Bringing people together

Kumar Mangalam Birla
Chairman, Aditya Birla Group
Outlook Business
21 August 2008

In the last decade and half, as globalisation has made rapid strides, the world has shrunk. Trade barriers have been significantly dismantled. The whole world has become one market. Our debut in becoming global, with a foray into Thailand, in the late 1960s, prepared us for this new world order. The early experience of going global made the process of change far more palatable and easier for us than for most organisations. For us, the change has been dramatic. On the people front, even up until five years ago, we were predominantly Asian. Now we have a workforce of a 100,000 people comprising 25 nationalities, with operations spanning 25 countries.

Today, of our US$ 28 billion turnover, more than 60 per cent comes from our overseas businesses. As a Group we are in the league of the Fortune 500 Companies and aim to be in the Fortune 150 League by 2012. For us, the underlying logic in many of our businesses is clear: if we want a leadership position in that business, we have to necessarily be global. Our vision is – "To be a premium global conglomerate with a clear focus on each business".

Drivenby our vision, we have moved swiftly toconsolidate our position in key businesssectors, through a well forged strategyof both organic and inorganic growth. Apartfrom the aggressive pace of expansions inall of our businesses, we have put through12 acquisitions – chiefly, Novelis from Canada, the MountGordon and the Nifty copper mines inAustralia, and UltraTech,Indal, MaduraGarments and PSIData Systems in India.

These acquisitions mark a departure for an organisation that has traditionally grown organically. They attest to the fleet-footedness we have displayed. The moves signal that we have the capability and flexibility to change, in tune with the changing competitive landscape. The process of integrating the acquired units with the rest of the organisation is as important as the acquisitions themselves. We have not been a great believer in the 30- or 100-day integration plan. Instead, we allow it to evolve as a natural phenomenon with s;elective interventions.

Insider view
Transforming Hindalco into a non-ferrous metals global powerhouse with Novelis rolling in, has been time consuming and challenging

Having gone through restructuring, acquisitions and mergers over the last couple of years, one has an insider's view of the challenges involved. It is not an easy task. Each experience has been worth a thousand words. Creating in Grasim a cement entity with global standing and transforming Hindalco into a non-ferrous metals global powerhouse with Novelis rolling in, have been time consuming and challenging, yet rewarding experiences. Adapting management and business processes and cultural integration call for a huge investment in terms of time and energy. Along the way, we have learnt much, we have also unlearnt a few things.

For a conglomerate, an acquisition could be in a space where it has the requisite domain expertise or it could be in an alien territory. Hindalco-Novelis and Madura Garments reflect two ends of a spectrum. Each acquisition is unique in its own way. Trying to slam every M&;A into one mould never works.

The coming together of two companies is not just about stronger balance sheets, larger market shares or distribution channels. It is, at the end of the day, a coming together of people; their hearts and minds, cultures and values coalescing. The process per se is wrought with anxiety and uncertainty. Allaying fears of colleagues in the acquired company is indeed critical. Worries and anxieties only dissipate energies, result in a loss of productivity and commitment, and may lead to erosion of customer focus. The mantra has to be "business as usual", with the customer top of the mind.

In our acquisitions one of the principles is to not make senior manager shifts, initially. We scout for talent in the acquired organisation, elevate them or give them significant roles within the Group. This stokes their confidence levels and leads to a relatively smooth transition.People due diligence
In our view, assessing people is as crucial as the business due diligence. Alongside the key business team, HR is an indispensable member. For us, the integration process commences with the eyeballs we connect with through such an engagement.

For instance, after acquiring a key company, we assigned a highly reputed global consulting firm to conduct a skills, competence and values inventory. The consultant took stock of the key people, their roles, their track record and their potential, going forward. It was carried out in an environment of openness and transparency. We explained the process to the management of the acquired company. Such a process makes the integration process a little less difficult.

Based on the findings, we could take decisions in the people area. The tie-breaking criterion is happily not the norm for us. Where we find two people equally-talented and critical, we have the leeway to position one of them to a comparable level in our other businesses. The point: even if the physical assets are world-class and global in scale, if the management team is of a middling quality, then that company is not up our alley.Knowledge integration

The value of an acquisition lies in the knowledge quotient, the technology, the innovativeness of the acquired organisation and how we can leverage these towards value creation.
We believe that there exists a bank of experience and knowledge, both in the acquirer and acquiree. Unless we make a conscious effort, this will lie undiscovered and un-leveraged. One of the cardinal principles is to collaborate extensively and to move knowledge round from where it resides to where it is needed. If not, there is a danger of it becoming an island of excellence without any bridges to one another. There is a certain pride in sharing knowledge and experience, and creating an environment that becomes exhilarating and charged. As a result, there is very little polarisation. Novelis and Hindalco constantly exchange ideas on business processes, customer orientation, HR systems and operational excellence.

Communicate, communication
Ongoing communication is also key to maintaining morale. We extensively communicate our mission, values, culture, decision-making processes, performance management processes etc.

In some instances we have had to go far beyond our internal stakeholders. The acquisition process for the A.V. Nackawic Pulp Plant in the Province of New Brunswick, Canada, was an interesting one. Our pulp and fibre team needed to make presentations to groups of the local community of the mill township of Nackawic. Their livelihood depended to a large extent, on the restarting of the operations at the plant.

There were searching questions from the local unions, the provincial government and the employees. Our team effectively allayed their fears. By the end of the process, the employees were convinced that they would rather work for an Indian multinational with credibility, than for the local company that presided over its shutdown earlier. Our acquisition team was taken to the provincial Parliament, where they received a standing ovation. In yet another acquisition, the entire top/senior manager level team of the company being acquired was invited to a two-day 'get to know us' sammelan at Gyanodaya, our Institute of Management Learning. Overnight, they were rooting for us aggressively. We now take recourse to this route in a major way.

A strong respect for local cultures, norms and the processes that have worked out well for the acquired firm is a must. We respect diversity. The glue that binds all of us 100,000 employees together is our values — integrity, commitment, passion, seamlessness and speed. These are edicts, written in stone.