Ajay Piramal: The consistent strategist

"For a good organization to become great it should first have the courage to think big and challenge the rules," says Ajay Piramal, Chairman, Nicholas Piramal India Limited.  In 1988 when nobody was investing in the pharmaceutical sector we acquired Nicholas. We were a product of what the strategists would call "unrelated diversification" - a textile group diversifying into pharmaceuticals with no apparent "synergies". 

However I pressed ahead because of my conviction in my actions. We defied the market rules in every possible way and went ahead with our strategy and that has enabled NPIL to attain its current position. In the exclusive with The Smart Manager, Ajay Piramal reveals how he achieved phenomenal corporate growth in a new industry by implementing a differentiated strategy.

Ajay Piramal, Chairman, Nicholas Piramal India Limited, reveals how he achieved phenomenal corporate growth in a new industry by implementing a differentiated strategy.

You cannot fool yourself, reality will strike. Five years ago, my management style was radically different from what it is today. I was a hands off manager and had entrusted the running of the company to a professional manager. However, over a period of time I realized that though the company was profitable it was not performing to its fullest potential. Delving deeper into the issue I recognized that the company was not moving in the right direction in terms of sustainability of profit levels, quality of people and retaining market share. 

The first thing I did was to change the CEO and personally get involved in the management of the company. I took a step back, understood the basics, hired McKinsey to evaluate our strategy and then implemented it. My top management was restructured and we improved the quality and depth of management across the company. 

We got out of unprofitable businesses and worked on maximizing the value of the assets we owned. This was a huge challenge for me and it made me more detail oriented and quantitative. I spend a fair amount of my time now in planning and thinking in order to identify performance levers, growth engines and the root causes of poor performance.

You have to think big. Because ultimately you are what you think you are. For a good organization to become great it should first have the courage to think big and challenge the rules. In 1988 when nobody was investing in the pharmaceutical sector we acquired Nicholas. We were a product of what the strategists would call "unrelated diversification" - a textile group diversifying into pharmaceuticals with no apparent "synergies". 

However I pressed ahead because of my conviction in my actions. Another myth we debunked is that an acquisitive strategy cannot be sustainable or value adding. We defied the market rules in every possible way and went ahead with our strategy and that has enabled NPIL to attain its current position. We rewrote the recruitment rules of the pharmaceutical industry by handpicking our senior management members from varied fields such as management consulting and FMCG, in addition to the pharmaceutical industry. This has brought in diversified, out-of-the-box thinking and varied perspectives into the organization.

Secondly integrity of the top is vital. According to me integrity is demonstrated when management says what it thinks and does what it says. And unless you find this integrity across the organization you cannot get superior performance. It is the responsibility of the leadership team to set the tone of integrity and ensure that it seeps across the company. Third comes execution. It is not enough if a company just has a great vision and a strategy - it is equally essential to build a system that enables focus on excellent execution. The human factor comes fourth. It is essential to choose the right people for the right jobs. I believe that it is the people of the organization who actually differentiate a good company from a bad one.

The values of the employees should be harmonious with those of the organization. The biggest change that has occurred over the last few years at Nicholas Piramal is improvement in the quality of the people. To be a world-class organization we felt that we needed better managers. So we have raised the bar across the board - in our recruitment, performance management and compensation systems.

Getting the right person is really a difficult process. It is difficult to understand or assess a person in the one, two or three interviews that we usually get. When recruiting a person I usually try to find out the basic value systems of the person because for us integrity is important. I then try to judge the person's attitude: 'Is he a risk taker? Does he have the hunger to achieve more?' This is essential to us because we are an organization with a healthy appetite for taking calculated risks. We believe in looking for the big breaks.

Our policy is to get the best people, pay them best-in-class salaries and demand superior performance from them. Thus, we have not only increased compensation levels, but also increased our performance expectation. We have a more rigorous performance evaluation system to measure and deal with the consequences of both good and bad performance. Feedback is usually given across the table. If a person is not performing well then we give him clear feedback. We explain what was expected out of him and where he has fallen short of the mark. If we find no change in his performance after some time, then he may be asked to leave.

You must keep stretching your employees more and more. I believe that you should give greater responsibilities to your employees and then judge their performance. I have found that talented people like being given more responsibility - that is the way they learn and develop their professional skills. 

Given the spiraling cost of good talent, it has become imperative to embrace the concept of lean management that says, "Hire the second person when you need the third." Though it is a risky proposition I have found this exercise worth experimenting. I have been in the business for the past 27 years and I have made my share of misjudgments with people. But it has also served as a process of learning and growth for me.

It is essential to break barriers. We are now working towards a more focused organization. We have discontinued peripheral ventures and pumped in more resources-human, technological and financial - in areas that we found are really important to the future of the organization.