see merit in this approach or do you think this would end up doing more damage (in the long term) than the short-term good?
  Of course this is good. If governments can do this, it is favorable for the workforce. And we have to remember that both Japan and Germany have very high quality and efficient companies. They have trained, high-value workforces. As long as such systems do not encourage the unfit and inefficient to become part of the systems – which both Japan and Germany do – then this is good. However, not all governments are able to do this. Nor is it desirable or feasible across the board. We all need to work with the constraints and the positives of our own situations.