Tata Motors Commercial Vehicles Business Unit

Authored by James Creelman

Summary

The Commercial Vehicles Business Unit of India-based Tata Motors manufactures the full range of
commercial vehicles and is one of the world's top 10 truck manufacturers.

Years of poor financial performance had thrown off-track the Unit's objective of being among the world's
five most profitable commercial vehicle makers. The CVBU developed a strategy for effecting
turnaround, creating sustainable growth and profitability. Earlier studies, using the Malcolm Baldrige
model, had highlighted the unit's weakness in strategy deployment. In response, senior managers chose
the Balanced Scorecard as the preferred driver of change and strategy implementation tool.

Implementation began in 2000. Within two years, the CVBU was able to reduce costs, accelerate
revenue growth, and move from losses to profits. In addition, the CVBU's success with the scorecard
extended to a place in the Balanced Scorecard Collaborative's Hall of Fame.

The CVBU had a high-level Steering Committee, reporting to the ED, for creating a Strategy Map and
Balanced Scorecard. A 5-member team facilitated scorecard creation and deployment. Widespread
communication was taken up to devolve the scorecard. Later, the CVBU cascaded the Balanced
Scorecard to the lowest working levels in the organization. Strategy mapping workshops were run within
plants and functions. A review process was put in place for monitoring and analyzing performance on
local Balanced Scorecards, of which over 300 were created. As part of the process, lower level
scorecards were linked to the higher level scorecards. This helped align the strategic initiatives to the
challenges faced by the Unit.

Today, the CVBU's top management shares the company's vision, mission, future directions and
strategies, and conducts scorecard cascading workshops. In fact, the entire Unit's mechanisms
(including internal publications and intranet websites) are leveraged to communicate the Balanced
Scorecard as a performance management and strategy implementation tool.

Tata Motors Commercial Vehicles Business Unit

Consisting of three plants in India, and supported by a nationwide sales and service network, Tata
Motors Commercial Vehicles Business Unit (CVBU) manufactures the full range of commercial vehicles,
such as 60-seat buses and 6x4 off-road vehicles. With a workforce of over 26,000, CVBU serves over
60% of the Indian market and is one of the top 10 truck manufacturers in the world. The CVBU has a top
financial objective of being among the world's top five profitable commercial vehicle manufacturers,
which is supported by growth and cost themes and objectives.

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 Scorecard Commencement

CVBU began its scorecard implementation in 2000, in support of efforts to reverse several years of poor
financial performance. A new strategy, crafted by the leadership team headed by the then new Executive
Director (essentially CEO) Ravi Kant focused first on turnaround to be followed by sustainable growth
and profitability through being the lowest-cost producer.

The scorecard was chosen as the preferred strategy implementation tool following the attendance by
several senior managers at a seminar delivered by Dr. Norton.

Benefits

And thus far the benefits from deploying the scorecard have been impressive. For instance, between
2001 and 2003 revenues grew by 40% (to a least double that of its nearest competitor). Note that from
April – December 2002 total volume sales of commercial vehicles was 72,612 units, which rose to
104, 626 in the same timeframe in 2003 - an impressive increase of 44%. Such performance, coupled
with an aggressive cost reduction programme, helped its parent, Tata Motors Corporation, turn a
US$108.62 million loss into a US$65.17 million profit between 2001 and 2003. For fiscal year ended
March 2005 CVBU reported a 25% increase in sales in its domestic market of 25% against industry
growth of 22%.

As recognition of its success in 2004 CVBU was inaugurated into the Balanced Scorecard
Collaborative's prestigious Hall of Fame, one of the first two Asia-based organizations to be afforded this
honour.

The original Strategy Map and Balanced Scorecard was created by putting in place a high-level steering
committee, comprising functional heads and some other key officers such as the regional managers in
sales and marketing. The committee reported to Ravi Kant.

The committee appointed a core project team of five people (from the Business Excellence Service
Department and Executive Director's Office) to facilitate the scorecard creation and deployment process.
Final validation and ownership would remain with Ravi Kant and the

Steering Committee.

At the outset the core team's knowledge was essentially drawn from the performance management and
measurement expertise from the Business Excellence Service Department (the head of which sat on the
Steering Committee), which had longstanding expertise in performance management frameworks such
as The Malcolm Baldrige model. Indeed it was a Baldrige assessment that highlighted the business unit's
weakness in strategy deployment.

Once the CVBU Strategy Map was agreed upon, a concerted programme was conducted to provide
detailed explanations to all functions and departments of the benefits of the scorecard and its importance
to CVBU.

Devolution

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 Despite widespread communication, in year one the key focus was on defining the strategic objectives
and their supporting strategic initiatives, and so the scorecard remained a high-level tool.

KC Girotra, who as Head of the Business Excellence Service Department leads the scorecard effort,
says:

"It was then decided that it should be cascaded to the lowest working levels in the organization, such as
the Area Offices (sales and Marketing) and Centres of Excellence/Departments (plant locations)."

The cascade process involved Business Excellence Service Team Members, who had been trained by
external consultants, running strategy mapping workshops within plants and functions. Team members
also collaborated with both the CVBU Steering Committee and managers at lower levels to put in place a
review process for monitoring and analysing performance on local Balanced Scorecards.

Evolution and review led, for example, in year two to a sharpening of strategic initiatives to be more in
line with the strategic challenges and the introduction of comparative data as a basis for selecting
targets.

More than 300 scorecards have been created within CVBU covering all functions, departments,
manufacturing centres of excellence and area offices (deepest work units within the sales and marketing
organization).

The CVBU level Balanced Scorecard defines the overall objectives, targets and timeframes to be
achieved by the organization. These goals are then cascaded into Balanced Scorecards at each lower
level. Hence, each scorecard is linked to the higher level scorecard.

Additionally, each division/function defines its own initiatives to help achieve their own strategic
objectives. For example, the CVBU level strategic objective of 'being a dominant player in domestic
markets in all segments' was cascaded into Lines of Business (LOB) scorecards where there are specific
market share targets. The performance plans prepared by individual employees and cross-functional
teams align all employees and teams to the company goals.

Maintaining Momentum

To maintain momentum, CVBU pays close attention to the continuous communication to all employees of
the scorecard approach and benefits. Each year Ravi Kant initiates the process of sharing the company's
vision, mission, future directions and strategies at a town hall meeting with all employees. He repeats the
communication session personally at all locations in the company to ensure that all employees have a
strong, consistent, understanding of the business units longer-term and shorter-term goals.

More, the scorecard core team conducts scorecard cascading workshops at each division/function, to
communicate the CVBU Strategy Map,

Balanced Scorecard and initiatives. Other communications systems include internal publications, intranet
websites, presentations made by senior leaders, and so on.

Critical Success Factors

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 KC Girotra says that there are three critical success factors in implementing the Balanced Scorecard.

- The active and visible support of senior management

- A strong review process

- A knowledgeable team to drive and support scorecard deployment

As a final note, Ravi Kant is now Managing Director of the Tata Motors group. As much as anything this
is an unambiguous endorsement of how successfully he led the implementation of CVBU's strategy.

This is an extract from a case study that appears in the book 'Mastering Business in Asia: Succeeding
with the Balanced Scorecard' by James Creelman and Naresh Makhijani, John Wiley & Sons, 2005.

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