Dr. K.K. Chauhan
Dr. K.K. Chauhan was basically a research scholar and master in his field. He had a dream of
becoming an entrepreneur. His dream came true in 1966 when he started a small pharmaceutical bulk
drug-manufacturing unit named Kusum laboratories at Industrial Estate of Indore (M.P.), India. Soon,
other renowned scientists and scientists and scholars in the area of chemistry joined him. The team
researched and developed better and economic ways to manufacture bulk drugs like, Niacinamide,
Thiacetazone, Isoniazid, Probenecid and Chloroquine Phosphate.The products of Kusum laboratories,
by virtue of its quality and price became very popular and soon the list of customers included big
brands like Bayer, Merck & others. The company grew in name, fame and size and very soon had a
workforce of about 40 workers, 9 chemists and a factory manager to look after the production. The
high demand and completion of process called for 24 hours running of the factory and thus it was
run in three shifts giving an output of 3.5 metric tons per month. The workers were treated as family
members and Dr. Chauhan personally used to enquire about the welfare of the workers. The
Semester 1 Examination Paper
IIBM Institute of Business Management
laboratory increased in size day-by-day and new departments like administration, accounts, stores and
personal were formed. This changed the entire scenario and by 1987, the factory had a production
workforce of 60 workers, 12 chemists and a factory manager giving a production of 60 MT/annum.
From the year 1996 to 1998, Kusum laboratories had come a long way. Things had changed at all
levels and Dr. Chauhan was no execution. His earlier modest thinking that he was only a part of the
institution’s success had now yielded to an arrogant belief that success was due to him alone. This
myopic vision started reflecting in the output of the organization and the production level stopped
improving. To improve the production, the personnel manager appointed a few musclemen to
supervise the workers. This increased the production, but the joy was short-lived. Soon the
musclemen recognized their importance and the focus shifted from obtaining planned production to
self-attention. The workers were busy in favoring their supervisors and completely distracted from the
work they were hired for. The situation started deteriorating in all departments and as a result the
company was sold to ASV labs in 1988.ASV took an aggressive stand fired the so-called supervisors,
but paid little attention towards the workers. Though the fear of musclemen was no longer there but
the workers felt themselves neglected and de-motivated and thus, the production did not improve over
10MT/ month, and the company was taken over by KBCL in September 1994. KBCL was a
renowned name Indian pharmaceutical industry and was the brand leader in a couple of formulations.
It had multilocational production facilities with state-of-the-art plants at Aurangabad, Mahad,
Dombivali, and Ratlam.KBCL was brand leader in Chloroquine Phosphate formulations in India and
their in house requirement was more than the production output. The entry of China into bulk drugs
however changed the equations. The cost of imported Chloroquine Phosphate was quite low and the
competitors started using imported raw material in their formulations instead of buying indigenous
material, giving them a leverage of price. To defend the brand position with limitations in increasing
price in the market, KBCL had no choice but to reduce the cost of production of its Chloroquine or to
use imported raw material. The top management had a brainstorming session on whether to continue
production at Indore or to close the unit. After much deliberations, Suyash Modi, Vice President of
Aurangabad plant was given the responsibility to head the Indore unit. Suyash immediately worked
on modifying the processes and upgraded the plant. However, Suyash realized very soon that he
would not be able to achieve the production goals with de-motivated workers. He announced various
welfare programs for the workers like wage hike, in-house inter-department contests, acknowledging
the ideas and contributions of workers etc. This slightly motivated the workers, and they started
responding by increasing the production from 10 MT/ month to 36 MT/month. Plant Supervisor
Syriac was wondering why the workers, in spite of so many announcements, were not responding the
way he envisaged. Suyash asked Syriac to have patience. He said that let the workers feel that the
new team was their well-wisher and did not have the sole motto of profit. The workers though
listening to Suyash, still had their reservations in believing him. Suyash continued practicing what
he preached. He welcomed suggestions and ideas from the workers and also started converting ideas
into projects asking the ideas generator to become the leader, choose a team of his choice and
complete the projects. On successful completion of the project the impact of the project was evaluated
and then local or multi-location implementation was done. He began acknowledging the successful
efforts and ideas of the workers by classifying the ideas according their importance in five categories
ranging from one star to five star. Then, according to their weightage and applicability, single star
idea got a cash price of Rs. 75/- per head and five star idea was rewarded with a cash price of Rs.
500/- per head and a dinner along with his family with the M.D.Suyash also introduced Total Quality
Management (TQM) and started appraising the production batches on the parameters of yield and
quality. The standards were laid down and targets were given on a monthly basis. He then announced
that extra production than the standardized yield would be evaluated at 60% of manufacturing cost.
The evaluated money then would be divided equally amongst the entire staff from workers to the
Vice President, provided the assigned targets were achieved. This had a tremendous positive effect on
the thinking process of the workers. This not only increased accountability and involvement, but also
integrated the entire team. The wastages and manufacturing losses were dramatically controlled.
Semester 1 Examination Paper
IIBM Institute of Business Management
KBCL now was not an organization with departments but a unified team working for a common goal.
When asked about the success, Suyash commented that workers and management in KBCL were not
two different levels but they were a synergistic combination. This was obvious from the yield which
had touched the unbelievable records of 70 MT/month. This made KBCL the world’s largest
Chloroquine phosphate manufacturing unit. 60% of in-house production was being used for domestic
market and the company began exporting the rest to South Africa, Pakistan, CIS, and the Gulf
countries.
1. What additional compensation and reward system would you suggest apart from the ones
mentioned in the case?
2. If you had been in the place of Suyash, what measures would have recommended overcoming the
Chinese threat?
END OF SECTION B
