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Presentation
on the Aditya Birla Group by Mr. Kumar Mangalam
Birla, Group Chairman, at the DSP Merrill Lynch
Investor Conference, Goa, 9 February, 2004.
View
the presentation here (download pdf 2.74 MB)
Ladies
and gentlemen... welcome to the presentation on
the Aditya Birla Group.
In this important gathering, I would like to share
some of the contours of our value journey and
the exciting potential for transformation of our
group companies into global sized, globally competitive
operations, with the ultimate objective of creating
value for all our shareholders.
The Aditya Birla Group: a snapshot
Before
I embark on the core part of my presentation, let
me introduce the Group to those few who are new
to India.
We
are amongst the three largest industrial groups
in India. Through decades of operational excellence,
we have built leadership across sectors such as
cement, viscose staple fibre, metals, fertilisers,
insulators and carbon black. While we stand tall
in the traditional businesses, we have also built
leadership in emerging growth sectors like garments,
asset management and more recently in insurance
and BPO. Our global accomplishments in these sectors
are outlined in the slide.
As
a Group, we are a US$ 5.5bn conglomerate and we
enjoy the trust of over 700,000 shareholders. We
are driven by values and anchored by over 70,000
employees committed to the cause of creating shareholder
value.
Operations
across continents
It might interest you to note that our Group enjoys
the distinction of being the pioneer in the globalisation
efforts in India. We have manufacturing operations
in 8 countries across Asia and enjoy leadership
position even in these market economies.
For
example, in VSF, we are the global leaders with
a 24% global market share. Our operations span
across India, Thailand, Indonesia and Canada.
In carbon black, we have successful operations
in India, Thailand, Egypt and now in China.
Similarly,
in the non-ferrous metals, we have been a key
player in Asia with a strong presence across the
value chain. We have forayed into Australia through
the acquisition of Mt. Gordon and Nifty Mines
last year. Likewise, in chemicals, we have successful
operations across South East Asia.
It
is even more important to note that the Group's
operations in the market economies of South East
Asia have been highly successful. In fact, they
have come unscathed and demonstrated strong resilience
even during the economic crisis of 1997. It is
this experience that boosts our confidence of
sustaining superior value creation even in the
globalising Indian environment.
Our
value creation framework
Against
this background, I would like to outline our value
creation framework wherein we have aligned organisational
interests with that of stakeholders. This framework
stretches across companies towards our aim to build
global sized, globally competitive businesses.
The
Group's vision is to be a premium conglomerate
with a clear focus at the corporate level. Our
mission is to deliver sustained superior value
to our shareholders at all times.
Towards
this end, we have a well defined framework that
rests on four principles:
- Focus
on people
-
Institutionalise processes and systems required
for any modern multinational fast growing corporation
-
A strong customer orientation
-
Build strategies to ensure sustainable competitive
advantages in all our businesses
Let
me explain on the details now.
Core
strength — nurtured over the decades
As
a Group, over the decades, we have built up an inventory
of core strengths. I would maintain that our key
strengths are the intellectual and emotional commitment
of our people, operational excellence, razor sharp
focus on costs and efficiencies, streamlined systems
and processes, unmatched financial prudence and
superior governance standards. To top it all, the
principles of trusteeship that we follow in our
decisions. These are the key strengths that we bring
to the table.
People-ise:
providing us the cutting edge
I
believe, our most important asset, one that is not
reflected in our financial statements, is our people.
Over the last few years, our focus as regards people
has been to build competencies and a meritocracy.
We have taken several initiatives in this regard
and I shall dwell only on a few here.
We
are contemporising the talent pool through lateral
inductions across all levels. Several of our business
heads and senior managers are now drawn from multinationals
and other corporates in India and abroad. We have
established a Group Management Trainee Scheme
that helps us recruit entry level managers from
reputed business schools and academic institutions.
Simultaneous
to talent acquisition, we have focused on development
of people and building capabilities. Towards better
role clarity and career management, we have undertaken
a job evaluation study by Hewitt Associates and
their recommendations are under implementation
across the Group.
Towards
actualising people development needs, we have
invested resources in creating a management centre
par excellence, named "Gyanodaya". Over
2000 senior managers have been trained at Gyanodaya
during the last 4 years. Along side, we have fostered
the concept of mentorship, where our senior managers
become performance coaches and role models for
the leaders of tomorrow.
Thirdly,
we have institutionalised the process of Organisational
Health Survey, which is a well regarded tool globally
of tracking employee satisfaction.
Finally,
we have laid equal emphasis on getting our people
focused more towards common organisational objectives.
We have put in processes that link rewards to
performance and encourage excellence, both at
the individual and at the team level.
People:
providing us the cutting edge
The most obvious outcome of our efforts on the people
front is the significant enhancement of our brand
as an employer. This provides us better access to
some of the best minds and talents in the country
while also winning accolades.
You
may note that the Group has been ranked amongst
the Top-20 employers in India by Hewitt Associates
and Business Today as well as by Grow Talent
and Business World in their independent studies
last year. At the same time, our overseas units
have been named amongst the best employers in
Asia, Thailand and Indonesia during the last two
years.
Our
intention is to be known as a people sensitive,
achievement focused, development oriented organisation.
Institutionalise:
adoption of best practices — VBM
Let
me move on to the second pillar viz., institutionalisation.
Even as people management would unleash creativity,
the need to institutionalise and create a system,
needs to be underscored. We have institutionalised
several processes during the last five years, but
let me dwell on only a select few here, starting
with the Value Based Management system.
We
adopted the Value Based Management process in
the Group. Our intention has been to create awareness
of the cost of capital, make operating managers
better relate to shareholder aspirations and link
rewards more directly to business performance.
The
journey so far has been encouraging. We have adopted
EVA (Economic Value Added) as the measurement
metric in our value management process. The value
based management process is a six pronged approach
as outlined here and is under implementation by
Stern Stewart & Co.
I
should say that the new VBM system fundamentally
impacts how we value our businesses, how we set
strategic targets for business managers to realise
the value, how we review our businesses and compensate
our managers. Importantly, all the future capital
allocation decisions will be based on the value
creation criteria. We are confident that the process
will further align interests of all stakeholders
towards the common objective of value creation.
Institutionalise:
adoption of best practices — WCM
Secondly,
we have adopted a system that we call "World
Class Manufacturing (WCM)" in all our units.
WCM encourages manufacturing excellence by integrating
several contemporary initiatives like Total Productivity
Management (TPM), Total Quality Management (TQM),
Business Process Restructuring (BPR), Six Sigma,
International Quality Rating Systems (IQRS) and
several global best practices in the area of manufacturing.
These
initiatives have helped us enhance our focus on
quality and costs, put our businesses on the global
map of achievers and won for us several accolades
in recent years.
Institutionalise:
adoption of best practices — corporate governance
As
a Group, we are recognised for our governance practices
and disclosure standards. Our boards constitute
independent directors who are persons of eminence
and bring objectivity to the decision making process
and decisions are taken keeping in mind the best
interests of all stakeholders. In recent years,
we have concentrated our energies on further improving
levels of transparency and disclosure as well as
adoption of global accounting practices.
We
take pride in the fact that our disclosure levels
are internationally comparable. Our stakeholder
communications provide deep insight into the business
performance and strategies for the future. Our
efforts have won us recognition from investors
as well as the financial media in recent years.
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