Corporate
chiefs on how they survived their greatest crises
—
from family feuds and market crashes to failed JVs and revolutions
Santrupt
Misra
Last year,
as a fascinated world watched the Arab Spring sweep through Egypt, Santrupt
Misra sat glued to the television in his office in Mumbai, one worried man. The
CEO of the Aditya Birla Group's carbon black business had seen many crises in
his long business career, but none of them were quite in the same league as
this. More than one-third of the Group's carbon black operations were in Egypt,
where it operated Alexandria Carbon Black Company, a joint venture (JV) that
owned one of the largest carbon black units in the world, with a capacity of
manufacturing 285,000 tonnes of per annum.
The Egyptian revolution had already cut off the flow of finished goods to customers in European markets and Misra now needed to take a call on whether to order an evacuation of the plant. "This is the sort of thing that happens to you once in a lifetime," he says. "You can prepare for floods, fire, earthquakes, but you can't prepare for a revolution. Nothing had prepared me for dealing with a country's political turmoil. The experience taught me the importance of connectivity in a foreign country. You need to have access to people in the government and administration who can help."
Misra made several trips to Alexandria and after discussing the situation with the 100-odd Indian expatriates stationed there, he decided not to evacuate the plant. "Our people there didn't want to leave. They believed they should stand in solidarity with the people of Egypt at that point and they were right. An evacuation would have seemed opportunistic."
The Egyptian revolution had already cut off the flow of finished goods to customers in European markets and Misra now needed to take a call on whether to order an evacuation of the plant. "This is the sort of thing that happens to you once in a lifetime," he says. "You can prepare for floods, fire, earthquakes, but you can't prepare for a revolution. Nothing had prepared me for dealing with a country's political turmoil. The experience taught me the importance of connectivity in a foreign country. You need to have access to people in the government and administration who can help."
Misra made several trips to Alexandria and after discussing the situation with the 100-odd Indian expatriates stationed there, he decided not to evacuate the plant. "Our people there didn't want to leave. They believed they should stand in solidarity with the people of Egypt at that point and they were right. An evacuation would have seemed opportunistic."
Arun Maira
Ask Indian
CEOs about the biggest crises they've had to face in their careers and you get
a wide range of responses. And we're not talking about little things like loan
defaults or labour disputes. The crises our CEOs talk of are tied to global
issues and the challenges are epic in proportion. Planning Commission member
Arun Maira remembers his stint at a Tata Motors JV in Malaysia in the late
1970s as being the biggest crisis he has had to handle and one that left an
inedible mark on his thinking and his career. "In Malaysia, I learnt that
people work for more than just money, they work for pride and reputation. I
realised that companies focused only on profit and shareholder value will never
beat those who set broader goals," he says.
In 1977, Tata Motors CEO Sumant Moolgaonkar deputed a 33-year old Maira to head a floundering JV between Tata Motors and a branch of the royal family of Malaysia. The JV had originally been conceived as one where the Tatas would provide technical expertise in truck manufacturing, while the management would be Malaysian. This was in the mould of Tata Motors’ deal with Daimler Benz and also in tune with the bhoomiputra policies of the Malaysian government. Still, the Tatas had been required to invest some amount of foreign exchange in the JV, for which special permission had been taken by the government. Two years later, representatives of the Development Bank of Malaysia, the main lender to the JV, came calling at Bombay House to say they were recalling their loans as they felt the project had no chance of ever making money. "It was a major embarrassment," recalls Maira. "It was one of Tata Motors’ first such JVs and it shook our confidence. The bankers, lead by an Australian, said we were terrible managers, clueless as to the nature of the competitive market in Malaysia." 0 The Tatas persuaded the Malaysian bankers to give the JV a one-year reprieve and asked the Malaysian government to allow for an Indian managing director. Permission received, Maira arrived in Malaysia, fired by the idea he had to save the reputation of not only of the Tatas, but of India. Though the Board had advised him to get a new management team, he decided to retain everyone, including his Chinese head of sales, Malaysian head of finance and the five Indian expats who were in operations and servicing. "I had to convert a crisis of condition to a crisis of aspiration. These people all had great reputations in their fields when they were recruited. I just had to rekindle the passion, creativity and commitment," he says.
Maira eventually did turn the company around and he remembers the greatest accolade he received was from the Japanese head of Toyota in Malaysia, who invited called him to tea towards the end of the assignment in Malaysia: "He said he was especially impressed that I had done it with only five other Indians whereas he had 30 Japanese expats with him. He actually said 'That means one Indian equals five Japanese'. It was a moment of great pride."
In 1977, Tata Motors CEO Sumant Moolgaonkar deputed a 33-year old Maira to head a floundering JV between Tata Motors and a branch of the royal family of Malaysia. The JV had originally been conceived as one where the Tatas would provide technical expertise in truck manufacturing, while the management would be Malaysian. This was in the mould of Tata Motors’ deal with Daimler Benz and also in tune with the bhoomiputra policies of the Malaysian government. Still, the Tatas had been required to invest some amount of foreign exchange in the JV, for which special permission had been taken by the government. Two years later, representatives of the Development Bank of Malaysia, the main lender to the JV, came calling at Bombay House to say they were recalling their loans as they felt the project had no chance of ever making money. "It was a major embarrassment," recalls Maira. "It was one of Tata Motors’ first such JVs and it shook our confidence. The bankers, lead by an Australian, said we were terrible managers, clueless as to the nature of the competitive market in Malaysia." 0 The Tatas persuaded the Malaysian bankers to give the JV a one-year reprieve and asked the Malaysian government to allow for an Indian managing director. Permission received, Maira arrived in Malaysia, fired by the idea he had to save the reputation of not only of the Tatas, but of India. Though the Board had advised him to get a new management team, he decided to retain everyone, including his Chinese head of sales, Malaysian head of finance and the five Indian expats who were in operations and servicing. "I had to convert a crisis of condition to a crisis of aspiration. These people all had great reputations in their fields when they were recruited. I just had to rekindle the passion, creativity and commitment," he says.
Maira eventually did turn the company around and he remembers the greatest accolade he received was from the Japanese head of Toyota in Malaysia, who invited called him to tea towards the end of the assignment in Malaysia: "He said he was especially impressed that I had done it with only five other Indians whereas he had 30 Japanese expats with him. He actually said 'That means one Indian equals five Japanese'. It was a moment of great pride."
Motilal
Oswal
Stockbroker
Motilal Oswal, chairman and managing director of Motilal Oswal Financial
Services doesn't need to go back very far in time to find his greatest crisis.
It happended in January 2008, when the market crashed and his clients demanded
they be allowed to take fresh positions without squaring up outstanding
positions. "We specifically trained our team on how to deal with such
calls. They explained to our clients and business associates the dangers and
problems they could face in such volatility. We allowed fresh positions only on
cash and carry system. One thing I learnt from that crisis is, don't fall to
pressures of sales people as well as customers as both have very short-term
outlook," says Oswal.
Tapan Singhel
Changes in
government policy are capable of triggering major corporate crises and many
CEOs will empathise with Tapan Singhel, managing director of Bajaj Allianz
General Insurance, when he recalls the government's decision to allow free
pricing in general insurance in 2007 as his biggest crisis. Singhel, who was
then head of sales & marketing, says: "A price war was triggered and
there was a 40% fall in premium rates. We had to follow or lose market share.
But then, margins shrank and there came a point where we decided to take a
stand. I felt claims settlements might get compromised if we went further down
this path."
Bajaj Allianz first began to raise prices in automobile insurance, which constitutes half the general insurance business. At the same time, it began offering better service while trying to reduce costs, no mean feat. The company did lose market share but then, prices began to stabilise. "My learning from this is that it pays to stick to your values and deliver on promises made," says Singhel.
Bajaj Allianz first began to raise prices in automobile insurance, which constitutes half the general insurance business. At the same time, it began offering better service while trying to reduce costs, no mean feat. The company did lose market share but then, prices began to stabilise. "My learning from this is that it pays to stick to your values and deliver on promises made," says Singhel.
Ganesh
Nayak
A crisis, by
its very nature, has a flash point, a short sharp shock which drains the blood
from the face. For Ganesh Nayak, COO and executive director at Cadila
Healthcare, the crisis hit in 1995, when the company he had worked in for 17
years was split into two. The Patels and Modis, the company's promoting
families, decided to go their own separate ways and as senior vice president
for marketing, Nayak was given the responsibility of dividing up the product
portfolio and sales team in an amicable manner.
"We had no external consultants, it was all done internally," he recalls. "And once the division was done, we had to figure out how to survive and grow, given that we had lost the economies of scale. I was operating with half the number of sales representatives with half the products."
To Nayak's credit, Cadila Healthcare has grown spectacularly and is now a listed company, with a turnover in excess of $1 billion and ranked fifth in the pharma sweepstakes. The other company, Cadila Pharmaceuticals, is still privately held and figures nowhere in the top 20. How did he do it? "When you're in a crisis, you're motivated by a spirit of survival," says Nayak. "We worked really hard those days, starting the day with meetings at 6 am. You need to have the right people and you have to lead by example, otherwise a crisis can destroy you."
"We had no external consultants, it was all done internally," he recalls. "And once the division was done, we had to figure out how to survive and grow, given that we had lost the economies of scale. I was operating with half the number of sales representatives with half the products."
To Nayak's credit, Cadila Healthcare has grown spectacularly and is now a listed company, with a turnover in excess of $1 billion and ranked fifth in the pharma sweepstakes. The other company, Cadila Pharmaceuticals, is still privately held and figures nowhere in the top 20. How did he do it? "When you're in a crisis, you're motivated by a spirit of survival," says Nayak. "We worked really hard those days, starting the day with meetings at 6 am. You need to have the right people and you have to lead by example, otherwise a crisis can destroy you."
Sanjiv
Kaul
Indeed, when a family
run enterprise is in crisis, it is often the professionals who bear the brunt
and many modern day CEOs narrate the horrors they went through earlier in their
careers, which helped shape the way they function today. Sajiv Kaul, managing
director of ChrysCapital recalls the last two of his 20 years at Ranbaxy as a
period of continuous crisis. "The promoter family was asserting itself, DS
Brar, the managing director, was on his way out and Ranbaxy was a terrible
place to work. The value system and the performance system were all going down
hill and there was little one could do to stop it," he says.
Kaul was corporate vice president and a member of the management committee when he finally quit Ranbaxy in 2004, along with Brar. He then had the option of joining Novartis, which needed someone with emerging market expertise, or getting into something new, such as private equity. Ashish Dhawan was a friend from a Harvard Business School programme he had attended many years ago, but when the promoter of ChrysCapital offered him a partnership, Kaul was hesitant at first. "It was a major dilemma," he says. "Novartis looked like a secure job and it involved moving to Barcelona, which my family liked. But ChrysCapital was a pioneer in private equity, much like Ranbaxy was in pharma, and I was drawn to it. I decided to follow my heart."
Kaul was corporate vice president and a member of the management committee when he finally quit Ranbaxy in 2004, along with Brar. He then had the option of joining Novartis, which needed someone with emerging market expertise, or getting into something new, such as private equity. Ashish Dhawan was a friend from a Harvard Business School programme he had attended many years ago, but when the promoter of ChrysCapital offered him a partnership, Kaul was hesitant at first. "It was a major dilemma," he says. "Novartis looked like a secure job and it involved moving to Barcelona, which my family liked. But ChrysCapital was a pioneer in private equity, much like Ranbaxy was in pharma, and I was drawn to it. I decided to follow my heart."
Faisal
Farooqui
Lastly, for a change of
pace, here's an exciting example from the dotcom business. Faisal Farooqui, CEO
of mouthshut.com, says his great crisis was when an
extortionist launched an attack on his website in 2006. "We were doing
very well then, with a community of 11 lakh users, when this person started
posting comments and creating fights using anonymous email IDs. Then he called
us and asked for money."
Farooqui called for help from the cyber-crime police and the extortionist was finally tracked down in Hyderabad. It turned out he had a grudge against the website because it had once banned him. "I should have acted sooner," says Farooqui. "I didn't realise the seriousness of the damage he was doing and let it go on for a month before I went to the police. The lesson I learnt is that you have to pay close attention to what's happening on your site. The internet is sentiment-driven and it takes a few seconds for people to change loyalties."
Farooqui called for help from the cyber-crime police and the extortionist was finally tracked down in Hyderabad. It turned out he had a grudge against the website because it had once banned him. "I should have acted sooner," says Farooqui. "I didn't realise the seriousness of the damage he was doing and let it go on for a month before I went to the police. The lesson I learnt is that you have to pay close attention to what's happening on your site. The internet is sentiment-driven and it takes a few seconds for people to change loyalties."
Dibeyendu
Ganguly CDET120727
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