MANAGING Indian MNCs
How corporates are building systems to manage
operations in distant lands
WE ARE THERE TO LEARN THE CULTURE OF THAT
COUNTRY. WE SHOULD NOT EXPECT THEM TO LEARN INDIAN CULTURE
When Mahindra & Mahindra asked Mahindra USA (MUSA) to fall in
step with the Indian accounting year, it seemed like a reasonable enough
request. MUSA is a wholly owned subsidiary of the parent company, unlike
Mahindra China, an unlisted joint venture where it owns 51% or The Ssangyong
Motor Company in Korea, a listed company where it owns 72%. In China and Korea,
protocol requires the parent company to consult with the local management on
major decisions. But at MUSA, which makes standard Mahindra tractor models for
the US market, the Indian owner is the acknowledged boss. The CEO of MUSA
reports to the head of the tractor division at headquarters (HQ) and its CFO
reports to the CFO at HQ. MUSA's board meetings use video conferencing, with
Mahindra representatives attending from Mumbai.
So when it was decided that the American subsidiary should switch
its financial year to April-March, there were no questions asked. It turned out
to be a bad decision. For one thing, MUSA is longer in sync with the American
financial year. American market share data, for example, is for the
January-December year and this now has to be converted to April-March for
reporting to the parent company. But the problem actually goes deeper. Focusing
on the technicalities of financial reporting, the Mahindras sent out the wrong
signals, culturally. Lesson learnt, it now conducts itself with more
sensitivity. Says Pawan Goenka, executive director of Mahindra & Mahindra
and chairman, MUSA: “We are there to learn the culture of that country. We should
not expect them to will learn Indian culture. We certainly shouldn't force the
Indian way of working on them.“
That is why Godrej Consumer Products is careful not to call itself
a multi-national company (MNC) but an `emerging market multilocal company.' The
company's international operations are through acquisitions and it has gone all
out to retain local autonomy. In the initial phase, it had ring-fenced
international operations with a separate international business head and last
year, it switched to a cluster model. There are three clusters -Africa, Middle
East and Indonesia and Latin America and UK -and profit and loss responsibility
lies with the cluster heads, who take all business decisions. “We are clear
that we don't want to lose the heart and soul of the acquired company that made
it successful,“ says managing director Vivek Gambhir.
Omar Momin, EVP, M&A and business development, says the pace
of integration with the parent company needs to be decided by the subsidiary:
“Integration is led by the cluster head and the collaboration with HQ happens
more in areas like HR and finance to establish a common set of practices.“ It's
left up to the companies to decide when they want to change their name and
adopt the Godrej brand. In Argentina it happened after one year, in Indonesia
after four.
When it comes to multi-national operations, Indian corporates tend
to manage acquired companies very differently from wholly owned greenfield
subsidiaries. Take Birla Carbon of the Aditya Birla group. Till four years ago
it had subsidiaries in Thailand and Egypt, where Indian managers had a major
role to play. Then it acquired Columbian Chemicals, an American company with
operations in ten countries. Now CEO Santrupt Misra no longer talks of deputing
Indians to Egypt but moving talent across the globe from Brazil and Spain to
Thailand and Korea.“My talent is global,“ says Misra, who is also director,
group HR, Aditya Birla Management Corporation. “Half our top management team is
in Atlanta, half in Mumbai. We meet halfway in Europe.“
The American acquisition has turned Birla Carbon into the world's
largest producer of carbon black, but more importantly, it has been a lesson in
how to be a high grade MNC. “You learn to integrate, harmonise, let go. You
learn to execute locally and manage through technology,“ says Misra. Technology
is certainly playing a major role in turning Indian corporates into MNCs. When
Symphony acquired Impco Air Coolers in Mexico in 2009, it was a “leap of faith“
for chairman and managing director Achal Bakeri. He hadn't really thought
through how he would manage an operation so far away, where everybody spoke
Spanish. Bakeri flies to Mexico at least four times a year for five days at a
stretch, but his real means of managing the Mexican operation is Symphony's ERP
system. “We've aligned Impco's system to India so operations are perfectly
harmonised. It's a web based system with data stored in the cloud and can be
accessed anywhere. That makes it possible for us to quickly approve important
decisions taken in Mexico,“ he says.
When Bharat Forge acquired 140-year old German auto components
maker CDP in 2003, things weren't all smooth.“They were tense and wondered
whether we would shut them down and move operations to India. It took time to
build our reputation and trust,“ recalls Amit Kalyani, executive director,
Bharat Forge. To build trust, Bharat Forge decided to go with the talent it had
acquired and not send over Indian expats. Kalyani's experience has been that
businesses in developed economies are process driven to a point where it gets
in the way of adapting to a new business environment. “We are much more
intuition driven and while that helps, this is also where jugaad comes in. So
as long as you can weed that out, it is a good thing when it comes to managing
overseas,“ he says.
Be that as it may, systems are useful when one is managing
operations across vast distances, both in terms of geography and culture. Glenn
Saldanha, chairman & MD of Glenmark Pharmaceuticals, operates in a sector
dominated by big-time MNCs and he has worked with some of them. “The difference
between them and Indian companies lies in their systems. It takes time to
build, but I think we're getting there,“ he says.
Home growing leaders
With a research centre in Switzerland and manufacturing operations
in the US, Czech Republic and Brazil, Glenmark is now a full fledged MNC and it
has managed this growth organically, without acquisitions. One of the most
interesting features of the process is that it has grown global talent
internally. For example, its London based president for Europe and Emerging
Markets, Magdalena Tomaszewska, was once Glenmark's country manager for Poland.
Glenmark's chief scientific officer, Michael Buschle, looks after the R&D
centres in India as well as Switzerland. “If you're going to be a global
organisation, you have to behave as an equal opportunity employer,“ says
Saldanha. “We don't depute senior leaders to our units abroad as a matter of
policy. But we do send out managers at different levels for their career
development.“
Globally, MNCs have a matrix reporting structure where function
heads (HR, finance, procurement, legal) and business division heads report to
their counterparts at HQ as well to the local CEO. Some centralised MNCs favour
dotted line reporting to the local CEO and a solid line to HQ. Indian MNCs have
tended to give their subsidiaries abroad more freedom, with dotted line
reporting to HQ.
Thermax has structured its international operations according to
business verticals. For example, its China subsidiary is engaged in making
cooling equipment and its CEO reports to the head of the cooling business at
HQ. Another subsidiary in Denmark is engaged in making heating equipment and
the CEO reports to the vertical head in Pune. “In our system, it is a specific
business vertical that enters a new market and not the company as a whole,“
says MD & CEO MS Unnikrishnan. “It is not me but the head of that specific
vertical who sits on the board of the MNC subsidiary.“
Tata Chemicals quickly changed from a domestic enterprise to an
MNC after an acquisition binge beginning 2005.Today, 30% of its revenues come
from global operations located in the USA, UK, Netherlands, South Africa, Kenya
and Morocco (where it has a joint venture with the Birlas and the Moroccan government).
The subsidiaries have now been renamed Tata Chemicals North America, Tata
Chemicals Europe and Tata Chemicals Magadi and CFO PK Ghose sits on all three
Boards. The fact that the subsidiaries all produce natural soda ash gives the
company's overseas operations a sharp focus. “We control the overseas
operations through the SAP package we have installed all across,“ says Ghose.
“Energy is the biggest cost in soda ash, so that is one parameter we keep a
close watch on. Then there's currency and commodity hedging, which are a key to
profitability.“
Input costs are not the only things that make Indian MNC bosses
sweat.
“Our biggest issue is regulatory com pliance,“ says T Hari, chief
marketing officer and global head of consulting at Tech Mahindra, which has
operations in USA, Philippines, China, Brazil, Nigeria, Switzerland (all
acquisitions), Australia, France, Hungary. “The law of the land must be
followed in matters of tax, employment rules, money transfer,“ adds Hari. What
are the chances of the company being hit with a sexual harass ment suit in a
far off land? “The chances of breaking protocol is always high in a foreign
country,“ says Hari. “You just have to be cognizant of it.“
By
Dibeyendu Ganguly & Priyanka Sangani CDET27FEB15
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