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‘A leader can’t allow ego to dictate decisions’

business Updated: Jun 14, 2012 01:45 IST
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Flush with cash from the sale of his generic drugs business to Abbott Laboratories in 2010, Ajay Piramal, chairman, Piramal Healthcare, has been identifying opportunities to put his billions into profitable use, for himself as well as his shareholders, for as he says, a leader needs to be smart enough to see a good deal when it comes his way, and cash in on it. Excerpts:

How do you view your role as a leader — is it being a savvy investor or is it more of a turn-around specialist?

I have an obligation to my shareholders, to create maximum value for whatever they have invested and that’s what my job is and that’s what I am here to deliver. I don’t carry an egoistic or emotional attachment to the businesses. We did a calculation to justify the value that Abbott paid — I would have had to grow the business for 15 years at 20% CAGR with an operating margin in excess of 35%. Now that’s not possible and therefore, the choice was should I leave aside my ego that it is my business and I created it, or should I do what is in the best interest of shareholders. If you look at like that, that’s what a leader ought to do, in my view. Job of a leader is to act like a trustee.

But trustee has to be smart enough to recognise the opportunity, because at the end of the day there is also a personal benefit that you get?

Yes, because I am a shareholder so I will get that.

What are the essential qualities for a leader?

A good leader has to have high integrity. Integrity means what you think , what you say and what you do should be in alignment. To me a good leader must be courageous — courage to take decisions. To me a good leader is somebody who is dispassionate and doesn’t get carried away.

Do you think you have imbibed all these attributes or are you falling short somewhere?

I don’t know. I am falling short in many places.

For example?

I don’t think I like to spend as much time on execution detail and in system processes. I also think I am sometimes too soft with people when one has to take harsh decision.

Could you shed some light on your failures as a leader?http://www.hindustantimes.com/Images/Popup/2012/6/14_06_12-buss23.jpg

We failed sometimes in terms of some acquisitions. For example, after we acquired bulk drug unit in Hyderabad, for many years it was bleeding. That was a wrong decision or we did not assess it properly.

Then why did you stick with it and not exit?

Because there was no choice, otherwise you have to write it off.

So you are not prepared to take failures in your stride?

No, I have no problem. I mean so many times we fail and you have to fail. If you have not failed then I think you have not taken enough risk. So failure is part of life and that in some way strengthens you.

How would you go about the deal again, if given a second chance?

First, the selection of target is very important and here, I believe integrity is really important. The person you are dealing with should have high ethical standards. I think that is a mistake we made, for instance in Hyderabad, we did not do enough diligence on the person who sold to us, he said something and delivered something else.

Second, in an acquisition one has to be decisive, one must have a clear plan what he wants to do and then act accordingly. About 70% of the mergers fail because of the ego of the chief executive saying I want to do it, and then I don’t care for value or anything.

Has your role as a leader become challenging as you increase your presence in other countries?

The way to run business is changing, more employees out of India, more senior people now, more diversified businesses, you don’t know as much, if it is one or two businesses you can understand, here your knowledge is limited, so yes it is more challenging. So we are adapting, we are changing.

Can you elaborate how you are changing?

One is that now we are pushing down much more full responsibility of a business to individuals and giving them more authority. They are accountable for delivering results. Earlier I used to have that responsibility. Also, getting high quality of people means incentivising them in the manner which you haven’t done earlier, through stock options.

Deep Focus

How can a leader make an M&A smooth for both companies?

Leading from the front in the context of a merger or an acquisition can be daunting. Merger and acquisition (M&A) is not an everyday business for even the biggest of companies. For smaller companies, it has the ability to be completely transformative — or to tear apart the company. I have some important lessons to share — Identify clear objectives and stick to them: The key team needs to have very specific (2-3) objectives, and revisit them in an organised way. Protect your key people: Across both companies, the leader should have a list of key people to retain. Protect the existing business: It’s very important to not let the M&A process cause disruptions in the core business. Other objectives such as joint culture and value system as well as clear communication to both companies are also very important.

(Kaushik Sen, CEO of Healthspring Community Medical Centres)

The dilemma is always how fast to proceed. Investors want results and want speed. A few dos and don’ts: Don’t spook the staff. Don’t announce all the rationalisations required immediately. Be prepared for departures. Be visible and accessible to as many people as possible and listen. Be the great communicator. Make people understand compulsions. Don’t change systems immediately. Change products only after explaining rationale. Don’t even think about changing the culture too soon. Don’t announce rapid-fire changes to timings, dress codes, approaches, hierarchies, work-flows and operating procedures. Keep the unified organisation lean and simple. Don’t overburden the new organisation with top heavy management or fixed costs. Reward people often.

(VN Dalmia, chairman Dalmia Continental Pvt Ltd)