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MODULE 11 - RAJASTAN RUGS MANUFACTURING LIMITED

Updated: May 12



 

RAJASTAN RUGS MANUFACTURING LIMITED

 

Context Appreciation

 

Incorporated in the year 1985, Rajastan Rugs Manufacturing Limited (RML) is an India based promoter driven company. The company has had a successful past and has steadily moved from being a simple manufacturer of rugs to becoming one of the largest integrated RML mills in India. RMS is recognized as an industry leader, falling on number 4 in terms of global exports. The company’s turnover in 2024 was pegged at USD 300 million.

 

Traditionally, since its inception, the company has been manufacturing and exporting rugs (on the basis of which RML gained size and capacity). However, in the last 5 years the company has entered other segments of RML such as curtains, upholstery, sheets, towels, and pillows etc.

 

In 2023, in a bid to increase its size and scale RML has acquired a couple of companies overseas and has initiated the process of operational integration

 

Top Team Structure

 

 

 

The situation

 

The last few years have been the most significant in the growth story of RML. In the last 5 years the company has moved from being a USD 100 Million dollar company to a USD 300 million dollar company. The growth was attributed to the following factors:

 

  • Commissioning of a new integrated high-efficiency plant doubling existing manufacturing capacity

  • Acquisition of new customers through an aggressive marketing strategy

  • Establishment of “RML USA” – the marketing arm of RML based in the USA to manage US client relationships

  • Acquisition of companies in Europe and UK – bringing in more customers to the table

  • Hiring of employees at senior and middle management levels known as “star performers” in the global rugs industry

  • To top it all aggressive targets and deadlines set by the management

 

Needless to say, this meteoric growth brought with it a number of challenges, as in the case of any company experiencing run-away and tumultuous growth. To begin with, the company management failed to envisage the toll this fast-paced growth would take on the company’s internal processes, systems and infrastructure. As a result, very little was done to strengthen and streamline process, build IT infrastructure, set more formalized policies and practices etc.

 

Additionally, human resource development activities took a backseat. Managers across the organization, heavily caught up in meeting daily and monthly targets, released their focus on managing people related needs and issues. The HR department, still in its infancy, could not manage the sheer size and volume of the HR challenge that began to quickly emerge. As a result the HR climate began to rapidly deteriorate.

 

  • Little/negligible focus given to Training and Development, resulting in a marked skill deficit

  • No defined induction process for new joiner’s resulting in an attrition rate of whopping 25% amongst them

  • Excessive work stress and work fatigue. Excessively long work hours to cope with the increase in work load.          

  • Little focus on team building and interpersonal relationship building resulting in the erosion of cooperation and congeniality in teams. HR Processes (which were not formalized to begin with) began to corrode – out of turn promotions, bonus disbursed at the discretion of individual leaders

  • Blurring of hierarchy and organization structure resulting in lack of role clarity

  • Compensation related issues – lack of internal parity

  • Little focus given to the integration of new overseas companies resulting in those companies operating in isolation

  • Lack of formalization of authority levels and hierarchy giving rise to fiefdoms run by functional heads. The organization began to run within functional silo’s giving rise to communication issues.

  • Excessive job insecurity brought about by random firing of employees by functional heads without the interference of HR. The term being used on the shop floor was “fear psychosis”.

  • Attrition level logged in 2023 mid was 40%

 

Outcomes

 

At the end of 2023, for the first time in its history the company logged losses. Targets set were far from being met. Shipments were delayed and the company spent a huge sum of money on air freight which impacted the bottom line in a very big way. A number of client relationships soured resulting in the firm losing its market share to competitors. A diagnostic study of the situation revealed the following:

 

  • Delays in shipments were due to excessive quality issues, mainly attributable to human error.

  • There were several gaps in communication between marketing and production resulting in incorrect product specifications, breaching of timelines, samples being rejected (increasing the overall operating costs)

  • The India marketing team and the US marketing team were not on talking terms hence customer relationship management was not taking place

  • Attrition had resulted in 70% of employee population falling in “Trainee/ new joinee” category

  • RMLs brand name in the employment market had visibly deteriorated and now the company was having trouble acquiring new talent.

 

 

Your task is to analyze the situation, identify cause and effect linkages and create a detailed root-cause analysis tree.

 

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