THE SMT WAY

CREATING COMPETITIVE ADVANTAGE THROUGH AN EMPOWERED WORKFORCE

The right work culture can make all the difference between a good and a great company. How can a
company create a culture where employees work seamlessly, learn extensively, and produce results
otherwise considered difficult? Is it possible to create an environment where even the youngest
member has the freedom to make choices and convert those choices into desired actions? How to
establish accountability in such a scenario? Can teams create a shared vision and achieve it? Who
will ensure discipline? Which processes will facilitate this way of functioning?

Dr. Reddy’s1 has searched for answers to the above and at times created more questions in its
journey, spanning more than a decade, with the SMT (Self Managed Team) Way. The new
manufacturing facilities of Dr. Reddy’s follow this approach and have set numerous benchmarks on
parameters like Safety, Quality, Delivery and Productivity. What sets these units apart? And why did
Dr. Reddy’s think of a new way of working?

GV Prasad, Chairman and CEO, Dr. Reddy’s, outlines the thought behind the
efforts, “There are very few initiatives in Dr. Reddy's that I am as excited about
as the Self Managed Team (SMT) initiative. The SMT way of working is inspired
by one of our values- ‘Respect for the Individual’. This initiative allows individuals
to grow in their job horizontally and vertically within the organisation. It helps
them work in a hierarchy-less organisation. It helps them to build multiple skills
and empowers them to handle end-to-end jobs. Furthermore, it promotes a
work environment with minimal levels of hierarchy. Apart from resonating with
our values, the SMT way of working also helps us to improve Safety, Quality,
Productivity and Availability at the work place. Hence this initiative has a far
reaching impact on multiple dimensions at Dr. Reddy's.”

The above quote from the Chairman and CEO of the company summarizes some of the critical
aspects of this approach. This case will document the journey of SMT Way in Dr. Reddy’s – its
genesis, set-up, benefits and challenges.

1
Established in 1984, Dr. Reddy's Laboratories Ltd. (NYSE: RDY) is an integrated global pharmaceutical company, committed to providing
affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services and Active Ingredients,
Global Generics and Proprietary Products – Dr. Reddy’s offers a portfolio of products and services including Active Pharmaceutical
Ingredients (APIs), Custom Pharmaceutical Services (CPS), Generics, Biosimilars and Differentiated Formulations. Source:
www.drreddys.com. Read more about the company and the industry in Annexure 1.
THE SMT WAY

THE GENESIS

After implementing several successful improvements in existing manufacturing units, Dr. Reddy’s
had something different in mind while setting up a new formulation manufacturing unit 2 in 2001.This
line of thinking was a result of the challenges posed by traditional organization design and
management style, and the impact on the company’s performance.

One such challenge is that multiple levels of hierarchy create gaps in communication both from top
to bottom and vice-versa. This inevitably leads to the alienation of employees on the shop-floor as
they are disconnected with the objective and purpose of the organization.

As this phenomenon continues, it eventually creates a work environment where people function in a
‘mechanical’ manner, with low energy and minimal passion. Over time, the organization becomes
inflexible and less responsive, shop-floor employees lack self-motivation for development and
growth, and even the smallest improvement initiative takes a lot of additional effort. All these
factors impact performance severely.

Many of the existing units in Dr. Reddy’s were experiencing such problems. The junior most
employees, the workers, were engaged in dead-end jobs and had no growth prospects. Also, this
workforce was not so flexible in learning new skills or in shifting to new locations and their
association with a union made the transition more difficult.

To overcome these challenges, few members of the senior management were keen on introducing a
new way of functioning – a new design and an environment where the focus would be on practicing
empowerment in its true essence.

Mr KB Sankara Rao (Head Product Development (retired)), one of the

pioneers behind introducing the SMT concept at Dr. Reddy’s explains: “The
concept of SMT appealed to me because it empowered our first-level people.
Generally, there are five to six layers in an organization, with the result that
people often don’t feel the ownership; they feel disconnected. In this model,
people are responsible, accountable and have a sense of ownership”.

By definition, a Self Managed Team is a group of empowered, self-managed and committed

individuals, who plan, organize and manage all the day-to-day activities in a manufacturing facility.
Their areas of operations include the entire gamut- manufacturing, packaging, quality control and
assurance, warehouse operations, and engineering.The SMT way is an innovative business model
which comes with multiple advantages. It benefits the company through better business results, the
individual through education and training, and society by creating better citizens (Figure 1). 3

Dr. Reddy’s was the first pharmaceutical company in India to implement this concept. The initiative,
since then, has stabilized and has been adopted at other units. It was not an easy transition, though.
The management, the planners, the implementers and the employees in the new unit overcame
several challenges to stabilize the operations to its current level.
2
Pharmaceutical formulation, in pharmaceutics, is the process in which different chemical substances, including the active drug, are
combined to produce a final medicinal product. Source: Wikipedia
3
Explained in detail in the sections titled ‘Community Living’ and ‘Conclusion’
THE SMT WAY

Figure 1: Alignment at strategic level

Source: Authors

THE BEGINNING OF THE SMT JOURNEY

The SMT journey began in 2001 in the picturesque town of Yanam 4. The concept was new, radical
and without too many precedents. Hence, it required tremendous effort to gain the necessary
support from all members of the senior management team. A cross –functional core team was
formed to work on the initiative.

Atul Dhavle, Vice President and Head - Operations Excellence and

Continuous Improvement (and one of the earliest champions of SMT) says:
“The concept of SMT has an inherent belief that ‘people are good and
capable’. Hence, it believes in providing the right training, tools and
environment to employees to enable, empower and motivate them. The
concept encourages creation of wholesome-job as against breaking jobs
down into smaller pieces that leads to higher ownership and increased
accountability.”

As the concept was unconventional, the core team conducted several brainstorming sessions to
evaluate the pros and cons of using the model in the pharmaceutical industry. Many senior members
were involved in defining initial processes so that proper alignment with strategy remains. The team
also debated on several aspects of SMT, and finally formulated the conceptual framework for this
initiative, which is referred to as ‘The Principles of SMT’ and ‘The Pillars of SMT’.

4
Yanam is a town in the Union Territory of Pondicherry, India
THE SMT WAY

The Principles and Pillars of SMT

The conceptual framework was formulated by the

core team (Figure 2) within the purview of the
company’s objectives, culture and value system.
These concepts were evolved and improvised over a
period of time, and then reintroduced at a new plant
which was set up in Baddi 5 in 2005. The core team
first worked on the principles that will lead to a fully-
functional SMT way. The principles are:

Figure 2: Principles of SMT

Source: Dr. Reddy’s Newsletter 2011
Shared Vision – In SMT way all team members are aligned to common goals and purpose. The
relevant information related to operations is shared through various means on an ongoing basis.
Management shares information with team members so that they can take initiative and make
decisions to solve problems and improve performance.

Egalitarian - Egalitarian work environment eliminates status and power differences and, in the
process, increases collaboration and teamwork.

Learning Organization– All employees have the innate desire to learn, contibute and grow. In order
to ensure that everyone is on a learning curve; appropriate processes are designed to continuously
enhance their knowledge and skills.

Empowerement – The SMT way of working involves providing team members with the necessary
skills, resources, authority, opportunity and motivation. It also involves holding them responsible
and accountable for the outcome of their actions.

Understanding these principles and putting them to practice required a fundamental shift in the
thinking process of those designing the framework as well as the team responsible for day-to-day
functioning of the plant.

Handling a young team was also a challenge as the policies and processes were more in tune with
the traditional and older work force of the company, and this was a new experience. As the core
team underwent this transformation, they decided to build the organization in a way that the new
paradigm gets engrained in the very DNA of the organization. This led to the creation of ‘The Pillars
of SMT’. The evolution of these principles and pillars is explained in Figure 3.

5
Baddi is a town in the Solan district of Himachal Pradesh, India
THE SMT WAY

Figure 3: Principles and Pillars of Self Managed Team

Source: Dr. Reddy’s Newsletter 2011

The Pillars of SMT mutually enforce the need for each other as well as promote the Principles of
SMT.

CREATING A LEAN AND AGILE ORGANIZATION

Starting from the objective of creating an empowered work place, a new organization structure was
first proposed at the Yanam plant. It involved just three layers of hierarchy – The Plant Manager, The
Hand Holding Team (HHT) and the SMT. The organization chart is displayed in Figure 4.

Figure 4: Flat Organization Structure

Source: Authors

In this structure - the SMT members plan, organize and execute all day-to-day activities including
material receipt, work-order creation, production scheduling, manufacturing and packaging, product
THE SMT WAY

analysis, documentation, 5S6, equipment upkeep and maintenance. Also, the traditional designation
of a ‘supervisor’ or a ‘boss’ is done away with.

The structure instead promotes hand-holding and hence, a Hand Holding Team was created. The
HHT comprises of a small group of people hand-picked from existing plants, each member heading a
critical functional area, who act as guides rather than typical bosses. They help the SMTs in
commissioning and start-up and also offer guidance in matters relating to the day-to-day functioning
of the plant.

Dinesh Patil, HHT member and Head of Quality Control in one of the
plants in Baddi says: “Personally I have learned a lot that has helped me
enhance my managerial skills, like handling people from different age
groups. The best thing about the SMT culture is that managers work as
mentors and not as bosses. This makes the SMTs comfortable and
promotes a sense of bonding.”

Initially there were several challenges related to formation and working of HHT and some of them
exist even today. While the company is making utmost efforts to fill Team Leader positions with
SMTs itself, some HHT members still need to be hired from outside or transferred from other
locations. They sometimes find it difficult to work in the SMT way. In case of change in leadership,
the company needs to expend a lot of energy in bringing new members on board.

Hiring for Aptitude and Training for Skills

Once the organization design was in place, efforts to actualize the dream began. The recruitment
process for SMTs started with the publishing of advertisements in local newspapers, inviting
applications from intermediate-pass science students from local communities. Recruiting these
youngsters was part of the well formed strategy to engage and retain talent.

To assist in this process, a scientific selection process was devised consisting of a series of tests –
written, psycho-diagnostic and neuro muscular, a group discussion, and finally a personal interview.
Various factors like educational performance, family background and overall personality were
considered along with the results of these tests. Figure 5 summarizes the recruitment process
(figures are taken from the first batch hired in 2001):

6
5S is a structured program to systematically achieve total organization, cleanliness, and standardization in the workplace. 'S' stands
for Seiri, Seiton, Seiso, Seiketsu, and Shitsuke (Japanese words)
THE SMT WAY

Figure 5: Selection Process

Source: Authors

With the right set of people on board, the process of acclimatization started. This happened through
carefully designed induction and training module, that is part of the “Continuous Learning” Pillar.
The training was designed by the HHT and delivered by an external partner. It covered concepts of
pharmaceutical manufacturing and also imparted softer skills to the SMTs.

Jayalakshmi, a member of the first SMT team of 40 at Yanam recalls the 50-
day rigorous training period that followed: “The first 10 days were devoted
to activities like communication skills, team building, creativity, and cultural
and group activities. The next 40 days were spent at a Pharmacy College
where we gained basic understanding of pharmacy. By the end of it we
really felt like a team.”

The focus of the training was to equip SMT members with the right knowledge and techniques. The
core team created a model where the learning was not limited to this 50-day training only. The focus
was on ‘continuous learning’. Regular classroom sessions were conducted on basic areas such as
GMP (Good Manufacturing Practices), SOPs (Standard Operating Procedures), Safety and basics of
pharmaceuticals. In addition, on-the-job training was provided in the areas of quality,
manufacturing, engineering and warehouse management.

One of the key elements introduced as a part of continuous learning was the higher education
program designed for the SMT members. Most of the new recruits were from small towns and
villages near the plants, and the opportunity to work as well as complete a company sponsored
higher education program proved beneficial for them.
THE SMT WAY

Parminder, a young SMT team member from Baddi, says: “We are really proud
of the work we are doing. We have been given an opportunity to become
independent. When we compare our present status with the other options that
were available to us, it seems that we have benefited immensely.”

This is win-win proposition for both the company and its employees since the higher education
course has many advantages for the former as well. It keeps the youngsters meaningfully engaged
over the weekends, and also connects them to the company for the three years they pursue this
course. It also creates a well-defined path for the SMTs. Hence, they ‘earn as they learn’, and also
graduate with a degree at the end of three years. However, as the higher education program starts
only after two years of work experience at Dr. Reddy’s, convincing parents to allow their children to
stop education for some time was challenging. The concept, though, was well accepted by families
with financial challenges.

Training was not limited to SMTs only; the core team also formulated a training module for the HHT
to help them transition to the new way of thinking and working. This included ways to promote
empowerment by involving people in decision making, sharing information and creating an open
work culture. The HHT members were also trained to be effective coaches.

While training is the responsibility of the company, the SMT culture also creates a mechanism by
which SMT members share their learning as well experiences which each other. A cycle called ‘Learn-
Teach-Learn (LTL)’ promotes this activity. LTL is a unique methodology which enables SMTs to first
learn from books (Learn), then share their knowledge with peers (Teach), and in the process learn
through this entire experience of sharing their learning (Learn). The objective of LTL is to encourage
SMTs to develop perspectives through book reading and group learning.

BUILDING STRONG RELATIONSHIPS THROUGH COMMUNITY LIVING

What encourages the SMTs to work together as a team? Why do they work better than traditional
teams? What helps them set and achieve new standards of excellence? The answer begins with
‘community living’.

While the training sessions involve an element of building effective teams, the community living
concept creates opportunities for the young members to develop long and trusting relationships.
This is incorporated as ‘mutual accountability’ and teamwork, essential for the SMT concept to work
seamlessly.

In Yanam, a residential bungalow was converted into a hostel with separate floors for boys and girls,
with a common canteen and recreation area. The SMTs manage the hostel with a well-defined
disciplinary model (explained later in the document). Other than living together, the SMT members
also participate in a series of engagement initiatives designed to enhance ownership and team spirit.

Team spirit is probably the single most important ingredient for the success of this experiment.
There is a level of camaraderie and shared purpose that has not faded with time. Six years down the
road, Bhaskar, of the Yanam team, can say this with confidence: “There is a lot of understanding
THE SMT WAY

between departments and functions. There are no barriers. Each supports the other. The goal is to
get the work done. Everybody is equal.”

Community living is designed in a way that the company participates only to the extent of providing
a common place to live. The SMT members then take on the responsibility of running the hostel.
Different batches of SMTs have formulated their own ‘do’s and don’ts’ related to community living.
Adherence to these rules is a must for all SMT members.

This system gives them a sense of independence with an element of conscientiousness. The SMT
members follow a meticulous lifestyle which includes yoga, games, and study hours. Some of the
principles of 5s are also imbibed as the members are responsible for keeping their living place clean
and tidy, and the same is audited to ensure continuity. Thus the initiative has led to benefits for the
organization, society and employees; a win-win-win proposition indeed.

Vijay Singh, Plant Head at Baddi elaborates: “The organization reaps benefits
when a highly energetic, productive and flexible team consistently strives
towards achieving the desired business goal. On a personal level, the SMT
members get an opportunity to learn at an accelerated rate. Finally, society too
gets benefited as these people become the future talent pipeline for the country.
This has been sustainable for so many years as it is a win-win-win situation. The
winners are society, the company and employees”

While there are several advantages of this culture, it poses certain challenges as well. Ripples are
created when one of the SMTs is promoted to next role and others still wait for their progression.
Obvious comparisons are made and despite a very open and measurable performance assessment
system, it becomes quite challenging to handle undue peer pressure.

Also, as most SMTs are hired from local communities they are not willing to move to other locations
within the company to take on higher responsibilities. This often leads to their moving out of the
organization. In some cases where the SMTs did move to the new locations, it was difficult for them
to adjust to a different way of working and continuous counselling and support was required for
them as well as their new team managers.

Communication processes for Sharing Information and Promoting Egalitarianism

Creating the right organization processes is as important as creating the right organization design.
The core team designed several processes to ensure that their objective of creating an empowered
workforce is achieved. Sharing of information is one such essential element. It is imperative for
building trust, fairness and a shared vision.

While entrusting people with responsibility and holding them accountable, it is necessary that they
are provided with a participative work culture where all relevant information is shared openly and
frequently. Also, sharing information is one side of the coin, involving people in decision making is
the other. How then is participative decision making achieved?
THE SMT WAY

This is where empowerment plays a key role. It entails creation of forums where employees
responsible for execution of work are involved in decision making as well. In fact, decisions regarding
day-to-day functioning of the plant are left to the SMT members. The HHT members guide them as
and when required. The means to promote communication are in-built in the system itself.

From communication boards that share information regarding plant operations to frequent
communication meets, all means of disseminating information and sharing ideas have been put in
place.

Every shift begins with a ten minute ‘shift assembly meeting’ conducted by the shift leader. This is
done to share information regarding the previous shift and draw out a plan for the current one. The
Plant Manager conducts monthly meetings to share information on the overall performance of the
company as well as their own plant. These meetings provide a platform where all issues and
challenges are shared openly. The communication meet ends with an open house where ideas are
also debated.

There are obvious business benefits of involving first-level employees. Schemes like ‘Saral’
(suggestion scheme on the shop floor) have brought several improvements on the machine
maintenance and operation fronts thanks to suggestions by SMT members. The company, however,
needs to continuously train and guide the HHTs to involve the SMTs. Also the HHTs spend an
enormous energy on managing the suggestions by the SMTs. At times disappointments need to be
handled carefully to avoid dampening the enthusiastic spirit of the young SMTs.

ENABLING PERFORMANCE CULTURE

With processes in place for sharing information and participative decision making, it is easy for the
teams to discuss and evaluate their performance through the SMT scorecard. The scorecard creates
an open and transparent system through which members can clearly understand their performance
targets and reflect on the results. These are displayed at relevant communication boards so that
teams can assess themselves and improvise continuously.

The daily shift meeting happens in front of the scoreboard as the team leader discusses the team’s
performance, targets and priority areas. An example of a team scoreboard from Baddi is displayed in
Figure 6.
THE SMT WAY

Figure 6: Performance Scorecard

Source: Dr. Reddy’s newsletter 2011

Recognition and Celebration foster team spirit

The core team involved in designing the SMT way has put together a special mechanism to recognize
and celebrate extraordinary efforts at both individual and team levels. The criteria for these awards
are well defined and communicated to the teams as well as the adjudicators. The SMT at Baddi
which is also the youngest team at Dr. Reddy’s, was declared as the ‘Best Factory’ in May 2012 for
the third consecutive time as per pre-established parameters used across all Formulation plants.

Enabling Horizontal as well as Vertical Growth

One of the main objectives of adapting the SMT way in Dr. Reddy’s was to create ‘wholesome jobs’
that are capable of keeping employees engaged in their work for a long tenure. Skill Based
Progression System (SBPS) is designed to promote multi-skilling for SMT members, thereby
improving their performance and creating flexibility. SBPS recognizes employees for the depth,
breadth, and types of skills they acquire and apply in their work, and lays strong emphasis on the
career progression of the SMT members.
THE SMT WAY

Samiran Das, Executive Vice President, FTO, says “Skill Based

Progression system results in a Win-Win wherein employees take
charge of their own career by learning many skills while, the
organization, on its part provides a clear WIFM (What’s in for me) to
fully leverage this flexibility.”

There are well defined skill blocks in a Plant viz. Manufacturing, Packaging, Engineering, Warehouse,
Quality, etc as shown in Figure 7. A skill block consists of a number of job skills pertaining to one
particular area (e.g. Granulation area is considered to be one skill block with a number of skills
identified under it. Compression, Coating and Capsulation are other different skill blocks 7.)

Figure 7: Skill Blocks

Source: Dr. Reddy’s newsletter 2011

Each block has a number of skills that need to be acquired along with relevant theoretical
knowledge. These are well defined and relevant training materials and manuals are prepared for the
same. The training modules consist of a mix of on-the-job training and class room sessions.

In addition, the skill levels of each of these blocks are defined in the form of Learn, Execute, Excel
and Propagate (LEEP). These levels help an individual SMT member assess the learning and identify
gaps for further development. Also, as a person crosses a certain level (Level 2 in most cases); he
becomes eligible for rotation to another skill block. A certification process consisting of theoretical

7
Granulation, compression, coating and capsulation are different processes involved in the manufacturing of a medicine
THE SMT WAY

knowledge, work ethics and practical experience is considered. Line Managers play a crucial role in
enabling this process.

A progression process is also devised to enable team members to take higher responsibilities and
position. It assesses the overall development of an individual. The performance rating of an
employee, peer feedback, performance in the higher education program, and acquisition of skills are
considered. This has led to some SMT members taking charge as Team Leaders in just 5 years.

Ms Jayalaxmi, one of the members of the SMT batch of Yanam enumerates the
benefits of SBPS: “I was initially in manufacturing at the Yanam plant for over 3
years. I then moved to the packaging function and worked there for about 2
years. Then I got married in 2008 and moved to a plant in Hyderabad. I am
now working as an Assistant Manager in Quality Assurance. With the basic
knowledge of production and packaging, I believe I am able to add better value
to my job. I owe it to the multi-skilling opportunity provided to SMTs, due to
which I have a better understanding of processes like primary and secondary
packaging, and compression.”

The story of Ms Jayalaxmi is just one of the many examples of careers being made by the SMT work
system at Dr. Reddy’s. The plant in Baddi recently witnessed a process in which 25 (out of 85) team
members were moved to the position of Team Leader through SBPS. This system has also helped in
addressing the challenges related to attrition and workforce management since the SMT way keeps
resources flexible and multi-skilled.

Despite the existence of SBPS, many members from initial batches left their jobs. The reasons for
attrition were lack of clarity in career progression and the absence of an effective monitoring
process.

CONTINUOUS IMPROVEMENT TO DRIVE EXCELLENCE

All Dr. Reddy’s plants maintain a special focus on ‘Manufacturing Excellence’ and that includes those
which function with SMTs. The SMT members are encouraged to participate in improving their
plants’ performance. As a part of Continuous Improvement, teams take up various improvement
projects in their work area to improve Safety, Quality and Productivity. The SMT members are
trained to use tools and techniques, like 7 QC tools. Teams took more than 250 improvement
projects in 2012 leading to a saving of several lakhs.

SELF GOVERNANCE THROUGH HUMAN VALUE ACTION TEAM (HVAT)

The SMT work environment necessitates a large degree of freedom, openness and self-sufficiency.
How do these youngsters monitor their own conduct and behaviour? Can management keep its
hands off while managing the plant? Some SMTs, especially from initial batches, took time to
THE SMT WAY

understand that what they considered innocent fun could lead to serious disciplinary issues for the
company.

While plants operating the conventional way have disciplinary committees consisting of members
from senior management and HR for handling such deviations, the SMT way promotes self-
governance and self-discipline. Members themselves draw up a list of desired and undesired
behaviours and acts relating to the overall culture. Special efforts are made to make all rules visible
and comprehendible. The SMT members in Baddi have created a Citizenship Charter that is
mandatory to be read, understood and signed by all new team members at the time of induction.

With the focus on self-governance, they have also created a Human Value Action Team (HVAT) to
handle deviations. This team enables a healthy and conducive work environment by encouraging
desired behavior, discipline and practices at the work place, while correcting undesired ones through
a well-defined process. The most important part of the HVAT is its composition. The HVAT involves
members from the SMTs and a typical team consists of: 3 SMT Members, 2 Team Leaders, 1
Resource Leader, a Facilitator (Human Resource) and a Chairman (Plant Manager).

This process also has its own challenges. It is sometimes difficult for HVAT members to understand
the serious implications of the actions of their peers. In some cases they also find it hard to take
difficult decisions against their batch mates and friends. Hence the facilitators need to carefully
anchor and steer these discussions keeping in mind the sensitivity involved in the process.

CONCLUSION

Turning traditional thinking on its head, the SMT concept has proved more effective and successful
than initially thought off. The result is that all Dr. Reddy’s plants established since 2005 are now
operating in the SMT way. Figure 8 rightly captures the essence of the program and summarizes the
entire journey.

Self Managed Teams (SMT)

▪ Good Citizens
▪ Diploma ▪ Pursue better and higher
▪ On the job training Degree opportunities
▪ Handholding

▪ On job – independent ▪ Higher responsibility

▪ Team bonding ▪ Skills – technical/soft
▪ Living together in DRL
▪ Weekend college ▪ Better equipped to
▪ Learning together
face life’s challenges

▪ Belief in self/pride in work

▪ DRL’s ▪ Confidence in skills
selection ▪ Learn as you earn
▪ Attitude/
values Take charge of own destiny, facilitated
▪ Malleable by DRL program
▪ Skill progression (TTC)
▪ Purpose/pride ▪ Career laddering (HR Policy)
▪ Sense of ▪ WIFM (Skill based pay /R&Rs)
responsibility ▪ Mentorship – coaching KPIs for
DRL managers
▪ Teens – 10 + 2 ▪ Respect (Self / Others / Work)
▪ 17 / 18 yrs old
▪ Underprivileged/in need
THE SMT WAY

Figure 8: SMT Journey

Source: Dr. Reddy’s annual report 2011

Dr. Reddy’s has reaped several gains from the SMT model. The SMT culture creates an agile and
energetic workforce which helps in implementing any initiative quickly. In such plants, the overall
productivity is higher than traditional plants. Saumen Chakraborty, President, CFO and Global Head
of HR and IT says, “The enthusiasm of the SMT members is remarkable, and their pride in their work
is noteworthy”.

Also, as the awareness and understanding of business, plant operations, processes and systems is
high, the SMT members’ ability to contribute and improve is much higher than those working in
traditional systems. The curiosity and inquisitiveness of SMT members pave the way for a culture of
continuous improvement. “You can see a lot of energy pulsating throughout the plant”, says Atul
Dhavle.

The operations in SMT plants are more seamless as resources become flexible and can handle
multiple tasks. Decision making is speedier, hence execution becomes timely. The overall
engagement levels of SMT members are higher than in traditional plants as the jobs are designed to
be wholesome and the work culture empowers team members.

Statistics in the recent past too have corroborated the success of the SMT model in Dr. Reddy’s. The
plants with SMT culture have witnessed significant improvement on some key statistics. The
productivity in these plants has been higher with marked reduction in manufacturing lead times and
stock-outs8 of key products. In the Figure 9, results from different formulations plants are shown.
Plants 1 and 2 are fully on SMT way.

Figure 9: KPIs Formulations Plants

Source: Dr. Reddy’s annual report 2011

8
Lead Time refers to the time taken in making a product available in final form. Stock-outs refer to the situation when an order is not
fulfilled due to non-availability. Reduction in lead times and stock-outs help in increasing availability of product in the markets. These are
critical parameters for a manufacturing unit.
THE SMT WAY

While the company has benefited with this model, the SMT way benefits the employees and the
society as well. The SMTs get an opportunity to learn at an exponential rate while earning at the
same time. Overall more than 880 SMTs have joined in 24 batches so far under this program.

The society benefits as many of these youngsters come from financially weak families and this
addresses their need for education as well as income. As on date 9, 40% of the employees from initial
batches have completed their higher education and 270 SMTs are still enrolled for the course.
Another advantage for the society is that this initiative creates a talent pool that is utilized by the
industry. The average attrition rate is 6.20% (after working for 5-6 years with the company) and
approximately 80 employees are now contributing to other companies in leading positions.

Thus, this initiative creates a win-win for all the stakeholders. Despite its inherent challenges, the
success of this concept has encouraged the management to expand it to all the new set-ups and
existing plants as well.

Annexure 1

The Industry

The global pharmaceutical industry, which undertakes the development, production, marketing and
supply of medicines, is valued at USD 900 Billion 10 plus with a compounded annual growth rate of 3-
6%. It is expected to be valued at USD 1.1 Trillion in 2016 11.

North America, Europe and Japan account for over 80% of this share currently. However, the growth
in these markets is muted and moderate. The bulk of the growth is coming from the Emerging
markets, which include countries like China, India, Brazil, Russia, amongst others. Most of these
markets are growing at double digits.

The Indian pharmaceutical industry stood at USD 12 Billion in 2012, registering a year on year
growth of 16%.  India is expected to join the league of top 10 global pharmaceuticals markets in
terms of sales by 2020 with the total value reaching USD 50 billion. Indian pharmaceutical

9
Data as on June 2013
10
This estimate includes all retail sales of pharmaceutical products and institutional sales at ex-manufacturer prices (source: IMS World
Review and IMS Midas, Dec 2012)
11
Moody’s Global Pharmaceutical Industry: Return To Earnings Growth In 2013 Keeps Outlook Stable, Apr 2013
THE SMT WAY

companies are also amongst the largest exporter of generic formulations globally, and contribute
significantly to bringing down health care costs worldwide. 12

Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) is an integrated global pharmaceutical company,
committed to providing affordable and innovative medicines for healthier lives. Through its three
businesses - Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary
Products - Dr. Reddy’s offers a portfolio of products and services including APIs, custom
pharmaceutical services, generics, biosimilars and differentiated formulations. Major therapeutic
focus is on gastro-intestinal, cardiovascular, diabetology, oncology, pain management and anti-
infective. Major markets include India, USA, Russia-CIS and Europe apart from other select
geographies within Emerging Markets. Revenues for the fiscal year FY 13 were USD 2.23 Billion. iii

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http:// www.fao.org., accesses on 07th Jan 2009.

12
McKinsey & Company, India Pharma 2015 – Unlocking the potential of the Indian Pharmaceuticals Market
i

ii
The authors acknowledge the contributions of the following persons from Dr. Reddy’s Lab who, as true professionals,
provided all required data, information during research: Atul Dhavle, Garima Yadav, Jagjit Singh, Richa Yadav,
Srinivasu Malladi, Vaidehi Hussain,