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'Great companies are always built on aspirations'

January 23, 2008
What gives an entrepreneur-owner the confidence to say that some of his employees are smarter than him when he was their age?

"A lot of people, who have been working here for five, six years, when they joined were in their 20s and 30s, have grown tremendously. Interestingly, a lot of them are much smarter than maybe what I was when I was 33."

If you think this is condescension then you can never be more wrong than you are now. For, Rashesh Shah, chairman, CEO and managing director of the Rs 682.70 crore (Rs 6.827 billion revenues for nine months ended December 31, 2007) Edelweiss Capital, is humility personified.

During the course of the interview with Prasanna D Zore, Shah, who is a member of's board of directors, discussed his career and what it has taught him.

His days at IIM-Ahmedabad.

I think when all of us are growing we have some aspirations and some plans here and there. Going to IIM-A was a great atmosphere to be in there. The average competence level there was very high. It is a place where anybody's aspiration levels will get fired up. For me it was really at IIM-A that my aspirations took shape.

Before that it was always a few ideas here and there. I actually come from a traditional Gujarati business family. As a result of that I always had an attraction towards doing jobs. In my family everybody was running their own business. I always found wearing a tie and going to work as more professional in a sense.

So the idea was never to start my own business but run a professional company or be in one. So it was this fire that took me to IIM-A.

About leaving a good job at ICICI Bank [Get Quote] and starting Edelweiss Capital.

In between ICICI Bank and Edelweiss I did a couple of jobs in investment banks; but the end game was to always start a professional company on my own.

Investment banking at that time was very exciting, capital markets were just beginning to get more sophisticated; SEBI was formed, NSE was formed. It looked like a brave new world at that time.

I was excited by the new opportunities; economic liberalisation happened in 1991, so by 1994-1995 confidence seeped in that India would soon be on a growth trajectory. Of course, after we started the Indian economy and the markets went into a slump for three years. The long-term opportunity was always there but in the short-term there were many hiccups.

The early days of Indian capital markets excited me. A lot of global investment banks like Goldman Sachs and Morgan Stanley blossomed in the US in the 1980s. I had a few friends there and I saw how they progressed. I believed that the same will happen one day in India. We will have well-established and vibrant capital markets.

Was he always confident that this is where he wanted to be one day?

The aspiration is always there. One of the things in Edelweiss is that we have aspirations and a plan. The plan is for the next 18 months but the aspiration is there for the next 18 to 20 years.

The aspiration is to build a large, global investment bank that will be one of the best in the world. We are always committed to that. Obviously, you have to be fortunate to get some good clients, get great employees, good marketing people, and try to grow faster than what others are doing. It's a combination of all these good things. But the aspiration is always there.

Great companies are always built on aspirations.

The challenges, from a 50-employee company to more than 1,400 now.

The challenges were manifold. One is managing the rapid pace of growth. At Edelweiss we have been growing at 100 per cent for the last five, six years. We were only 30 to 40 people in 2003; now we are a little over 1,300 employees. So the key to this was managing people effectively which resulted in managing growth at the pace that we have till now.

The second thing is that we don't have a handbook. Like at ICICI Bank you had a handbook or a JV partner who had an employee manual. Here you don't have such a manual. So here you are learning a lot as you go along.

When you start scaling at the pace that we have done then you start leading from the back compared to the early days when you were leading from the front.

You delegate a lot of freedom amongst your employees but at the same time take care that they are going forward as a cohesive unit towards a common goal. When you are a small company you are leading from the front; rolling up your sleeves, deliver a letter to the courier office if you have to and such small things.

Has he ever done that?

You have to do it. Even in our first office at Edelweiss I remember we did not have phone lines. I had to stand in a long queue to get the form from the MTNL [Get Quote] office and get the phone ringing in my office. Of course, I was the only employee of Edelweiss then in 1995. We have done our share of hard work. But it's all a part of your work.

But when you grow as a company you stop intervening directly. I'd rather lead them, goad them guide them and mentor them. So the transition from the direct to indirect intervention is the hardest thing to overcome for any manager. But as you grow as a company the aspiration of your employees also rise. So aligning their aspirations to their satisfaction also becomes crucial.

The last thing is that we are a bunch of very, very smart people. I think we have a huge number of smart people in India today. It is one thing to appoint and get these smart people into my company -- which in itself is a challenging task -- but to make smart people work with each other is a greater challenge.

Thankfully we have added more and more smart people and successfully made them work as a cohesive unit. We have done this without becoming autocratic or monolithic as a company. The challenge is: Can you lead from the back but still make the collective energy of so many employees work constructively and positively for the betterment of all?

It is like the job of a shepherd. He has to allow everybody to roam freely; somebody will walk faster somebody will walk at a slow pace. But collectively you are in charge of the well-being of the entire herd.

Has he managed this process successfully?

I think we have an excellent team at Edelweiss; I am very proud to have most of the people that we have here. I think we have managed it well. We did a lot many right things and a few wrong things as well. Fortunately, what we did wrong was not as bad compared to what we did right.

About hiring undergraduates and sending them to B-schools.

We don't send them to top B-schools. We encourage them to go there. The important thing we have found by looking at India's demographics is that a host of people in this country are at the entry level. Very smart, very energetic, young people who were born in the 1980s have seen the poor India then and have grown modern in their outlook because of their exposure to cable television, the electronic media, the Internet, and the mobile communication revolution.

Somebody born in 1983-1984 is some 23, 24 years old now and is coming out of colleges now. They are very smart and global in their outlook; but what they need is experience. The Indian education system does not provide immediately employable people. The IT sector, the financial sector or for that matter most booming sectors are now filled with young people. What we decided was a fast growing company like ours cannot only depend on experienced people -- as it is, they are so difficult to find.

So getting fresh young graduates who are high-energy, high-capability, getting them into the system, training them, motivating them, empowering them because I wish when I came out of the college I had an opportunity to go and work somewhere for three years and get a ringside view of the Indian capital market would have been invaluable.

We want to give this opportunity to young people which I and many like me could not get in earlier days. We basically hire all these guys through a fairly stringent hiring process -- entrance exam, interviews and all that. And increasingly these graduates within a few years start running things here.

For example we have Edelweiss Analysts Programme, EAP that strives to increase the skill sets of young graduates whom we hire. Today the very same graduates run this programme at Edelweiss -- hire graduates, interview them train them for EAP.

If a lot of this smart bunch of graduates wants to go for an MBA programme we encourage them to do it. At any point in time we are hiring 150, 200 young, smart graduates each year. And we invest wholeheartedly in their future.

This is an ongoing process and we are making offers to young graduates this year also. We look out for hard-working students with a good academic track record. Obviously, we need intelligent people who can figure out things for themselves given the right ammunition.

We are a 1,400-people company, but the average age of an Edelweiss employee is just 27 years. We are amazed with the quality of young people at Edelweiss.

What are Edelweiss's guiding principles?

We have two: One, of course, is the guidelines of the company which you will find on our Web site. These are a set of business principles that are like the preamble to our Constitution. The other is the right approach and there are five things here:

  • One is growth. We are very, very hungry for growth. After growing at a 100 per cent pace for the last five, six years we are still hungry for growth.
  • We also believe in profitability. For the last eleven years we have been making profits irrespective of how the markets are.
  • Third is a very high level of employee ownership. Out of 1,400 Edelweiss employees over 800 employees own stock in the company. If you have to build a strong business then you need to make your employees own the business.
  • The fourth principle is to always innovate. India is a high growth country and if you want to always remain profitable then you have to innovate. Innovation is a very cliched word; it sounds very sexy. But then innovation is all about doing 'khatpat, bhejaphod' (brainstorming); it's thinking about executing an idea in ten different ways and finding the best that will serve the purpose.
  • And the final fundamental principle that we believe in Edelweiss is we want to build an organisation with greatest diversity possible. A lot of people here have a lot of power, everything is not concentrated at one place; even our business revenues come from diversified sources. None of our clients contribute more than 3 per cent to Edelweiss' overall revenues.
  • Creating wealth for his employees.

    There are two things here. In a way you know it's a good thing and you are happy that so many people who have been around in the company for long have got a chance to participate in its growth and wealth creation. But more than that it is about an employee's individual growth and satisfaction.

    A lot of people who have been working here for five, six years, who when they joined were in their 20s and 30s have grown tremendously. Interestingly, a lot of them are much smarter than maybe what I was when I was 33.

    So, if you ask me, it's not just wealth. It's wealth along with personal growth, opportunities and the freedom to execute them. The responsibilities and the challenges that Edelweiss offers them to grow gives me great satisfaction.

    However, at the end of the day, we all know that this is work in progress; so we are never happy and satisfied that it's over now. So there is this constant feeling that we all need to do more. Yeh dil [Images] maange more.

    Edelweiss, ten years from now.

    India is a structural growth story without doubt. There will be hiccups as we go along; there will be couple of bad years for the economy, say due to poor rainfall or whatever other reasons. But the long-term story remains strong.

    I see Edelweiss becoming an integrated and broad-based financial services player which will not only grow rapidly but build a high quality financial institution. That's our aspiration, ambition ten years down the line. We would like to emerge as one of the top 10 financial services companies in India.

    His advice for young Indian entrepreneurs.

    Start as fast as you can, be in your business for the long-term, don't give up in the face of adversities. Make sure that you understand the financial and economic module of your business.

    Lastly, you should all be bi-focal. Keep one eye on the short-term like how you will pay salaries to your employees and think about your own and your employees' aspirations for the long-term. Managing both the short-term and the long-term is equally important.

    Funding startups a few years from now?

    Absolutely! We as a company has been associated with entrepreneurs all the time. The idea is just not to create wealth but associate ourselves with brilliant minds and ideas. Again, the idea is not to provide funding but also do mentoring and hand-holding through a difficult period of time.

    We all benefited from advice and help of other entrepreneurs. Now it is our job to pass on the same to young entrepreneurs in India.

    His mentor?

    My family obviously has played a large role in keeping me balanced. My wife is my mentor; I have learned a lot from her. My employees are my mentors; I learn new things from them all the time. I learn a lot of things from my clients. In a way it is difficult to pinpoint a finger towards one person. We all learn a great deal from each other.

    We asked Rashesh's office what young people who want to join Edelweiss need to do. And this is what they said: Applicants can visit the Edelweiss Web site and post their resumes. Depending on the vacancies available at the company, suitable candidates will be called for an interview.

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