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Mahesh Madhavan tastes success atrevamping Bacardi IndiaAnumeha Chaturvedi April 30, 2012

Executive Summary: In 2007, Bacardi India was floundering. Enter Mahesh Madhavan.

After successfully transforming the fortunes of Bacardi Thailand, he took on the challenge of

repeating the feat in India. Madhavan quickly revamped the company, hiring new talent, firing

underperformers and steering it to a new set of longterm goals. In less than five years, he

transformed Bacardi India - its turnover has tripled and it is growing 40 per cent annually.

When Mahesh Madhavan was appointed Managing Director of Bacardi India in August 2007,

the company was on a downward spiral. Bacardi Superior, a white rum that constituted

about 95 per cent of its spirits portfolio, was losing market share at the rate of eight per cent

annually. And while the industry was growing 18 per cent a year, Bacardi India was lagging

behind at 11 per cent. (Retail consultancy Technopak estimated the size of the liquor market

in India to be $1.64 billion in 2006.)

"The loss in market share was because of many things," recalls Madhavan. The global

parent had cut investments in India between 2004 and 2007, and the brands started to

decline. "Investments were diverted to markets providing a better return on capital." Sensing

a decline, about 66 employees quit in those three years. For a company whose headcount

was 71 when Madhavan joined, that was massive.

While conventional wisdom would call for loyalty rewards, some of those who remained

would face the axe. "The team was a mix of different types. Some were very passionate and

talented, and some were floaters, who were sticking around simply because they couldn't get

a better job elsewhere," says Madhavan. "We had to get rid of the deadwood and inject some

fresh energy, ideas and passion."

MESSAGE IN A BOTTLE

THE PROBLEM

Sales of Bacardi's top brands were declining. Market share was falling

THE CHALLENGE

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People in the company lacked the skills needed to drive performance

THE SOLUTION

A complete revamp of HR processes

THE RESULT

The buzz is back and so are sales

Madhavan, who was the Managing Director of Bacardi Thailand prior to his India stint, was

not new to people problems. Bacardi Thailand had a turnover of baht 300 million (around Rs

32.2 crore then) when Madhavan joined it in 2000. The problems there also had to do with

people. "I got a lot of people off the bus, and a lot of people on the bus," he says. By the time

Madhavan left, the company had a turnover of baht 1.2 billion (around Rs 129 crore).

Perhaps, it was because of this turnaround that he was picked to steer the Indian operations.

There were problems aplenty in India, most of which were on the human resources (HR)

front. The company did not have an HR team. There were no clear processes, and no

distinction between high and low performers. "If I'm not performing, and you're doing a

fantastic job, you'll wonder why you're breaking your back. So we had to initiate a culture

based on performance," he says.

Madhavan also needed to hire people. But he faced budgetary restrictions and had to find

other ways to bring in talent. The marketing director position, for instance, was vacant. But

instead of a replacement, he hired Arvind Krishnan as a marketing controller in February

2008, to work alongside Gautam Gangoli, who had joined a year earlier.

Krishnan joined the company from Luxor, a writing instrument maker, where he was the

Senior Vice President for Business Operations. "Bacardi was in the process of charting a

new career path, and the challenge of turning things around attracted me to the company,"

he says. Krishnan is now Vice President and Brand Managing Director for Bacardi's Dewar's

whiskey in the United States.

{blurb}"A marketing director may not have joined the company then, as Bacardi was not

doing too well and did not have resources. But for mid-level professionals like Krishnan and

me, it was an exciting opportunity to turn things around and grow," says Gangoli. "Splitting

the portfolio between two strong midlevel marketing controllers who directly reported to

Madhavan helped," he adds.

Madhavan also initiated discussions with consulting firm Right Management in November

2008 to give the company a clear focus. "Mahesh was clear about where he wanted to take

the organisation but was not sure whether the team would be able to do it. He was extremely

transparent," says Chaitali Mukherjee, Country Manager, Right Management.



Bacardi India's global parent wanted long-term business targets, from 2008 to 2014, and the

initial meeting with Right Management was about business goals. "But, as we continued our

discussions, we realised that the probability of success depended on the people who would

chase them," says Mukherjee.

In February 2009, a vision was drawn up for the company, detailing what it wished to achieve

by 2015. Clearly defined goals and targets were set for Madhavan, those reporting to him and

function heads across verticals, such as sales, HR, and marketing.

The leadership competency - the parameter of the 'right leader' for Bacardi India - was

defined in line with the global organisation's requirements as well as local market

requirements. "Using that framework as the base, we assessed close to 30 key leaders to

understand their individual strengths and challenges," says Mukherjee. People who did not

match up were asked to leave.

Among those facing the axe was a senior executive who headed a function and reported to

Madhavan. "It was a tough decision, as Madhavan was facing a leadership crunch, but he

decided to do away with him," says Mukherjee. The company's existing talent was also

nurtured with a 12-month executive coaching programme. Eight key leaders, including

Madhavan, Gangoli and Sanjeet Randhawa, who was Director, Finance, were coached

individually for larger roles by senior business coaches from Right Management.

The consultancy's team looked at past performance data and drew up a

Performance/Potential matrix for each executive. People who scored high on both

parameters were identified as top talent. Those who scored high on one of the axes, or who

were in key leadership roles but came low on potential were identified as people who needed

to be worked with.

Through these assessment systems, Bacardi India was able to restructure the organisation

in terms of interim and longterm restructuring. Existing talent, including Gangoli, was

groomed for bigger roles and new talent was hired when the need arose.

The sessions were held once a month, and each leader had a different coach. "I was

someone who was impulsive and hot headed. The coaching taught me how to think and act

like a CEO, adapt to different cultures, and look at things from a 360 degree angle," says

Gangoli. "I learnt about the paanwaala syndrome from my coach Sudhir Chand. A paanwaala

manages everything single-handedly. I learnt to be able to handle things single handedly and I

still use this approach when I am stuck," he says. Gangoli was made Managing Director of

Bacardi Thailand in August 2011, and has now moved to China as a Commercial Director.

With investments picking up from 2010, Bacardi India started introducing more brands and

hiring people from strong and diverse professional backgrounds. For instance, the new HR



Bacardi has tackled people

very boldly and effectively,

unlike many organisations:

Sridhar Ganesh

Director, Saurabh Upadhyay, was hired from Nokia in 2010. The new Sales Director came in

from Pernod Ricard.

The company also instituted more town hall meetings and ensured better communication

with the leadership team through offsite sessions. In addition, it rationalised performance

bonuses and salaries, rewarding top performers and letting go of the bottom five per cent.

Today, Bacardi India's revenues are growing 40 per cent annually, outstripping the industry

average of 17 per cent. The company has grown more than three times over the last five

years. And attrition rates have come down to 12 per cent. In 2007, it had just two senior

leaders: Madhavan and Randhawa. Today, Bacardi India has a fullfledged leadership team in

place, including function heads for sales, marketing, human resources, operations, and

finance.

Many leaders from Bacardi India have gone on to take up larger, global roles. While Gangoli

headed East, Krishnan shifted to Miami, and Amit Dutta, a brand manager, moved to London

this year as Global Brand Manager in Bacardi's travel retail division.

Madhavan feels vindicated. "It takes around four to five years to turn a company around.

These postings show the global team recognises Indian talent," he says with a sense of

satisfaction.

EXPERTS SPEAK

PEOPLE AGENDA

There is considerable learning in this case, not just for similar

companies, but for India Inc as a whole. Making the 'People

Agenda' the top boss' agenda is the starting point. Bacardi appears

to have got its basics right. It has tackled people issues very boldly

and effectively, unlike many organisations, which flirt around people

issues. It has addressed the core, providing answers to the

universal questions that every employee asks: "Tell me what I am

supposed to do", "Tell me how I am doing", "Help me to perform

better". These are fundamental questions in any organisation

worldwide.

Full marks to Mahesh Madhavan and his team. In India, most organisations shy away from

tackling these issues head on and carry on believing (rather erroneously) that they will get

addressed somehow. They often forget that it is not the process but the "spirit behind the

process" that needs to come alive. That is a self-limiting belief, which, if not challenged, can

lead to the sort of situation that Bacardi faced in 2006/07.



The next challenge for

Bacardi in sustaining

enthusiasm levels and

interest the board: Asha

Bhandarker

Another great takeaway for me is the close cooperation between Madhavan and the HR

consultant. The growth story highlights the power of line and HR working together to create a

magical workplace, where both results and people-care not only co-exist but actually flourish.

This partnership is a rare phenomenon. Instead, what is common is the lament from either

side about how uncaring and incapable the other is. It takes only that little step to come

together but alas, we see it rarely.

Sridhar Ganesh, Director HR and Lead Director Diversified Business Group, Murugappa

Group

VISIONARY LEADERSHIP

Bacardi is a case of good turnaround management. The company

was losing market share rapidly, attrition rates were impossibly

high, and people were demoralised. In such a situation, Mahesh

Madhavan brought a 'fresh eye' to view the situation. Setting a

vision for the organisation (with the support of its consultant) was a

crucial step. Any vision/mission exercise brings the team together.

Madhavan participated in the exercise along with the team and

together they charted the path to be taken in the medium term. This

sort of exercise builds morale and people bond together to build

their collective future. Above all it builds clarity of direction and trust, and is a good way to

start getting the organisation back on track. The other interesting thing Bacardi did was to

bring performance-reward clarity, which motivated high performers to reach tough targets.

Clarity has a powerful and positive effect on performance.

Potential identification and talent management was another important step. Identifying the

right talent and placing it in the right role can dramatically increase efficiencies and returns.

People were convinced they were valued and being prepared for bigger roles. One of the

biggest mistakes companies make is to not take the role-talent fit seriously, thereby living

with sub-optimal performance.

The next challenge will be in sustaining the levels of enthusiasm and interest across the

board. This is because, in any difficult situation, the troops get together and pull things

through, but after a while monotony may set in and reward/recognition practices will need to

be creatively addressed.

Asha Bhandarker, RML Chair Professor of Leadership Studies & Dean, Research and

Consulting, MDI, Gurgaon

Did Bacardi India address the problem effectively? Would you have approached the



company's HR challenge any differently? Write to us at [email protected]. Your

views will be published in our online edition, and the best comment will win a Harvard

Business School Press pocket mentor. Previous case studies are at

www.businesstoday.in/casestudy.

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