TISCO - The World's Most Cost-Effective Steel Plant

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Implementing Best Practices

In 1999-2001, TISCO took measures to reduce costs further by adopting innovative strategies and other cost-cutting exercises. For example, TISCO stopped using manganese, an expensive metal used to increase the strength and flexibility of steel. The company made efforts to reduce its product delivery time from 3-4 weeks in 1998 to 2 weeks in 2000. The company aimed to further reduce the time to one week. TISCO also took steps to reduce its manpower costs. Between 1996 and 2000, TISCO reduced its workforce from 78,000 to 40,000 employees. Analysts opined that cutting its workforce by 38,000 employees was not an easy job and the company was able to do it with a lot of communication with employees. TISCO had adopted Performance Ethic Programme (PEP), under which, it planned to promote hardworking young people to higher positions depending on their performance, rather than following the convention of seniority. This exercise was expected to cut the management staff from 4000 to 3000.

PEP had two core elements. Firstly, it proposed a new organizational structure, which was expected to foster growth businesses, introduce more decision-making flexibility, clear accountability, and encourage teamwork among the managers and the workforce. Secondly, PEP proposed to introduce a Performance Management System (PMS). It would identify and reward strong performers, and also offer development opportunities for each employee. PMS would also ensure that every employee's job profile was clearly defined. By introducing PMS, TISCO wanted to make performance appraisals transparent and fair and reward the good performers.

The company also planned to introduce a new compensation package based on performance from November 2001. Muthuraman explained the benefits of PEP, "Youngsters are getting higher salary than some of the seniors, and after the restructuring, the average age of the managers has fallen by 10 years. Through PEP, TISCO also reduced the hierarchical levels from 13 to 5."

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