DIAGNOSES
presents analyses of the management
Clariant India Ltd. (A)
The April-June 2003 (Vol 28 No 2)
issue of Vikalpa had published a
management case titled “Clariant
India Ltd. (A)” by Mukund R Dixit and
I M Pandey. This issue features four
responses on the case by Manu
Tandon, Rajnish Karki, P Ravichan-
dran, and Salma Ahmed and Ashfaque
Khan.
VIKALPA • VOLUME 28 • NO 4 • OCTOBER - DECEMBER 2003
case by academicians and practitioners
CASE ANALYSIS I
Manu Tandon
Managing Director
Schenectady-Beck India Ltd.
Pune
e-mail: manu.tandon@beckindia.com
T
he problems Mr Rastogi, the new Managing Director of Clariant India
Ltd., faced could be summarized as follows:
• Culture and practices of the pharma business dominated the other
activities of the combined Sandoz company.
• Legacy of problems of the older Kolshet plant at Thane such as an
antiquated plant; history of poor industrial relations and strife, and
high wages.
• Common manufacturing resources and services for the chemicals,
pharma, and agro businesses.
• Compartmentalized management culture.
The problems that beset Sandoz were typical of multinational companies
set up in the outskirts of Mumbai which had over the years become high wage
islands yet suffered from labour problems. The pharma activities were no doubt
more profitable than chemicals and, in the early years, there would have been
few compulsions to streamline operations and cost structures. By 1990, profit
before tax to sales had slid to 4.5 per cent and return on net worth to 15 per
cent, marginally higher than the then prevailing interest rates. However, by
1995, the company had pared down its employee strength significantly and
improved profitability. Also, Clariant India had the disadvantage of the same
remuneration levels as the pharma industry which it could not afford due to
inherently lower margins of performance chemicals industry.
The Sandoz management culture was one of compartmentalization within
functions and a hierarchical top-down approach:
• The Managing Director set targets with no bottom-up inputs and rarely
interacted with the factory.
• Divisional targets were personalized with no standardization or modera-
tion.
• The factories were predominantly occupied with industrial relations
issues and matters of process improvements, cost control, and quality
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 management appear to have had second priority.
The sales and marketing functions, on the other hand,
appear to have been well organized with a wide range of
customers from large textile and leather units to small
scale industries.
The company had a good technical service support
which is essential for performance chemicals and a large
distribution network. However, customer order process-
ing and logistics was cumbersome, slow, and not respon-
sive to the changing market needs.
RECOMMENDATIONS
Mr Rastogi should send out a personal letter to all business
associates, customers, suppliers, financiers, etc.,
explaining the new organization, rationale for the de-
merger, and an assurance of continued business
relationship and enhanced level of cooperation. He should
also visit factories, offices, and branches, and address
employees. Choice of words and assurances should be
carefully drafted as the new structure could result in
downsizing.
A new management structure should be put in place
with independent responsibilities for sales and market-
ing, manufacturing and technical, finance, IT and admin-
istration, research and development, legal and secretarial,
personnel and industrial relations.
Depending upon the size of business, it may be prac-
tical to have two separate divisions for textile chemicals
CASE ANALYSIS II
Rajnish Karki
Director & CEO
Stratdesign
Mumbai
e-mail: rkarki@stratdesign.net
T
he essential agenda for Clariant India is to find its
bearing as an independent legal, business, and
organizational entity and to do so in an optimal
manner from short-and long-run perspectives. It is a
change in the ‘being,’ especially with respect to the
removal of support system available while operating as
a part of an established multinational corporation in India.
On the other hand, while following a more complicated
de-merger process, Clariant India would continue to be
a part of the multinational business system of Clariant
International. Any de-merger leads to a flux like situation
resulting in some freedom to bring about fundamental
changes but here the approach of Clariant India would
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and leather chemicals as these markets are very distinct.
Legal and secretarial may be combined with finance.
The MD should, within three months, initiate opera-
tional improvement and change the company across all
functions. Projects should be proposed by function heads
with the consensus of their individual teams. These should
also include cross-functional projects. Implementation
of projects should be the responsibility of carefully cho-
sen cross-functional teams (CFTs) with the dual objective
of effective implementation and creating a seamless or-
ganizational culture. Periodical review of CFT progress
should be carried out by the full executive committee.
CFT projects could include: business processes; cost re-
duction; product improvement; new business opportu-
nities; production process improvements; plant moderni-
zation opportunities; quality programme implementa-
tion, e.g. ISO; and learning processes. Mr Rastogi should
form an executive committee comprising of the function
heads and meet once a month to review all operations
and plan actions thereof. Occasionally, the meeting could
be held at the factory so as to identify with the manufac-
turing location.
A structured communication system should be set
up to involve personnel down the line on events, devel-
opments, and changes within the organization through
review meetings; e-mail communications; house journals;
and presentations.
certainly be guided by and would need to be consistent
with the overall direction of Clariant International.
The concept of business is unlikely to go through a
major shift with both Clariant International and Clariant
India continuing to be in the business of dyes and speci-
ality chemicals. Since this case does not indicate a dra-
matic shift in the industry situation, strategic direction is
likely to remain unchanged. By becoming a focused busi-
ness, Clariant India should be able to aim at higher busi-
ness objectives through greater aggression and speed in
the market. Given the complexity and urgency of de-
merger issues, a tightly integrated conception of the fu-
ture and a clearly defined transition process would be
CLARIANT INDIA LTD. (A)
necessary. Clarity about where Mr Rastogi, the Manag-
ing Director, wants to reach and about how or the proc-
ess, will enable speedy implementation and enhance
learnings and adaptations. He needs to create a superior
performing organization in the shortest possible time. A
clear conception will also ensure that Mr Rastogi emerges
as a leader — who is and is seen to be in command of the
situation. The initiatives he needs to undertake are:
• Define and communicate the business agenda: De-
merger creates a high degree of uncertainty and
confusion among all the stakeholders, e.g., managers,
employees, customers, shareholders, etc. Rumours
come into play leading to politicking and affecting
the morale. Defining the business objectives and
approaches would clarify what the new entity stands
for and how it will lead to superior results in
comparison to being a division. The objectives can
be defined on two time horizons, precisely for the
first one year and broadly for the next three years.
Mr Rastogi can involve three or four senior members
of the new team in defining the business agenda.
The business agenda can be communicated to all the
members of Clariant India and it would help dispel
the sense of uncertainty and energize and focus the
members. The outlining and communication of
business agenda should preferably be completed
within the first four weeks.
• Evolve new organization structure and person-
position matrix: Given the commodity orientation
of dyes business and the technology orientation of
speciality leather and paper chemicals business, a
divisional structure on the lines of erstwhile Sandoz
would be ideal from the long-run perspective. But,
paucity of senior management personnel and lack of
general management skills would force Clariant
India into a functional structure which may be
designed in such a way that it can evolve into divi-
sional structure after two or three years. The functions
at the second level should be — Marketing; Pro-
curement, Supply Chain, and Commercial; Manufac-
turing; Finance and Legal; and Personnel and
Industrial Relations. This division of responsibilities
ensures adequate specialization and control and
integration could be enhanced through a ‘business
committee’ headed by Mr Rastogi. He should further
define the roles at the third and fourth level and
identify persons to man the various positions. In
terms of process, he should identify second level
VIKALPA • VOLUME 28 • NO 4 • OCTOBER - DECEMBER 2003
111
person and gaps therein himself and ask the second
level executive to recommend people for third and
fourth levels. Simultaneously, surplus managers and
workers should also be identified, guided by the
objective of aiming for the optimum as per business
objectives. New structure should preferably be
defined during the next two weeks and commu-
nicated to the entire organization along with the
business agenda during the next four weeks.
• Recast targets, design management systems, and get
started: In the first four weeks, Mr Rastogi should
also get the targets delineated as per the new business
agenda and organization structure. He can hand over
the targets with announcements which would help
the organization get out of flux and uncertainty. He
can consider strategy-linked planning approaches
with periodic monthly operational and quarterly
strategy reviews. He may also consider superior
performance managements systems comprising of
operational and strategic parameters and fixed and
variable compensation approaches. Planning, review,
and performance management systems can be
discussed and outlined by the senior management
team during the second and third months. He should
also set up task forces to work on business and
organizational policies for the new company with
the intent of learning from both positive and negative
experience of the past and of aiming at the very best
in future. Task forces should be cross-functional,
follow a structured methodology, and finish the work
in two months.
• Launch mobilization and skill development initia-
tive: Mr Rastogi should breathe a sense of purpose
and excitement in the entire organization which will
help weaken the negative influences of union. A
communication exercise with partnering approach
should be initiated with union, workmen, customers,
shareholders, etc. Besides communication sessions,
he can selectively use the media for greater external
as well as internal impact. All the senior managers
including Mr Rastogi himself need to add new
functional and general management skills. He should
formally define the skill gaps at least for the top dozen
executives and define a time-bound path to reach
the required levels. While the new business agenda,
organization structure, and management systems
would create the framework for developing
appropriate culture and competencies, he should
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 actively seek a style of trust and transparency and
encourage each member to achieve more and
shoulder greater responsibility.
Mr Rastogi faces a challenge but also a rare opportu-
nity for a corporate executive. Clarity of thinking and an
CASE ANALYSIS III
P Ravichandran
Managing Director
Nubiola India Ltd.
Chennai
e-mail: skuc@satyam.net.in
W
ith the de-merger of Clariant, the company is
required to take all the decisions on its own.
To manage such a situation, what is required
is clear leadership competencies coupled with decision-
making skills to navigate through the ever-changing
environment. And, to minimize the shock, the leader
should ensure that the team is well-organized and intact.
LEGACY OF CLARIANT INDIA LTD.
The company has some positive features which are:
centralized annual plan approved from headquarters;
function-wise organizational structure; common
manufacturing facilities with pharma; reward on the basis
of target achievement; better waste management;
recruitment of quality technical people; standardized
labour management practices; higher wages compared
to the industry norm; excellent customer-relation coupled
with consistent quality and prompt technical service; and
long-term relationship with the distributors.
The company also has some problem areas such as:
lack of trust on the employees; management yielding to
the union demands; lack of involvement of other em-
ployees while formulating the annual targets as it is done
by the top management; resistance to change; and ab-
sence of team-spirit.
SWOT ANALYSIS
Strengths
• prompt technical service to the customers and
consistent quality
• long-term relationship with distributors
• good customer profile tracking system
• specialties/niche products
• productivity increase
• improvement in the financial problem
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approach for innovation and experimentation should see
him moving towards creating something outstanding. He
should move speedily to create the new framework within
the next six months and new business competencies and
organization culture in the year thereafter.
• better waste management
• changing labour mind-set which led to downsizing.
Weaknesses
• outdated equipment in the plant; lack of process
flexibility; physical separation of facilities leading
to delay in supplies
• productivity less than competitors
• R&D at Switzerland and local R&D only for customer
complaints resolution and troubleshooting
• standardized labour management — no focus
• customer-employee interaction
• strong union and short-term solutions to labour
problems
• top-down objective setting
• minimum involvement of MD
• factory management mostly fire-fighting
• no network of computers.
Opportunities
• indigenous demand growing at 10 per cent
• export demand expected to grow at 15 per cent.
Threats
• competition from organized large players which are
international in nature; they compete on range of
offering and relationship
• competition from small players on the basis of lower
prices.
The following questions need to be addressed by the
company in order to survive on a long-term basis:
• How will the company survive in the next five to ten
years?
• What are the changes in the environment?
• What is the nature of competition and on what basis
do they compete?
• What is the core competency of Clariant India? How
CLARIANT INDIA LTD. (A)
 should it leverage the same?
• Can the team embrace change? If so, how?
RECOMMENDATIONS
First, the company should have a well-organized and well-
knit team which would focus its energies on assessing the
market rather than using it internally. Therefore, it should
immediately develop trust between the workers and the
management. This can be done by constant interaction
and consistent communication between them. Since Mr
Rastogi believes in simple life and working and
celebrating together, it will not be a difficult task.
However, he has to instil the same values in his team
through constant interaction. Constant interaction with
the employees will also help in creating a sense of
belongingness which will create a suitable atmosphere
for initiating change.
Second, Clariant India should involve the employ-
ees in objective-setting. Their creative potential should
be tapped so that their contribution can be maximized.
Involving them in objective-setting creates the feeling of
ownership which will motivate them to perform better.
Their remuneration should be linked to their objectives.
The facilitators could be the hand-picked internal team
(all levels of the organization) in collaboration with the
external change consultants.
Third, the company has to identify its core compe-
tency. Going by the case, it seems that its strength is in
CASE ANALYSIS IV
Salma Ahmed
Senior Lecturer
Dept. of Business Administration
Aligarh Muslim University,
Aligarh
e-mail: salmaahmed6@rediffmail.com
I
n 1990, many large diversified organizations chose to
split into separate companies with the need to define
clearly core business and/or the market focus. This
case revolves on a similar premise. The Swiss multina-
tional, Sandoz International Limited, de-merged its
chemical business thereby creating a new company,
Clariant International Limited. The objective of this de-
merger was to enable the company to tap the opportunity
in the global chemical sector.
The company operates in textile, leather, and paper
(TLP) chemicals. It holds the position of being a market
leader in textile chemicals. An analysis of the environ-
VIKALPA • VOLUME 28 • NO 4 • OCTOBER - DECEMBER 2003
113
developing niche products and providing excellent tech-
nical service. If this is the case, it has to develop the prod-
uct in its R&D laboratory and get it manufactured from
others (outsourcing manufacturing) and concentrate on
technical support and service. This will reduce its de-
pendence on the age-old factory (keep the critical prod-
ucts and critical processes in-house) and will also give
the necessary flexibility to face competition.
Fourth, the management should be transparent. It
should instil discipline among the employees and involve
them in decision-making. It should communicate the
changes to the employees on a regular basis and their
impact on the company.
Fifth, the company should develop the mission/vi-
sion statement based on employee participation, articu-
late the same, and involve everybody in implemen- ting
the same.
CONCLUSION
If these recommendations are implemented, the results
will be positive for the whole organization. Other
stakeholders like customers, suppliers, and shareholders
will definitely react positively to the changes, because,
eventually, shareholders want maximum return on their
investment, suppliers want constant supply and prompt
payment, and customers want consistent products at
competitive rates.
Ashfaque Khan
Manager – S&M
Kale Consultants Limited
New Delhi
e-mail: Ashfaque_Khan@kaleconsultants.com
ment reveals that the demand for chemicals is expected
to grow in India as well as abroad. Competition prevailed
mainly from two players— ICI and CIBA in the organ-
ized sector and a host of small players in the unorganized
sector. The task at hand is to chalk out a strategy for suc-
cess for the newly formed company.
The macro issues as identified by Mr Rastogi are:
ƒ creation of a new organization — name, mission,
vision, road-map
ƒ assimilation of the stakeholders in the change
process
ƒ creation of managerial practices and processes.
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 The micro issues as brought about by the case study
are:
ƒ the chemicals division’s R&D activities centred
around resolving customer complaints and trou-
bleshooting
ƒ outdated productivity norms and machinery
ƒ IR issues like insecurity and trade unionism
ƒ wages and payrolls — salary linked to the
erstwhile ‘pharma division’
ƒ delays and coordination chaos while processing
order (between sales and manufacturing)
ƒ outsourcing manufacturing
ƒ the distributors’ own format for assessing the
customers and estimating the market potential
ƒ lack of synergy in the organizational goal (diffe-
rent VP’s strategies a reflection of their personal
agenda)
ƒ lack of interaction between customers, employees,
and management (the stakeholders)
ƒ top-down management (target setting, etc.)
ƒ hierarchical issues (reporting and ownership).
The industry-specific issues are:
ƒ competition from organized and unorganized
sector including global
ƒ new product line and range
ƒ organic growth
ƒ perception management
ƒ Clariant India vis-à-vis Clariant International.
We analyse the above issues under the following
heads:
PRODUCT MANAGEMENT AND
MANUFACTURING
There are two manufacturing plants at Kolshet in
Maharashtra and Panoli in Gujarat which are shared
between Sandoz and Clariant.
New product line: There is a need to diversify and
consolidate the position of the portfolio of products from
the Clariant stable. Of the three categories of product in
which the company operates, it is a market leader in only
one of the categories. Therefore, the company needs to
diversify into industrial chemicals like process chemicals,
performance chemicals, cellulose ethers or biocides.
Besides, under the master batches category, there can be
tangential growth with the focus on computers, toys,
cables, etc.
Upgradation of infrastructure: Modernization of the plant
is the need of the hour. The machines and equipments are
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outdated and the production process demands flexibility.
Production norms are old and need to be reviewed. These
changes need to be initiated to make the company
competitive.
Outsourcing manufacturing and vendor management: The
factories are plagued by industrial unrest. Clariant India
could outsource manufacturing and retain marketing and
brand management under the category. Besides, the
number of its own vendors (i.e. 300) is too unwieldy to
manage. Tierization of vendors into categories and
rationalizing these vendors would give the company the
economies of scale which, in turn, would help manage its
sourcing.
Coherence in the organization goal: The organization is
pulled by different personal agenda of its decision-
makers. One of the VPs focuses on cost-control while the
other is on new product introduction. The organization
needs to define its holistic goal and its functional leaders
need to define their aims within the goal.
HUMAN RESOURCES AND
ORGANIZATIONAL HIERARCHY
Managing human assets is perhaps the most challenging
job for a manager when he is expected to deliver results.
A review of the human resource system and structure
reveals that though recruitment norms seem to be
satisfactory and well accepted, problems were encoun-
tered in the following fronts:
• labour issues
• wage related issues
• insecurity among employees
• functional silos.
The management’s approach to labour can be said to
be negative as the company had to issue charge sheets a
number of occasions. The reasons for the issue of the
charge-sheets need to be explored to assess whether the
need for it existed or not. In all, 40 litigations were made
by the union and they had resorted to strikes a number of
times. In short, there was complete unrest. The company
was moving towards outsourcing and thereby reducing
dependence at the Kolshet plant and may be finally a
closure of the plant.
A standardized approach to labour management
made the salary and bonus structure similar which is an
anomaly. The reason for the high wage bill is not clear
and needs to be reviewed. As per the industry norms,
different structures should be created for the company,
SBU, and individual performance.
CLARIANT INDIA LTD. (A)
 The de-merger of the organization was closely fol-
lowed by a voluntary retirement scheme. Insecurity pre-
vailed amongst the employees after the de-merger fur-
ther fuelling trade unionism. Therefore, it is important
for the management to undertake relation-building
through frequent interaction, joint problem-solving, and
participative decision-making. Informal meets could go
a long way in allaying fears and restoring employee con-
fidence.
The company adopts a top-down approach, i.e., the
MD decides upon the annual (target) production figure
which is communicated to the executives. Executives
down the line are not involved in decisions regarding the
target, i.e. there is total absence of participative manage-
ment.
The organization structure which exists would not
work for the present set-up where thrust has to be on
open communication. There seems to be a lot of cross-
reporting leading to lack of ownership. The stress should
be more on flatter structure, communication, and trans-
parency. Creation of new profiles under supply chain
management, functional heads, and quality would cre-
ate clearly defined responsibilities. In order to ensure that
the organization does not create functional silos, a man-
agement committee with representations from functional
heads should discuss issues of common goals.
MARKETING, DISTRIBUTION, AND
CHANNEL MANAGEMENT
Customer relation is undertaken actively. Customer
complaints are handled by technical staff who work on
the shop floor. Also, customer visits to shop floor are
permitted. There is a need to reiterate customer commit-
ment through creation of new product categories.
Problem of coordination exists between the order
processing and the plant. The distribution unit sends
orders to the marketing department at the head office
located at Mumbai which then places orders at Kolshet.
Effort should be towards integration to build an effective
supply chain.
Besides, distributors’ methods and processes do not
seem to concern the organization. The processes and sales
information system need to be enhanced to the level of a
data warehouse and information could be mined for more
effective use.
COMMUNICATION
As of now, there appears to be a complete breakdown of
VIKALPA • VOLUME 28 • NO 4 • OCTOBER - DECEMBER 2003
115
communication. The MD rarely visits the plants, factory
functionaries are not aware of the corporate heads, and
organization goals are not clear across the lower channel.
Now that Clariant India is in the throes of change,
communication and meeting perceptions of the
stakeholders at large (employees, customers, share-hold-
ers, vendors, media, and regulatory bodies) should be
undertaken to allay any fears.
Mr Rastogi should visit the plants more often and
interact with the employees/workers to instil confidence
in the employees particularly in the changed scenario.
FINANCIAL ISSUES
Clariant should focus on short-term measures with special
emphasis on the areas of working capital, purchasing,
logistics, and reducing the cost base. In the longer run,
the organization should focus on selling/hiving-off non-
performing product/manufacturing lines. The above
measures enhance the financial parameters like Return
on Capital Expenditure, Return on Investment, and
working capital.
INNOVATION
Quality: The organization needs to empower itself with
globally respected certifications (like ISO, Six Sigma, etc.),
which would not only enhance its market credibility but
also provide a broad plank around which it defines its
processes cutting across functional lines.
R&D: The present R&D capabilities seem to be geared
more for post-mortem analysis rather than providing
innovations for future developments. Emphasis needs to
be on product, application, process development, and
patents which can act as growth-drivers.
Hub for global sourcing: With the cost advantages that
India offers, Clariant India should focus on being one of
the global sourcing centres for its parent company. It can
borrow a leaf from the experiences of organizations like
Timex. It should also create competence centres which
could become industry benchmarks. This will enable the
company to cater to global projects and improve the future
revenues of the company.
Organic growth: Clariant India has its production centres
only in the western part of India which creates problems
in distribution. It can opt to create nation-wide infra-
structure through organic growth which could be through
local players, national players (like Tata Chemicals) or
international alignments (like British Chemicals).
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