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ASHRAF SILK AND GENERAL MILLS In mid October 2002, Khawaja Fawad Kalim, Director, Ashraf Silk and General Mills (ASGM), Gujranwala, Pakistan was faced with the difficult choice of whether or not to reemploy the two weavers who had left his company earlier. Fawad also realised that he had to take some long term measures to attract, retain and motivate weavers, to optimise the benefit from the already installed automatic looms. COMPANY BACKGROUND At the time of the partition of India in 1947, Khawaja Mohammed Sadiq, Fawad’s grandfather (see Exhibit 1) emigrated from Amritsar, India, to Gujranwala, Pakistan. The newly formed Government of Pakistan gave him some shares in the Okara Textile Mills, in lieu of his looms left at Amritsar. In 1979, because of disagreements with the other partners, Sadiq left Okara Textile Mills. He formed Ashraf Silk and General Mills at Gujranwala, in collaboration with his son, Khawaja Mohammed Kalim, (Fawad’s father). In 1965 ASGM had only one main competitor. ASGM produced silk- velvet cloth for products like bed-covers, prayer rugs, and suiting for men and women. The product mix changed with time to accommodate changes in demand. Sadiq or Kalim would either modify the existing looms or replace them with new ones to meet the market requirements. Before 1974 all the looms at ASGM were manually powered (handlooms), with the operator himself pushing the shuttle through the warp. In 1974 ASGM imported four power looms from Japan and started producing ‘shaneel’ (a kind of velvet). In 1993, Khawaja Zarar Kalim joined ASGM after completing his MBA from the University of the Punjab. Mohammed Kalim then thought about expanding his business. The existing facilities of ASGM were in a crowded part of Gujranwala, and permitted no room for expansion. Even if any of the neighbouring factories were ready to sell their space, Mohammed Kalim did not want to expand the existing facility for fear of losing control over the labour force. Many labour laws, including provisions for a labour union, became applicable at the mill with its work-force of 35 or more. To avoid these problems Mohammad Kalim bought a piece of industrial land on the Grand Trunk Road in Rahwali (a town eight kilometres north of the existing facility in Gujranwala).
This case was written by Research Associate, Arif I Rana under the supervision of Professor James Erskine and Professor Zafar I Qureshi to serve as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. This material may not be quoted, photocopied or reproduced in any form without the prior written consent of the Lahore University of Management Sciences.

©1989 Lahore University of Management Sciences

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Mohammed Kalim also ordered four looms from Gusken in Germany and with their arrival in 1995 set up a sister company of ASGM under the name of Ashraf Textile Mills (ATM) in Rahwali to produce velvet cloth. In 1999 he bought a finishing unit from Mortamate in France for the Rahwali plant. This gave velvet cloth a very special finish which made it possible to sell it as a high quality cloth at a higher price. In 2000, four more looms were bought for ATM from Gusken, and four looms with jacquards were imported from Vamatex in Italy. The jacquard looms had a capability of inserting a third pattern in the background, a facility that no other velvet producer had in Pakistan. In 2001, Mohammed Kalim purchased 16 automatic looms from the mayor of Gujranwala who had already sold 24 such looms to his own brother. The mayor had bought 173 of these looms from a bankrupt company in Belgium but, because of his preoccupation with politics, he had decided not to utilize them himself. These looms were not very popular in the textile sector in Gujranwala because there was a shortage of weavers trained to operate them. The remaining machines were gathering dust in the mayor’s warehouse. The automatic looms were about 50 years old and cost Rs 1 50,000 each, which was roughly the price of a new non-automatic Pakistani loom. A new automatic loom cost three times this price. The only company manufacturing such looms in Pakistan was the Pakistan Engineering Company (PECO). INDUSTRY BACKGROUND Over the years Gujranwala (60 kilometres north-west of Lahore) developed into a major silk weaving centre, producing 90% of Pakistan’s silk cloth. In 2002, the ASGM/ A TM group was one of the four main producers in Gujranwala. Yarn for silk-velvet cloth was not manufactured in Pakistan and had to be imported from Australia or Italy. Unlike the cotton textile industry, the silk and velvet textile industry in Pakistan lacked the price advantage of raw material in international competition, and could not compete as well as cotton textiles in the export market. The taxation and labour laws also discouraged large level producers. All these factors resulted in middle level producers like ASGM, dominating the silk-velvet textile industry. The selling ‘season’ for velvet and shaneel was from December to March. Shaneel was generally used for curtains, bedcovers and quilts. Only 30% of the cloth produced in the nonseason period was sold during that period. The rest was stocked to be sold during the winter season.

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In October 2002, US $ 1 = Rs. 60

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WEAVING Until the early nineteenth century, weaving was primarily a manual process. In late 1700 and early 1800 weaving looms were developed that were partially machine powered. Later, entirely mechanical or power driven looms were produced. Weavers were hostile to these mechanical looms at first, for fear that the machines would make them redundant. Consequently, the Industrial Revolution was well under way before its effects were felt in the weaving mills. During the late eighteenth and early nineteenth centur y, automatic features were added to existing looms to accelerate operations and reduce the frequency and extent of damage due to faulty functioning. Woven fabrics consisted of sets of yarn interlaced at right angles in established sequences. The strands that ran parallel to the selvage or to the longer dimension of a bolt of fabric were called warp yarns or ends; those that ran across the fabric were called filling yarns, weft yarns, or picks. Operations at ASGM Imported silk yarn from Australia or Italy was the main raw material for ASGM. The yarn first underwent the warping operation. From 650 to 1,200 parallel strands were wound on to an iron roller to form a ‘beam’. This beam was then mounted at one end of the loom (see Exhibit 2) to form the warp of the cloth. The warp beam held the lengthwise yarn. It was fixed at the back of the loom and released yarn to the loom as needed. The heddles were wire or metal strips with an eye located in the centre through which the warp ends were threaded. The harness was the frame that held the heddles in position. A loom had two to thirty-two harnesses. Harnesses could be raised or lowered in order to produce the shed through which the filling (or weft) yarn was passed to place the crosswise yarns and control the pattern of the weave. The shuttle moved across the shed, laying the filling yarns between the warp yarns. Mounted on the end of the lay or batter bar was a comb- like device called the reed. The openings between wires in the reed were called dents. Warp threads passed through the heddles and then through the dents. The reed kept the warp ends from tangling, and beat and packed the filling threads into their proper position. The reed was parallel to the harness. The cloth beam or roll, located at the front of the loom, held the completed fabric. The looms were laid out so that a weaver could operate two looms without moving from his place (see Exhibit 3). At ASGM, a weaver was assigned two looms, following the general practice in the silk weaving industry in Guj ranwala. In Europe, a female weaver would normally operate 8-12 such looms. Also at ASGM, there were two supervisors, one for the automatic looms and another for the simple power looms.

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The weaving department worked on a double shift schedule six days a week. The day shift was from 6:00 a.m. to 5:00 p.m. and the night shift from 5:00 p.m. to 6:00 a.m. These shifts included an hour’s break. The weavers could also take a tea-break after three hours of work. The tea breaks usually lasted from 20 minutes to half an hour. The start and finish of the shifts could vary, since a weaver generally did not leave the machine until the next weaver arrived. This was because the weavers were responsible for fixing any minor faults that might arise in the machine during production. They preferred to hand over the loom in working condition to avoid being held responsible for any defects that might arise during the next shift. Losses in production occurred when the machine halted, and the weaver was not present to attend to it; the weaver may have absented himself for tea or a smoke. Napping during the night shift was usual. Sometimes a machine stopped due to a minor fault that the operator could not fix, and it would be out of production until the next morning. There was no technical supervisor during the night shift. Production was lower during the day than the night shift. This was because the weavers had fewer visitors during the night shift, and the looms received maximum attention as long as the workers were awake. During the day shift it was common for weavers to absent themselves every now and then to attend to visitors, keep appointments and run various errands. Weavers rotated between day and night shifts on a weekly basis. They were paid every Thursday on the basis of their production during the previous week. Fawad observed: It seems that the weavers have a preconceived notion of what they should earn every week. The production on Saturdays and Sundays is sometimes half of that on Wednesdays. On Wednesdays it is not unusual to have production upto 45 yards per shift, whereas the weekly production per shift is usually in the range of 150 to 175 yards. The Weavers In Gujranwala there were close to 10,000 weavers working in over 1,000 textile weaving plants. Many plants employed 15 to 20 weavers and a large number had as few as four weavers each. Many of these small plants were weaver-owned, and produced cloth on a contract basis either for larger producers or distributors. Weavers were generally paid on a per unit basis. As of October 2002, the market rate for weavers was Rs 7.00 per metre of cloth produced. At times factory owners provided loans to weavers in order to meet emergency expenses. These advances were deducted from their pay later. The wage per unit of cloth produced for weavers in Gujranwala had not increased in the last two years. However, there was a general increase in advances demanded by the weavers. Ten years earlier the weavers rarely ever got an advance. In 2000, most weavers owed ASGM advances ranging from Rs 1,200-1,400. In 2002, this figure had jumped to between Rs 2,0003,000. 4

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Weavers commonly worked in groups of two or three based on friendships developed over the years. They helped each other by attending to a friend ’s looms, while he was absent. A group certainly had greater bargaining power than an individual. The weavers had a sense of loyalty to their groups, and if one of them felt ill- treated, they all could leave. For example, if a weaver got irritated on being asked questions about avoidable defects in the cloth, he might quit. Since the overall demand for weavers was greater than the supply, they were generally sure of being hired elsewhere. Feroze Shahid, the general manager at ASGM (see Exhibit 4), was responsible for managing the weavers. He authorised their hiring and salary advances. By keeping contact with labour union leaders, he was popular among the weavers and made it a point to visit weavers’ hangouts frequently. These hangouts were usually small kiosks selling hot tea and biscuits in the neighbourhood of weaving units. If ASGM needed a weaver, Feroze would go to these kiosks and hire one within two to three days. The labour turnover in the textile industry in Pakistan had traditionally been very high. According to the report on the weaving industry of Pakistan, published in 1973 by the International Labour Office, ‘Labour turnover is often very high, a figure of 200% not being unusual’. Fawad estimated that on an average two weavers out of twelve left every month. Of these 50% left for better pay, 30% due to a friend leaving, and 20% due to a personal problem. If an experienced weaver left, or threatened to leave, Fawad tried to retain him with a better offer. He was usually indifferent towards inexperienced weavers. According to Fawad, ASGM had built up a good reputation over time and its weavers were considered superior. At times other producers ‘kidnapped’ weavers working at ASGM, with promises of better pay and facilities. Feroze Shahid would follow-up on a weaver if h left without fully paying back any loan e advanced to him by ASGM. He either went to the weaver and used personal pressure, or to important people in the weaver’s neighbourhood, to influence him to return the advance. Sometimes Feroze went directly to the new employer, who either paid back the advance on behalf of the weaver, or asked the weaver to make some arrangements. Six of the twelve weavers employed at ASGM had been with the company for over nine years. To have worked with the same employer for a long time was a source of pride among the weavers. A good weaver (in terms of quality) was likely to be a stable employee and an expert at his craft. Traditionally, in the Indo Pak subcontinent, families were associated with professions. Although this tradition was dying, there were still families who had been weavers for generations. Such weavers were usually more reliable and professionally competent. Weaver Training ASGM also trained weavers. A trainee was usually a friend or a relative of the general manager, supervisor or someone, whom Fawad wanted to oblige. Since adult trainees learned 5

03-336-89-1 faster, ASGM had a minimum age requirement of 14 years and preferred those who were even older. However, older people, especially those who were married, seldom wanted to undergo training to become a weaver because of the low pay that a trainee received. A trainee was first assigned for a month to the pern2 winding operation, which was a relatively simple task. He was evaluated in terms of punctuality, obedience and readiness to work overtime when asked. During the observation period, the trainee would also adapt to the environment at ASGM and make friends with the weavers. If the trainee adjusted and was acceptable, he was attached to a weaver with whom he got on well. Weavers generally disliked training other weavers for fear of creating competition against themselves. However, there were three old weavers at ASGM who were willing to become trainers. These trainers were called master weavers. The trainee worked on the same looms with the master weaver from six months to a few years. The trainees adversely affected production in terms of quality and quantity during the first month. The master weaver either used the trainee as a helper in operating the looms or let the trainee operate the looms and simply g ave instructions. He also used the trainee to run personal errands. The trainee was paid Rs 800 to 1,000 per month during this period. When the trainee was able to make major adjustments to the loom and perform other important tasks like changing the warp, he was put in charge of his own machines. The master weaver however continued to supervise the trainee. He was paid Rs 4 and the trainee Rs 3 for every metre of cloth produced by the trainee. This arrangement lasted f r at least o three months. When the trainee was able to make the fine adjustments to the loom, he became an independent weaver. Such a weaver was paid Rs 6 per metre for a probationary period of two months before earning a full pay of Rs 7 per metre. ASGM had a policy of keeping at least one or two trainees at all times. This was a contingency measure in case a weaver left without notice. The weavers were aware of this and tended to be less threatening when trainees were about to complete their apprenticeship. However, ASGM had a problem attracting good potential trainees. Most young candidates preferred other professions that paid an equivalent amount or more without the inconvenient night shift. FAWAD’S STARTUP In January 2002 Fawad joined ASGM, after getting his Bachelor of Science degree in Statistics and Economics. At that time ASGM had been closed for a year because Fawad’s brothers and father was involved with A TM and other family concerns. Fawad started operations with 12 old looms and eight of the 16 newly purchased automatic ones. The automatic loom stopped as soon as any of the threads broke and the machine would
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A thin but long cone use in the shuttle

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03-336-89-1 not restart unless the broken thread was fixed. Woven cloth of much better quality was produced on these automatic looms ; with the simple power looms the weavers sometimes ignored one or two broken threads just for the sake of higher production. A quality conscious weaver could produce much more on an automatic loom, since he could operate it at a much higher speed. The other eight automatic machines were lying idle at ATM. Weavers generally did not like to work at an automatic loom as they considered the automatic stoppage as a device designed to benefit the factory owner. The weaver had to undergo a week or two of training to be able to operate an automatic loom. Since the automatic looms were easier to operate, weavers who got accustomed to them hardly ever went back to the old looms. Within a month and a half of his joining the company, Fawad had successfully managed operations of the old looms. He then hired Ghulam Rasool as supervisor for the automatic looms. Ghulam Rasool had 25 years of experience, and started with a wage of Rs 8 per yard 3 . Within a week he asked for a raise to which Fawad agreed. Fawad explained his decision as follows: Since we were just getting into automatic weaving I decided to increase his salary to Rs 11 per yard. I was hoping to be able to attract suitable weavers and give an incentive for higher productivity. However, I cannot continue at these rates forever since my gross margin for most qualities is from two to four rupees per yard, although for some designs it goes up to Rs 32 per yard. Instead of acting as an incentive to produce more, the raise had the opposite effect. After the first week of the raise Ghulam Rasool made Rs 1,824. Within a few weeks his weekly pay had come steadily down, and levelled off at Rs 1,128, which was about what he received before the raise. A couple of weeks after hiring Ghulam Rasool, Fawad employed Najibullah and Amjad. They were 14 to 15 years old respectively and started training at Rs 700 per month with Ghulam Rasool. Najib was a cousin of Feroze Shahid ’s friend, and Amjad was from the same village as one of the weavers. By October 2002, Najib and Amjad had been at ASGM for seven months and had almost completed their training. Fawad increased the pay of all weavers by Rs 1 per yard. There was no increase in Najib’s and Amjad’s pay, because Fawad felt that at a salary which was double of what the competition paid to trainees, they were already being overpaid. About a week later Amjad and Najib threatened to leave, and on Fawad’s ignoring them, they left. In Fawad’s words:
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Pakistan changed to the metric system in the seventies. Shaneel cloth however continued to be sold according to the old (British) system.

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I was told that they had joined the mayor’s brother at Rs 1,200 per week. Given their abilities I felt it was simply atrocious. They were almost fully trained but still needed some ‘polishing’ before they could be given over the independent charge of machines. Most probably they lied to our competitor that they were fully trained and were operating their own looms. Three days later the weavers were brought back by their supervisor. The supervisor requested Fawad to forgive Amjad and Najib this time, assuring him that they would not repeat their past behaviour.

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Exhibit 1 ASHRAF SILK AND GENERAL MILLS Family Tree

Khawaja Mohammad Sadiq

Khawaja Mohammad Kalim

Khawaja Mutahir Kalim (Director ASGM)

Dr Abrar Kalim (Surgeon)

Khawaja Zarar Kalim (Director ATM)

Dr Ammar Kalim (Physician)

Khawaja Zawar Ashraf (Director ATM)

Khawaja Fawad Kalim (Director ASGM)

Source: Writer’s Assessment

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Exhibit 2 ASHRAF SILK AND GENERAL MILLS

Source: Introduction to Textiles

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Exhibit 3 ASHRAF SILK AND GENERAL MILLS Looms at ASGM

Source: Case Writer’s Photographs

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Exhibit 4 ASHRAF SILK AND GENERAL MILLS Organisational Chart
Director Fawad Kalim

General Manager Feroze Shahid

Accountant

Peon

Guard

(Supervisor Automatic)

(Non-Automatic)

Wrapping

(Dyeing)

(Drying & Finishing)

Weavers (3)

Weavers (6)

Assistant

Operators (4)

Operators (8)

Helper (2)

Source: Company Records

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