CASE ANALYSIS

FLAXO EXPORTS : MANAGING PEOPLE

IN A SMALL-TO MEDIUM SIZED ENTERPRISE

SUBMITTED TO : DR. BISHAKHA MAJUMDAR

SUBMITTED BY :
AARTI GIANCHANDANI (ROLL NO. 232001)
HEMANT KUMAR (ROLL NO. 232008)
SUSHEEL SAMANT (ROLL NO. 232012)
VIKASH KUMAR (ROLL NO. 232013)

WMG 23
SEMESTER IX

FORE SCHOOL OF MANAGEMENT

Introduction
Flaxo exports is family run enterprise in SME category which was established in
1982 and it managed by father-son named Anil Sharma and Abhishek Sharma
respectively . It is located in Panipat ,Haryana . Flaxo was one of Panipat's five
leading handloom units exporting 100% of its goods.' The firm manufactured
carpets , furnishings and related item. The goods manufactured were exported in
20 countries . Bulk buyers of Flaxo products included large American companies
such as Wal-Mart and Target.Flaxo had a turnover of INR 400 million. Flaxo was
renowned in Panipat as well as amongst its importers not only for its
professionalism and quality consciousness but also for the humane values espoused
by the Sharma family.
The competitive advantage which was giving them the edge was customer
centricity through their satisfaction level , timely deliveries , honoring
commitments , innovative design and commitments and their humane
value towards employees.

Flaxo Work Dynamics :

The two factories and the head office of Flaxo had about 488 employees.

One factory had 275 employees

Other had approximately 196.
Sixteen people were employed in the firm's head office : 6 managers and 8
supervisors.
115 workers were paid on a time rate basis which include: clerical,
supervisory and managerial personnel
76 were women workers worked as yam rollers on a piece-rate basis.
Blue-collared category who worked on a time-rate basis were mainly involved
in clipping, finishing and packing operations.
370 employees were weavers who were paid on a piece-rate basis.
Composition on religion : 75 % were Muslims and rest Hindus

The weavers were further classified into two categories: the masters and the normal
weavers. Masters were senior weavers who often advised other.
Wage rate in Haryana was Rs. 2500 however in flaxo workers were able to earn
between a range of Rs.4500 to 9000.
Flaxo did not had any HR department in all these years and owners are handling on
their own things like promotion , hiring , retrenchment , performance appraisals ,
training , employee engagement and relationships crche facilities etc. However
they are not following any government guidelines like PF , ESI , Pension , Gratuity ,
Medical facilities, labour laws ,industrial dispute, union etc

Personality & Management Style of owners :

Anil Sharma

Abhishek Sharma

Gentle & Kind

Aggressive mindset , wanted to achieve

new heights
Want to expand business
Want to bring professionalism
Directly involved however prefer to
manage it through manager
Non abusive behavior , Non-usage of foul
language
Appreciation for good work in public and
reprimand in isolation
Wanted to bring Chinese style of
productivity

Satisfied with current growth & venture

Paternalistic Style
Directly involved in supervision and
management
Non abusive behavior , Non-usage of foul
language
Appreciation for good work in public and
reprimand in isolation
Satisfied with current structure

Challenges Ahead :
Abhishek is thinking :

Exponential Growth

People management:
o What kind of skills, mindsets and talents were needed?
o How to go about modifying the existing systems, processes and
mindsets to successfully implement his ideas.
o Cost factors involved in changes required to do in people
management

Questions of Case

1. Provide a detailed analysis of the key elements of the present system

of people management at
Flaxo.
Ans.
People management was only happening through the owners (Anil & Abhishek) and
partially by the managers and by masters weavers who were training the weavers
and various problems that were encountered at workplace. There was not any
structured mechanism through which people management used to happen . A
glimpse of the Flaxo is as under :

No rules of discipline follow

Example from case : The firms did not feel the need to create any rules of conduct
for disciplining the employees or taking action against them.

There was no systematic performance appraisal ("PA") for

any calegory of employees. Any PA that was done was judgmental, based on the manager's
personal impression. The considerations that were kept in mind were indicators such as
revenue increments, the quality standard attained and the number of complaints received.
Financial incentives were offered to workers at competitive rates as a retention device

No service record files made for any worker

Example from the case : Flaxo just made a file for each worker who joined the
firm, which
related to his or her service record.

Consideration for PA were : quality of work , complaints received , revenue

increment

Example from the case : There was no systematic performance appraisal ("PA")
for any category of employees. Any PA that was done was judgmental, based on the
manager's personal impression. The considerations that were kept in mind were
indicators such as revenue increments, the quality standard attained and the
number of complaints received. Financial incentives were offered to workers at
competitive rates as a retention device

Personal touch in dealing with people

Example from the case : Despite the absence of formal HR procedures, a

personal touch was shown by both partners in their dealing with people.

Motivation techniques like : appreciation for good work , helping

workers in their financial needs

Example from the case : Other motivation and retention devices in use were
open appreciation for good work, and helping the employees in meeting their
personal and financial needs.

Training at indigenous level by masters to let them aware with tricks

of trade open learning school

Example from the case : Training was done at an indigenous level by the master
whereby he would call his family members to the loom to teach them the tricks of
the trade.

Assessment of competencies and designing their roles by Anil

himself

Example from the case : Anil also used his judgment in assessing the
competencies of his team members and designing their roles as per this
assessment.

Even CEO comes down and work with the team and increase their morale

Example from the case : Our CEO does the work of a manager or even a
supervisor when the
sitl/olion so demands.

Following a piece rate basis approach

Example from the case : I must say that the piece-rate system is of great help in
this regard as it keeps the worker busy in maximising his earnings.

Flaxo was offering Rs. 4500 to 9000 pm to its labours

Example from the case : Flaxo worker was able to earn a minimum of about INR
4,500 per month. Many workers earned far more, at limes making INR 9,000.

Since no concept of retirement people used o work till 70 yrs as well

Example from case : Therefore some employees were retired very early while,
others continued even when they were in their 70s.

Using placement agencies for recruitment

Example from the case : Flaxo used the services of three or fOUf placement
agencies

to help with the recruitment process.

Q:2- Are there any HR problems at present? How should Flaxo deal with
the issues at hand?
Ans :
Present problem in HR in Flaxo:

Strategic HRM was missing. So the following are the important missing words:
Alignment with business strategy
Adaptability with the business environment
A channel to provide competitive edge to the organization

Needed Systemic Changes to meet the needs of the organisations future

survival and growth (Flaxo brand, business expansion into the new product
line and entering in the Indian Handloom Market) but No HR department with
whom they can discuss the possible issues like

What kind of skills, mindset and talents were needed.

How to handle change management

What is the best practices in other SMEs in India and elsewhere.

No performance appraisal

No retirement system

No formal training (but Perfection in operations)

No appointment letter to any labourer

No gratuity

No system for handling employee issues

No rules of conduct for disciplining

Finding ways to avoid unionisation(50 workers were already members in

2007)

False image of bonded labour

Factors for further talent search were loyalty, professionalism, right attitude
to work

No motivation program like Reward and Recognition

Basic legal requirement was unknown to them

Solution to deal the problem:

Flaxo can deal with the issues at hand by abiding with the law of land, the HR
Bundles Approach (Horizontal Integration and Performance based pay should be
accompanied by transparent and objective appraisal, need based training,
management by objective, and merit based promotion policies and following the
best practice Approach because Certain HR activities universally support firms in
reaching a competitive advantage regardless of the organizational setting or
industry (Redman and Wilkinson 2009).

Since the company is in growth stage so following HR practice will be critical:

More sophisticated recruitment and selection

Training and development

Performance Management Process

Reward systems

Focus on high commitment

Developing stable employee relations

Q3: How should Abhishek go about changing the people-management

systems so that he can implement his business strategy?
Ans.

From the above model we choose the Prospectors Business Strategy , which
dominates the following because Abhishek is looking for change:

Thrive on Change

Favour strategies of product and /or market development

Prospectors HR Strategy will be

Creative and flexible management style

Have high quality human resources

Emphasize redeployment and flexibility of HR

Acquire human resources

Likely to emphasize recruitment, selection, and performance based

compensation

Workers participation in management through workers committee

Involving workers in change management and bringing the change from top
to bottom

In order to make it a global organization effective HR policies employee

benefits , basic law should be abided with the help of HR team like : PF ,
Gratuity , ESI Benefit , maternity benefits , following Factories Act , Industrial
Dispute Act , Insurance, Medical allowance etc.

To bring about the change we will also follow Long Term and People oriented Change
Agent and develop human resources to facilitate organizational transformation.
Abhishek may develop resources through the help of HR department who reflect the
OCB (Organizational Citizenship Behaviour)
o
o

To build organizations capacity to accept and capitalize on change

To make sure the vision gets translated into specific behavior by helping
employees to understand what is required to realize the vision of the
organization
To facilitate cultural change in the organization

HR team can help through :

o
o

Doing the audits and letting the company know about improvement areas
and facilitate implementation of strategy
Defining , setting , tracking and measuring specific and measurable goals and
holding HR accountable for results.

Adopt a mix strategy for having a successful people management system .Best
Practice approach should be kept in mind for achieving the strategic objectives of
the company :

Employment security

Selective hiring

Teamwork

Performance-based pay

Training

Reduction of status differences

Information sharing

Horizontal Integration