The king's gambit

Corporate Dossier
The Economic Times
27 May 2005

1995: During his first-ever interview to the media, the young Kumar Mangalam had asked Corporate Dossier (CD), "Why is everyone running me down? I haven't had a chance to do anything yet." The shy, mint-fresh London Business School graduate, was just about taking on his father's mantle in the dark-panelled board room on the fifth floor of Industry House in South Mumbai and everybody was busy writing the young Birla off.

2005: The Birla sitting in his fifth floor corner room at the Hafeez Contractor-designed Aditya Birla House is altogether different. The faux leather sofas at the Industry House have given way to post-modern modular chairs. Raza and Hussain paintings have replaced ancestral portraits of venerable past Birlas.

1995: Amit Chandra, joint MD, DSP Merrill Lynch, a close associate of Birla recollects the initial years when most people, including the media, had completely written him off. Birla was struggling with a bunch of incomplete projects, a downturn in commodity cycles, a fast-changing business environment, and he had very limited experience in managing a company or a business let alone the complex conglomerate whose reins were thrust into his hands.

2005: Considering that Birla has been able to double the group's turnover from Rs 15,000 crore when he took over, there are few now who would think of writing him off. In the world of Indian business, this is the Birla. When the 38-year-old chairman of the Rs 30,000 crore conglomerate says: "We have legitimate reason to believe that as a group we can soon enter the Fortune 500 list," the world listens respectfully.

Kumar Mangalam Birla still comes across as somewhat shy, but oozes confidence. Completing 10 years can't be an excuse to celebrate, he argues. What can I say, you should ask other people, he tells CD. People within and outside the company who have worked closely with him, are in a better position to identify the changes. We have, we tell him. Then he settles back to think: "Well, it's a good occasion to actually do some retrospection," he admits ... and over a series of meetings, CD tags along as he travels into the past and looks into the future.

Inflection point. If you ask this CEO for a status report, that's where he thinks his group is now. "The focus has been on placing larger bets on fewer businesses. It's a portfolio issue and it's a much tighter portfolio today. We have taken hard decisions on exiting businesses, but I am glad we did. We are on a cleaner wicket now," says Birla.

It's a telling comment on his priorities and for Kumar Mangalam, any Birla story is about people. He just can't take his mind off people issues; this is one CEO who looks at himself and his group through people-focused glasses. For instance, what role does the 38-year-old chairman see himself playing in the future? Here's what some top brains in India Inc. think. Hemendra Kothari, chairman, DSP Merrill Lynch, says, "In 10 years Birla has emerged as a respected and mature leader. He's no longer seen as a new entrant and the AV Birla group is seen as a house that hasn't taken any short cuts to success." Therefore, some in the industry suggest that he should don a larger public role, more in the footsteps of GD Birla and emerge as a spokesperson for Indian business. Adds Chandra, "The group is almost on an auto-pilot and he can play an owner's role than a manager's role — from being a fire-fighter to a constructor." Ask Kumar Mangalam, and it's thanks, but no thanks. "My natural choice would be to work more on building the organisation. That (being the spokesperson for the industry) is not something that excites me. It's organisation-building that keeps me ticking."

Well, the organisation has already achieved a lot. It's among the global leaders in industries like viscose staple fibre, carbon black and insulators, is among the world's lowest cost aluminium producer and is Asia's largest producer of aluminium and cement. Its recent forays into cement, financial products, telecom and ITES have been successful in placing the group in a leadership position in the domestic market. The focus now is to further consolidate its geographical leadership in each of the industries it's present now. But having inherited an unwieldy conglomerate, the toughest challenge definitely was understanding each of the businesses from close quarters.

Arun Maira, then associated with Arthur D Little, met Birla for lunch in 1996, and remembers him asking questions on organisational learning even then. On Maira's return to the country in 2000, as the chairman of the Indian operations of Boston Consulting Group he would get to know Birla more closely. Maira recollects his personal interaction with Birla and says, "His questions have changed — what would be the new organisational capabilities, what would be his role and how to be an effective leader in order to grow and take the business forward. Now there's a sense of confidence and maturity. Earlier his questions recognised his innocence in his field." Yet, as Chandra points out, "What struck me was, he was absolutely unflappable. There was a sense of belief and purpose in his capabilities."

"The Birla genes were at work from day one," recollects Shailendra Jain, president, Grasim, and one of the few professionals who has worked with four generations of the Birlas. What changed under the younger Birla, however, was the expectations from the employees. Both G D Birla and A V Birla were more focused on relatively short-term goals, explains Jain, but the current chairman takes a long-term view and while he is less demanding in the short-term, in the long-term he is far more demanding. Jain adds, "Initially, he was trying to understand, now he is in complete command. Earlier he would ask, now he gives us the direction."

While hunting for mines in Australia, Debu Bhattacharya, MD, Hindalco, recalls that after three days of intense negotiations, a particular deal was dumped. In the meantime, due to locational constrains he hadn't been able to stay in touch with headquarters. When a hesitant Bhattacharya called up to convey that he had rejected the deal, Birla respected his decision and went on to add that he must have done the best thing. Reflects Bhattacharya, "Such an explicit support ensures that every decision I make, is merit-based and not on whether I will be able to muster his support. I don't have to look over my shoulder and check whether he liked it or not."

For Birla it was a reiteration of one of the crucial objectives he has — emerge as an employer of choice and the message he wants to send out is "if you are an intrapreneur, this is the place to work in."

Not surprisingly, the first move that Birla made was bringing in professionals who could face the grind he wanted the company to go through. Says Birla, "One of the things I got to know early that helped me know myself better was my own strengths and weaknesses. It was very important for me to get people who are much brighter than me, not just people who have more experience. That's what keeps me challenged." The next objective was institutionalising systems and processes and turning the high-potential managers he had brought in to become entrepreneurs in their own right.

But Birla himself points out, "Systems can add speed, but can also constrain innovation. There should be a framework in place that does not allow for ad-hocism, but systems should not be rigid." Senior managers at the group point out that within the peripheries of organisational context, heads of business have complete freedom to operate. Says Santrupt Misra, who heads the corporate human resources and information technology function of the group, "He always wanted to delegate, but you can't delegate without knowing the capability of the people. He took time to understand and is now clear about whom to delegate and how much." Adds Bhattacharya, "What excited me was his ability to delegate and yet be supportive when you need it".

In fact, there seems to be an overwhelming sense of ownership among employees. Every professional we meet at the group reiterates a common theme — we need to emerge as a leader in all the industries that the group is present in.

Every business has been categorised according to the geographical leadership roles these can play and the focus is very much on profitability and growth rather than on size or footprint. There have been setbacks, but Birla is willing to look beyond, "Getting into IT, at the time we did, may have turned out to be a bad decision. But the BPO operation is better poised to achieve leadership, and has made up for IT. But significant synergies exist, even in IT, and we haven't given up yet. In the BPO space we can look at a leadership role. It's close to a point of inflection and the need now is to scale it up once again."

Having set the priorities and having identified leaders for each of the businesses, what's his role going to be like from now onwards? Maira points out that there are three patterns of leadership characteristics that exist between the centre or the CEO and the different businesses that the group is present in. One is where the leader assumes the role of a portfolio manager who sets targets and exits businesses that don't achieve the target. Then there are hands-on leaders who check the accounts every day, every month. But there are a s;elect few CEOs who act as enablers in the business, by identifying the leaders in individual businesses and set goals, giving freedom through explicit decision-making rights and a set of values and principles based on which decisions are to be made. Explains Maira, "It's about moving from being tacit to being explicit. This is the journey Birla is on at the moment, a professional parenting role much like Jack Welch."

In fact, Welch is someone Birla looks up to. He says, "I have tracked Welch very closely. He c;reated a huge amount of value and was a truly transformational leader. He was able to communicate that through the phases of organisational life." The other person he closely follows is management guru Gary Hamel, who taught him at LBS. But about his role, Birla is clear how it's going to evolve. "My role has to be more and more strategic and have a less operational focus," he asserts.

It's time to leave the smaller details to the army of loyal lieutenants he has cultivated and focus on the big picture — storming into the Fortune 500 club.

The decade-long march

2005
Hindalco announces Rs. 25,000 crore investments across five projects

2004
Takeover of L&;T's cement division completed. UltraTech Cement launched Indal merges with Hindalco

2003
Liaoning Birla Carbon incorporated in China Acquires TransWorks and forays into BPO space Exits MRPL
Secures copper mines in Australia

2002
Landmark restructuring of Hindalco and Indo Gulf

2001
Grasim piles up over 10 per cent stake in L&;T Acquires PSI Data Systems

2000
Indian Rayon takes over Madura Garments Hindalco acquires Indal Birla Sun Life Insurance launched

1999
JV with Sun Life of Canada inked

1998
Pulp mill JV with Tembec Inc Cement business of Indian Rayon and Grasim consolidated into Grasim Copper entry with Indo Gulf's commissioning a copper smelter

1996
Group companies consolidated under the umbrella of the AV Birla Group

1995
Enters telecom with a JV with AT&;T Kumar Mangalam Birla takes over at the helm of the Aditya Birla Group