Leaders on Leadership
11th February, 2013
At times, life's turning points occur gradually. Sometimes, like lightening, they strike suddenly, a bolt out of the blue. We put it down as a freak occurrence, a Black Swan event, and a hand of fate. There are also those who lean on hindsight to make the case that the disaster was waiting to happen; no one would heed their warning! Sometimes, we are squarely in the eye of the storm and are rocked and buffeted. Sometimes, if we are fortunate, we sail through with minor bruises.
How one fares depends on the responsiveness of individuals and their degree of awareness, powers of observation, and sensitivity to the event. For most of us, if an apple were to fall on our head, we would shrug it off as just one of those things and quickly forget it and turn our attention to other things. But if that same thing happens to Isaac Newton, it results in a totally different course of events. So the same event can affect or shape different people differently.
These turning points have the potential to change the course of individuals, nations, and even civilizations. As we say, if a butterfly flaps its wings in one part of the world, that can well lead to a storm at the other end of the world.
Look at some of the turning points people have been through, and consider how profound the impact of that moment was. When Gandhiji was thrown out of a whites-only train compartment in South Africa, his focus changed forever, from his law career to the struggle for human dignity and equality, leading to India's struggle for freedom from the colonial rule. When Jamshedji Tata was refused entry into a club because he was an Indian, it affected him so much that he resolved to set up a hotel just as grand that would welcome Indians-that led to the Taj. When the tape recorder was invented around the early 1950s, for some time it failed to sell.
One day, Akio Morita, the founder of Sony, was walking, and he happened to see a man in an antique shop handing over a lot of money to buy a vase, which cost much more than a tape recorder and had much less utility. That was one of the turning points for him. At that moment, he decided that Sony must communicate aggressively the applications and benefits of the product to get people to buy it. So he went to the law courts, which were experiencing a shortage of stenographers. Eureka! That was when everything changed. These momentous turning points strike every industry. The advent of word processing revolutionized not only the typewriter industry, but also workplace practices-now even managers and professionals can, and have to, do a large part of their typing themselves.
It's not just individuals that experience turning, but nations and the world do too. The assassination of Archduke Franz Ferdinand, heir to the Austro-Hungarian throne, triggered a chain of events that led to World War I. The fall of the Berlin Wall was another such turning point. In India, the balance of payments crisis in 1991, when India had to pledge its gold holdings, turned out to be a major turning point that led to the unleashing of economic reforms.
While learning is a continuous, life-long process, during major turning points the intensity and force of learning takes a quantum leap. Learning becomes intense and compressed. For me, every inflection point has turned out to be a powerful period of learning. It's like an exploding star that emits a lot of light within a short burst of time.
At such times, learning is driven deeply into you, by the force of circumstances. These are the times when great upheavals are experienced, be they in personal life, at work, in your industry, or in the global economy. Sometimes they come in the shape of headwinds, sometimes as tailwinds. Each of those moments is a moment of truth. When you are passing through the eye of the storm, you are wonderfully focused, because often, this can be a make or break moment.
Let me now recount some of the key turning points that I, personally, and our Group have been through over the years, and what we learned from those moments. These turning points are not always sequential. Neither are they strictly points-they can be an extended period. Often, there are different forces at work at the same time. And sometimes one turning point leads to another. So one cannot always neatly demarcate the cause and the effect.
Turning Point 1: Passing away of my father
On a personal note, the biggest turning point for me was the death of my father. It was a very difficult time emotionally because my father passed away unexpectedly. Also because of the large responsibility that I had to suddenly shoulder. At that time, I was pretty much in a fish bowl. I was only 28, while the average age of the Group was 56. Filling in the shoes of a legendary icon was a tough task. I had limited but high quality experience and exposure under him.
But at that point in time the only thought in my mind was to carry forward my father's work, his legacy of creating wealth for our multiple stakeholders. So I decided that I'd just put my head down, hang in there, and just keep going at it. Truthfully, I was much better prepared than most people thought because of a couple of factors. When you grow up in a business family, subconsciously there is a lot of learning that happens. It might just be conversations across the dinner table, for example.
Moreover, I had worked with my father for seven-eight years before he passed away. He had given me independent charge of a few of our plants. I had sat with him very closely for his meetings and kind of shadowed h im for four years. I learnt how to be adept in dealing with different business situations. So I wasn't a rookie.
When the mantle of the business fell on me, for the initial years, I worked late into the night, seven days a week, kept up crazy schedules, listened a lot, asked a lot of questions, and encouraged constructive discussions. I was never a fence sitter.
The passing away of my father was not only a turning point for me. It was one of the key defining moments for our Group. He was a huge store of energy, drive, inspiration, and charisma. His passing away created a void that had to be quickly filled, as best we could. I can tell you firsthand that a leadership transition of the type we had to engineer can be one of the most traumatic periods in the life of an organization. I was, however, fortunate to have the emotional support, goodwill, and backing of a solid team. It was a great business and organizational legacy that my father had left me. That's what made the task manageable and doable. So one of the lessons was the importance of the emotional connect of people. I was fortunate to be able to dip into the deep pool of goodwill built up over decades, and that made all the difference.
Another important lesson for me was the criticality of building great teams. We, in India more than elsewhere, tend to be very individualistic. This is partly an outcome of our educational system, which necessitates cut-throat competition. It puts a premium on individual achievement and brilliance, at the cost of team or organizational effectiveness. Although individual stars are valuable, they cannot, by themselves, create the brilliance of a galaxy.
In business, one constantly has to interact with people and work in teams. Most business situations cut across a range of product, geographic, and functional areas. Hence, a full range of competencies needs to be deployed to deal with the situation at hand. No one person has all the answers. Naturally, teams are the predominant and most effective setting for carrying out complex tasks.
At different points in time, depending on needs of the business, one may have to be engaged with multiple teams, move out of one team, and connect with a new one. This calls for skills in multitasking, as well as an ability to repeatedly make on and off mental and emotional switches. The textbooks have yet to ink out ready answers to how best these real-world skills can be learnt.
Turning Point 2: Unleashing of India's liberalization
While the unleashing of India's liberalization process in 1991 was indeed a turning point for our country and business houses, it took a while for the reforms to get rooted. By 1995 the reforms were being aggressively pushed. Very soon after my sudden transition from an entry-level apprentice to a CEO, I sensed that our Group needed to change. The changing business landscape called for new thinking, new ideas, and new attitudes. We had to move away from a mindset that was based on decades of monopoly, to one based on a future in which competitive pressures would be increasing across every business. That would call for large-scale development of people, as well as induction of talent from outside.
These compulsions were completely at odds with the way the Group functioned then. There was an implicit guarantee of lifetime employment, lack of ethnic diversity, and under-representation of women. We lacked the brand image and reputation to attract young talent from the leading educational institutes. I remember a pre-placement talk I was giving at the Indian Institute of Management (IIM) Calcutta (now Kolkata). At the end of it, I asked how many students would like to join our Group. Not a single hand went up. They did not like the fact that we did not have a retirement policy and that the Group was hierarchical, that it lacked training and development processes for the young. There was little differentiation-in recognition and rewards-between performers and nonperformers. The alarm bells had begun ringing.
I sensed that we needed a transformation-not a cosmetic transformation, but a fundamental change in the way we operated. I believe transformation is all about turning aspirations into reality. It is about converting setbacks into opportunities. But I had the courage of conviction. To me, transformation is about what Charles Handy calls "the creation of new alchemists from ordinary people".1 Admirably supported by our HR Director, Dr Santrupt Misra, and others on the Management Team, we set up highly energized processes. We were firm in our belief that we had people with an indomitable spirit who would help us make new things happen and create value. The only question was: when? The timing needed to be worked out carefully.
I had to take the skeptics and doubters along. Very often, the approach of building a consensus puts a break on speed at a particular point. But if I look back along the entire change cycle, consensus usually speeded the process. Once people are on the same wavelength, the problems at the implementation stage are dramatically fewer, the resistance much less. Things move forward at a faster clip. I believe that it helps to have individuals and teams involved in the decision-making process. Once they own the idea, the commitment to the task at hand is much greater. There is no attempt to push the blame and there is no looking back.
Today when I mull over our Group's transformational journey over these 17 years, I believe that we have changed in very fundamental ways. In fact the genetic coding of our Group stands altered substantially. We have become a global, multicultural entity, comprising more than 133,000 people, drawn from 42 nationalities. More than 60 percent of our people are under the age of 40. Seventeen years ago women executives were few and far between. Today, women constitute more than 17 percent of our managerial cadre, and the number is on the rise.
Today, we are rated as a meritocratic organization, one where talent always bubbles to the top. The Group has been ranked number four in the Global "Top Companies for Leaders" survey and ranked number one in Asia Pacific for 2011. "Top Companies For Leaders" is the most comprehensive study of organizational leadership in the world conducted by Aon Hewitt, Fortune Magazine, and RBL (a strategic HR and Leadership Advisory firm).
As we venture into new countries, our Group's geography has changed phenomenally as well. The work ethos has changed because the world around us has changed dramatically.
So a key learning for us is to continue to constantly reinvent ourselves. Change is the only constant in life.
Turning Point 3: Major shifts in the Group strategy
The sharp change in our Group's growth strategy has been a critical turning point. Earlier, we had been growing organically. Our decision to step on the inorganic growth accelerator has been dictated by the fact that some of our businesses demand that we become global players. Hence, fast-forwarding our growth and market position with well-considered acquisitions seemed logical.
In the last 17 years, we have made around 26 acquisitions, in India and overseas. Among them are Novelis (Canada), Mount Gordon and Nifty Copper Mines (Australia), Liaoning Carbon Black (China)2 and, of course, UltraTech from L&T, Indal from Alcan, Madura Garments from Coats Viyella, among others. Each acquisition has been a learning experience for us. The process of integrating the acquired units with the rest of the organization has taught us a lot. We have never been a great believer in a mechanistic 30 or 100-day integration plan. On the softer side, our learning has been that each acquisition is unique in its own way. Trying to force fit every M&A into a single mold, never works. At the end of the day, M&As are not about stronger balance sheets or enhanced market shares. Rather, they are about the coming together of people, their hearts and minds, and cultures and values.
Of all our acquisitions, the US$6 billion acquisition of Novelis was among the largest by an Indian company at that time. It moved us several notches higher in terms of scale, global reach, and forward integration. Despite the inherent long-term rationale of the acquisition, over the short term, we had to contend with the attendant higher risks. This stemmed from the funding we resorted to for the acquisition, and also from the onset of the US recession, around the same time we made the acquisition. We were severely criticized, and Hindalco's stock took a temporary beating. Even so, in my gut, I felt it was absolutely the right decision. Yes, we could have bought it cheaper, had we bought it now. But that's hindsight. You cannot time the market. Today, the performance of Novelis has vindicated our decision. Bear this in mind-the Novelis acquisition was done not only by applying our analytical and logical thought processes, but just as importantly by also applying intuition, gut feel, and the sixth sense.
Corporate strategy and acquisitions have been subjects of great attention in the world of management. Here, we did break ranks with the prevailing management thinking that frowned on the conglomerate model of business organization. Our Group had developed as a classic so-called conglomerate. It had proven successful. We found no compelling reason to turn back on something that had worked so well, at least in India. So our thinking was: if it isn't broke, there is no need to throw it away.
However, while retaining the conglomerate model, we did realign and fine-tune our approach in fundamental ways. Most important, we decided that each of our businesses must have the potential to achieve a leadership position in the industry it is in. If that was not feasible, we would exit the business. We exited a few businesses, among them refining, sponge iron, and seawater magnesia. Divesting a business is a difficult thing to do. You have to be careful and not let ego come in the way. Then there are the people-it's wrenching to see the disappointment and the parting with the Group. Generally, though, we negotiated with buyers so that the long-term interests of the business and the employees were taken care of.
A major learning has been about building brand equity globally. Let me recount our experience in acquiring a pulp mill in the New Brunswick province in North Eastern Canada in 2006. The mill-which had been shut for a year-had 400 employees, a large number by Canadian standards. It had run into deep financial trouble. When we first thought of acquiring the mill, it appeared unviable, unless the employees accepted new work norms, unless the union extended complete flexibility and cooperation, and unless the provincial government made significant concessions. There were many constituencies to convince and carry along.
We had to introduce ourselves, tell them our story, and narrate to them our successes and experiences in other countries time and again. This involved talking to individual provincial leaders, making short presentations to leadership teams, and even to the provincial parliament. We met with limited success initially. We had to go back again and again, with more facts, with more evidence, and with more conviction.
The entire community's economic existence in the mill township of Nackawic depended on how credible our revival plans were. While they already knew enough and more about us having searched the Internet, we had to get our story across to the employees, their families, and even to the small business owners in the township. We showed them films on our factories, gave them literature on our company, and answered their searching questions. And, our team did so with sincerity, respect, and a sense of commitment.
Finally, at the end of it all, an Indian company had put a new footprint on Canadian soil. Today, many of the employees feel that they are better off with an Indian MNC that is credible rather than with a local company that had presided over its closure.
So, building brand equity in new economies and winning the confidence of your new stakeholders, despite the strengths you have in your country, is a challenge that can be a humbling experience.
As we shifted to inorganic growth, we have also learnt a great deal about managing acquisitions. One clear lesson is the importance of taking the affected people-employees, their families, suppliers, community leaders, government officials, and politicians, into confidence and keeping the lines of communication open every step of the way. We have, in the process, evolved a very different, non-Anglo-Saxon approach to acquisitions, one that is nonhostile and results in minimum disruption. We usually have little inclination to make drastic changes, overhaul management, retrench people, or close plants. That's not our style. In fact, when we acquired Novelis, the employees there were waiting, almost expecting, that we would take some drastic steps during the process of integration. They were absolutely surprised that nothing earth-shaking happened. Today, Novelis is run by pretty much the same team that was there earlier, and their autonomy is intact. Employees in the West find this approach refreshing.
Turning Point 4: Rapid increase in the Group's diversity
Discontinuities, more often than not, turn out to be turning points, for organizations as well as individuals. In our case, the Group's increasing diversity turned out to one such marker of discontinuity. Although this is really an outcome of our strategic shifts, I think it's appropriate to treat this separately as it deals with the important issue of changing mindsets.
Our Group has undergone a huge transformation, from one that was relatively homogenous to one that is strikingly diverse. The diversity is evident whichever way you look.
Earlier, our presence was primarily in traditional industrial businesses. Today, our portfolio has a significant component of new businesses, among them financial services, telecom, retail, branded apparel, and business process outsourcing (BPO).
Many of our businesses are also much more integrated than they were-for instance, in VSF and Metals, we have resorted to acquisitions in order to secure our raw material supplies.
Today our businesses are also much closer to the end customer. For instance, in financial services, retailing and garments, we make direct contact with the final customer. This is a big change from two decades ago.
Turning Point 5: The great global economic disruption of 2008
Let me mention a fifth turning point. A powerful moment of truth for our Group, as for many other businesses the world over, was the global economic crisis that hit in late 2008. The suddenness, ferocity, and the unexpectedness of it all snowballed into a global recession. In India, we were fortunate to experience only a slowdown over two to three quarters. But more significant than the limited business impact, the crisis forever changed our organization's mindset in very profound ways. This was the closest brush with disaster, in our lifetime and in our memory.
The severe economic and business storm of the type we have flown through is a great litmus test about how strong and valid our strategy is. We now ask ourselves one simple question: If a down-turn of this magnitude were to persist for some time, would we be the last man standing, which means, will we be the industry player least likely to be affected or the least affected? If the answer is yes, our strategy stands the test.
Being a global group, we could not remain unscathed by the crisis. We had to take timely steps to respond to the crisis. For us, that was a time to pause, rethink, and regroup. During the early months of the crisis, the focus was on consolidation and on the basics, such as lowering the break-even point, bolstering cash flow, and cutting the flab.
While, hopefully, the world is past the low point of the crisis, the aftershocks keep rumbling intermittently-an all too familiar phenomenon. It will be a while before the calm returns.
The crisis earlier or even today has not shaken our long-term strategy. Becoming more efficient is only part of the equation. Few businesses become great just by cutting costs or downsizing. If only it were that simple! Over the long run, what counts is building a robust strategic architecture, innovation, creativity customer orientation, and the readiness to take risks, all backed by a great team of talented and totally committed people.
We constantly remind ourselves that our objective is to build businesses for the long haul-and I am talking about the next 30, 40, and 50 years. In the past too, there have been sharp swings in business cycles, and there will be more of these in the future, though hopefully, not of the magnitude and ferociousness we witnessed.
A key learning has been the importance of values and beliefs. Our values always guide us, much like the North Star. Our history and heritage as a group, in one word, stand for trust. Whilst we saw a meltdown the world over, not just of economies, but equally of governance, I believe that our demanding standards of governance will set us apart, even more, now, and in the future. Clearly, investors and employees will appreciate and learn to differentiate between organizations like ours that are honest, ethical, transparent, and well governed, and others, for whom governance is merely a platitude. This is a huge strength, ingrained over time into our genetic coding.
At the end of the day, I believe, leadership is all about plugging into the minds and hearts of people. It is about rallying them around to a compelling and exciting vision of the future. It is about upping the quality of imagination of the organization. It is about encouraging a spirit of intellectual ferment and constructive dissent so that people are not bound by the status quo, and mavericks are given space and free play. It is about building the highest levels of empathy, without compromising on fairness and without running a popularity contest.
The most important thing is to dream audaciously, and to pursue that big dream with all the passion and the fire within you. It's about reaching for that dream, no matter what and riding even the most gigantic waves of turbulence and disruption, much like a champion surfer.
1 Charles Handy. 1999. The New Alchemists. UK: Hutchisnson.
2 Columbian Chemicals (US), Domsjo Fabriker (Sweden), Terrace Bay Pulp Mill (Canada), EYA Star Cement (UAE).