‘What I Inherited Is Today 12% Of L&T; The Other 88% I Have Created’
a professionally-managed company has to plan succession and do it so well that the company must be what it will be in 2040
For AM Naik, Larsen & Toubro is his temple and work, indeed, is worship. It’s his relentless passion and commitment to L&T that has led him to spot new opportunities in new businesses. The executive group chairman has transformed L&T from a mere engineering and EPC player to a mammoth conglomerate that’s into defence, water, technology and hydrocarbons, and heavy engineering.
In a free-wheeling conversation with Clifford Alvares, Naik dwells at length on what drives him, on the importance of succession planning and the growth of L&T. Edited excerpts:
You are moving ahead. Is there an unfinished agenda that you are working on?
I will take up my new role as group chairman. But, group chairman with a difference. I will promote one of the largest projects in future. Then, I am going into succession planning. I have finished mentoring Batch 1, which included seven independent heads and five directors, including my successor S.N. Subrahmanyan. I have now taken on the next batch of 22 people, and they will be ready to take over as heads of various divisions, while some will graduate to become directors at around 2030. Our present CEO is on till 2032, and they will be ready by then.
You have announced succession planning quite early. What is the motive?
This has been the most classical succession planning ever done. For 12 years, I mentored Subramanyan, and started giving him more and more responsibilities from 2006. Three years ago, I declared that he would succeed me. He is the vice-chairman both for L&T Infotech and L&T Technology Services, and the CEOs report to him.
Eighteen months ago, I gave him the Hyderabad metro rail. Ship building is run by him. On 1 July, he became the CEO & MD, notified to the stock exchange and implemented.
Succession planning in a promoter company is very different. But, a professionally-managed company has to plan succession and do it so well that the company must be what it will be in 2040. I have made a plan up to 2040 now with Team 2, which is being mentored. I have found when the top people are retiring, and we have made matches, and are training and mentoring them for the jobs. Nobody does that. My time will be mentoring and succession planning so that the company is strong till 2040, and stays good to defend itself.
What are the key business changes that you are implementing at L&T?
I am restructuring L&T. There are small businesses that are to be sold off. L&T has to rediscover its core because the new economy is on us. Defence is a big area for us; we are in all defence-related activities, except aeronautics. I am looking for leaders for our next businesses, I will make a final plan. Most of the small businesses would have by then been sold off; they are never going to be part of my successor’s portfolio.
How would you spend your time now?
I am and will remain in charge of the Trusts of L&T. So I will still be busy for 35 hours a week. I have worked more than 106 years. Many businesses have started on a clean slate, whether it is defence, IT, realty, engineering service, hydrocarbons or heavy engineering. L&T is not the same. What I inherited is today 12 per cent of L&T; the other 88 per cent I have created.
What has driven you over the years?
L&T is my temple. Everybody works hard to retain their job. For me, it is devotion. To whom are you devoted? You are devoted to God. You go to a temple. I hope L&T is able to be a strong company forever and ever. This is all from the bottom of my heart. I worked 16 hours a day, nobody told me to work that long. Later, I worked for 12 hours. While I am retired and not being paid, I will still work seven hours a day, five days a week.
You are wearing a lot many hats in L&T. How did you manage so much?
L&T has 81 businesses, you could say that is 81 hats. I keep introspecting. Mornings, I used to close my eyes and consider what I would do that day. Evenings, I closed my eyes and introspected what I had done, and whether I could have done this or that better. I did this for years together, mostly during travel. Second, I used to observe many successful people. So, I am a constant learner. I keep learning every day.
What are the businesses that you will restructure or sell off?
It cannot be said because employees are very touchy about this. You will hear that every 3-4 months one business has been sold off. You have seen recently that the cutting-tool business was sold for Rs 174 crore to our Israeli partner. We sold our foundry some time before that. Right now, we are talking about 5-6 companies, but all this takes time. We have redefined our core in a new emerging situation. I want defence to grow from 10 per cent to 15 per cent; today it is 3 per cent. I want hydrocarbons to become 10 per cent; today, it is 6 per cent. L&T in 2021 will have a different core. But when all is over, everyone will say this is not the L&T I knew.
One of the key things about managing such a large conglomerate is to have the right people. How are you managing that?
My main job is HR. I spend 4-5 hours on HR. Mentoring takes much time.
How do you identify talent in your organisation or future leaders?
We have seven steps of progression, where there are different stages that we have prepared with various business schools, and programs we conduct. The last stage is mentoring by me to find leaders for independent companies; some of them may become directors. We keep watching every step, and then we see how well they are doing on the job. It is massive work. Your one question will take me days to answer.