set up a dedicated training-center with state-of-the-art
Case 60 - Training
"Every time I read Lester Thurow, I am reminded of the grim
fate of manufacturing industries and the bright future of brain
power business. To survive in the knowledge economy of
tomorrow, organizations have to feed on ideas. Ideas come
from people in the organization. But, unless you create a
culture that can breed innovation, you cannot keep pace with
change. I have not come across a single idea from my managers
that have startled me. What they suggested has, often disturbed
me. They are still influenced by the strategic paradigms of the
past; they have no feel for the future. I have tried to stimulate
minds by sending my senior managers to the best B-Schools
for short-term courses on strategic vision. They have come
back refreshed, but they have not been able to galvanize the
organization. I wonder if I will be able to infuse my
organization with new ethos if I set up a training-center. My
workers need to retool their skills, my middle managers need
to handle people better, and my senior managers need to re-
invent our business models. But my entrepreneurial mind is
averse to investment during a recession where the pay-offs
are not immediate" Neelkant Rao, the fifty five years old CEO
of Sankalp Electricals, was in two minds even as he tried to
create a new future for his organization.
Excerpts from self-review by N. Rao, CEO, Snakalp
Electricals Ltd.
Something interesting cropped up at our weekly
Management Committee meeting this morning. It had, in fact,
been added to our discussion at the behest of our President
(HRD), S.L. Suryanarayanan. The issue was simple: should we
technology on our premises? Or should we continue to depend
on external resources and facilities for our training
programmes. Most large companies in the country, I
understand, are grappling with this dilemma. I have a personal
interest in the matter because I have always valued training,
and, consciously, assigned great weightage to the development
of our human resource. Our discussion was tentative and
inconclusive. Understandably, Suryanarayanan was keen that
SEL should establish its own training center. Our President
(Finance), Santosh Khurana, played the role of a bean-counter,
sounding the note of caution. He was keen on examining the
financial implications in detail. There were arguments and
counter-arguments; the cost of setting up such a center and the
pay-offs were hotly debated. While it is, of course, necessary
to evaluate any proposal on the basis of its Return On
Investment (ROI), I think that there is a need to adopt a holistic
view about training, where, pay-offs are not tangible. But I have
an open mind on the issue. How do you evaluate the benefits
of a training programme? I draw a blank with most of my
fellow CEO's whenever I talk to them about it. There are,
clearly, no tried-and-tested methods of evaluating the pay-offs
from training. This is particularly true of development training-
programmes, which our senior managers often attend for
exposure to strategy. The impact is neither immediate nor
measurable. But it is, indeed, possible to ascertain the benefits
of a programme, which is skill-based, function-specific, and,
hence, sharply focused. For instance, if a field salesman attends
a course on merchandising, an improvement in the
merchandising index for the territory he controls would be a
yardstick to measure the benefits of that course. In fact, we have
already done some work in this regard on dealer training. Like
most of its contemporaries, SEL began as a trader. We used to
import electrical goods in 1965, and sell them through
commission-agents at a profit of about 20 - 25 per cent. That
phase, in fact, laid the foundation of a distribution network
which, we believe, is our strength today. SELboasts of a 4,000-
strong dealer network - the second-largest in the electrical

industry. In 1968,we set up a manufacturing facilityin Mumbai
for assembling ceiling fans and low horse-power motors. By
the early 1980's,SELhad 5 plants all over the country, m~g
transformers, switchgears, lighting equipment, and electrical
accessories.Wecontinued to expand over the years, and, today,
we have 8 plants in 6 locations in the country, manufacturing
30 generic products, which are both exported and sold locally.
Wewent in for a new business structure three years ago, when
we regrouped all our divisions into four Strategic Business
Units (SBUs):Power Systems (transformers, switchgears, and
projects),Industrial Systems (motors, alternators, and signaling
and transportation equipment), Digital Systems (industrial
electronics and informatics), and Consumer Products (fans,
lighting-accessories, and appliances). We have also
decentralized HRD, R&D and finance to the SBU-Ievels;they
are represented at the corporate office by the core teams, each
of which is headed by our president.
Suryanarayanan was giving me some statistics about what
two of our competitors have done about training. The Rs.
1,800crore Thirtha Enterprise - which has the largest market
share of 21 per cent in the electrical equipment industry - has
set up a dedicated training-center, with a Rs. 10 crore
investment in real estate, buildings, and related infrastructure.
Located on a sprawling 12,OOO-squarefoot plot near the
company's corporate headquarters in Chennai, it has a modem
auditorium, employs nine full-time trainers, and has a regular
visiting faculty. It has earmarked an annual budget of
management trainees in his first year. My other prime
competitor, the Rs. 1,100crore Omkar Appliances, inaugurated
its Rs. 4-crore HRD Center in Mumbai last year. Built on three
acres of land near the company's plant at Thane, with
beautifully-landscaped residences, it conducts residential
training-programmes. It can house 56 guests, and has a well-
equipped auditorium, a conference-room, a library, and a
cOIhputer lab. It trained 1,300 people last year through as
many as 16 programmes. While Thirtha Enterprise ensures
that each of its employees spends 2.50per cent of his working-
days every year on training, Omkar Appliances' 1,500
The Case of the Traini!fgi~,
~agers spe~d 1.50per cent of its wage-bill on~ ... \...
arms to push It up to 5 per cent by 2000. :r idf~.t~~}'.
We were looking at some of our own fi~.;ia~.i.,'i';'!
10,000 employees spends about 3 per cent of his UN'IIt.
training - which works out to 9 days per annum .-:-
aim is to take it to 5 per cent per annum by 2002.Our aM.
~.,i"
outgo on training is in the region of Rs. 9 crores which;OI\'l
turnover of Rs. 1,500crores works out to less than 1 per ..~
of our sales. My objective is to double the outlay in the ~
two years. SEL has several different types of trailling-
programmes. We even have induction- programmes. fOJ
fresher's targeted at about 50 engineers and management
graduates, whom we recruit directly from the campus ev~
year. It lasts for over 10 months. In fact, this is the only full-
fledged in-house programme we have. Then, we have
supervisory - development programmes, where experienced
engineers are trained in communication skills and team
building. We also have management development programmes
for the junior - and middle-management cadres in addition to
core management programmes for our senior managers. And,
finally, there is the much-coveted Business Leadership
Programme, which is targeted at potential profit-center heads.
About 30 managers have attended this 18 month programme
so far, and our aim is to build a critical mass of 200 business
leaders by 2OG2.In addition, there are a number of programmes
that cut across the hierarchy; some of them are conducted
specially for each BSU.All this proves that training is as serious
a business for us as it is for our rivals.
There are two other parameters, which reinforce our
commitment to training. We have already initiated Human
Resources Accounting, which placed the value of our human
resource at Rs. 820crores last year. Human resources constitute
an important raw material for any strategy. We should,
therefore, regularly monitor our people-skills so as to upgrade
them whenever necessary. This cannot be done in vacuum.
You need a yardstick, and Human Resource Accounting
provides one. Once you ascribe a value to your human
resource, it gives you manpower-quality, and utilizes your
 people better. Human Resource Accounting was actually a
sequel to our attempts to bench-marking SEL'sHRD practices
with the market-leader, Thirtha Enterprises, which had used
HRD as a vehicle for its resources in every annual report to
its share holders. Now, there are various ways and, tested in
several companies, including Thirtha Enterprises. Accordingly,
we have defined their value as lithe value of current wages
payable to employees for the remaining years with the
company. That was the fundamental parameter. Of course,
II
we excluded several categories from the exercise - trainees,
apprentices, casual, and contractual labour - because they were
not on programmes as well. Although it is confined to dealer-
training, we will, hopefully, extend it across the organization
once we have fine-tuned the methodology. The programme
emerged out of the realization that a salesman's biggest fear
is the closing of a transaction. So, we· decided to train all the
salesmen at our dealerships in the art of closing deals. We
also decided to evaluate the benefits of training in strictly
monetary terms. We used the conventional market research
method of having a control group and a non-control group.
As part of the first evaluation exercise in February, 1994, we
chose 40 salesmen from the control group based on our
training-requirements. We tracked down their commissions
too for the same period. Post training, we kept track of the
commissions earned by both groups for six months. The
trained group increased its earnings by an average of Rs. 2
lakh per annum per salesman; while the untrained group
. increased its earnings by Rs. 75,000.On every investment of
Rs. 1 Lakh for the training programme, SEL's sales had gone
up by Rs. 2.50 crores. We could now boast of an ROI of 250:1.
Evidently, the programme had paid off. It is, of course, not
possible to conduct such an evaluation for every kind of
training. That is the biggest downside to investing in executive
education.
I see my goals quite differently. I hate to subscribe to the
conventional emphasis on top-and-bottom-line growth. The
CEO,as I underlined in my lecture at the Chennai Management
Association last week, is the de-facto Chief Personnel Officer
of a company. Most organizations today, particularly in our
business, are knowledge-intensive - not asset-intensive. To
manage the intangible assets, you have to organize people
well so that you can utilize them in any part of the
organization, and in any aspect of the strategy. There is a
global war for professional and technical talent in the electrical
equipment industry. Assets like financial capital, plant, and
equipment are available in plenty; outstanding leadership-
skills and managerial expertise are scare. An organization
should be able to motivate, attract, and retain performers. You
have to constantly aim at cornering a disproportionate share
of the outstanding talent in your industry. That calls for a
different type of organization, which is both entrepreneurial
and empowered. That is the kind of institution I want to build
at SEL.I know I will face problems. I also know that training
is crucial to achieving my goals. Post-liberalization, India has
spawned as external training industry which, according to
estimates made by the Indian Society For Training &
Development - a professional body of trainers - has a turnover
of Rs.2,500 crore per annum. Companies are faced with an
array of programmes spread over a variety of locations,
duration and prices. How do we choose what is best for our
company? That is the crucial question. Even the best course
will do no good unless it is tailored to our specific needs. We
should choose only such training programmes that fit with
SEL's business strategy. Our business goals should translate
annual plans, which generate project ideas; once you know
who is going to work on these projects; their training needs
can be easily identified and fulfilled. It is essential to use
training as part of a well thought-out programme. Do we
want educational programmes that increase a person's general
knowledge, such as courses on business environment and law?
Do we want developmental courses that prepare people for
future roles as leaders? Or do we desire courses that impart
specific skills in inventory-control and financial management?
Most courses do not come cheap; so it is important to evaluate
what an organization needs. Here are four things we could
do:

1. Identify where the organization is going, and what
skills it needs to get there. For example, if the company
is moving into a high growth rate phase, we would
need people trained in risk taking and change-
management.
2. Look at what roles various individuals play in that
process. Those identified as potential leaders, for
instance, would benefit from leadership or general
management programmes as well as courses that hone
their skills in InfoTech and marketing.
3. Mesh them with individual training needs, which can
be ascertained through appraisals or feedback. An
individual's perception of what training he needs is,
often different from what an organization thinks.
4. A cascading model of learning could be big help.
Whoever attends a course is required to conduct it
subsequently for his subordinates. This way, the person
directly internalizes the learning, and it is also cost-
effective. Suryanarayanan tells me that this is what
Xerox Corp. does worldwide.
The issue of a training-center came up again at our
Management Committee meeting today. V.M.Jagannathan, our
President (Works), argued that setting up a dedicated training-
center runs contrary to the spirit of outsourcing, which is part
of our mission statement. It clearly says that we will focus
only on value added activities, and offload those that are not
part of our core business to agencies, which, in our view, have
the required competence to do it for us which is why we have
reduced a number of our activities in the last couple of years.
Not only has this helped us get a grip on our core business;
it has allowed us to reduce our operational costs by at least
10 per cent. And it has also enabled us to develop a set of
reliable Tier - 1 supplier - 2 for each material or service - in
tune with the organization's TQM philosophy. Jagannatha had
a valid point when he said that, in most companies, even
support functions, like HRD are outsourcing a number of their
activities: security, canteen-facilities, recruitment, and
compensation. Almost every human resources activity, he said,
The Case of the Training Center f!II.
should be offloaded in a competitive environment. So, why
should we buck the normal trend? Why should we add toOl.:ii
costs?
Suryanarayanan replied that if cost-cutting was a criterion;
there was everything to be said in favour of having our own
training center. An in-house center is cost effective because a
large number of people can get the same exposure for the cost
incurred on one individual. He said, for instance, that an
individual residential programme at an Indian Institutes of
Management (IIM)could cost Rs. 25,000a week while the same
quality of training could be imparted to a large number of people
by inviting the faculty to lecture at our premises. While travel
and accommodation-costs could add up to Rs. 6,000 per day
per head in the case of external training, the expenses could be
minimized to Rs. 500 per day at an in-house training center.
Suryanarayanan referred, in particular, to the Business
Leadership Programme, which was customized for SELat a cost
of Rs. 8 lakh. A similar programme at an IIM campus would
cost thrice that amount, he said. A valid pomt; I almost agreed
to the idea of setting up our own training-center. There were
some other points that were raised at the meeting yesterday.
"We should conduct a management development programme,
which talks of the company's vision." Said Himanshu Roy,
President (Power Systems). "Since the vision is unique to each
company and it cannot be formulated elsewhere. The culture
of the company and its values cannot be experienced by sending
people to external programmes, where they deliberate on issues
as part of a disparate group of individuals coming from different
backgrounds." He also said that a dedicated training-center
allowed a company to tailor programmes to the needs of the
company and of the individual rather be straight jacketed by
what is available. Roy suggested that we could regularly change
the modules to suit our needs, and could develop customized
programmes to suit each of our SBUs. But Satyajit Chaterjee,
President (Digital Systems) still felt that building a separate
center was not the right approach. "It makes you lose focus;
you become inflexible since you have to work within the given
infrastructure at the center." He said. But the strongest argument
against a dedicated training-center came, surprisingly, from
Vatsala Suraj, President (Consumer Products). She said that
people tend to vest all the responsibility for training with a
dedicated center, and wash their hands off the obligation of
training their subordinates, which is an integral part of their
day-to-day roles. "Corporate values like delegation, monitoring,
and empowerment will all take the back-seat at the individual
level. And that is a serious risk" she said. I was again in two
minds: should we or shouldn't we?
Suryanarayanan was saying yesterday that the training-
center could well be turned into a profit-center. We could sublet
the facilities in order to ensure full occupancy, he said. I
wondered whether HRD should run business in its own right,
or concentrate on its core function of developing people. That
is the most important function of a training-eenter. Ambience is
also an important aspect of training. Unfortunately, none of my
managers brought it up during our discussions. Employees
should, not only interact during training sessions, but also after
the programmes. We should take people away from their daily
stress to an environment that rejuvenates them. When people
are relaxed, they are in a better learning mode, more receptive,
less distracted, and closer to nature. Finally, the center should
be a benchmark for training in the industry. That is the goal, we
must pursue single-mindedly, if and when we decide to set up
our own training-center.
Should SEL set up its own training-center? Should it have
only in-house faculty? Or external teachers too? Should it be
part of the corporate headquarters or located on the outskirts
of the city? Should it be pursued as a profit-center? Could
commercial considerations dilute the focus of the training-
school? When almost all HRD activities are being outsourced,
why should training remain an in-house activity? Will the CEO,
Neelkant Rao, be able to set a benchmark for training in the
industry? Can he turn his company into a learning organization
where knowledge-gathering systems are institutionalized?

Taken from the Question Paper of Symbiosis Institute of Management

Studies, III RD Semester End Examination held in September, 2001.