Commentary

Butter chicken at Birla

What succeeds at home may not work overseas. The chairman of Aditya Birla Group,
Kumar Mangalam Birla, says Indian companies must be prepared to change long-held
traditions if they are to thrive on the global stage.
December 2013 | byKumar Mangalam Birla

Mahatma Gandhi was killed in my great-grandfather’s home. Near the end of his
life, India’s founding father used to stay at Birla House when he came to Delhi, and
in January 1948 an assassin shot him point-blank as he walked out into the grassy
courtyard where he held his daily prayer meetings. The house and garden are now
a shrine and museum, visited by tens of thousands of admirers every year.
Growing up, I hardly needed to visit the memorial to be reminded of the values held
by my close-knit Marwari family. Our tiny community, originally from Rajasthan,
has had spectacular success in business, in part because we have maintained tight
familial relations and traditional values—including many of those promoted by
Gandhi himself. Marwari traders apprenticed their sons to other Marwari firms,
loaned each other money, and insured one another’s goods, confident that their
partners held to these same codes. To some in the West, our ways probably looked
old-fashioned: when I took over the company, in 1996, at age 29, after the sudden
death of my father, no meat was cooked in Birla cafeterias; no wine or whiskey was
served at company functions.

Seven years later, we bought a small copper mine in Australia. The deal wasn’t a
huge one, worth only about $12.5 million, but it presented me with a unique
challenge of the sort I had not yet faced as chairman. Our newest employees were
understandably worried about how life might change under Indian ownership.
Would they have to give up their Foster’s and barbecues at company events? Of
course not, we reassured them.

But then several of my Indian managers asked why they should have to go meatless
at parties, if employees abroad did not. At Marwari business houses, including
Birla, the top ranks of executives traditionally have been filled with other Marwaris.
I had introduced some managers from other firms and other communities, and they
had a valid point. I was genuinely flustered. My lieutenants were relentless: I had
never faced a situation where my own people felt so strongly about something. Yet
at the same time, I knew vegetarianism was a part of our values as a family and as a
company. A core belief! I had broken a lot of family norms, but I thought this one
was going to be multidimensionally disastrous for me.
Fortunately, my grandparents merely laughed when I approached them with my
dilemma: they understood better than I did that our company had to change with
the times. If we wanted to make our mark on the world, we had to be prepared for
the world to leave its mark on us.

The Aditya Birla Group is now one of India’s most globalized conglomerates. We
have operations in 36 countries on five continents and employ 136,000 people
around the world. Over 60 percent of our revenues come from overseas. In the
1970s, my father, frustrated by the heavy-handed and corrupt “license raj” at home,
expanded widely in Southeast Asia. Since I took over as chairman, we’ve made a
dozen acquisitions overseas, worth a total of more than $8 billion, in sectors as
varied as mining, pulp, aluminum, and insurance. We’ve branched out into
Australia, America, Canada, and Europe. For the moment, our top management
remains all-Indian, even if not all-Marwari. But I would guess that within a decade,
half of our most senior staff will be non-Indian.

We have expanded internationally for many reasons—sometimes to spread our bets,

sometimes because we found it impossible to open a plant in India as fast and as
cheaply as we could abroad. In each case, we’ve based our decision on whether or
not the deal would increase shareholder value. Yet when I look around me, I see too
many Indian companies eager simply to be written about as global players.
Sometimes that clouds the fundamentals of making an overseas acquisition or
having an overseas presence. To globalize for the sake of globalizing, as a matter of
ego, is perilous. Expanding internationally is hard, risky work. And as I was
reminded the first time I saw butter chicken being served in a Birla canteen, the
most difficult challenges turn out to be the ones you least expect.

One thing I’ve learned throughout this process of international expansion is that if
Indian companies want to reinvent themselves as world-beaters, they should be
prepared for some humbling experiences. Birla is a sixth-generation industrial
concern; we sponsor hundreds of schools and temples around the country. Virtually
every Indian recognizes our name. But when we decided to acquire a Canadian pulp
mill in 1998, none of the 1,200 residents of Atholville, New Brunswick, had any idea
who we were. We had to present ourselves, our credentials, our philosophy to
everyone, from the local shopkeepers to the unions and provincial government. The
team I’d sent to Canada to sign the deal was initially quite upset; they felt
demeaned, as if they were being treated like fly-by-night operators.

The process of building trust does not end once the deal goes through. With any
foreign acquisition, the new employees watch for signals to see if you are walking
the talk, if your decisions match your promises. You have to be very careful that
people don’t read into things more than they should—how many people have been
sent out from India, how often they report back to headquarters, whether they’re
treated any differently from non-Indian employees. All these things can make the
difference between a company that integrates well into the larger group and one
that resents being taken over.

Globalization is not just about putting up a plant. It’s not about making an
acquisition. It’s much, much more. One has to tread cautiously, patiently. It has to
be an evolutionary process. Before we made our biggest purchase to date—the $6
billion buyout of aluminum giant Novelis, in 2007—I asked the due-diligence team I
sent out to give me substantive feedback about the attitudes of the company’s
American employees. I told them to engage the Novelis people in deep
conversations to find out how they felt about working for an Indian conglomerate
and what questions they had about our culture. The deal would be the second-
largest Indian acquisition ever in North America and would make us the biggest
producer of rolled aluminum in the world. But “soft” concerns were as important to
me as statistics about plant machinery, profitability, productivity. I don’t know if I’ll
ever write a check that big again; I certainly didn’t want it to buy a hostile,
disgruntled workforce.

Integrating all these global operations is obviously a challenge in itself. Some

Indian companies prefer to leave their foreign acquisitions to operate on their own,
almost as independent outposts. But if you want all your employees to share the
same values and to feel a sense of kinship with one another, as we do, you’ve got to
work at creating an emotional bond—the kind of thing that an Indian growing up
hearing the name Birla, or attending a Birla school, would take for granted. By the
same token, you have to be prepared to treat all your employees and managers,
Indian and non-Indian, equally. The views of people outside India have to count as
much as those of people here at home. It might take them longer to bond with the
parent company, to think about the larger good rather than maximizing their silo
operations. But the effort is worth it.

What’s even more difficult for a tradition-bound company like ours, but just as
valuable, is learning and importing values from the new acquisitions. This goes well
beyond the food in the cafeteria. Before we started expanding overseas, the
corporate presentations in our commodities businesses never discussed safety and
the environment. Then we saw how our new employees operated. Their first slides
always dealt with safety. They talked about near misses, fatal accidents. It was a
huge deal—it came before any discussion of the competitive environment or
profitability. Now we do the same. We have a deeper appreciation for the value of
environmental sustainability.

Some lessons surprised me even more. Ironically, before we became more

international, I used to be much more impressed by someone who could speak the
Queen’s English than, say, by a chartered accountant from Jodhpur whose spoken
English required some effort to understand. Now when I look across all our
operations in places like Brazil or Egypt or Thailand, I see a whole host of people
who aren’t comfortable in English, who need interpreters, but who are very, very
good at what they do. Sadly, it took that experience for me to respect an accountant
from Rajasthan—my home state—as much as a graduate of St. Stephen’s in Delhi.
At one time, we even wanted to run English classes for some of our employees! Now
it’s not an issue in my mind. If you can get your point across, if you are adding
value, if you are competent, then bloody hell to your English.

More concretely, as we’ve grown, we’ve also had to learn new ways of structuring
our organization. We’ve created positions for sector heads who control billions of
dollars’ worth of business—just as some of our foreign acquisitions did—rather than
hundreds of millions.

The good news is that globalization gets easier over time: there is a snowball effect.
The next time we bought a pulp mill in Canada, we were known. The New
Brunswick government was comfortable with us; the mill workers knew who we
were. Interestingly, as we become more global, people have real feedback to fall
back on. When we acquired Columbian Chemicals, in 2011, executives at
Columbian headquarters in Atlanta were able to go across town to the Novelis
headquarters and ask about us—what we were all about, how we’re run, what sort
of autonomy we encouraged. They were talking to people to whom they could relate
easily and who could give them honest and accurate information. Maybe not all of it
was positive, of course, but at least it was real.

Now, when we want to recruit expat talent to move to India, it’s much easier as well
because they know about our global operations. They know that opportunities
across the group are getting bigger and more interesting. That’s made us a more
attractive employer to non-Indians. As we are “going global,” we’re also finding that
global executives are becoming more willing to “go Indian.”

As I’ve said, this has taken years of painstaking work. It’s not an overnight process,
and it’s not as easy as writing a check. There are opportunities out there for
ambitious and well-run Indian companies—as long as they remember that the world
will change them as much as they hope to change the world.

About the author

Kumar Mangalam Birla is chairman of the Aditya Birla Group. This essay is excerpted fromReimagining
India: Unlocking the Potential of Asia’s Next Superpower. Copyright © 2013 by McKinsey & Company.
Published by Simon & Schuster, Inc. Reprinted by permission. All rights reserved.