Company Analysis Of Hindustan Zinc Limited Management Essay

Hindustan Zinc Limited (HZL) is the only integrated zinc producer in India and is the third largest zinc producer of the world. HZL has six smelters at three different locations and the current project attempts to study and critically analyze the performance management processes and systems of the Leaching and Purification strategic business unit of the zinc smelter situated at Visakhapatnam (ZSV).

The output of ZSV is mainly used for galvanization applications and being at a port location, ZSV is ideally located to export the metal to East Asian and Latin American countries which have a high demand for zinc. As global zinc prices are controlled by London Metal Exchange, minimizing the cost of production is critical for improving net profit margin. On account of location and cost advantages, ZSV has access to markets in various parts of the world and is not affected by slowdown in some economies/regions and hence capacity utilization rather than order fulfillment/production by order is a strategic goal of ZSV. In addition to cost and capacity utilization objectives, environmental and safety goals are identified as the strategic goals of ZSV.

Overview of Hindustan Zinc Limited

Hindustan Zinc Limited (HZL) is a subsidiary of Vedanta Resources, a FSTE 100 metals and mining company and is the only integrated producer of zinc in India. HZL currently produces 707,000 metric tons of zinc per annum and is the third largest producer of zinc in the world. HZL has captive mines situated at Zawar, Rajpura Dariba and Rampura Agucha (all in Rajasthan), smelters at Chanderiya, Debari (Rajasthan) and Visakhapatnam (Andhra Pradesh), and currently it has 6,400 employees.

The present project attempts to study and critically analyze the performance management systems of the Leaching and Purification strategic business unit of the zinc smelter situated at Visakhapatnam.

Scenario of Zinc Industry

The global zinc consumption in 2009 was 12.5 million tones and consumption is growing at a rate of 2.9% per annum. The annual consumption of zinc in India is 470,000 metric tons and it is growing at a compounded annual growth rate of 8%. Apart from HZL, the only other primary zinc producer in India is Binani Zinc and it produces 38,000 metric tons of zinc annually. As the domestic production far outstrips the demand, HZL exports a significant portion of its output to East Asia, Latin America and European markets. HZL competes with Korea Zinc, the largest producer of zinc in the world and other Chinese players like Hunan Zhuzhou Smelter Group Corporation Limited, Huludao Zinc Industry Corporation Limited, Sichuan Hongda and Henan Yuguang Gold & Lead Corporation in these markets.

Zinc Smelter Visakhapatnam

The Zinc Smelter at Visakhapatnam (ZSV) had been commissioned in 1977 as a public sector undertaking and production started in 1979. The Government of India, as a part of disinvestment drive had privatized HZL in 2002 and Sterlite Industries India Limited, a subsidiary of Vedanta Resources had acquired a controlling stake in HZL. Before privatization, ZSV had a workforce of 2,200 and produced 35,000 tons of zinc and 25,000 tons of lead per annum. Post privatization, the new management of HZL attempted a major restructuring programme and introduced a voluntary retirement scheme for right-sizing the workforce. On account of tougher environmental protection norms and cost disadvantages, the lead plant at ZSV was closed and its 800 employees were separated through the voluntary retirement scheme. Though closure of lead plant reduced the morale of the employees, the industrial relations scenario was peaceful and production was not affected. Post restructuring and right-sizing the workforce of ZSV has been pruned to 830 and the existing capacity of ZSV was augmented to 56,000 tons per annum, mainly by de-bottlenecking the existing operations and modifying/discontinuing some redundant processes. The restructuring of the processes was well executed and necessary training was imparted to the employees to function effectively under the changed circumstances.

Products and Customer Segments

The main product of ZSV is high grade zinc (HG Zinc, composition: Zn > 99.975%, Pb 100 to 160 ppm, Fe 10 to 30 ppm, Cd 10 to 20 ppm and Cu 10 to 20 ppm). Cadmium and sulphuric acid are produced as byproducts of the process. HG zinc is mainly used for galvanization of steel to improve its corrosion resistance and hence its durability. 90% of the zinc produced by ZSV is used for galvanization (globally, galvanizing accounts for 70% of zinc consumption) and the remaining 10% is used in medical, cosmetic applications, zinc alloy batteries, paints and pigments. High grade zinc produced by ZSV is more suitable for galvanization and for use in paints, pigments rather than other applications where the purity requirements are much more stringent. Binani Zinc being a custom zinc smelting producer caters more to medical and cosmetic applications. ZSV being at a port location, most of its output is exported and the output from other smelters of HZL is used to cater the domestic demand.

Operations/Processes in Zinc Smelter Visakhapatnam

ZSV produces zinc through the hydro metallurgical route of roasting-leaching-electrolysis. The concentrated ore (zinc sulphide) consisting of 54% zinc is transported from mines to ZSV through railway wagons. The daily consumption of concentrated ore is about 300 to 330 tons. The concentrated ore is roasted in a fluidized bed roaster at 900 to 930°C where zinc sulphide is oxidized and zinc oxide and sulphur dioxide are formed. The sulphur dioxide so formed is sent to sulphuric acid plant for conversion to sulphuric acid and the zinc oxide (calcine) is sent to Leaching and Purification Plant for further treatment.

In Leaching and Purification Plant, the calcine is treated with spent electrolyte (dilute sulphuric acid) from the Cell House and after a series of reactions and sedimentation in Dorr thickeners; a clear overflow of zinc sulphate is formed and is sent for purification. The underflow is treated in progressively acidic conditions and high temperatures to recover any unreacted zinc oxide and after almost all the zinc content is recovered, the residue is water washed on a horizontal belt filter and the cake so formed (called jarosite cake) is sent to effluent treatment plant for further treatment and is then disposed off in a secured land fill. In Purification Plant, the overflow from leaching is treated with zinc dust and potassium antimony tartrate (PAT) to remove impurities and the pure zinc sulphate solution is sent to Cellhouse.

The pure zinc sulphate solution is then subjected to electrolysis in electrolytic cells and the zinc metal deposited on the cathode is manually stripped once in every 24 hours. The stripped cathode sheets are melted in an induction melting furnace and are casted into standard size 25 kg ingots.

Organizational Structure

Post privatization and restructuring, the operations at ZSV are categorized into three strategic business units (SBU’s): Roaster and Sulphuric Acid Plant, Leaching and Purification Plant, Zinc Electrolysis and Melting Plant (Cell House) and the current organization structure and the manpower distribution of Leaching and Purification SBU is as shown (please refer next page)

The brief job descriptions of some key executives in each SBU are given below:

The Senior Manager of each SBU is responsible for the cost of production per one unit of output and oversees the production, maintenance operations, quality and safety initiatives, plans capital expenditure requirements and coordinates with the commercial department in formulating annual maintenance, material handling and housekeeping contracts.

The Manager (Process) is responsible for overseeing the day to day operations of the plant, coordinating with commercial department for timely procurement of various chemicals, coordinating with Asst. Managers of electrical, mechanical and instrumentation departments to formulate preventive maintenance plans.

The General Shift-Incharge oversees the execution of maintenance operations, monitors housekeeping activities, assists the Manager (Process) in material planning, implements various quality initiatives and relieves the Shift-Incharge during change of shift.

The Shift-Incharge is responsible for the production processes and should ensure the supply of output of required quality and quantity to downstream operations during his shift.

Helper

Senior Manager (SBU Roasting)

Senior Manager (SBU Leaching & Purification)

Senior Manager (SBU Electrolysis & Melting)

General Manager

Asst. General Mgr (Finance)

Asst. General Mgr (HR)

Asst. General Mgr (Operations)

Asst. General Mgr (Services)

Asst. General Mgr (Commercial)

Asst. General Mgr (EOHS*)

Asst. Manager (Engineer- Instrumentation)

Manager (Process)

Asst. Manager (Mechanical)

Asst. Manager (Electrical)

Shift Engineer

Asst. Foreman

Asst. Foreman

Technician

Asst. Foreman

Fitter

Asst. Foreman

Electrician

*Environment Operation Health and Safety

Manager (Process)

Shift Engineer

Charge hands (Residue Treatment)

Asst. Foreman

Charge hands (Neutral Leaching)

Charge hands (Purification)

Operators

Helpers

Process

Mechanical

Electrical

Instrumentation

Total

Senior Manager

1

1

Managers

1

1

Asst. Managers

1

1

1

1

4

Engineers

6

2

1

1

10

Ast. Foreman

5

4

4

4

17

Charge Hands

12

12

Fitter

12

12

Electricians

12

12

Technicians

12

12

Operators

25

25

Helpers

48

25

20

93

Total Manpower in Leaching and Purification SBU

199

Fig.2. Manpower Distribution of Leaching and Purification SBU

Major Challenges

Manpower Shortage: Since plant is in the mode of increasing annual production to tap the increase in demand the shortage of machine operators is the biggest hurdle they are facing currently. Acquiring skilled operators and retaining them is an issue with the plant as Vishakhapatnam has a lot of potential job opportunities for the operators and they go where they get the best wages. This shortage of skilled manpower directly affects the production.

Improper Planning: On some occasions, planning at the end of the officials at HZL goes wrong in the sense that coordination between different function is less which leads to high inefficiency in the process and wastage in the processing of Zinc.

Machine Failure: Although not very frequent, but machine failure also causes that production to stop. The time taken to repair the machines is not much since the maintenance engineers are permanent employees of HZL and are present at the plant during all the shifts of production.

Employee development: The current performance management system does not lay any emphasis on employee development. Over time the work will get very mundane and the motivation levels will drop. Money can’t be always used as the sole motivator. Also a measurement of employee development will aid promotion decisions. Emphasis on leadership development, communication skill development etc. is important.

OD Intervention

Based upon the major challenges identified at the Zinc smelter in Vishakhapatnam following OD intervention are proposed.

Human Process Interventions

Coaching

Reason for Implementation

Coaching involves working with managers and executives on a regular basis to help them clarify their goals, deal with potential stumbling blocks and improve their performance. Coaching, with its focus on the individual, emphasizes establishing the interpersonal relationship with the ability to create trust, communicate, listen and utilize powerful questions.

Primary intentions is that it help addressing performance problem and also in developing new behavioral skills as a part of development program. Each of the functional heads operations (Process, mechanical etc.) are facing performance issues due to which they are not able to meet their targets. Moreover, improper planning causes a lot of production loss and quality of the product suffer. Coaching intends to clarify and establish the goals of the functional heads so that they can not only do their own work in an organized and planned manner but also help their entire team consisting of shift engineers, foreman, etc. in performing up to their utmost potential.

Steps to be followed for Coaching Intervention

Step1: Establish the principles of the relationship:

This initial phase would lay down the parameters of the relationship between the functional head and the OD practitioner such as schedules, resources and compensation. Since the functional heads have a full time workload coaching would have to be restricted to just once a week. Since Saturdays are generally meant for meetings and planning, a 2 hour coaching session would be possible on this day. As it proceeds, the sessions can become once in two weeks. This stage should be utilized by the OD practitioner to create an amicable atmosphere where the client would become comfortable in sharing his performance issues unlike in a feedback session.

Step 2: Conduct an assessment:

In this phase, the OD practitioner needs to conduct a personal assessment of the functional heads. A 360 degree feedback would be the best tool to assess the client here as his performance is closely linked to both his superiors and subordinates and they can be the best judge of his personality as they spend at least 8 hours/ day with him. This personality assessment would lay a strong foundation for the coaching ahead.

Step 3: Debrief the results:

Here OD practitioner would discuss the assessment data and come to a consensus on the diagnosis with the functional heads. The OD practitioner would give them proper feedback based upon interpretation of results. The main purpose of this session is to enable the functional heads to take action towards his goals. This would help them in realizing his potential and also identify areas of improvement on a personal level.

Step 4: Develop an action plan:

The activities that the OD practitioner and the module head would engage in would be specified in this step. It is the most difficult and critical step in the process as wrong selection of activities could be disastrous for the plant. During this step a framework to monitor the progress and the effectiveness of the coaching process should also be formulated.

Step 5: Implement the action plan:

In this stage, the OD practitioner has to confront, challenge and facilitate learning of the client. This would be done mainly in the one on one weekly meetings conducted with the client.

Step 6: Assess the results:

Finally, OD practitioner and the client together would evaluate the results of the client’s actions every month. Based upon this information, the goals can be reviewed and the coaching can be stopped if not needed further.