Book Excerpt: Turning Around HUL: How Nitin Paranjpe’s Bold Bet Paid Off
‘Nitin Paranjpe, you have been appointed as Managing Director and Chief Executive Officer of HUL’.
It was a bolt from the blue. Doug Baillie had been CEO for just 2 years; a change was completely unexpected.
“I could barely believe my ears…!” This was well beyond his wildest dreams, not something aimed for or planned for. Of course, it felt great to be the youngest-ever CEO at Hindustan Unilever. But the honeymoon lasted less than 6 months. In September 2008, Lehman Brothers collapsed and the effects of the global financial crisis hit India. The year 2009 was a nightmare. HUL performance stalled, the share price tanked.
“Those were the most miserable 9 months… once again I had sleepless nights.”
Though Nitin had some experience of going through bad times, this time, the stakes were much, much bigger. The leadership team was struggling with the question: what do we do. How do we get back on track? But not once did anyone entertain the idea of taking shortcuts. Let’s do it, but let’s do it right. And it has to be something different because more of the same is not going to work. But how?
Back in the year 1999, Nitin had met the late Prof C K Prahalad as part of the Millennium project. The good professor asked, “What do you think HUL needs to become an even greater organisation?”
Nitin replied, “We should become more entrepreneurial.” “Okay,” said Dr Prahalad. “Tell me, what is the difference between a manager and an entrepreneur?”
Nitin rolled out the obvious stuff: risk-taking, ambition, innovation. The professor shook his head. He went up to the blackboard and wrote two alphabets: A and R, A and R.
In the first line he wrote: A >> R
In the second line he wrote A <= R
What was this mysterious formula… it made no sense to Nitin.
Dr Prahalad then wrote the word ‘entrepreneur’ next to A >> R.
And the word ‘manager’ next to A <= R.
“A stands for aspiration or ambition and R for resource,” said the professor.
The only difference between an entrepreneur and a manager is the mindset.
Managers manage resources, that’s what they have been taught, so a manager will have A = R. You give me a little more budget, I’ll do more, you reduce my budget, reduce my target. That’s the conversation that happens when managers talk about what it takes to get results. But for an entrepreneur, the ambition and aspiration have no correlation to the resources.
A guy with barely a penny in his pocket would be dreaming of ‘changing the world’. “It is this mismatch between ambition and resource which causes him to do things differently,” said Dr Prahalad.
This conversation impacted Nitin deeply, and at this time of crisis, he was struck by a thought. How can an organisation like HUL consciously create A >> R? How do you raise the bar, set audacious new goals? Most people are happy living in their comfort zone, they resist change. But desperate times call for desperate measures…
Thus began the first experiment of real boldness, to tackle the crisis of 2009. The route Nitin chose was a dramatic leap forward, in distribution. At the time, HUL was already the market leader with close to 1 million points of sale across the country. With annual growth of 10 to15,000 outlets every year—maintaining its number 1 position in the industry.
“Our people were feeling good about it and that’s where the problem was. Yes, we were ahead of everyone else but that gap was narrowing.”
When you are the market leader, you are the ‘target’ everyone else is chasing. And over time your competitive advantage gets eroded. So how do you break out of this complacency?
By using the formula A >> R. Between 2005 and 2009, HUL added 50,000 retail outlets. In 2009, Nitin Paranjpe declared, “Our goal is to add 500,000 in the next 1 year.”
There was a stunned silence.
“It sounded stupid then and it sounds stupid now… but later, I realised the value of this.
It took the conversation, the thinking, into a completely different space.” Now, had the goal been 30,000 new outlets, the team would have negotiated—‘Boss, we’ve never done more than 15,000 a year, stretch kar ke we can manage 20,000’.
However, if you start with 5 lakh—what do you negotiate down to? 4 lakh is just as impossible…
Nitin realised that people negotiate for lower goals because of just one reason: fear of failure. If, by some magic wand, you can eliminate that fear, human beings are capable. Of anything they imagine!
A larger vision, a purpose, which is audacious and energising.
“Let’s go for it and build pride back in this organisation!”
The magic would work on one condition: Do not doubt the idea, do not doubt yourself. Instead, keep visualising the outcome. What it would look like, what it would feel like.
“Basically what I was asking them to do is keep the rational mind aside and embrace the goal from the heart. Because the mind will use its logic and reason to hold you back…”
To the credit of the organisation, they didn’t pooh-pooh these radical thoughts. Or shake their heads and say, ‘Get real!’ Instead, the rank and file accepted the idea, became obsessed with it. The same team, the same resources—but people found completely new ways of doing things. Discovering, in the process, the joy of being a pioneer.
One problem HUL had been grappling with—for years—was how to reach the remotest of villages. Where the cost of reaching the product was higher than the size of the business itself.
Now, unfettered by ‘what has been done before’, the team came up with a bold new plan.
‘Let us partner with a company who will pay us, to distribute their product’. A perfect (and non-competing) partner was found in Tata Docomo, which paid HUL a massive distribution fee to take its sim cards into rural India. And it worked brilliantly, for both companies.
This is what it means to think and act like an entrepreneur.
At this point I ask Nitin, “When you began this exercise, did you believe the goal would be met?”
He replied, “The actual number was not the point. Even if we didn’t achieve 500,000 but 200,000, we would all be heroes.”
When you set an audacious goal, 9 out of 10 times that goal will not be met. But you still end up doing not marginally better but several times better than your original set-point.
The one who wields the wand must, however, have a great deal of trust and confidence in the team. His job, first and foremost, is to be a cheerleader.
“If all you do is make a person feel inadequate and lousy about himself or herself, is there any chance they will get there… not a chance!”
The best chance of magic happening is when people feel good about themselves. But not so good that they sit back and relax.
“As we reviewed the progress every other month, I was amazed. It was beyond belief and I said so. Everyone was a hero and I would make them feel like one.”
At the same time, Nitin would let them know, the game is not over, as yet… At the end of 2010, HUL had added 500,000 new outlets. Everyone thought, okay, the job is done, now we will consolidate. Nitin was thinking, what next, we can’t stop here! But he didn’t convey his ambition through a PowerPoint presentation. Just casually slipped it into a conversation.
“You know… I was thinking… what would happen if we get another 500,000 next year!”
No analysis, no discussion—let the team soak it in. No one feels pushed, or threatened. Neither is there any outright excitement. But a seed has been planted.
“By the time we actually made the announcement, there was no shock. Half the team had already internalised the idea, made it their own.”
There’s a small voice within that says, ‘I am capable of doing more. I want to do more’.
Koi aapko push nahin kar raha, aap apni marzi se, apni khushi se kaam kar rahe ho. Haan ji!
The second target of 500,000 was reached at the end of 2010-11. The formula A >> R actually worked!
Nitin shrugs. “What we have tried to do was create the conditions that allowed people to flourish. And I must say that we did not succeed with everyone. But we certainly moved the needle!”
What Nitin Paranjpe is most proud of is doing business, with good, old-fashioned values. HUL has never been focused on ‘shareholder wealth maximisation’.
That’s not the purpose, that’s the outcome of good business!”
Today, society’s trust in business leaders is at an all-time low. That’s because we see these leaders acting in a self-serving manner. Nitin believes that the model of leadership itself is flawed. Look at Enron, or Lehman Brothers—IQ was not enough, neither was EQ. What is needed is a MQ—Moral Quotient. The capacity to take decisions using the yardstick of what is right, what is wrong.
Excerpted with permission of Westland (an Amazon company) from Shine Bright: Inspiring Stories of CEOs Who are Intrapreneurs by Rashmi Bansal.
The views expressed here are those of the author and do not necessarily represent the views of BloombergQuint or its editorial team.