Case-Uniting Spirits

Indian School of Business
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January 4, 2021
Chandrasekhar Sripada | Thomas J Menachery
UNITING SPIRITS: THE PATH TO A NEW CULTURE AT DIAGEO INDIA

On March 27, 2020, three days into what would become the world's largest and strictest lockdown,
the usually bustling roads of Bengaluru, India, were eerily quiet. Anand Kripalu, chief executive
officer (CEO) at Diageo India, the country’s leading alcohol beverage company, put down his phone
after making a brief congratulatory call to the team that had produced a large volume of hand
sanitizers in a short period of time in response to the COVID-19 public health emergency. The
sanitizers were intended for healthcare workers and the armed forces who were on the frontlines of
the battle against COVID-19. This was an exceptional achievement for a company that had never before
made sanitizers. Kripalu looked out from his apartment window, smiling. He was happy that their
efforts had borne fruit and that all the functions of the company had broken out of their silos and
collaborated to produce the first batch of hand sanitizers in just five days. The company’s quick
response to the national health crisis and requests for sanitizers from local governments had been
remarkable, thought Kripalu. Surely, this was powerful proof that the culture building efforts at
Diageo over the last few years were paying off.
Many questions crossed his mind: How did we achieve this feat at unprecedented speed? Is this
kind of collaboration across different functions and levels of the organization truly reflective of our
culture or was it induced by the pressures of a pandemic?
Kripalu recalled the long culture building journey that he and his colleagues had undertaken to
reach this point. Soon after Diageo plc, the global leader in premium alcohol beverages, acquired a
majority stake in Indian liquor giant United Spirits Limited (USL) in 2013-14, the culture change had
begun. USL had previously acquired several other well-established companies, each with its own
deep-rooted, unique culture. Kripalu had heard from his colleagues that USL was not well united.
Its people were identified with individual companies, for example, as “Herbertsons people,” “Shaw
Wallace people,” or as “United Spirits people.” USL was, in effect, a potpourri of cultures. And then
came Diageo, bringing its own unique global culture.
Professor Chandrasekhar Sripada and Dr Thomas J Menachery prepared this case solely as a basis for class discussion. This
case is not intended to serve as an endorsement, a source of primary data, or an illustration of effective or ineffective
management. The authors would like to acknowledge the support provided by Aarif Aziz (Diageo India), Abhishek Binani
(Diageo India), Kaveri Sheel (Diageo India) and the Diageo India Leadership Team, in the writing of this case. This case was
developed under the aegis of the Centre for Learning and Management Practice, ISB.
Copyright @ 2022 Indian School of Business. The publication may not be digitised, photocopied, or otherwise reproduced,
posted or transmitted, without the permission of the Indian School of Business.
This document is authorized for use only in Prof. Kapil Verma's Organizational Behaviour-II (OB2) Sec-B &C at IIM Kozhikode - EPGP Kozhikode Campus from Jun 2022 to Dec 2022.
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When Kripalu took over as CEO, his primary focus was to unite the diverse cultures of the former
USL and build a new culture at Diageo India while retaining some of the unique strengths of USL.
He was not alone. Ivan Menezes, chief executive of Diageo plc, urged him to focus on culture.
Together with the HR and leadership teams, Kripalu and Menezes identified four cultural pillars:
breaking hierarchies, celebrating life, ensuring complete compliance, and fostering cross-company
collaboration. Menezes emphasized the fundamental role culture played in Diageo’s business. “Culture
is the big unlock to our performance and reputation. Culture is a huge competitive advantage for
building a sustainable enterprise that can perform consistently and do the right things,” he said in a
message to the leadership team of Diageo India.
While some sporadic efforts towards building a new organizational culture had been made over the
years, real programmatic and focused work in this direction began in earnest in April 2019. Within
a year, these efforts had started bearing fruit. In late March 2020, shortly after the government had
issued lockdown orders in response to the pandemic, the company rose to the occasion, came
together as one, and produced hand sanitizers at record speed. Pleased as he was by the team’s
performance, Kripalu knew he could not let himself get carried away by these reflections. Culture
building at Diageo was an ongoing exercise, and there was still work to be done. We need to take stock
and understand how much we have moved the needle, thought Kripalu. More importantly, we
must ask ourselves, what is the road ahead? What needs to be done to ensure that the gains are
firmly institutionalized and will sustain long after I am gone?
DIAGEO PLC
Diageo plc was created in 1997 through the merger of Grand Metropolitan and Guinness. 1 By 2002,
Diageo had consolidated its operations to focus on premium drinks and had sold its food assets,
including Pillsbury and Burger King. By 2017, Diageo, headquartered in London, was the second largest
spirit company globally with a presence in over 180 countries. 2 Its collection of over 200 brands
included globally recognized brands with long traditions such as Johnnie Walker, Smirnoff, Captain
Morgan, Don Julio, Tanqueray, and Guinness. As part of its plan to expand into the fast-growing
emerging economy markets, Diageo acquired USL, India's leading spirits company, in 2013,
spending more than USD 3 billion for a controlling stake.
DIAGEO INDIA
Diageo plc took over USL in 2013-14 with the acquisition of a 54.8% stake in the company, making
India one of its largest markets. By 2020, Diageo India, a subsidiary of Diageo plc, was the country’s
leading beverage alcohol company with revenue of INR 285,892 million and net profit of INR 6,773
million in 2019-20 (Exhibit 1). The company manufactured, sold, and distributed a portfolio of
premium brands, some imported and others locally manufactured, such as Johnnie Walker, Black Dog,
Black & White, VAT 69, Antiquity, Signature, Royal Challenge, McDowell’s No.1, Smirnoff, and
Captain Morgan. Headquartered in Bengaluru, Diageo India had a committed team of over 3,300
employees, 49 manufacturing facilities across India, a strong distribution network of more than
65,000 outlets, and a state-of-the-art technical center. Incorporated in India as United Spirits
Limited (USL), the company continued to be listed on both the National Stock Exchange (NSE) and
Bombay Stock Exchange (BSE).3
1
Diageo website. https://www.diageo.com/en/our-business/our-history
2
Diageo India website. https://www.diageoindia.com/news-media/press-releases/diageo-celebrates-20-year-anniversary
3
Diageo India website. https://www.diageoindia.com/about-us/who-we-are
Uniting Spirits: The Path to a New Culture at Diageo India | 2
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COMPANY HISTORY
USL's origins dated back to 1826 when Scotsman Angus McDowell set up McDowell and Company,
a trading company in Madras (now Chennai). Indian entrepreneur Vittal Mallya’s United Breweries (UB)
Group acquired McDowell and Company in 1951 and set up its first distillery in 1959. McDowell's
strengthened its business by acquiring breweries and distilleries across India and launching many
successful brands such as McDowell's No.1 Whisky, McDowell's No.1 Brandy, Celebration Rum,
Signature Whisky, Diplomat Whisky, and Old Cask Rum over the years.
The UB Group and McDowell's continued their expansion through several regional acquisitions. In
1999, McDowell and Company Limited, Chennai, a more than 100-year-old company, merged with
McDowell Spirits Limited, a Bengaluru-based company that had been specifically formed for acquiring
McDowell and Company Limited and various other companies. McDowell Spirits Limited subsequently
changed its name to McDowell and Company Limited. In 2006, McDowell and Company Limited
acquired Shaw Wallace & Company, Hebertsons Limited, Triumph Distillers and Vintners Private
Limited, Baramati Grape Industries India Limited, Shaw Wallace Distilleries Limited etc., and
changed its name to United Spirits Limited. By 2011, USL had established volume leadership in the
beverage alcohol market, becoming the world's largest spirits group volume wise. By the time Diageo
took over, brands such as Royal Challenge, Black Dog, Antiquity, Director's Special, and White Mischief
were part of USL's portfolio.
It could be said that on taking control of USL, Diageo acquired a history dating back nearly 200
years. That period, from the start of McDowell’s in 1826 to Diageo’s takeover of USL in 2014, was
marked by frequent churn from a series of acquisitions and mergers (Exhibit 2).
USL’S CULTURE
Vijay Mallya, the son of Vittal Mallya, took over as the Chairman of the UB Group and McDowell's
in 1983 at the age of 28, following the death of his father. Under Vijay Mallya's chairmanship, the
business expanded. Growing from 2.85 million cases 4 in 1983 to 114 million cases in 2011, 5 the
company established volume leadership in the world alcohol beverage market. Vijay Mallya’s
flamboyant and lavish lifestyle earned him the title “King of Good Times.” His extravagant parties in
his many luxurious villas and yachts were the talk of the town. In 2005 he launched Kingfisher
Airlines with the ambition of creating India's largest airline. He famously claimed that all the flight
attendants had been handpicked by him. He bought a Formula 1 team and named it “Force India”
and acquired the Bangalore franchise of the Indian Premier League, a professional Twenty20
cricket league, calling it “Royal Challengers Sports” after the best-selling whisky brand in the USL
portfolio. However, the good times did not last, and Mallya’s empire collapsed spectacularly.
Kingfisher Airlines was grounded in 2012, and Mallya faced the heat of lenders to whom he owed
huge sums of debt. The financials of USL rapidly deteriorated. Eventually, Vijay Mallya was accused
of defaulting on loan repayments, money laundering, and tax evasion. A few years after he sold USL
to Diageo, he left the country.
Under Vijay Mallya, the organizational culture was a mosaic of different characteristics. Long-time
employees of USL fondly recalled the company’s entrepreneurial agility. A former senior employee
said, “There was hardly any interference in day-to-day operations. COOs used to manage profit and
4
A “case” contains nine liters of alcoholic beverage, for instance, a case holds 12 bottles of 750 ml
each. 5 Dalal, M. (2012, November 9). Diageo-USL deal puts to test Mallya’s credentials. Live Mint.
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https://www.livemint.com/Home-Page/ltAz4H445V3fEeceY8ghOL/Mallya.html
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loss (P&L) and the various functions with total freedom. However, all the critical decisions were
taken only at the top. USL was a well-tuned ‘war-machine.’”
An executive committee member who had been part of the company before Diageo took
overstated, “United Spirits had a very different culture. It was a traditional Indian company where
hierarchy mattered, and the word of your boss was final. The culture was ‘get the things done come
what may.’”
Mallya had an iron grip on the company, and he, along with a small group of senior leaders, made
all the critical decisions. A supply chain leader observed, “Everyone fairly well understood that it
was Vijay Mallya's company.”
Even though Mallya did not get overly involved in the company's day-to-day operational activities,
he made sure he had a dedicated team of top leaders. They reached their financial targets and kept
the brands strong. These top executives were paid very high salaries.
It was a culture in which employees did not feel particularly empowered. One high-level executive
observed, “There were signs of a culture that was deeply hierarchical, such as seniors turning up
late for meetings, only seniors being invited to and speaking at meetings, and many other similar
examples. Also, there was no women’s representation in the leadership team.” He described the
business and culture as very transactional and traditional, with USL entirely focused on making
profits and winning in the market. He recalled, “The then Managing Director of USL did not
announce an event as important as the Diageo takeover to the wider organization; only the senior
leaders were in the know. The rest of the employees learned about the takeover from external
announcements and the grapevine.”
DIAGEO INDIA: NEW BEGINNINGS
When Diageo acquired a majority shareholding in USL in 2014, USL became a part of the global Diageo
group. This marked the beginning of a major transformation at the company. Diageo made efforts
to knit together its brands and people with those of USL and evolve an ethical and sustainable
business.
Highlighting the two most significant challenges in building Diageo in India, Menezes stated, “The most
important was doing business the right way. The second was restoring the financial health of the
business.” Kripalu added, “It was about managing yesterday, today, and tomorrow all at the same
time.”
With a new vision “to become the best performing, most trusted and respected consumer products
company in India,” in line with Diageo plc’s global strategy, the company evolved a new 5-point
strategic agenda:
1. Strengthen and accelerate core brands

2. Evolve route to consumer
3. Drive out cost to invest in growth and expand margins
4. Lead USL and industry towards the highest ideals of corporate citizenship
5. Create a future-ready organization
Putting compliance and ethics at the heart of the business, one of the first things that the newly
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integrated company did was to provide 20,000 hours of training and awareness programs on
ethics,
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values, and compliance in the very first year. It adopted a new marketing code for responsible
brand communication. It redesigned the organization structure, created new functions and
capabilities, and overhauled the rewards and compensation process.
Kripalu introduced new processes, controls, systems, and governance mechanisms. He aligned Diageo
India more closely with Diageo's global values, steering the organization towards being more open,
process-driven, and transparent. He did not attempt to change everything, saying, “I chose to continue
the entrepreneurial spirit, can-do attitude, ability to find solutions to unexpected changes, intent to
break boundaries, and so on, that were part of USL’s culture. However, I was keen on bringing in
Diageo’s brilliance in brand building, its systems, processes, capabilities, and talent, and most
importantly, its commitment to doing business ethically. I was sure that if we combined the
strengths of USL with Diageo, 1+1 would be 11 and not 2.”
The company brought in new talent from diverse backgrounds. Thus far, it had consisted of people
who had spent most of their careers within the beverage alcohol industry, but now it inducted
professionals from other sectors, such as fast-moving consumer goods (FMCG), to create a more
diversified talent base. Many people in senior management either retired or moved out. There
were changes in the top-level leadership, as well. The Diageo India Leadership Team (DILT) was
repurposed and expanded to include the company’s top 50 people. The existing management
committee (Mancom) was replaced by a new executive committee (Excom). Excom was broad-based
and included many functional heads. These structural changes were brought in with a view to
strengthen functional expertise, create centralized processes and controls, and provide integrated
oversight to regional operations. Some of the old-timers were uncomfortable with these changes
and were anxious about losing their autonomy and freedom.
BUILDING THE NEW CULTURE
Having firmed up the strategy and transformed the structure, Kripalu and Aarif Aziz, chief human
resources officer (CHRO) at Diageo India, focused on building an enabling culture in the
organization through focused programmatic efforts starting in April 2019. They wanted Diageo
India’s culture to resonate with the company’s core purpose: “Celebrate life, every day,
everywhere.” Diageo’s global culture was built around the values of being passionate about
customers and consumers, wanting to be the best, giving each other the freedom to succeed,
valuing every person’s contribution, and being proud of “what we do” and “how we do it.”
Addressing employees at a townhall meeting in early 2019, Kripalu reiterated the importance of
culture for Diageo India, “The magic really happens when you focus on building the soft parts of the
company, that is, the culture of the organization. Culture drives performance more than anything else.
Culture is the only sustainable source of competitive advantage. Therefore, we are trying to drive
culture in a strategic way in the company with a vision and a plan.”
The DILT held a culture workshop in July 2019 to pause and take stock of progress, to assess
whether certain factors had to be strengthened and in what ways, and to discover how leaders’
behaviors impacted employee experience and built culture. During the workshop, DILT members
were given a list of workplace behaviors and asked to reflect and introspect on their own conduct
with respect to those behaviors, for example:
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 You're in a team meeting, and you agree to take up an issue offline with another
colleague. You volunteer to send the calendar invite if he is senior, and you silently expect
him to send you the invite if he is junior.
 You are more confident on the delivery when you are working on the project alone.
 Your team celebrated and recognized members in the monthly call. You do it because it is
a custom but personally do not value their work or achievement as exemplary.
The leaders were asked to rate themselves honestly on how likely they were to demonstrate such
behaviors, which they knew were hierarchical, non-collaborative, and ritualistic. By and large, they
rated themselves honestly and identified specific actions towards strengthening the culture they were
committed to building. The workshop was designed to ensure that the leaders went back with a
collective understanding of what the new culture would be and their personal opportunity to role
model. They even filled out personal commitment cards at the end of the workshop. (Exhibit 3).
It was clear. The new culture must be founded on four pillars: 1) compliance, 2) non-hierarchy, 3)
collaboration, and 4) celebration.
Compliance
Having gained the collective commitment of the organization’s leaders, HR began working
programmatically with other functions to deepen and institutionalize each of the four culture
pillars. The leadership team accorded the greatest importance to “doing business the right way.”
Anand had considered this his main mission as CEO of Diageo India, and the DILT culture workshop
allowed USL to stop and think whether there were more engaging ways in which ethical decision
making could be embedded in the organization, going beyond the traditional methods of policy
making and training. Compliance was challenging in the context of the over-regulated alcohol
industry in India, but it ensured a non-negotiable way of working at the highest global standards.
Menezes explained, “The industry in India is regulated at the state level, and we require something
like 220,000 approvals a year from government officials to operate this business. For instance, it
can be an excise inspector at a distillery that signs out the truck that leaves the distillery. The
industry was messy and did not operate according to the highest standards.”
He prioritized compliance and told the Diageo board, “For the first two years, financial
performance is secondary. It will be what it will be. What is much more important is that we focus on
doing business the right way and deploy this concept across the company. It means changing
practices that have existed for decades in the industry.” In a strong signal of the DILT’s commitment to
compliance, all the Excom members signed a compliance pledge.
The DILT recognized all the efforts that had been made till then to embed compliance into the
functioning of the business. The company had trained and certified over 2,000 existing employees
in compliance. Every employee was required to take a yearly refresher course on policies and
procedures around bribery and corruption, gifting and entertainment, money laundering, sexual
harassment at the workplace, and employee alcohol use. The compliance awareness programs
were delivered in local languages to ensure that those employees who were not proficient in
English were also brought up to speed. The company had instituted a robust process where
concerns could be reported on a helpline (anonymously, if wished), and would be investigated and
followed up with appropriate disciplinary actions or process improvements. The company also
acknowledged that its commitment
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to doing business ethically had resulted in some financial and business losses, which it accepted as the
cost of compliance.
While acknowledging that these were important steps in the right direction, the DILT believed it
was necessary to go beyond this traditional approach and implement a framework where
employees would be more engaged in discussions on ethical decision making and see compliance
as a matter of pride.
Consequently, a compliance champion was appointed at each unit. Together with the
manufacturing head, the compliance champion monitored and ensured adherence to all applicable
statutes. A set of compliance and ethics ambassadors were pressed into action in various locations
and functions to embed knowledge on these matters and increase employee awareness and
commitment. During the various training sessions, the ambassadors identified and recognized top
performers.
The company launched an automated tool called “Tabtitude” to measure the effectiveness of
compliance training among sales executives on the move. Tabtitude posed one policy-based
question every day to all the frontline sales teams. The company also created a comprehensive
data analytics framework at the backend to understand specific gaps on policy knowledge and
address them.
The DILT realized that specific instances of breaches could serve as learning events for employees. This
gave rise to an interesting initiative called the “Wall of Wisdom,” in which case studies and
instances of compliance breaches (with names disguised) were posted on the company intranet so
that employees could learn from them. They also publicized the confidential whistle-blower
helpline “Speak Up” to remind employees about the ways in which they could alert the company
about code of conduct breaches.
The DILT introduced the “Signature Compliance Hero Awards” to recognize individuals and teams who
stayed true to the beliefs and purpose of the company and made exemplary contributions to
achieve 100% compliance.
The focus on compliance was not limited to the internal organization. As a responsible corporation,
Diageo India wanted all its suppliers and business partners to meet the highest compliance standards.
Thus, it launched the “Know your Business Partner” program, using a web-enabled tool to
streamline and automate the process of assessing third parties against the risk of bribery,
corruption, and money laundering. All business partners were trained and informed about the
company’s compliance policy specific to bribery and corruption, its expectations of these partners,
and the consequences of any lapses.
Diageo India’s efforts to build a compliance culture not only ensured the “right way of doing things”
but also led to significant cost savings. In improving operational efficiency internally, the company not
only resolved several outstanding tax disputes, but also digitized its entire tax history, bringing in
the transparency required of a compliant organization.
As employees saw their leaders consistently prioritize compliance at every level, sometimes over
revenue and profits, the organizational mindset shifted, and total compliance became a way of life.
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Non-hierarchy
The company was determined to break the thick layers of hierarchy that had been cemented
during the USL days. The number of levels and grades in the organization had not only mushroomed
over the years, but had also created a stifling environment for those at the lower end of the
hierarchy and placed them at a disadvantage. To reduce this complexity, the company cut the number
of levels from 19 to 7 over the period 2016-2020 (Exhibit 4). Leadership privileges such as dedicated
car parks and elevators, cabins for managers, and differentiated treatment at work were removed.
One employee recalled, “There were five elevators in the building, and one was reserved
exclusively for senior management. Once Diageo took over, this elevator was thrown open to all,
and so were the reserved car parks.”
Another employee said, “The company was very hierarchical pre-Diageo. We had a cabin culture then,
and I had to wait outside my boss’s cabin to meet him. Though we did not see it often, in some
cases, separate restrooms were held in reserve for people at higher levels in certain remote factory
sites.”
Kripalu said at a townhall,
“Hierarchy is sometimes about the soft stuff: it is where you sit in a meeting,
whether you greet the security guard on your own or wait for him to say, ‘good
morning, sir,’ whether you take pride when people call you ‘sir’ versus really feeling
miserable about it, or getting the driver to carry your bag. These are symbols of
hierarchy. We have to change this.”
Following structural changes and leadership communication within the organization, in mid-2019, the
manufacturing HR team, in partnership with the business teams, created a “busting hierarchy” plan to
assess whether the cultural changes necessary to a non-hierarchical environment had been
implemented on the shop floor. As part of this plan, they sought feedback on whether old practices
such as addressing higher-level officers as “sir” instead of by their first names, carrying their bags,
providing different types of furniture for different grades, etc., were still continuing (Exhibit 5).
They reviewed progress using hierarchy evaluation forms, which measured instances of
unacceptable hierarchy-based practices across units. Every instance of such behavior was given a
score of -1. Each unit’s monthly scores were calculated, and the top 10 hierarchical practices
identified. Analysis of the scores over months revealed that certain practices, such as the use of the
title “sir” or “madam,” exclusive cabins for managers, and discrimination between workers and
executives in giveaways and celebrations, persisted.
To continue its emphasis on diluting hierarchy, both in terms of age and tenure, the company
instituted a new “reverse mentoring” program. The idea was to help senior, aging, and longer tenured
executives learn from their younger, next generation colleagues. In the first few weeks of the
program’s rollout, top leaders including the CEO, CHRO, chief commercial officer, chief supply chain
officer, chief marketing officer, chief of strategy and corporate affairs, and general counsel
volunteered to take part and seek help from “millennial mentors” (Exhibit 6).
Over time, employees reported that the tell-tale signs of hierarchy that had existed in the USL days
had considerably decreased. Beyond the external signals of hierarchy, employees also observed a
similar reduction in the bureaucracy and red tape that the earlier system had created and fostered.
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One employee said, “Now we are more open. Managers are more approachable, and we can talk to
anybody. Everyone is treated equally, we have freedom of speech, and everyone's opinion is
valued. Now it is possible to see a divisional director without having to go through the hoops of
proper channels.”
However, in September 2020, 18 months into the programmatic culture journey, employee
feedback suggested that progress towards a non-hierarchical organization had not been uniform
across locations and functions. It was evident that while the headquarters and city-based central offices
were quick to dispense with hierarchic practices, some of the regional and non-urban locations still
had much more work to do.
Collaboration
The leadership team at Diageo India wanted to foster a culture of collaboration with high levels of
trust. Instead of focusing on delivering excellent functional outcomes, it focused on “customer
outcomes.”
Employees felt that the culture change initiatives driven by the leadership after April 2019 had
helped create the conditions and positive mindset for collaboration. One employee said, “Now
departments talk to each other. There is cross-functional interaction between various
departments. I am in sales, and I get the support of marketing and supply teams daily.
Manufacturing, procurement, supply, marketing, and legal collaborate with each other.”
Kripalu, Aziz, and the leadership team seized the opportunity presented by the extraordinary
COVD- 19 crisis to accelerate their efforts to build a collaborative culture. Instead of whining over
its inability to organize in-person meetings and events, the company quickly adopted and leveraged
emerging digital technologies. It launched a digital campaign called “Win together, stronger
together,” in which it invited ideas from the entire organization to reimagine engagement with
consumers, customers, and employees. People were encouraged to collaborate through digital
platforms and suggest improvements in operations and cash flow management. Several new
quality ideas poured in from across all sections of the company. Yammer, the company’s internal
collaboration channel, was buzzing with activity. People shared ideas, commented on each other’s
posts, and rich conversations flowed between and across functions. An already collaborative culture,
amplified by the opportunities that the pandemic threw up, unleashed creativity and innovation. The
leadership team was pleasantly surprised to see employees passionately pitching new ideas such as
the home-delivery of alcohol products, digital menus, offering online experiences, and tele-calling
with trade partners during the lockdown.
Each function used the unique “window of opportunity” the pandemic presented to focus on
building new capabilities and functional excellence. Every major function from sales to finance
worked on enhancing operational effectiveness, strengthening processes, deepening its compliance
focus, and building clarity in roles and responsibilities. They also created specific processes for
enabling smooth handoffs within and across functions.
Something interesting started happening as more and more people saw the benefits of the
collaborative partnerships that were being forged across departments. Sales leaders in Jharkhand,
a northeastern state with a large tribal population, wanted to extend this spirit of collaboration to
their customers and to the regulator—the government. Instead of approaching the government
in the
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conventional way of seeking permissions and approvals, the local Diageo team decided to forge a
partnership with the government. They worked closely with regulators on important issues such as
curbing the sale of spurious liquor and reducing bootlegging from neighboring states. The team's
efforts bore fruit as Jharkhand became the first state in India to start the home delivery of liquor
through national-level food delivery aggregators. Surprisingly, despite the lockdown, the new
partnership with the state government reduced the company’s accounts receivables and increased its
access to the market through new routes to consumers, such as home delivery.
The most remarkable example of Diageo’s collaboration with state governments occurred at the onset
of the pandemic when it pledged to produce 300,000 liters of bulk hand sanitizers. Kashinath Jha,
operational leader said, “We had never made sanitizers before. Nobody in the company had any
idea how to make sanitizers. Despite this, we were able to deliver the first batch of sanitizers within
five days of taking the decision on March 22, thanks to a collaborative team effort.”
Within 24 hours of making its pledge, the team had secured all the necessary internal approvals,
decided the manufacturing locations, and finalized the sanitizer formulation based on World Health
Organization (WHO) guidelines. On March 23, a core committee consisting of legal, finance,
technical center, and manufacturing plant heads was set up. With all the departments working
together, they hoped to be able to get FDA approval quickly.
The corporate relations team liaised with excise officials, and the legal team prepared the draft
document for the FDA authorities. Diageo delivered the first batch of sanitizers to the government
authorities on March 27. All the different functional teams collaborated to realize the goal within
five days.
However, some employees remained skeptical about the true extent of collaboration in the
organization and regarded some of these successes as isolated instances. Employee feedback in the
middle of 2020 pointed to the continued existence of functional silos. One leader said, “In fact, the
centralization of structure and management control for various functions post the USL acquisition only
accentuated silos.” Many leaders proposed that all functions own cross-functional goals, much like
how people goals were owned by non-people functions such as supply or marketing. The strong
suggestion was that a more programmatic assignment of cross-functional goals would
institutionalize collaboration, pushing it beyond the current voluntarism.
Celebration
The purpose statement of Diageo read: “Celebrating life, every day, everywhere.” Celebration was
seen as the spirit that underpinned everything that the company did. Aziz explained that
celebration at Diageo went far beyond just having fun. It was about “celebrating our people, our
customers, our partners and the communities we operate in. We believe in bringing our purpose to
life in everything we do.”
Commenting on the culture of celebration at Diageo, an employee said,
“We have monthly and quarterly connects where we acknowledge great work and
time is set aside for rewards and recognition. Even during this pandemic, we had a
three-hour virtual gathering with the families of employees.”
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All functions dialed up their engagement with employees and their families during the pandemic.
The finance team started “Easy evenings with family,” informal catch-up sessions over Zoom. The
supply team started to host virtual tea parties for their employees called “Chai pe charcha”
(meaning “chat over tea” in Hindi). The commercial team in the region hosted an evening of music
and songs for their colleagues and families. These virtual events not only sustained a spirit of
celebration in the face of social distancing challenges, but also fostered cross-functional
collaboration.
The company also revamped its rewards and recognition system (Exhibit 7), introducing two new
award categories: i) three spot awards, and ii) three India-wide annual recognition awards.
Captain Morgan’s “Hola Captain” was a spot award aimed at building a culture of recognition and
celebration through positive affirmations. Royal Challenge’s “Be bold” celebrated bold bets by
those who went above and beyond their duties, and McDowell’s spot award recognized high-
performing, collaborative, and inclusive teams
Among the annual awards, the Johnnie Walker “Keep walking” award recognized high performers who
exhibited Diageo’s leadership standards, stretched boundaries, and inspired others, while the
Signature “Leave your mark” award recognized excellence in innovation and compliance, and the
McDowell “Amazing team” award recognized teams that went the extra mile and achieved remarkable
outcomes.
To enable a seamless. digital process around recognition, the company created a portal hosting
various recognition options that made it easy for managers to exercise them.
The annual recognition awards, a powerful platform for celebration, had to be reimagined. Due to
the lockdown, people could not be brought together physically. Therefore, the annual recognition
awards event was held virtually on Zoom. More than 1,100 employees attended the event virtually.
In fact, the constraints of cross-country travel had made it necessary to localize these events in the past.
Now, employees across India could come together in celebration on a digital platform. Celebrating this
esprit de corps, Kripalu and the other Excom members raised a toast to employees and their
families.
Celebration at Diageo was not limited to employees. It extended to the company’s many stakeholders
and society at large. The company wanted to create a positive social perception of alcohol and of itself
as an inclusive business that played its part in building thriving communities and promoting
responsible drinking.
It launched DRINKiQ, a website created to educate people about alcohol and provide them with the
tools to make more informed choices about drinking, including the decision not to drink. The company
used DRINKiQ as a way to engage with more than 1,500 MBA students across top B schools and
communicate the importance of responsible drinking.
In a similar spirit of community outreach, the company launched water, sanitation, and health (WASH)
interventions that increased people’s access to potable water in rural areas. Diageo installed
community water purification plants in several villages in rural India, constructed new water tanks,
and renovated or repaired local water bodies. This initiative was particularly appreciated by rural
women, who had hitherto shouldered the burden of fetching and carrying drinking water across
long distances.
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During the pandemic, the company had to reimagine ways to promote responsible drinking and spread
cheer in the community. To support the reopening of bars and pubs, it launched an initiative called
“Raising the bar,” which supported bars, pubs, and restaurants by helping them invest in a series of
revival measures such as improving hygiene, training bartenders, purchasing equipment, and
introducing digital and touch-free operations, among others.
Despite all these efforts, some employees felt that though there were many tools available for
recognizing and appreciating people, not everyone was aware of them. One employee said,
“Sometimes we do not celebrate enough.”
Inclusion and Diversity
Soon after the takeover of USL, Diageo India took steps to increase diversity and make the organization
more inclusive. Its initial focus was on increasing gender diversity. From as little as 1% during the
USL days, women's representation in the workforce steadily increased to 9% in 2015-16 and 20% in
2019-
20. In less than six years of the takeover, the DILT’s composition changed significantly, with women
leaders making up 27% of the team. Further, the company inducted three senior women leaders
into the Excom (38%) in contrast to the erstwhile Mancom, which had been an all-male team just a
few years earlier.
This was no mean achievement given that as a workplace, beverage alcohol companies were not
the preferred choice of Indian women. In many of the more conservative communities across India,
women were not encouraged to join an alcohol company. This meant that the industry and its
workplaces were largely male dominated.
Abanti Sankaranarayanan, chief of strategy and corporate relations, recalled her early days in the
business, saying, “No one made eye contact with me in what were largely all-male meetings.” She, like
many others, was happy to see the steady progress in women’s representation in the workforce
after the takeover. But some women employees wondered whether the increase in numbers would
be followed by true inclusion.
Diageo India had to take many steps to make the organization attractive to women. To start with, it
offered maternity benefits with 26 weeks of paid leave as early as 2016, much before a law to this
effect was introduced in the country. Policies were redesigned with empathy and consideration for
women’s special needs. Flexible work options were offered to women returning post-childbirth and
their job was kept open for them during their leave period. The company also addressed the concerns
and medical needs of women dealing with fertility issues, redesigning their health insurance programs
to reimburse in-vitro fertility procedures (IVF).
Workshops and activities were organized to increase employees’ awareness of inclusive behaviors.
Training sessions on “managing inclusively” helped managers identify and overcome unconscious
biases, non-inclusive practices, and micro-aggressive behaviors.
Eventually the company expanded the diversity agenda to include additional constituencies such as
differently abled people and members of the LGBTQI6 community. The supply function hired
several differently abled people across their manufacturing locations. They created accessible
infrastructure
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6
LGBTQI is an abbreviation for lesbian, gay, bisexual, transgender, queer, and intersex.
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and provided a supportive climate for their early success. In terms of LGBTQI inclusion, the
company made policy changes to recognize same sex and unmarried partners and give them the
same benefits as a legal spouse. It also offered gender reassignment surgery support and surrogacy
support benefits.
The company launched an inclusion and diversity employee resource group, which was a voluntary
and cross-functional group that aimed to accelerate the advancement of an inclusive culture.
Reflecting on their inclusion and diversity efforts, Aziz said, “We have made significant progress
despite all odds. However, our goal is to achieve complete gender parity in senior leadership
sooner than 2025.”
Performance Evaluation System and Culture
The performance evaluation system was changed to include both the “what” and the “how” of
performance. Aziz explained, “If you want the behavior of people to change, you start looking at ‘how’
they do things, evaluating people for it, giving them incentives and recognition, or penalizing them
if they do not exhibit the behaviors. When we were doing the review for 2019-20, we penalized a
very senior leader who exceeded expectations in terms of all the business performance metrics but
was not a collaborative leader.” Aziz recalled that it had been a difficult conversation as such a
thing had never happened before. In another case, a leader who had failed to create a culture of
compliance had his bonus and stock options reduced.
Aziz added, “What we have been trying to do over the last year, starting from the top, is to make
culture real, making sure there is a conversation, feedback, assessment, and incentives linked to
the ‘how’ part of the equation.”
Digital Initiatives for Employee Engagement
The leadership team leveraged digital platforms to create more opportunities to listen to what
employees had to say. Members of Excom started “Hangout café,” informal reach out sessions to
get a pulse on the progress of the cultural journey. Based on employee feedback, Kripalu
announced “Zoom-free” Wednesday afternoons and meeting-free lunch hours. The company
launched an artificial intelligence (AI) based chatbot, its first virtual employee, to engage with
employees and seek feedback. Interestingly, sometimes employees found it safer to talk to a chatbot
and provided valuable feedback through this channel.
THE ROAD AHEAD
Delighted with the significant cultural transformation that had taken place at Diageo, Kripalu
decided to reflect, introspect, and critically take stock of the progress made. In an hour-long
conversation with his leadership team, he posed the following question: “I know we have made
great progress. Not sure if the pandemic has slowed us down, or in fact has accelerated our cultural
journey. What do you think?” Aziz reminded the team of the positive employee feedback they
received in the latest pulse survey. In the July 2020 survey, 96% of employees said they were proud
to work at Diageo. They commented positively on the company’s “flexibility and adaptability to
new conditions” and on its collaborative structure where “managers are empowered to make
decisions on their own in consultation with their team members.”
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Kripalu replied, “I have no doubt our new culture of collaborative working has enabled us to
contain losses and bring down the revenue decline from 6.6% in the previous quarter to 3.6% in the
quarter ending September 2020, despite the pandemic.”
Aziz added, “We have to listen carefully to employee feedback. For example, in the employee focus
group discussions I recently organized, they unambiguously asserted that the company is 100%
compliant and ethical today. They said we have made great progress in generating collaboration.
However, they also felt that we have some distance to cover before we can overcome all the
aspects of hierarchy to become truly inclusive and make holistic celebration a way of life.”
The leadership team agreed that there were challenges in the road ahead. Transformation thus far
had focused on articulating the aspirational culture, the role modeling of leaders, consciously changing
ways of working, aligning systems and structures to support the effort, and rewarding and recognizing
the desired behaviors. The question now was how to internalize and sustain the transformation. What
were the challenges to their ongoing culture journey, for example, the challenges presented by the
pandemic? How could they institutionalize the gains they had made and ensure that the cultural
transformation they had begun would continue and succeed?
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Exhibit 1
Selected Financial Information of Diageo India
Revenue and Profit (INR million)
Source: Company documents (2020).
Exhibit 2
USL Acquisition History
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Exhibit
19
Leaders Displaying Personal Commitment Cards
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Exhibit
20 and after the Culture Change
Levels in the Company before
Levels in the company prior to change Levels in the company post change
President and MD
Executive - CEO
Deputy President
Executive Vice President
SL
M1A
M01
M2A
L2
M02
M3A L3
M03
M04 L4
M05
M06
L5
OO3
OO2
L6
P06
P05
P04
P03
P02
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Exhibit
21 of Hierarchical Behaviors
Busting Hierarchy: List
 Calling others “sir” or “madam” and not by their first names

 Different gifts for workers and executives
 Different mealtimes or breaks for executives and workers
 Different chairs for managers in the leadership team and other employees
 Attendants or peons carrying the bags, briefcases, and lunch boxes of senior employees
 Serving of tea or water to senior members of the team
 Bowing and touching the feet of managers
 Lower-level employees or peons opening doors for managers
 Allowing executives and line supervisors to bring mobile phones into production areas
 Different gates/entry for workers and executives
 Differential security protocols for executives, e.g., no frisking or checks of their vehicles
 Washing and cleaning of personal vehicles by housekeeping staff
 Managers/ leadership team members utilizing peons to give messages to their team members
 Cleaning of managers’ lunch boxes by peons
 Cabins for managers
 Different quality of tea for workmen and executives
 Different colored gate passes for executives and workers
 Senior employees not wishing workers on special days such as Holi, Diwali, or their birthdays
 Different uniforms, safety shoes, personal protective equipment (PPEs) for workers and executives
 Fixed/reserved car parking for executives
 Different drinking water sources for executives and workers
 Different meal menus for different classes of the workforce
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Exhibit
22 Mentoring
Reverse
Exhibit 7
Recognition Framework for 2019-2020
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Exhibit 8
Delivery of Sanitizers

Case-Uniting Spirits

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Indian School of Business

Chandrasekhar Sripada | Thomas J Menachery

UNITING SPIRITS: THE PATH TO A NEW CULTURE AT DIAGEO INDIA

Uniting Spirits: The Path to a New Culture at Diageo India | 2

Uniting Spirits: The Path to a New Culture at Diageo India | 3

Uniting Spirits: The Path to a New Culture at Diageo India | 4

DIAGEO INDIA: NEW BEGINNINGS

1. Strengthen and accelerate core brands

Uniting Spirits: The Path to a New Culture at Diageo India | 6

BUILDING THE NEW CULTURE

Uniting Spirits: The Path to a New Culture at Diageo India | 7

Uniting Spirits: The Path to a New Culture at Diageo India | 8

Uniting Spirits: The Path to a New Culture at Diageo India | 9

Kripalu said at a townhall,

Uniting Spirits: The Path to a New Culture at Diageo India | 10

Uniting Spirits: The Path to a New Culture at Diageo India | 11

Commenting on the culture of celebration at Diageo, an employee said,

Uniting Spirits: The Path to a New Culture at Diageo India | 12

Uniting Spirits: The Path to a New Culture at Diageo India | 13

Inclusion and Diversity

Uniting Spirits: The Path to a New Culture at Diageo India | 14

Uniting Spirits: The Path to a New Culture at Diageo India | 15

Performance Evaluation System and Culture

Digital Initiatives for Employee Engagement

THE ROAD AHEAD

Uniting Spirits: The Path to a New Culture at Diageo India | 16

Uniting Spirits: The Path to a New Culture at Diageo India | 17

Revenue and Profit (INR million)

Source: Company documents (2020).

Source: Company documents (2020).

Uniting Spirits: The Path to a New Culture at Diageo India | 18

Source: Company documents (2020).

Uniting Spirits: The Path to a New Culture at Diageo India | 19

Executive Vice President

Source: Company documents (2020).

Uniting Spirits: The Path to a New Culture at Diageo India | 20

 Calling others “sir” or “madam” and not by their first names

Source: Company documents (2020).

Uniting Spirits: The Path to a New Culture at Diageo India | 21

Source: Company documents (2020).

Source: Company documents (2020).

Uniting Spirits: The Path to a New Culture at Diageo India | 22

Source: Company documents (2020).

Uniting Spirits: The Path to a New Culture at Diageo India | 23

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