How Mahesh Madhavan transformed Bacardi India
Anumeha Chaturvedi Edition: May 13, 2012
When Mahesh Madhavan was appointed Managing Director of Bacardi India in August 2007, the company was on a downward spiral. Bacardi Superior, a white rum that constituted about 95 per cent of its spirits portfolio, was losing market share at the rate of eight per cent annually. And while the industry was growing 18 per cent a year, Bacardi India was lagging behind at 11 per cent. (Retail consultancy Technopak estimated the size of the liquor market in India to be $1.64 billion in 2006.)
"The loss in market share was because of many things," recalls Madhavan. The global parent had cut investments in India between 2004 and 2007, and the brands started to decline. "Investments were diverted to markets providing a better return on capital." Sensing a decline, about 66 employees quit in those three years. For a company whose headcount was 71 when Madhavan joined, that was massive.
While conventional wisdom would call for loyalty rewards, some of those who remained would face the axe. "The team was a mix of different types. Some were very passionate and talented, and some were floaters, who were sticking around simply because they couldn't get a better job elsewhere," says Madhavan. "We had to get rid of the deadwood and inject some fresh energy, ideas and passion."
MESSAGE IN A BOTTLE
Sales of Bacardi's top brands were declining. Market share was falling
People in the company lacked the skills needed to drive performance
A complete revamp of HR processes
The buzz is back and so are sales
Madhavan, who was the Managing Director of Bacardi Thailand prior to his India stint, was not new to people problems. Bacardi Thailand had a turnover of baht 300 million (around Rs 32.2 crore then) when Madhavan joined it in 2000. The problems there also had to do with people. "I got a lot of people off the bus, and a lot of people on the bus," he says. By the time Madhavan left, the company had a turnover of baht 1.2 billion (around Rs 129 crore). Perhaps, it was because of this turnaround that he was picked to steer the Indian operations.
There were problems aplenty in India, most of which were on the human resources (HR) front. The company did not have an HR team. There were no clear processes, and no distinction between high and low performers. "If I'm not performing, and you're doing a fantastic job, you'll wonder why you're breaking your back. So we had to initiate a culture based on performance," he says.
Madhavan also needed to hire people. But he faced budgetary restrictions and had to find other ways to bring in talent. The marketing director position, for instance, was vacant. But instead of a replacement, he hired Arvind Krishnan as a marketing controller in February 2008, to work alongside Gautam Gangoli, who had joined a year earlier.
Krishnan joined the company from Luxor, a writing instrument maker, where he was the Senior Vice President for Business Operations. "Bacardi was in the process of charting a new career path, and the challenge of turning things around attracted me to the company," he says. Krishnan is now Vice President and Brand Managing Director for Bacardi's Dewar's whiskey in the United States.
In 2009, a vision map was drawn up, detailing what Bacardi India wished to achieve by 2015. Clear targets were set for senior managers.
People who performed well and had good potential were identifi ed as top talent. They were groomed for bigger roles in the company.
Today, Bacardi India is growing 40 per cent annually, outstripping the industry average of 17 per cent. Attrition rates have come down to 12 per cent.
Madhavan also initiated discussions with consulting firm Right Management in November 2008 to give the company a clear focus. "Mahesh was clear about where he wanted to take the organisation but was not sure whether the team would be able to do it. He was extremely transparent," says Chaitali Mukherjee, Country Manager, Right Management.
Bacardi India's global parent wanted long-term business targets, from 2008 to 2014, and the initial meeting with Right Management was about business goals. "But, as we continued our discussions, we realised that the probability of success depended on the people who would chase them," says Mukherjee.
In February 2009, a vision was drawn up for the company, detailing what it wished to achieve by 2015. Clearly defined goals and targets were set for Madhavan, those reporting to him and function heads across verticals, such as sales, HR, and marketing.
The leadership competency - the parameter of the 'right leader' for Bacardi India - was defined in line with the global organisation's requirements as well as local market requirements. "Using that framework as the base, we assessed close to 30 key leaders to understand their individual strengths and challenges," says Mukherjee. People who did not match up were asked to leave.
Among those facing the axe was a senior executive who headed a function and reported to Madhavan. "It was a tough decision, as Madhavan was facing a leadership crunch, but he decided to do away with him," says Mukherjee. The company's existing talent was also nurtured with a 12-month executive coaching programme. Eight key leaders, including Madhavan, Gangoli and Sanjeet Randhawa, who was Director, Finance, were coached individually for larger roles by senior business coaches from Right Management.
The consultancy's team looked at past performance data and drew up a Performance/Potential matrix for each executive. People who scored high on both parameters were identified as top talent. Those who scored high on one of the axes, or who were in key leadership roles but came low on potential were identified as people who needed to be worked with.
Through these assessment systems, Bacardi India was able to restructure the organisation in terms of interim and longterm restructuring. Existing talent, including Gangoli, was groomed for bigger roles and new talent was hired when the need arose.
The sessions were held once a month, and each leader had a different coach. "I was someone who was impulsive and hot headed. The coaching taught me how to think and act like a CEO, adapt to different cultures, and look at things from a 360 degree angle," says Gangoli. "I learnt about the paanwaala syndrome from my coach Sudhir Chand. A paanwaala manages everything single-handedly. I learnt to be able to handle things single handedly and I still use this approach when I am stuck," he says. Gangoli was made Managing Director of Bacardi Thailand in August 2011, and has now moved to China as a Commercial Director.
With investments picking up from 2010, Bacardi India started introducing more brands and hiring people from strong and diverse professional backgrounds. For instance, the new HR Director, Saurabh Upadhyay, was hired from Nokia in 2010. The new Sales Director came in from Pernod Ricard.
The company also instituted more town hall meetings and ensured better communication with the leadership team through offsite sessions. In addition, it rationalised performance bonuses and salaries, rewarding top performers and letting go of the bottom five per cent.
Today, Bacardi India's revenues are growing 40 per cent annually, outstripping the industry average of 17 per cent. The company has grown more than three times over the last five years. And attrition rates have come down to 12 per cent. In 2007, it had just two senior leaders: Madhavan and Randhawa. Today, Bacardi India has a fullfledged leadership team in place, including function heads for sales, marketing, human resources, operations, and finance.
Many leaders from Bacardi India have gone on to take up larger, global roles. While Gangoli headed East, Krishnan shifted to Miami, and Amit Dutta, a brand manager, moved to London this year as Global Brand Manager in Bacardi's travel retail division.
Madhavan feels vindicated. "It takes around four to five years to turn a company around. These postings show the global team recognises Indian talent," he says with a sense of satisfaction.
There is considerable learning in this case, not just for similar companies, but for India Inc as a whole. Making the 'People Agenda' the top boss' agenda is the starting point. Bacardi appears to have got its basics right. It has tackled people issues very boldly and effectively, unlike many organisations, which flirt around people issues. It has addressed the core, providing answers to the universal questions that every employee asks: "Tell me what I am supposed to do", "Tell me how I am doing", "Help me to perform better". These are fundamental questions in any organisation worldwide.
Full marks to Mahesh Madhavan and his team. In India, most organisations shy away from tackling these issues head on and carry on believing (rather erroneously) that they will get addressed somehow. They often forget that it is not the process but the "spirit behind the process" that needs to come alive. That is a self-limiting belief, which, if not challenged, can lead to the sort of situation that Bacardi faced in 2006/07.
Another great takeaway for me is the close cooperation between Madhavan and the HR consultant. The growth story highlights the power of line and HR working together to create a magical workplace, where both results and people-care not only co-exist but actually flourish. This partnership is a rare phenomenon. Instead, what is common is the lament from either side about how uncaring and incapable the other is. It takes only that little step to come together but alas, we see it rarely.
Sridhar Ganesh, Director HR and Lead Director Diversified Business Group, Murugappa Group
Bacardi is a case of good turnaround management. The company was losing market share rapidly, attrition rates were impossibly high, and people were demoralised. In such a situation, Mahesh Madhavan brought a 'fresh eye' to view the situation. Setting a vision for the organisation (with the support of its consultant) was a crucial step. Any vision/mission exercise brings the team together.
Madhavan participated in the exercise along with the team and together they charted the path to be taken in the medium term. This sort of exercise builds morale and people bond together to build their collective future. Above all it builds clarity of direction and trust, and is a good way to start getting the organisation back on track. The other interesting thing Bacardi did was to bring performance-reward clarity, which motivated high performers to reach tough targets. Clarity has a powerful and positive effect on performance.
Potential identification and talent management was another important step. Identifying the right talent and placing it in the right role can dramatically increase efficiencies and returns. People were convinced they were valued and being prepared for bigger roles. One of the biggest mistakes companies make is to not take the role-talent fit seriously, thereby living with sub-optimal performance.
The next challenge will be in sustaining the levels of enthusiasm and interest across the board. This is because, in any difficult situation, the troops get together and pull things through, but after a while monotony may set in and reward/recognition practices will need to be creatively addressed.
Asha Bhandarker, RML Chair Professor of Leadership Studies & Dean, Research and Consulting, MDI, Gurgaon
Did Bacardi India address the problem effectively? Would you have approached the company's HR challenge any differently? Write to us at firstname.lastname@example.org. Your views will be published in our online edition, and the best comment will win a Harvard Business School Press pocket mentor. Previous case studies are at www.businesstoday.in/casestudy.