The CEO Factory: Management Lessons from Hindustan Unilever

The CEO Factory: Management Lessons from Hindustan Unilever. To be released in Dec 2019.

For six decades Hindustan Unilever has remained among India’s top 5 most valuable companies. No

other corporation in the world has done so well for so long. Its brands sit in most Indian homes, its

financial indicators are among the best in Dalal Street and it is famously a factory for CEOs. For the first time, comes a book that decodes how this great business works from a director of the company who has spent his whole career there. 

Why are there so many CEOS who are ex-Unilever men? What is the company’s secret management training sauce? Why is marketing at the heart of every business? Why is it easier to create a new market, than grab a slice? How is it actually smarter to stock your product in smaller quantities in a store instead of pushing orders? And why you should never, ever believe that if you price your product down you will get more customers.  

Sharp, insightful and entertaining, CEO Factory: Management Lessons from Hindustan Unilever is an MBA course in a single book.

Sudhir Sitapati joined HUL in 1999. He is currently the Executive Director, foods and refreshments. This is his first book.

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.