Mir Jafar, East India Company and Global MNCs
Companies with colonial ambitions and puppet managers fail to create sustainable value for their stakeholders. This was first demonstrated by the East India Company. Robert Clive conspired with Mir Jafar, a general in the army of Nawab Siraj-ud-Daulah. Mir Jafar betrayed his master paving the way for the rout of the Bengal army in the Battle of Palashi (Plassey). The East India Company rewarded him by crowning him as the Nawab. Mir Jafar’s rule, under the armed protection of the East India Company, heralded the beginning of the British rule in India. The rich Bengal treasury was asset-stripped, plundered and driven to bankruptcy. The puppet Nawab was replaced.
Puppet managers have always spelled disaster. In the early days of British capitalism in India, we had the managing agency system. The top management team was essentially British. They devised systems and procedures that enabled monitoring of performance at the home office without daily interference. The CEOs typically came from Britain. They were usually young men who were endowed with unquestioned authority. Many of them succeeded because they were not remote-controlled. They had a mind of their own and took bold decisions locally.
When the British left India, a vacuum was created. The organisations they ran were at crossroads. The first road led to the continuation of the ‘managing agency’ model with one key element missing: the ‘empowered’ CEO. The Indian CEO who succeeded was usually a postbox. He was neither fully empowered nor was he completely trusted. The results were disastrous.
Many of these companies did a fire sale to local businessmen and moneylenders. The rest perished. The remains of the fallen mighty are still visible if you walk around Calcutta’s Dalhousie Square — particularly the part that was known as Clive Street (now Netaji Subhas Road).
But there was a second road that some companies took with very different results. I will cite only two examples. The first: Lever Brothers, which started business in India in the summer of 1888 when the first crates of Sunlight soap, manufactured in England, arrived at the ports of India. It was not until 1933 that it established a corporate identity in Bombay. After independence, it began to seek its identity as an Indian company. In 1961, Prakash Tandon took over as the first Indian CEO. At that time 191 of the 205 managers were Indians. In 2007 it finally changed its name to the present Hindustan Unilever (HUL). HUL today touches the lives of 700 million Indian consumers, has over 52,000employees, sells soaps, detergents, tea, coffee, toothpastes, personal care products, food and so on. Why did HUL succeed when others had failed?
HUL’s CEO and management team were always empowered and trusted. Some of HUL’s illustrious CEOs have served on the global management team of the company — among them Ashok Ganguly, Keki Dadiseth and Harish Manwani. HUL reinvented itself as a global yet local company and became a magnet for talent. Many of India’s successful companies have HUL alumni in key positions.
HUL saw what was coming. Corporations that successfully groom their talent globally based on merits and performance (rather than loyalty or nationality) would be the winners. Unilever is still an Anglo-Dutch company but it moves its managerial talent across the globe — including in and out of India. HUL is 52 per cent owned by Unilever.
The second company that comes to mind is ITC. Its journey and the road it took are even more dramatic. It started life as the Imperial Tobacco Company in Calcutta in 1910. It is today a conglomerate with a diversified portfolio of businesses — cigarettes and tobacco, hotels, IT, packaging, paperboards and specialty papers, agri-business, foods, lifestyle retailing, education and stationery and personal care. ITC ownership is majority Indian unlike HUL. It has a turnover of $7 billion and a market capitalisation of over $30 billion. Last year it celebrated 100 years of its existence. ITC has also produced some of the finest Indian managers with a flair for entrepreneurship and innovation.
As India increases its participation in the world economy and grows global MNCs, there are lessons to be learnt. When we acquire global companies, Indian owners should not go in as ‘conquerors’. They should have the humility to forge friendships and partnerships. That is the only way they will retain the talent and preserve the market share in the foreign lands. They should never foist on the acquired companies a host of Indian managers whose primary qualifications are loyalty and nationality rather than skills and experience.
The key to success tomorrow will be a global mindset and the ability to attract, retain and manage a global workforce. Promoting corporate puppets with a colonial mindset will prove to be a very expensive hobby. There is no place for colonial thinking in a global business. The future global manager will look increasingly like Carlos Ghosn of Renault-Nissan. Is he a Brazilian or Lebanese or French or Japanese? He is of Lebanese ethnic origin, born in Brazil, studied in Lebanon and France and worked in three continents —turning around Nissan in Japan. To win, we must appreciate the value and experience of managers with global experience.
We must develop a global mindset and groom a globally mobile workforce with the mantra of meritocracy. The only question to ask is whether the cat catches mice, never mind its colour or how loyal it is as a pet.
(The writer is Managing
Director of Deloitte
Consulting, India. These
are his personal views)