HUL on a roll with Nitin Paranjpe at wheel

16 May,2012

By Kala Vijayraghavan & Sagar Malviya


When Nitin Paranjpe took over at the helm of Hindustan Unilever Ltd (HUL) in April 2008 at 44, he became the youngest chief executive to head the Anglo-Dutch consumer products giant’s Indian operations. Now Mr Paranjpe has another one for the record books – he is the only CEO in the past two decades to be recommended by the board for a second stint.


The man, who joined HUL way back in 1987 as a management trainee, has been reappointed managing director & CEO for another five years beginning April 2013. The longest serving head of HUL was Ashok Ganguly, who was chairman from 1980-1990.


Of course, there is little guarantee that Mr Paranjpe would continue as CEO till 2018, what with previous CEOs – from Keki Dadiseth to MS Banga – going on to assume larger responsibilities at the parent company, during their stints.


Paranjpe’s imminent second stint is just what the doctor – Unilever CEO Paul Polman – ordered. In 2010, Mr Polman, the first outsider to head the $40-billion consumer goods giant, mandated longer tenures for the top and middle management. Polman’s directive was to ensure greater organisational stability while tackling increasing competition and business volatility. The CEO’s view was that management stability would ensure quicker decision-making and accountability.


That’s certainly been the case at HUL; and those benefits have translated in creation of shareholder value. When Mr Paranjpe took charge in 2008, the HUL stock was quoting around 230 levels. Today it is 87per cent higher at a little over 430; the benchmark Sensex has fallen 2.8per cent during the same period.


Over the past two years, Mr Paranjpe added some 4,500 crore – quite literally the size of some mid-sized rivals – to its top line by increasing sales from Rs17,873 crore in fiscal 2010 to Rs22,394 in fiscal 2012 – a compounded annual growth of 12 per cent. “We want to set goals that are so audacious that, even if they are missed, the performance is still heroic,” Mr Paranjpe told ET.


“There is an obsessive focus on the consumer that goes beyond just slogans and ensures execution. We are now gearing the organisation to future-proof the business through innovation, improving product quality, dramatically raising execution capability and ruthlessly focusing on costs,” he added. And then there’s the supply chain where the CEO says he “wants to be the best at both ends of the market, the top and bottom. There will be no compromises at any end.”


The relentless consumer focus – the shareholder cannot be ahead of the consumer, avers Paranjpe – manifests itself in initiatives like Mission Bush Fire, an employee-led market execution and customer interaction exercise initiated in 2010 to get the home & personal care giant to connect with the market place. HUL CEO Nitin Paranjpe and every member of the company’s management committee participate in this project to get direct feedback on how HUL brands are faring.


“Bush Fire has resulted in a 40 per cent spike in sales in stores wherever the initiative has been implemented, according to internal company estimates. And HUL managers say Paranjpe has led from the front. “There is nothing he expects us to do that he has not done himself. Nitin is out on the road making customer visits almost 15 days a month,” said a senior company official.


Analysts are calling it a dream run. Abneesh Roy, associate director, institutional equities, research, Edelweiss Securities said: “HUL is in a growth phase with Paranjpe leading from the front with vigour and stability. His reappointment is a move by Unilever to reward his performance and execution capabilities as CEO.”


HUL’s sales have been growing not just by value over the past several quarters, but also consistently recorded volume growth that is ahead of the market. Despite a spurt in input costs and aggressive spends in ramping up distribution, HUL has maintained its 2008 operating margin at 14.1 per cent during the last fiscal year.


Company watchers say Mr Polman too deserves credit for HUL’s outperformance as it was the global CEO who injected a sense of aggression and put in place a performance culture across Unilever globally by linking rewards to results. For instance, it was Mr Polman’s decision to hike variable pay to as much as 50 per cent of total salary from 30 per cent as this would lead to hefty bonuses for those who deliver and penalise those who don’t. “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,” said Mr Paranjpe.


Source: The Economic Times
Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved


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