HCL's Shiv Nadar on Bringing Business-plan Rigor to
Social Entrepreneurship
Shiv Nadar, founder and chairman of
the US$5 billion Indian IT group HCL, has forayed into setting up educational
institutions and attempting to bridge the country's urban-rural divide. He has
designed this effort with business-plan rigor, thinking big but starting with
pilot projects before scaling them. In a conversation with Wharton management
professor Michael Useem and India Knowledge@Wharton, he spoke about
his model of social entrepreneurship and building organizations, processes and leadership skills in students,
among other topics.
An edited transcript of the
conversation follows.
India Knowledge@Wharton: You have spent your career building HCL as an
entrepreneur. How do you view the relationship between entrepreneurship and the
social goals you are trying to achieve through the Shiv Nadar Foundation?
Shiv Nadar: I have a view on this. When a corporation grows up, when
it takes up a certain percentage of its revenue [or] a certain percentage of
its profit and puts it into social causes, what can be done gets fairly
limited. And it'll create a very discontinuous effort. Otherwise it'll become
very small. If we say that we will put in one percent of our profit or five
percent of our profit, and then put it in, what happens when you do this in a
year in which there's no profit? Then they all become projects. Projects are by
nature discontinuous. But what [the corporation] gains is the project
management and program management capabilities, which will always be inherently
very strong in the corporation.
We know that the subjects where we
can contribute are very many. So we encourage our employees to participate
along with NGOs (non-government organizations) in many of the causes. One of
the causes for which we seek their cooperation is to go and teach in a school.
It's a question of how long your time is available, and accordingly, we work
with NGOs which will find when our employees can go and teach in a school. We
have 62,000 employees. So the number of hours they can contribute is large.
But what we have done, or what my
family and I have done, is different. We have two operating companies in HCL --
HCL India and HCL Global. HCL India is about US$2.5 billion in size and HCL
Global is US$2.8 billion. They have been declaring dividends since inception.
HCL India was formed in 1976 and HCL Global is [the former] HCL Technologies,
formed and listed in 2000. These dividends flow into a family corporation. The
family corporation bequeaths a large quantum of it into a Shiv Nadar
foundation. So we have found a very sustainable way of doing this. With this,
we can take a long-term effort -- something which will take 10 years or 25
years, a big project. At the end of the day, what have I achieved, what have we
achieved? We have built two institutions. And we know how to run them with
processes and structures. So if you want to create institutions which are built
to we will do them as institutions, not as projects.
Michael Useem: Let me ask you about the target of your efforts. It could
be health, the arts or community services, but you have chosen to focus on
education. Why education?
Nadar: Education came [about] with not much of reasoning. Because
when we wanted to give something back, I looked at myself, I said, "What
am I?" I'm a product of education. Education and scholarship gave me a lot
of confidence. And aspirations I picked up from friends and the ambience in
which I grew. If I could provide a similar ambience, it could help a lot more
people. That's how we set up a college of engineering (the Sri Sivasubramaniya
Nadar College of Engineering), under Anna University. But we set it up [saying]
that this is going to grow big, this is going to last, this is going to do many
more things than just engineering. We bought a 230-acre (an acre is 4,047
square meters) campus near Chennai.
In 14 years, we did the processes
right, we built the institution right. In its ninth year it's topped the state;
there are 400 engineering colleges in the state. In the 10th year it ranked
among the top 10 private colleges in entire India. Nine years ago, we said,
'Let's start a joint program for masters, and let's do it with the best school
in the world in these fields.' So we've done that with Carnegie Mellon
[University, in Pittsburgh, Penn.]. We offer four post graduate courses. In a
globalized world, we believe you should study in multiple countries.
Now I'll step back and give you the
reasons. China has become India's largest trading partner. It's rare to find an
Indian who speaks Chinese. It's rare to find a Chinese who can speak any of the
Indian languages. Neither of them at the trading level -- I want to repeat
this, at the trading level -- can speak English either. All businessmen -- how
do they communicate? God knows. Sign language, probably. They are our largest
trading partner; they displaced the United States. We all speak English, but no
one speaks Chinese. If you've ever traded with them ... they come up with a
calculator and tell you, "This is the price." That's all. You always
go back with the price that you want. The way they cost their materials is
probably very different, [perhaps] by weight or something [else].
So now, this has to be recognized.
It has to find its way into the education system. It will be good for India
exchange programs, where if there's a two-year course, someone goes there,
spends three months and comes back. And then over that entire period learns
Chinese -- to speak, read or write. You have a problem in America where
everyone speaks only English or Spanish. In India everyone speaks their mother
tongue or English. [Over time], the economies at No. 2, 3, 4 and 5 will be
China, Japan, Germany, India. They have to speak a different language now.
Anyway, we thought that this joint
program should pick up the experience. These programs have two semesters in
India and one semester in the U.S. The students are solid; most of them work
for American company and go through a placement system. In the third step, we
had a product of technology. We had a product of R & D. Our company began
its efforts in producing computing before either Microsoft or IBM did in the
personal computing area. We were one of the earliest in the '70s. We were also
one of the earliest in Unix.
So we know that the way stages
itself. Technology comes first. Research comes first. As a result of it
(research), technology comes. As a result of it, engineering comes. If you
build an engineering college, how do you connect it up with what happens
before? So we started working on that. We built a research center. We got
somebody from defense research. We've got great advisors who are supporting
this. The people who support us include [Carnegie Mellon professor] Raj Reddy
and V.S. Arunachalam (former scientific advisor to India's defense ministry).
We thought we would do this as something which is inspiring. Our belief is that
aspirations, meritocracy and a world class institution are the three
ingredients our country needs.
India Knowledge@Wharton: How serious is the educational challenge in India and what
is your strategy to try and tackle that?
Nadar: Education in India requires correction in some places, new
interactions in some places and widening in some places. When my daughter
(Roshni Nadar) came here to study, the first thing I insisted was: 'You live
abroad for a year alone and work in a company just by yourself.' She went and
worked in the communication business with Sky News (in London), completely
anonymous. No one knew who she was; she got a job because she had a degree in
communications. But it's great experience. One must have some alien experiences
like this. Studying in one location somehow doesn't appeal to me -- not for the
future.
I come from a generation in which
the average life expectancy is in the 80s. They (his daughter's generation) are
going to be in a generation in which life expectancy should be 100 plus. If it
is so, they have more time to strengthen their education. It can be a
discontinuous effort, too.
We thought that we would provide all
these things and build a university. That is another project we are doing. We
are not doing it in the traditional style, where we take land, then start with
some courses and then build it [over time]. Not like we did it the last time.
This time we are going ahead and constructing it, so that a full fledged
university is what will be built. We will get to work with partners across the
world and then take it from there, offering a completely different educational
experience. Someone asked me what is this [university] going to look like? We
don't know. It's a leap of good faith. These are two things we're doing in
higher learning.
Useem: You've built the university, and yet I know you're also
very interested in students of younger age at a different stage. Where have you
intervened in the educational course that people follow? Why intervene at the
university level? Why intervene at a younger level? A related question is, what
do you think about scale or scaling? You want to intervene, but I also know you
want to intervene and have a large impact on a lot of people.
Nadar: There are two things that we noticed as serious gaps. One,
let me talk about my home state. My home state is not where I come from, which
is Tamil Nadu. My home state is U.P. (Uttar Pradesh, adjacent to New Delhi),
where we are the largest private employer, which is where we built all our
businesses. We employ 20,000 people who all are in U.P. If the state were to be
a country, with a population of 190 million, it will be the seventh most
populous state in the world. But it has very depressing failures. The school
system with 180,000 schools is not able to cope with the needs. Politically,
compulsions have been such that a student will just get through class after
class after class without measuring what he or she has learned.
If you take fifth standard students
(aged 10-11), 45 percent of them don't know how to read. If you take second
standard students, a similar percentage of students can not recognize letters.
So we have a serious problem, okay? If you knew that how to correct that, they
would have followed it. The state government is very sincere; I'm not blaming
them. Someone needs to experiment and find an answer.
We have run some pilot models of
delivering education through a non-qualified teacher. Deliver it through this
medium and a telecast mode, where someone only is assisting, standing next to
the student; it's almost like cooking with a television instruction. We created
it, tested it and piloted it. After every hour or so, we reinforce the
learning, then find gaps and close them.
The huge advantage a city-bred
person has is the mother becomes a teacher. No one can replace a mother's
teaching, because she will ensure that the child learns and retains what she
has taught, if she can teach. That's why the urban students get to be much more
competitive, particularly the bulk of what learning potential that there is. We
are bringing in a control and command system through satellite, so that the
most proficient of the teachers take all the students who have gaps; they're
connected through satellite, and they teach and correct.
Our objective is to get 90% of what
is being taught to be retained by 90% of students. The advantage of this system
is if someone has a two-month handicap, he or she can join a class. You take
away this mental conception of one year for each one standard. Think without
those limitations. You have so much to study; it has to be paced to what you
have. And in between, if you are to go away for something else, it'll wait.
These are people who may drop out after the first standard or drop out after
school. This is the only opportunity they have to have any foundation.
The government knows that we are
fairly sincere people. We have a good reputation. We say we will do what we say
we will do. And if we don't commit [to] anything, we'll say at least we'll
experiment with all sincerity. So of the 180,000 schools (in U.P.), we asked
them to give us the management of 200 schools. [We asked them to] just agree to
be patient with us and we will correct things. We are yet to do it. But we are
starting now.
They (the U.P. government) said,
"Take at least 1,000 schools." There were 200 schools and we are
talking about 60,000 students. So it is a very serious responsibility. I said,
"Look, it's an act of faith with what you're giving. It's a leap of faith.
And the least we will do is we'll follow the old method, but deliver good
education to these people." These 60,000 people will take charge. Next
year, we'll write in the letter of intent that we'll go up to 1,000 schools.
But post that, we will program-manage this interaction over the state to the
180,000 schools. This is the largest such effort. We will work side by side
with [the government.]
It's a very well-intentioned thing.
And the team which is doing it is highly capable. The project is headed, you
know, by a person no less than T.S.R. Subramaniam, who was chief secretary of
U.P. and [Union] cabinet secretary. The team is very high-powered, and has very
capable individuals. I'm personally involved in this project, which is called
Shiksha. The other project is called VidyaGyan. [It addresses the urban-rural
divide, which] is very sharp.
[Take] 2001, 2002, 2003. In three
consecutive years, India registers nine percent growth. In 2004 there is an
election and the ruling party (the Bharatiya Janata Party-led National Democratic
Alliance) is defeated. And it has not come back [since then]. The problem is
the [country's] 300 million poor people who go and vote, never saw the benefit
of the nine percent growth. In the subsequent five years, they (the government)
called it all-inclusive growth, and did partly, and promise mostly, that they
would get them (the poor) the benefits. And they started seeing them.
Currently all benefits are going to
urban people. How do we take it to the rural people? How do we bring them to be
equals? We need to bring leadership at the rural level. Talent is randomly
distributed. It doesn't look at caste, it doesn't look at creed, it doesn't
look at religion, it doesn't look at where you are studying and where you are
living.
India Knowledge@Wharton: How can you develop leadership at the high school level
among students?
Nadar: At the level in which you develop them, because afterwards
it may be late. You develop it in every stage. They get very aspirational.
Aspiration comes when all of them are almost similarly qualified. If you go to
2,000 schools and take school toppers and select 200 students, they're all very
similarly qualified when they come in. So you compete and then you correct
yourself. In some field or the other, we make sure that they lead. If we hold a
play like Ramayan (an ancient Indian epic story), 56 of the 200 students will
participate. We'll make sure that in sports, they compete every week on
something or other. Competition raises leadership. There are many team events
in which they participate. It's a very busy life. Those kids lead a very busy
life. They get up at five in the morning, they get to work at 5:45 and they get
to sleep at nine or 9:30; they don't have a minute free.
To me these are projects which will
take a long time. I hope I live long enough to see the results because they
have to go to school, then they have to go through college, then they have to
go through work life. Will they go into an IIT or IIM (Indian Institute of
Technology or Indian Institute of Management)? I guarantee you, yes.
Unquestionably they will be able to pick up where they want to go, anywhere in
the world. I would want them to go back to IAS (Indian Administrative Service,
the country's civil services cadre) or political life. Run for office. We would
prepare them for it. When I was very young, they said every Kennedy was
prepared to be a president of the United States. They pretty much did.
Useem: So as a business entrepreneur for many years, you
developed a capacity to think strategically and to build an organization, set a
direction. As you've come in now to serve as a social entrepreneur, what are
the skills that have carried over from your years at HCL?
Nadar: Whatever we aspire to do has to be big to keep my interest
in it alive. All our initiatives were bigger than what we thought we could do
at the time we started them. The first thing we always do is to work out a
plan. The plan has always been a 10-year plan. We work on financial
allocations, which will be a 10-year allocation. We work out an organization
structure of how we create it. We said, "First, we need a board that will
guide it." We construct the board. The person who had served as the head
of the IAS academy is on our board, someone who's managing the petroleum ministry
is on our board. You know, we got them. For the school, we have one who is
principal of Miranda (Miranda House, a residential women's college in New
Delhi); the vice chancellor of Delhi University is on our board. For the
engineering college, we have Dr. Natarajan (R. Natarajan, former director of
the Indian Institute of Technology Madras in Chennai) on the board and we have
Dr. [V.S.] Arunachalam on the board. We have the previous election commissioner
on the board.
The first task is to create a board
that will help and then build the institution. And then build an organization
structure. How do you translate a 10-year goal to a five-year goal? They have
to have the aspiration. These things cannot be served by people to whom it is
just not a job. In our educational institution, people turnover is pretty close
to zero because they like what they do. They are compensated well and we
introduce metrics for everything, because it must be measured. The topper's
grade was 92.8 percent. In the school for leadership, 25% [of the students]
scored about 90%.
How did they get there? It is
checked out week by week. It runs with an institutional discipline. I learned
that from somebody. I learned how the [Bill and Melinda] Gates Foundation
works. It works like a business organization, excepting [that] its business is
to meet some other objective, which are not business objectives.
India Knowledge@Wharton: How will you measure your success?
Nadar: In?
India Knowledge@Wharton: In the field of social impact and education.
Nadar: The social impact of something like an engineering
institution is measurable. There are many measures to that. [But for] something
like a brand new idea of a university, which will function in collaboration
with universities in multiple countries, it has never been done before. So it
has to be adapted. We always create an institution, an organization.
We have to keep correcting -- being
the first in doing anything is nothing to go by. The only thing to go by is to
keep collecting feedback to see [if what you are doing] is correct and keep
checking the outcome. We have an advisory board of people who not only govern
the inputs but also will be the final consumers -- it could be businesses, it
could be the government, or wherever we want these people (students) to go to,
such as research.
India Knowledge@Wharton: Thank you very much.
Useem: Terrific, thank you. It was very interesting.
http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4489
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