The new millennium Birla

Bhakti Chuganee

In just eight years at the helm, Kumar Mangalam has grown the A. V. Birla group fourfold. But while he himself has grown immensely in stature, the essential simplicity remains.

The name Kumar Mangalam has a meaning. While Kumar means young, Mangalam encompasses tranquillity, prosperity, happiness, well-being. Kumar Mangalam Birla's grandmother Sarla Devi Birla thinks both words together make it a beautiful name and can't understand why everyone calls the chairman of the Rs 27,000-crore Aditya Birla group just 'Kumar'. Mangalam is the main thing in the name. But just so everyone in the group could understand what she was saying, Sarla Devi sent out a note to the departments concerned explaining the meaning of his name.

If one takes the meaning into consideration, and applies it to what 36-year-old Birla has achieved, itseems he is living up to his name. When in 1995 a 28-year-old Birla stepped into the very large shoes of his father, the late Aditya Birla, sceptics wondered if he would be able to lead a 60-year-old group. Birla, on his part, had no time to think. "Well, one did get intimidated. One did realise that it was a big responsibility, but there was no time to brood, let's put it that way. So one just got on with the job. The day after the funeral I was in the office," he says.

When Birla stepped in as chairman he had the experience of being in charge of a few significant units in the group ­; Vikram Cement, Indo Gulf Fertilisers, the group's chemical division, and Alexandria Carbon Black, to name a few. He had no preconceived pan-group view in mind. Though he had worked very closely with his father for five years, and knew the issues that the group faced, Birla decided to takes things as they came. In the course of the first two years a lot of time went into thinking and talking to people. In a situation like this it was the urgent matters that took priority. He set off on an excruciating schedule, working very long hours. It gave him a sense of where things were, what needed attention, the group's capabilities, and its shortcomings. It was then that he started building on the group's strengths and filling in its lacunae.

Mahesh Bagrodia, MD of Birla Management Centre, who has worked with four generations of Birlas and was Kumar Mangalam's teacher at the units he was in charge of previously, says: "Personally speaking he had the advantage of having worked with his father. He was already involved in some of the major companies like Indo Gulf, Birla Copper, Vikram Cement, caustic soda, and carbon black. So I thought there would be no problem for the group. I also never thought that there would be such a quantum jump in the whole group, and his personality. No one would have dared to change all these things."

It was a time for Birla's own evolution as well. "One thing's for sure ­; I've learnt a lot, and that's helped me to grow as a person, and as an individual, outside of work as well. And it's been a huge challenge," he says. Wife Neerja explains, "It was a difficult time for him. There was a personal loss. Prior to that he was looking after certain units, so the responsibility was less. Then the quantum of work increased x-fold; he was now dealing with people two or three times his age. He was stressed and ruffled easily. He is now calm and has learnt to take things in his stride."

Bagrodia adds, "At that time also the decisions that he was taking were very mature, and he would not take any decision in haste. Now of course he has matured very much." Amit Chandra, a member of the board of DSP Merrill Lynch Ltd, says: "While keeping the wonderful human side of him intact, he has become a lot more confident and bold as a leader."

Influences of his great-grandfather G.D. Birla and father Aditya Birla have also come into play. The relationship with his great-grandfather was one of unconditional love. Besides sharing a good rapport with him, Birla learnt from G.D. Birla that while you could get love and affection from people, there were norms to be followed as well. Birla reminisces that GD was particular about things like being on time for a family function, and dressing appropriately for functions. And in fact was reprimanded a bit for being late for the former, and made to go change for the latter. "For me he was my great-grandfather, someone I was attached to, someone who I could talk to, and someone who also could get angry with me. I took a very long time to get over the fact that he passed away. I just couldn't accept it, because he had been quite hale and hearty, and suddenly he had a heart attack and passed away. Sometimes it just puts into perspective the value of the person. I am really blessed that I spent time with him. I picked up so many things from him. Simple living and high thinking, nothing extravagant." Says grandfather B.K. Birla, "Honesty, integrity, and hard work are factors similar to all us Birlas. We are old-timers and Kumar Mangalam is 36. Age has its own effect on people."

He has tried to imbibe his grandfather's financial acumen, "but I'm notsure how I've done on that," he adds. A very sharp man with outstanding time management skills, B.K. Birla has also done a lot for education and religion. "One has tried to do that consciously or unconsciously. I was also encouraged to be my own person," says Kumar Mangalam.

Having had the opportunity to work with his father, Aditya Birla's influence was a large one. "Anything that I've learnt in work has been from him. Seeing him in action, just absorbing from him. The way he was with people, the way he dealt with situations, the level of personal commitment," says Birla. In fact, he remembers a time in Baltimore, a couple of months before his father passed away. As his father was in a lot of pain, he was given drugs that had a sedative effect on him, and each time the effect would wear off his father would be signing papers. "That kind of commitment can come only from deep within," he adds.

Most in the group agree that Birla has the good balance of a great leader. "You can change a man's capability. I can change capability by training and motivating, but changing an attitude from achieving an also-ran kind of performance to a cutting-edge performance? That's leadership of very high kind," says Debu Bhattacharya, MD of Hindalco, and director in charge of Indal.

Birla's quiet confidence, and his ability to remain unruffled, his childlike innocence ­ he doesn't pretend to be a know-all chairman, ­never out to impress anyone, and his reflective nature are qualities that are admired by senior Executives from the old guard and the new. Seeing the concern and care for people that Birla demonstrates, it is something most want to inculcate

According to Bhattacharya, "Mr Birla comes across as a man of great generosity, almost to a fault. It is a great quality I find in a manager. As a leader I've never seen a leader with so much empathy. And that empathy is not playing to the gallery, it is genuine. That is one thing you see through over a period of time." Even Neerja agrees with his knack for dealing with people. "His ability to handle people and their emotions is a major positive and has helped him through a lot of things," she says. "He's inspiring in a very understated way," adds Bhattacharya.

Corporate HR head Santrupt Misra points out, "He has a soft personality, with a strong will power inside him." Says grandfather B.K. Birla, "Despite all the power he has, he is humble to all of us and to his own staff."

In fact, as a leader, Birla's biggest strength is not only his people skills, but also his affinity to separate the chaff from the grain, and his ability to reduce very complicated issues to a simplified form, attacking the core, an ability he has demonstrated time and again. "Let's take an acquisition case, where we are looking at various things. He can cut out all the accounting jargon, he goes to the business core, and he can say therefore it looks attractive, and therefore the strategic value. He doesn't try to impose his authority on making a decision. He brings in a perspective," says Bhattacharya.

In the early days Birla had more of a mid-term agenda for the group. Today, with a long-term perspective, he comes across as a visionary. "One thing my father used to always say is that you should always have a view of the long term, and no shortcuts. That's always stuck with me," he says.

The evolution of the group started in 1996. What Birla has been able to do is orchestrate a team by both acquiring new skills from outside, and building on the enormous strengths the group earlier possessed.

The first visible signs of the evolution were the launch of a group identity ­; the Aditya Birla group with the rising sun logo. "I felt we needed something to bond us. My father would never have named it the Aditya Birla group after himself. For me it seemed the most natural thing to do," says Birla. The group identity served like glue to stick people together. And from a business point of view it made sense to have a group identity, to which people could relate despite dealings with any of a number of separate companies, all falling under a broad umbrella of the Aditya Birla group. "From the investors' point of view, from that of the general public, even of the employees, they felt like they belonged to a much larger entity which was beyond their own profit centre or unit, or business or company," says Birla.

However, in the eight years that he has been at the helm, turnover has increased fourfold from Rs 7,200 crore in 1995 to Rs 27,OOO crore. Adversity brings the best out of Birla. According to Bhattacharya, "The metamorphosis of the group, which had a history of 60 years, and to change it from just one of the industry houses to a cutting-edge one in four, five years is perhaps a great challenge. First, to conceive this; second, to embark on this; and third, to succeed ­; that's a great achievement." According to DSP Merrm Lynch's Chandra, "The most objective statement of Kumar's achievements is the fact that nearly all group companies have grown both top and bottomline strongly despite continuously falling tariffs over the last eight years. And the very fact that it the same media that virtually wrote him off when he took over have recognised him so strongly is an indication of his achievements in a short period of time."

One of Birla's main achievements is what is now very well known, the retirement policy.Though it was something that was absolutely needed to be done, it also changed the face of the group. Though the retirement policy was put in place in 2001, Birla took a year to think about actually implementing it. "In the end I came to the conclusion that even though you have to take a tough decision, it is for the benefit of the company," he says. "I think it's been one of the most important decisions I've had to make. I think any decision that directly impacts people's life becomes a very difficult decision to make, because you feel responsible. And when you've grown up with this trusteeship concept, then all the more. And especially when something that is a stark departure from what the group has been known to be like in the past from within. The intent was just to make sure we have all the right people," he adds. Today the group has a good mix of the old and the new. According to Chandra, "Kumar has focused hard on growth of management talent and deepening the decision-making processes at the senior level. He recognises that taking the group to the next level will require a further impetus in that direction."

For the amount of change the group was going through, Birla managed to attract some of the best in the field. In fact, recently a business magazine rated it among the Top 20 employers in Asia. Misra, who joined the group 7 1/2 years ago from Hindustan Lever (HLL), says: "There was something about his qualities, about his inquiring nature, and need to know more, that I got the feeling he was committed."

Bhattacharya, who also joined the group from HLL, adds: "He appeared to me to be exceptionally appreciative of issues. He was very humane. He never gave the impression of being the scion of the Birla family. It won't be an exaggeration to say that I joined this group because of Mr Birla. Because for somebody who is from a highly respected MNC in the country, going to an Indian business house, I had a lot of reservations, and so had many of my colleagues. My reservation came from that perception [of the group]. I didn't know anything other than that. I was so overawed with his simplicity, his genuineness, and his ability to explain simple things without trying to sell the job. The worst thing when you are looking for a job is when the company is trying to sell the job. So I found this extremely attractive, and because of him I joined. If I had to take that decision all over again I'd do the same."

Another achievement was to put systems in place, such as the Birla Management Centre (BMC), the apex body of the group. Though it did loosely exist, Birla strengthened it by adding functions like communications, HRD, legal, and finance, spearheaded by experts in their own fields. So whenever there is a new project, function heads have to be approached directly and simultaneously, as Birla approves the project only after it is approved at the BMC level. Bharat Singh, director of corporate strategy and business development, says: "As we built each function it became clear that here was someone who was dreaming of meeting the challenges of the global marketplace. As the pillars were added, they made the foundation strong. He didn't look at others [to benchmark], so in the corporate office each function has a distinctive and clear role," he says. "He's getting expert advice for each line. That makes it much easier, and the quality of decisions is much better," says Bagrodia.

Having had the advantage of training under his father for seven years, Birla also implemented review meetings similar to the ones he used to sit in on with his father. "He picked up that style from A.V. Birla," says Bagrodia. "Because of his CA and MBA background he has adopted or improved the systems," he adds. A major change is that while Aditya Birla loved detail, Kumar Mangalam leaves the day-to-day details to his business directors and unit heads. He is consulted on group policy and HRD.

The stereotype is that when a new CEO steps in, he announces new projects. However, with Birla, he set about cutting back projects. Though some of these were implemented by G.D. Birla, Kumar Mangalam kept business completely aloof from emotions. Clearly profitability was what mattered. 'All in all, the group divested the paper and pulp project, the PTA paraxylene project, MRPL, the fibre-glass project, and the steel project.

These were at various stages of consideration. The idea was to close lossmaking units. Other units Birla divested from the group include the seawater magnesia plant, Kerala Spinners, and the weaving division of Grasim Gwalior. "We thought we were much better off consolidating what we had, than getting more diverse at that point. Sometimes a decision not to go ahead has a huge positive impact, which you can't really write off, because you didn't go ahead. They would have distracted us from our focus areas in terms of management time," says Birla.

According to Shailendra Jain, director of the BMC and global head for the viscose staple fibre (VSF) business, Birla has kept the continuity of the core values of the group and also improved on them. "He removed the emotional bondages by changing the business portfolios, but without undermining their value."

An inspiration
" I feel rather inadequate to comment on someone who has professionally achieved such high ideals which most of us in that age bracket can only aspire to. Taking over a very successful business empire from his father, and taking success to new levels which very few have achieved, is like creating business history which only veterans in the business field have a right to comment on. Kumar has set new goals and ideals of success and achievement that can be only achieved by commitment, determination, and his exceptional abilities to be a visionary. I feel more comfortable to talk about him personally because it's more at that level that I have interacted with him The warmth and affection of his interaction with me have often made him feel more like an older brother rather than a distant cousin. His unassuming nature and levelheadedness, I would say, are outstanding qualities he has managed to maintain despite him achieving tremendous success.

"In totality Kumar is an inspiration whose success story should continue to inspire even the future generation."
— Yashovardhan Birla

In the case of MRPL, a joint venture with public-sector Hindustan Petroleum, it had become very clear that the partnership structure wasn't working, and that it wasn't being run the way a corporation in a highly competitive industry should be run. It was also clear that the equity value had eroded substantially. "It was a great asset which was just not happening, because of the way the partnership was structured. We were running systems, rather than running a company. We took a call to get out, and we took a very large writedown. It's not a decision that one would have made without exploring all the options. It was clearly the last resort," says Birla.

"There was a great determination to cut off debt," says group Executive president and CFO D.D. Rathi. "When you want to acquire, you should learn to divest."

A lot of financial restructuring has taken place at group companies Indian Rayon and Grasim. The latter's business portfolio comprised cement, VSF, textiles, chemicals, sponge iron, and trading activities. Today Grasim is already the largest manufacturer of VSF worldwide with 24 per cent share of the world market. By 2010 Birla wants the company to have a 40 per cent share of the world market. A tough call for a business that is not growing globally.

When he stepped in in 1995, it was not clear that the group would become one of the larger players in the cement industry. Obviously, Birla saw the inherent capabilities of his company and started growing the cement business. For one, Indian Rayon's cement division was demerged from the company, and in turn merged with Grasim. In 1998 two more cement companies ­ Dharni Cement and Digvijay Cement ­; were added through acquisitions. Again, the company's cement business is poised for a quantum jump once the Larsen &; Toubro cement business is added to its fold by the middle of next year, subject to all the processes going through. With a total capacity of 31 million tonnes (15 Mtpy at present + 16 Mtpy from L&T), the Birla cement business will be the largest in the country, and the seventh-largest in the world. "Today Grasim is a cement and fibre company. And investors are happy that it is not competing with a group.

With this, group flag-ship Hindalco Industries became one of the largest aluminium companies in the Asian region. The combined entity has a metal capacity of 1.15 Mt, and aluminium capacity of 460,000 tonnes per year.

To make it a stronger player in the fertiliser industry, the copper business from Indo Gulf was demerged into Birla Copper. Smelter capacity has been increased from 100,000 to lain: "Birla believed we were better off consolidating than getting more diverse" company," says Rathi. Adds Chandra, "One of his biggest achievements has been to address the issue of scale and synergies across the group. From being a mid-tier player across companies in the cement and nonferrous metals space, Birla has taken the group into domestic leadership in both, and to being a player that is being watched carefully by global majors."

Also, cross-holdings between Grasim, Indian Rayon, and Hindalco were freed. In fact, Hindalco divested its stake in Indo Gulf Fertilisers through the open market. Even in Hindalco, it was not clear that the company could be a leader in aluminium and copper. Again Birla spotted the opportunity and acquired Alcan's 54.6 per cent stake in Indian Aluminium (Indal) for Rs l,008 crore in March 2000. With this, group flagship Hindalco Industries became one of the largest aluminium companies in the Asian region. The combined entity has a metal capacity of 1.5 Mt, and aluminium capacity of 460,000 tonnes per year.

To make a stronger player in the fertiliser industry, the copper business from Indo Gulf was demerged into Birla Copper. Smelter capacity has been increased from 100,000 to 150,000 tpy, Acquisitions of two copper mines in Australia earlier this year have made Birla Copper an integrated copper company. Indo Gulf has been converted into a pure fertiliser company.

Indian Rayon is the largest producer of insulators in the country. Its insulator business has been demerged and spun off into a joint venture with Japanese company NGK Insulators. This move was primarily to sustain the group's leadership position in insulators and grow it.

In VSF, nonferrous metals, and cement, Birla's ambition is to be a global player. In other businesses, aspirations are to be either a regional player or a national player. Two main issues that give credence to this thought are, one, economic constraints, and secondly, in terms of managing time, one can't have so much of bandwidth. In most of the businesses the group is in the top three slots. In aluminium, Hindalco is already the largest, lowest-cost manufacturer in Asia. In carbon black it is second only to Philips Carbon in the Indian market. On a global scale it ranks number four. In the palm oil business it already boasts the world's largest single-location refinery.

Birla's people skills can be seen even in the acquisitions. In all the acquisitions ­; L&T cement, Indal, Madura Garments, TransWorks, and even the recently acquired copper mines in Australia ­ he has made no management or system changes. In fact, video messages are sent out to the acquired companies, welcoming them to the group. "The objective is to build the business," says Singh. "If all systems are alright there is no need to disturb them," he adds.

Birla's appointment to Sebi's committee on corporate governance was a feather in his cap. The learning experience was transferred to the group. A code for insider trading was set up within the group. A code of conduct for employees ­; comprising a preamble, two pages of principles, and 15 pages of explanation ­; spells out the values and ethics of the group was formulated. This is signed by each employee. Some of the principles of the code include integrity, giving proper feedback, no paying bribes to or taking kickbacks from anyone, no accepting gifts, how to be a good corporate citizen, responsibilty to the government, etc. If someone does receive a gift, there is a format of how to refuse the gift as well. Any sign of corruption by employees is treated with a swift removal, irrespective of the level of the person.

An election fund was also set up. This was necessary in the group's context. In fact, according to the rules set here, no money is paid to any political party. All payments to parties and individuals are by cheque.

People both within the group and outside view Birla as a visionary. "Kumar undoubtedly is a visionary. On many instances, I have seen him take decisions of humungous proportions, irrespective of their being popular or unpopular. The cement consolidation story in this industry can significantly be attributed to him, as can the growth of the nonferrous sector and international moves by Indian manufacturing companies," says Chandra.

While Birla has his father's passion for work, they are two different personalities. While his father was known to be aggressive, Birla has his own quiet way of letting people know that he is either pleased with their work or not. For instance, if a project has been successfully completed, he sends notes to each team member informing them of how pleased he is with their effort.

Notes aren't the only way appreciation is showed. Internal awards have been instituted. The Aditya Birla award is given to teams or units. The Chairman's Award is given to individual star performers. "It's very important for people who are doing well to be told that they are doing well. And to be told by the organisation that we appreciate what they are doing and that they are on the right track. Performance or grades of discussion are not enough. I think they need larger recognition of the fact that they are star performers," says Birla. It's to do with recognising merit and motivation. "I've seen people who have been great performers because of which they've got the award. If you just see the jump in their performance after they've received the award, it makes it very obvious that people require public recognition. It also sends a signal to the rest of the organisation of the kind of people who are considered achievers in this group," he adds.

The Sun Awards are also part of the Aditya Birla award. The idea here is to share information between different units. It's a way of moving knowledge around. "There's so much outstanding work happening in different units, where a team, because of sheer energy and enthusiasm, has gone on to achieve something outstanding. There has to be some way of recognising it, archiving and showcasing it, so that other people can learn from it," says Birla.

This year was the first that the group instituted inter-unit case studies. Here, units or groups write case studies on their achievements. The purpose here is twofold ­; to recognise good work, and to archive achievements. In three months over 100 entries have been submitted. The case studies are then put on the group's intranet for internal access. Birla considers these to be his props, a way to reach out to more people and bring people from different parts of the group together. "It gives them a sense of belonging to a larger entity. It also gives them a chance to know the group," says Birla.

Today family is an important quotient in' his life. After the first four years, on a holiday with wife Neerja and daughter Ananyashree, "I felt like a complete stranger because they had a very good bonding. And for my daughter, I was almost like a stranger. I felt like I had sort of gatecrashed into someone else's family. After that I decided that wasn't something I was happy about. I have tried, at least on occasions, to be around. But nowhere close to the kind of time I'd like to spend with them, or I should be spending with them," says Birla. An effort is being made here. In fact, when a few months back his children were participating in a play, Birla left his office early for those eight days and made it a point to attend each show. Like any other parent, Birla also attends his children's parent-teacher association meetings. And Sundays are for the family. "If there is a complete man, the model needs to be changed on that ad. I believe he is a complete man. He doesn't do it for the effect," says Bhattacharya.

On the community side, education plays an important role. The group is setting up an international school near Bangalore. The term begins in June 2004. Birla is quite hands-on with this project. In fact, he even interviewed all the teachers for the school. "This is his pet project at this point in time," says Neerja. "And he's doing it shauk se." Birla also makes sure that the quality of education is high at all the 33 schools the group oversees at its plants. He makes it a point to address the principals' conference every year.

For the long term, the group has to make a quantum leap. Over the next decade Birla wants his group to catapult into the league of leading Fortune 500 companies in every way that counts. This, by the time Birla is 46 years of age.

A perceptible change over the last four years is the enormous excitement Birla has generated among all in the group. It's an excitement to achieve excellence, and to strive for it. With the destination clearly charted out, the resources by and large in place, guidelines clearly delineated, Birla is set to take the group places.

According to Jain, Birla has a dream, the glimpses of which come out when he talks. His vision is more than one for business ­ it has a nationalistic element attached. "He has derived this quality from his great-grandfather. He is not only looking towards business, but also at the country. Coupled with this he has the killer instinct of Adityababu. It's a formidable combination."