HUL book makes case for how to be a champion CEO

From the early days in 1888, when William Level introduced Sunlight and Lifebuoy for ‘the washing needs of teeming millions of Indians’, to the establishment of HUL in 1933 by Lever Brothers (which, following the merger of constituent groups in 1956 was renamed Hindustan Lever), to Hindustan Unilever Limited (HUL), which was renamed in June 2007, the company not just has a storied past, but a ubiquitous presence in our lives. It’s a fact that nine out of 10 Indian households use HUL products, including, but limited to such brands as Lifebuoy, Dove, Clinic Plus, Ponds, Lakme, Closeup, Surf Excel, Vim, Brooke Bond, Bru, Kwality Wall’s, and Kisan.

In 2019, the company made a profit of Rs 6,080 crore, compound annual growth of 15%. Besides being an iconic company on Dalal Street, for the last decade, HUL has been ranked by AC Nielsen as the dream employer of choice in top 20 business schools in India. There is a reason. No other company has given more CEOs to corporate India than HUL. There are currently around 400 HUL alumni who are CEOs/CXOs across corporate India. In corporate circles, HUL is known by the nickname, and which give its name to the book, The CEO factory.

In this book, Sitapati asks and then answers the question, why a company this large has been a success for so long. And most importantly, what exactly do managers learn in HUL that makes them so much in demand as CEOs across the industry?

To bring home the conclusion, beside discussing the broad ingredients of HUL success over the last 100 years, Sitapati focuses on different aspects of the company’s value chain — marketing; product; pricing; sales; cost management; HR and values of the company.

The title of the first chapter perhaps explains why HUL is a CEO factory — Middle-Class Management: The HUL way. The Indian middle class is hard-working, frugal, aspiring and humble. HUL takes pride in being the middle class it serves. The managers spend time in remotest of the villages and also talk to foreign investors. This wide exposure helps managers understand the problem well.

Ownership and result-oriented culture create professionals who would identify and solve difficult problems, thus inculcating an entrepreneurial mindset very early on. As these people move on to other companies, this mindset helps them move quickly by identifying the real problems the company is facing and solving them — the defining trait of leadership. As Sitapati writes, the company would rather close operations than compromise in value. “Paradoxically, to succeed in India in the long term you have to stay honest,” he writes.

Stable and flexible
As Sitapati presents a long sequence of interesting examples to drive home the points outlined in the first chapter, what comes across in the pages of The CEO Factory is the picture of HUL as a company that has institutionalised change by carefully mapping every aspect of the product life cycle and yet allowed itself to remain flexible enough to respond rapidly to changes in the market.

There are some remarkable management lessons here. For example, Sitapati writes, “What matters is the quality the consumer gets and not the quality you design in the laboratory.”

There are also some valuable tips on pricing some of which might seem preposterous to eCommerce companies. Gross margins, for instance, are sacrosanct at HUL and costs have to be constantly bent to ensure that, which is where ingenuity and innovation come in. Faced with the high cost of fabricating the caps of its many diverse bottles, the company just changed things around such that it used the same caps for differently shaped and sized bottles. It is one of the several deep insights the author slips into the book ostensibly about leadership.

Another important aspect is HUL’s approach to advertising. The company spends about Rs 3,500-crore on advertising and accounts for about 15% of spends and 20% of the country’s ads on TV. (It buys much cheaper due to scale). Unilever believes that advertising is too important to be delegated. A senior person should lead the process from brief to production. That person can choose to consult with others or not. That’s her call. But ultimately in advertising, there should be one single decision-maker, the advertising leader.

Sitapati writes, “Over time, Taj had moved away from using Zakir Hussain as its ambassador to use more conventional celebrities like Madhuri Dixit and Saif Ali Khan. In 2013, just as I was taking over the tea category marketing in HUL, I heard two youngsters saying ‘Wah Taj’ when they spotted the santoor maestro Pandit Shivkumar Sharma at Mumbai airport. What a phenomenal memory structure to nurture! We moved Taj back to its old memory structure – classical musicians (in three subsequent ads we have used Niladri Kumar, Rahul Sharma and Nirali Kartik as our ambassadors) playing mesmerising music to the refrain of Wah Taj. Taj advertising has suddenly become recognisable again and the brand has started gaining market-share after a decade.”