EMERGING HUMAN RESOURCE PRACTICES AT ADITYA BIRLA GROUP

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EMERGING HUMAN RESOURCE PRACTICES AT ADITYA BIRLA GROUP ASHOK SOM This article describes in detail through a longitudinal case study the emerg- ing nature of human resources (HR) practices at Aditya Birla Group and, more importantly, links it to the strategic redesign that the whole organization un- derwent from 1995 to 2006. The longitudinal case study provides a snapshot of the dynamic and turbulent nature of the new liberalized Indian economic envi- ronment and how an organization such as Aditya Birla Group needed to brace itself from competition through innovative HR practices. The article argues that in challenging liberalizing business environments like India, the nature of HR itself demands that organizations develop new capabilities and that HR’s role is to reevaluate its competencies and develop new ones to help in the overall strategic redesign of organizations.The article elaborates on two critical issues: (1) the peculiarities and defining characteristics of HR models unique to India and (2) the main factors that shape people management policies and practices in the liberalized Indian environment. © 2010 Wiley Periodicals, Inc. Keywords: redesign, innovative HR practices, India, Aditya Birla Group Introduction O ver the last 15 years, radical innova- tions have taken place in the human resource management (HRM) func- tion in India (Som, 2006) due to phased liberalization of the Indian economy that has created a dynamic, turbu- lent, and hypercompetitive business environ- ment. Organizations in India are facing in- creasingly greater turbulence, volatility, and complexity, with the corresponding need to adapt their strategies and HR functions as new realities emerge. Human resource (HR) functions in Indian organizations have re- sponded to this turbulent environment (Som, 2007). In challenging liberalizing business environments like India, the nature of HR it- self demands that organizations develop new capabilities, and the role of HR is to reevalu- ate its competencies and develop new ones to help in the overall strategic redesign of orga- nizations. To understand this phenomenon, a growing spate of literature has tried to un- derstand the emerging role of HRM in the Indian context (Budhwar, 2001; Budhwar & Boyne, 2004; Som, 2008; Venkata Ratnam, Correspondence to: Ashok Som, Management Area, ESSEC Business School, Paris, Avenue Bernard Hirsch - B.P. 105, 95021 Cergy-Pontoise Cedex, France, Phone: 33 (0)1 34 43 30 73 / 3309 (O), Fax: 33 1 34 43 36 90, E-mail: [email protected]. Human Resource Management, Human Resource Management, May–June 2010, Vol. 49, No. 3, Pp. 549– 566 © 2010 Wiley Periodicals, Inc. Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/hrm.20354

Transcript of EMERGING HUMAN RESOURCE PRACTICES AT ADITYA BIRLA GROUP

EMERGING HUMAN RESOURCE

PRACTICES AT ADITYA BIRLA

GROUP

A S H O K S O M

This article describes in detail through a longitudinal case study the emerg-ing nature of human resources (HR) practices at Aditya Birla Group and, more importantly, links it to the strategic redesign that the whole organization un-derwent from 1995 to 2006. The longitudinal case study provides a snapshot of the dynamic and turbulent nature of the new liberalized Indian economic envi-ronment and how an organization such as Aditya Birla Group needed to brace itself from competition through innovative HR practices. The article argues that in challenging liberalizing business environments like India, the nature of HR itself demands that organizations develop new capabilities and that HR’s role is to reevaluate its competencies and develop new ones to help in the overall strategic redesign of organizations. The article elaborates on two critical issues: (1) the peculiarities and defi ning characteristics of HR models unique to India and (2) the main factors that shape people management policies and practices in the liberalized Indian environment. © 2010 Wiley Periodicals, Inc.

Keywords: redesign, innovative HR practices, India, Aditya Birla Group

Introduction

Ov er the last 15 years, radical innova-tions have taken place in the human resource management (HRM) func-tion in India (Som, 2006) due to phased liberalization of the Indian

economy that has created a dynamic, turbu-lent, and hypercompetitive business environ-ment. Organizations in India are facing in-creasingly greater turbulence, volatility, and complexity, with the corresponding need to adapt their strategies and HR functions as new realities emerge. Human resource (HR)

functions in Indian organizations have re-sponded to this turbulent environment (Som, 2007). In challenging liberalizing business environments like India, the nature of HR it-self demands that organizations develop new capabilities, and the role of HR is to reevalu-ate its competencies and develop new ones to help in the overall strategic redesign of orga-nizations. To understand this phenomenon, a growing spate of literature has tried to un-derstand the emerging role of HRM in the Indian context (Budhwar, 2001; Budhwar & Boyne, 2004; Som, 2008; Venkata Ratnam,

Correspondence to: Ashok Som, Management Area, ESSEC Business School, Paris, Avenue Bernard Hirsch - B.P. 105, 95021 Cergy-Pontoise Cedex, France, Phone: 33 (0)1 34 43 30 73 / 3309 (O), Fax: 33 1 34 43 36 90, E-mail: [email protected].

Human Resource Management,Human Resource Management, May–June 2010, Vol. 49, No. 3, Pp. 549– 566

© 2010 Wiley Periodicals, Inc.

Published online in Wiley InterScience (www.interscience.wiley.com).

DOI: 10.1002/hrm.20354

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Human Resource Management DOI: 10.1002/hrm

1998). This article analyzes a longitudinal case of organizational redesign and the emerg-ing role of HRM during this redesign of Adi-tya Birla Group, the third largest diversified business group in India, that grew from US$1.5 billion in 1995 to US$7.59 billion in 2006 (see Figure 1).

Previous Research

Before looking at the case study findings, this study began with a review of previous litera-ture on case studies of different organizations that reportedly understood HRM practices and their redesign.

Describing findings from 11 longitudinal case studies, Som (2006) elaborated on them with the challenge of increasing competition that has resulted from liberalization. Indian organizations have adopted innovative HRM practices both critically and constructively to foster employee creativity and innovation. Som described how Indian firms were adopting in-novative HRM practices to brace for competi-tion in the post-liberalization scenario.

A case study on the development of strate-gic HR professionals at BAE Systems found that BAE understood the demand for greater HR contributions to its business value by pro-viding a comprehensive HR professional de-

velopment program that developed knowl-edge (real capability), competence, HR knowledge, management skills, organization design, and development and consulting. This was meant to enhance its HR professionals’ competencies to encourage better business performance (Quinn & Brockbank, 2006).

A detailed case study of employee reten-tion at Wal-Mart demonstrated that any cor-poration, particularly a high-growth business, needs to focus some attention on employee retention. It pointed out that without mini-mizing the importance of roles such as com-pliance, diversity, compensation, and bene-fits, if the basic exercise of getting, keeping, and growing a company’s talent is done well, the other HR functions will reflect this excel-lence (Peterson, 2005).

In the case of Sysco Corporation, Cascio (2005) reported that in the 1980s, a combina-tion of economic and political factors led to the demand for greater accountability in all functional areas of business, including HR. The massive restructuring of organizations in the 1990s led to the outsourcing of many of HR’s basic transactional functions. For HR to add value to an organization, five key compe-tencies are needed: common understanding of the mission, clear expectations, compli-ance, commitment, and capability.

FIGURE 1. Growth story of Aditya Birla Group, 1999 to 2005Source: Internal company documents, Mumbai, India.

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In a detailed longitudinal case study, Som (2005) built a conceptual model of strategic response through effective HRM policies and practices within the framework of a liberal-ized market environment. The article under-stood this phenomenon from the contin-gency perspective of an Indo-Japanese joint venture, Maruti-Suzuki. Som (2005) found several issues relating to organizational rede-sign, effective corporate responses, profes-sional and employee-oriented modes of man-agement, and a hybrid model of Indo-Japanese HRM interventions to be critical for effective-ness in the Indian context.

In the case of Lafarge, Som (2003) described the detailed process of redesigning and imple-menting its HR function. The article argued that a well-articulated and integrated approach requires (1) recruitment, selection, and induc-tion; (2) retraining and redeployment; (3) a performance appraisal system; (4) a compensa-tion and reward mechanism; and (5) rightsiz-ing to be aligned with the organization’s over-all business strategy. It also reinforced that the foundation of a value-added HR function is a business strategy that relies on people as a source of competitive advantage.

All the above studies threw light on the competencies required for the new model of HR that had borne fruit in organizations. But few of the studies tried to understand and elaborate on two critical issues: (1) the pecu-liarities and defining characteristics of HR models that are unique to a particular coun-try or environment and (2) the main factors that shape people management policies and practices within the context of a specific macroenvironment. Also, though the previ-ous articles have discussed and elaborated on redesign of organizations and HR functions, few argued that a turbulent environment ne-cessitated that organizations develop new capabilities and that the role of HR is to re-evaluate its competencies and develop new competencies to help in organizations’ over-all strategic redesign.

Methodology

This study is exploratory. Following Yin (1994) and Eisenhardt (1995), I found an em-

bedded case-study design suitable for this study and deemed a broad, qualitative method suitable to study the phenomenon of HRM, utilizing multiple sources.

This paper reports the find-ings of a longitudinal case study of the third largest Indian con-glomerate, Aditya Birla Group. I chose this business group for anal-ysis specifically because it is suc-cessful in terms of financial per-formance (i.e., it was a leader within the industries it operates, was growing at a steady rate, and had been profitable within indus-try standards), it has an excellent reputation in India for HRM, and it was willing to participate in the longitudinal study.

I collected data over a six-year period in two phases from Decem-ber 2000 to February 2001 and from January to March 2006. I in-terviewed more than 11 top man-agers (including directors, regional president, executive vice president, vice president, general managers, and country heads) and four se-nior and middle management ex-ecutives, including HR executives, using a detailed, semistructured, open-ended interview format. On average, each interview lasted 1.5 hours to 2 hours. I extensively evaluated archival data, company documents, media reports, consul-tant reports, and sector reports.

Introducing Aditya Birla Group

The roots of Aditya Birla Group can be traced back to the 19th century, when Seth Shiv-narain Birla began trading in cotton in the picturesque town of Pilani in the Rajasthan Desert. It was here that Seth Shiv Narayan Birla started trading in cotton, laying the foundation for the House of Birlas.

Through India’s arduous 1850s, the Birla business expanded rapidly. In the early 20th century, the Group’s founding father, Ghan-shyamdas (G. D.) Birla, set up industries in

[F]ew of the studies

tried to understand

and elaborate on

two critical issues:

(1) the peculiarities

and defining

characteristics of

HR models that

are unique to a

particular country

or environment

and (2) the main

factors that shape

people management

policies and

practices within the

context of a specific

macroenvironment.

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critical sectors such as textiles and fiber, alu-minium, cement, and chemicals. As a close confidante of Mahatma Gandhi, he played an active role in the Indian freedom struggle. The luminaries of the Indian freedom struggle often met at Birla House in Delhi to plot the downfall of the British Raj. G. D. Birla found no contradiction in pursuing his business goals with the dedication of a saint, emerging as one of the foremost industrialists of preindepen-dence India. His grandson, Aditya Vikram Birla, the Group’s legendary leader, soaked up the principles by which G. D. lived.

A formidable force in Indian industry, Mr. Aditya Birla dreamed of setting up a global business empire at age 24. He was the first to put Indian business on the world map as far back as 1969. In the then vibrant and free

market Southeast Asian countries, he created world-class production bases, setting up 19 companies outside India in Thailand, Malay-sia, Indonesia, the Philippines, and Egypt. Interestingly, for Mr. Aditya Birla, globalization meant more than just geographic reach. He believed that a business could be global even while based in India. Back in his home territory, he singlemindedly put together the building blocks to make his Indian business a global force. Under his stewardship, his com-

panies rose to be the world’s largest producer of viscose staple fiber, the largest refiner of palm oil, the third largest producer of insula-tors, and the sixth largest producer of carbon black. In India, the company attained the status of the largest single producer of viscose filament yarn, apart from being a producer of cement, gray cement, and rayon grade pulp. The Group was also the largest producer of aluminium in the private sector, the lowest first-cost producer in the world, and the only producer of linen in India’s textile industry. At the time of his untimely death from pros-tate cancer in 1995 at age 52, the Group’s revenues topped $1.5 billion globally; assets, comprising 55 plants, were $1.5 billion; em-ployees numbered 75,000; and there were

600,000 shareholders. Most important, his companies had earned the people’s respect and admiration as one of India’s finest business houses. Through this outstanding record of enterprise, he helped create enor-mous wealth for the nation and respect for Indian entrepreneurship in Southeast Asia. In his time, his success was unmatched by any other industrialist in India.

After the untimely death of Aditya Vi-kram Birla in 1995, Kumar Mangalam Birla (Mr. Birla) started shaping, reshaping, and redesigning his companies relentlessly (see Table I).

From its diverse portfolio of textiles, ce-ment, tea, sponge iron, aluminum, fertilizers, shipping, carbon black, palm oil refining, chemicals, and a clutch of small businesses, Mr. Birla decided to focus on cement, alumi-num, viscose staple fiber, and carbon black, which he regarded as value businesses, along with knowledge sector industries such as tel-ecom, software, insurance, and branded ap-parel. The Group grew and consolidated its portfolio through a spate of acquisitions and greenfield projects. About 25% of the reve-nues came from textiles, a highly regulated and fragmented sector with margins as low as 8% to 10%. In cement, there were two sepa-rately listed companies where lack of syner-gies was adding to the costs. The Group had no competencies in refining and had made a half-hearted foray into it. Mr. Birla could not grow the fertilizer business because it was highly regulated, obstructing plans of expan-sion. The high cross-holdings within the Group and the unplanned diversification that came from the opportunistic responses of the license raj made capital allocation highly complex. Within 10 years, he steered the Group to an $8.3 billion conglomerate by focusing on market leadership and size in its chosen sectors. It institutionalized the rule of three—to be within the top three players in the world or at least the region—in each of its businesses (see Table II). It considerably re-duced its dependence on its fiber business.

Today, the Group is a dominant player in all of the sectors in which it operates, which include viscose staple fiber, nonferrous metals,

It institutionalized

the rule of three—to

be within the top

three players in the

world or at least the

region—in each of

its businesses.

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cement, viscose filament yarn, branded ap-parel, carbon black, chemicals, fertilizers, sponge iron, insulators, and financial services. Under Mr. Birla’s leadership, the Group be-came a world leader in viscose staple fiber,

and it also grew to become Asia’s largest inte-grated aluminium producer and the fastest-growing copper company in Asia. It is the11th largest cement producer in the world and the seventh largest in Asia, where it is also the

T A B L E I Vision, Mission, Value, and Strategy at Aditya Birla Group

Vision

To be a premium global conglomerate with a clear focus on each business.

Mission

To deliver superior value to our customers, shareholders, employees, and society at large.

Values

Integrity—We defi ne integrity as honesty in every action. We shall act and take decisions in a man-ner that these are fair, honest, and follow the highest standards of professionalism. Integrity shall be the cornerstone for all our dealings, be it with our customers, our employees, suppliers, our part-ners, shareholders, the communities we serve, or the government.

Commitment—On the foundation of integrity, we see commitment as doing whatever it takes to deliver as promised. Each one of us shall take ownership for our own work, teams, and the part of the organisation we are responsible for. Through this value, we shall build an even sharper results-oriented culture that is high on reliability and accountability. Our commitment is likely to make us a formidable leader and competitor in every market that we are in.

Passion—We defi ne passion as a missionary zeal arising out of an emotional engagement with work which inspires each one to give his or her best. All of us are expected to be enthusiastic in the pursuit of our goals and objectives. We shall recruit and actively encourage employees with a “fi re in the belly.” With this value, we hope to build a culture of innovation and breakthrough thinking, lead-ing to superior customer satisfaction and value creation.

Seamlessness—We understand seamlessness as thinking and working together across functional silos, hierarchy levels, across business lines and geographies. Each one of us shall demonstrate high level of teamwork through sharing and collaborative efforts and garner the synergy benefi ts from working together. Before we can truly benefi t from a borderless world, we need to build a borderless organization. We visualize free fl ow of knowledge and information across the group. I am reminded of the words of my father, the late Aditya Vikram Birla:

Our search for knowledge is not limited to within the group.We seek knowledge from every nook and corner, from our competitors, suppliers, cus-tomers et al.Even the worst-run units in India would have something to teach us. It is with this humil-ity that we seek knowledge.

Speed—One step ahead always. We look upon speed as responding to internal and external custom-ers with a sense of urgency. We shall continuously seek to crash timelines and ensure expeditious completion of our tasks. Through this value, we hope to build an agile and proactive organisation that is prompt to respond to the present and future needs of our customers.

Strategy

Achieve leadership and profitability in markets in five years’ time (rule of three) by acquisitions, brown-field and greenfield expansion. Differentiate yourself in the marketplace and become the preferred provider.Develop the assets and capabilities to achieve the above. If these cannot be achieved, we will re-assess the business plans and re-route resources to more deserving businesses.

•••

Source: Internal company documents, Mumbai, India.

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T A B L E I I Aditya Birla Group in 2006

Company Sectors/Products Country Some Competitors

Grasim Viscose staple fi ber (VSF), rayon grade pulp, cement, sponge iron, chemicals, textiles

India VSF: Lenzing (Austria)Textile: Gap, Arvind Mills

Ultratech

Shree Digvijay CementTanfac (JV)

••

Cement

Cement

India

India

India

Cement: ACC-Holcim, Gujarat Ambuja, Lafarge

PT Elegant Textile Industry Fluorine chemicals IndonesiaPT Sunrise Bumi Textiles Yarn IndonesiaPT Indo Liberty Textiles Yarn PhilippinesIndo Phil Textile Mills Yarn PhilippinesIndo Phil Cotton Mills Yarn PhilippinesIndo Phil Acrylic Mfg. Corp Yarn IndonesiaPT Indo Ray Kimia Yarn ThailandAditya Birla Chemicals (Thailand) (four companies merged)

Carbon disulfi de, chlor alkali & ECH, epoxy, polyphosphates, sulfi tes, peroxides

Thailand

Thai Peroxide Chemicals Co. Ltd. Refi ned palm oil, palm olein, stearin, and PFAD

Malaysia

Pan Century Edible Oils Fatty acids and glycerine Malaysia

Pan Century Oleochemicals VSF ThailandThai Rayon Spun and fancy yarn ThailandIndo Thai Synthetics Fabrics ThailandCentury Textiles Acrylic fi ber ThailandThai Acrylic Fibre ThailandHindalco

Indian Aluminium Company Ltd. (INDAL)Bihar Caustic & Chemicals

Non-ferrous metals

Aluminum and copper

Fluorine chemicals

India

India

India

NALCO (National Aluminium Company), Sterlite Industries

Birla Mineral Resources Pvt Ltd. Copper mines Australia International Players:Alcoa, PusAl, Hydro, BHP, Rio tinto, Dubal, Codelco, Gmexico, Mitsubischi

Aditya Birla Nuvo

Indian Rayon

Indo Gulf Birla NGK Insulators (JV)Birla Sun Life Insurance (JV)PSI Data SystemsTransworksBirla Global Finance

••••••

Viscose fi lament yarn (VSY), carbon black, insulators, garments, and textiles

Fertilizer, urea, seeds, pesticides

InsulatorsInsuranceInformation technologyIT-enabled services—BPO

India International in Carbon Black: Cabot, Degussa

International in Acrylic Fibre: Mitsubischi Rayon, Japan Exlan, AKSA (Tur-key), MonteFibre (Italy)

National:

Gujarat Narmada Valley Fertilizers, Gujarat State Fertilizers, Bayer Crop-Science, E.I.D.-

Continued on next page

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fourth largest producer of carbon black. The company is the world’s largest single-location palm oil refinery and the world’s number one in insulators, with its joint venture with NGK Insulators of Japan. In India, it is a premier branded garments player, has the most en-ergy-efficient private-sector fertilizer plants, and is the second-largest producer of viscose filament yarn, the number two private-sector insurance company, and the fourth-largest asset management company. It has a market cap of $12 billion, employs 72,000 from 20 different nationalities, and 30% of its revenue comes from operations in Thailand, Indone-sia, Malaysia, Philippines, Egypt, Canada, Australia, and China.

Redesigning and Redefi ning the Group

The Aditya Birla Group decided to sustain and grow its business where it had clear strength, a dominant presence, and a per-formance track record. This was in line with its vision of being a premium conglomerate with a clear focus at each business level and relentlessly pursuing value creation. This intent necessitated constant restructuring of the Group’s portfolio and redesigning

and consolidating the businesses. The logic underpinning consolidation had been the push for market leadership, economies of scale, productivity gains, and operational efficiencies, coalescing into value-added growth.

In the past 10 years, the Group grew through acquisition, unlike in the past, when it achieved growth through green-field projects. The growth imperative focused on value addition in industries in which the Group operated rather than on expansion of assets in diverse industries. When Mr. Kumar Mangalam Birla joined the Group, he sold off some megaprojects such as paper, sugar, and steel that the Group had embarked upon. Earlier, the overall portfolio was predominantly fiber-based businesses that were being replaced by nonferrous metals and cement. The share of textiles had since dropped from a quarter of the Group’s turnover to below 5%, while the share of metals and cement had increased to 62%. The Group had branched out into consumer products, ser-vices, and telecom, while the family for-tune was founded on commodities. The Group consolidated each of its businesses. In the words of Mr. Birla:

T A B L E I I Aditya Birla Group in 2006 (Continued)

Company Sectors/Products Country Some Competitors

Financial services Softwood/hardwood pulp (for VSF)

Canada Parry (India), Nagarjuna Fertilizers, Colour-Chem, Rallis India, IPCL, Marico Industries

AV Cell Inc.PT Indo Bharat RayonLiaoning Birla Carbon Co. Ltd.Alexandria Carbon BlackAlexandria FibreThai Carbon Black

VSFCarbon blackAcrylic fi breCarbon black

Indonesia

China

EgyptEgyptThailand

Mangalore Refi nery & Petrochemicals Ltd,

ICI India Ltd

ESSEL Mining Iron ore mining, noble ferro alloys, nitrogen gas, wind power generation

India Mainly state-Owned companies

Idea Cellular Telecom India Hutch, Bharti Telecom, Reliance, BSNL

Source: Internal company documents, Mumbai, India.

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We still have a very strong presence in the commodities sector, and I am very com-fortable with that. But I see our Group as a conglomerate. I am quite happy being in-volved in a variety of businesses, provided I am sure that we can attain a dominant position in those businesses. So you’ll fi nd us now in mutual funds, insurance, and branded garments. In fact, we’re the mar-ket leaders in the branded garment busi-ness. The focus has been on placing larger bets on fewer businesses. We have legiti-mate reason to believe that as a Group we can soon enter the Fortune 500 list.

The Birla Group redesigned its portfolio (see Figure 2). Mr. Birla brought the cement businesses under the Grasim umbrella, acquired L&T cement and renamed it Ultrat-ech, and completed the change by moving copper from Indo Gulf to Hindalco. Mr. Birla acquired Indal to consolidate the nonferrous metal business. Further redefining the Group, he undertook a three-way merger of Indian Rayon, Birla Global Finance, and Indo Gulf Fertilisers. The new entity, Aditya Birla Nuvo, has been called a conglomerate within a con-glomerate. This landmark redesign, valued at more than $100 million, was one of the major consolidations of its kind in India and a major step in creating shareholder value. It created a company that captured opportunities in the

evolving Indian economy through focused value businesses, such as carbon black, viscose filament yarn, textiles, and fertilizers, and driving high-growth businesses such as gar-ments, Information Technology (IT) /IT en-abled Services (ITeS), financial services (life insurance, mutual funds), and telecom.

Emerging Human Resource Initiatives and Activities

Creating an Identity

The redesign process started in 1996, a year after the death of Mr. Aditya Birla, under Mr. Kumar Mangalam Birla’s leadership. The Group launched for the first time a corporate identity that would serve as its logo—“Ad-itya,” which means “the Rising Sun.” Dr. Pragnya Ram, Group Executive President, Corporate Communications, summarized:

At that time when the organization was going through turmoil, the symbol of the Rising Sun brought different parts of the Group together, helped us as an organi-zation to reenergize ourselves, cross the bridge, and to get started on the path of change. The Rising Sun in a strange way brought a new optimism and served as a rallying point for the organization. That really, in a strategic way, was the fi rst pos-itive step for us in our process of change.

FIGURE 2. Redesign timeline of Aditya Birla GroupSource: Internal Company Documents, Mumbai, India.

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Notwithstanding the Group logo, the Aditya Birla Group, as an entity, was un-known, although the name Aditya Birla was much vaunted. There was no brand recogni-tion, so it was a challenge to attract the brightest and the best talent to work with the Group. Aditya Birla Management Corpo-ration Limited (ABMCL) was created to com-bat that issue. The Corporate Cell at ABMCL is the Group’s apex decision-making body, and it provided the Group companies’ strate-gic direction. Mr. Birla is the nonexecutive chairman with eight directors representing the major businesses and the HR function acting as a business partner and involved in the Group’s ROI (Ulrich & Smallwood, 2005).

ABMCL hosts Active Centres of Excel-lence, and its job is to think like a company and not like a Group. Its role is to integrate and coordinate the Group’s activities—inte-gration of people, systems, and fungibility—as if a company mandated them to create an integrated entity. Within this framework, Business Review Councils review the busi-nesses’ strategy as well as their operating performance. Each Group company has a board of independent directors who have expertise in related areas of that Group’s busi-nesses. The board, which is accountable to the company and the shareholders, provides strategic guidance and ensures performance through effective monitoring. ABMCL’s role was to assist Mr. Birla in making decisions.

The Group logo and the ABMCL gave employees ownership with the brand rather than the family; that, in turn, moved the Group from a paternalistic to a professional culture. The management model under Mr. Aditya Birla was a decentralized structure in which there was little synergistic contact be-tween the different Group units. To overcome this and establish an institutionalized sharing of best practices, Mr. Birla started the Birla Management Centre in 1989.

Through such forums and the interven-tions of the chairman’s office, the Group ob-tained the benefits of its collective strength. Under Mr. Birla, the Group developed a pow-erful corporate center that does not com-mand and control but leverages its strength

and resources and facilitates innovation. It has clearly defined the Group values and the corporate policies and practices on HR, com-munication, and world-class manufacturing that all Group units need to follow. In this Corporate Cell mode, HR has studied and implemented best practices within the Group.

Dr. Santrupt Misra, director of HR, ex-plained:

A great admirer of Jack Welch, Mr. Birla modelled the ABMCL along the lines of GE Capital. The ABMCL is the central nervous system of the Group, which allowed for individual businesses to function to their optimum under their respec-tive managements, while lev-eraging the expertise of the Corporate Cell. About 20 busi-ness leaders and those with Group-wide responsibilities are housed at the headquar-ters; they report directly to the chairman. Not even his secre-tary is allowed to get between him and them. He gives them complete freedom to run their businesses but also holds them accountable for their perform-ance. He has his own anten-nae and picks rare moments to assess people. If you pass muster at those points, then you have his trust forever.

Organizational Restructuring

With the Group identity and his team at ABMCL in place, Mr. Birla started deconstruct-ing and reconstructing businesses. Bharat K. Singh, Director, Business Strategy, and Dev Bhattacharya, Strategy, explained that during the time of Mr. Aditya Birla, most of the busi-nesses were small units or split into small units because licenses (during the license raj) were difficult to obtain. Growth was stunted in every way possible and competition within India was self-imposed. The first priority for any license was employment generation and

Its role is to

integrate and

coordinate the

Group’s activities—

integration of

people, systems,

and fungibility—as

if a company

mandated them to

create an integrated

entity.

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managing more employment. In 1991, with liberalization, markets opened up, business paradigms were redefined, there were pres-sures from shareholders, and the main ques-tion was, How does the Group operate as a Group and not as an amalgamation of loosely knit companies? Transition is never easy for any company. The initial transition phase was more externally driven (because of market forces, customers, and shareholders) as the shareholders wanted a certain amount of clar-ity and understandability. In the early 1990s, the Group started transitioning to a profes-sional organization for the sake of stakehold-ers’ interest (mainly employees). It was pain-

ful, was compelling, and entailed a learning process. At the begin-ning, financial markets did not view the restructuring process kindly, but restructuring contin-ued with a focused business strat-egy in the key business areas. The Aditya Birla Group was a pioneer/leader in changing the mind-set of a large, diversified, family-owned Group to a focused, professionally managed conglomerate.

The structure of the Group is entirely divisional; it is unit based; that gives it high clarity but creates confusion and contradiction at the top because there are 20 to 25 dif-ferent businesses. The governance role of the Group with corporate functions is at the conglomerate level. Mr. Birla is responsible for

the corporate functions. This interplay of sup-port/corporate function has been improved with the new structure. There is more ac-countability and responsibility at the business head level, though people sometimes feel pro-prietary but not necessarily entrepreneurial. Figures 3A and 3B show in detail the organiza-tional structure before and after redesign.

The businesses have been consolidated by product structure and report to one business head, rather than in the earlier structure, in which similar businesses reported to different business heads. The country head was done away with, and the overseas operations were structured by the different businesses. Mr. Birla

hand-picked the heads of the businesses and the next level of direct reports. The unit presidents have freedom to run their opera-tions under the overall supervision of the business heads. Mr. Birla only gets involved monthly or quarterly and provides freedom to make operational decisions. Certain other processes like world-class manufacturing have also been institutionalized so that the entire Group focuses on preparing itself for external competition and benchmarking itself with the best in the world. To motivate people for competition and to share their best practices, systems like annual awards have been insti-tuted in which the units showcase their achievements and are publicly recognized for their excellence.1

Cultural Heritage of Marwari Family Businesses

In traditional Marwari business families in India, scions are not expected to have a mind of their own. Typically, they are expected to continue family traditions and customs and play the benefactor babu.2 It is very hierarchi-cal, usually with no woman in the top eche-lons, and has a prevalent control-and-com-mand management style. To do away with the babu culture so prevalent at Birla compa-nies, Mr. Birla launched a 360-degree perfor-mance appraisal program that allowed man-agers to question even his leadership style. Complacency at Aditya Birla Group is not tolerated. No one doubts Mr. Birla’s ability to expand his empire, even though concerns remain about uncertainty related to line of reporting and accountability. Despite the del-egation of authority, people still prefer to wait for Babu’s orders directly. Changing this mind-set is Mr. Birla’s biggest challenge now.

His answer to the unprecedented chal-lenges has been simple: He has assembled an impressive group of professionals; he listens to them and empowers and delegates, while he himself scans the environment to antici-pate changes. Implementing the HR policies that were needed for the new business envi-ronment, Mr. Birla let go 350 vice presidents above age 60 in one day, something unheard of in those days. Most of these people were

To do away with

the babu culture so

prevalent at Birla

companies, Mr. Birla

launched a 360-

degree performance

appraisal program

that allowed

managers to

question even his

leadership style.

EMERGING HUMAN RESOURCE PRACTICES AT ADITYA BIRLA GROUP 559

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loyalists who had worked for Aditya Birla for years, so the womb-to-tomb3 policy came to an end. Along with Santrupt Misra, the HR Director (hired from Levers in 1996), Birla introduced a pathbreaking retirement policy that saw 325 senior executives between the ages of 62 and 65 step down after years of

service. Together, they then built a team by hiring senior people from outside, a marked departure from the past.

In Mr. Birla’s words:

When I took over as chairman, people in the Group were about twice my age. I had

FIGURE 3. (A) Organization structure of Aditya Birla Group, 1999. (B) Organization structure of Aditya Birla Group, 2006.Source: Internal company documents, Mumbai, India.

Group Companies

HindalcoIndustries

IndianRayon

Chemicals &Rayon

GrasimIndustries

Indo GulfCorporation

Thai CarbonBlack

Birla AT&TCommunications

Birla Management Center

Managing Director Directors•••

•••••

Group Companies

Grasim Hindalco Aditya Birla Nuvo IdeaCellular

InternationalOperations

JointVentures

Aditya Birla Management Corporation Ltd.

Board of Directors Corporate Cell(Provides group-wide services and acts as

consultants to Group companies)

Technology, Strategy, & ServicesCommunicationsFinanceCorporate HRInformation TechnologyLegalManagement AuditCorporate Affairs and DevelopmentSafety, Health, & EnvironmentStrategy and Business DevelopmentManagement ServicesWorld Class ManufacturingEconomics

A

B

Viscose Staple FibreThai & Indonesian OperationsFinancePower & Financial ServicesChemicals & Rayon

AluminiumTextilesCarbon Black, HGI, Essel Mining,MRPL & Malaysian Operations

InsulatorsCarbon Black

Ultratech Indal Indian RayonIndo Gulf (etc)

Chairman: Kumar Mangalam Birla

Chairman: Kumar Mangalam Birla

560 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010

Human Resource Management DOI: 10.1002/hrm

great respect for them personally (a strong 100,000 workforce with an average age of 58), but I also felt the need for change. The company was in mourning. At meet-ings, seniors, who had worked with my father, would frequently break down and cry at the mention of his name. For me this was traumatic. I felt that if people

never retired, then there was no place for younger people to rise. So it was important to institute a retirement policy. I also felt that the company should instil meri-tocracy rather than compliance, the so-called kith-and-kin policy.4 So, I instituted a policy that vet-ted all applications from family members of existing employees. None of this made me very pop-ular, but I thought it needed to be done and now, I think people are much more accepting of the policy. Also, I replaced the pratha system5 … with cash value added. This was a change in mind-set as it shifted the focus from day-to-day operational focus to the con-cept of added value vis-à-vis cost

of capital and risk associated with the business, and it had substantial implica-tions on communication and training throughout the Group.

Management Style: Intellectual Curiosity at the Top

Mr. Aditya Birla built a substantial part of the Group, especially the overseas operations, from scratch. He was involved in many of these businesses from conception, formulat-ing the strategy for them, implementing the projects, and running them on a day-to-day basis. His management style was very much hands-on with respect to management and operations. He motivated his workforce by interacting with them and would review and oversee the operations personally. Despite his active involvement, he ran the business in a decentralized style; business heads had responsibility and authority for running the

business in their style. This resulted in differ-ent businesses being run in different man-agement styles. The earlier organizational structure consisted of different unit heads reporting to certain business heads based on the growth emanating in a particular corpo-rate entity or region. The Group had a life-time employment policy; people rarely moved from one business to another. Unifor-mity across businesses was therefore never possible because microcultures existed within the Group. The level of delegation varied widely, depending on an individual’s per-sonal relationship with Mr. Birla. Though the overall Group objectives had certain com-mon themes, the Group was managed in a decentralized fashion.

Under Mr. Birla, the size of the businesses increased considerably, and the business en-vironment changed. Since he delegated the day-to-day operations to the business heads, he only got involved in strategy formulation, decisions impacting the long-term growth of a business, large capital expenditures, and HR-related matters. He institutionalized the HR processes so that the Group’s senior-level appointments and movements are done in joint consultation with businesses and HR. Common HR policies pertaining to such things as recruitment, interunit movements, job bands, compensation, and welfare have been put in place to bring uniformity to the Group’s work and culture.

As the Group redesigned itself from a paternalistic, centralized, decision-making system to a decentralized, consensus-based process, it worked on making decisions in Business Review Councils to have a seam-less integration between and within busi-nesses. Decision making in conglomerates tends to be slower. But the new organiza-tional design is expected to preempt any such impediment, and empowerment and speed of decision making will rival the competitors’.

A. M. Naik, L&T’s “never-say-die” chair-man and managing director, commented, “Mr. Birla’s style, very simply put, is to win over the person across the table with a lot of patience. He just won’t give up. He is very charming and friendly even in the thick of

This was a change

in mind-set as it

shifted the focus

from day-to-day

operational focus

to the concept of

added value vis-à-

vis cost of capital

and risk associated

with the business.

EMERGING HUMAN RESOURCE PRACTICES AT ADITYA BIRLA GROUP 561

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negotiations. He gets exactly what he wants by actually winning you over.”

Summarizing, Mr. Birla reflected:

Compared to my management style, I think my father was more hands on. My style is much more to give people free-dom to do their own thing. As long as they deliver, I don’t like to get involved. They should have the freedom to do what they think necessary. I am available if they need me and I will hold them ac-countable, but I will not interfere need-lessly. People used to say that when my father phoned somebody, then that per-son would stand up while answering the phone. He was great at bilateral motiva-tion and contact. My style is more group oriented. I like motivating groups of peo-ple. However, much as we have changed, we continue to constantly reinvent our-selves. We are not a family-run business.

Building Human Capital

The growth required the next push to be on the people front. In 2002 the Group created a management talent pool that identified more than 200 managers as performers and put them on a fast track. With the goal of providing for systematic and structured pro-cesses for career growth, the HR department trained more than 100 managers as job ana-lysts and another 100 as job evaluators. With this evaluation, 5,000 jobs were evaluated, resulting in the formation of 11 distinct job bands. In addition to this, the HR Depart-ment continued to enhance the quality and the pace of the institutionalization of the systems and processes that embraced the en-tire life cycle of the employees’ engagement with the organization. Several new initia-tives were instituted to enhance employee well-being, particularly in training, succes-sion planning, health care, educating their children, and other critical aspects that would have a significant bearing on em-ployee performance. Setting bigger chal-lenges and giving incentives to achieve them was the key to preparing the organization for growth. Consistently, the Group contempo-

rized a talent pool through lateral inductions across all levels. The HR department estab-lished a Group Management Trainee Scheme that helped recruit entry-level managers from reputable business schools and academic in-stitutions. To track employee satisfaction, the Group institutionalized the process of Organisational Health Survey, which is a globally well-regarded tool (see Table III).

Dr. Santrupt Misra, director of HR and IT, said:

We had to invest in capability develop-ment. Some of us thought it was a waste. But we had to prepare the Group for glo-balization and to gain benefi ts from In-dia’s economic liberalization. In some ways, we changed everything little by little. Later we changed [a] few things completely but never thought of changing the core of the company, its values, the re-spect for individuals that the company fosters, empowering people, bringing in innova-tion, and the emotional con-nect that the employees have with Aditya Birla. It symbol-ized that we as a Group were committed to people invest-ment. Our resources are world class, and in some sense, we had to destroy some of the old cultural mind-set of a fam-ily organization. We brought in internal competition to rekindle outside competi-tion. It enabled people to believe in the system and process that we put in place, and employees could see that they can apply, without asking permission from their boss or without personal requests. It was open and transparent. It created turmoil on one hand but signalled that changes were going to happen. We pro-moted teamwork, moving away from is-lands of power centers, [and] participated extensively in business school campus activities and recruitment. HR was a stra-tegic partner in this change process from the very beginning. Our efforts had been well received by the industry peers.

Our resources are

world class, and

in some sense, we

had to destroy some

of the old cultural

mind-set of a family

organization.

562 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010

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Humanistic Attitude

The Group inherently believed in the trustee-ship concept of management and portrayed itself as a value-based, caring corporate citi-zen. A part of the Group’s profits are plowed back into meaningful welfare-driven initia-tives that make a qualitative difference in the lives of marginalized people. These activities were carried out under the aegis of the Aditya Birla Centre for Community Initiatives and Rural Development that Ms. Rajashree Birla spearheads. For corporate citizen activities, the Group has received prestigious national and international awards. According to Ms. Rajashree Birla:

For us in the Aditya Birla Group, Corpo-rate Social Responsibility (CSR) is very much a part of the overall business portfo-lio. We work in around 3,700 villages and reach out to approximately 5 million peo-ple every year. Of these, more than 60% live below the poverty line.… We have a strong team of 250 people who work to raise literacy levels, take health care to the hut-step of the villagers, and train them

to eke out a sustainable livelihood, em-power women, provide basic amenities, and espouse social reform. Our second project is on a partnership with Habitat for Humanity International—an interna-tional NGO working in the areas of hous-ing for the marginalized section of society. The third community work is promoting widow remarriages and dowryless mar-riages. In 2005, more than 500 widows have been remarried. Together with this, we run 45 schools and 16 hospitals. We annually spend about US$18 million.

Weaving the Future: The Emerging Challenges

Over the last 10 years, the strategy of redesign-ing the organization worked very well. During that time, the Group pulled off a string of ac-quisitions at home and abroad. The Group was reasonably professionalized, with systems and processes and a strong brand identity gaining over the long-placed paradigm of loyalty over competence. It geared itself to compete in a global marketplace.

T A B L E I I I HR Awards and Honors

The Aditya Birla Group fi gures high in the Hewitt Associates ranking of the “Best Employers in India.”Our Group has been ranked as one of the “Great Places to Work In” by Business World Growtalent Magazine. The Group’s joint venture concern, Birla Sun Life Insurance Co. Ltd., was ranked ninth in the same study.Thai Rayon Public Co. Ltd., our company in Thailand, is the fi fth best employer (2005) in Thailand, according to Hewitt.Thai Carbon Black and Indo Thai Synthetics, our overseas company, rated as best employers in Thailand in 2003 by Hewitt.PT Elegant Textiles, yet another of our Group companies, ranked best employer in Indonesia and fi fth best employer in Asia in 2002 by Hewitt.Attrition rate of 1 percent for 2004–2005 is one of the lowest in the country.

Mr. Birla’s comment on the ingredients for current and future success

I believe our most important asset, one that is not refl ected in any of our balance sheets—consti-tutes our people. We endeavour to attract the best of talent, create an enabling environment, link our rewards systems to performance. We recruit people with high levels of energy and enthusiasm.

Behind our Group’s considerable achievement lies the intellectual and emotional commitment that our people bring to their work. Besides operational effi ciency and project management skills, honed under the most demanding and competitive conditions, it is the spirit of entrepreneurship and the way that our people bond cohesively with the Group, which is at the core of our ongoing success. I know it will continue to be the pivot for our future success.

Source: Internal company documents, Mumbai, India.

EMERGING HUMAN RESOURCE PRACTICES AT ADITYA BIRLA GROUP 563

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With these events, the Group seemed well positioned to selectively acquire busi-nesses and technologies from Europe and the United States, where companies were strug-gling to cope with rising costs of manpower, environmental cleanup, and overhead. Ac-cording to Mr. Birla:

We can see a discernible shift in supply chains to Asia, which present enormous opportunities for us to consolidate our hold on some of these industries, glo-bally. We are now in the phase of re-scaling, re-scoping, and re-designing the supply chain integration to gain access and growth in these markets. Being a conglomerate, we seek global growth in multiple businesses simultaneously, and this leads to several management chal-lenges. The complexities facing us today are multifold: global competitive pres-sures, changes in technology, changing customer requirements, demanding in-vestors, and businesses competing for re-sources.

Collectively, the Group faced some chal-lenges. The first challenge was developing a global corporate mind-set within a family owned business that had a history strongly rooted in India. It was important to ask whether the company wanted to be a true multinational corporation (MNC) or just an Indian company operating internationally. Being a true-blue MNC was only partly about geographic spread. It was more a mind-set of leveraging resources seamlessly, eager to build unique capabilities to tran-scend the barriers of language and cultures to create value. It was about being global in attitude without letting go of the compa-ny’s roots. The second challenge was to be responsive to local cultures, on one hand, while commanding brand equity abroad. Without recognition it was difficult to ac-cess talent—the key resource to making the company global. The third challenge was the respect of the values the Group epito-mized. These values were a moral contract between the employees and the organiza-tion and went beyond business and eco-

nomic transactions. The fourth challenge was the Group’s ability to morph commod-ity businesses into customer-centric busi-nesses—for example, from cement to ready-mix concrete, from aluminum to foil. Going downstream, closer to the consumer, might be the only way to insulate commodities from business cycles.

According to Debu Bhattacharya, man-aging director, Hindalco, Aditya Birla Group has four major challenges: (1) greenfield and brownfield growth, (2) the ability to adopt new cutting-edge technologies along with developing appropriate bandwidth to carry out a large number of proj-ects in remote locations, (3) funding, and, most important, (4) people. As India’s gross do-mestic product (GDP) was grow-ing at 8% to 9% a year, the main challenge for any corporation in India was going to be to attract, nurture, and retain the right professionals, and, more impor-tant, to keep them motivated for the right challenges. Indians had run businesses very successfully both in India and in developed economies. With easy adaptabil-ity that Indians had demon-strated over the years, it will not be difficult for Indian compa-nies to turn global. Indeed, the Group’s experiences, as well as the recent acquisitions abroad by Indian companies, justify this confidence. According to Debu Bhattacharya:

To be successful, there is a say-ing—if you want to catch fi sh, you have to get wet. As Indians we have confi dence in our abilities, we are clear what we want to do, and we are commit-ted in our endeavor to make this Group a world-class company be it [an] MNC or a Fortune 500 company.

Nurturing leaders is a challenge for most emerging Indian MNCs. Leadership can be nurtured if trust can be built with higher re-

As India’s gross

domestic product

(GDP) was growing

at 8% to 9% a

year, the main

challenge for any

corporation in India

was going to be

to attract, nurture,

and retain the right

professionals, and,

more important, to

keep them motivated

for the right

challenges.

564 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010

Human Resource Management DOI: 10.1002/hrm

spect for verbal communication and tolerance for genuine mistakes. Respect comes when 70% to 80% of the business decisions are right. If there are no mistakes, it means there was no decision taken. If everything is run by set systems and processes, technically, this

will dampen entrepreneurship, risk-taking ability, and speed in decision making, which were the original strength of the Birla Group.

On nurturing future leaders, Sanjeev Aga, Managing Director, Aditya Birla Nuvo, explained:

We have to change orbits—be-come top-notch and do things differently. Strategy, structure, sys-tems—these hygiene factors will take us thus far but will also restrict us after a point. In the businesses and times in which we operate, systems and processes cannot sub-stitute [for] people capabilities. We want processes to be institutional-ized but not fossilized. We have to facilitate and fi lter to attract and retain talent. We are striving to be a class act but are not yet there. We can extrapolate and grow, but to be world-class, we have to change orbits, not necessarily disruptively, but it will certainly be a very con-

scious effort coming from the heart.

Lessons for Emerging HRM Paradigms in the Indian Context

Clearly, the implications of the Aditya Birla Group case study (and the experience of other emerging MNCs) revolve around the use of HRM as a strategic and innovative tool aligned to the changing business dynamics of the environment. Although a single, longitu-dinal single case study, the present case study might not be generalizable, but it holds a number of potentially important lessons for researchers and practitioners who are or will be trying to understand the emerging HRM practices in large business groups within the Indian context.

Aditya Birla Group’s transformation and successful redesign focus on consistency, trust, and commitment toward the organiza-tion’s people and HRM practices. The first implication of the case study, therefore, is that HR must design and redesign effective methods to anticipate the needs of the cur-rent business environment (though they might be difficult to implement and might hurt the organization’s core). In challenging, liberalizing business environments like India, the nature of HR itself demands that organi-zations develop new capabilities and that the role of HR is to reevaluate its competencies and develop new ones to help in organiza-tions’ overall strategic redesign.

The second implication of this study is to develop top-management commitment, cre-ate a shared identity, and translate this com-mitment and identity through mission, vi-sion, goals, and business strategy into practices. At Aditya Birla Group, the impact of the Rising Sun as a symbol brought the different parts of the Group together and helped reenergize it to cross the bridge and get started on the path to change. The name “Aditya Birla” made an emotional connec-tion that was woven through the Group to create an integrated whole. In a strange way, the Rising Sun brought new optimism and served as a rallying point for the organiza-tion. That, in a strategic way, was the first positive step to start the process of change.

The third implication focuses on the im-portance of HR’s role as a business partner that participates in the organization redesign. At Aditya Birla Group, the HR Director sits on the Board and on the Group’s apex committees.

The fourth implication reinforces the role of HR in change management and explains how and to what extent the HR practices can be redesigned to create a meritocratic culture that supports the change process and spear-heads the change momentum. At Aditya Birla Group, new HR initiatives were taken, all with a clear focus on institutionalizing systems and spawning leaders and entrepreneurs into the very innards of the organization.

The fifth implication follows the need of the organization to import new skill sets; at-tract, nurture, and retain the right profession-

The first implication

of the case study,

therefore, is that

HR must design

and redesign

effective methods

to anticipate

the needs of the

current business

environment (though

they might be

difficult to implement

and might hurt the

organization’s core).

EMERGING HUMAN RESOURCE PRACTICES AT ADITYA BIRLA GROUP 565

Human Resource Management DOI: 10.1002/hrm

als; and, more important, to keep them moti-vated for the right challenges to transform employees into a winning team. To use an analogy from the game of cricket: A team needs not only several good batsmen, but also players who can take good catches, if it is to remain a winning team. Aditya Birla Group has redesigned itself from a very homogeneous group of people with a striking similarity in backgrounds to a more heterogeneous and di-verse entity—and, in some ways, a melting pot of culture—while retaining its distinct identity but changing the organization’s genetic code.

The sixth implication is the emerging role of HR in the organization’s corporate gover-nance processes that nurtures openness and transparency and puts a premium on integ-rity. This fosters a high degree of ownership and, consequently, entrepreneurship backed by significant empowerment. Experimenta-tion, risk taking, and innovation can then be a manifestation that absorbs a global dimen-sion and mind-set.

The seventh and final implication is the role of HR in developing a humanistic and corporate socially responsible organization that gives back and improves the society.

Conclusion

This case study explained how an emerging Indian MNC redesigned itself within a span of 10 years through its HR function to keep up with the accelerating pace of change in the external and internal environments. Within a hypercompetitive and turbulent environment, HR itself demanded that the organization develop new capabilities aligned to the organization’s business strat-egy. Within this framework, the role of HR is to reevaluate its competencies and develop new competencies that provide return on intangibles (Ulrich & Smallwood, 2005). Within this framework in the context of India, this article elaborates on some of the peculiarities and defining characteristics of HR practices unique to India and some of the main external and internal factors that have shaped the attitudes, work systems, and strategic and HR skills of Indian organi-

zations in the context of the liberalized Indian environment.

Notes

1. Outstanding performance is recognized by confer-

ring aspirational awards such as the Aditya Birla

Awards, the Chairman’s Award for Lifetime Contribu-

tion, Exemplary Service, Outstanding Leader, Excep-

tional Contributor, Distinguished Achiever, and Young

Professional. Awards like Anubhav—The Case-Study

Competition—and Rananiti, a mind-game for Man-

agement Warriors, heighten the sense of competi-

tion and organizational excellence. The Leadership

Development Centre, called Gyanodaya; E-learning

network; internal knowledge portal, called Adityadi-

sha; Management Journal, called Aditya; and the

in-house magazine, called Aditya Kiran, collectively

improve connectivity, communication, and team

spirit.

2. In babu culture, the head of the company is always

looked to for direction and decisions.

3. The womb-to-tomb policy meant that there was no

fixed retirement age. Loyalists of the family stayed on

with the company as many years as they could work

and be of help to the company (similar to the age-old

Japanese system). When they could not work any-

more, they would request the babu to guarantee their

children a job in the company.

4. The kith-and-kin policy meant guaranteed jobs for

family members in the Group. It happened that if one

son was very bright, he went to work for an MNC. The

other son, if he was not good enough for anywhere

else, was sent off to work for the Group.

5. The pratha system was a manual system suited for

relatively small production systems for determining

input costs such as plant capacity utilization, energy

consumption vis-à-vis daily cash profits as com-

pared to budgeted profits. G. D. Birla had developed

the system of accountability based on pratha, in

which each company in the Group had to draw up a

series of informed estimates of how much it would

cost to manufacture a particular volume of produc-

tion, sell it, and meet a profit target based on this

estimate. The amount of capital it takes to support

the manufacturing was also taken into account. On

the other hand, CVA was calculated as (gross cash

flow) minus [(Cost of Capital) minus (Gross Cash in-

vestment)] that led the Group to focus on profitabil-

ity, asset productivity, and growth.

566 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2010

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ASHOK SOM is professor and associate dean of the Global MBA program at ESSEC Busi-ness School. He is the founder of the India Research Centre at ESSEC. He received his Ph.D. from the Indian Institute of Management, Ahmedabad; an MSc and MTech from the Indian Institute of Technology, Kharagpur; and a bachelor’s degree from Presidency Col-lege, Calcutta, India. Ashok’s three main research areas are in organization redesign, inno-vative HRM, and creative industry innovations in Asia. His research has been published in Human Resource Management, International Journal of Human Resource Management, Asia Pacifi c Journal of Management, Thunderbird International Business Review, Euro-pean Business Forum, to name a few. He is Adjunct Faculty at IIM Ahmedabad (India) and Visiting Professor at GSB, Keio University (Tokyo); Tamkang University (Taiwan); and AUT University (New Zealand). He was the winner of the EMFD Case Writing Competition 2008. He was nominated as one of the 2000 Outstanding Intellectuals of the 21st Century in 2008–2009. He received the Pride of HR Profession Award awarded by the World HRD Congress in February 2010. His book Organization-Redesign and Innovative HRM was pub-lished by Oxford University Press (2008) and International Management: Managing the Global Corporation was published by McGraw-Hill, UK (2009). He is a regular speaker at international conferences and consults with European and Indian multinationals.

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