Finding the right formula
January 2001 | Christabelle Noronha

A chemical engineer by profession, Prasad Menon took over the reins of Tata Chemicals (TCL) as managing director on October 4, 2000 at a crucial juncture in the history of the company. Once a colossus in the group, TCL was beginning to feel the impact of dramatic changes in the environment in which it operates. With a mandate to write a turnaround script for the revival of the company’s fortunes, Mr Menon has a challenging assignment ahead of him. How does he plan to get this elephant to dance?

In an hour-long meeting with Christabelle Noronha he speaks about the challenges facing the company, his style of management and how he plans to restore TCL to its pre-eminent position.

tata.com: Economic transformation entails painful change that many Indian organisations have yet to come to terms with. In the light of this, what are the challenges facing TCL?
Prasad Menon: Here is a company that was on a continuous growth path for decades, highly respected for its pioneering technology at Mithapur, which is now faced with enormous challenges from a global environment. Like most large manufacturing companies in India, we too have found it difficult to respond quickly to the new demands of the market which has resulted in a downturn in our fortunes. Therefore, the biggest challenge facing TCL is really to move from a relatively sheltered environment where we had a huge market share and no curbs on production, to a bewildering new world where the market determines what is required, how much and at what price. This requires a complete mindset change in the organisation — to be market-led, customer-centric and highly focused on costs and speed of response.

tata.com: How do you plan to stimulate thinking and planning on these issues to bring about a mindset change among the employees?
PM: You’re right, we have to start with people, the core of any change process lies there. Therefore, an area we are concentrating on is HR – skill development, leadership programmes, awareness of internal and external customers etc. We are fortunate in that our people have crossed the first hurdle by understanding and accepting the need for change.

The second set of actions we are taking is to revamp and strengthen the marketing function. Business plans of the organisation will now be driven by the marketing plan, and our production teams will have to understand this shift in thinking.

The third area we are looking at is this whole issue of performance – financial results, moving towards best practices, looking at our ability to leverage technology. We will use a performance management system based on the Balanced Scorecard to move in this direction, and we will integrate this with, TQMS is helping us with this.

Lastly, we have taken some hard decisions, such as that of exiting some of our businesses which are not adding value – detergents and cement. We have to accept that we must deliver profit-growth, sometimes even in the absence of sales-growth.

tata.com: While the WTO is going about creating binding agreements, the www-driven technology is churning businesses worldwide; what do you think the combined effect of these two will be on TCL, with specific reference to risks and opportunities?
PM: Let me first take WTO and India’s commitments towards lowering tariff barriers. I think we all have to accept that success for a chemical manufacturing company can only come through being globally competitive. We have set ourselves the objective of being the lowest-cost producer of soda ash in the world in two years time, and our fertiliser plant in Uttar Pradesh is among the most efficient plants in the world. All our businesses must achieve this objective – through cost optimisation, marketing strategies, technology improvements and people skills. The risks of failure to reach these objectives is obvious, and the opportunity is that we can become a global player.

As far as the web and IT are concerned, we have already implemented SAP across the organisation, and we are now moving in a phased manner towards web-enabling our business processes. We are talking to TCS about this, and we will ensure that each investment will have a clear ROI (return on investment).

tata.com: What challenges do you foresee from imports, specifically from China, and how do you propose to cope with them?
PM: This is really related partly to the question on WTO. Today it is China that is a threat, tomorrow it could be US or Kenyan producers. We just have to be ahead of the pack, may be not in every parameter, but surely as a package of competitiveness.

tata.com: With your two main businesses, soda ash and salt, requiring different sets of managerial skills, does it make sense to exit one?
PM: Yes, I do agree that skill sets are different, but don’t forget that salt has industrial customers too, and that there are opportunities of exporting salt to Africa, Middle East and South East Asia. Salt is also a raw material for soda ash, so we have to look at salt as a composite of different product segments. Tata Salt is a terrific brand, and we must be a lot more aggressive.

tata.com: What is TCL’s USP in these markets?
PM: If we look at the three major marketplaces we are in, soda ash, salt and urea, I would say that our strengths are brand and technical efficiency.

tata.com: For many years, TCL was a proud pioneer in basic chemicals, do you have any pioneering plans in terms of new and related areas of businesses?
PM: Our immediate task is to consolidate our existing businesses – we are good at making and selling basic chemicals. But we are simultaneously looking at fresh opportunities – both in the sectors we are in, as well as new areas. The Tata Strategic Management Group (TSMG) is working with us on a strategic plan which should be ready in two to three months.

tata.com: What are the leadership challenges that you are being confronted with?
PM: How do I convince all levels of the organisation that they must "want to change"? Because it is a fact that change initiatives can only be sustained if a majority of the employees embrace them. So this is the biggest leadership challenge I face – to understand the constraints, and attend to them. A great help has been the fact that people in the organisation, without exception, have made me feel at home, although I am an "outsider".

tata.com: So far, we have been talking about a very domestic-centric operation, how do you plan to scale it up to a global operation?
PM: Our first effort must be directed towards making our businesses competitive, only then can we hope to be a global or at least a regional player. Opportunities exist for salt and soda ash and we are pursuing these.

tata.com: It is three months since you have taken over the reins of TCL as managing director, what message would you like to convey to your customers, investors and employees?
PM: That’s a tough one, but I would like to give a composite message to all three – this is still a great company with some inherent strengths, we are making every effort to be forward- looking, performance-oriented and agile. We don’t have the luxury of time, but I feel confident that you will find a change in the "environment" at TCL by the end of this year.