More of the same
Rakesh Goyal, senior executive at a stock brokerage, believes what worked for his firm in the downturn — good HR practices, great service, word-of-mouth publicity — will work during the upturn. Devraj Uchil reports.Updated: Sep 09, 2009, 01:53 IST
Rakesh Goyal (35), senior vice-president of Bonanza Portfolio, ends a phone call, smiling to himself. His is among the companies that have beaten the downturn.
Bonanza’s earnings have been growing — not as fast as more aggressive companies, but steadily and surely.
In the 12 years he’s spent in the stock market, Goyal has seen several ups and downs at close quarters. But the recent downturn, he said, was the worst. Stock markets are the barometers of an economy’s health. When they dip, everyone is affected.
“There was a correction in the market, but no panic [at that time],” said Goyal, recalling the January-August 2008 period that saw the Sensex fall from 21,000 points to around 8,000. “Initially, most market players thought we were decoupled from the global economy and felt confident. Or, I would say, overconfident of the Indian economy’s strength.”
Some were so sure of a recovery that they kept investing instead of cutting costs or reducing the pace of growth.
But when the bottom seemed nowhere in sight and Merrill Lynch went bankrupt in September 2008, panic set in.
Goyal said Bonanza was always cautious. Its expansion was slow, which was a blessing when the downturn set in. “Our budget was not high, but we became cautious as stock values eroded. The Satyam crisis was the last nail in the coffin,” he said.
As a result, Goyal was forced to take some tough decisions on cost-cutting and improving productivity. The company made good use of subdued market activity by restructuring and cleaning up its system. “It was like the Diwali cleaning done before ushering in the goddess of wealth,” Goyal quipped.
The cost-cutting measures included moving their Lower Parel office to Goregaon, near their corporate office. The new office cost less and the location improved employee coordination.
Goyal said the downturn didn’t hurt him greatly, but his parents, who stay in his native place, still worry about how he’s doing. “Explaining the downturn to my mother was one of the most difficult things I have done in recent times,” he said. “The daily bread and butter is not an issue even during a slowdown, but the income level did get hit.”
He added, tongue firmly in cheek: “My wife has started spending less.”
Though Goyal’s finances remained comfortable, the general environment made him cautious too. Movies, shopping, family outings and picnics took a backseat.
“As Indians, we are used to seeking value for money. When it’s in short supply, its value increases. Despite [the first signs of the] upturn, that sentiment lingers…,” he said.
Goyal said Bonanza is unlikely to step on the gas just because things are improving. The franchisee model helped the firm tide through the crisis and that’s what it’ll stick with during the upturn. It’ll keep budgets modest and not try to outrun the market. “This strategy helped us tide over the worst of the crisis without much pain. We’ll stick to it during the upturn as well,” said Goyal.
During any crisis, human resource policies are critical and Bonanza maintained good working conditions and policies to keep staff churn low. “Many of our employees have been with us for over a decade. What people need is space and peace. This is what we aim to provide, along with the freedom to speak your mind,” said Goyal.
Pressure, he pointed out, doesn’t always work. “I don’t like pressure, nor would my subordinates. Employees will stand by you only if you treat them well.”
Bonanza doesn’t intend to splurge on publicity either. After 1,100 offices in 350 cities, Goyal believes that word of mouth is best. That’s one of the reasons why Bonanza suffered less than the others.
“Our advertising spend was minimal and our employees became our brand ambassadors. Our quality of service was enough,” said Goyal.
Though this approach is slow, it has more impact on investors. They start believing the company is truly interested in helping them, which builds trust and loyalty. As Goyal said, when you enjoy such customer confidence, no slowdown can harm you.