The Grave Challenges that Tatas Faced

 

The House of Tatas is known as a salt-to-silware conglomerate. Its listed companies have a market cap of more than 300 billion USD. Its group companies are leading players in jewellery retail, commercial vehicles, cars, steel, airlines, airconditioners, hotels, packaged consumer products like tea and salt, chemicals, coffee chains, housing, lending solutions, tea, e-health, e-grocery retailing and more. Tata Consultancy Services (TCS) is a behemoth and is the largest IT services company in India. 

The list of businesses the Tatas run is very long.

More important, it is one of the business groups that has lasted for more than a hundred years. It is still thriving. It has an excellent reputation and the brand generates a certain amount of trust.

The stories of its philanthropy are known and so are its pioneering ventures into airlines, steel or luxury hotels(Taj, Mumbai). Less known are the challenges it faced in its early stages where it may not have survived.

This is the fascinating bit about businesses where entrepreneurs take risks and survive. Overcoming these life-threatening risks typically is a turning point. The entrepreneurs learn from these events and rework the business model.

The group was founded by Jamshedji Nuserwanji Tata in Mumbai. He set up a trading company and earned a lot of money during the American Civil War. But when the collapse of the American economy happened in 1865, the firm made huge losses. Jamshedji had to honour heavy debts and had to sell his house in Fort, Mumbai to meet his obligations.

Jamshedji's son Sir Dorab took over in 1904. The Tata Steel Company was set up in 1907 and started manufacturing in 1911. But in 1924 it was on the verge of closing down and Sir Dorab had to get a loan of INR 10 million from the Imperial Bank of India to establish a public limited company. To do this Sir Dorab had to pledge his entire personal fortune( INR 10 million) and his wife's jewellery. 

The highly risky decisions at these pivotal moments are what makes the journey so interesting.

 

We the Leaders: My foray into writing a book

 

Leadership is a fascinating subject. Partly because it is part of our everyday usage but it is not easy to explain it, partly because it has so many facets. This is one of the most written about topics in management literature. Academics, top global CEOs. Journalists - everyone had a stab at it.  

I was also transfixed by the idea of understanding it. I still am. The world has seen the leadership of Gandhi, also of Churchill; Jobs, and also of Eric Schmidt. Their styles within even a narrow domain of human endeavour could not be more different.

Who is a leader? What is leadership? How do you become a leader? How much more effective can you be by becoming a good leader? Is it action or is it inspiration? Is leadership contingent or does it have permanent values? What role does culture play in leadership style? Is a Japanese leader different from a British one? Can you transfer leadership skills from a monastery to a commercial organisation?

The leadership puzzle has countless questions. My book, published as an introduction to leadership drew from my experience as a leader of a commercial entity and my readings. 

I thought it would be more appealing to have a short book but the regret I have now is I should have put more on each topic.

But then there is always a tomorrow.

( The book is available on Amazon)

Is it the power of generosity?

 

Narayan Murthy is a true legend, an icon for generations. As a successful middle-class professional in India in the 1980s, it was an audacious step  to take the plunge into entrepreneurship. And in his journey, he set several benchmarks - the first to distribute wealth through stock options to a very large base of employees, the first to insist on the highest corporate governance standards for a fledgeling business, the uncompromising adherence to values and more. In the process, he created the  $70 bn behemoth that gave a fillip to job creation and entrepreneurship in the country and built the reputation of  India flying high as an IT superpower. IT services today are the biggest exports from the country. There are very few companies anywhere that are so innovative, pioneering and that also have transformed an industry and maybe even changed a country.

He belonged to a lower-middle-class family, his father was a schoolteacher with eight children. Now he is worth about $ 4 bn and by all accounts with time, his reputation and respect keep going uph. His daughter is married to the Prime Minister of the UK. It is by all means an abundantly blessed life.

In a recent interview with his son Rohan on TV ( link below), he says his favourite character in Mahabharata is Karna for his generosity. In the story, Karna gives away anything that anybody asks for including his shield that can protect him from any weapon. He is a tragic hero, He is the finest warrior amongst the heroes,  he suffers all along from fate but that does not stop him from being always ready to sacrifice. Murthy also in a very uncharacteristic gesture, did not retain a substantial equity in Infosys as everyone would do, but shared it equitably with his co-founders and employees. Infosys Foundation has carried forward that work too. 

It is quite curious that someone who in the last few decades gave away the most has also got back the most.

https://www.msn.com/mr-in/news/other/exclusive-rohan-murthy-interviews-dad-nr-narayana-murthy-on-starting-up-sacrifices-values/vi-AA1dzxnN

The Twenty-first Century Workplace

The global workplace is changing fast. The new generation is becoming more progressive,more linked and more demanding with a radical change in priorities.What should the organisations strive for - my take in the blog for Great Place To Work® Institute - a global research and consulting firm. 




http://greatnessdiaries.com/2014/11/05/salil-k-sahu-managing-director-home-store-india/

Management Skills and Indians

In a recent alumni meet of the engineering college that I studied in(NIT, Rourkela),we had organized a talks by alumni and external speakers. The gathering was given a jolt by Anand Pillai of HCL ( a brilliant speaker) who spoke on talent transformation.

First, his earnest call to make the degrees come with an expiry date made everyone sit up. I agree with him. Peter Drucker had a point to make on this – he said that knowledge is different from other resources because it dissipates and becomes irrelevant soon. The turbulent times that we live in ensure that the really important knowledge becomes outdated faster with rapid advances in understanding .So degrees received twenty to thirty years are probably useless from a current relevance point of view. We see this in our organizations when very senior people talk in a language that nobody else understands.

Second, Anand also mentioned that a recent Gartner research has shown major drawbacks in the Indian technical and managerial talent emanating from our cultural and educational conditioning. The top rated management skills for transformational leadership are initiative, decision-making efficiency (not accuracy) and willingness to take appropriate risks. Indians have high technical skills but register the highest gaps in the most-desired leadership skills.

Leadership Lessons From Obama

The ascent of Barrack Obama has entranced millions across the world. We find people in urban India bewitched by the rise of a black man in another country. This is true of many individuals around the world. From Kenya, through Berlin and Russia to Malaysia, we are all awash with hope and a sense of optimism through this splendid leader.

Reams have been written about him, his mixed lineage, his transcendence of race and his stupendously efficient organization of the election machinery. There have also been endless discussions about the fundamental transformation of the American society which has enabled his rise.

But the Obama phenomenon powerfully demonstrates the classic principles of leadership. These are the basics, many have chosen to forget or ignore, in the daily battle for survival and growth and some out of short-sightedness. True leadership stands on the pillars of self-awareness, managing paradoxes, authenticity, vision, and ability to fight against odds in pursuit of a dream. These have defined the paradigm of timeless and effective, long-term leadership through out history from Christ to Gandhi and Churchill.


Self-awareness: The Oracle at Delphi said Know thyself and the Indian scriptures espouse the idea of self-knowledge as being the highest form of knowledge. Socrates said, “The unexamined life is not worth living.” Obama’s first book’ Dreams of my father’, he wrote at 33, is full of extraordinary self-reflections and insight into his complex years in different countries and in the fractured American society. It is an emotional odyssey that delves into his inner life, his variegated upbringing through intense reflections. It is a voyage of self-discovery as powerful and poignant as any other.

Self-awareness is the profound and deep understanding about your strengths, your desires and your sources of energy, your wings of inspiration and your place in the world. Self-awareness enables one to resolve your paradoxes, to transcend conflicts and to become the masters of our own lives rather than slaves. As Warren Bennis puts it,” You make your life your own by understanding it.” A self-aware individual has also the courage of his convictions. This is the stepping stone to leadership.

Managing Paradoxes: We live in a complex world. The leader is tested everyday by conflicts, contrasting positions and mindsets and it is his job to manage those paradoxes and contradictions. Barrack is a true master in managing paradoxes. He is a black from working class roots who studied in the best schools. He is a Harvard lawyer who chose to be a community organizer. He is a community organizer who decided to fight for presidency without any significant experience. His grandfather was a Muslim, his father an atheist and he is a practicing Christian. He diets on asparagus and salads and has complete empathy with his repressed black brethren. He fought hard against McCain and Clinton with grace and candour. He does not compromise and yet drives his point. He manages the contradictions between black and white, democrats and republicans, and change and American founding ideals with remarkable élan.

A leader has the ability to engage with diverse viewpoints, probe the ideas sincerely and then arrive at a rational solution embracing the contrasting positions.



Authenticity: A true leader is completely authentic. Authenticity inspires trust. It is about developing your personality free of falsehoods and illusions. Obama has never flinched from confronting realities about himself and his own inner contradictions. He has gone through moments of self-doubt about his race and his choices. He has always maintained with African –Americans that he is black but has never been keen on using the color of his skin to get votes. He has not withdrawn from taking on the most difficult facts about his life like his association with Bill Ayers and Jeremiah Wright and openly talking about them to the public. He is what you see and that authenticity has led to the extraordinary trust reposed in him by people across age, race and class.

Authenticity is associated with sincerity, honesty and integrity. It is a reflection of a leader’s own self and leaders have to adapt to multiple situations without losing their identity and that is why authenticity is so important and together with the ability to manage paradoxes , enables a leader to handle complex situations and uncertainty.

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Vision: Barrack has always communicated and remained steadfast to his vision. It is a vision of hope, unity and working together. It is free of rancour and negativity. It is remarkable in its scope of appealing to the best in us. It is a brave new world without any distinctions of race, creed or origins.

This vision is forged in the reality of today, is interpreted through the existing strands of culture and is an indistinct but credible version of tomorrow. The leaders need to develop a vision and communicate it continuously.



Fighting against odds: Last, Obama stands out for being able to fight against odds in every situation. His entire life is a story of overcoming odds stacked against him by his origins, his circumstances and then in the presidential battle by the formidable Clinton machine. Along the way he fights mental demons, prejudices of his closest friends and family and battles on for a brave, new world without harbouring any self-doubt.

The media and bookshelves are full of material and literature on leadership. They emphasise communication, false significance of heritage, confidence and various other attributes. They are important but they do not make a true leader. They are the secondary characteristics of a leader. The principal pillars are these timeless principles.

Lalu Prasad Turns Into Jack Welch

I have been tracking Laloo (not Lalu as he calls himself now) for a long time. I got fascinated by this rustic man with tremendous wit and humour ten years back. I also knew he was the smartest operator in Indian politics - anybody who can install his wife, with a primary education , as the chief minister has to be really a smart cookie. He also gave a voice to the downtrodden.

But the lower castes in Bihar under his patronage started doing what the upper castes had indulged in-plunder, terror and exploitation. The state treasury was shamelessly looted by Laloo and his cronies. The state went back in time. But Laloo survived through his buffoonery and political savvy.

I had to follow his motorcade once on a drive from Gaya to Patna. Laloo had just lost the lok sabha elections and you expected him to be down. But he was irrepressible on the route. The route itself was lined with his supporters on both sides - thousands of emaciated, bare torsoed men and children cheered him as he went by. I had to follow his motorcade as nobody in Bihar can overtake him. Laloo stopped in four places where he opened the door of the car, put his feet up and had samosas and jalebis offered by the locals. He got down in a few places to give im promptu speeches.One interaction went like this.

Village Youth : We do not have jobs. Can you help us? You did not give us jobs when in power ?

Laloo:What have you studied? Do you speak English? Do you know computers ?

Village Youth: (now befuddled and embarrassed) No.

Laloo: The government at the centre now is not allowing me to expand employment in Bihar. They allow only multinational companies who want candidates with knowledge of English and computers.

The entire village then starts cursing the centre.


Laloo has a unique way to use humour and twisted logic to set his own agenda in a conversation.

He is now employing the same tactics in portraying himself as the great turnaround specialist of railways. Anyone with a modicum of experience in running an organisation knows, that it takes much more than allowing a bureaucrat a free hand (which is all he seems to have done) to achieve any sort of improvement. For an organisation of the size, complexity and mindset of the railways obviously it would take enormous effort to make any dents.

The railways have started delivering results possibly because of a) initiatives already in place before b) economy growing c) factors in the transport sector d)some changes brought about by Laloo's team e) other environmental drivers.

But the media is portraying him as a management genius.He has been given the entire credit for the performance.This is absurd.I also suspect management schools are playing to the gallery in this.

Nobody who has mismanged a state badly for so long can overnight become a genius like this. This is simply not human nature.

The CEO-The Other Side

The aspiration of anybody who passes though a B-School is to be a CEO. He is the great figure of our times. He is intelligent,powerful,smart and experiences life in ways that other people cannot. It does not hurt that he makes loads of money. The media has stories about these celebrities and their lifestyles which encompass but are not limited to , buying art, diving in Australia and spending the summers in Finland besides driving the latest cars. There is a massive industry of consultants and reporters which thrives on understanding this great animal.

So a couple of years ago, four of us sat down to unravel the mystery of these creatures. Was it genes or parenting or the management school that made them successful? Or was it exceptional communication skills or interpersonal ability or strategic thinking? Or was it all of them?

Arun Sarin of Vodaphone has probably given the best answer , I have come across, to explain the phenomenon. He says to be a CEO you need to be two sigma on the seven or eight key management competencies like analytical ability, communication, interpersonal skills, strategic thinking etc. rather than three sigma on some and one sigma on others.

But coming back to our discussions, we tried to analyse the thirty odd CEOs we knew or had interacted with between us. It was a sad story. Most (may be about four exceptions in the group) of them had reached their positions due to luck or their exceptional maneuvering skills. They were obviously very good in touting every success in their functions as theirs. They were also very good in reading signals and adept in manipulating these signals to their benefits. Several of them were good functional heads but being CEOs was a question mark.

Many of them had no character and were low on integrity.Many misled their phirang bosses shamelessly.

We tend to think that everyone who is a leader or CEO is a great performer. This is not true.If it were true then it would be so simple to choose the leader-just make the best performer your leader or CEO. So the CEOs also did not have sterling performance records also. It was more of a case of being in the right place at the right time and using the environment to suit your own interests.

None of them could be our role models. And here I am talking about the CEOs, of the may be top two hundred employers in the country.

But still at the end of the day the prize of being a CEO is worth it for the influence and satisfaction you can get. So the rat race will go on.

Is your social strategy in place?

Despite all the euphoria about economic growth, the obstacles in India’s path remain formidable. One of the most difficult issues to tackle would be the increasing level of economic disparities. So while there are 53000 households with annual incomes of more than 1 crore, 400 million go to bed hungry. These 400 million are below the poverty line which by definition means that they do not get enough to eat everyday. The simmering violence of a hungry stomach can be explosive. And a large alienated mass of people is a potential tinder box if they are mobilised. History has shown that such disparities are socially unsustainable.

When a large section of the society is disaffected then it tends to retaliate against people who it thinks are exploiting them or the society. The consequences of such conflicts are enormous and problems become intractable. We have seen that the population of NE and Kashmir have felt alienated(though for both economic and political reasons) and it has led to a spiralling circle of violence and resentment. This has had catastrophic impact on the economic activities. Despite the best efforts of the government and parts of civil society business has not recovered in NE. We are seeing the increasing influence of the naxalites in a broad swathe of Eastern and central part of the country. The dangers of such inequality are multiplied in India because of lack of a proper justice system and endemic corruption in the law enforcement circles. The lack of justice and the unfairness around make the deprived sections more volatile and violent.

In these circumstances, it is even more threatening for the key organs of the society which are seen to be exploiting the society. So the rich landlords were the targets in the naxalite movement and the government or security forces in Kashmir or the tea gardens in Assam. In these times of increasing disparity, many people have started seeing the corporate sector as flourishing at the cost of poor people by charging high prices or making money unethically. This is reinforced by the visible lifestyles of executives and owners.

The typical response of businessmen to this would be that they need to reap the rewards of their talent and hard work. The executives also need to be paid international salaries as the country becomes more competitive and the companies need to retain talent. While these are valid reasons, the corporate sector needs to also take steps to assuage the concerns of large sections of society. This can be best achieved by being a good corporate citizen . Good corporate social responsibility can act a protection against the vicissitudes of the social dynamics and make the companies less immune to violence and subsequent losses. The steps taken today can prevent bigger disasters tomorrow. One shudders to imagine what would happen to FDI or venture capitalists if the CEO of a multinational is kidnapped and beheaded for a ransom.

Corporate social responsibility implies a) Being honest, doing everything legally
b) Fulfilling all obligations and commitments towards all stake holders(including society at large)

Sadly, many corporates in India fall short of expectations even on being ethically proper. In the past, we had examples of companies not paying the employees their providend fund dues which has fortunately got corrected. Many corporates go to great lengths to avoid taxes, duties in collusion with government officials. They shamelessly degrade the environment knowing fully well that it is a treasure to be fully protected. There are several instances of crooked businessmen not clearing the genuine dues of their business partners and associates. The consumers getting cheated by cynical manipulation of licenses with the help of politicians is an accepted practice in this country. No wonder in surveys of respectable professions ,managers and entrepreneurs still figure very low.

This aspect of corporate social responsibility should be a given. In fact, the corporate associations like FICCI and ASSOCHAM or CII should be pro-active in ensuring minimum level of ethics like watchdogs. Any member flouting or sidestepping the law should be censured by its peers. Necessary inputs and systems for getting information and acting on them should be put in place. The government has to be more concerned about this and should tighten laws for evaders.

It is also important in the era of globalisation to be ethically above reproach especially for companies which have global aspirations. The consumers worldwide expect ethical behaviour and can with the power of internet or alert citizen groups or individuals can destroy companies. . It cannot be just an offshoot of the benevolent intentions of the CEO. This also has to be in the DNA of every employee or dubious acts by sections of the company like in Arthur Andersen can lead to collapse


The second aspect of corporate social responsibility then assumes importance. It is about giving back to the society from where one draws sustenance. The Tatas have done it widely in different fields and the goodwill they enjoy today is partly an outcome of this. The benefits for business from this dimension of CSR are enormous. No government or political party in Jharkhand today can think of unduly harassing TISCO. Similarly, Infosys by the simple act of funding the expansion of the premier pediatric hospital in Bhubaneshwar today commands huge goodwill in Orissa. Fortunately, many corporates today have embarked on programmes to give back to the society.


But in India the corporates need to also go beyond the above traditional understanding of the corporate social responsibility to ensure that they actually work as a powerful force for the good of the society. Today the best and brightest join the corporate sector with idealism in their hearts. They look upto their leaders .At the top there are crooks but there are also men of iconic stature and unimpeachable integrity like Premji and Murthy. There are some top level professionals chief executives who command a great deal of respect in the society. They need to dynamically influence policy and be more engaged with society. It is in the interest of the business that they speak up on behalf of the silent masses of society. The civil society needs people who have the courage to stand up. Many arms of the society (academia or media)in the face of consumerism can wilt because many times they are not financially independent or there is a quid pro quo with the powers that be. It is on such issues that the corporate leaders of the society should stand up. Today, they have the strength to not to succumb to pressure. But they do not stand up and only seethe silently. So it is sad to see that the Gujarat riots are not censured by the corporate community in general or Gowda’s antics are being handled with kid gloves.

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So corporate social responsibility which is ethical behaviour and fulfilling obligations towards all stakeholders is not just a feel-good activity to draw talent or build up reputation .For the Indian industry the significance of corporate social responsibility goes beyond the traditional underpinnings. It is a strategic necessity from several angles. The corporates need to have a sound social strategy as part of their business strategy.

Innovation and FMCG industry in India

Background

The Indian FMCG market has slowed down in growth for sometime. From a growth rate of excess of 12 percent in early 90’s, it has registered only 4.4 percent odd so in the last five years.
In the last five years , the GDP has grown by a CAGR of close to 6 percent at real prices. So FMCG business is not even growing at the pace of the domestic economy. One would have thought that in a country where penetration and consumption are still low by international standards, this industry catering to basic necessities would have registered higher growth. But in the last decade sectors like telecom and durables have grown spectacularly but not FMCG.

The reasons for the slow growth have been discussed and debated endlessly. Primarily a) The housing, telecom and durables sectors had a latent demand which ensured explosive growth. b) The easier and cheaper availability of credit supported this growth. c) The consumers started spending more on products of these sectors and had lesser money for FMCG products and so downgraded in FMCG.

To counter this, most companies have got into a battle of market share and aim to differentiate themselves on trade reach or advertising efficiency. The route to winning has been believed to be better distribution, operational improvements or outflanking the competition on pricing and promotions. However on hard evidence, these directions have delivered incremental growth and also not helped in exploding the categories.

Failure to exploit trends

In general however, the sector has been unable to exploit the key demographic and sociological trends of the last decade. Within the sector, the companies which have done so have reaped dividends.

The most significant demographic trend in the recent years has been that Indian consumer is getting younger. The average age of the population is amongst the lowest in the world. The youth has far more purchasing power than before and a different attitude towards life in the post-liberalisation era. So sectors which have captured this trend in products and communication have grown like lifestyle apparels, shoes or even trendy watches. In FMCG , Perfetti has done well growing at more than 30% CAGR in the last decade by mainly focussing on youth with hip products and edgy communication targeted at them..

The second important trend has been that families have become increasingly nuclear and urbanised. This has necessitated the need for convenience foods and saving of time. One outcome of this has been the restaurant boom. But convenience foods are yet to take off more due to issues of taste and right price rather than cultural factors. Largely, the industry has missed the bus here.

The other major trend of higher consumption potential due to both rising incomes and increasing consumer base hence has anyway not translated into corresponding growth.
Any sector or company which wants to grow spectacularly has to exploit the inherent potential in the above three defining trends a)Younger population with a different attitude b)Need for convenience and c)Increasing consumption potential. The visible and existing models of behaviour and organisation and strategy in most FMCG companies do not suggest that they are trying to ride these trends and hence it is difficult to anticipate any major change of trend in performance.




Criticality of Innovation

So the sector needs to look at significantly different ways to participate in India’s boom. It need not be dependent on the monsoons or minor price-cuts to drive its growth. These new ways should exploit the key demographic and economic trends. The companies cannot depend on existing products and communication strategies to drive their business. And only new and innovative ways in the sector can rapidly leverage these broad trends for growth.

The other industries have seen spectacular growth due to innovations which have exploited these trends. Some of them which have changed the rules of the game are a) The consumer financing boom changed the way durables could be bought b) The technological changes leading to crash in rates of calls and equipment altered the way cellular telephony is perceived and experienced.

Similarly in FMCG, innovation as played a key role in the outstanding growth of some companies. Frito lay has experienced spectacular growth with an innovative product Kurkure. The caps in sachets by Colgate, the introduction of “lite oils”, the sachet revolution by Cavincare have fundamentally altered the rules of the game and delivered spectacular growth to the companies.

But for most companies, innovation though important, is not a key strategy in performance. There is no premium on innovation. The companies remain hostage to analysis and stability. The R and D centres are not the leading edge departments. The structures do not support innovation. The cultures encourage conformity. Innovation is not on the agenda of most senior managers where as it needs to be the prime driver for their performance.

It is important to realise that the innovation will play the most critical role in rescuing the industry from lack-lustre performance. It is also important that this percolates to every level of the organisation. The processes starting with appraisals, brainstormings and feedback loops have to be in place. The innovation has to be across all dimensions starting with product development, distribution, communication, people strategies and manufacturing. It needs to be pervasive and a very powerful element in the fabric of the organisation.


It is time the industry moved to innovations as the prime platform to ride on the broader social and economic trends .