Times of India

15-07-2010

The B-Team

In 2003, Anand Mahindra made elite groups of young managers, and told them to express themselves as
if they were running the company. Shadow boards are now part and parcel of the group, report Lijee
Philip & Kala Vijayraghavan.

IN JANUARY, WHEN MAHINDRA & Mahindra (M&M ) drove into the commercial vehicles segment with
the launch of two Navistar trucks, it was a moment of great satisfaction for 41-year-old Satish
Karandikar. Six years ago, in 2004, it was a group of seven young M&M managers, under his
stewardship, that first tossed the idea of diversifying into commercial vehicles to the company brass.
Since many of our utility vehicle buyers also purchased commercial vehicles, we could ride on our good
name to make them buy something more from us," says Mr. Karandikar, who was 34 then.

But first the greenhorns had to make the M&M management committee buy the idea. That was made
easy because the brass was willing to hear them out. Not in a casual or ambivalent way, but in a serious
and structured way. Anand Mahindra, vice-chairman and managing director, Mahindra Group, wanted
to "hear the voice of the young". So, in 2003, he added a new circle in the organisation structure of
Mahindra companies to give young managers a voice at the highest levels of decision-making. 'Shadow
boards', it was called.

Seven promising young managers, all below the age of 35, were hand-picked in each Mahindra
company/division and were asked to think of themselves as another management committee. They
were asked to choose three to four subjects, anything at all, deliberate on them for two years and make
recommendations. Those recommendations might be implemented, junked or filed away, but the
assurance was given that the senior management would take them all up.

Some of the recommendations made by the Mahindra shadow boards have found their way into the
groups business: the diversification into commercial vehicles, a round the-clock helpline, a more
personal approach to distributing increments, even a leap into a bold acquisition.

Many of the young managers who have spent time on shadow boards have seen their careers fast-
tracked. Back in 2004, Mr. Karandikar was the brand head for a utility vehicle, Bolero. Today, he heads
product development and marketing for the group’s international business. Harish Chavan, 40, heads
M&Ms tractor division in China. Anirudhha Haldar, 34, is currently the chief marketing officer at
Mahindra Holidays. Says Prince Augustine, EVP-human capital, automotive and farm equipment sectors:
There are at least 15 others in the 31-45 bracket who graduated out of shadow boards and are currently
occupying key positions.

At the $7.1-billion group, shadow boards are delivering the outcomes Mr. Mahindra had hoped for
when he asked the group to embrace this management concept. Says Mr. Mahindra: They provide a
fresh source of ideas from the front line of the businesses, they foster a feeling of participation in
important decision-making, and they provide top management with a periscope into the fresh and
young talent in the group.

YEARS AGO, UNILEVER AND General Electric introduced the concept of shadow boards, but they found it
difficult to sustain it, as their senior managements didn’t get involved. At the Mahindra group, the
senior management especially chairman Keshub Mahindra and Anand Mahindra threw its weight behind
the concept, and got the senior management involved.

The Mahindra group has sustained the concept for eight years; currently, 11 companies or divisions of
the group have shadow boards. Says Rajeev Dubey, head of HR, M&M: Shadow boards evolved as part
of a large talent-management process. It gives young people the liberty to engage with problems and
aids lateral thinking. Adds Ramesh Iyer, managing director, Mahindra Finance: Often, top managements
think they know it all. Shadow boards expose them to a young team that innovate and think differently.
It’s not the popular view in India Inc. Not too many other Indian companies have engaged with the
concept of shadow boards. Says Harsh Mariwala, chairman, Marico: Shadow boards may have its uses at
times, but we never felt the need to set one up. Sometimes, they have engaged only to disengage, like
the Adi Godrej group.

Between 2000 and 2009, the Adi Godrej group had a young executive board (YEB). Says Adi Godrej,
chairman, Godrej group: It operated like a shadow board and worked closely with the group
management committee. Interestingly, Nadir B Godrej, managing director of Godrej Industries, is on the
M&M board, and the two groups are believed to have exchanged ideas on shadow boards.

The Godrej YEB consisted of 11 talented employees, all below 30, chosen across functions and from
various group companies. Members were rotated every two years. The YEB was responsible for
changing the maternity-leave policy and introducing flextime options. However, last year, in its final act,
the YEB recommended it be disbanded and reformed to reflect the group’s new youthful and consumer-
centric identity. This is expected to happen this financial year.

At the other extreme is Rahul Bajaj, the voluble chairman of Bajaj Auto. Having shadow boards is
pointless, as there is no governance involved and it is more advisory in nature, he says. Mr. Bajaj,
instead, suggests putting young talent on actual boards (See box: The Alternate View). Extending Mr.
Bajajs thought, Harish Bijoor, CEO, Harish Bijoor Consults, a consulting firm, adds: Maybe, a single board
that has 30% younger A-listers from the organisation.

IT'S HOW YOU DO IT, SAYS MR. Mahindra. You can’t do this unless the top leadership commits their time
to interact with the shadow boards, he says. Adds Arun Wakhlu, executive chairman of Pune-based
Pragati Leadership Institute, which focuses on leadership development and organisational
transformation: Shadow boards need complimentary teams with senior board members to act as
mentors and filter ideas.

At the outset, the Mahindra group roped in senior managers to act as mentors to the shadow boards.
Typically, the pool of mentors for a shadow board comprises the company’s MD and the functional
heads. So, for instance, Ramesh Iyer, managing director, Mahindra Finance, will mentor a shadow board
of the company. In addition, the shadow board can also access, say, the HR or finance heads on matters
concerning their respective areas.

Mentors are advised to keep a distance. Says Mr. Augustine: The idea is to not get too involved with
them. At the same time, they should not feel they don’t have anyone to take care of them. The big
challenge for mentors is to bring the shadow board members on the same page. When some people are
better than others, the ability to converge is difficult, says Mr. Augustine.
Mentors help sharpen good ideas or weed out the bad ones. More often than not, the ideas are good,
but the mentors find more appropriate ways for the company to take them on. For instance, the idea for
the group to enter retail came from a shadow board, but the company chose a small-store format (Mom
& Me, for infants).

The mentors at M&M say that at least 50% of the ideas coming from shadow boards are based on what
the Mahindra business is planning. Shadow boards have made a case for, among other things, Mahindra
Finance increasing its exposure to second-hand vehicle financing as it was a natural business extension,
the Mahindras diversifying into healthcare as people saw it as a brand they could trust, making
Mahindra Holidays a $1-billion company by market capitalisation by 2015.

Says Mr. Iyer: Initially, I found the members asked innocent questions, but these innocent questions are
always the beginning of a big idea. Shadow boards discuss both hard and soft ideas. Some of these get
taken up, most of them don’t. Even when they have not found expression, they have become a part of
the collective thought of the Mahindra group. They swirl or rest in the minds of the people that matter
in the group. Sometimes, they are revived in the most unexpected of ways to deliver a handsome
payback.

Anand Mahindra remembers a shadow board presentation in 2006, where it took on the identity of a
competitor. It simulated a strategy session of the competitor to show how it would be detrimental for
M&M to lose out on acquiring a third rival. Their analysis played a key role in influencing our top
management to forge a winning bid for an acquisition that has proven to be hugely successful, says Mr.
Mahindra, possibly alluding to its takeover of the Satyam Computer.

In October 2009, Mahindra even put in place a shadow board at Mahindra Satyam (the renamed
entity).This forum brought stability in the company, says S Swaminathan, chairman of the current
shadow board at Mahindra Satyam. It also gave an insight into the transformation process and brought
out the voice of the employees.

The group even tried a super shadow board for the entire group in the early years, but that failed due to
a lack of interest from the senior managers. The shadow boards, meanwhile, are thriving, benefiting
company and managers alike.

THE FIRST SHADOW BOARD IN the Mahindra group, in 2003, had a tenure of two years. Now, Mahindra
shadow boards are reconstituted every year, with 50% of the members being replaced. This adds
dynamism and brings in fresh ideas, says Uday Phadke, a shadow-board mentor on corporate finance, IT,
legal, HR and secretarial issues. Mentors are not involved in the annual reshuffle. The members, after
getting a fresh set of nominations, decide who the chairman and the secretary will be, says Mr.
Augustine. On an average, 50% of shadow board members have been 30-35 years, 25% below 35 years
and 25% above 35 years.

In the very first shadow board, recalls Mr. Iyer, enthusiasm levels were phenomenally high. Most of the
members thought they had a new status, he says. Mr. Haldar of Mahindra Holidays, who has been part
of two shadow boards (in 2004 and in 2007), says the meetings bring out the competitive streak in
people. The I-know-more-than-you know approach is what sends sparks flying at these meetings, he
chuckles.
That’s not such a bad thing, says Mr. Iyer. When competition is high in the shadow board, it builds
confidence and communication ability, develops self-motivation skills and raises enthusiasm levels, he
says. Most often, the members are not concerned if their idea wins. The very fact that the idea finds
favor at the top management is what sustains the program.

Young managers who have been on shadow boards say the experience has shaped their business
outlook and managerial style. Says Mr. Karandikar: I learned to work with people from different
functions and with different mindsets. Mr. Karandikar also appreciated the understanding of corporate
strategy. Without giving out strategic information, we shared information with cross-functional groups,
he says.

Kaushalya Sreenivasan has been a part of the auto sector shadow board since 2009.Just 29, she’s the
regional head for north, automotive, M&M. She says being on shadow boards has honed her
communication and presentation skills. Each year, at the annual Blue Chip Group conference of the
group, each shadow board presents its best idea to senior managers. My defining moment came when I
made a presentation to 450 senior managers, says Ms Sreenivasan. Adds Charandeep Singh, manager,
marketing & strategy, Mahindra Finance: It improves confidence levels.

Members face challenges, notably balancing this new responsibility with their work. Says Mr. Phadke:
They often find it difficult to spare time for these meetings. Sometimes, they feel the need to opt out,
more so since it is not linked to their performance appraisal. For those who stay on, the paybacks can be
big. For shadow-board members, the line of sight is much high, says Mr. Phadke. If they are reasonably
good, they get picked up faster. Across the Mahindra group, there is proof of that.