Once in a while Outlook Business comes out with a format called ‘Secret Diary of an Entrepreneur’ which is fun to read. It encapsulates, in the first person format, the journey of an entrepreneur from their childhood till date based on interviews done with him/her.
The most recent version had the secret diary of Vineet Nayar which is quite interesting. The below article is heavily inspired by the above.
Vineet Nayar is the former CEO of HCL Technologies, the fourth largest IT services business in India. He is credited with turning around HCL through a series of unconventional measures. He is also the Founder Chairman and CEO of Sampark Foundation, which aims at revolutionizing education in India through frugal innovation. In addition, he has also authored a critically acclaimed book titled Employees First, Customer Second.
I don't fight 90% of the battles I face; the 10% that I do pick, I fight aggressively.
During his childhood, Vineet Nayar attended a small school run by the Sisters of Notre Dame which had an American Principal named Sister Laurette.
Vineet was the ringleader among his group of friends. In his sixth standard (equivalent to sixth grade in the US), there was a new inexperienced teacher who the students felt could be taken advantage of. Vineet and his friends decided to drop marbles on the floor - one-by-one - whenever the teacher turned to face the board. Not surprisingly, she got mad and complained to Sister Laurette, who threw the kids out of school.
Now, fear is a fearsome motivator. Vineet was simply terrified of telling his parents that he got kicked out of school. Also, as the leader of the group that pulled the prank, he came up with the idea of going to school and just sitting in front of the gates - every day. He had figured out the concept of dharna even before he understood what the term meant. Sister Laurette continued telling them to go back home, but the kids would not budge - they claimed they were technically out of the school as they were sitting outside the gates. They even claimed they could hear the lessons.
Eventually, Sister Laurette relented. She called him to her room and told him,
"Vineet, you will go far in life, but only if you pick your battles right. If you demonstrate the spunk you showed here in those battles, you will rise. On the other hand, if you choose the wrong battles, you will go down."
This advice shaped his life. To this day, he lives by this principle -
If you step away from 90% of the battles, you will fight the remaining 10% with a velocity and ferocity that is unbeatable.
This rhymes with Buffett’s rule of selective focus, covered by Ian here.
At the age of 15, Vineet’s father passed away from a heart attack. His family had exactly Rs. 320 in the bank then (<$5). The event forced him to mature. A disinterested student till then, he studied hard. The below average student with a penchant for mischief turned into a hard working student who graduated from one of the premier management institutes in the country - XLRI. However, the penchant for irreverent thinking remained.
How do you motivate demotivated employees? You use condolence cards.
Vineet was clear about his preference for a tech company and chose HCL which was one of the largest IT companies in India, with an ambition to become the largest.
Within 30 days of joining the firm, he almost got fired. The new joinees were told they were hired to be change-makers in the organization, and he took that to heart. He decided to give his blunt opinion about where he disagreed with the management. This led to arguments, and in turn, he was given the feedback that he did not fit with the culture of the organization.
As luck would have it, around this time, many employees in the Bombay office were resigning. So the company’s decision to fire him was postponed. Instead they sent him to tackle an impossible task. At the time HCL had marginal presence in Bombay and on top of that the employees were thoroughly demotivated - with both the attrition and the consistent losing of deals to competitors. Vineet was sent in to turn this office around.
How do you incentivise a bunch of demotivated employees?
Well, one won’t find the approach Vineet used in books. He brought 50 condolence cards to his office and told his employees that every time they win a deal, they would send a condolence card to a salesperson from the competing company. That became the challenge - to send all the 50 condolence cards within the year. It worked. The negative energy of losing deals evolved into a positive force as the team began thinking out of the box to win deals. When the first deal was won, the entire office signed the card and decided to send it, not to the salesperson but the top executive of the competing company. The whole office got a kick out of this and since then, the office began winning one out of every two deals they bid.
After spending 5 years at HCL, Vineet quit in 1993 to start his own business Comnet which incubated the remote infrastructure management industry. The change in his perception at HCL is evident in the fact that Shiv Nadar, the founder of HCL was the earliest backer of his business.
How to win your first client? Work for 24 hours a day, and have 13 people stay in a room
With ZERO revenues and an employee base of 13, Comnet decided to bid for the tender floated by the National Stock Exchange (largest stock exchange in India today). The deal size was $6.5 million, the largest deal till then.
Comnet was up against formidable competition - Wipro, HCL and AT&T. Vineet motivated his employees by telling them to dream of the impossible. And to make this dream possible, he told them they were going to leverage a force that nobody else could - they were going to work 24x7. By partnering with a top firm in Israel and other unconventional methods, Comnet made to the final two. Given those were pre-cell phone days, they had to give an address and a landline number. Vineet told NSE that his entire staff was in The Oberoi, one of the most premium hotels in the city. There was not enough money and so Vineet booked a room in his name and his entire staff of 13 stayed in that room and slept in the room. The resident snorer was banished to the bathtub at night. When the hotel staff came, the others would hide in the bathroom or in a corner.
But the team was together and made a great presentation for the final round. Below is the excerpt from the article:
*"I knew how to make a convincing pitch. If you are looking to propose to a woman, you can do it two ways. Either you go, ‘Marry me because I am the most handsome or the richest guy in town’ or you make it about her. Tell her she is the most beautiful person you have ever met, the warmest, and so on.
The same principle works when you go to sell a product or service. Most sales guys go the first route. Going the second way worked for us. Our pitch was about NSE’s aspirations and granular details of how we will get them to that point - faster cheaper and better. They wanted more than a technical solution - they wanted people committed to their vision. They saw that in us. We did not talk about ourselves because that was our weak point."
The deal made Comnet. This was again an extension of the lesson he learnt as a child. Pick 10% of the battles you come across which you believe are worth fighting, and fight them with abundant focus and ferocity.
Shake a leg. Dance if you have to. Employees come first
Comnet eventually became part of HCL and neared the $1 billion mark around 2005. Around this time, Vineet was contemplating quitting as he felt the urge to give back to the disadvantaged in the country. But Shiv Nadar was not ready for him to leave. He asked Vineet to lead the transformation at HCL. HCL, despite being an early leader was lagging in growth and profitability to the large peers like Infosys and TCS.
Vineet was extremely reluctant at first, but when a man you consider your mentor asks you for something it is hard to resist. It was daunting for him - he had never turned around a large business. While there were other things that he implemented we will focus here on one unconventional (conventional by now for Vineet) approach.
The first principle was a radical management approach - employees first and customers second. Just like Herb Kelleher of Southwest Airlines (which we covered in our first book) HCL Tech under Vineet Nayar applied this to achieve extraordinary results. This unconventional philosophy came about through first principles thinking. After being appointed President of the company, Vineet traveled the world speaking to his customers, and noticed that almost all spoke not about HCL’s products or technologies, they inevitably spoke about HCL’s employees. Certain fundamental questions arose:
What was the core business? To create unique experiences and thereby unique value for customers.
Who creates the unique experiences and value? Employees.
If the employee creates the value, what should the role of the management be? Well, it should be enabling and encouraging the employees.
This shaped the Employees First, Customers Second philosophy which was eventually made into a book.
But HCL was not organized that way. It was a traditional pyramid structure where employees reported to a cadre of managers. Vineet wanted to turn it upside down - he wanted the heads of enabling functions such as human resources and finance and even the CEO—to become accountable to employees.
But it is easy to spout a management philosophy. One can imagine the skepticism from the frontline employees, it is not easy to get their buy-in. So Vineet initiated town halls where he would meet the frontline employees. But all companies have town halls, so Vineet decided to have his a tad differently. Here is an excerpt from a Harvard article written by him:
"I felt that at the very first meeting it would be counterproductive if I marched up to the podium in a suit and tie and expected people to open up to me. Only the boldest or the craziest would speak. I had to remove the gulf between employees and executives.
So I walked to the center of the stage and looked out at some 4,000 faces. I said nothing. A popular Bollywood number suddenly blared from the speakers. I started to dance. I wiggled. I danced into the aisles. I pulled people up from their chairs and danced with them. HCLites, as we call ourselves, still chuckle about my performance. After a few minutes the music ended, and I went back onstage to make my remarks. Those words sounded very different coming from a sweaty man who had just proved in public that he couldn’t dance than they would have coming from the emperor at the podium. Two hours of purposeful and animated discussions followed.
I went on to repeat that performance about 25 times that year, dancing my way around the world. I don’t know whether people thought my dancing showed I was crazy enough to believe in EFCS or whether it disarmed them enough to accept change. I do know that by the year’s end the change initiative had gathered momentum."
Vineet’s approach to employee motivation went beyond ‘elegant’ dancing. Inspired by Blue Ocean Strategy, Vineet came up with radical Blue Ocean Droplets. One droplet involved extensively sharing all relevant financial data. Employees earlier could only view data pertaining to their project. Now, data across groups, pertaining to their business unit, and the organization was freely shared with all.
Next, he got his 360 degree appraisal done and posted the results on the intranet for all his employees to see. He said if his ratings were below a certain level, he would give up his right to lead. This just inspired the managers below him. Many posted their reviews on the intranet as well. He also set up an online system which allowed anyone in the organization to lodge a complaint to raise a ticket, and the employee who opened the ticket determines whether its resolution is satisfactory. This effectively put the management at the service of the employees.
The whole idea was to increase the transparency and improve the passion level of the employees who were the primary value generators. And boy did it work!
From 2005, when he was appointed the President, to 2013 when he stepped down from the Board, HCL’s revenues, profits and market capitalization all increased by around 5x or more and that too was on top of a large base. Revenues grew from ~$750 million to ~$4 billion, profits from ~$140 million to ~$750 million and market cap from ~$2.3 billion to ~$14 billion.
Vineet’s approach in HCL is similar to what David Cote did at Honeywell during his tenure from 2002 to 2017, which Ian has covered here.
Where does Vineet Nayar spend his time today? He is bringing his radical thinking, irreverence and unconventional approach to improve the society. Inspired by his mother he started the Sampark Foundation (his mother threatened to disown him if he called it the Nayar Foundation. The Foundation is focused on improving the primary school education standards in India through frugal innovation in teaching practices. Today it reaches 76,000 schools and 7 million children.
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