MY FIRST ARTICLE IN INDIAN EXPRESS WHICH WAS RE-PUBLISHED

Is it the‘C’ FACTOR


He may be the quintessentially rustic politician whose 15-year-rule in Bihar as chief minister was dubbed by critics as ‘jungle raj’, but India’s Railway Minister Lalu Prasad Yadav is set for an image makeover when he dons the role of a lecturer at the Indian Institute of Management, Ahmedabad next month. The turnaround in the financial health of the Indian Railways, with Prasad in charge, has been the subject of major discussion at IIMs and he is already being looked upon as a management guru. Ever since Prasad took over as India’s railway minister, the railways have become the second largest PSU profit-earner after the Oil and Natural Gas Corporation. Lalu has surprised many by emerging as one of the top-performing ministers in Prime Minister Manmohan Singh’s cabinet.

So what has Prasad done to the Indian railways which his predecessors could not?

The key policy decision, which significantly contributed to this remarkable turnaround, was to maximize the productivity of all existing assets by taking full advantage of sunk COSTS .The above mentioned financial turnaround of the railways could be logically linked to the efficient COST MANAGEMENT.

Cost Management is the process whereby companies use cost accounting to report or control the various costs of doing business. The term CM (cost management) is widely used in business today. Unfortunately there is no uniform definition. We use CM to describe the approaches and activities of managers in short run and long run planning and control decisions that increase value for customers and lower costs of products and services. For example, managers make decisions regarding the amount and kind of material being used, changes of plant processes, and changes in product designs. Information from accounting systems helps managers make such decisions, but the information and the accounting systems themselves are not cost management.

Cost Management has a broad focus. It includes – but is not confined to – the continuous reduction of costs. The planning and control of costs is usually inextricably linked with revenue and profit planning. For instance, to enhance revenues and profits, managers often deliberately incur additional costs for advertising and product modifications.

Cost Management is not carried in isolation. It’s an integral part of general management strategies and their implementation. Examples include programmes that enhance customer satisfaction and quality as well as programmes that promote blockbuster new product development.

Lalu when asked the reason for the railways turnaround. He put it in his inimitable style: “My mother told me not to handle a buffalo by its tail, but always catch it by its horns. And I have used that lesson in everything in my life, including the Railways.” Prasad’s other management mantra for the railways have been: “If you do not milk the cow fully, it falls sick,” which he is practicing while running the railways.

It is not just business schools that are awe-struck. Prasad has also attracted the attention of railways in other nations and, the global engineering house, General Electrics of United States.

It was not as if Prasad applied some new principles .He was just the guy who said ‘let us get down to it’.


Abhishek Ranjan
IMED