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25% part of its equity held by an Employees Trust. Creating and nurturing loyalty is how L&T has traditionally believed in retaining talent. Says AM Naik, Chairman and Managing Director, “Our main job is to convert employees to L&T-ites, so that the future of the company is secure.” His own feelings for the company verge on the emotional. “In my career of 40 years I’ve received many offers, but I always tell them that this life is reserved for L&T, may be if I am reborn and return as a human being, I could consider then,” he says. Training was a way of fostering loyalty and increasing competence. Timely promotions, mentoring and training of engineers and deputations to reputed technical and business schools for higher education, are routine in the organisation. However, L&T is facing a crunch of talent, compounded by a loss of trained middle management employees through the 80s, when a merit-oriented system was replaced by a senioritydriven one. The lack of leaders is sufficiently serious as the company is not letting directors retire. Naik is worried. “I am losing people fast and there are not many around, from whom I can select,” he says. Recently the company took on consultant McKinsey to create a leadership development programme. A prominent long-term feature is the campus ambassadors programme, which will help the company pick up talent from business schools. Having faced a severe crunch of skilled construction workers over many years, the
ECC division has successfully established the Construction Skills Training Institute (CSTI) for 7 trades. The CSTI has now expanded beyond Chennai and opened branches in Ahmedabad, Bangalore, Delhi and Kolkata. One of the main strategies to meet competition for the future is “ramping up of skilled manpower through a systematic training process,” says KV Rangsawami. This is in line with the overall vision for L&T’s future. “Our
as daunting as it sounds. To achieve this milestone, L&T is moving away from a semiintegrated structure and plans to create 12 verticals in 2009: nine (including engineering & construction, power and hydrocarbons, electricals, machinery business, industrial products, heavy engineering, technology and ship building) are mature businesses; the remaining three verticals will be part of the mid-term and long-term growth
internal processes training and development, encouragement and empowerment, must be such that ordinary people can do extraordinary things,” avers Naik.
strategy. “We have plans to create 12 operating companies within the L&T corporate structure and each operating company will be responsible for its strategic and operational decisions and performance. Each company would have independent support functions such as finance and accounts, HR and supply chain management. The new structure is expected to provide a platform for sustained value creation,” says AM Naik. Considered a logical
The future L&T has set itself a new quantitative milestone – a target turnover of Rs 500 billion ($10.7 billion) for 2012. Considering that the company has doubled its revenues in just three years to register a figure of Rs 300 billion in 2008, this may not be
progression in the growth curve of a large-cap company, the move is expected to achieve two objectives. One, activities that logically fit together will be clubbed to achieve greater efficiency. Two, each business will get the autonomy and resources it deserves. In a nutshell, businesses are expected to create more value for the company with this new structure. Analysts opine that the move serves another objective, that of diversification, which is inevitable for a company this large. “Despite its emphasis on its core competencies, an experienced management team like L&T’s is bound to realise the dangers of being an overly dominating player and dependent on any one market,” says Dr Amit Kapoor, Professor of Strategy and Industrial Economics at the Management Development Institute, Gurgaon. “Diversification is the most logical strategic move at this point,” he adds. Clearly, the four years to the 2012 target will be testing ones for L&T, as it confronts three issues. There is international expansion, and yet the demand is largely from the domestic market. There is growth, but few future leaders to steer it forward. There is diversification, yet the construction and engineering business contributes the lion’s share of revenues. Clearly, L&T will continue to succeed in its mission of building India. Success in achieving the Rs 500 billion milestone will be a little more difficult. ■
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Go India January 2009
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