November 2000 | Christabelle Noronha

The turnaround maestro

Nawshir Khurody, the dynamic managing director of Voltas, talks about where he plans to take the company now

When Nawshir Khurody took over the reins as maaging director of Voltas Limited in April 1997, the well-known engineering and marketing company was beset with problems. With his enviable reputation of turning around companies, he was just the right man to bring the sheen back to Voltas.

Mr Khurody set about the task with enthusiasm. His ability to bring out the best in people and his clear strategic thinking are beginning to bear fruit. After an aggressive reorganisation, Voltas is starting to shine again.

Nawshir Khurody
What did it take to get an elephant to dance? What were the hurdles that had to be crossed? Where does Voltas go from here? Mr Khurody answered all these queries and more in an interview with Christabelle Noronha at his office at Ballard Estate, Mumbai.

On his successfully bringing the company out of the red
In my opinion, we have just embarked on the road to recovery. I have been very fortunate to have all my colleagues in the company put their shoulders to the wheel. This, despite the fact that we began with huge losses on our balance sheet, irate shareholders, excess manpower and some of the most ineffective businesses on our portfolio.

What we first did was to decide on our focus areas. We then went about excising unsustainable businesses from our portfolio, isolating them and taking a hard look at them with the aim of reducing unwanted costs, shedding excesses in manpower and controlling the use of capital. In short, we were trying to ensure that we could make all our available assets "sweat".

On leveraging the initial victory to forge ahead
"Victory" is a term I would like to avoid, for we are yet to reach there, as yet! We still have to contend with over a thousand surplus people and surplus costs. Not to forget the businesses on the block for which there are no takers.

This is like walking a tight-rope, accentuated by the expectations of those who have made Voltas a part of their lives. These expectations are only natural since the company has a great heritage and engineering reputation.

Our shareholders have some expectations. We are very clear that these should be met. The concept of shareholder value will underpin all our actions. We have to deliver value. This is our top priority and it is linked closely with the company’s new focus.

On the company’s new focus
The company has, after great consideration, decided to focus on the following areas for the immediate term:

  • growth in top line – which will come from volume-led growth in unitary cooling products (room air-conditioners, commercial refrigerators and contract manufacturing)
  • growth in free cash flow – which will come from a renewed drive in engineering and chemical trading and services.
  • growth in return on assets – which, besides being driven by the growth in the top line and the growth in the free cash flows, is strengthened by shedding non-performing assets and sweating fully, under-utilised assets.

On promoting growth and maintaining fiscal discipline
We are very clear that fiscal discipline ought to be linked with growth. According to me, without fiscal efficiencies, we will once again destroy value as we grow. Fiscal discipline only comes when managers are held accountable for the opportunity cost of capital used by them, in whatever form. Working and fixed capital management is now an obsession in Voltas, almost to the point of being tiresome, forcing managers to do more with less.

As regards growth, we will continue to do everything to increase revenue and earnings. We will concentrate on central air-conditioning; unitary cooling products; forklifts, water supply projects and increase our representation in textile machinery; mining and construction equipment and chemicals. All of this will have one central theme – the best-in-class products and services.

On the company’s restructuring and aligning itself to the new economy

According to me, no company, let alone Voltas, can afford to stop restructuring itself. We have to restructure not just businesses, but the way we work and, above all, the way we think. I love the feeling of constant chaos, but not everyone does! Fortunately for all, we have open doors.

In keeping with the needs of today, we have leveraged our knowledge and organised our business around three clusters:

  • Electro-mechanical projects and services with the accent on air-conditioning and ventilation
  • Engineering representations of best-in-class machinery and equipment for India’s infrastructure and industrial growth.
  • Unitary cooling products/services for demanding customers (institutions and retail);

We can only align ourselves to the new economy by moving into it. We enter the new economy through --

  • outsourcing
  • service engineering; and,
  • supply chain and logistics efficiencies

Using the new economy tools we will address complex customer needs as well as address our own supply-chain inefficiencies to gain financial leverage.

On managing change and people
Fortunately, Voltas, being engineering-driven, has been used to change and has had a history of empowering its people. So, more than a change in attitudes, what we are attempting to do is to bring about an evolution of attitudes to higher and more encompassing levels.

Through transparency at the top, professionalism in the rules of the game, admission of failure whenever necessary and open and constant communication, we are providing our people with the exposure to synergies that go to create the value stream.

We are striving to create a Voltas where talent is not stifled, but stretched and accountable. I am working hard at replacing the walls in the system that hinder people’s growth with gateways. With this in mind, we had a major overhaul in our human resources department and now have a very young and dynamic team pushing through new initiatives.

On regaining the lost ground in the climate-control market
Let me be clear about one thing. There is no way that Voltas, now or in the near future, will be able to match the resources being ploughed by multinational companies on brand building.

So how do we compete?

In cooling products, installation and service build reputations or destroy them. Features and benefits in cooling products are no longer a critical differentiator. With the products in our category becoming increasingly commoditised, a lot of ad spend is thrown at the experientials which, though of minor significance, do capture consumer minds.

While being careful not to fall into the trap of emulation, we are leveraging our pioneer status in the industry to regain the trust and respect of the consumer. We are offering best-in-class products, installation and service, at unbeatable prices for the value delivered.

Unitary cooling products is also a volume game. Hence Voltas has consciously adopted a policy of making for others, provided they want world-class products. The volumes gained by such badge-engineering not only fill asset capacity, but also put us on a learning curve that moves straight into the new economy.

On the recent decision to divide operations into two streams
I would prefer to describe Voltas as an emerging company divided into three logical clusters, which, though semi-independent, are beholden to the Voltas values. Each cluster has a specific portfolio of products, services and measures in place to ensure that the portfolio is dynamic so that products and services get dropped or added.

We are very clear that, in each cluster, we will source technology that is world-class. Voltas has done this for decades. And we will continue to deploy technology to cater to the growing market expectations. This is the very heart and nature of the engineering beast, if it is to survive.

On where the company will move from here
At Voltas, every phase is a turnaround phase. Every move we make is towards business excellence. This is a continuous and infinite destination, where to arrive is to begin afresh.

Fortunately, the Tata Group Executive Office is breathing down our necks with the Tata Business Excellence Model (TBEM). Voltas is embracing this in stages, starting with the businesses where its impact is the maximum and it is heartening to see how the TBEM sceptics are now lovers. The TBEM lays down speed-rails along which we can build our travel plans, directions and destination within time-frames and assesses us on various parameters.

In the end, it is all about leadership. And the standards of excellence will continue to rise as the bar is raised by consumers. So Voltas will not just "achieve business excellence", but move towards higher parameters set by the marketplace.