Birla Group’s management strategy: Prepares second line of leadership by naming deputy heads for major group cos

Sabarinath M
14 November 2014
The Economic Times

MUMBAI: Ever since he joined the Aditya Birla Group from Hindustan Lever in 2004, Dilip Gaur's leadership skills have been put to the test in three disparate businesses such as edible oils, carbon black and copper. Little did he realise then that the leadership transition would eventually mean a larger role for him in the $40-billion group. Last month, Gaur was elevated as the deputy managing director of the group's cement company, UltraTech. As business environment becomes increasingly competitive, billionaire Kumar Mangalam Birla-controlled businessconglomerate has institutionalised a leadership back-up plan by anointing deputy managing directors at its group companies.

The process, which was set in motion with the appointment of Ambrish Jain as the deputy MD of Idea in 2011, is taking a definitive shape. Group companies such as Idea, UIltraTech, Hindalco and Aditya Birla Financial Services now have deputy heads. While Satish Pai has taken charge as the deputy MD of Hindalco from February this year, Pankaj Razdan is the deputy chief executive of financial services business. Lalit Naik, who used to be the deputy MD of Aditya Birla Nuvo, has recently taken over as the managing director. The group is exploring the possibility of appointing deputy MDs in other group companies."It is tough for one person to carry the burden as the business environment has become complex and challenging. So, it is important to c;reate a second line of support to the heads of various businesses," said Santrupt Mishra, director, human resources and CEO, carbon black business at Aditya Birla Group.

The metals-to-telecom group is experimenting on a model that combines the intrinsic strengths of two different people. As the deputy MD, Gaur is also the chief manufacturing officer. So, Gaur, who had proved his project skills at Hindalco, is in charge of the research &development and technical skills. "Being a chemical engineer, it comes naturally to him," said Mishra.

Management experts feel that the move to c;reate a second line of leadership signals the group's transformation into "democratic professionalism". "Most Indian family businesses have been practising a limited level of professionalism. The Birla Group has now confirmed their movement from what I call 'directed professionalism' to 'democratic professionalism' wherein high quality team members are respected and treated equally by the lead promoter," said Kavil Ramachandran, Thomas Schmidheiny Chair Professor of Family Business and Wealth Management, Indian School of Business. "This is how most family-controlled businesses have grown global in any country," he added. However, this process of talent grooming and systematic succession planning is over a decade old and institutionalised at the group.

Unlike Satish Pai, who was initially hired from Sclumberger as CEO of Hindalco's aluminium business, the group had handpicked the second line of leadership from within. As part of the succession planning initiative, leaders who showed uncanny ability to rally people were chosen for the top posts. Jain, who joined Idea when it was a very small regional operator, proved his leadership skills and competencies, supporting the company's rise as the third-largest telecom operator.