The Sanmar Group Corporate Board added two new members - M K Sharma and V Thyagarajan - who bring in their extremely diverse experience to add an outside-in perspective to Sanmar’s strategic think-tank. They talk to Matrix on a host of topics, peppered with their past experience.
His 38-year career-span starting at Glaxo is as colourful as a United Colours of Benetton advertisement. The pendulum of his assignments swung from one division to another, one part of the world to another, almost as if Stanford professor and writer Robert Sutton’s ‘Weird Ideas that Work (11 ½ practices for promoting, managing and sustaining innovation) was being put to test! Life to the 33-year young Glaxoite was calm until he was plucked out of nowhere and packed off to study the Glaxo operations in Spain. The spunky young man knew the consumer product divisions, sales, marketing and product management in the pharmaceutical business in Glaxo, India - but he knew no Spanish. 8 lessons later, young Thyagarajan with a smattering of Spanish had to understand the dynamics of the Spanish operations, also laced with hostilities from senior management personnel, and present his value additions. He went on to accomplish five such assignments. Was it a maverick’s perspective that he brought in or was it an insider’s perspective coming from the outside? Either way, ‘VT’ left his stamp across the Glaxo operations in Europe. The launch of the drug Zantac in Middle East, Africa and Eastern Europe (Zantac was the world’s top selling medicine by 1986), change management during the SmithKline merger, the restructuring at the time of the Glaxo-Wellcome merger were some of the other landmark initiatives that he landed with a perfect ten in his career bar-hop. ‘In order to innovate, forget past successes’ suggests Sutton. Every project VT undertook, he had to unlearn his learnings and learn afresh. This is the unique profile of Venkatraman Thyagarajan, Independent Director at The Sanmar Group Corporate Board.
Having been tossed out of a multi-cultural cauldron, your professional moorings were shaped from a ring side view of different leadership styles across the globe. What does it take to be a global leader?
One has to have a global mindset – it is all about going beyond your normal way of thinking to look at things from a different perspective. It is about understanding and being tolerant to diverse cultures and people, being open and receptive to vagaries in people. Most of all it is listening hard, accepting people as they are and respecting them for whatever they are. It is also important to have a natural curiosity and interest in things around you, an awareness of what is happening globally.
What about leadership?
For a manager to be a leader, he should have character. When things are stacked up against a person, someone with a sense of character will do the right thing and emerge a leader. A leader will help people achieve their potential. It is all about having a fine balance of hands on-hands off approach according to the context. It is imperative however, that the leader knows and understands the business thoroughly; there is no getting away from it.
Managing change at the time of the Glaxo-Wellcome Group merger.
At that time, Glaxo was a stodgy, conservative, behemoth on a burning platform. It had to change, people totally accepted that. This was the change enabler.
I grew up with Glaxo and I knew what had to change. As Director of South Asia,
I was overseeing the Indian operations directly.
As a lead architect for change, I had a core group of change agents to work with me. We downsized from nine factories to two. The social context had to be kept in mind and people had to be treated with fairness, dignity and respect. The central change point was the field orientation towards profitability. Sales people had to be oriented towards thinking commercially, stop promotion of non-viable products and so on. Over a period of time, the demographics of the company changed dramatically. The organisation had younger people, became less hierarchical, HR policies were changed; I’m deeply satisfied that the company I grew up with changed dramatically and it was in pretty good shape when I left it to become Regional Director, Glaxo-SmithKline Asia Pacific.
On risk management
Risks are inherent in any business. What is important is to identify plans to mitigate risks and advise the CEOs accordingly. The counsel from independent directors adds value as their experience in other industries will provide a new perspective. When a CEO is steeped in his own business, he may not question himself. The independent directors’ collective and individual intellect throws new light on the problem by raising the right questions. Not just for risk management, even for a well-run company, this is required to raise the bar year on year.
What does independence signify in ‘independent directors’?
Boards of companies, globally, are composed of whole time and independent directors. Earlier, it used to be a clubby thing. The CEO’s well wishers and acquaintances are roped in and there would be an unwritten pact that the apple cart shall not be upset. Today things are different. Shareholders’ expectations are high. It goes beyond conforming to governance practices and extends to protecting shareholders’ and investors’ rights. So in today’s context, independence means giving advice which is right for the company however unpalatable it may be. Independence means bringing to bear one’s cumulative lessons learnt to help the company perform better, asking uncomfortable questions without being swayed by personal relations. That is the fine balance – to challenge agreeably.
For India Inc ‘internationally incorporated’, what should change in current corporate governance practices?
In the last ten years, India has brought up to speed its operational practices in line with international standards of quality to compete globally. Similarly, India needs to raise its sights to be more aligned to international parameters in corporate governance and not just to best practices in the Indian context. To name a few parameters -
Transparency around accounting standards - Increasingly there is a convergence of standards. The US GAAP is of late, adopting IFRS standards. Indian accounting standards should also facilitate this convergence.
Transparency in related party transactions - treating all shareholders fairly and not circumventing the rules.
Sustainable development - The concept of sustainability is changing. Good global companies are moving towards sustainable practices including environmentally sustainable operations not because it is mandated but because it is the right thing to do.
Having good board practices is part of the journey towards best governance practices. Many companies are at different milestones on this path. Progressing on this journey requires enlightened thinking. Sanmar is one such group of companies. It has a Group Corporate Board even when it doesn’t have to.
When it comes to civil servants, media environment and community at large, I would say it has to begin with a clear articulation of CSR (corporate social responsibility) philosophy of the group and communicating it.
What are the key ingredients in mergers and acquisitions?
Acquisitions are different from mergers. When a company acquires another, the acquiree’s writ runs and most often the culture that dominates is that of the acquiring company. At the same time, when you acquire a company you are also acquiring capabilities. Learning from the other company should happen and the acquiree has to be flexible enough to adapt the change and send out the signals of its openness.
In both mergers and acquisitions, the people aspect is paramount. The right people should be on board irrespective of their lineage to any company. There also has to be a clear vision, a key driver behind mergers and acquisition and this has to be communicated to people. Communication is extremely important - internal and external, formal and informal, because people’s lives are impacted and their anxiety has to be eased out.
‘MNC’ is a bad word among NGOs and large multinationals are stereotyped to be focused on ‘money not community’. How did you approach this?
The skepticism and antagonistic mindsets are characteristic of both sides. MNCs also consider NGOs as misguided activists. At Glaxo, we engaged with NGOs, sat across the table and discussed. Initially we were also defensive.
R & D costs $ 800 million. How were we to recover this cost, leave alone profit? Take the case of drugs for malaria. Our business opportunities for the product lay in countries that could not afford the drug. So we had to change our business model, work with governments and NGOs and share the burden. With HIV/ Aids drugs, the industry learned a huge lesson. The drug costs were phenomenal, but millions were dying. With a social issue such as this industry couldn’t throw up its hands and walk away. Public-private partnerships are the way out. After all NGOs are part of the society and society is telling us something. We have to find common ground and use collective intellect to resolve issues. NGOs should also realise that not all corporates and MNCs are ‘bad’. The change in perception will happen only if industry engages with NGOs and communicates to society.
In your second coming, what is the role you wish to play?
I hope to be more of an advisor than a doer. I will use my accumulated experience to act as a senior level partner to executives, a sounding board to them. I have been a small cog in the great wheel of the pharmaceutical industry for 38 years. Being in a leadership position to me is not just about the bottom line. My measure of success lies in how I have impacted people so that they become better humans, better managers, and better leaders with character.
I would also love to give back to society, work with NGOs and provide them with leadership advice.
1998 - SmithKline Beecham and the World Health Organisation announce a collaboration to eliminate lymphatic filariasis (elephantiasis) by the year 2020.
1999 - Glaxo’s HIV/ AIDS campaign in Press won the first prize for the best “Social Responsibility Communication”, awarded by the Association of Business Communicators of India (ABCI).
The Positive People Campaign entitled ‘Real Friendships Don’t Die with HIV’ also won the Global Award from the New York Festivals.
2007 - Launch of the Oxfam Report, a report that assessed the contribution by pharmaceutical companies for increasing access to medicines since 2002. Glaxo was a major contributor to this report.
M K Sharma, has worn numerous corporate hats in his long career, almost obscuring his own persona. But as he speaks with a flamboyant flourish of words, his lawyer ‘instincts’ surface. Talking to Matrix, he throws light on matters springing from his 33-odd years of corporate wizardry, some of it gleaned at Hindustan Unilever Limited, through various positions he held, including-board membership. He has been one of the lead members of the core teams in Levers which managed 14 mergers, 5 acquisitions, 5 joint ventures and 15 disposals. He is presently on the board of about six companies such as ICICI Bank, ICICI Lombard, Mitsubishi Finance, Bata India, Fulford India, etc., and The Sanmar Group Corporate Board. In his second innings, post-retirement from Hindustan Unilever, he consults on corporate laws and regulatory matters.
Trainee turned legal manager and upwards, you have seen HR, Corporate Affairs, Real Estate, M & As, divestments and more.
I dabbled with HR in my younger days. I am passionate about employment laws, IR issues, collective bargaining process and corporate litigations. I carried out most functions wearing my larger corporate hat that tapped into my understanding of the business environment, presentation and negotiating skills. At Levers, while we had an uninterrupted record of bilateralism and settlements with our work force at most of our units, at a select few we also had a long trail of litigations!
What is the Houdini’s key that breaks a deadlock? You must be someone who thinks from the other person’s shoes.
Absolutely. Negotiations can never be ‘My way or highway.’ I believe, to be successful in negotiations, you have to look at things from the counter party perspective and then put up a proposition which he or she would be comfortable with.
To negotiate successfully it is imperative to have a clear idea on what is critical and non-negotiable from your own perspective, what are the issues you are willing to yield or shield or make concessions on and put it across upfront. Consensus is the key. Once you know what is non-negotiable from either side, the focus areas of the deadlock to be worked upon are clear and you can look for a win-win solution. In business nothing works except a win-win solution whether in IR, commercial dealings or joint ventures – anything else would reflect the short-term compulsions of one of the parties and this could pose serious implementation challenges. Simple solutions albeit more expensive, should be preferred over complex and structural solutions.
Talking of joint ventures, in the early days JVs with Indian companies were more regulatory led? In present times, what makes for successful JVs?
Historically the Indian joint venture partners saw their role as managing Delhi and inputs for success in the business came from the overseas partner. Today, understanding of the Indian market, the Indian distribution system, bringing in hardcore manufacturing skills and competencies in the Indian environment, etc., are far more relevant. Lever has a 50:50 JV with Kimberley Clarke Corporation of the US. They provided the technology for Femcare and childcare products from the US and we put together our expertise in the distribution process, and the synergies in terms of buying advertisement space apart from seconding quality managerial resources to man the JV. Being an FMCG company we had access to advertisement space at significantly more competitive rates than anybody else in India. That was seen as a huge benefit in these nascent product categories where consumer communication was key to building the market. But technology and branding were clearly the forte of the overseas partner. We positioned ourselves as a substitute Indian entrepreneur and it worked pretty well.
Hindustan Lever, though an MNC, functioned as a substitute Indian organisation for Unilever.
In the larger Indian environment, Hindustan Unilever has always been considered more an Indian company than an MNC. Partly to do with the name and partly to do with the management culture and the belief that what is good for India is good for Hindustan Unilever.
In the mid fifties and mid sixties, Unilever, even in the absence of a legal requirement, made issue of capital to Indian investors; this enabled the Company to have local listing with concomitant accountability for performance.
This increased further, with the dilution of Unilever’s share holdings from close to 85 % to 51 % to comply with FERA regulations. Post liberalisation, one major investor concern was that given our size we were not as nimble-footed as our competitors to adapt to market changes. Competition was in the form of large MNCs like Colgate, Proctors, Henkel and large Indian corporate like Godrej, Marico, Tata Tea, etc., on one side and low cost manufacturers like Nirma, Ghadi, Cavin Care, etc., on the other. We responded well to these changes in the environment and people said, ‘the elephant has learned to dance!’ We came out with a low cost detergent, ‘Wheel’. We also pioneered the introduction of low unit price packs of shampoos, skin creams, detergent powders, to grow the market with easy affordability. We introduced new products specific to the Indian market that became successful internationally. Fair & Lovely, a cosmetic product is a local organic product contributed by India and is globally marketed by Unilever today. Traditionally, in the food industry, Unilever had instant foods like soups, etc., In India, we entered the staples business with Annapoorna brand wheat flour and salt. We believed that in India if you had to succeed you had to be in the centre of the plate of the consumer. Today, the Annapoorna brand is marketed in many countries and is a vibrant brand in Africa and the Middle East. These are some of the value additions that the Indian operations brought to the global Unilever.
What else did the MNC do to ‘Indianise’ its operations here?
The most important step was to build a cadre of talented Indian managers to man its operations in India from the pre-Independence days. The mid fifties saw the introduction of Management Trainee Scheme to develop local talent. In the sixties, the Company started exporting talent to Unilever and by 1980, an Indian joined the Board of Unilever.
Hindustan Unilever was very responsive to the government’s call for action. When the government wanted import substitution, we responded. When the government wanted industries to go into no-industry districts we made those investments in the no-industry districts in the back and beyond. In response to the call for revival of sick units, we came to the forefront, took over a large number of sick units and revived them. We did a lot of things clearly led by national priorities and not necessarily dictated by our headquarters in London. Levers board became an Indian board with only one or two expatriate directors - very unusual in the 70s. So much so that the media, politicians and regulators saw us as an Indian company. This ethos was also reflected in the way we partnered local trade - both at the back end to secure supplies of inputs as also at the front end, for sales and distribution.
Yet, even good Samaritan corporates continue to be harassed by litigation, bureaucracy and the likes. What has changed from the Raj, the license Raj, liberalisation until globalisation?
Only change that has happened is earlier directives were from the notional perspectives of politicians, bureaucrats and regulators as to what was good for the people and the country, often overshadowing economic and commercial logic.
Now it is replaced by activism of the NGOs, who are driving litigation against large corporates. Most often the public interest litigation is becoming a tool for green mailing, for harassments, for ulterior motives at times led by competition, delaying and increasing project costs. As for government intervention, in the 70s and 80s, Delhi played a great role influencing business growth and prosperity. Today, whether it is land acquisition, environmental clearance, employment of locals or location of plant- there is a power shift in favour of States. It makes the task of national companies more challenging. However, there is now a healthy competition amongst States to attract investment. This bodes well for growth and development on the whole, but could pose a challenge in terms of a balanced regional growth in India.
Does this shift make things any easier?
In a way it’s easy depending on how you tilt the balance of power and value addition that you bring, by creating a competitive environment. If you have a Rs 500-crore investment to make, you have a value proposition for the state and you can choose the state where you are most welcome. However if your investment is committed and restricted to a particular state or location e.g. next to a mine to be leased/licensed by Government, then they have a stranglehold on you. The stance has to be taken before making the investment decision and announcing it to the public.
You have managed investor relations at Lever and the corporate communication functions. What is the framework for investor and external stakeholder communication?
Communication to investors is more about what you are doing, how you are doing, being more transparent about governance norms and standards, etc., and holding yourself accountable for performance both, in an absolute sense for the Company and in a relative sense vis-à-vis competition.
What parameters should define a CSR policy?
A CSR policy should clearly represent what the organisation stands for and not the personal belief of some senior managerial personnel. You have to identify the negative elements of your business and initiate steps to counter it. If you are drawing too much water, how would you replenish it? If you are using land, how would you make the rest of the land doubly productive? How would you provide alternative sources of livelihood to people who get displaced as a result of industrial activities? How can the corporate help in dealing with issues such as global warming etc. CSR initiatives should be partly restitution/partly rehabilitation and focused around the organisation’s material issues. The other aspect is to build CSR taking note of needs of the society and community which can be linked with your company’s business. At Levers 90% of our product’s purchase decisions are made by women. Hence women are important stakeholders for us. We started Project Shakti to empower rural women and provide them with economic independence. Being in the health and hygiene business we ran a Lifebuoy Swasthya Chetna campaign to create awareness about the health benefits of hand wash to reduce incidence of disease.
Most often CSR initiatives and corporate reputation initiatives suffer if they are not rooted in corporate ethos but based on the hobby horses of the senior executives. 50% of CSR budgets are wasted in India by most corporates. PR related expenditure and CSR budgets should be segregated. Bulk of the budgets should be channelised only to designated initiatives so that there is responsibility, accountability and measurement against objectives.
To ensure credibility, CSR initiatives must be put into practice over a period of time before you communicate it.
Sanmar is looking at a 3-fold growth in 3 years. What is the need of the hour?
The growth path Sanmar has chosen is indeed remarkable in many aspects. In seeking to become a truly global organisation, it is exposed to incremental risks –
1. High leverage to finance the growth and a concomitant requirement ensuring timely project execution and revenue generation from these projects to meet the financial commitments.
2. Political and environmental risks in new geographies which the Group may not understand as well as it does in the local geography.
3. Integration of a diverse workforce in terms of retaining the core values of the Group which has contributed to its success so far while being open to imbibing best practices that the newly integrated organisations have to offer.
4. Due to the pan-global nature of operations, systems and processes should be made more robust and tweaked to adapt to the new global context of its operations.
5. Finally, no corporate can ignore the risk or challenge in the context of war for talent – both recruitment and retention!
The Group will need to constantly evaluate and examine whether certain businesses which it currently owns, have better growth opportunities (hence better prospects for employees, suppliers and customers) with someone else who can derive and deliver better value, and find appropriate homes for such businesses/ business units. This will generate financial resources for the Group to fuel its growth in its chosen categories while affording the business segment better opportunities for growth and rewards, in a new home.
A simple risk minimisation approach for an organisation on a high growth trajectory is one in which growth is achieved in steps rather than in a linear fashion. In a growth phase, the primary focus is on project execution with focus being on asset creation at optimal cost and making these productive in the shortest possible time. In order to ensure success, there tends to be cost and resource over-runs. This does lead to certain temporary weaknesses and inefficiencies. If the growth phase is intercepted with a consolidation phase, these inefficiencies and weaknesses could be corrected.
Looking back at your career, what would you consider as your single greatest achievement?
Simply put, serving the organisation with a clean conscience. A corporate lawyer has a business development/enabling role and a gate-keeping role. I believe that I struck the right balance in performing these two roles. My greatest achievement during my career with HUL as a Corporate Lawyer, was that every single working day, I looked forward to going to work and thoroughly enjoyed what I did – whether as a gate-keeper or as a business enabler.