The Hindu Business Line : `We need a new template for an Indian MNC'

MR ANAND Mahindra (right), Vice-Chairman and Managing Director of Mahindra and Mahindra Ltd, receiving the 2006 CNBC Asia Business Leader of the Year Award, from Mr Jeremy Pink (left), President and Managing Director, CNBC Asia Pacific, and Mr Todd Thomson, Chairman & CEO, Citigroup Global Wealth Management, at the awards ceremony in Hong Kong on October 26.

Thursday, October 26: The hour is late at Hong Kong's tony Conrad hotel, the venue of television network CNBC's Asia Business Leader Awards 2006. A formal black tie event unfolds with the brightest and best of Asian business mingling, quaffing some fine wine and spirits: award ceremonies are interspersed with jazz and robust conversations around the many tables. At the end of it all 51-year-old Anand Mahindra, Vice Chairman and MD of Mahindra & Mahindra Ltd, in a de rigueur bandh gala, is still looking fresh and energetic. And, why not? He has just done with a stirring acceptance speech to rousing applause after receiving the 2006 CNBC Asia Business Leader Award, staving off challenges from business leaders across Asia.

The award is a recognition for Mahindra's global forays, sales growth and profitability as well as the group's community initiatives to promote the welfare and education not only of the group's employees but also the local community. This, Mahindra believes strongly, will be the face of the Indian MNC and he is striving to develop a template which will define the face of an Indian MNC rather than a global model so far developed by the West.

The top award of the night, after innovators, corporate citizens and entrepreneurs' awards were given to various businesspeople across Asia. He is the third Indian to bag the award after ICICI's K.V. Kamath won the inaugural award in 2001 and TCS' Ramadorai in 2002. Business Line caught up with Mahindra soon after the awards ceremony for a lengthy conversation in the foyer of the Conrad, not so much on the hard numbers that make up the Mahindra story but on his management philosophy and style and the story behind the growth. Excerpts:

Now that you have made several forays in various countries from manufacturing to marketing tractors to automobiles, do you regard yourself as a global MNC or at least one in the making?

It is always going to be a work in progress. I think there are very few companies in the world, and not just Indian ones, who can tell you that they have got the formula right. People have to keep relearning things all the time. One of the things I learnt when we met Renault is that one of the essential prerequisites for a true blue MNC is humility — the understanding that whenever you do business around the world you can learn things from your partners and I remember that Renault said this was very much part of its character. How many MNCs do you know that can make such a claim? So, unless you have that, you can't be a true MNC. I don't care if you throw me statistics of how many branches you have around the world or how many factories; you can still screw up. Humility is not all, there are other things, but it is important. I have a special project going on to define a template of what is a global company. The basic question was: Can we create a template for what is an Indian MNC; it can range from what percentage of your revenues come from across the world to what is your gender ratio. I believe a truly global company is a diverse company and you cannot consider yourself such unless you have a bigger representation of non-Indians, women, and things like what is your level of language skills... we've embarked on a truly exciting study to evolve some benchmarks for an Indian MNC.

What are the few characteristics that you would say would make a true Indian MNC?

We are looking at the parameters of this animal which will be defined by the study: what is the source of global revenues; how much of production and revenues come from overseas; what is our gender ratio; the diversity ratio, what is the level of language skills. The second thing is the softer aspect. Everyday in business we ask ourselves: what is our USP? What is our differentiation: that's the heart of strategy. When Indian companies become MNCs, how are they different from the template that have been set by Western companies? Why should we just accept that? As we do everyday in business, can there be a differentiation for an Indian MNC? My feeling is this: what the West is beginning to realise post-Enron is that you cannot simply go by saying shareholder and profits are everything.

Also, you realise that by serving society and at the same time finding a societal benefit can actually be a profitable proposition. It's not just a greater good. There are many ways of putting it; you can have clichés like long-term self-interest, but whichever way you want to put it, the fact is, as Prahalad has said, there are opportunities at the bottom of the pyramid. I believe the Indian MNC should be one that differentiates itself by not ignoring the needs of its surrounding society and serve them and serve it profitably and that's an interesting win-win situation. We in India as MNCs can perfect that.

If I go to Romania, for example, I would like to first find out what the surrounding community needs. Can I convert that into a profit-making stream or a business enhancement or a strategic advantage, can I do something in that area so that I am perceived positively and it actually enhances my business value? The Japanese taught us that quality comes free. In a similar way, serving society can also be done at a profit. I think that's the kind of recognition that the Indian MNCs can give the world.

You are expanding all over the world from one end of the world in the US to China, and to Gambia and Australia. So how are you managing this new animal?

(Laughs) If there was a well-known formula for doing that I could retire to the Bahamas! The fun is in creating that. What you touched upon is my main preoccupation. How do you manage? What is the new template? It's part of the global thing and more. We have a new integration template coming; how do you quickly get new acquisitions up and running with minimal disruption. That's something we are working on. But, at the end of the day there are two major enablers: one is global hiring, which is going to play a key role and what we are doing now when looking for acquisitions is we put a premium on a company where we inherit management.

For example, in Jeco Holdings (a recent acquisition) we have a wonderful manager there who is going to remain CEO. He will be a tremendous addition to the senior management of the group. So, right away you're net positive in management... so in a world where there is a war for talent we are looking at a premium on companies that have good talent. Second is that technology is going to be a major enabler — (points to his Palm Top) I don't think if this little device did not exist, I could have managed an MNC. You're online at any point of time anywhere in the world. You cut down your lead time in getting information and making decisions - and this little device allows that, much as it annoys my wife, competing as it is for my affection! You literally hold the world in your palm - so technology is enabling companies to manage in a way they would never be able to. So, our IT strengths are very high and will be higher. The first thing in integration is that we want everybody to be on the same IT platform wherever in the world they are - so despite the multifarious languages that exist in the group, we want one technology language to exist.

At a broad level your group's global forays look very disparate in its acquisitions as well as in the locations you're going into. So, what is it that makes it all hang together, in a managerial sense?

Well, keep in mind that we are a business group with six verticals, each of them with their own global imperative. What you see from the outside is Mahindra everywhere but each sector has a clear trajectory they are going to follow in terms of where they want to go and what their global plans are. So, for example, if the tractor business enters Gambia, it's not Gambia alone that it is looking at but a footprint in Africa. South Africa too will be a major springboard as the infrastructure is terrific and this is where we will base our operations for Africa not just for tractors but auto as well. It could even be holidays - Mahindra Holidays was in South Africa last week looking for time share partners. It's very planned and orderly; we have annual strategy sessions where we demand from each group what its trajectory is going to be and why. They have to commit on what their profit curve will be like.

What is the award in recognition of - M&M's global foray and positioning and its profitable acquisitions?

Well, the jury had some hard parameters like global sales, return on assets, so clearly the company's financial performance had to go through a filter and in a sense almost every Indian company is surfing the wave of the Indian economy. It's a recognition that India is growing and secondly a recognition of how well the company has capitalised on these macro-economic indicators. That to me is very interesting. I was amazed by the rigour of the process — the interview was so rigorous that I thought the interviewees were fairly skeptical. But, I was told later that the decision was unanimous.

You're relatively young in the M&M group, so what is the management psyche that you're driving through the group?

(Laughs heartily) I thought I stopped being young when I crossed 50! I have a concept that I haven't named yet: it is how do you create a sense of co-ownership - we are in a business which still is family driven. We are extremely aggressive with our stock options scheme, which is a commitment from us. We have our own internal millionaires; they are a lot of people in the organisation who made a substantial amount of money. So, they know that we are walking the talk. And, there is the psychological aspect of ownership - does he really leave you alone and trust you? I would argue that why we have fairly low attrition at senior levels — even though we are not the best paymasters in the industry and yet we retain people — is because of this attitude. Some people have criticised me in the past saying that I am too hands off. But, ultimately, you are getting results. You can argue about that endlessly. But I know enough about the businesses - in the main business I worked my way up and in the others I helped start them. So, I know enough to come in at the right time when nobody will grudge my interest and when somebody is looking for a path or guidance. Once that trajectory is set no one can quarrel with my claim that I leave them alone.

So, where do you draw your inspiration from and set your benchmarks?

Well everybody asked me that today, so I will be consistent. My parents told me never to have one role model - they said the world is a food court and you can go anywhere and take the best from different cuisines. So, why clone yourself after one person? I told my daughters the same thing - the world is too large so just go out and take the best from the variety you see. So, I don't have one role model — I read voraciously and keep scanning the Web looking for new ideas. It needs more openness of mind rather than finding one person for inspiration.

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