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Gita Piramal |
June 16, 2005
Hero Group chairman Brij Mohanlall Munjal is the epitome of the Punjabi patriarch: the wise karta holding together a burgeoning family through strong Hindu values. He is also the ultimate 21st century manager: keeping happy customers, employees, investors, vendors and dealers, all his stakeholders in fact.
His earthy style sits comfortably with Honda's Japanese culture. How does this smart leader manage the contradictions so successfully, even effortlessly?
The Regal Room, one of Mumbai's most elegant party rooms, was particularly well dressed on September 27, 2001. Apart from the stage, twenty-two round tables had been laid out, seating ten guests apiece.
A placard announced the chief guest of the table: Nandan Nilekani, Ekta Kapoor, Yang Soo Kim, Yogesh Deveshwar. . . each a candidate for Ernst & Young's Entrepreneur of the Year award. An audio visual presentation on each hopeful's achievements expertly generated feelings of heightened expectancy.
As Rahul Bajaj, chairman of the award committee, handed the trophy to Brij Mohanlall Munjal, the room burst into applause, and watched inquisitively as the two rival kings of India's roads exchanged smiles and shook hands.
In his acceptance speech, Munjal spoke of his surprise at being included in the shortlist. He was not being modest: neither he nor a Hero Honda manager nor a family member had nominated him. Rahul Bajaj had secretly championed him.
Exactly a year back, in September 2000, Hero Honda had overtaken Bajaj Auto to become India's largest two-wheeler maker. Success continues to dog Munjal: 2002 saw accolades from The Economic Times. Behind the kudos and the applause is an extraordinary man.
All of us wear masks which we don and take off according to the company we keep. Here is a complex man of not many masks but of many faces. He combines in himself modernity and tradition, an earthy Punjabi with a high regard for the social mores of other cultures, be they German or Japanese.
A family karta and a CEO, a hard-nosed businessman and a paternalistic, almost feudal, employer: he is a man capable of rare relationships, able to balance the desires and conflicting interests of those around him. For example:
Many of Hero Honda's vendors are companies privately owned and promoted by members of the Munjal family. When deciding component prices, someone has to fairly balance the needs of the Munjal family businesses with the interests of the publicly quoted Hero Honda. It's BM Munjal.
In Hero Honda, the Japanese giant contributes technology. Honda is a learning organisation and having been in India for almost two decades now has a good understanding of the Indian market. It can easily start a rival company as the government has liberalised this sector. Yet Honda has so far refrained from breaking the relationship. Why? It is mainly because of BM Munjal.
The man himself simply says, "I look at myself as an advisor, as a support system. I won't call myself the brain behind the group. The group functions well through marvellous planning and execution. The team is a hundred per cent professional."
He rarely, if ever, uses the first person singular while talking and is clearly much more comfortable saying 'we' than 'I'. Speaking about himself does not come easy to Brij Mohanlall Munjal. Articulate about events in the office, he becomes tongue-tied about events in his personal life, about the events which shaped his career and his management philosophy.
From zero to hero
His success story began in 1944 when a 20-year old Brij Mohanlall and his three brothers, Dayanand (32 years), Satyanand (27) and Om Prakash (16) moved from their birthplace Kamalia in Pakistan to Amritsar. There they started supplying components to the local bicycle business.
Only one of the Munjal brothers had previous business experience although two had worked for the British in the Indian civil service.
Partition in 1947 forced them to move to Ludhiana. The town was already a hub of the Indian bicycle business as well as an important textile center.
According to Jocelyn Probert and Dominique Turq who wrote perhaps the first case study on the Munjals, the brothers "traveled energetically with their component samples throughout India, selling in Bombay, Madras and elsewhere, and learning the intricacies of the fragmented Indian distribution network."
The loving brother
"Starting Hero Cycles was a turning point for us, the whole family got a direction and everyone started putting hundred per cent of their effort and time," recalls BM, "and our success was not me alone. Business is all about relationships. If a dealer comes, he would be taken to Om Prakash's house for lunch."
"Not even once has it happened that this tradition was not followed. If we are travelling by train and we get off at any station, our dealers will be waiting with flowers. Never has it happened that they are not there to receive us. This is the relationship building of Om Prakash."
"There is no one better than him. He took over marketing, bhaisaab took over manufacturing, quality, and I took care of dealing with government, to get quotas for various things. It automatically became such a beautiful combination. We had to run around for a Rs 50,000 loan, now we are offered crores. The management of relationships is our biggest strength."
Over the next three to four years, the Munjal brothers became one of India's largest bicycle parts suppliers. It was time to extract greater value from their knowledge. In 1952 they moved into manufacturing: handlebars, front forks and chains.
When the Punjab state government announced the issue of twelve new industrial licenses to make bicycles in Ludhiana, they leapt at the chance. Encouraged by the then minister of state for Punjab and government financing of Rs 600,000 to supplement their own limited capital resources, Hero Cycles was registered as a 'large-scale industrial unit' in 1956. Initial production was 25 cycles a day or 7,500 units per year.
Well-established competitors such as Raleigh, the Birla-promoted Hind Cycles, Chennai-based Tube Investments and Delhi's Atlas were rudely shaken out of their complacency by Hero Cycles. Indians then and now are extremely price sensitive.
The Hero bike was noticeably cheaper. It was a sturdy, reliable vehicle, capable of carrying 80kg of cargo as well as two adults. The Munjals believe in giving value for money. Their judicious treatment of employees, suppliers and dealers enabled cost effective, tightly managed just-in-time manufacturing operations before the phrase had been coined.
As Hero became a household name, competitors began to disappear. Production climbed steadily. In 1986 the Munjals entered the Guinness Book of World Records as the world's largest bicycle maker, ahead of both the United States and China, by selling 2.03mn units through various group companies.
The alliance partner
The mid 1980s turned to be as much a watershed period as the mid 1940s. In January 1984 Japan's Honda, the world's largest manufacturer of motorcycles, sent an invitation.
"Your culture is just like ours, shall we make motorcycles together?" Disappointed that Honda had not chosen to share its scooter technology with him, BM Munjal nonetheless swallowed his chagrin and the first Hero Honda motorbike rolled out on 13 April 1985. The rest as they say, is history.
Behind Hero Honda's success are some easily distinguishable factors. Both Honda and the Hero Group possess some pretty powerful attributes. Honda's four-stroke motorcycle technology has proved itself globally; its top management is committed to the Indian market; its brand is well known and accepted by the Indian consumer.
The Hero Group's strengths include engineering capability; relevance and salience of the Hero brand; a wide distribution network; management's commitment to quality; and experience in handling large volume production and distribution.
Added to this formidable line-up was changing consumer trends which favored motorcycles above scooters. Interestingly, other companies (such as Kinetic Honda) started out with even better expectations yet could not capitalize on their attributes. The extra intangible factor is BM himself, though he himself avers this is not so.
"Obviously Hero Honda's success makes me very happy, but it is not true when people say that Hero Honda will not be able to function without Brij Mohanlall Munjal. My role is to bless, to guide."
The independent son
"Togetherness is a value we learnt from our seniors and parents in our childhood," he continues.
"Your ethical values show when a problem comes. Leaders stick by their values. These values are respect for elders, religious leaning and living within your own means. In school, there were children in our class who would bring silver coins and we were lucky to have one or two paise, but because of our values, we never minded that we had less, or that we should get friendly with those with more money."
School was the local paathshaala. There was also a brief stint at a gurukul headed by a Rishikesh-trained instructor. "I stayed there only for two years," recounts BM reluctantly, clearly unused to talking about his childhood.
"That influence doesn't go anywhere, it stays. Even today I can recite so much without referring to any books. I got admission without my parents' consent, I don't think my mother would have permitted me if I had asked."
"One morning, I heard that admission was open and I went there to get admitted. They shaved my head, gave me different clothes and told me to get bhiksha from my mother. When my mother got to know, she cried. It was a new age."
"She had ambitions of sending her son to a modern school and then high school. She was 101% religious: we were woken up by four in the morning and taken to the ashram where she used to go. But she had already given one son to the gurukul and didn't want to give one more. That is how mothers are."
He did make it to college but had to drop out "because there was pressure to start earning".
"The values from childhood have stood me in good stead," BM stresses. His upbringing has strongly influenced his decision-making. At the same time, "I wouldn't say there was any one individual who influenced me. It was the entire setup, my parents. It was a combination of almost every individual who we came across. Respect has to come naturally."
What about contentment and growth, can they come together? "Contentment doesn't mean you should be satisfied with whatever little you have but it means that you achieve more for yourself but don't go for what others have. You have to labour hard, there are no two ways about that. Never shirk work."
What about respect for elders? All of us want our children to grow into managers who can take independent decisions, take responsibility, who can be innovative and creative, but don't we then put a leash on them?
"No, no, please don't bind respect with discipline," Munjal explains.
"Respect doesn't mean you don't allow children to grow. Respect is more than something to do with age. Respect and discipline are two different things. I have an elder brother and younger brother. I always bow down to my elder brother even in public without any shame. Whenever Om Prakash comes, he always bows to me before he takes a seat. It comes from inside, deep inside. I don't know what you will call it."
The just karta
From the time the four Munjal brothers set up shop in Amritsar, they have stuck together. In 2000, 21 family members were working in different businesses of the group, up from four in the 1940s. If the family stands united today, it is largely due to impeccable equity planning and BM's charisma and personal standards of fair play.
The original partnership understanding between the four brothers continues. Promoters' holdings in the various group companies are structured so that each of the four families controls 25 per cent.
According to BM, "We have always tried to give every incoming family member a meaningful role to play in the group's growth."
He and his brothers meticulously work on stability. Over the years, as new companies are launched, they ensure that all four branches hold equal stakes in them. Since the family stakes are identical, all get equal returns on their investments in the form of dividends or bonus shares.
Moreover splits are thwarted by an intricate network of family-owned investment companies. And none of the four families can transfer shares to a third party.
To further nip tensions in the bud, elders keep young minds busily focused on work rather than on each other. New companies or divisions are continuously being floated.
In the mid-1990s, the need for growth led to the group's bid for Scooters India, a tie up with Austria's Steyr Puch to make mini-motorcycles, and a flirtation with Germany's BMW to make expensive 650cc motorcycles as well as cars. Within the existing businesses, several new models of cycles were introduced both to meet the needs of the newly emerging leisure cycle market and to keep family members occupied.
The 1990s also saw the opening of a cold rolling mill in Ludhiana which ensured the quality of the group's basic raw material, steel, as well as a reliable supply at reasonable prices.
The mill's output goes to all Hero group companies and other buyers as well. The responsibility for managing prime companies or divisions depends on the member's competence rather than the branch to which he belongs.
The perpetual student
Always hungry for knowledge, BM feels that, "One of the most important lessons I learnt is the need to be well prepared and I learnt it in Germany. It was 1959, my first overseas trip, an Air India flight. I missed the flight I was booked on and had to catch the next one. A German was waiting for me at the airport. We were going to buy equipment from his competitor."
"A meeting was already scheduled with them, but he wanted to take me away from them to his company. He drove to the airport, back to the city, again to the airport and back again, 400 km each way. On the way to the hotel he recited shlokas from the Bhagwad Gita, and because I came from Punjab, recited verses from the Guru Granth Sahib."
"He had done a thorough study of Indian culture and could talk about it. In the hotel, he ordered food to my taste and liking. That impressed me thoroughly. If you prepare early and well, you can be so successful. These are the kinds of lessons I learnt."
"Germany would become my second home. We started looking for equipment but didn't have too much money. The same person, he knew a lot of places but he had to convince his boss that he would get a good order in the end, and we traveled extensively. We picked core technology but built everything else in India. I learnt how you should deal with people, how you should behave if you want to be in the big league. One has to project oneself properly."
An Iranian importer taught Munjal his next big lesson: keeping one's word. "We export bicycle components. We started exporting in 1964-1965 when an Iranian came to us with some other buyers. In Ludhiana, there were many manufacturers of bicycle components, many bigger than us, but we got an opportunity and that gave us very good lessons in quality requirements, timely shipment, money management, foreign exchange management."
The balanced CEO
The third all-important lesson was controlling his own selfishness.
"If you want a company to function smoothly, you have to go beyond yourself and your needs. In any organisation, and particularly a large one, there are issues everyday, some kind of proposition and some kind of opposition, but everything gets sorted out by the evening."
"We always find a way out, there is nothing that can't be sorted out. For an alliance to work, one has to give, one has to sacrifice, one has to be far less selfish. Your needs will be fulfilled, nothing will stand in the way, but you have to take care of everyone else as much as is due to them. There also has to be a certain amount of discipline."
But what about non-family managers? Promoters may be willing to sacrifice the short term for the long term but professional managers need to look after their self-interest, move up in their careers, show quick results, so their time frames are different, their needs are different, how do you balance all that?
"They have their aspirations, but they see us," points out Munjal. "Even we have aspirations and they see that our vision is long term. They are not paid less or taken less care of than anywhere else in the country. I don't compare with IT or new economy. But here they have all the privileges that any good company will offer. Therefore knowing that their aspirations are also met, they are not unhappy."
The Munjal attitude towards vendors and dealers is similar.
"Pricing is transparent, and if full details are given to the company, the information will not be exploited or misused," is typical Munjal-speak.
The family is always friendly when a dealer comes and don't deny him anything. If he needs a car, they'll get one for him. They make him feel at home. And they listen to him. For vendors, payment is always on time. Since vendors are either Munjals or brought in by a Munjal, personal loyalty is expected, but loyalty is not enough. All terms are settled on logic, not sentiment.
It's this fine sense of balance which has kept the Munjals and Honda together.
"The media has been speculating so much about what could happen after 2004; that if Honda goes its own way, what will happen to Munjals. We are equal partners but technology is from their side so many decisions have to be made by them. But true financial management, human management, marketing management, and even production management to a certain degree, the total selection of equipment is our own."
The problem solver
"In terms of culture exchange, I think the Japanese managers might be carrying something from us back to Japan," muses BM.
"We keep them informed about every detail, they have started working in our ways in some processes. We work well as partners. Our functioning is very straight forward. We work hard, they work hard. Why should there be a dispute? Issues will always come, and when they do, there is always a solution. Always it can be sorted."
Undoubtedly a good philosophy by which to live life as a man and a manager.
The author is Managing Editor, The Smart Manager
Published with the kind permission of The Smart Manager, India's first world class management magazine, available bi-monthly.