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The cycle of Indian industrial giants from their inception to today.Once Marwari-dominated, group sheds tribal instinct
Starting today, The Times of India introduces an occasional series called 'Corporations & Cultures' that will look at how India Inc is changing in terms of ethnicity, demography, gender and other socio-anthropological markers. Some of the pieces will investigate industry-wide trends, while others will seek to illustrate broad transformations through the prism of a single company or business group.
BN Puranmalka, who worked with the A V Birla Group for over 40 years and was managing director of one of its largest companies, recounts his first 'audition' with G D Birla with some amusement. A chartered accountant, Puranmalka, now 74, expected to be quizzed on matters of finance. Instead, Birla was mostly interested in the newbie manager's family background, cultural roots and value systems.
The circle of trust has historically been a cornerstone of top leadership formations within organizations. And they have almost always been drawn from people within the immediate ecosystem - the ethnic network closest to the promoter. Take a deep dive into history and it'll be apparent that Parsi-owned business groups like Godrej or Tatas drew a large part of their management team from within their own community. Similarly, the Birlas historically attracted managers of Marwari/Rajasthani origin, just as TamBrams constituted the steelframe of some of the old Madras-based groups.
As with many things, economic liberalization brought in its wake greater business complexities, and chipped away at hiring practices that were driven by parochial considerations. It wasn't good enough for people to be from a particular clan or community to be guaranteed a job. Besides, new thoughts emanating from human resource (HR) management changed many of the established rules of recruitment.
Several groups resisted change, though. By and large, they are today seen as retro in the un-cool sense of the word retro; worse, because they are thought to favour 'jaatbhais' of the promoters, professionals from other ethnic/language backgrounds hesitate to join them. "Will I be trusted with the CEO's job?" is a question they ask themselves.
The Aditya Birla Group is one of the traditional business houses that, under Ghanshyam Das's great-grandson Kumar Mangalam, has taken the secular, multicultural route. In perception terms, it is today seen to be more progressive than many of the other Birla groups that were born out of the division of the empire GD built.
In the pre-1995 era, the group's top leadership team of eight members largely comprised people of Rajasthani origin. The culture, at the time, reflected the lineage of the promoters - the Birlas - whose forefathers hailed from a small town called Pilani in Rajasthan. Cut to the present and the group's top leadership team of eight members (directors on Aditya Birla Management Corporation - the thinktank of the group) is a diverse bunch that is ethically and geographically a lot more representative of India. Of them, only two - K K Maheshwari, director, VSF, and O P Puranmalka, director, Grasim Industries (cement business), both long-timers- come from families of Rajasthani origin. It was really in the tenure of Kumar Mangalam, who took control in 1995, that the change took place.
Some of it was driven by the liberalization that helped the group expand and diversify its businesses. "There was a business logic to it: India was getting younger and the next generation was looking for opportunities. Organizations cannot change unless set ways of doing things are forfeited," said Santrupt Misra, group head (HR and CEO) of the carbon black business (Misra insists that there is a distinction between Rajasthanis and Marwaris).
Ethnic diversity pushed its way through the system as growth outstripped the supply of people from the old socio-cultural network. The group's turnover grew nearly five times in the first decade of Kumar Mangalam's reign. To fuel the new requirements of the group, it consciously and actively looked outside the social network.
"The more you built your leadership and employee profile outside the old network, the bigger the network became. The dominant representation of a certain group automatically reduced because the new skill sets needed weren't always available within the ethnic group Also, as education expanded, the supply of professionals from other backgrounds grew," said Misra.
When business historian Gita Piramal interviewed the late Aditya Birla for her book 'Business Maharajas' and asked him why there were so many 'Marwaris' in the business, he was annoyed. "He insisted that there was nothing wrong with the practice - and indeed it had much merit - and that the group would continue to hire Marwaris from a 30-km radius of Pilani. Many years later, after Kumar Mangalam became head of the group, he introduced a different principle. As an MBA student, Kumar enrolled at the London School of Business and came under the influence of the late Euroguru Sumantra Ghoshal," said Piramal.
Earlier, when avenues were limited, chartered accountants were given preference. A majority of the top leaders at the group then were CAs. Given the economic scenario then, financial engineering was an important capability for a leader to have. But as businesses grew post liberalization, engineers and MBAs were recruited, changing the fabric of the organization.
"One must keep in mind that HR strategies have to be in sync with the times. As Kumar Mangalam expanded the group westwards to Canada and eastwards to Australia, the organization needed global managers. The requirement for good talent became larger and certainly beyond the 30-km radius of Pilani," said Piramal.
The group brought multiple experiences into its fold. The requirement now was more for managers capable of dealing with larger complex issues and diverse geographical jurisdictions.
"During the licence raj, there was no competition. The only way to rely on people was to hire from your own community, people you could trust. Today, organizations operate in a very competitive scenario and there are far too many stakeholders involved. They have become very careful about the kind of recruitments they do. Caste and creed has lost significance," said Richard Rekhy, head of advisory practice at KPMG, a global consulting firm.
New mechanisms have replaced the old system of identifying 'trust' in a person. Hiring from one's closest ethnic group has been replaced by psychometric tools, background checks and references. In a way, the modern facade and interiors of Aditya Birla Centre - the corporate office of the $35-billion Aditya Birla Group located in Worli, Mumbai - reflects the new management ethos.
Once Marwari-dominated, group sheds tribal instinct - The Times of India
Industry has woken up to the pressure of the bottomline in the books than community and caste loyalties.
But were the old ways all that bad?
