INTRODUCTION
“Sir, my company’s founder would like you to visit our
company,” said Ms. Swati Ponnala to Professor Vince
Klassen who, in early 2014, made a short presentation on
management control systems (MCS) to a group of 25 women
working in the social enterprise sector. These 25 women
were participating in a week-long management development
program (MDP) conducted by a reputed management
institution in southern India. “Your presentation was so
impressive that I have already talked to my founder about
it,” she added. Two weeks later, Professor Klassen was
sitting face to face with Mr. N. K. Chaudhary (Mr. NKC),
founder of Jaipur Rugs (www.jaipu
ugs.com), headquartered
in the city of Jaipur in western India. Mr. NKC was dressed
informally, defying the stereotypical image of the founder
and chief executive officer of a company with approximately
₹1.2 billion in sales revenues (about $18 million).1 “Welcome,
professor,” said Mr. NKC, as he greeted Professor Klassen
at the entrance of the main office. “Wow, this man is
very humble, and he appears to possess decades of life
experience. What will I be able teach him that he does not
already know?”
JAIPUR RUGS
Mr. NKC, who hails from a small village in western India,
started a carpet weaving business in 1978 with the intention
of empowering underprivileged rural women of India to
uild their self-esteem and to enable them to provide for
themselves and their families. To this end, he developed
a unique business model by training individuals in rural
communities to become skilled weavers of high-quality area
ugs. The company was established as Jaipur Carpets in 1999
and renamed Jaipur Rugs Company Private Limited (JRCPL)
in 2006; its formal vision and mission are stated below:2
We look upon business not merely as a source of
income or profit, but as a way of life, as a medium for
putting our talents to good use, while at the same time
affording us an opportunity to be of service to the
community. Profits will follow. Let us remember that
profit is not just a set of figures—but of values.
“Service to the community” is our motto. Our
company strives towards this focused direction to make
the society grow hand in hand with our own growth and
prosperity. We ensure that the need of our customers is
matched by the skill of our weavers.
JRCPL is built on a foundation of six core values:
empathy, simplicity, honesty, integrity, transparency, and
commitment. Its philosophy may be stated as follows:
“We believe (1) in the transformative power of beauty
of the product, (2) in the importance of relationships, (3)
in providing value to customers, (4) in the role of social
esponsibility, (5) in developing the full potential and
consciousness of our people, and (6) that there’s always room
for improvement.” Over the past decade, the company’s
sales grew 630%, and its profits grew 850%.
IMA EDUCATIONAL CASE JOURNAL XXXXXXXXXXVOL. 9 , NO. 2 , ART. 1 , JUNE 20161
ISSN 1940-204X
Jaipur Group: A Management Control Journey
Suresh Kalagnanam
University of Saskatchewan
Sumit Mitra
Indian Institute of Management,
Kozhikode
Margie Parikh
Gujarat University
©2016 IMA
At the time of writing this case, JRCPL had reached
out to approximately 40,000 artisans with 7,000 looms;
the artisans reside in 600 different villages spread across
five states. More than 80% of the artisans are rural women
elonging to the lower end of the social hierarchy, a
significant portion of them lacking any formal education.
The caste system is an integral part of the social fa
ic in
India, and most of the weavers belong to what is considered
the “lower caste.” Additionally, women, especially ma
ied
women, are bound by customs and traditions that restrict
their mobility. For example, they seldom interact with a
male member of the community who is not part of the
family. Additionally, they often cover their faces with veils
when they are outside of their homes. These cultural norms
pose human resource challenges in terms of training, career
development, and communication in general.
A significant aspect of the business model is that the
weavers are not employees of the organization. Instead, they
are independent, skilled artisans who get paid for the work
they do based on a predetermined compensation formula.
This means that they are bound to JRCPL only through
their loyalty, a personal sense of obligation, and mutual trust
established between them and the founder.
The handmade carpet industry provides an excellent
option for nonfarm employment in rural areas, provides equal
opportunity to women and the underprivileged, controls
migration to u
an areas, and causes minimal harm to the
environment.
ORGANIZATION STRUCTURE
Jaipur Group consists of three main entities: (1) Jaipur Rugs
Company Private Limited (JRCPL), located in Jaipur, India,
(2) Jaipur Living, Incorporated (JLI), located in Atlanta, Ga.,
USA, and (3) Jaipur Rugs Foundation (JRF), located in Jaipur,
India. Figure 1 illustrates the relationship among the three
entities (JRCPL, JRF, and JLI). Several family members are
actively involved in the business, as mentioned below.3
JRCPL manages all elements along the value chain
ight from procurement to final sale. The corporate office of
JRCPL houses the administration, finance, human resources,
information systems, design, and purchasing functions.
Mr. NKC’s youngest daughter heads the design function,
and one of his two sons looks after business development.
Manufacturing takes place in 600 villages spread across
five states, and is enabled by 17
anch offices that are also
spread out so that
anch personnel are in close proximity
to the artisans. Mr. NKC’s
other-in-law, who has been
associated with the business for decades, is believed to know
everything there is to know on the manufacturing side of the
usiness. All of the raw wool is procured through Bikaner
Wools, which is run by another
other-in-law of Mr. NKC.
JRCPL also manages a showroom for final products in Delhi
(International Home Deco Park—IHDP).
JLI was originally incorporated as Jaipur Rugs,
Incorporated in 1999 and renamed in XXXXXXXXXXJLI is the
marketing arm of the Jaipur Group that manages the
marketing, sales, and distribution in the United States, and
is the major consumer of JRCPL’s products. Mr. NKC’s two
older daughters manage the U.S. operations.
Jaipur Rugs Foundation (JRF) was registered as a
not-for-profit organization in 2004, and works hard to
empower the artisans by elevating them from the grassroots
level to become entrepreneurs. This is JRF’s enterprise
development activity.4 JRF invests in its artisans and their
families by providing direct skill development to the
artisans as well as education on best practices in carpeting,
offering alternative education programs (AEPs) that focus
on providing functional literacy, and focusing on health,
sanitation, and other areas of what Vijay and Prabhu (2013)
call social development. JRF has also considered establishing
community mobilization initiatives in order to minimize
social evils often faced by the marginalized section of the
population. In this regard, Tyagi states:5
By undertaking proactive activities for their [sic]
global supply chain, JRF wishes to ensure that the people
(social cohesion) not only get assured income (social
capital) staying in their own villages but are also assured
of good quality of life through enhanced skills of existing
and potential artisans to enable them to meet the market
demand; and eradicate exploitation, institutionalize fair
trade practices in carpet industry and develop conducive
environment for people to get attracted towards carpet
making as an occupation.
In the last six years, JRF has won numerous awards for its
contribution to society.
Although Mr. NKC’s wife is not active in the business,
she plays the important role of mentor to the weavers who
visit the head office as part of the weaver engagement
program (discussed below). Both Mr. NKC and his
other-
in-law have learned through on-the-job experience.
IMA EDUCATIONAL CASE JOURNAL XXXXXXXXXXVOL. 9 , NO. 2 , ART. 1 , JUNE 20162
MANUFACTURING AND DISTRIBUTION
JRCPL’s main products are rugs that vary in weave style
(e.g., tufted or knotted) and material (e.g., wool, silk, and
cotton). While a tufted carpet lasts for about five years,
a hand-knotted one can last for up to 100 years. The
price differential between the two types of carpets is also
significant—about $2 per square foot for a tufted carpet vs.
$25 per square foot for the hand-knotted carpet. Recently,
JRCPL has also started producing pillows and poufs.
JRCPL takes the necessary materials to the weavers’
doorsteps so that the artisans are not required to travel
outside of their dwellings to begin the day’s work. The
production process may involve a single weaver or a “village
factory” comprising up to 12 weavers working together. The
company pays close attention to quality, process efficiency,
and costs. Since the job is performed manually, the artisan’s
understanding of the entire weaving process is critical, and it
is also important that they continue to develop their weaving
skills. Therefore, the development of weaver skills assumes
strategic importance.
The lead time for hand-knotted carpets is between six
and eight months, including approximately two months of
actual weaving time. The remaining time is consumed by
other processes in the supply chain as well as waiting time.
Figure 2 illustrates the steps (elaborated below) involved
in the supply chain from order receipt to final delivery for a
handmade wool carpet.6
1. Customer Order: Each order that is received from the
customer, typically via JRI if it is an export order or from
IHDP if it is a domestic order, is entered into the system.
2. Carpet Map: The customer’s needs are translated into
design specifications; the “map” is a visual of what the
finished carpet will look