Larsen and Toubro Case Study

July 1, 2018 Management

Development (OD) is a planned long term effort led and supported through the top management to improve an organization’s ability and to solve its own problems by continuously working together and on managing the culture using behavioural skills. Thus, there are some certain aspects worth discussing about which are- OD is a planned effort. It requires a lot of effort, patience, and faith and is time consuming. Secondly, OD usually uses outsiders.

These ‘facilitators’ as they are called are process specialists and are involved in depth in this process. The pioneers of OD in India were Larsen and Toubro India (L&T). OD at L&T started by calling in 2 eminent professors- Dr Udai Pareek and Dr TV Rao to study the appraisal process at the company. The existing appraisal system had many faults and needed to be corrected. The difficult task started by the professors interviewing some bosses and subordinates from different departments (using Diagnosis or Action Research) and they got a very interesting feedback.

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Some of the aspects of the feedback were – juniors wanted to know how well they were doing on the job, but weren’t told; people wanted to know what the growth opportunities in the company were; the appraisal form was too lengthy; some bosses had too many subordinates to appraise, etc. After getting the feedback from the employees the professors gave a report to the top management about the actual problem. The appraisal system had to serve not just one but many purposes namely it should help people understand their strengths and weaknesses, their own progress on the job, how they can perform better, and how they could grow in the company.

So the appraisal process had to address the issues of appraisal, potential, counselling, career development and training all in one! The top management after reviewing the report gave the go ahead and they did two main things which were the most important which were bifurcating the Personnel department into personnel department and HRD department. This bifurcation was the first sign of ‘structural’ change. Secondly, a team of 6 senior managers was formed which would be responsible for implementing the changes required.

The story continues when the 6 task force and the professors decided that the appraisal process had to involve the line managers personally, the performance goals must be set jointly by boss and junior and the appraisals must also involve feedback and counselling to people. Thus, they prepared a Performance Appraisal Manual by involving the departmental heads and other senior managers to analyze what kind of objectives could be set and then added such guidelines in the manual. To address the issue of feedback and counselling, the team identified around 29 senior line managers and some senior staff with a flair for public speaking.

These selected people were put through a workshop on how to be good ‘Givers’ and ‘Receivers’ of feedback and then later conducted the same workshop for other employees at HQ and regional offices. Thus, the first workshop was a ‘Train the trainer’ workshop which was cascaded to the other employees. After putting in so much of effort now the management at L&T wanted to know whether the process was working for them or not. So again the professors interviewed some seniors and juniors about how the appraisals were going on.

This time different views came into the picture – the goal setting was seen as time consuming, appraisal was becoming a numbers game, and was tending to become ritualistic. The HRD department was asked to conduct a survey (Participant Action Research). The survey also threw new light about the new appraisal process. The bosses now did involve their juniors in the goal setting and there was ‘healthy resolution’ of difficulties and there was a ‘high degree of trust’ between the seniors and juniors which led to ‘increased joint understanding about the job’.

After receiving such a feedback, they again tried to simplify the appraisal form by adding the definitions of the attributes listed in the appraisal form. In addition, they held refresher courses in feedback skills for both ‘givers’ and ‘receivers’ of feedback. The facilitators felt that the appraisal system has stabilised when 80 to 85% of the appraisal forms were returned within six weeks of the target date. Also the HRD department started analyzing all the appraisal forms.

The data from the analysis was used for listing high and low performers for a certain period; for finalising departmental developmental plans and for preparing the list of department wise employees and the training courses they needed. The above mentioned process took L&T 8 years to complete and stabilise themselves. Thus, I can conclude that OD is a long term process which requires a lot of patience, support from the top management and a vision to a bright future.


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