The Mahindra group wants to change itself as its business expands.
Sometime in the second half of 2009, Mahindra & Mahindra came out with the Gio (‘live life fully’ in Hindi), a small load carrier positioned between three-wheelers and the Ace, Tata Motors’ small truck. The cost of the disruptive innovation was a paltry Rs 25 crore — the company modified a Kohler single-cylinder engine and used the tooling and dyeing competencies of its three-wheeler business. Out of almost nowhere was born the Gio.
More recently, the company realised that there was no tractor that catered to small farmers. With their small land parcels, they needed a tractor that was compact yet powerful, gave good fuel economy and came with a short turning radius. Most important, it had to be cheap. In a market where a nine-horsepower tractor was priced at Rs 2 lakh, Mahindra & Mahindra introduced the Yuvraj 215, a 15-horsepower tractor, at Rs 1.75 lakh. It was positioned clearly to upgrade farmers who use bullocks to plough and prepare their fields to tractors.
There are, within the Mahindra group, no fewer than 11 shadow boards. These not only act as a sounding board for the directors but also give youngsters a ringside view of decision-making at the highest level.
As Mahindra & Mahindra develops a global footprint, it will need more and more such innovations to stay ahead of rivals. At the moment, the group has over 113,000 men and women on its rolls. Of these, about 5,000 are foreigners and another 8,500 are Indians posted abroad. Once the SsangYong acquisition is completed, the roll call will have 4,500 Koreans as well. The Mahindra group has initiated an exercise to change the mindset of these people. They will henceforth be required to accept no limits, think alternately and drive positive change. Shorn of the jargon, it means that productivity, innovation and quality will be paramount in recruitment, on-boarding, training, performance appraisal and reward & recognition.
These leadership competencies, Mahindra & Mahindra President (group HR and after-market) Rajeev Dubey says, have been fed into the recruitment process. “In the induction and on-boarding process, we are injecting a lot of modules that will talk about these pillars,” adds he. Dubey and his team have also started the process of creating an army of change agents — the Risators. “These could be people in any function, though right now we are talking about people at the general manager level, who will be trained in the use of these principles to catalyse and facilitate the business plans,” says Dubey. “At the moment, the first batch of 30 has been done. Ultimately, we hope to have at least a thousand.”
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Mahindra & Mahindra Vice-Chairman Anand Mahindra has been conscious of the need to change the organisation for some time now. He took over as the de facto head of the group in 1991 when the economy was liberalised. Decades of protection had made all Indian companies slow and inefficient; Mahindra & Mahindra was no exception. In 1994, he did the first restructuring to make the group cope with free markets and competition. Yet, its performance failed to pick up and the stock price kept falling. The lowest point came when Mahindra & Mahindra was dropped from the 30-share bellwether of the Bombay Stock Exchange.
In 2002, Mahindra collected about 50 of his top people to brainstorm on the need to transform. The resolve was to become innovative and the leader in whatever the group does, develop a global outlook and instill financial discipline. Any company that didn’t meet the financial targets set for it would have to fold up. That caused the performance of the group to improve. That session has morphed into an annual retreat called Blue Chip; the last one was held in Kuala Lumpur in which 500 people took part.
Much has happened in the last nine years since then. One, the group has spread its global footprint — it now operates in 79 countries. Two, it has developed global ambitions in areas like automobiles and tractors. Three, it has grown through a string of acquisitions in India and abroad: Punjab Tractors, Kinetic Engineering, Satyam Computers and Reva Car Company in India; two tractor companies in China; three forging units and a two-wheeler design outfit in Europe; and now SsangYong. (The group’s record on turnaround of acquisitions, claims Dubey, is almost 100 per cent.)
This has necessitated the recent course correction. First and foremost, the earlier battle cry, Indians are second to none, needed to be changed. This led to Rise, the new corporate positioning. The group worked on it for two years and took the help of New York-based Strawberry Frog to articulate the new identity. As the name suggests, it is meant to galvanise the people.
Doesn’t the need to change assume that the group’s productivity, innovation and quality indices are way short of the best practices? “Comparisons,” says Dubey, “show that we are not the best in India, but we would be somewhere there.” Still, Mahindra has pressed on the gas and has told his people that what matters in the current business environment is innovation at the lowest cost, and this will differentiate the group from others in the days to come.
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How has that translated into practice? Not too badly. Mahindra & Mahindra President (automotive & farm sector) Pawan Goenka, for instance, had recently told Business Standard that his engineers can develop an all new automobile platform for Rs 500 crore if the engine and transmission are already in place; otherwise, it could cost Rs 350 crore more. To put it in perspective, globally the cost of development of a new platform is at least $600 million (Rs 2,700 crore ) — more than thrice of Mahindra & Mahindra. The company is working on as many as seven new platforms that will be rolled out by 2016.
But the out-of-the-box thinking seems to be restricted to the automotive and farm equipment sectors. It needs to spread across all businesses. The group could perhaps borrow a leaf from the Tata group which set up the Tata Group Innovation Forum in 2007 as a catalyst for innovation. It meets every two months to take stock of the situation and remove hurdles. Tata Sons Chairman Ratan Tata gives away annual awards to the best innovations in the group as well as to those ideas which did not work out. The idea is to remove the shame of failure from trying out something new at work.
Dubey knows that the Mahindra group needs to work further on this aspect. “We do reward innovation and its scope will broaden,” says he. Dubey’s team also wants to document all the innovations, big and small, that have taken place in recent times. One of these is the Shaan, the first multi-utility tractor that can be used for haulage as well. Mahindra Holidays & Resorts, in another instance, has got off its high horse and come out with a budget timeshare called Zest for young couples, Terra camps for the adventurous lot and Mahindra Homestays for the budget travellers.
Quality, of the group’s products and services, is captured through customer satisfaction. Every business gets a “customer-as-promoter” score. Customers are asked one question: Will you recommend Mahindra or the Mahindra brand to others? The response is fitted into a scale of 0 to 10. Those who put it from 0 to 6 are called detractors, 7 and 8 are passives, and 9 and 10 are promoters. The difference between the percentage of promoters and detractors gives the final core. According to Dubey, the scores in the group range from over 70 per cent to -30 per cent. The highest score so far has been achieved by Mahindra Insurance Brokers.
In addition, the group has an internal benchmark called the Mahindra Quality Way which has been influenced heavily by The Japanese Way and designed by the Nashik-based Mahindra Institute of Quality. All businesses are ranked on a scale of one to seven by a team of Japanese experts on four parameters: Top management leadership & strategy, daily management & standardisation, management of quality improvement, and employee involvement & development. The farm equipment business, Dubey discloses, is already at level 7, while newer businesses are at levels 1 and 2; the maximum bunching is at level 3.
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So how motivated are the Mahindra employees? The group runs Gallup tests on employee engagement, though its results are confidential. Dubey, whose interests include past-life experiences and fire walking, wants to institute an “employee as promoter” score. It will ask employees: How strongly will you recommend Mahindra as a place to work to your friends and relatives? “This will capture our progress on the Rise initiative,” says Dubey.
The group is also keen that each business should leverage the capabilities of others. Mahindra Satyam, for instance, wants to leverage Tech Mahindra’s competence in telecommunications and Mahindra & Mahindra’s in automobiles to widen its portfolio. The research teams of Mahindra & Mahindra’s automobile and farm equipment divisions have been merged. The Swaraj and (erstwhile Punjab Tractors) tractor divisions of Mahindra & Mahindra have pooled several vendors and suppliers.
The savings, according to Mahindra & Mahindra Farm Equipment Sector Chief Executive (tractor & farm mechanisation) Bishwambhar Mishra, are to the tune of Rs 4,000 per tractor. There are plans to showcase Mahindra vehicles in the films the group produces and drive visitors around in these vehicles in the holiday resorts it runs.
To move it further, the group has set up cross-business councils in functions like human resources, sustainability, brand, finance & accounts, corporate governance etc. Will that be good enough?