| Yourself, your brother N Kumar and
your son Vijay Sankar are professionally qualified, and you have been
running the Sanmar group for the last three decades. Now, you have
inducted professionals who are non-family members as heads of the
various units of the group. Do you feel professionals who are non-family
members can run a business better than those from the family? |
| I don’t think running
a business successfully depends on whether somebody is a family member
or not. It depends on the capabilities of the individuals concerned.
There are good managers among family members; there are also bad managers
among family members. There is no connection between the two. |
| The two of us (N Sankar and N Kumar)
have proved that we are good managers. I have been in this field for
the last 30 years and we have the arrogance to say that we managed
our business well. We have done a reasonably good job. It is not that
we couldn’t have done better. Any professional manager who wants
to match us will have to really put in a lot of effort. It is not
that they can’t do it. I think all of us have the confidence
in ourselves. I have confidence in my ability. There are certain businesses
I am knowledgeable about, and there are some businesses about which
probably a professional manager knows better. So your question is
difficult to answer. It is possible to do better and it is also possible
to do worse. I am sure genes do not have anything to do with it. |
| You have been doing quite well all
these years. Then why did you decide to hire professionals to run
the various units of your business now? |
| The personal reason is that
I am now 55 and Kumar is 50. As long as we are looking after the operations,
decision-making gets pushed up. Anyway, the ultimate decision has
to come from the shareholders, forget the family part of it. Decision-making
starts with the operational management, then it goes to the board
and finally to the owners who are the shareholders. What happens now
is that issues that can be settled at the operational level get pushed
up. That doesn’t help develop the next level of managers. After
all, I am 55 and one day I am going to retire. So, the institution
has to learn to manage without me. |
| And I like to do that when I am there
to see the transition to the extent that I can, that is, the right
people are doing the work in the right way. I had decided long ago
that at 55, I would retire. No, not retire, I would go offline. It
doesn’t mean that if one of the managers messes things up, I
won’t come back and do anything. After all, the one person who
can’t run away from the job is me. We have the intellectual
arrogance that we can run any one of the businesses better than the
guy currently running it. But we can’t run all of them as we
have diversified and even after all the restructuring, we have four
core businesses and an IT business now. No one individual can run
all the five businesses. But we are not competition to any of the
professional managers. They have the freedom up to the managing director’s
level. |
| So, where does the buck stop in the
Sanmar Group now? |
| Operationally, it stops at
the managing director. Operation management is one and long-term management
is another. As the decision gets more critical, it goes up. It is
a fuzzy line, you know; what is operational and what is long-term
and what is medium-term. |
| It may be an operational decision but
a very critical one; like closing down one business. But it will have
to go all the way to the board. So, it is very difficult to say where
the buck stops. But I think it can be said that it stops with the
operational manager. |
| Why is it that of late, many business
houses run by families have started employing professionals? |
| I have been thinking about
this for a long time. |
| Several family run businesses have
taken the help of management consultants from abroad while you chose
to have those who had been with you. |
| That shows I have professionals
in my group. I have had them for the last 20 years. Anyway, there
was nobody else from the family except Kumar and I to look after our
business. Vijay is pretty young. He has just come in. My father retired
from India Cements, and was never with the Sanmar group. We have no
relatives in the business. So we have always had professionals running
the business. We have delegated a lot more operational and short-term
strategic management to professionals more than the other businesses.
The reason could be that we didn’t have any family member to
run the business. |
| What we have done now is that we have
completely withdrawn from the operational management. We have prepared
these people all these years too. I don’t want one dictator
to go and four dictators to come in. We have spent time developing
a common set of Sanmar group’s philosophies and processes, and
these people are committed to them. |
| Isn’t what you have done a kind
of re-designation? |
| It is not. |
| These people had always been with
you, and now you have made them managing directors. |
| Yes, they have been with us.
But today, they take the responsibility. In the past, they always
had the feeling that ultimately we are there to take the final decision.
I come to work at 8 in the morning, and till 6, I am here. So, they
just come ‘for a minute’ and ask something. Finally, they
always say that we discussed it with you when I was not in a position
to seriously think about an issue and come to a decision. Now, I tell
them to take decisions and take responsibility for them too. |
| Yesterday, you said things would be
more transparent now. Why? |
| Not ‘more’. Things
have always been transparent and they have to continue running transparently
too. |
| Let me go back to employing ‘professionals’
once again. Is it because multinationals are coming in and there is
going to be more competition that many family-run businesses are going
in for professionals to manage their businesses? |
| I don’t think so. In
the past, you could come in and take a decision a day and promise
to look at the other things in a day or two. It cannot be done today.
Everyday, there is a problem and you cannot sit back and say, I will
look at it tomorrow or the day after. Everyday is a crisis. In the
old days, inheriting a company was something to look forward to. Today,
I am not very sure it is so. |
| Is it because of competition? |
| It is a lot tougher to run
businesses these days. |
| Why is it so? |
| Yes, competition. Because
of the economy opening up, people demanding more, and more imports
coming in. So it is no longer a bed of roses to inherit a company.
It is a big commitment and responsibility. And, in the past, because
of our tax laws, the only way you could maintain a comfortable lifestyle
was to be a company executive. Today, that is not required any more.
Today, you can get good dividend and returns from the stock market
and the banks, and live a good life |
| Besides, people are getting qualified
and they can get a good job and a salary of not merely Rs 2,000 or
so. They get a substantial salary, without any ownership. So there
is no necessity to employ a family man any more. |
| Some Indian business groups are employing
consultants from abroad. Do you feel those who studied and trained
abroad are better than those coming from our management institutions
like the IIMs here? |
| Not only IIMs, but all our
professional educational institutions produce excellent people. The
only problem is that they don’t stay back in India. In the last
20 years, we have appointed many management professionals from the
IIMs and other quality institutions. |
| Recently, a business magazine said
in its cover story that nobody employs a professional who is 45-plus
even if he is highly qualified and experienced. Of course, all your
managing directors are 50-plus. Do you think there is a general shift
in the corporate sector towards younger people? |
| In the past, you automatically
got promoted based on your seniority. Now, it is not so. In the future,
it is not the next senior man who goes up but the next capable man.
In this environment of IT, it looks like youngsters are more capable
to do e-business than we are. At the same time, it is his capability
that counts. We have people of 55, 54, 50 etc., and they are there
because they are capable. There are many others whom we have moved
sideways; we have also let some people go. That was not because they
were old but because they were not capable. |
| Now, you have re-entered the IT field
too. Do you feel the IT stocks and to some extent pharma stocks too
are pushed up in an exaggerated fashion? The old economy is down for
a very long time. Where will this lead to? |
| The business concept of IT
is not exaggerated or overvalued. What is wrong is the valuation given.
See, you have production at one end and the consumer at the other
end. The consumer could be a retailer or a businessman. And the manufacturer
could be a manufacturer of cement, steel, sugar or whatever. Now,
you have to take goods from here and deliver it there. There is a
lot of money going into the delivery mechanism and also to the consumers
in the form of loans etc., but there is no money going to the manufacturing
area. |
| Unless we manufacture goods,
where are they going to come from? I know from where they will come
– overseas. So, shortly, we are going to have an excellent delivery
mechanism and you are giving a lot of money to the customers too,
but the production side is dying. |
| That will be a bad scenario for the
country. |
| For the country, it is bad
but not for the consumer. Individually, I am a consumer first and
a manufacturer second. I am very happy because I have enough wealth
to consume and you have all the imported stuff here. But as an Indian,
I am not happy. India is growing at six to seven per cent a year.
But if you take cement for example, seven per cent of cement of 100
million tonne is seven million tonne. There is no seven million tonnes
capacity coming up. I am only giving you rough figures. |
| So what will happen to the old economy
like steel, cement etc? |
| All of them will be closed
down and we will have only imports, unless there is a change in the
policy. I will say again, this is not good for India. Information
Technology is only an enabling factor but we have to manufacture the
basic things to deliver. See, if you have bought lots of trucks to
deliver stuff from the factory to the consumer, and the consumer is
ready. But what will happen if you don’t produce any goods in
your factory? |
| What should be done to revive the
old economy, according to you? |
| As a part of
second-generation reforms, we need equity funds. The old economy is
fighting with its hands tied. It has distinct businesses and even
in this condition nobody can close it down because it runs into labour
laws. The new guys coming in starts with much fewer people. That is
one part of it. Okay, if I expand and put up a huge business, there
is no equity funding available. You have people coming in and saying,
you have a wonderful project. We will give you all the money you want
as loans but we won’t give you equity. If the project is good
enough for loans, it is even better for equity. But there is no equity
available. So how can you set up a project? |
| The government has to bring back the
equity culture. I think what you need is an equity fund like what
the LIC, UTI and ICCI are holding. The government should come forward
to fund a good project. |
| And, of course, you need some reforms
in the laws whether it is labour laws or finance laws. |
| Earlier, when the government announced
its decision to build infrastructure, the prices of cement and steel
went up for a while but as nothing further happened, what went up
came down. So you expect hard decisions and initiatives from the government
other than just announcements? |
| Absolutely. Initiatives are
very important. Okay, about taking hard decisions, they may talk about
political compulsions. But I think what we need is an equity fund.
Now, if you need equity, you have to go the foreigners. I am not against
foreign investment but then you have to think of the country’s
future. As far as I am concerned, I have no problem. |
| You are into the shipping business
too. What do you say about the privatisation of ports? What do we
have to do to make our ports function properly? |
| It is a good idea to privatise
them but then who is putting in the money? All the money is coming
from overseas. There is no Indian money going into any of these. Then,
all these will be internationally owned and not domestically owned.
If you say that is the way you want to go, fine. |
| I am not for a closed economy. I am
only saying that we need to enable the domestic economy; we need domestic
investors who are able to complete things in a proper way, in a balanced
way. |
| Do you want protection? |
| I am not for protection. I
am only saying that if there is a project that can be set up here,
which is viable even at the low rates of import duties, that should
be supported. Now, you get all the loans but there is no equity culture
here. |
| Do you agree with government running
businesses that make bread, butter and cars? |
| I am only asking for equity
funds and that the government owns more but does not run the business.
I say, you invest but let the management run the businesses. Don’t
do it through politics. |
| But when their money is in the business,
they will play politics, won’t they? |
| Who are ‘they’?
The government is ‘we’, not ‘they’. The government
is not investing its money but my money and your money. So, you and
I should be managing the business. What about mutual funds? They don’t
invest their money? They invest others’ money and they run it
well. |
| In politics, we have only people who
are in their seventies and eighties, and a person in his fifties is
called young. Here you are at 55 want to go offline. Why? |
| I want to relax now. But those
who know me say I will not do that. Then I am a good planner. So now
I can do a lot of planning for the business. Then I can think. I can
catch up with my reading. I am not very computer savvy and I want
to spend a month learning some basics. |
| Play more tennis? |
| I still play tennis. But I
don’t think my body will take any more even if I want to. |
