POM - Learning video

I made of set of three videos due to space constraint of 1 GB on Youtube. One video is here. The links for the other two are provided below.

POM Learning: Part 2

POM Learning: Part 3

Flavors of Organizational structures

Defining organisational structure and design (In development)

Organisational structure

 The formal arrangement of jobs within an organisation.

Organisational design

 A process involving decisions about six key elements:

1. „ Work specialization
2. „ Departmentalization
3. „ Chain of command
4. „ Span of control
5. „ Centralization and Decentralization
6. „ Formalization

Organisational structure

1. Work specialization

 The degree to which tasks in the organisation are divided into separate jobs with each step completed by a different person. However, Overspecialization can result in human dis-economies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover.

2. Departmentalization by type

• Functional: Grouping jobs by functions performed

• Product: Grouping jobs by product line

• Geographic: Grouping jobs on the basis of territory or geography

• Process: Grouping jobs on the basis of product or customer flow

• Customer: Grouping jobs by type of customer and needs

3. Chain of Command

The continuous line of authority that extends from upper levels of an organisation to the lowest levels of the organisation and clarifies who reports to who.

• Authority

 The rights inherent in a managerial position to tell people what to do and to expect them to do it.

• Responsibility

 The obligation or expectation to perform.

• Unity of command

 The concept that a person should have one boss and should report only to that person.

4. Span of control


 The number of employees who can be effectively and efficiently supervised by a manager.

  Width of span is affected by:

1.   Skills and abilities of the manager
2.   Employee characteristics
3.   Characteristics of the work being done
4.   Similarity of tasks
5.   Complexity of tasks
6.   Physical proximity of subordinates
7.   Standardization of tasks

5. Centralization and Decentralization

Centralization

  The degree to which decision-making is concentrated at a single point in the organisations.

  Organisations in which top managers make all the decisions and lower-level employees simply carry out those orders.

• Environment is stable.
• Lower-level managers are not as capable or experienced at making decisions as upper-level managers.
• Lower-level managers do not want to have a say in decisions.
• Decisions are significant.
• Organisation is facing a crisis or the risk of company failure.
• Company is large.
• Effective implementation of company strategies depends on managers retaining say over what happens.

Decentralization

  Organisations in which decision-making is pushed down to the managers who are closest to the action.

• Environment is complex, uncertain.
• Lower-level managers are capable and experienced at making decisions.
• Lower-level managers want a voice in decisions.
• Decisions are relatively minor.
• Corporate culture is open to allowing managers to have a say in what happens.
• Company is geographically dispersed.
• Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions.

5. Formalization

• The degree to which jobs within the organisation are standardized and the extent to which employee behavior is guided by rules and procedures.
• Highly formalized jobs offer little discretion over what is to be done.
• Low formalization means fewer constraints on how employees do their work.

Organizational structure of Steel Authority of India - SAIL

Introduction

The organisational structure in any business is important for the survival as all organisations have to be able to accomplish tasks and carry out certain duties. Structure splits the tasks of the whole organisation into smaller and more practical chunks, and allocates them to sections of the organisation that are held responsible for its completion. It also ensures that all the different sections are coordinated and controlled in a way which it has to achieve something. This blog tries to decode the organizational structure of SAIL paying interest to critical detail.

Organisation chart - SAIL

I believe that SAIL's structure is a Product grouping; mainly because a Product grouping is most often established where an organisation has a number of specific product lines (in this case the different models/makes of vehicles). Usually in this sort of structure each individual section is operated separately giving it a number of advantages. For instance, everything in a certain product line is brought together in the one central area making it easier for communication and coordination. 

Due to SAIL's product development nature, such an advantage is especially relevant as it allows for a specific team to be able to convey information between each other much faster. It is, therefore, easier to understand the information as it is easier to understand the information as it is directly being talked about directly, rather than in a document where visualisation may be required. However a Product grouping also has disadvantages, for example, team members can become to focused on their own product and lose sight of advances made in other product groups. Again this could pose a problem in an organisation like SAIL as it could potentially cause disillusionment between product groups by group members choosing to use their own way to achieve objects instead of listening to information from group members out with their product group which could aid them.

Centralization

Centralization is another key feature in the structure of an organisation. This underlines the locality of decision making in an organisation and through this develops an understanding of the authority and responsibility in the organisation. Everybody in an organisation has responsibility, but when it is used in terms of the structure it refers to those who have a larger effect on the overall managerial aspect. In SAIL, for instance, it is assumed that the Managing Director is responsible for the performance of the company; at the next level down would be the marketing director, who would be held responsible for achieving marketing objectives and so on.

In centralised structures decision making tends to be retained in the hands of a small number of people at the top of an organisation, while those that are decentralised, decision making authority is delegated. From my point of view I think that SAIL is a decentralised, as decisions are made at a point closer to operational levels. By being able to make these important decisions closer to the operational aspect of the product groups it makes a decision on the problem at hand quicker to solve, and also develops leadership skills of those lower down in the organisation. It also frees up the top management to devote its attention to long term strategies, which a company like SAIL has to take into account due to the constant changing market direction and the type of customer who is attracted to its products.

Formalisation

Formalisation reflects the extent to which the formal rules and procedures govern activities in an organisation and, in particular whether the nature of the work is prescribed in rules that specify what shall be done and often how it will be done, rules and procedures can be implicit as well as explicit, and can be used to either prescribe what should be done or proscribe what is forbidden. To some extent increased formalisation is a function of organisational size. 

Once an organisation grows beyond a certain point it becomes almost impossible to rely on interactions used to control and coordinate a smaller company. For a larger company, such as SAIL, there tends to be more specialists higher up in the hierarchy allowing it to focus more on the long term strategic issues. Thus procedures and rules become the main way of controlling activities and introducing a degree of predictability into the organisation. This is a large disadvantage for the smaller product groups within SAIL as it means there is a larger degree of predictability into their activities as well as a large distance between the groups and the management level.

Organisational culture is used to try and describe the experiences of people within the organisation. It usually describes their beliefs, habits, manners, self-image and they way tasks are undertaken. To current employees the culture within their organisation will go unnoticed.

Organizational culture

The culture within the organisation is important as it key to the company functioning at its best as well as developing leadership throughout the company. A key role for the culture of an organisation is to differentiate its own specialised culture from another organisation. From my point of view, I think that SAIL has a Task culture. This is because the management could be seen as having a series of problems to be solved. 

Vision, Mission and Purpose

To be successful a business must continually modify to its competitive background. There are certain central ideals which stay steady and provide a sense of direction in the decision making process. These unchanging ideals form the company vision and help in identifying the company’s mission.

The mission conveys the belief s and objectives (vision for future), which is made up of three main elements:

Values

Purpose

Objectives (Vision)

The values and purpose together create the beliefs of the company and usually remain the same in the long term.

The values central to a company are limited to a small number (usually no more than five). They reflect the principles of the organisation as a whole. One way to identify a value would be to see if it would stay the same if the organisations situation changed. It would be counted as a value if it did stay the same. Also, if the organisation changed into a different industry, the values that were carried over would be the central values. For instance, a central value that I believe SAIL employs is innovation. Now, as unlikely as it may seem, if SAIL was to change its market area and this key value was no longer an advantageous aspect of the company then it would be detrimental to the company. But if SAIL were to change its market then I should change to one where its value of innovation would aid in SAIL's success.

The purpose is the reason that the company exists. It is shown through the company’s mission. Similar to the company values, the purpose of the company is relatively unchanging and lasts for long periods of time. This purpose is what sets the organisation apart from similar organisations. Since the main priority of a company is to turn over a profit, however this should not be part of the company’s main mission as it does not offer a suitable path for employees to follow. For example, one of SAIL's purposes would be to provide excellent customer service when dealing with potential clients. This would be especially important to the management of the company as it would show how the whole company treats individuals and would also influence employees on how to treat others – not just with clients.

Both the purpose and values are not directly selected but are exposed. The beliefs of the company should not be goal orientated but instead, it should reveal the company as it is.

The objectives (or vision) are what the higher management (such as the CEO of the company) decide to try and achieve. The vision dictates an objective that the company will set as a long term goal. This contradicts the central beliefs of the company as the vision is directly chosen.

Due to the vision being long term goals, they are much more demanding than other goals. The organisation has to realize that there is a reduced chance of successfully achieving the vision, but to initially begin to compete these goals the company must believe the vision can be achieved. The goals should be challenging enough that it motivates staff into increasing efforts to reach them.

The majority of visionary goals come under four main categories:

Target – e.g. sales targets

Common Enemy – e.g. overtaking rival companies in the market

Role Model – e.g. to emulate companies of a similar type

Internal Transformation – e.g. becoming number one company in the market

Even though a company’s vision may take a large amount of effort to achieve, most companies that have employed a long term vision have become very successful. But once the goal has been achieved, a company which would like to continue its success usually employs a new vision to keep the organisation motivated. For instance, a long term vision that could be employed, especially for a company such as SAIL, would be to reduce the carbon footprint of the company. This would be seen as a long term goal as it would take a long amount of time to successfully convert from fossil fuels to renewable energy as well as to research new way in which to power cars cost effectively.

Creative problem solving

Introduction to Creative problem solving - Tinker Toy

" The majority see the obstacles; the few see the objectives; history records the successes of the latter, while oblivion is the reward of the former."

                                                                        ---  Alfred Armand Montapert 

Life, during its journey, poses several problems that require a creative bent of mind for the solution. Particularly, if you are a manager who needs to deal with several such situations in your everyday life, it becomes necessary that you develop such a mindset to be effective. As a part of our 'Principles of Management' course ware by Dr. Prasad, we were introduced to creative problem solving in the form of a Tinker toy. In this blog, let me outline the steps we have taken to solve it.

The Tinker toy

The Tinker Toy consists of a wooden tennis bat structure with a slot in the handle. A rope passes through this slot whose ends hold one wooden square piece and one plastic ball each on either side of the slot. A circular disk encloses both the ends and is not wide enough to be removed from the toy. Neither can it pass over the wooden pieces to fall down.

The slot in handle is wide enough to let the circular disk and square pieces to pass through but not the balls. There is no possible way the rope can come out of the slot due to the balls. The challenge is to remove the ring from the toy without tampering in anyway with the toy.

Solution

After many trails and errors, we began to outline an approach to solve this puzzle. I will try to outline the steps in our thought process:

1. The ring is the primary hindrance to any movement through the slot. Push the ring up above the slit in the toy.

2. To pull out the wooden ring, the two wooden blocks need to be on the same side of the slot. Hold the ring and take one of the hanging wooden blocks and pass it through the slit onto the other side of the toy. The ball for the same would be near the slit.

3. Pull the ring down below the ball. Hold the ring up and pass it through the slit from the direction opposite to the side having the ball. The ring can be removed from the other side.

To get a clearer picture, take a look at the video:

Learning

                                        

Let me outline my learning in this exercise with the above diagram. Any creative solving problem requires the following three basic steps:

1. Explore the challenge

	Objective Finding - Identify Goal, Wish or Challenge This could be a wish or a goal. In our case it is to remove the circular disk from the tinker toy.
	Fact Finding - Gather Data Assess and review all the data that pertains to the situation at hand. Who’s involved, what’s involved, when, where, and why it’s important. Make a list of the facts and information, as well as the more visceral hunches, feelings, perceptions, assumptions and gossip around the situation. In this step, all the data is taken into consideration to review the objective and begin to innovate.
	Problem Finding - Clarify the Problem In this step, explore the facts and data to find all the problems and challenges inherent in the situation, and all the opportunities they represent. This is about making sure you’re focusing on the right problem. It is possible to come up with the right answer to the wrong problem. Re-define what you want or what’s stopping you.

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Idea Finding - Generate Ideas Generating ideas is much more than brainstorming. During this step, be vigilant about deferring judgment and coming up with wild, outrageous, out-of-the-box ideas. This is where you explore ideas that are possible solutions and have the most fun. It’s also where you need to stretch to make connections, take risks, and try new combinations to find potentially innovative solutions.

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Solution Finding – Select and Strengthen Solutions First, try to strengthen and improve the best ideas generated. Next, generate the criteria that needs to be considered to evaluate the ideas for success. Apply that criteria to the top ideas and decide which are most likely to solve the redefined problem. The best idea needs to meet criteria that makes it actionable before it becomes the solution. A creative idea is not really useful if it won’t be implemented.

Acceptance Finding – Plan for Action In this step, look at who’s responsible, what has to be done by when, and what resources are available in order to realize this idea as a full-fledged, activated solution.

The following statement summarizes it all:

"The first step is to make the problem specific . . . ; The second step is to form theories freely of how to rid yourself of that burden . . . ; The third step is to develop in foresight the consequences of your proposals . . . ; The fourth and final step in thinking is to compare the consequences of your proposals to see which is best in the light of your scheme of life as a whole . . . ; Whether you choose a vacation or a spouse, a party or a candidate, a cause to contribute to or a creed to live by - think!" — Brand Blanchard

Theory X and Theory Y managers

Introduction

Theory X and Theory Y was an idea devised by Douglas McGregor in his 1960 book “The Human Side of Enterprise”. It encapsulated a fundamental distinction between management styles and has formed the basis for much subsequent writing on the subject.

Theory X

Theory X is an authoritarian style where the emphasis is on “productivity, on the concept of a fair day's work, on the evils of feather-bedding and restriction of output, on rewards for performance … [it] reflects an underlying belief that management must counteract an inherent human tendency to avoid work”. 

Theory X is the style that predominated in business after the mechanistic system of scientific management had swept everything before it in the first few decades of the 20th century.

Theory X assumes that individuals are base, work-shy and constantly in need of a good prod. It always has a ready-made excuse for failure—the innate limitations of all human resources. Theory Y, however, assumes that individuals go to work of their own accord, because work is the only way in which they have a chance of satisfying their (high-level) need for achievement and self-respect. People will work without prodding; it has been their fate since Adam and Eve were banished from the Garden of Eden.

In summary,

• An average employee intrinsically does not like work and tries to escape it whenever possible.
• Since the employee does not want to work, he must be persuaded, compelled, or warned with punishment so as to achieve organizational goals. A close supervision is required on part of managers. The managers adopt a more dictatorial style.
• Many employees rank job security on top, and they have little or no aspiration/ ambition.
• Employees generally dislike responsibilities.
• Employees resist change.
• An average employee needs formal direction.

Theory Y

Theory Y is a participative style of management which “assumes that people will exercise self-direction and self-control in the achievement of organisational objectives to the degree that they are committed to those objectives”. It is management's main task in such a system to maximise that commitment.

Theory Y gives management no easy excuses for failure. It challenges them “to innovate, to discover new ways of organising and directing human effort, even though we recognise that the perfect organisation, like the perfect vacuum, is practically out of reach”. 

McGregor urged companies to adopt Theory Y. Only it, he believed, could motivate human beings to the highest levels of achievement. Theory X merely satisfied their lower-level physical needs and could not hope to be as productive. “Man is a wanting animal,” wrote McGregor, “as soon as one of his needs is satisfied another appears in its place.”

In summary,

• Employees can perceive their job as relaxing and normal. They exercise their physical and mental efforts in an inherent manner in their jobs.
• Employees may not require only threat, external control and coercion to work, but they can use self-direction and self-control if they are dedicated and sincere to achieve the organizational objectives.
• If the job is rewarding and satisfying, then it will result in employees’ loyalty and commitment to organization.
• An average employee can learn to admit and recognize the responsibility. In fact, he can even learn to obtain responsibility.
• The employees have skills and capabilities. Their logical capabilities should be fully utilized. In other words, the creativity, resourcefulness and innovative potentiality of the employees can be utilized to solve organizational problems.

Analysis

There are parallels with Abraham Maslow's hierarchy of needs, and Maslow was indeed greatly influenced by McGregor. So much so that he tried to introduce Theory Y into a Californian electronics business, but found that the idea in its extreme form did not work well. All individuals, he concluded, however independent and mature, need some form of structure around them and some direction from others. Maslow also criticised Theory Y for its “inhumanity” to the weak, and to those not capable of a high level of self-motivation.

In his comic classic “Up the Organisation”, Robert Townsend wrote powerfully in support of Theory Y:

"People don't hate work. It's as natural as rest or play. They don't have to be forced or threatened. If they commit themselves to mutual objectives, they'll drive themselves more effectively than you can drive them. But they'll commit themselves only to the extent they can see ways of satisfying their ego and development needs."

Implications of Theory X and Theory Y in management

• Quite a few organizations use Theory X today. Theory X encourages use of tight control and supervision. It implies that employees are reluctant to organizational changes. Thus, it does not encourage innovation.
• Many organizations are using Theory Y techniques. Theory Y implies that the managers should create and encourage a work environment which provides opportunities to employees to take initiative and self-direction. Employees should be given opportunities to contribute to organizational well-being. Theory Y encourages decentralization of authority, teamwork and participative decision making in an organization. Theory Y searches and discovers the ways in which an employee can make significant contributions in an organization. It harmonizes and matches employees’ needs and aspirations with organizational needs and aspirations.
• A YouTube video summarizing Theory X and Theory Y had been included here for reference.

Company profile case - Steel authority of India(SAIL)

Introduction

Steel Authority of India Limited is one of the largest state-owned steel makers in India and one of the top steel makers in World. With a turnover of 48,681 crore, the company is among the top five highest profit earning corporate of the country. It is a public sector undertaking which trades publicly in the market is largely owned by Government of India and acts like an operating company. Incorporated on January 24, 1973, SAIL has more than 1 lakh employees.  With an annual production of 13.5 million metric tons, SAIL is the 14th largest steel producer in the world. In this paper, we will try to trace out the life of SAIL since its inception to its performance in recent years.

History and strategy

History

The Indian steel industry was the third fastest growing steel industry in the world next only to China. The demand for Indian steel was growing at 8-9 % as against a global average of 5-6 %. By the end of 2006, the Indian Steel Industry was the 8th largest producer of steel in the world. With capital investments of over Rs. 100,000 crores, the Indian steel industry provided direct/indirect employment to over 2 million people. 

Over the years, India produced international quality steel of almost all grades/varieties and had also been a net exporter of steel. On November 4 2005, the Indian Government gave its approval for the National Steel Policy (NSP), which aimed at hiking production to over 100 Million Tonnes Per Annum (MTA) to make the Indian steel industry globally competitive in terms of cost, quality and product mix. The NSP anticipated achieving 100 MTA by 2019-20 from 38 MTA in 2004-05. The core of this vision was Steel Authority of India Ltd.

SAIL traces its origin to the Hindustan Steel Limited (HSL) which was set up on January 19, 1954. HSL was initially designed to manage only one plant that was coming up at Rourkela. But later, with the completion of the 2.5 MT stage at Bhilai, 1.8 MT at Rourkela and 1.6 MT at Durgapur, the total crude steel production capacity of HSL was raised to 3.7 MT in 1968-69 and subsequently to 4MT in 1972-73.

Strategy

On the demand side, the strategy was to create additional demand for steel through promotional efforts, awareness creation and strengthening the delivery chain, especially in rural areas. On the supply side, the strategy was to create additional capacity, remove procedural and policy bottlenecks in the availability of inputs such as iron ore and coal, make higher investments in R & D and human resource development and improvise infrastructure such as roads, railways and ports.

Organizational structure

SAIL operates through a network of integrated steel plants namely:

1.  Rourkela Steel Plant (RSP) in Orissa set up with German collaboration (The first integrated steel plant in the Public Sector in India, 1959)

2.   Bhilai Steel Plant (BSP) in Chhattisgarh set up with Soviet collaboration (1959)

3.  Durgapur Steel Plant (DSP) at Durgapur, West Bengal set up with British collaboration (1965)

4.  Bokaro Steel Plant (BSL) in Jharkhand (1965) set up with Soviet collaboration (The Plant is hailed as the country’s first Swadeshi steel plant, built with maximum indigenous content in terms of equipment, material and know-how)

5.   IISCO Steel Plant (ISP) at Burnpur, West Bengal

Special Steel Plants

1.       Steel Authority of India Limited (SAIL), Kanpur, Uttar Pradesh

2.       Alloy Steels Plants (ASP), Durgapur, West Bengal

3.       Salem Steel Plant (SSP), Tamil Nadu

4.       Visvesvaraya Iron and Steel Limited (VISL), at Bhadravathi, Karnataka 

Subsidiaries

1.       Maharashtra Elektro-smelt Limited (MEL) in Maharashtra

Central Units

1.       Centre for Engineering and Technology

2.       Research and development centre for iron and steel

3.       Management Training Institute

4.       SAIL safety organization

5.       Raw materials division

6.       Central Marketing Organization

7.       SAIL consultancy organization

Joint Ventures

1.       NTPC SAIL Power Company Limited (NSPCL)

2.       Bokaro Power Supply Company Pvt. Limited (BPSCL)

3.       mjunction services limited

4.       SAIL-Bansal Service Center Ltd

5.       Bhilai JP Cement Ltd

6.       Bokaro JP Cement Ltd

7.       SAIL&MOIL Ferro Alloys (Pvt.) Limited

8.       S&T Mining Company Pvt. Ltd

9.       International Coal Ventures Private Limited

Financial Performance for FY2011

Steel Authority of India (SAIL or the company) is engaged in the business of manufacturing and marketing steel and its allied products. It is a fully integrated iron and steel maker, producing both basic and special steel products for construction, engineering, power, railway, automotive, and defense industries. 

The company primarily operates in India. SAIL is headquartered in New Delhi, India and employed about 110,800 people as of March 2011. The company recorded revenues  gross sales) of INR472,652 million ($10,365.3 million) in the financial year ended March  2011 (FY2011), an increase of 7.4% over FY2010. The operating profit of the company was INR31,894.2 million ($699.4 million) in FY2011, a decrease of 63% compared with FY2010. The net profit was INR50,172.9 million ($1,100.3 million) in FY2011, a decrease of 26.8% compared with FY2010.

 Achievements

1. Quality Summit New York Gold Trophy 2007 (International Award for Excellence & Business Prestige) and Award of Excellence Maintenance for Sumitomo Heavy Industry & TSUBKIMOTO-KOGIO, Japan won by Alloy Steel Plant, Durgapur.

2.   SAIL was featured in the 2008 list of Forbes Global 2000 companies at position 647.[8]

3.  Golden Peacock Award for Combating Climate Change – 2008 for BSP, Occupational Health and Safety – 2008 for BSL

4. National Safety Award to Bhilai Steel Plant announced by the Ministry of Labour & Employment, Government of India - 2008

5.  Durgapur Steel Plant won the 2nd Prize in the Association of Business Communicators of India Awards - 2008.

6.  Ispat Bhasha Bharati. the Rajbhasha Journal of SAIL has been awarded with the first prize under the All India House Journal Award Scheme - 2008-09

7.    Salem Steel Plant received the prestigious Greentech Gold Award in Metal and Mining Sector - 2008-09.

8.    Golden Peacock Award for Corporate Social Responsibility won by Bhilai Steel Plant (BSP) for the third year in a row - 2009.

9.    Rourkela Steel Plant bagged the prestigious Srishti Good Green Governance (G-Cube) Award - 2009.

10.  Greentech HR Excellence Award bagged by Durgapur Steel Plant - 2009

11. The steel township of Rourkela Steel Plant (RSP) has been ranked 14th in sanitation and cleanliness by Union Urban Development Ministry - 2009-10

12.  Greentech Safety Gold Award was bagged by Bhilai Steel Plant - 2010

13.  The HR Excellence Award by the Greentech Foundation won by Bhilai Steel Plant - 2010

14.  SSP has won the prestigious Greentech Silver Award in Training Category of Greentech HR Excellence Awards - 2010.

15.   Award for financial and operational strength by Indian Institute of Industrial Engineering (IIIE)- 2009-10

16.   Golden Peacock Environment Management Award - 2011

17.  Randstad Award for HR Practices and Employer Branding under 'Manufacturing Industries' category - 2011

18.   Maiden Wockhardt Shining Star CSR Award in the Iron & Steel Sector category - 2011.

19.   Salem Steel Plant (SSP) has won the prestigious National Sustainability Award for the 6th time in succession and 13th time since inception of the award from Indian Institute of Metals (IIM)- 2011.    

Other achievements

• Of the 33 Prime Minister's Shram Awards announced for 2010 by the Ministry of Labour, Government of India, 17 of which went to PSUs, SAIL employees bagged 11 awards.
• Of the total number of 76 awardees for the year, 45 belong to SAIL - a remarkable distinction for any organisation. 
• Maharatna SAIL has received the prestigious Golden Peacock Environment Management Award for the year 2011. The award, in recognition of SAIL's initiatives and achievements in the field of environment management, was presented by Union Minister for Home Affairs Shri P. Chidambaram on 24th June, 2011
• 74 of a total of 128 awardees who have won the prestigious Vishwakarma Rashtriya Puraskar (VRP) are from SAIL. The 15 out of 28 awards won by SAIL went to our 74 employees for the performance year 2008. Bhilai Steel Plant won 7 such awards involving 36 employees, Bokaro Steel Plant won 6 awards involving 29 employees. Durgapur Steel Plant and Salem Steel Plant both won 1 award each involving five and four employees respectively. SAIL employees have bagged 4 out of 5 awards of Class A, which is the highest number of A Class awards won by any PSU in India.
• The India’s union minister of steel, Mr Beni Prasad Verma has said that the Steel Industry in India which contributes over 2% to the GDP is expected to become the 2nd largest producer of crude steel in the world by 2015.

CSR and Green measures

ENVIRONMENT MANAGEMENT

SAIL reaffirms its commitment to contribute towards a clean sustainable environment and continually enhancing its environmental performance as an integral part of its business philosophy and values.

As a responsible corporate citizen, SAIL is fully committed towards Corporate Responsibility of Environment Protection (CREP) target. Plants have taken lot of measures in the field of reducing fugitive emission, specific water consumption, specific energy consumption and enhancing solid waste utilisation. All these actions are continuous in nature so that SAIL strives to go  beyond the targets set, wherever possible.  

Modernisation and ERs.pansion plan of SAIL is taking care of 

(a) 100% production of steel making through Basic ORs.ygen Furnace (BOF) route, 

(b) 100% processing of steel through continuous casting,

(c) auRs.iliary fuel injection system in all Blast Furnaces, 

(d) energy saving schemes and 

(e) adherence to environmental norms. 

In fact, one of the guiding principles of SAIL is to make positive impact on the environment and promote good environmental practices.  Areas of improvement during 2009-10 over 2008-09 are : 

• Air emission reduced to 1.55 kg/tcs, an improvement of more than 3%. 
• Solid waste utilization increased to 80%, an improvement of more than 1%. 
• Specific effluent discharge reduced to 2.53 m3/tfs, an improvement of more than 1%. 
• Energy consumption reduced to 6.72 Gcal/tcs, an improvement of 0.1%. 
• More than 2.1 lakh saplings have been planted during 2009- 10 at plants, mines and townships with accumulative plantation of 175 lakh till date.

 CORPORATE SOCIAL RESPONSIBILITY

For any organization, CSR begins by being aware of the impact of its business on society. The Credo of SAIL specifically highlights the commitment towards society at large which states, inter-alia "Making a meaningful difference in peoples life". SAILs Social Objective is synonymous with Corporate Social Responsibility (CSR). Apart from the business of manufacturing steel, the objective of the company is to conduct business in ways that produce social, environmental and

economic benefits to the communities in which it operates.

• To meet the above objective, specific Corporate Social Responsibility (CSR) Groups have been formed at Corporate Level and at all plants/units in SAIL. As a matter of policy, the Budget allocated for Corporate Social Responsibility [CSR] is 2 % of budgeted distributable surplus (after Dividend and Dividend TaRs). 
• SAIL has established 61 Primary Health Centres, 8 Reproductive and Child Health Centres, 18 Hospitals and 6 Super-Specialty Hospitals for specialized healthcare to almost 26.7 million people since inception.
• 138 schools have been set up in the steel townships for modern education to about 74,000 children.  Assistance has been provided to over 260 schools of villages surrounding its units for free education of more than 55,000 tribal students. SAIL has achieved a Girl:Boy ratio of 1:1 for all levels of education and a survival rate of 95.8% in SAIL Primary Schools and 90% in SAIL Secondary Schools. 
• Since inception, SAIL has provided roads in 435 villages helping around 56 lakh people and has been undertaking their construction and repairs on a regular basis. SAIL has also provided access to water infrastructure to people living in far- flung areas by installing 4714 water sources, thereby providing drinking water access to around 37 lakh people. 
• SAIL has been awarded Annual SCOPE Award-"SCOPE Meritorious Award for Corporate Social Responsibility & Responsiveness for the year 2008-09" by Honble President of India. The Annual FICCI Awards 2008-09 in the category of "The Vision Corporate Triple Impact - Business Performance : Social & Environmental Action and Globalisation Award : 2008-09" by the Honble Finance Minister of India, Shri Pranab Mukherjee.  Bhilai Steel Plant (BSP) -SAIL has been short listed for "Golden Peacock Award for CSR- 2008-09". 
• 79 villages have been adopted for developing them as Model Steel Villages across eight states. The developmental activities being undertaken in these villages include medical & health services, education, roads & connectivity, sanitation, community centers, livelihood generation, sports facilities, etc. By March, 2010, 54 Model Steel villages have been completed. 
• The Company is also working towards preserving culture and heritage. Some of the key activities include assistance to maintenance of monuments in Lodhi Garden, New Delhi.

Future plans

• SAIL, is in the process of modernizing and expanding its production units, raw material resources and other facilities to maintain its dominant position in the Indian steel market. The aim is to increase the production capacity from the base level production of 14.6 MTPA (2006-07) to 26.2 MTPA of Hot Metal.
• On the 25th of May, 2012, Steel Authority of India entered into an Memorandum of Understanding with the West Bengal government and Burn Standard Company Ltd for setting up of a railway Wagon factory of approximately Rs. 2100 crore. This project will create an approximate of 75300 jobs.

SWOT analysis

Strengths

• Staffing is a big strength for SAIL as being a Govt.venture it is looked upon for generating and offering employment
• Customer base is another major strength for SAIL as it offers steel at subsidised rates and hence caters to high volume of clients
• Another strength for SAIL is its Market position which is on a very successful level and thus there is no hesitation in its clients
• Financial Resources also acts as a strength as it can use Govt funds for ventures.
• Sales Channels also is a strength as it uses all possible channels for promotion and Sales.
• Another Strength is the (product Steel) is core in nature and related to almost all development and infrastructure activities.
• Profitability is another strength as SAIL records astounding profit figures in spite of providing social benefit and subsidies to its clients

Weaknesses

• Staff also posses as a weakness in a certain way as SAIL being a Govt. venture, targets and workload are not tight and job security leads to staff not being fully productive
• Another weakness is that higher profit margins are possible but not allowed since being a Govt venture.
• Competitive Vulnerability is another weakness as competitors include private players with better quality manpower, strategies and policies.
• Another weakness is production of a single vertical(Steel) and no diversification.
• Also a major Weakness is completely answerable to the Central Govt. and hence exposed to corruption and mismanagement

Opportunities

• However SAIL has certain opportunities as it is affiliated to the Central Govt. of India and hence expansion and growth is possible
• SAIL also can adopt globalization with ease using Govt. support
• Also SAIL being financially sound can undertake merger and acquisition projects with weaker counterparts.
• It can also involve in production of forward integration products and by-products apart from its core product(Steel) with the help of its healthy brand image.

Threats

• Threats would include change in Govt Policies and Economy trend which can have a direct impact on the functioning of SAIL.
• Also emerging and existing private sector competitors who can steal market share.
• Also late implementation of technology and modern machinery as compared to counterparts can pose a potential threat.
• Apart from the above major threats, labor turnover canalso cause problems due to existence of higher paying jobs with better benefits in the sector.

 My take

The Steel Authority of India Ltd. (SAIL) enjoys a good market position and diversity in India and its captive sources of iron ore and power that result in above average profitability. SAIL's good access to funding as a government-related entity is an additional rating strength. The company's deteriorating credit measures and weak operating efficiency partly offset the above weaknesses. A delay in the completion of SAIL's capital intensive expansion plans and a challenging steel industry environment have weakened the company's credit protection measures.

The company is the largest integrated steel manufacturer in the country, though its market share of crude steel has been declining and was about 18% for the fiscal year ended March 31, 2012. SAIL's market position is expected to improve after it has completed its expansion plan, which would add about 7 million tons of steelmaking capacity. The company also has good end-market and customer diversity. It benefits from focus on the Indian market where demand is growing at a faster pace than global steel demand. This has resulted in SAIL's capacity utilization being consistently more than 100%.

SAIL's backward integration supports its above average profitability. The company meets its entire iron ore requirements and 70% of its power needs from captive sources. This helps offset its weaker operating efficiency stemming from a large workforce, above average coking coal consumption, dated technology, limited value-added production, and sales of semi-finished goods. However, SAIL plans to address many of these issues with its current capital expenditure on modernization.

SAIL's operating performance in fiscal+.l 2012 was weaker than expectations due to a challenging operating environment. The company's profitability weakened with EBITDA margins declining to 15.2% from 20.3% in the previous fiscal year. Prices of coking coal, which SAIL imports, were high, while the prices of steel were subdued. In addition, the completion of many of the company's projects was delayed resulting in a lower-than-expected increase in steel production. Nevertheless, we expect SAIL's operating performance to improve in fiscal 2013 and beyond because of improving operating efficiency, capacity expansion, and some improvement in the industry.

SAIL's credit protection measures have deteriorated more than expected because: (1) operating performance was weaker than anticipated; and (2) the company did not issue any equity in fiscal 2012, which we had expected it would. Nevertheless, SAIL's ratio of adjusted debt (adjusted for the company's cash holding of more than Indian rupee (INR) 45 billion) to EBITDA weakened to 2.6x as of March 31, 2012, from 1.5x a year ago. We expect the ratio to further weaken to about 3.0x over the next two years, and then improve. The company's ratio of adjusted debt to capital was also about 32% as of March 31, 2012. We expect the ratio to increase to 38% in fiscal 2013.