A company that deals with adversity well will do well, is Sanjoy Bhattacharya, managing partner of Fortuna Capital's mantra for investors. He was speaking at the Motilal Oswal Wealth Creation Study and was also joined by Raamdeo Agrawal, co-founder and joint MD, Motilal Oswal Financial Services.
Speaking at the same event, Harsh Mariwala, MD and CEO, Marico, said he has chosen product categories where he wants his company to have high market share. "We have been choosy about our product portfolio," he added. According to him, a company should identify the right values and reinforce them to create a culture.
Adi Godrej, chairman, Godrej Group, on the other hand said chasing high return on equity should not be the focus of any management. He said streamlining businesses processes and capital management are key to strong growth. Additionally, sense of purpose is also critical in driving success and accomplishment.
Below is the verbatim transcript of the panel discussion
Bhattacharya: When you calculate the probability, 3 on 1,900 and you feel the world is stacked against me. My belief is apart these numbers that you see with high return on equities (RoEs), this leadership, this persistence of growth actually has much more to do with a bunch of other things. It has to do with how organisations are built, what it takes to succeed and in that are certain things which are very difficult to crystalise and like every other place in the world, if you can’t measure it, it can’t be counted.
All three as entrepreneurs here, and he is a pretty successful entrepreneur, one thing that makes a huge difference and you can identify it even in the smallest companies is a sense of purpose, a mission, a value system, call it what you will. If you find that and if your value system that resonates with you and that you believe is something that is laudable that is the first big way to really try and spot something that goes from whatever it is to mega and I will give you three illustrations.
1995 I was privileged I met Narayanan Murthy and I was struck by his honesty. Whenever I meet Indian entrepreneurs who believe that honesty above all is an important characteristic of building organisation, I have always been deeply struck by that because the conventional belief in India is if you want to succeed in business you have to cut corners. So when I meet people who challenge that belief, to me that is a wonderful sign. In fact the two other gentlemen here, on this dais, and Raamdeo himself are outstanding examples of that.
I was privileged to meet Mariwala in 1998 as a young analyst, exactly the same thing – tremendous passion and a truly laudable set of values about how you do business. When Godrej Consumer got listed I don’t know whether it was fluke or not but it was a shareholder. It is a tragedy that I sold too early. However, clearly the same story, a family which values traditions, believes in building up business and the fact that in fact some of their businesses remain unlisted to this day in some sense is testimony to how they believe those business should be grown and developed which most of us find very difficult to expect.
The second thing which I think is very important is again very fuzzy is culture. Sustaining a culture actually delivers the growth. Let me simplify what culture means, at least my understanding of it, is the way they do things in a company. The way you conduct yourself day-to-day in a company and then there are two other things which are simple, the people you hire and how you develop them. Again I can’t find better examples than these two gentlemen on the dais. I think in fact Mariwala’s illustration of this in Marico is unsurpassed. In this country I haven’t seen it – a better example, an actual live example of how you do that and it takes great courage I must say.
The two other things which I think are very important are innovation. How given circumstances of your business you manage to do things differently which help you to grow, which help you to be profitable, which help you to allocate capital sensibly and again I think the innovation foundation - I think Adi Godrej is a chemical engineer by training and I think that builds something in you but clearly both of them share this as well.
Finally I think something which Raamdeo didn't mention which I think is very essential is you need to have luck on your side. There are some people and there it is truly admirable they don't have the best of luck and yet they do incredibly well. I remember there was a very large multi-national which competed with Harsh Mariwala and I think their behaviour in terms of trying to cause him difficulties at a point in time when he was still a relatively small company is not something that people typically associate with multinationals and that particular multinational.
The manner in which he dealt with it and came out of it I think vindicated all collectively as Marico shareholders our faith that despite what was a very difficult set of circumstances here is a company that knows how to deal with adversities because dealing with adversities is essential to success and when you get great illustrations of that you do very well. I think the journey from mini to mega which is obviously incredibly profitable is actually a journey we should strive for. So, I am going to deviate slightly from what he said though I think a lot of the takeaways will be common.
Bhattacharya: Adi Godrej your group has many wonderful companies which are true leaders as Raamdeo said. We don't appreciate some of them simply because they are not listed but Godrej and Boyce I think is a truly outstanding company, there are a bunch of other companies and the fact that so many international leaders have come to partner with you is suggestive of the fact that you run a wonderful ship. To you how important is this thing of having a sense of purpose, how much does it drive the way you do business, is it important or do you think if you did not have as deep rooted a sense of purpose as appears to be the case to the external observer it wouldn’t make much of a difference?
Godrej: I think it is extremely important. I think it drives success in many businesses very well and a sense of purpose, of course the definitions can vary. I think it is very critical to drive great success and great accomplishment. There are different ways of going about it but once you define how you are going to do it and you propagate it amongst the people who work for you. I think it works extremely well.
Bhattacharya: That is what creates the culture? The translation from mission or purpose to culture?
Godrej: Absolutely. I think you hit the two very important points that create for great success.
Bhattacharya: How does someone sitting here or lets us say analysts or people who interact with Godrej consumer or the Godrej group, financial analysts, what are the cues you think they could use to determine that here is a company that is very purposeful, that is driven by a set of beliefs that are very important, how do they do that?
Godrej: I think we communicate on what we do. For example in our group I think one of the things that have helped us tremendously is some the business processes we have adopted. We used EVA as a major financial metric, we decided on that many years ago. As a financial metric that leads to very good success but most importantly we have strongly used improvements in EVA in our various businesses across the board for major variable remuneration programmes for a large part of our workforce.
We have some of the largest ratios of variable remuneration to fix remuneration and that has helped tremendously, not just as an incentive, one thinks of these sort of things as working very well as an incentive, they do but it has helped team work very considerably because we have gone for overall performance of a company or a large part of a company in these measurements and it has led to strong accent on reduction of capital use in the business.
For entire discussion, watch accompanying videos
