How Maruti Suzuki streamlined productivity by revamping vendor’s HR

The company focussed on handholding and developing the vendors supplying over the lion’s share of their components.

Organisations have been debating on how HR can be a business partner in the true sense. The contribution of HR to business profitability has often been questioned. Indeed, HR plays a crucial role —mostly indirect though —in making businesses run successfully and sustainably. But here is a case where HR did something unusual to help overcome a business hurdle and consequently boost growth and profitability.

Maruti Suzuki India, the country’s largest car manufacturer, has a business objective of producing two million cars by 2020. For each of its products, it relies on several big and small automobile component vendors manufacturing different parts of a car. So, obviously Maruti Suzuki’s stable functioning depends a lot on a streamlined supply from these vendors. However, back in 2012–13 it witnessed a lot of labour unrest in most of its vendor firms, especially Japanese vendors, which consequently impacted its business.

Vinod Rai, head–supply chain & vendor HR, Maruti Suzuki India Ltd, said “The labour unrest resulted in the loss of production and market share. This is when we decided to delve deeper into the issue for some fact finding and we identified several causes of the conflict”.

Rai and his team found out that there were various labour concerns at these vendor firms, which were being ignored for a while. One of the issues was wage disparities between the regular and contracted workers. Uncertainty prevailed in the minds of the contracted workers regarding their future as employees. Lack of trust between the workers and the HR officials was another major issue. Rai shared that the predominant perception amongst the workers was that HR is not their well-wisher but an agent of the management serving the sole purpose of ensuring that the demands of the workers — justified or not — are not met.

Moreover, the Japanese firms suffered from a huge lack of connectivity and active communication between management and the workers, which meant that the management had no inkling whatsoever about the labour discontent. The management at these vendor firms also did not have any feedback or information-collecting mechanisms to find out the general level of satisfaction or dissatisfaction amongst its workers. The workers also felt that they were deprived of their deserving share in the company’s profits. All these issues together proved that the vendors focussed more on their quality and costs rather than the concerns of their workers. “These issues hinted towards an incapable HR, poor union management and a clear lack of communication. We realised that we may not be able to achieve our goal of two million by 2020 if we do not help our vendors develop a strong sense of HR and its importance in solving people issues”, said Rai.

With that in mind, Maruti Suzuki India conceptualised Vendor Human Resources in 2013. The aim was to build the HR/IR capabilities of its vendors, ensuring a smooth and uninterrupted supply of components. This was a much needed one-of-its-kind initiative as Rai felt that in order to meet their business objective and to mitigate any future HR/IR risk, it was paramount to handhold and develop the vendors that supply more than 75 per cent of their components. The sole intent was to support business productivity and this is actually how HR can be a true business partner.

Rai shared the seven areas important to the health of an organisation and where they needed to help develop the vendor HR— Leadership, demographic profile, human resources processes, environment health & safety, corporate social responsibility, industrial climate; and shop floor practice. “We defined a template and kick started this project in April 2014 with a five-step process. The project has a duration of nine months per vendor”, Rai explained.

Maruti Suzuki made sure that the MD/CEOs of the vendor companies participated in this programme along with their HR heads, as it was crucial to make them understand the importance of the HR development plan. The five-step project had two checkpoints at the second and fifth month, to ensure everything was moving as planned.

This intervention by Maruti Suzuki India brought about a significant transformation, not just in its vendor organisations but in its own business growth as well. While its market share grew from 42 per cent in 2014-15 to 46 per cent in 2015, its vendors became more people oriented and HR focussed.

Affirming the proof of the pudding, Rai said, “What was considered good to do has now become essential to do. Training, employee involvement, two-way communication, recognition, induction and orientation, shop-floor improvement backed by solid employee involvement, dexterity centres and technical skill building have all become a norm for these companies. Also, it is interesting to see the traditional welfare-oriented employee relations approach of the promoters being supplemented with some sharp process work. To see a formal talent management programme in an INR 300 million company, was a sheer delight”.

The auto component industry has some great HR talent, and now they are appropriately tasked by the leadership, are grounded and have an infectious enthusiasm about their work. “It’s so refreshing to meet them”, says Rai. As a result of the VHR programme, the shop floor is now safer, cleaner, more organised and better lit. Also, an INR three billion plant recorded 5000 days of continuous working without a reportable accident, which is a great accomplishment. Rai also shared that the layer of management called ‘front-line supervisors’, who for years were a reasonably disempowered lot are rapidly becoming the back bone of the improvement activity. They can operate the machines, command the respect of the operators, are trained and have become a healthy talent pool to finance growth.

This HR-driven change initiative will surely go a long way in building confidence among the workers about the honesty and forthrightness of the management. It will also change the face of HR as a true business partner. This, by far, is the best HR can do to ensure business success, as Maruti Suzuki India has set a new benchmark in planning and implementing such an extensive HR change initiative.

By March 2016, Maruti Suzuki India had covered 100 vendors, having transformed 70 percent of them. While the programme is still on, the car manufacturer is already noticing a sharp decline in production loss and labour issues, with a constantly growing market share.