Qimat Rai Gupta's Old-World Leadership Powers Havells

Qimat Rai Gupta
Chairman, Havells Group
Age: 76
Rank in the Rich List: 68
Net worth: $910 million
Big challenge faced in the last year: Consolidating the turnaround of Sylvania
Way forward: Sylvania’s revenues remain sluggish. Gupta wants to expand the brand to other global markets to increase revenues.


It is 10 am on a Monday. At QRG Towers in Noida, the global headquarters of the Havells Group, senior executives of the electrical equipment company are huddled inside the office of their chairman, Qimat Rai Gupta. These include his family—brother-in-law Surjit Gupta, son Anil Rai Gupta and nephew Ameet Gupta—as well as company directors, presidents and vice presidents.

Gupta, 76, starts by recounting a conversation he had with his son on the importance of vendors. It sparks off a discussion that culminates in the formulation of a new initiative: A conference for Havells’ top vendors to convince them to reduce prices. In turn, the company would commit to taking measures to process payments in half the time it takes at present. This would help Havells save up to Rs 150 crore annually, a handsome amount when the industry is squeezed for margins.

That is not all. In the next one hour, the group interviews a candidate and confirms his appointment as head of a special business unit. It also reviews the company’s performance and runs through the agenda for a national conference call slated for later in the afternoon. It is not all work, though. The meeting is peppered with conversations about Lalu Prasad and the state of the country’s politics, and the chairman’s friendly banter with one of his senior executives about his high salary.
 
Now, for the thousands of small- to mid-sized family businesses in India, this is not a novel practice. As Professor Kavil Ramachandran, who leads the Thomas Schmidheiny Chair of Family Business and Wealth Business at the Indian School of Business, says, “Most of the smaller companies do hold such meetings”. But he also points out that few family-run outfits are able to sustain the practice or appreciate its importance as the business grows. But Gupta has managed to retain this practice even as Havells grew.

This represents the leadership approach of Gupta who has been the principal driver for one of the fastest growing companies in India over the past two decades. From a little over Rs 100 crore at the turn of the century, Havells clocked nearly Rs 8,000 crore in revenues in 2012. Gupta debuted on the Forbes India Rich List in 2011 at 98, climbed up to 64 in 2012 ($965 million) and is ranked 68 in this year’s list with a wealth of $910 million. He calls these morning huddles an integral aspect of his “participative management style” that marks an entrepreneurial journey that started in 1958.

“Even when the company was small and had much fewer employees, my father had this practice,” says son Anil, joint managing director. “It started as an extension of his leadership instinct to align his team along the same vision. Today, the practice has been institutionalised at Havells.”

Every morning, the top team gathers in the chairman’s office; when he is not there, they convene in Anil’s room on the same floor. Issues are taken up, decisions are made and previous decisions are reviewed. There is no fixed agenda, but the meeting inevitably results in several outcomes that are religiously followed. “The exercise will be a waste if there is no execution,” says Gupta. Similar meetings are held in every branch of the company in India and even overseas in London, the centre of its European operations.

Anil identifies this morning ritual as an integral factor in the company’s success over these years. As Havells president Sunil Sikka says, this “small company culture in a big company” has helped quick decision-making and sometimes, even radical ones. The latest initiative to tap vendors was suggested by Rajeev Goel, president of its London-based business Sylvania. He had just returned from a similar meet in Spain three days ago. “How can you be quicker than this?” Sikka says about the immediate adoption of the proposal.

THE DESI STYLE
By keeping his style relevant even as Havells grew, Gupta has shown that the traditional way of conducting business is far from obsolete. Business schools are more tuned into concepts such as total quality management or just-in-time management made legendary by Japanese car major Toyota. Of late, though, the Indian style has garnered some attention. In a 2010 book titled The India Way: How India’s Top Business Leaders are Revolutionizing Management published by Harvard Business Press, the authors—professors of the Wharton School of Business—list out four key attributes of the “India Way”. One of them is the “holistic engagement of employees”. The work culture at Havells closely resembles that attribute. “We work as a cohesive unit across regions and verticals,” says Ameet Gupta, executive director.

While impressed, Professor Ramachandran points out, “They can push the decisions downwards and classify them into layers of delegation provided there are clear policies and norms. It may not be easy to sustain this when the business becomes more complex, independent of the turnover.” So far, however, the Guptas have ensured that the decision-making isn’t hampered as the organisation grows.

In 2000, Havells had only one product—switchgears. Today it has 16 verticals. Its network of dealers has grown from 300 to 5,000. And the morning meetings have only become more important. “There are 16 different teams that meet the dealers, some of whom sell more than one product. So it is important that each team is guided by a common philosophy. The meeting helps to percolate the company vision down the ranks,” says Anil.

SAVING SYLVANIA
This approach was put to test in 2007, after Gupta’s most ambitious move till date when he acquired the Germany-based Sylvania, a major lighting company, for $300 million. Within a year, the step looked liked a big mistake. In the backdrop of the economic slowdown, Sylvania reported losses in 2008 and 2009. Worse, the company breached its covenants in debt repayment.

“We committed a mistake in letting Sylvania work as a different unit with its own culture,” says Anil. The patriarch took charge and used the morning meeting to push and motivate the team. Top officials from London (Sylvania had shifted its base from Germany) also attended; it was in one of these meetings that it was decided that Anil and his cousin Ameet would relocate to London to turn around the overseas unit.

The team undertook a series of measures to fix Sylvania. It negotiated for more time from the banks for loan repayments, a few plants were closed, jobs were cut sans any union problems, and new marketing drives were executed: This saw Sylvania increasing its prices and improving margins. The culture of open communication helped motivate colleagues in international units and the overall confidence grew. The company came back to black in 2010 and has since grown its profits which stand at €30 million for FY2013 (the corresponding revenues stand at €440 million). Today, Anil proudly says, “The London office also holds morning meetings and this has helped with integration across verticals.”

The objective for Gupta and the rest of the promoter team will be to reinvent the scope and impact of the morning meeting to keep it relevant. “For the sake of delegation and nimbleness on the ground, the top team should redefine the issues it will look into,” says Prof Ramachandran.

The challenge is particularly sharpened when new entrants join from the industry. “I worked in a multinational for 19 years before I joined Havells less than a year ago. I was initially shocked by the culture here. But now I understand its importance,” says Sanjay Mohan Sharma, vice president-material management, Havells India. Some are unable to cope, complain and opt out. “The first six months are critical. The candour in these meetings might seemingly hurt egos but everyone is respected,” says Gupta.

This particular Monday morning meeting is about to end and the decision has been taken to call 300 of Havells’ vendors for the first meet. Gupta asks his office to prepare the invitation note that will be sent to vendors. The draft is ready within 15 minutes; Gupta signs it and says, “I have approved the budget, please get going.” And the ball is set rolling again.