(The writer is a best-selling author and corporate advisor. He was Director of Tata Sons and Vice Chairman of Hindustan Unilever).

Email: rgopal@themindworks.me

In two previous columns, I had recounted the initial responses of Hindustan Lever and Tata Group respectively to the shocks of the 1991 liberalization. In this column and the next, I propose to summarize how both steadied their boats.

Hindustan Lever undertook what I call QICA efforts—Quality, Innovation, Collaboration and Acquisitions. The key lesson to remember is that transformation efforts demand upgrading the car engine while it is running.

In this brief article, I have highlighted only those activities that could not be undertaken earlier due to restrictions. The QICA issues may appear to be ordinary when viewed through a 2021 lens, but they were a novel way of thinking at that time. It also demonstrates how far Indian management has moved in terms of strategy in the three decades.

Four key initiatives were:

Quality: A major product quality drive by benchmarking locally produced products with imports, pointing to the urgent need for upgradation. HLL internally proselytized techniques like TPM, and considered imports of machines and packaging materials, as required, an activity that was near impossible earlier.

Innovation: Next was the special emphasis on product innovation and the setting-up of a second international R&D centre at Bangalore, the first one having been set up in Mumbai in the 1970s.

Collaboration: Then there were multifarious business collaborations with the parent Unilever. Earlier Unilever could not be remitted brand, technical or service fees, but such expenses could now be paid under the new dispensation. For example, being a global leader in ice creams, Unilever had for long been very keen on establishing an ice cream business in India. Under the license-permit raj, dairy ice cream was reserved for the small-scale manufacture, being one out of some 750 items so reserved. Claiming vegetable fat-based product, which was called frozen dessert by HLL, was different from dairy ice cream, Brooke Bond Lipton set up a spanking new investment at Nashik and launched Walls Frozen Desserts. This became very controversial at that time, though the controversy died a natural death with subsequent de-reservation of several reservations, including ice cream.

Acquisitions: M&A was a relatively new activity in the 1990s for India Inc. After acquiring TOMCO, HLL went on to acquire Lakme from Tata after both companies undertook relevant governance processes. HLL also divested its phosphate chemicals business to Tata Chemicals. The acquisition of the public sector company, Modern Bakeries, followed. Later HLL divested its hair oil brand, Nihar, and purchased an ayurvedic hair oil brand called Indulekha. Cadbury’s ice cream operations were acquired by Brooke Bond Lipton. The company entered a hugely complex deal to acquire four independent Kwality ice cream entities, all of which used a common brand name. This could help Unilever to establish an ice cream business in India. Kissan tomato products business was acquired from the flamboyant Vijay Mallya, as also the Zahura tomato plant from PepsiCo India. It was an appropriate vehicle for the ambitious plans that Brooke Bond Lipton’s foods business had.

When I was the Managing Director of Brooke Bond Lipton, I found a company whose employees had experienced as many as ten mergers within just the previous four years: first Brooke Bond acquired Lipton, then Doom Dooma Assam and Tea Estates India, followed by Kissan, Milkfoods, Zahura and four differently owned Kwality entities. All this was possible in such a short time because of liberalization. I might point out that the resultant company suffered from some indigestion and loss of morale.

In a quandary about how to handle management morale, I casually asked an assistant hailing from Kerala what the future bore for the company. Being a trained astrologer, he promptly cast the company horoscope after ascertaining the date of birth from the company’s registration certificate and pronounced, “This company has so far behaved as a man and has given its own name to those he married. The company will get peace of mind by behaving like a woman, and by taking the name of a husband whom she should marry.”

His astrological opinion did not influence the subsequent decision to merge Brooke Bond Lipton into Hindustan Lever! It became the biggest merger of that time and was also highly controversial because it led to some legal cases.

Before liberalization, India was quite insulated from global media, trends and thinking. The winds of liberalization brought in global ideas into business.

In the case of HLL, this began in the mid-1980s, a tad ahead of liberalization. HLL strived to be productive, not only in economic terms but also in terms of benefitting the environment. HLL started the first experiment with Chhindwara in Madhya Pradesh where it began to recycle significant quantities of treated effluent back into process or on land for irrigation. This saved costs for the company but ensured that HLL’s operations would not strain the rural environment. The chemical engineers in the factories explored the possibility of designing zero effluent factories long before it became a part of sustainability programs. Re-forestation attempts at Khamgaon in Maharashtra were started for similar reasons.

Did Lever transform itself successfully by repairing the car while its engine was running? In 1991 HLL earned a revenue of USD 700 million, which has grown to over USD 7 billion now. The company’s market capitalization has grown from USD 900 million to over USD 75 billion currently.

The post Transformation after liberalization: HLL appeared first on The MindWorks.

The disconnect between the fundamentals of several companies and their market valuations has widened over the last year. While this exuberance may well prove to be justified for a few companies, for most, it will be judged to have been thoroughly misplaced.

Disruption is to be welcomed; it is a fantastic event. As history shows, the line between disruption and mania is thin—remember Tulipomania (1636), Mississippi Scheme (1719), and South Sea bubble (1720). Nick Leeson’s last few trades brought the mighty Barings Bank down. Gordon Gekko could not imagine his protégé, Bud Fox, double-crossing him. Harshad Mehta betted one trade too far before he got caught out. For my former colleague, the late Dilip Pendse, the world collapsed while trying to cover some trading steps gone wrong.

I worry that the hard-earned savings of middle-class investors could be at risk. The odds are decidedly stacked against such investors if the quality of companies getting listed —and the grey market premiums getting accorded to them —are anything to go by.

I have learnt useful things through my conversation with capital markets cognoscenti. Capital market activities impact Indian citizens, much like cricket does: It irrationally depresses or excites people. Unlike in the case of cricket, however, capital markets can be cruel and punishing if investors don’t check their instincts. Fortunately, there are three simple rules worth following to avoid financial heartburn.

1. Know what you own. These words are so simple, but such is the power of greed, that it can often overcome one’s long-term resolve to follow this rule.
2. Know how much to own. A basic rule of thumb when investing in early-stage initial public offering (IPO) companies is to invest an amount wherein if you lose everything, it will not negatively impact your lifestyle. Unfortunately, most investors at the height of the mania do just the opposite: They invest as large a proportion of their net worth as they can, hoping to maximize their wealth in the shortest period. The reality is that for successful investing, you must be alive, and for that you must first survive.
3. Own your decisions. At the end of IPO manias, postmortems are always done on what the listing company, the investment bankers, the regulator, or even the government could have done to protect small shareholders. The conclusion is always the same: The buck —a euphemism for losses —always stops with the investor, however large or small.

What makes the upcoming IPOs unusual is that many of them defy conventional valuation methodologies. Companies have always been valued on cash generation, successful financial history, and distinctive pricing power. These help earnings growth to be reasonably projected. Several loss-making companies valued at billions of dollars today, however, do not generate any cash flow, don’t have any history of earnings, lack any modicum of pricing power. Yet, miraculously, and magically, they are expected to grow revenues exponentially with a hazy route to cash generation. They are also expected to generate a profit at some point in five years and positive cash flow in 10 years!

The reality is that while a lot has changed over the years, basic valuation techniques have not. As one successful entrepreneur, Alan Mitz, is reported to have said, “Turnover is vanity, profits is sanity, but cash is reality”. This adage must reflect in valuations at some time, and very few companies will live up to expectations.

To appreciate why, count how many companies worth more than a billion dollars have been established over the last 15 years that are profit-making? Contrast this to the number of unicorns out there and ask yourself: Have business fundamentals changed overnight?

What makes investing appear so simple to those outside the profession is the perception that there is a 50 per cent chance of either success or failure on every investment. You wouldn’t say the same thing about other professions such as pilots, surgeons, dentists, engineers, and so on! Although investing appears simple, it is not.

India is a tough place to earn profits. In India@75, there are about 250 listed companies with a market capitalization of $1 billion or more. Several became profitable only after enduring tribulations and heartbreaks. However, loss-making start-ups are nowadays valued at over $1 billion, initially through private transactions, but lately through public markets. In 2021, India celebrated and welcomed a new unicorn, a $1 billion company, every 10 days! Sheer ecstasy for a few, but will it be delayed pain for many?

This is best reflected in research published by Professor Hendrik Bessembinder of Arizona State University that shows that from 1926 to 2016, over half of all the net wealth created in the US stock market was created by only 90 companies, just 0.3 per cent of all companies. Small investors need to understand the asymmetrical outcomes and the probabilities involved in such payoffs.

The only antidote to irrational exuberance is rational humility combined with a deep sense of self-awareness. In times like today, it will help protect one’s wealth, health, and happiness.

The writer is a bestselling author and corporate advisor. His latest book, Pivots for Career Success: Unleashing People Power, has just been published by Rupa. He was Director, Tata Sons and Vice Chairman, Hindustan Unilever during his career.

(rgopal@themindworks.me)

The post Irrational exuberance and rational humility appeared first on The MindWorks.

To appear on 6-1-22

‘Transforming organizations’: a series in New Indian Express.

When the CEO really matters    

R Gopalakrishnan* 

(*The writer’s latest book title, “Pivots for Career Success—unleashing people power”, coauthored with R Srinivasan, has just been published. He was Director of Tata Sons and Vice Chairman of Hindustan Unilever). 

Email: rgopal@themindworks.me

The short answer is ‘matters a lot’, if the chosen leader is unfiltered, and ‘matters a tad less’, if the chosen leader is a product of fine filtration.

Over the last eighteen columns, I have written about vital and relevant aspects concerning organizational transformation and institution building, both of which are driven by three imperatives, one, the pace of change in the company’s industry; two, how urgent it is for the organization to respond; and three, the choice of the leader who has to implement the transformation program. 

Does the company need major organizational change? If yes, how does the board identify the ideal leader who can successfully supervise to make the transition? Does an individual leader matter at all, or is it the organizational momentum and history that determines outcomes? Do circumstances create individual leaders or do individual leaders make their own circumstances? Answers to these questions define who is an unfiltered or filtered leader.

Lately I have been reading several books on leadership talent. The Rare Find by George Anders was on talent in sports, and how exceptional talent makes a dramatic difference. The book has anecdotes on how coaches wagered successfully on a player despite contrarian indicators. The Master by Christopher Clarey is the ‘official’ biography of tennis star, Roger Federer. It describes episodes when several talent spotters decided to back Federer despite doubts on whether he was a top-class, exceptional tennis player. 

However, for determining leadership in a company, how can a board decide who might make an exceptional leader? Indispensable, by Prof Gautam Mukunda of HBS, is enlightening. The contents resonate with my own experiences in Unilever and Tata. What does Prof Mukunda narrate from his research?

There are companies that practice a well-honed LFS, which stands for “Leadership Filtration System”. For example, HUL has an explicit process to identify talent and groom managers for future roles of leadership. No wonder HUL churns out leaders so frequently. Its system filters out the odd ball, seemingly eccentric manager. After a fruitful service record in the organization, candidates for the top job emerge. 

Filtered leaders tend to resemble each other. Obviously, they are not identical, even though they have passed through the same filters.  Recall how in 1981, Reginald Jones, GE Chairman, selected his successor when Jack Welch was selected. Or 2002, when Jack Welch set up a process to select Jeff Immelt from internal candidates. From an external perspective, it could be argued that it really did not matter which of the internal candidates was selected because they all had the potential to be equally successful CEOs. 

In HUL, from an outsider’s perspective, Prakash Tandon was selected in preference to Kalyan Sunder Basu, or Ashok Ganguly over Susim Datta. There were obviously good reasons for the selections. But to be fair, either of the aspirers, could have done a correspondingly top-class job. In short, LFS candidates, according to Prof Mukunda, tend to be interchangeable. They represent the median of the talent pool in a company, where the median is quite rich because of the efficiency of the filtration system.

The HUL patten though is an exception in corporate India. Indeed, even in HUL, T Thomas could be considered as an unfiltered leader, because for some years in between, he had left to join his family company. At a senior level, he arguably escaped the rigorous LFS of HUL. When Thomas was recruited back by HUL, perhaps it was because he was a lateral thinker with different ideas. The condition of HUL at the time of his selection as chairman was life-threatening. A major portion of the company portfolio was under severe price controls; the government wanted to reduce foreign shareholding to 40% or less; worker unions were very militant. Such external circumstances made it imperative to identify a leader with unconventional ideas, which Thomas had in plenty. Thomas was a very successful CEO. He could be thought to be an unfiltered leader.

In the year 2005, the Unilever global board desired a dramatic change in the global organization’s unwieldy structure. For the first time, Unilever recruited an external CEO in Paul Polman, who turned out to be an unqualified success.

In Tata, talent management was within the domain of individual Tata companies. Tata Steel, Tata Consultancy and Titan have a well-developed talent filtration system; for many decades, managers advanced from among those who had passed through the internal filtration system. Long-time insiders become potential candidates for the top job, and, finally, one was selected from among very close candidates. 

This was not so when it came to the group. Group leaders changed rarely. When JRD Tata appointed his successor in 1991 after fifty-two years of his own chairmanship, Ratan Tata became the fifth chairman in 120 years. There was no rigorous system of internal talent filtration at the group level. Anyway, changes in group leadership were rare. Almost every appointment involved selection of an unfiltered leader, including the appointment of JRD himself in 1939, followed by the choice in the 1970s, of Minoo Mody from AF Ferguson as the first CEO of Tata Sons. 

I feel confident that when I was appointed in 1998 as an executive director of Tata Sons, I was perceived as an unfiltered leader in the group, though Ishaat Hussain must have been seen as a filtered executive director. Ratan Tata’s successor, Cyrus Mistry, was clearly an unfiltered leader within the Tata group. That succession did not end well. Chandra is far more a product of the intensive TCS LFS. 

In future articles, I propose to explore whether any rules can be set on the slippery subject of CEO selection. These rules can be applied and tested: in other private sector companies, in PSUs, in family businesses, and even in political institutions.

The post When the CEO really matters     appeared first on The MindWorks.

Can a professional CEO be entrepreneurial? And the converse?
By R. Gopalakrishnan*

(rgopal@themindworks.me)
(The writer is a bestselling author and corporate advisor. His latest book, “Pivots for career success: unleashing people power,” has just been published by Rupa. He was Director, Tata Sons and Vice Chairman, Hindustan Unilever during his career.)

India Inc needs many more entrepreneurial and professional CEOs. It is not a ‘this or that’ framework.

Legend has it that choosing the right CEO counts among the board’s most critical roles. Succession planning is a subject that is forever in the air—at startups, family businesses, PSUs, and at some of India’s biggest listed companies. There are those who favor ‘promoter-CEO’ appointments; equally, there are those who subscribe to ‘professional-CEO’ narratives. Both are deficient because they are slaves to a single narrative. Questions that arise are complex and intertwined:

• Who is better as a CEO, a family member or a professional?
• Are family members and professionals different?
• Should an internal candidate take the top job?
• When is it better to explore outside candidates?
• With a professional CEO at the helm, who will be in charge—majority shareholder or the CEO?
• Can the majority shareholder exercise influence and control after yielding autonomy to the CEO?

These are some of the questions that boards wrestle with. In this article, I propose to explore the nuances of a promoter CEO and a professional CEO.

Many founders and families believe that professionals lack skin in the game, and, therefore, don’t have the stomach to take long-term bets. They believe that professionals take a Q-Q view, whereas founders and families take big bets. This is partial truth.

As opposed to this narrative, many professionals believe that founders and families don’t adequately respect process and governance norms; that they are more motivated by personal gain for themselves. This is also a partial truth.

With such a mental demarcation, boards get one or the other because, in their minds, the circles representing promoter and professional CEO have no overlap. This is not a correct mental model.

I can think of promoter family members who are solidly professional in terms of their education, career, and management approach. Mukesh Ambani is both—as solidly entrepreneurial as professional. So also with Rajiv Bajaj, Rishad Premji, and Pavan Munjal. Further, there are promoters who have made explicit that their successor is either already from outside the family or will not be one necessarily in the future—for example, Anand Mahindra at M&M, Harsh Mariwala at Marico, and Uday Kotak at Kotak Mahindra Bank.

Conversely, there are professionals who are very entrepreneurial and take long-term bets. Think of Dr. DV Kapur at NTPC, or V Krishnamurthy at BHEL amongst PSUs as examples. Recall Darbari Seth of Tata Chemicals or Sumant Moolgaokar at Telco. Consider Anil Naik at L&T, who mounted an entrepreneurial defense of L&T when a takeover was attempted; through his Project Lakshya, Naik decoded the levers of change required to improve his company’s market value. Recall the spirited defense of Hindustan Lever, with a clear eye on the long-term, by T. Thomas and Ashok Ganguly, to retain Unilever shareholding, and diversifying into nationally desired sectors like fine chemicals, fertilizers, and exports. Consider Ajit Narayan Haksar, who as early as the 1970s, diversified ITC into hotels, paper, and agribusiness, with his eye on reducing the company’s dependence on tobacco. His successors, J.N. Sapru and K.L. Chugh, continued to develop an entrepreneurial, professional culture. Even Yogi Deveshwar began his term similarly, but, according to some, he became more promoter than professional in the later part of his term.

Thus, India Inc has experience of entrepreneurial, management professionals—not common, but known to perform well. Any of the names mentioned above belongs right there, irrespective of origins as a professional or promoter. The truth is that India Inc needs many more entrepreneurial, professional CEOs. It is not a ‘this or that’ framework.

Some commentators on India Inc seem to be obsessed with the idea of ‘control.’ Control of the affairs of the company? It is the executive management and the board that is in control. It is neither the CEO nor the majority shareholder, though, undoubtedly, they have considerable influence.

Of the 6,000 listed companies in the stock exchange, ten companies account for 90% of the profits. The top companies by market capitalization are all led by entrepreneurial, professional CEOs—Reliance, TCS, HDFC Bank, Infosys, HUL, ICICI Bank, HDFC Ltd, Bajaj Finance, SBI, Bharti Airtel, Wipro, Kotak Mahindra Bank, HCL Technologies, Asian Paints. Not one of them has a “stodgy, resistant-to-change professional” as the image of the professional is thought to be; equally, none has the “fanciful, buccaneer entrepreneur.” On the flip side, review the top NPA companies in 2020—Gitanjali Gems, Kingfisher Airlines, ABG Shipyard, Rei Agro, Winsome Diamonds—all strongly promoter-led.

In future columns, I hope to touch upon the making of the entrepreneurial professional leader—based on my experiences at Unilever and Tata, as also as an independent director of several listed companies in India and abroad.

The post Can a professional CEO be entrepreneurial? And the converse? appeared first on The MindWorks.

To appear 9-2-22 

Psychopathic founders need an ‘Asoka moment.’ 

(rgopal@themindworks.me)

(*The writer is a bestselling author and corporate advisor. His latest book, Pivots for Career Success: Unleashing People Power, has just been published by Rupa. He was Director, Tata Sons and Vice Chairman, Hindustan Unilever during his career.)

There are disturbing company reports of pathologically destructive leadership behavior—poor governance, discernible fudging, intemperate language, overweening ambition, perpetually boastful talk and so on. To my simple mind, psychopathic is like behaving in a toxic, megalomaniac or narcissistic manner.

Not every founder’s behavior is psychopathic, but as the cases keep coming, one wonders whether founder-CEOs are prone to this malaise—for example, BharatPe, PayTM, and Zee. Other examples have been Rotomac Pens, Pan Parag, RDAG, Kingfisher, Gitanjali Gems, Café Coffee Day, and Housing.com. Sometimes, the funders drive the founder into psychopathy.

During my career, I served as non-executive director of a start-up company with a founder as MD. It took the board seven long years to be convinced that the founder-CEO was a psychopath with hallucinations about who he was and what he was worth. It took the board another three years to ease him out since they desired no public controversy. I learnt a lesson about the tenure of founder-CEOs: if in doubt, pull the trigger sooner rather than too late, quite the opposite of the view of many founder-CEOs.

The drumbeats around the Indian start-up sector are loud and deafening. Every senior government official lauds the emerging ecosystem and the response through Start-up India. According to a recent NASSCOM-Zinnov report, between 2011 and 2021, India added 25,000 start-ups; 2,250 in the last year when India attracted USD 24 billion of equity investments. 6 lakhs direct and 34 lakhs indirect jobs were created by such enterprises. This array of statistics is overwhelming. 

Silicon Valley has its share of psychopaths. In 2020, Maelle Gavet, a veteran of the tech industry, wrote a riveting book, Trampled by Unicorns: big tech’s empathy problem and how to fix it. The book offers an account of the world’s tech start-up—Amazon, Google, Facebook, Twitter, WeWork, Tesla, Airbnb, Uber, not to forget Theranos. 

Big tech has progressed humanity’s most noble pursuits but has to grapple with destructive empathy deficit. Gavet says, “We need tech, but a more empathetic tech.” She quotes research by FBI that companies managed by psychopaths tend to decrease productivity and create low employee morale. Gavet argues that psychopathic leaders’ behavior trickles down and creates psychopathic companies by nurturing an “infantilized culture”, where employees become accustomed to working in “hyper-privileged bubbles in which their every whim is catered to and every need anticipated.” Her view about Steve Jobs, whom many founders try to emulate, is that his legacy has “cultivated an indelible association between being a jerk and a genius.” The 2011 Walter Isaacson biography and the 2015 Netflix movie purport to bring out the real Jobs. I asked a few Indian founders about the negative reports about Steve Jobs. Their response was, “He did not build Apple by being humble and caring about people.” 

According to the Hare Psychopathy Checklist, the universally accepted diagnostic tool used to assess this, includes traits such as “a grandiose sense of self-worth, lack of remorse or guilt, poor behavioral controls, pathological lying and a lack of empathy.” 

Thus there are two diametrically opposing narratives. Genius-like entrepreneurs who are out to change the world on the one hand, yet who are susceptible to toxic behavior on the other. There are far far more psychopathic founders than real geniuses. Further, every founder, like medicines and corporate CEOs, has a “use-by date.” The skillsets of a founder-CEO and a profitable-growth CEO are not necessarily the same. 

The psychopathy of founder CEOs is not yet at a crisis point for India. The Indian entrepreneurship flower can be nurtured. A former Verizon CEO details ‘watch-for bad habits’—not building trust and integrity, focusing on things that don’t matter, shirking being a role model, not reinforcing what is really important, trying to be popular, getting caught up with self-importance, burying one’s head-in-the-sand, and not fixing root cause of problems. 

Entrepreneurship associations and training institutions can help by emphasizing positive behavior as a necessary adjunct to the innovation role, like SINE at IIT Bombay and TiE do through their mentorship network and counselling. I tried to make a small contribution through a 2021 book, Wisdom for Start-ups from Grown-ups.  An empathetic Indian start-up atmosphere is desirable.

It is instructive to read the book, Myth of the Entrepreneur, by Ravi Kailas with Cathy Guo. He was a serial entrepreneur who built and scaled ventures spanning telecom, software, financial options and more. During the hustle and bustle of his journey, he got his ‘Asoka moment.’ After excelling as a traditional king or eight years, King Asoka watched with great pain his destruction of the fertile lands of Kalinga. This set Asoka, as is well-known to Indians, on a journey to express his inner revolution. 

Likewise, entrepreneur Ravi Kailas realized that the pearl jewel is formed around a grain of sand. That grain of sand catalyzes the pearl into being. Once the beautiful pearl has been formed, the grain loses its identity. The grain of sand is then significant only by its absence.  Indian founders, who created long-lasting enterprises, did exactly the same—Jamsetji Tata, Jamnalal Bajaj, Pirojsha Godrej, and Ghanshyam Das Birla. 

The post Psychopathic founders need an ‘Asoka moment.’ appeared first on The MindWorks.

(rgopal@themindworks.me)
(The writer is a bestselling author and corporate advisor. His latest book, “Pivots For Career Success: Unleashing People Power,” has just been published by Rupa. He was Director, Tata Sons and Vice Chairman, Hindustan Unilever during his career.)

Ideally, corporations should be run so that they acquire respect as well as love from stakeholders. Loving a corporation is not personal; it can be emotional, not necessarily of the physical or familial kind that we have for a family member or a pet.

For example, we connect emotionally with sportspeople. Rafael Nadal, Roger Federer, and Novak Djokovic have all won a record-breaking twenty Grand Slams in tennis, eliciting great admiration. Two of them, however, also arouse a warm emotional response from fans. When Nadal became the first-ever winner of 21 Grand Slams, Federer posted, “To my heartfelt friend and rival, hearty congratulations for being the first man to win 21 Grand Slams…. I am sure you have more achievements ahead, but for this moment, enjoy this one.”

A company earns respect and admiration by consistently delivering on the promises it makes to customers. These emotions transform into love when a company does things that tug at the heartstrings of a community, for example, through socially relevant or humanitarian acts. A wise leader creates a company that is respected, admired, and, most difficult of all, loved.

During my executive years, I asked managers to name five corporations that they respected. Spontaneous responses threw up names that were iconic and highly recognizable. Then I would ask them to name five corporations that they not only respect but also love. Love? How could you love an inanimate entity, some participants argued; a company is a money-making machine, others said. However, corporations can be personified in the minds of customers to the extent that if the corporation runs into unexpected difficulty, unfair controversy or does something heroic, people feel for that company. As the debate progressed, some participants would hesitatingly suggest a few names — Amul? Asian Paints? Bajaj? HDFC? Tata?

Interestingly, the list was short as the group broke through mental barriers. People exhibit love by exulting when something good happens or feeling bad when something bad happens to the company. I cast my mind to events that I have experienced.

After the terror attack in 2008 at the Taj Mahal Hotel, there was a flood of unsolicited letters received at both Tata and Taj. Emotional letters, for instance, about how the writer got married at the Taj, or celebrated a wedding anniversary, or some other life milestone. Some even enclosed cheques to help restore the Taj—small, yes, but touching as a significant expression of love. How much emotional attachment people had for the Taj Mahal Hotel!

Some years ago, I was being driven home by my company chauffeur. On Cuffe Parade, a policeman flagged us down. Apparently, we had jumped a red light at Wodehouse Road. To resolve the dispute, I offered to pay the fine for the alleged infraction. At that stage, the traffic policeman noticed my driver’s epaulet and asked me what work I did in Tata. A hitherto bellicose policeman softened and said, “In that case, I will not fine you.” I was mystified.

Here is the backstory: some five years earlier, the police station at Phaltan Road had not received government raincoats before Mumbai’s torrential monsoon due to a bureaucratic delay. Since the monsoon broke early that year, the cops faced a major problem. A visiting Tata Sons officer, upon learning of this issue, returned to Bombay House and secured 25 new umbrellas for the cops of Phaltan Road. This policeman was so grateful to Tata for this gesture, he said, that he now had the opportunity to express his gratitude. Later, I was able to verify this episode. I was overwhelmed at this spontaneous expression of love for Tata. Who said you cannot love a corporation? It takes just small acts of love and empathy to win hearts, isn’t it?

In 1990, I was posted to the Middle East, so I became especially interested in the region. Iraq invaded Kuwait that year. Many Indians will recall how 170,000 Indians were airlifted by Air India from Kuwait in what is recorded by Guinness Book of Records to be the world’s largest civilian evacuation in history! All this in just eight weeks between 13th August and 11th October 1990 with the stellar guidance of a Kuwait resident, Mathuny Mathews aka Toyota Sunny. People’s spontaneous love for Air India, even if short-lived, resulted in the making of a feature film, Airlift.

There will be a debate among strategists and entrepreneurs about whether Tata Sons has been wise to acquire Air India. This article is not concerned with that subject. After the acquisition by Tata, I posted an allegorical message that “an aunt, earlier young and beautiful, and now old, and who had left the family house 69 years earlier, had returned home.” The message was seen by over half a million viewers with hundreds of responses, expressing delight and best wishes.

A side story—in the late 1880s, Bombay Presidency’s largest textile mill, Dharamsi, was in trouble and put up for auction. Jamsetji won the auction; he struggled for seven years, and to the surprise and delight of many, turned into a roaring success a mill that he had renamed as Swadeshi Mills.

Now, the people of India want their Air India to be efficient and lovable again. The goodwill of 135 crore Indians is a huge intangible asset for the managers who will rejuvenate Air India. Who says that you cannot love a company or its brand?

The post What it takes to love a corporation. appeared first on The MindWorks.

(The writer is an author and a business commentator. His articles and videos can be accessed at his website www.themindworks.me and his email ID is rgopal@themindworks.me)

Practitioners of corporate governance are often challenged when the spiritual and material combine. One is faith-based, and the other is wealth-based. Spiritual and material tend to conflict because everyone loves God, money, politics, and sex! No wonder that Godmen have several books written about them—Khushwant Singh (2003), Bhavdeep Kang (2016) and Priyanka Pathak Narain (2017).

Ruchi Soya Industries Ltd (RSIL) recently raised equity. When RSIL started in the 1980s, I had just completed a feasibility study on soya. Subsequently, RSIL became insolvent. In 2017, it was acquired by associates of yoga guru, Baba Ramdev. In India, yoga and business have profoundly mysterious links. Godmen combine the spiritual and material, so they are able to act as power brokers. Recall Shraddha Mata, Chandraswami, and many others while our newly independent nation grew into today’s India@75.

Dhirendra Brahmachari, a hatha yoga expert, was powerful during Ms. Indira Gandhi’s tenure as PM. He built a dubious empire. So did Maharshi Mahesh Yogi and Osho Rajnish. Abhay De, better identified as Swami Prabhupada, arrived in New York in 1965 with nothing. By 1976, he owned the ISKON chain of marble and gold temples in 12 countries with assets over USD 1 billion. There exists a secret admiration for godmen’s Rasputin-like hold over important personalities. Currently, a new IPO, which links yoga with business, has been reported.

Baba Ramdev is described as a yoga guru–which he most certainly is. He is also projected as an entrepreneur–which is less obvious. His unlisted firm, Patanjali Ayurved, acquired influential television channels and is in the ayurvedic and consumer product business. The company makes bombastic claims, which upon challenge, often get retracted, but not without some high-profile publicity. Patanjali products are endorsed by VIPs like the Health Minister’s support for Coronil for COVID. Patanjali’s recent public offer had some controversies about unfair promotional tactics.

In 2015, Patanjali Ayurved was reported to be accelerating so rapidly that by 2020, its projected turnover would exceed sales of established FMCG companies, and by 2025, its revenue would be Rs. 120,000 crores! Professional equity analysts wrote effusive stories. Today these numbers appear implausible. But then who can predict the magic that may yet happen?

In 2019, unlisted Patanjali acquired visibility in the stock market when it beat an influential Adani Wilmar in a race to buy the debt-laden RSIL. Even though Adani Wilmar had bid higher at Rs 5,474 crores, Patanjali successfully raised legal objections. Mysteriously, Adani Wilmar withdrew its bid. Patanjali’s lower Rs 4,350 crores bid became the winner but with a curious twist—funding of the acquisition would be by Patanjali taking loans from the very same public sector banks that had just taken a 52% haircut on their NPA loans to RSIL. Sheer magic!

Some players have manipulated the IBC code within the regulations, so that the process and outcome leave a lot to be desired. State-owned banks have cooperated through an “accommodation transaction” according to an ex-banker. Why would public sector banks massively write down loans to a company, and then have the temerity to give fresh loans to a buyer for the purchase of the same company? Well, it seems in October 2019, the finance minister made an astounding announcement: that banks should not hesitate to extend loans to self-help groups and companies backed by spiritual leaders. Puzzling statement from any nation’s FM.

Godmen, like Russian oligarchs, have a cathartic effect on sound lending principles and sustainable enterprise building. Many, though not all, acquire disproportionate wealth through dubious means right under the nose of authorities. They appear to be shady, but nobody can quite fix their shadiness. Like oligarchs, they are perceived to enjoy such high political patronage that the system just falls in line. When the bubble bursts, the ‘I told you so’ commentators will climb out of the woodwork.

The Ukraine crisis highlights the classic example of oligarch Abramovich who became a billionaire from being a poor orphan. Abramovich made his first killing from dealings in the automotive sector. He then befriended and partnered Berezovsky, a well-connected and established oligarch. Using Berezovsky’s powerful contact with Boris Yeltsin, the duo proposed that the Russian government first merge a public sector crude oil producer with a public sector refinery–and then, hand over the enlarged business to their partnership. In return, the oligarchs offered to fund and promote a pro-Yeltsin television station. In 1995, the 29-year-old Abramovich invested USD 19 million in equity plus USD 220 million loans, to acquire 90% of the merged giant. Intriguingly, he managed to sell the company back to the public sector Gazprom for a profit of US $10 billion!  Similar tactics helped Abramovich to acquire interests in aluminum and steel.

Abramovich and Patanjali share some features. Both are led by leaders of similar age, both are close to ruling leaders, both run influential television stations, both buy major shareholding in listed assets at depressed values and flog the same assets for a huge profit. Both attract admiration from some, but also deep suspicion from many. When business logic is stripped of political associations, something crumbles.

As Alice in Wonderland exclaimed – ‘It gets curiouser and curiouser.’ Before we have our own Zuccotti Park-like Occupy Wall Street, lenders, investors, and regulators must avert the risks of a heady mix of business and spirituality.

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TNIE (26)

To appear on 14-7-22

‘Transforming organizations’: a series in New Indian Express.

Transformation experiences at Unilever

By R Gopalakrishnan

(The writer is an author and business commentator. His articles and videos can be accessed on his website www.themindworks.me and his email ID is rgopal@themindworks.me)

(Self-evident lessons are the ones that leaders tend to forget during transformation management. Enterprise leaders can learn and practice the skills of an anthropologist–observe, listen, record, and reflect—all, without judgement.)

In my June column, I mentioned that I would share my personal experiences on organizational transformation from Unilever Arabia between 1990 and 1994 (integrating eleven joint ventures) and from Brooke Bond Lipton India Limited between 1994 to 1998 (integrating eight acquisitions).  I feel encouraged that some readers have responded with enthusiasm and anticipation.  

In the interests of brevity, I propose to view the experience through a conceptual rather than an operational lens. The learnings may appear like motherhood statements. In my defense, I affirm that the self-evident lessons are the ones that leaders tend to forget during transformation management. It is useful to learn and practice the skills of an anthropologist, viz, to observe listen, record, and reflect, all without judgement!

I recall that I had memorized a mantra to guide my daily routines—SCUPT—standing for Socialization–Communication–Understanding–Patience–Trust. This mantra was the outcome of a program that I attended at INSEAD, Fontainebleau on how to get the best out of diversity. There are five lessons to embellish the SCUPT mnemonic.

In most transformations, the bottleneck, or Crux as academic Richard Rumelt calls it, is adaptiveness of the team. In summary, the true value of an HR professional as a key ally is palpable during transformations. 

Lesson1: Recruit early and make the HR chief as an ally: Colin Davie, an upcoming Scotsman in Unilever, was my first recruit as HR chief in Unilever Arabia. RR Nair, an accomplished professional, was already the HR chief in BBLIL—Brooke Bond Lipton–at the time of my joining the company. I had deep conversations with both the HR chiefs; they were incredibly valuable in helping me appreciate the song behind the words I heard.  Meetings with them sometimes took precedence over other colleagues, whereas CEOs naturally tend to prioritize marketing, operations, and finance. I emphasize that while operational functions possess a natural gravitas, the CEO must accord a special focus to the HR function while implementing a transformation.

Lesson 2: Interact with the least powerful people in the ecosystem: I used to travel to distant and less visited operations to connect with factory and salespeople. It was strenuous, but worthwhile–Gizan, Tabuk, Gassim in Unilever Arabia and Tundla, Kanhan, Ghatkeshwar, and Etah in BBLIL.  I learnt about the deep-rooted suspicions between Lipton India managers and Brooke Bonders, arising out of 80 years of head-on competition. In Arabia, the Lipton teabag business earned so much of the Unilever Arabia’s cash flows that the Lipton people silently disapproved of its reinvestment that cash in ‘the dud business of detergents’! Reach out and listen carefully for the subtle messages from out there.

Lesson 3: Formalize mechanisms for feedback about how things are: While informal methods of listening by leadership are important, the informal is not a substitute for the formal. In BBLIL, the HR chief, RR Nair, began an extended series at the Training Centre, branding it as Confluence Series. Almost 25 sessions were held, each session hosting 30-40 managers for an evening. RR Nair and I attended every session, thus connecting with about 1,000 executives. I learnt that merging balance sheets is easier than aligning mindsets. In Arabia, whenever I travelled, Colin Davie invariably arranged a lunch or formal communication meeting with the local managers in Bahrain, Kuwait, Dubai, Riyadh and so on. For me, these sessions were crucial. I had to train myself to listen to people without judging them—not very easy in a hierarchical organization. 

Lesson 4: Use the burning platform to stimulate change: A delicate balance is required between imparting a sense of urgency for change and avoiding doom among the executives. There was a continuous tussle between the advocates of continuity and those for change. Consultation with the HR chief and early experimentation were both fabulously valuable. I was a fiend for feedback from my HR chiefs after every communication session to the point of appearing vulnerable!

It is good to remember that the HR chief is the only professional to whom the CEO can express personal vulnerability without creating organization-wide doubts about the leadership confidence.  Luckily, my colleagues were frank about how the session could have been more effective. In Arabia, Unilever Arabia began just after the Saddam invasion of Kuwait, a war that began and concluded within three months. Times were stressful for Unilever managers to consider expatriation to the territory. In BBLIL, the Narasimha Rao-Manmohan Singh government had introduced liberalization. The measures threw up issues of cost benchmarking and competitiveness.  The personal trauma for long-standing managers was intense. Their self-image was of established competence, yet, to see the mirror and accept glaring deficiencies was a challenge. 

Lesson 5: Communicate constantly, but both ways: I learned that a CEO should never get tired of explaining the same thing repeatedly—without showing irritation or impatience. This is not easy for a pushing, tireless CEO, who is usually also in a hurry. Patience and understanding are essential. My perception at that time was that the advice of both my HR chiefs acted like soft brakes on a speeding automobile, metaphorically representing my leadership. They advised me about my own deficiencies in leading the company effort.  I was gently reminded of a paradoxical Korean proverb that it is precisely when you want to speed up that often you must slow down. 

In closing, I must add that the challenge of leading the transformation was not just mine but shared with a highly engaged and committed team of my corporate leadership team. 

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BS The Wise Leader (55)

Bequeathing leaders’ experiential wealth

By R. Gopalakrishnan*

*The writer is an author and a business commentator. His articles and videos can be accessed at his website www.themindworks.me and his email ID is rgopal@themindworks.me

During their career, executives and leaders acquire some financial assets, but lots of experiential assets. They bequeath financial assets as late as possible. Experiential assets get interred with their bones, to borrow from the Mark Antony speech in Shakespeare’s Julius Caesar. The “richest” real estate lies in the crematorium and cemetery, even though, unlike financial assets, experiential assets increase by sharing and distribution. But how can a leader share the experiential asset? 

The sharing of experiential assets requires the person to upgrade that asset into a customer-friendly form. The person must think through how to extract, process, distribute and market the value of the asset. Too often, experiential asset holders undervalue their asset and doubt that anyone might be interested to learn from a retired factory manager or a regional sales manager. There is, however, always a target group that benefits, be it big or small. Further, if a person does not know how to process and package the asset into a consumer-friendly format, it gets interred without benefitting those that it can benefit. 

Experiential assets are akin to bulk food grains, undistinguished and indistinct.  Value is added to food grain through a five-step process by (i) processing it into flour, (ii) cooking the flour interestingly, (iii) adding spices or tasty ingredients, (iv) packing in an interesting manner, and (v) distributing it widely. These skills exist in the domain of fast-moving consumer goods, FMCG.

For FMCG skills to be applied to experiential assets, the asset-owner must feel motivated and disciplined to do so. The person must train in processing and marketing methods as applicable to experiences. Increasingly these days, what with computers, word processors, google searches, and easier referencing methods, there is access to techniques and data bases.  

A few weeks ago, in his Saturday Ruminations, TN Ninan wrote about two genres of books by retired IAS and IFS fraternity. IAS folks write in the first person about how they played on the field, whereas the IFS folks write in the third person about the field and what they have observed. Interesting.  

In the world of Indian business and enterprise too, there appear to be two genres—first, private sector professionals, who write about the field on which they have played, resembling the IFS; second, entrepreneurs/public sector professionals, who write about their own roles. Resembling the IAS genre, entrepreneurs/public sector managers write often in the first person on how “we did it and what we learned”. Although the genres have overlap, each book belongs to a dominant genre. I mention about ten books in each to highlight the difference. 

In the 1970s, Arabinda Ray of Metal Box wrote about the “Indian manager in search of a style.” Sharu Rangnekar of Union Carbide wrote “In the wonderland of the Indian manager.” Prakash Tandon of Unilever, later of PNB, wrote a trilogy “Punjabi Saga.” Ashok Ganguly of Unilever wrote “Business-driven R & D”, drawing on his international experiences in linking scientific research with enterprise. Gurcharan Das of P&G wrote several books including “The difficulty of being good”. Nandan Nilekani wrote on “Imagining India” and “Rebooting India”. N Chandrasekharan of Tata wrote “Bridgital Nation”, while his Tata colleague, Harish Bhat, wrote four books including “The Curious Marketer.” Banker Naina Lal Kidwai wrote about “30 women in power”. Ravi Venkatesan of Cummins and Microsoft wrote “Conquering the chaos” and “What the heck do I do with my life.” Ambi Parameswaran of Ulka, Bharat Wakhlu of Tata, Kulbhushan Girotra, also of Tata, and Sudhir Sitapati of HUL too have written books. Saving my blushes, I mention my own output of seventeen books–so far!

Among public sector and entrepreneurs, DV Kapur wrote “The bloom in the desert.”  Arundhati Bhattacharya and Rajnish Kumar wrote separately about their years in SBI. S Ramadorai wrote “The TCS story” while Narotam Sekhsaria wrote “The Ambuja story.” Sunil Munjal wrote “The Making of Hero”. AM Naik wrote “The Nationalist.” Harsh Mariwala wrote “Harsh Realities.” Among startup entrepreneurs, there is K Vaitheeswaran’ s book “Failing to succeed”, TN Hari’s “Saying No to jugaad”, and Ronnie Screwalla’s “Dream with your eyes open.” This genre does run the natural danger of becoming a “boast seller and an I-witness report,” though some authors avert this danger. 

New formats, other than books, have been spurred by digital technology—podcasts, interviews, speeches, and videos. 

How can a leader bequeath experiential assets, considering that the skill set required is different? By seeking help from storytellers (yes, a new profession), media professionals, analysts, and management academics. HR professionals and B-Schools can contribute by interviewing multiple leaders and drawing hypotheses as illustrated by the Harvard CEM project (Creating Emerging Markets).  Also, by writing up case studies, inviting guest lectures, and writing blog posts. The Indian market for processed, packaged, and well marketed experiential content is undoubtedly large, and potentially enriching to the giver and the taker. 

Every writer does not have to be a Jack Welch or Bill Gates. It is to noteworthy that international writers are prolific—Dale Carnegie 10 plus books, Ram Charan 30 plus books, and Peter Drucker 35 plus books.  Therefore, the Indian runway will be long for well-produced content. 

As Mark Twain perceptively quipped, “History doesn’t repeat itself, but it often rhymes.”

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To appear on 8-9-22

‘Transforming organizations’: a series in New Indian Express.

Corporate ayurveda for rejuvenating companies 

By R Gopalakrishnan

(The writer is an author and business commentator. His articles and videos can be accessed on his website www.themindworks.me and his email ID is rgopal@themindworks.me)

For several months, this column has focused on organizational transformations. One may wonder whether this subject is progressively becoming a more crucial soft skill for the leaders of the future, and if so, why. After all, transformations and strategy have been important from the times of the Mahabharata and from when Hannibal crossed the Alps.

Organizational transformation is like rejuvenating the human body and mind. The pursuit of life and career imposes stresses on managers just as nurturing of start-ups does on the founding team. In the bloom of adolescence and youth, every person inadvertently subjects the human body to enormous stresses through inappropriate habits, lifestyle, and bravado. Rejuvenation involves going to the yoga center, naturopathy clinic, weight-loss camp, and rediscovering new ideas on old matters, for example, breathing techniques.  The rejuvenation efforts on transforming organizations are the equivalent of yoga for the body–what one may term as ayurveda for the corporation. 

Leaders must, and do, adopt a regime of ‘corporate ayurveda’, not necessarily by using that phrase. The need manifests when the company misses a few health parameters, enters a phase of steady decline, or suffers an enterprise ‘heart attack’. Advancing the metaphor, one could view the process as the equivalent of resetting habits and diet, strengthening the core muscles of the body, and keeping the mind active and engaged. 

This requires an understanding of what patterns of action and mindset a long-life company adopts. One essential aspect for the company, as with human beings, is to adopt a satwik and responsible lifestyle. There has been a resurgence of interest among management scholars into the subject of responsible (=honest and sustainable) business in societal matters. What is responsible business and what is the role of business in society? 

Two hundred years ago, the neanderthal version of modern enterprise adopted two remarkable innovations: double-entry accounting and the joint stock company. These two innovations permitted entrepreneurs to think big even with limited capital–the joint stock company limited the owners’ liabilities to their share capital, and thus facilitated taking greater risks, which is, of course, at the heart of enterprise. The accounting innovation required every transaction to be recorded in two aspects: debit and credit, corresponding to the person giving the benefit and the person receiving the benefit. 

Thus, a long-prevailing entrepreneurial mindset adapted and evolved into an industrial mindset. With the advent of the industrial revolution, industry could earn disproportionate wealth for the shareholder, which included the founder. Traders too earned money, but never on the scale that industrialists could.

Examples of such entrepreneurs are the founders of both the corporates where I had the privilege of working—Unilever and Tata. By the 1880s, William Hesketh Lever had amassed a fortune by launching his Sunlight and Lifebuoy soap empire. He started to build a township at Port Sunlight where workers’ families would get education and health facilities, a steady income, and standards of living could improve gradually from one generation to another. He also acquired a public profile. When asked what the ‘purpose’ of his soap empire was, he simply stated that he was trying to wash the teeming millions around the world. Unilever still washes the teeming millions, though the word washing now includes beautifying and nourishing people. Lord Leverhulme, as he became known by the time of his death, left his fortune in a Leverhulme Trust with a mandated social purpose.

In a striking parallel, Jamsetji Tata began his enterprise in textiles around the same time. By investing in risk-taking by acquiring sick textile mills, by deploying the latest techniques of production on looms and weaving, by producing textiles more productively than competition, viz Lancashire, Jamsetji became wealthy. On that base, he built his imaginative ideas for a modern hotel, steelmaking, hydropower generation, and the setting up an institute for science and research. In due course, these fructified as Taj Mahal Hotel, Tata Steel, Tata Power, and Indian Institute of Science at Bangalore. When explaining what the ‘purpose’ of his enterprise was, he unequivocally stated that it was to serve the community. “The community was not a mere stakeholder, but the very purpose of the existence of the firm,” he said. Stated that way, and that too in the 1890s, the view was quite remarkable! Jamsetji and his successors left wealth in trusts to engage on social issues. 

Both William Hesketh Lever and Jamsetji Tata were influenced by the contemporary philosophical thinking in the world’s prosperous nations–Britain and America. Influenced by the thinking of English philosopher, Jeremy Bentham, British capitalism had several benign features Entrepreneurship in America, however, developed more sharply with the emergence of what history has come to refer to as the ‘robber barons.’ Rockefeller, Carnegie, Ford, John Pierpont Morgan, for example, were controversial initially, but left their wealth in foundations for the community. Those foundations do a great deal of social and economic upliftment to this day.

Influenced also by prevalent ideas of the late 1800s, the initial corporations seemed to develop an ethical and socially oriented outlook. Initially, it took entrepreneurs time to shake off trading conservatism in decision-making. Attitudes morphed as entrepreneurs moved into manufacturing, which employs large labor forces. 

When big opportunity opens in an unanticipated manner, as with the Californian Gold Rush and sea voyaging for new lands, some entrepreneurs get carried away—as the current surge in the start-up economy indicates.  Innovation, creativity, and ambition abound, so also occurs in some, a cowboy mentality, greater risk-taking, and an increased mortality among enterprises. In the drive for survival and growth, enterprises focused more on rational and technological aspects—labor productivity, new manufacturing techniques, capital efficiency, and squeezing out more and more from less and less. 

The next few columns will cover how long-life corporations came to be so, and how the responsible corporation evolved.

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