How Wipro Learnt The Virtues Of Patience

When one buys a company, it’s wise to set aside the acquirer’s mindset of ‘let me show you how to do it’, says Vineet Agrawal

Published: Mar 19, 2012
How Wipro Learnt The Virtues Of Patience
Image: Namas Bhojani for Forbes India
Vineet Agrawal (in jacket)is President, Wipro Consumer Care and Lighting group

Vineet Agrawal
Designation:
President, Wipro Consumer Care and Lighting group
The Challenge: To expand international operations and integrate the $300 million acquisition of Unza which has a strong presence in South East Asian countries like Malaysia, Vietnam, Indonesia and China
How he did it: By deciding early on that he would not have the typical acquirer mindset and make as
few changes in Unza as possible, letting Unza retain its character

Arrogance is the biggest hurdle in making acquisitions work. In 2007 we bought Unza for about $300 million, it was Wipro’s second largest acquisition ever. At that time it was the largest international acquisition by an Indian consumer care company. We were buying a company bigger than us (Wipro’s consumer care revenue that time was Rs 600 crore, and we had 1,300-1,400 people. Unza was doing Rs 750 crore and had 4,000-4,500 people in 21 countries.) If it had tanked, it would be difficult for me to get the confidence to acquire another company.

It was a difficult acquisition because we didn’t know the geography, brands, or even product categories. We had never stepped into Malaysia, Singapore, China and Indonesia. That itself made us very careful.

But we were also the acquirers and it’s very natural to have the acquirer mindset; to say, ‘you stand aside and let me show you how to do it’. We had to remember that we bought the company because it was good, and we had to protect that.

You often hear of the 100-day plan for acquisitions, we never have the 100-day plan for any of our acquisitions.

We decided that there were to be zero policy changes. For the first two years we didn’t even change the name; it was continuing as Unza.

For instance, Unza allowed business class travel, which is not our style. We didn’t force fit in our grades; designations were not changed. In Malaysia, a salesman goes in cars and we continue that. Policies relevant to that country still continue; we have not changed it to the Wipro way. There has been some tinkering around, which is to benefit those employees. Like we have a better medical policy in Wipro, so we introduced that.

Before Unza we had acquired North West, a small company (Rs 40 crore turnover) making switches. We thought they would be thrilled to join a large company. But they didn’t feel this way at all. They felt they would be lost in a sea. In North West a salesman had a direct line with the owner of the company, but in Wipro he would have to follow processes. We tried to fit them into a grade structure which we thought was great but they weren’t happy.

So, while we may think we are great because we are a $7 billion company, they were not enamoured.

In Unza, there were other challenges. India was not looked upon as a great country especially in Malaysia, where many Indians were labourers. No one knew Wipro—this was the not the IT business. We were selling bar soaps and they found that decadent—they were selling shower gels and creams. When they came to visit India we were in the mom and pop retail stores, they were in modern retail.

The first thing we wanted was not to lose people, but what we had to do was not clear to us.

Within a month of taking over, we gave Wipro stock options to 70 critical people in Unza and that had a tremendous impact. They had worked with Unza for so long but had not received a bonanza like this. We called the same group in Bangalore to show them Wipro and India. They were given a five-day holiday and our teams took them around to Bangalore, Mysore and Agra.

Of these 70 only about eight people left in the first two years. Many of the core group of people are still with us.

We realised that communication is vital—as the integration starts, rumours can spread fast. For instance, all of us in India carried a Blackberry, but in Unza at that time they didn’t have Blackberries. So every time they saw the flashing red light, they felt we were recording their conversations. It took us four months to figure this out. There is an element of deep mistrust, which can be formed by any small action. There were language barriers—in China, Vietnam, Indonesia only functional heads spoke English. There were no Indians in the system who could vouch for Wipro or India.

So what did we change then?

One of the things we said was how can we help them do the job better? Every country had profitability targets and because of the Wipro name we could get them cheaper working capital loans. We struck deals with suppliers and passed on benefits such as cheaper Microsoft licences. Any savings in costs thus were passed on to the country manager and not to the corporate.

The only thing we insisted upon was faster growth. Unza was running on a 7 percent growth rate; we wanted it to be at 14-15 percent.

We drove that hard and said your growth have to be higher than industry and let us know what we can do to help. Second, we said you have to invest in advertising. They were doing a lot more below-the-line promotions. They were great in modern trade but not so good in general trade. We helped them improve that. We didn’t swamp them with our people—in each country we didn’t have more than two people from Wipro.

If this was India I would have come down hard on the team. Told them this is the number, rework your plan and tell me how you will achieve this. With Unza there was lot of persuasion, nudging them up from 7 to 9 to 11 percent.

It tested my patience.

When I am there I am persuasive, cajoling and supportive. People tell me that just because I am so nice there, I balance by being harsh to them here (laughs).

In India I am a lot more demanding and uncompromising.

But the whole organisation wanted the acquisition to succeed. There was tremendous pride in the team here, and people wanted to be a part of it.
Today we have learnt several things from Unza. We understand modern trade better. We learnt new product categories like deodorants, body lotions and skin care.

We had a seven-year plan with Unza and our numbers (internal rate of return, cash flows, profitability) are all on track.

Two years after we acquired Unza we acquired Yardley. We could have shown our arrogant best to Yardley because they were much smaller, but we didn’t do that. And that is something we learnt from Unza.

We followed the same model with Yardley: The welcoming committee, no change in policies, no change in offices, office timings, etc. We also didn’t move anyone to Wipro, although many people wanted to.  

Initially we tried pushing Wipro products to them but what we found was that the Yardley team was happy building the Yardley business. We thought we were doing them a favour by giving them more brands to sell from our stable. Instead of handling a Rs 5 crore turnover, the guy there could handle a Rs 10 crore business. First we felt that it was because of lack of ambition, but realised that Yardley was his passion and we should let it be there.

In Yardley, when we were integrating the companies, every month we would do a review with the liaison team and we would say that don’t get worried if the Yardley team is doing things in a different way, give them some time. We didn’t acquire them for six months or one year, we are not asking for results in six months. We had to pull people back from our liaison team if we felt they were not able to build trust with the other side.

(As told to Mitu Jayashankar)

(This story appears in the 16 March, 2012 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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  • Mayank Gupta

    By reading this interview my mindset had got changed!!

    on Nov 15, 2013
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