Marico Believes In Profit After Trust

Marico is taking decisions against the typical instinct of a successful business: Give up today to gain tomorrow

Published: Oct 13, 2010
Marico Believes In Profit After Trust
Image: Kaushik Chakravorty for Forbes India
Harsh Mariwala of Marico

Harsh Mariwala is not your conventional businessman. In an age when entrepreneurs are expected to focus only on maximising profits, Mariwala belongs to a small but growing club of businessmen who try and adopt a holistic attitude to the way their companies operate.

As the man at the wheel of the $600-million consumer products firm Marico, Mariwala tries to ensure that all stakeholders in the business — from employees to suppliers to dealers to consumers — benefit from company operations. That means no squeezing of suppliers or treating consumers as second class citizens or exploiting employees. He believes that running a company this way is very beneficial in the long run. “We have a belief that there is a certain interconnectedness among [stakeholders],” says the tall and wiry Mariwala. “There is ample evidence we are gathering from our internal experience that whenever we have acted in the interest of all [stakeholders] it has paid us back.”

Mariwala’s ideology can be best illustrated by the relationship between Marico and the farmers from whom it sources safflower for its cooking oil brand Saffola.

Marico is India’s largest buyer of safflower and has 32,000 farmers under contract. But when open market prices soar, many farmers turn opportunistic and renege on those contracts. For instance, over two-thirds of the contracted safflower was sold in the open market this year instead of to the company.

Marico says it is OK with this because its main objective has been to ensure an increase in safflower production. When only a third of the contracted safflower turned up last year, Marico did have the option to enforce the contract and ask for all. But Mariwala chose against it because that would have soured the relationship between the company and the farmers.

He decided to earn the farmers’ loyalty that would ensure long-term supply. He offered to pay the farmers the market rates  whenever the prices rose and a minimum guaranteed price if they fell. The strategy worked. The proportion of contracted safflower sold to Marico increased to 45 percent this year.

While it may appear as if Marico capitulated in a seller’s market, the truth is that Mariwala is a firm believer in Conscious Capitalism. He simply couldn’t deny the farmers the benefit of market forces.

In January 2009, Mariwala commissioned brand consultants Alok Nanda & Co. to conduct an in-house exercise to find a purpose for Marico — one that would drive the company and fire the imagination of its stakeholders. Alok Nanda, the consultancy’s boss, found that the employees wanted the company to go beyond business and do something with a social, environmental and health impact.

It was around this time that he read the book Firms of Endearment by Raj Sisodia. He asked Jagdish Seth, the Emory University professor and an advocate of Conscious Capitalism to conduct a workshop on the movement in Marico.

Called ‘Purpose’, the mission had multiple objectives. It included a range of programmes for employees ranging from anonymous counselling for mental health to financial planning and diet plans.

Marico also began working closely with suppliers. The company has an internal Web system that tracks all their contract farmers for safflowers. Marico texts farmers information on when to sow, how much and what kind of fertiliser to use based on weather conditions, soil quality and other such inputs.

Marico is working with the Coconut Development Board and the Kerala government to bring mechanisation to the dangerous and long drawn process that stretches from plucking coconuts to drying and extracting oil for Parachute (Parachute is the No. 1 hair oil brand in India).

Jojo Thomas, who has a coconut farm with 200 trees in North Kerala’s Mallapuram district, says his income has doubled because of the improved farm practices Marico has introduced. He harvests 40,000 coconuts a year now from around 16,000 coconuts earlier.

But won’t taking care of everybody’s need mean Marico will need to adopt a soft approach to business? “We are not running a charitable organisation. Let’s be clear,” says Mariwala. “In terms of work performance you have to be very demanding with your supplier associates. But at the same time you have to play a catalytic role in developing your own suppliers.”

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 Infographic: Malay Karmakar, Sameer Pawar

The biggest challenge will be to sustain the Purpose agenda throughout the company over the longer term. Mariwala says he now wants Conscious Capitalism to grow roots in the company so that employees can make it their own rather than treat it as something pushed down by management.

“Senior management have to be aligned completely because if they pass the message down the line that what we are doing does not make sense then that is what they will make of it,’ he says. Alok Nanda created communication that would amplify employees’ experiences and successes with purpose. He designed it to be a dialogue within the company.

“Purpose has to be lived,” Nanda says. ”We didn’t have to sell it. We just had to articulate it because there was a part vision and we held a mirror to the company.”  

(Edited by Abhishek Raghunath)

(This story appears in the 22 October, 2010 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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