We want to strengthen our performance culture and be intolerant of incompetence.....
Hailing from the rich pedigree of Hindustan Unilever that has been the grooming ground for India’s business leaders, on first look Nitin Paranjpe does not appear to be different from any of his predecessors. But as one explores a little further, one will find that this plain-looking, unassuming man is quite unique.
In the sense that, in a span of just 25 years being in positions of either extreme – vis-à-vis leadership - he has traversed every single mile to the top position as a new journey. From being a management trainee to area sales manager then moving on to assume greater responsibility(for various businesses of HUL ) as time passed by, ultimately culminating in him becoming the youngest CEO (at 44) of HUL, Paranjpe’s career has blossomed into something that can go down as a text-book example of a progressive and thoroughly professional entrepreneur. Along the way he has picked up skills, nuances, learnt lessons and acquired leadership qualities and, then after taking over the mantle of the company, his thought-leadership, vision, and leading by example to make it possible for the multi-billion dollar conglomerate to cruise along the path of dramatic growth and success that had been eluding it for about a decade prior to his becoming the CEO.
Son of an IAS (Indian Administrative Service) officer father, Paranjpe wasn’t your quintessential IIT or IIM grad (Indian Institute of Technology, and Management, respectively); rather he had honed his skills at the comparatively less famous Jamnalal Bajaj Institute of Management (JBIM), Mumbai, where his modest aspiration was to get on board the ranks of HUL (Hindustan Lever back then).
After completing his Master’s in marketing management from JBIM, he got a break with HUL as a management trainee. This exposed him for the first time to the scale of operations and business he had only seen in books and case-studies. Here he was walking alongside the people who made and sold a gamut of products to a good chunk of the population of country with more than a billion people. Mostly premium-priced, the range included everything from soaps and shampoos to detergents, salts, and scores of other products that constitute FMCG today. It was a god-sent opportunity for the young Paranjpe to acquire the knowledge of how companies work at that scale while always keeping in mind the changing trends and consumer buying-behaviours. Most importantly, he came to realise his own potential as a marketer and, extending further, an entrepreneur.
Paranjpe was inducted into the HUL system as Area Sales Manager for Detergents, after he had been thoroughly dipped in HUL colors and moulded into thinking along the Anglo-Dutch multinational’s business ideology during his internship as a management trainee. He worked for this segment of the company’s business for a few years which gave him a clear understanding of how the entire eco-system – from manufacturing to marketing to sales and distribution- works and, in the process, was also exposed to what was impeding its growth, if any.
Then, after almost a decade, in 1996, he was made Branch Manager for the Chennai region, in which position he worked for three years, before he was appointed as member of the Project Millennium Team. This was followed by his move to Unilever London in 2000, where he was involved in the review of the organization’s structure and, in the following year, he was made Executive Assistant to the Chairman and the Executive Committee of Unilever London.
Paranjpe became the Category Head - Fabric Wash and Regional Brand Director (Asia) for several Laundry and Household Cleaning (HHC) brands after returning from London in 2002, and did reasonably well in that position as well. The next five to six years saw him assuming two more senior positions which exposed him to the strategy level of management. The first one was in 2004 when he became Vice President - Home Care (Laundry & HHC) India, responsible for the Home Care business, and the second one was when he was appointed as the Executive Director for the Home & Personal Care business in March 2006. These two positions allowed him to gain vital insights into as to what was plaguing the sales volumes of the company, which has been near stagnant in the preceding eight to ten years.
If Paranjpe’s stint at Unilever London gave him a chance to observe how a truly multinational company works, then his leadership positions after returning to India provided him a thorough understanding of what is holding back the company from exploding, and registering sales growth that it was capable of. He was quick to put the finger on some of the major problems: there were surely a few inherent practices that were ingrained in the HUL thinking which were acting as the stumbling blocks in its growth. Primary one among them was the margin-focus. For years, as touched upon earlier, HUL sold products at a premium, which limited its penetration and, consequently, denting into its volume expansion plans. This was the anomaly that Paranjpe would correct not very long after he assumed office as Managing Director and Chief Executive Officer. In fact this was one problem area that kind of sparked a marketing and distribution revolution at HUL like it had never seen before.
The story thereafter
Paranjpe was made the CEO in April 2008. There is a little story regarding this appointment too. Apparently, Paranpje wasn’t even expecting to be elevated to the CEO’s position as he did not think it was time yet for that, apart from the fact that his very own performance at the senior positions wasn’t great either. But, Paul Polman, the Unilever CEO, who had had a chance to see Paranjpe from up-close during his work with Unilever London, had already spotted the spark in this relatively young man and, as a result, when the time came, he lost no time in put that potential to use by strongly advising the board for Paranjpe’s to be made the CEO of the company. If this is indeed true, then Mr. Polman was prophetic in his vision.
Upon assuming the responsibility of being the CEO of the then $40 billion-dollar company, Paranjpe set about setting some policies and processes right that he thought the company ought to have already and, also doing things he had envisaged for taking HUL to its rightful position as the leader in the FMCG segment -driven by strong volumes rather than just margins.
One of the first things that he set about changing was the margin-focused mind-set of the company. But this was easier said than done. There had to be research, plans and, accordingly, efforts commensurate with the same.
He now heralded a philosophy of consumer-focus that would determine every plan that the company made and every action it took. The fulcrum of it all was to connect directly with the market-place to understand and, thus, deliver what the market wants, as opposed to seeking a premium always to satisfy the share-holders, whose only stand-point was margins. Some of the pioneering initiatives are the additional rural-focus, innovative distribution methodology, the technology-enabled ‘Project IQ,’ and ‘Mission Bushfire,’ as also a spate of rural-inclusive activities like aligning with Self-Help Groups (SHG) and leveraging on their local base (Project Shakti), that have not only helped HUL penetrate the rural markets by ensuring effective hyper-local distribution, but also made the hundreds of rural-folk self-reliant. The project, according to internal estimates, has resulted in a 40% jump in sales wherever it was implemented.
All these initiatives stem from the need-basis. The Mission Bushfire was required to understand the customers, both urban and rural, through in-person interaction. This allowed the management committee to better understand the market demand, and come-up with products accordingly. Senior managers now make it a point to periodically establish direct contact with their end-customer through these drives. In fact, Paranjpe himself is said to be on the road for as many as fifteen days a month making customer visits.
The next step was to look at the distribution channels. Much before Paranjpe took over the as CEO, the company had around 10,000 distributors across the country, which meant too many over-heads in order to deliver the products to its customers and, thus, hurting the margins. This had to change if the company had to truly realise its potential as the market-leader. Paranjpe initiated a system that has turned out to be one of his many master-strokes. This was to shift production to supplier-owned factories close to the market, which has seen in the number of distributors coming down drastically to 2,400. Wheel detergent, which contributes more than Rs 2,000 crore, or more than 10 per cent of HUL's, is now supplied from 20 supplier-owned factories across the country rather than being concentrated in particular zones, which has led to savings of about Rs.1,000 to Rs. 1,500 per metric ton. Likewise, the sales are driven by smart region-specific and brand-specific pricing and product strategies. While Wheel has two mixes for different parts of the country: hard-water mix for northern India and soft-water mix for the south, Rin (detergent) –which contributes to about 5% of HUL’s sales- is priced differently in southern and northern India as, the company thinks, its "equity is different in the two parts. One definitely has a thing or two to learn from Paranjpe in thinking global and acting local. The company has also followed the practice of ‘zero-inventory,' vis-à-vis its distributors. Now, products arrive at its distributors' place from an HUL depot and stay there for just one night before being shipped to the retailers.
Then there is the ‘Project IQ,’ which uses analytics to better understand the buying behaviour of customers to get a thorough understanding of the market at a granular level. This is particularly effective when you are looking at data from million and a half outlets. It is almost impossible for humans to come up with the answers, thus necessitating the use of technology. Therefore, an algorithm was built to help support the app come up with certain recommendations of the system.
The result is that today, each of the 12,000 strong marketing staff (sales agents) employed by HUL’s distributors now carries a tablet computing device to the field where he has to just key in the store name to know what is to be done with that particular store. The software application on the tablet, built in-house by HUL, tells the agent everything from store-specific inventory control and re-order status indicators to the likelihood of which other products that store is capable of selling. The effort is further enriched by the tablet-app which even tells the merchandising agent who visits the store right after the sales agent has left the store, and who also carries the tab, how to arrange the stocks on the shelves.
Employing technology for effective sales and distribution help does not stop there. Paranjpe quite well understood and acknowledged the fact that the media-consumption patterns were changing with onset of the internet revolution, which has brought about a sea change in where potential customers spend their time. More so, the advent of social networking also eating into a lot of time and mind-space of the consumers, Paranjpe felt it was imperative that HUL is not left behind in capturing this source of connecting with its customer base. Since, all these new media-consumption sources were relatively alien to Paranjpe who, during the same period, was immersed in nothing else but strategizing the turn-around in the company’s performance and growth – which had been stagnant for well over a decade, he had to learn to get upto speed with the market-dynamics.
Paranjpe figured if he had to lead HUL in the era of digital marketing, then he would have to himself get used to living in the world his children were now a part of, which meant he would have to “go back to school” and attend digital workshops led by his brand managers, read the materials they insisted he read, and submit assignments they asked him to complete. Thus, in what can be called as ‘reverse-mentoring,’ endeavour, he hired a 25 year-old to tutor him on how to navigate the social media. Obviously, all this was to get to the root of phenomenon and to understand how it could made best use of in order to moulding HUL, the largest FMCG company in the country also as the largest digital marketing firm in the country.
The results of all the efforts that Paranjpe put in so far as the CEO of the company are there for all to see. He has changed a margin-focused company into a volume-centric business resulting in not only HUL headways in terms of market-penetration, it also allowed higher margins to retailers thus ensuring, in an indirect way, brand loyalty to a great extent. Further, although his aim of a ‘Perfect Store,’ which would work on ‘predictive intelligence,’ is still in the making, his emphasis on using technology through Project IQ has only added to the efficacy of his performance as the CEO. No wonder then that not only has the share value of HUL stock, which was languishing in the Rs.200 region for almost a decade, has shot-up by about 200% in the last two years to Rs.575, the company’s revenues have also gone up by Rs.4,500 Crore, from Rs. 17,000 Crore to Rs.22,500 Crores. This billion-dollar growth (exchange rates prevailing at the start of the sample period) – equivalent to the m-cap of many mid-sized companies-, has apparently not been able to ruffle the thinking caps of competing brands who contend that their market presence is not affected by this growth and expansion of HUL.
In any event, HUL’s story, and in particular, how Paranjpe brought about this remarkable turn-around would make for a thoroughly rewarding case-study in everything that has got to do with business and entrepreneurship. The company itself recognized this and re-appointed Paranjpe, who was the youngest CEO of the company (India) when he first became the CEO in 2008, even before his first term is completed in 2013 for another term which will last upto 2018, which would make him one of the youngest as well as the longest serving CEOs in the history of the company.
Awards and Honours
Best CEO (Multinational) at the Forbes India Leadership Awards (FILA), 2012.
Quotes by Mr. Nitin Paranjpe
"We want to set goals that are so audacious that, even if they are missed, the performance is still heroic."
"We want to strengthen our performance culture and be intolerant of incompetence. Consumer centricity must be a non-negotiable in business and so we have put a lot of pressure internally so that we delight externally,"
“People often talk about the choice between top line and bottom line. To me, that is a false choice. It is always both.”