How HUL Works: Lessons from India’s
best run company.
For six decades Hindustan Unilever has remained
among India’s top 5 most valuable companies. No
Excerpt from Preface
Few Indians have heard of Hindustan Unilever
(HUL). But they are intimate with the brands it sells. To name but a few -
Lifebuoy, Dove, Clinic Plus, Ponds, Lakme, Closeup, Surf Excel, Vim, Brooke
Bond, Bru, Kwality Walls, Kissan, and as of next year, Horlicks. 9 out of 10 of
Indian households use an HUL product every month. Forget Google and Facebook,
more Indians use HUL products than those who own a television, who vote, or
even those who have running water or electricity. Even if you don’t know much
about Hindustan Unilever, you have grown up with it and are touching it every
single day of your life. Just like your parents, grandparents and their
grandparents.
While researching for this book, I came across
a faded copy of the first annual report of the newly incorporated Hindustan
Lever in 1958. The company was already among the largest in the country and
made a profit after tax (PAT) of Rs. 1 cr. In 2019, the company made a PAT
of Rs. 6080 crs - a compound annual
growth of 15%! In the same period that HUL grew its profits 6000 times, the
Indian economy grew 1400 times. It’s
hard to find another large company which has delivered 15% annual earnings
growth over 650years anywhere in the world. It’s nearly impossible to find one
that has stayed in the top 5 of a large country for over 60 years.
It’s not just the long-term performance of HUL
that is stellar. Its current return on
capital employed of 92% is by far the highest in the country. In just the last
decade it has given shareholders an annual return of 23% with its stock price
up 7 times.
This has made HUL an iconic
company on Dalal street. If analysts were to rate Indian companies over a
century on financial and non-financial impact HUL would feature on the top
three of all and number one of most lists. HUL market cap has now crossed $60
bn, making it one of the most valuable FMCG companies in the world, ahead of
the global valuations of Colgate Palmolive, Kraft Heinz, Mondelez and Reckitt
Benckiser
Apart from
being omnipresent in our lives and being top of the business game for a very
long time HUL is an enormously influential company. For the last decade HUL has
been ranked by AC Nielsen as the Dream Employer of choice in the top twenty
business schools in India. HUL is taken extremely seriously in government
circles with many of its past chairman being Padma Bhushan Padma Vibhushan
awardees. Most famously nobody gives more CEOs to corporate India than HUL.
From Nestle to Diageo to Airtel to Hindalco to D’Mart to Raymonds to the Star
Network - there are currently around 400 HUL alumni who are CEOs/CXOs across
corporate India. Because of the influence of its alumni many business practices
in corporate India have their origin in HUL. This is obviously the case in
sales, marketing and HR but also exists in finance, supply chain, R&D and
legal as well. In corporate circles HUL is well known by the nickname ‘The CEO
Factory’
This book
asks and then answers the question of why has a company this large been
successful for so long? What exactly do HUL managers learn in HUL that makes
them in so much demand as CEO’s across industry ?
Excerpt from Chapter 1
In 2018, our chairman
of 13 years Harish Manwani finally stepped down. Harish had spent close to 40
years in the Unilever system rising to be global Chief Operating Officer. It
was the highest an HUL man had risen. Harish had double hatted as non-executive
chairman of HUL while serving his global responsibilities. He was now finally,
finally retiring from the company he had loved.
Harish had several
farewells and gave many speeches, but he saved his best talk for the retired
directors meet in 2018. The HUL retired Director’s meet held every June in
Mumbai is among the few HUL alumni events where there are no CEOs. Only those
who retired as directors and not those who left the company to become CEOs are
invited.
It is a unique ritual
and I am not aware of any other company that does it. The current Chairman
shares business progress of the previous year and is then grilled by the men
who built HUL. Sharp daggers are unsheathed from rusting scabbards. After the
trial by fire, there is a sit-down dinner, drinks and a few speeches by former
chairman and occasionally some others.
At the meet Harish
spoke about how unique a company HUL was. What, he asked, was its secret sauce?
He gave four answers which weaves itself through this book: a middle-class soul, a meritocratic culture,
managers who are equally comfortable in dusty Indian villages
as they are in London or Rotterdam and
finally an unchanging core values.
These aren’t just the ingredients of what makes HUL great, but also the four
qualities that makes HUL executives such successful CEOS when they run other
companies.
Almost every major company in India boasts a
HUL man/woman in its top management, and the companies that now have HUL alumni
as their CEO include Airtel, Viacom,
Diaggeo , DMART, Star TV, BMW, Raymonds and Nestle. So successful and in demand are HUL alumni in the Indian
corporate world that for many, it is seen as a the ultimate finishing school
for the ambitious executive.
Everyone I spoke
about the book, including several HUL alumni who have now become CEOs, agreed
with Harish’s four points. There was however a fifth quality that also came up.
The ability of the company to mould its employees into ‘Entrepreneur Professionals’. People who followed the processes and rigour required of a
professional company but were willing to go the extra mile that only
entrepreneurs do.
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