Tata Chemicals’ human touch
It has been a little over an year since R Mukundan took over as the managing director of Tata Chemicals. In a wide-ranging interview with Shubha Madhukar and Arvind Sridhar, he talks about how the company battled the recession and how it has revised its mission-vision to focus on the human impact of its businesses
On Tata Chemicals’ (TCL's) battle against recession
Way back in March 2008, even before the recession set in, we had anticipated pressure on profits due to a demand-supply imbalance in the soda ash market post the Beijing Olympics. As a proactive step to counter the same, we had put in place a programme called Action plan for downturn alleviation and profiting in turbulence (ADAPT) for the chemicals business, because we felt that the impact on this business would be severe. But in September, with the collapse of Lehman Brothers, something unexpected happened. The credit market froze, cash became critical and the impact was felt across the board.
The ADAPT programme was more about profit and margin protection, so we had to shift our focus from cost and profit to cash and cost. We have democratised this initiative by talking to employees across all locations and levels. Led by our senior team, we had extensively communicated and engaged with them in a two way process. We also extended ADAPT across the enterprise. We set ourselves a target of Rs1,000 crore cash in our books.
This programme has been successful. The hour of crisis seems to be over; we have not declared the war as over yet, but we think we are well on our way to victory. A lot of credit should go to the team and the businesses for having worked out a plan that has delivered. I would like to especially thank our employees who, cutting across functions and businesses, played a vital role in achieving our objectives. They were supported by the corporate team in a very efficient way. Prashant Ghose, executive director and CFO, TCL, and Ashok Gupta, senior VP, new business and projects, TCL, played a key role in supporting the effort by business teams led by DeLyle Bloomquist, president and CEO, General Chemical Industrial Products, US, and Kapil Mehan, executive director, TCL.
We handled the ADAPT initiative in a transparent manner. There were concerns about the impact of curtailing costs on employees. Eventually, we did curtail overheads, but without retrenching employees. We announced upfront that employees are central to business sustenance and that there will not be any retrenchment. Further, we confirmed that we believe in the ability of the employees to deliver the desired results. We moderated pay revisions and cut down on all unnecessary expenditure. Now, all of us travel economy and stay in guesthouses, Ginger hotels and other budget accommodation. We take early morning flights and return by the same night to avoid hotels. In effect, we have tightened our belts; what we would have spent in one month last year is now stretched over six months. We have survived the downturn by dint of the sacrifices that people have made.
Our business results show that our first half this year is worse than last year's first half. But we know that the second half of this year our businesses will perform better than the second half of last year. And all-in-all, I think we should be pleased with our performance and the tremendous spirit shown by our employees.
Surprisingly, the recession has been good for the company in several ways. I used to worry that we were building a set of managers who hadn’t experienced bad times or faced a real external challenge. There cannot be anything more frightening than an external challenge. It is an excellent learning experience. It brought all of us together, brought in focus and a sense of purpose. Now, we have a sense of achievement as well!
The second positive outcome of this entire process is that it has aligned teams across boundaries and cultures. The global chemicals business group is a much stronger team now.
On ‘The human touch of chemistry platform’
One of the things that I would regularly hear from our food team – the salt team – is that they have more to do with the FMCG sector and are not part of the chemicals umbrella. There was a notion that chemicals are bad. I have often wondered about how to demonstrate the positive impact on the common man that chemistry enables us to have in several areas. This has been the driving force behind the ‘The human touch of chemistry’ theme. We wanted to ensure that people within the company as well as those outside it have a more benign view of chemicals and chemistry.
The main idea was to add a bit of humaneness to chemistry. And that was how we arrived at ‘The human touch of chemistry’. Even within the company, we now consider the impact of our products rather than merely the product itself. And the impact of our products is that they lead to better living, be it through better food, better construction, better housing, better cars, better detergents, better hygiene, etc.
The fact of the matter is that we deal in chemicals. We are trying to move the edges of our boundary by getting into businesses that are more service and innovation oriented; we are trying to build a portfolio of service businesses for our agri-business and are also building innovations on the chemicals front.
For instance, our innovation centre works at the cusp of chemistry, biology and physics, that is with nanotechnology and biotechnology. The fertiliser business is trying to move from only fertilisers to the entire agri-input space. A part of this had to do with bringing Rallis India into the family. As a result, we have now entered crop protection and nutrition. Over a period of time, we will incorporate the service element throughout Tata Kisan Sansar (TKS) and the agri-business portfolio.
The mission of the company is to serve society through science. We are in the process of making sure that our new mission-vision is communicated extensively within the company. There are several implications to the human touch of chemistry platform, including is the company's position on climate change, issues of safety, health and environment (SHE), the kinds of investment we will be making in the future and so on.
On growth areas
We operate in two major sectors: the first is the industrial and consumer chemicals and the other is agri-inputs. The new business pillar supports these two, and is service and innovation oriented.
In the agri-inputs sector we have two strong pillars — crop nutrition and crop protection (through Rallis). In future, we will also see more speciality nutrients and speciality solutions for farmers. The service component of the agri-business has spawned a new busines such as Tata Kisan Sansar (TKS). TKS has taken off and has begun to turn in profitable numbers. We see huge potential in that business in terms of it taking a shape that is closer to a retail chain.
The industrial chemicals and consumer products sectors have a global leadership position; they need to leverage their low-cost position to maintain their momentum of market share and growth. We are looking at new products for the consumer products business.
In terms of potential for growth and profitability in the short term, I think the businesses which show a lot of promise are the agri-related and consumer-oriented businesses. The industrial chemicals business has an element of over-supply and will undergo a period of rationalisation in the next 2-3 years. But there are opportunities for expansion within the plants and also in new locations such as the Middle East and other areas.
On innovation at TCL
Each part of our business has shown a tremendous amount of innovation, which is one of the reasons why they show superior margins, greater customer connect and also a higher level of engagement with the issue of corporate sustainability (CS). We are among the few companies that have won international recognition for innovating in corporate sustainability. The ICIS award (an international award) which is contested by chemical companies, recognises the fact that some of the work done in our plants is not merely innovation that impacts operations but actually has a greater impact on the immediate community around the plant. Even during the recession, we have maintained our commitment to innovation.
Tata Chemicals Agri Technology Centre and the Innovation Centre have investigated ways in which we can impact the need for safe drinking water and the need for ensuring increased farm productivity even as water resources become scarce. While we deliver iodine through salt, the challenge is whether other micro-nutrients can be delivered using salt as a medium, for example iron-fortified salt. Work is currently under way in these areas.
We have used the framework of the Tata Business Excellence Model to imbibe business excellence into the company, along with the Tata Code of Conduct. These are our company's two prime, non-negotiable elements. Then, there is also our commitment to very high standards of SHE.
On sustainability and climate change
While commitment to sustainability is common across the board, the manifestation of sustainability may differ from one area to another. If you compare our corporate sustainability and plans on the ground in terms of our engagement with external communities in Kenya and India, there is a lot in common. There are numerous similarities between India and Kenya in terms of affirmative action. The economic divide between the external community and the internal community is distinct enough for us to say that we need much deeper programmes to engage with the community; else, this divide can create other hindrances to the smooth operations of the company. Conversely, in the US and the UK, community needs are different and hence, our responses to them are also different.
Other than that, for SHE, our standards are the same across all geographies and we maintain a zero-tolerance approach to deviations in the SHE area. Our standards with regards to emerging sustainability issues, like our stand on climate change, are almost entirely common across all our entities.
TCL was among the first few companies to adopt the Tata Climate Change initiative. We implemented carbon footprinting and adopted an abatement strategy. We have committed ourselves to the CII code for a 20 per cent reduction by 2020. While we do have a few plans, we are hopeful that as we move along, new technologies will emerge which will help us.
In our opinion, energy is going to be a big issue. Our investment in J-Oil for Jatropha plant seeds and the demonstration plant for sweet sorghum is an effort to branch into alternate energy systems. Environment is another issue. We have two products that we are working on: the first is bicarbonate and the second is liquid urea which can be used for nitrogen oxide (NOX) elimination in diesel engines. Since diesel is the preferred fuel for transportation of goods in India, urea will be useful for NOX reduction in diesel engines.
On people sustainability
People sustainability started as an initiative a year and a half ago. When we reviewed our employee engagement scores with Homi Khusrokhan (our former MD), we realised that they were not moving up at all. Mr Khusrokhan said that we must do something to set our house in order. That led to the theme of Year of the People, during which four or five key initiatives such as Home Shanti Home were undertaken, all of which were aimed at setting the work-life balance right and having more fun at the workplace. The Year of the People was intended to last for one year, but we never ended it. And our employee engagement scores did go up substantially.
The organisation has grown both in size and complexity. In our eagerness to grow, people engagement did get slightly weakened. But we recalibrated ourselves and brought it back to centre stage. This is an ongoing effort.
On an evolving vision
We envision TCL at the centre of integrating three things: having the best resources in the world, be it natural, human or economic resources; having the best processes in place and having the best customers.
I would like to see TCL as a company with a very strong presence in several areas, which leverages its strength in chemistry and science and impacts the areas of food, energy and environment, water and wellness (FEW). We have defined our areas of focus as materials which impact the FEW areas.
For instance, we believe that a lot of work needs to be done in the area of water for both farm and human consumption. In our view, water is going to be a very scarce resource and safe drinking water is going to be a big problem for mankind.