Hello everyone. This is Ronnie Screwvala. Co-founder & Executive Chairman – upGrad. We are going to have a serious conversation and you are going to draw a lot of insights from this session. Mr. Sanjiv Mehta needs no introduction. Overall, he has been heading Hindustan Unilever since 2003. When I was growing up he was the one entity where you felt they have mapped rural India and urban India in terms of distribution, knowledge and consumer understanding better than the Indian government.
18,000 employees is what Unilever has. Therefore, it would be appropriate for Sanjiv to share with us some of the thoughts of what’s going around with many of the working professionals and young people today. I saw him as a peacetime leader and a wartime leader. Therefore I requested him to address all of us today.
1. How bad is the impact on the economy? What are the scenarios for recovery and whether there will be any lasting structural impact of the crisis?
In reality, projections and indices won’t answer these questions. Hardly reliable in the calmness of time, GDP forecast is dubious especially when the virus trajectory is unknown, the effectiveness of containment efforts is unknown, and the consumers’ and companies’ or firms’ reactions are unknown. The reality is there is no single number that credibly captures or foresees what the impact of COVID-19 could be on the economy. When you look at the brutal meltdown in the global financial markets, including of course our own BSE, NSE, it might seem to indicate that the world economy is on the path to recession. The recession risk is absolutely real but let us not take it as a foregone conclusion.
Second, while financial markets are a relevant recession indicator, history has often shown that the markets do not necessarily lead to recession.
2. What is going to be the impact in India?
Of course, a lot will depend on to what extent can India contain the spread of the virus. The good news is that we have a large domestic economy and the dependence on exports is not really high. The risk, of course, is that the economy was weakening even before the crisis, and we could have comorbidity. India has to move the focus now from lives to lives, and livelihood. In fact, these are in many cases intertwined.
The government should be applauded and they have done a decisive job in closing the borders and locking down the country. And now, a similar kind of resolve should be shown to stop the economy from stalling. A big risk is a breakdown in the credit line, which could lead to a severe liquidity crisis, a high number of bankruptcies and severe job losses.
3. What is going to be the likely recovery path?
Now, whether economies can avoid the recession or not, the path back to growth will depend on many drivers, such as a degree to which the demand has been delayed or the degree to which the demand has been lost… Whether the shock is truly a spike, or it lasts, or there is structural damage.
4. Economists put the recovery path in three broad scenarios…
Economists generally sketch them in three broad scenarios, a V, a U or an L. In the V shape, the output is displaced, but the growth eventually rebounds. Though it may seem optimistic amid today’s gloom, this is very plausible. In the U shape, the shock persists and while the initial growth path is resumed, there is some permanent damage from an output perspective. The L shape is ugly; causes significant structural damage impacting the economy supply side, the labour market, capital formation and the productivity function.
At this stage, it is difficult to imagine the scenario, even with pessimistic assumptions. But, this is not something we should rule out and as a country. We should prepare for it, hope that it doesn’t happen and hope that it’s a V and not an L. But, we should definitely prepare for it. If we look at empirical data from the prior shocks, including epidemics, such as SARS, Hong Kong Flu in 68, Asian flu in 58, Spanish Flu in ’18, they were more like V shape. So, there is still… And I am a born optimist, I would still hope that in a country like India, god is kind and we are able to bounce back. It doesn’t happen in an L-shaped recession but it is more like a V.
5. How does the impact manifest itself?
There are three plausible transmission channels. The first is it takes a knocking on the confidence; what I call as the wealth effect. When you get a shock through the financial markets, your household wealth contracts and then, what the normal tendency is to start saving money and that impacts the consumption.
The second is when there is a direct hit to consumer confidence. When financial market performance and consumer confidence co-relate strongly, then the consumer confidence drops sharply. And, this could potentially have a direct hit on consumer spending, making them wary of discretionary spends, and perhaps becoming pessimistic about the longer term.
The third angle is a supply-side shock. Now, the difference between many other recessions and the financial crisis… Like, if we take the financial crisis that was very simple compared to what’s happening today. You take care of the global big financial institutions and the country’s big financial institutions, and you would be able to start overcoming the crisis.
Here, we have a demand-side problem, we have a supply-side problem, and then it could also lead to a severe financial problem. Now, as the virus shuts down production and disables critical components of the critical supply chain, gaps start coming into being and they then turn into problems. Productions could halt, layoffs could occur and that is when you get into a vicious cycle.
6. Things will be different after COVID-19 with regards to macro and micro economy…
Now, it is also very important to understand that recessions are generally cyclical in nature and not structural. However, the boundary can be blurred. History also suggests that the global economy after a major crisis like COVID-19 will be different in a number of significant ways. The first is if you look at it from a lens of microeconomy, a crisis can spur the adoption of new technologies and business models. The SARS outbreak in 2003 is often credited with the adoption of online shopping among Chinese consumers, which really resulted in Alibaba’s rise. This could have a similar impact on our own country.
As schools have closed in many parts of the world, could e-learning and e-delivery of education see a smart breakthrough? Digital efforts in Wuhan to contain the crisis via smartphone trackers, it did demonstrate a powerful new public health tool.
The other is when you look at it from a macroeconomic perspective. Even before the crisis, the world was moving away from globalization. Will this event give further impetus to anti-globalization forces?
Then, if you are to look at it from a political legacy perspective, the ramifications cannot be ruled out. Will it shape the US elections?
7. The move to unilateralism will depend upon how our leaders act and react…
And, also at a multilateral level, the crisis could be read as a call to more cooperation or conversely, the move to unilateralism. It will really depend on how our leaders act and react.
8. What should leaders do in relation to economic risk?
First, don’t become dependent on projections. Financial markets are currently reflecting great uncertainty. A wide range of scenarios remain plausible and should be explored by every business. Second, don’t allow your financial market turbulence to cloud your judgement. Third, focus on consumer confidence signals plus your own instincts and know how to leverage your business data and calibrating insights.
The impact is not going to be uniform. It won’t be uniform across countries. It won’t be uniform across industries. And, the conclusion will have to be very specific to the kind of business you are. Hope for the best, but prepare for the worst. Keep in mind that a V-shaped recovery is a plausible scenario conceptually and empirically, but don’t let that insight make you complacent. Start beginning to look beyond the crisis.
What micro or macroeconomics or legacy will COVID-19 have? What are the opportunities or challenges that will arise that you can encash? Consider, how you will address the post-crisis world? Can you be a part of the faster adoption of the new technologies and the new processes? Can you eventually find advantage in adversity for your company, your clients, your society?
10. Test of Leadership…
In every big crisis, it is, of course, a test of leadership. The different kinds of traits will have to be demonstrated. First and foremost, keep calm. Retain your confidence. Relentlessly communicate with your people. Make them comfortable. Actively collaborate with your partners, with the community. Reach out to the communities. Unless we step out and unless we can make a difference to the context, we won’t be playing a part. Be compassionate, and very importantly, focus on cash. These are the times when you go away from margin percentages and start looking at cash. Liquidity and cash are going to be the determinant of who survives and who does not survive.
11. The future of work, the jobs and career…
At HUL, we moved to work from home from the 16th of March. In Unilever, work from home is not something which is new, we have been giving this option to people and many have adopted it in the past. But, we have never practised it at this scale with thousands of workers. Initially, I too was sceptical but technology has enabled us to survive. And, while working from remote, we have not only been doing our best to keep the supply lines of essentials running, but I’ve also completed a multibillion dollar merger with GSK Consumer Health.
As we have settled down to new routines, it is also making us question our constant need to travel during normal times. It is also making us understand new ways of keeping virtual teams engaged, and very importantly, accelerating the adoption of technology at work. Isn’t this the new feature of work? The transformation of work and organizations is being shaped by technology and talent.
Faster computing power, connected devices, cloud, blockchain, RPAs are redefining the man-machine interface. The other is the entry of the digital natives in the workplace. This is a generation which has grown up in a world that feels much flattered due to the way the technology connects people, allows for immediate responses and a whole new way of collaborations. The implication of this combination on jobs and career is tremendous.
12. The entry of the digital natives in the workplace…
McKinsey Global Institute estimates that 60-65 million jobs in our country could be created through a productivity surge in the next few years, while at the same time, redeployment will be essential to help 40-45 million workers, whose jobs are likely to be displaced or transformed by technology. If I were to generalize a bit, then routine and mono-skilled roles will be replaced with specialists, insights-driven and multidisciplinary roles. Skills like creativity, empathy, collaboration will gain even more prominence as will the requirement for hardcore data scientists, design and systems and thinking talent.
If I pick up a very simple example, the conventional job of an HUL salesperson will remain, but he will be supported by technology which will enable him to customize assortment for each of the millions of stores in the country. But, at the same time, the timeless skills of building nurturing relationships with customers, creativity at the point of purchase will also be required. Not only are jobs being transformed, but so is the way the work is done… More interdependent, more collaborative, more agile and more flexible.
13. The vectors on which the teams will evolve…
In my opinion, the first will be remote, and I think the COVID-19 episode is going to accelerate this. Technology liberates the need for teams to come together, and we have seen that. Every day in the morning, I start by my South Asia leadership team meeting and I end the day at London time with the Global Unilever Executive Board Meeting. I used to travel to London twice a month. Now, we’re just about completing three weeks and we’ve been having more meetings as the Global Unilever Executive Board than we had before and all from remote.
The second is GIG. Teams will comprise permanent, temporary, freelance and machine employees, and this diversity will call for greater need to build cohesion within the members.
The third would be agile and organic. Teams will keep evolving based on the phase of the project, the value to be created and the skills to be required at any phase of work.
14. Teams shall be self-created rather than being curated by leaders…
Members could co-opt themselves to projects they are passionate about with teams being self-created rather than being curated by leaders.
15. Our work should be purpose-led, not power-driven…
I’ll give you another very easy example. Last year, we launched a fabric detergent brand called Love and Care. It was a classic case of a team that pivoted on all of the above four vectors. We had innovation experts inputting from London and Shanghai, brand managers in Mumbai working on the concept, a freelancer working on the packaging design and select members of the global fabric care team who had volunteered to be a part of this exciting project. The entire project was completed without any addition of any manpower in the innovation team.
Of course, this kind of environment will require some enablers. It will require technology. It will require a high level of social skills to connect a virtual team. It will require flexible work policies that allow people to choose work timings that work for them. And of course, leadership that is able to lead with influence and not authority, solicit participation and not hierarchy, and is purpose-led and not power driven.
16. How do you plan for careers in this era?
First and foremost, ladies and gentlemen, take charge of your own career. The days of patriarchal organizations that made decisions on our behalf on people’s career are long over. Second, careers do not view them solely from the lens of vertical progression. Look at adding diversity of experiences, acquiring new skills. Literacy will no longer be about learning to read and write, but it will be about learning, unlearning and relearning. India needs great managers and great entrepreneurs.
A fabulous case is our host today, Ronnie Screwvala. When we were young, only people with money could think of becoming entrepreneurs. Look at Ronnie. With his ideas, his passion, and his determination, he has become a great entrepreneur, a serial entrepreneur. And today, even money is not a constraint.
When you have the right idea, money does come in. However, there are many things which are timeless – expertise, domain skills, leadership, intuitions based on experience and skills, ambition and humility. Never ever lose sight of them. If you follow them, you will have a great career, whatever you choose to do.
17. The relevance, pros and cons of MBAs in today’s day and age…
I’m a chartered accountant by training. And, I’ve earned my spurs working in a company like Unilever in different parts of the world. But, I’m a firm believer that MBA is still relevant. The kind of skills MBA gives, you know, at the end of the day. We think we will go in for a great grad school and that’s the end of it. What a great grad school does is, teaches you what to learn and how to learn. And, that is what we need to pick up. I certainly don’t allude to that without an MBA you can’t succeed. Of course, you can succeed. But, if you go to a good school, what will take you trial and error and many years to learn, you can pack it in two years.
18. Do you see a role where artificial intelligence, machine learning and creativity can come into the sales job?
Massive! You know, the amount of investments we have done to bring in technology to the sales function. And, that’s what I was alluding when I was talking about it. Just think of it… A small grocery store, a humble grocer, on Alta Mount Road or Peddar Road, and the same kind of grocer in Dahisar should have a completely different assortment.
It should be based on the kind of consumers and shoppers who live in the vicinity, their purchasing power, their behaviours. And today, machine learning and AI allows you to do that. At HUL, we cover millions of stores but I have a very clear vision that in another couple of years, each of these million stores will have an assortment just made for them. That is where machine learning comes in. That’s where AI comes in.
My take on Sales… I worked in sales for three years. That is when I saw how a product gets converted to cash. That is where the rubber hits the road. That is where you know, if there is a two-rupee difference on a case, the stock will flow from Mumbai to Delhi. I would still urge everyone that if you get an opportunity, please do work in sales. It hones your leadership skills and it makes you understand the fundamentals of business.
19. Changes in consumer trends post COVID…
You know for the last couple of months, since the outbreak in China, we have been monitoring the trends, the behaviours very closely. Now, it is going to manifest in many different ways. The first is of course in the near term. There is going to be a change in behaviour. People won’t be going out. They won’t be celebrating in big pubs, restaurants, etc. So, there’ll be more about dining in. Yeah! But, also, for instance, your habits, your hygiene habits, that’s going to have a big shift. People will become much more conscious even when our country starts opening up. It is not going to be a scenario like before.
For many months there will be even government imposed restrictions. Work with half the number of people for instance. You can’t have office canteens where half the number of people are sitting like what it used to be earlier. It will all be spaced out because this is not something that will get over very quickly. You will have to be on your toes for a pretty long period of time. So, there will be definitely a dependence on the kind of economic crisis, the kind of recession that we will have, the kind of toll it will take on the country. It will also impact people’s attitude towards spending. Yeah!
20. What is your advice to senior managers, people who have another 20 years left in their careers? In their working life, they’re not in the mid-life crisis kind of situation. What are your words of advice to them?
The first is to become a learner yourself. And, it is very important for each one of us. If we don’t want to be fossilised, do invest in learning to reinvent yourself. If we don’t reinvent an organisation… An organisation, you know, the longevity goes away. Similarly, when I talk about careers, don’t be worried about technology. You need to have the passion, you need to have the enthusiasm.
And, keep investing in yourself and keep developing yourself. You know for many years, I have been going through reverse mentoring. I have sleek guys, tech-savvy guys, who helped me. But, at the same time, I also invest a significant amount of money and resources in learning technology. That’s the only way. Otherwise, we won’t be able to lead. We won’t be able to work because the impact is going to be across industries.
21. How as normal working professionals do we make work from home, which seems to be a long-term thing, more efficient with a little less distraction as most of us live in slightly smaller homes and in a joint family?
You know the first is, like everything good in life, you need to have a certain discipline. So, one of the things that we have done as a company is that we have told people that virtual meetings should be held only within a certain bracket. It’s not that some bloke will get up at 7 in the morning and say I need to have a meeting. Another guy will say I’m a late sleeper, so I’ll have the meeting at 10:30. No! You need to bring about discipline within because one has to understand that not everyone is going to have help at home. So, you will have to work on domestic chores, on cooking, cleaning. You know your kids will be there, you have to look after them. So, one has to bring about a certain discipline about it.
And then, there should be a certain cadence and rhythm. Now, what I have done is that all my, many of my meetings, which are regular in nature, are fixed at a certain time of the day. So, everyone knows it. And, it all adds up. So, what my board members and my South Asia country chairperson do is they have the meetings early in the morning. They get what is happening on the ground. So, when we meet, it’s a very focussed discussion.
We always, we focus on a few areas now. The first is the safety and health of our people. The second is we look at the supply lines. The third is we look at demand. How is consumer behaviour changing? What’s happening to the demand? The fourth is we focus on liquidity and cash. And, the fifth is we look at the community. These are the five big areas that we focus on. So, everyone knows that this is going to be the thing. And, many of the things, nice to do, etc., drop it for the moment. This is not the moment to focus on them.
22. The long-term health of the business is very vital…
One has to really break up also depending on the size of the organisation, the health of the organisation. If I look at small and medium enterprises which do not have many resources at their disposal, for them, the most important thing is going to be the focus on cash and liquidity. You don’t want to go bankrupt. So, if you want to organise a line of credit, do it now. If you want to reduce your certain exposures, do it now. This is a moment for you to focus and ensure that you keep running your business and you have enough liquidity to do that. So, that’s foremost.
Now, think of it… Even a large enterprise where there’s going to be supply constraints, there is going to be demand challenges. Again, your first and foremost job is to ensure the sustainability of your enterprise. If your enterprise does not survive, you won’t be able to look after your people and your community. So, first, focus on that.
What will you do to ensure the long-term health of the business? So, that’s very vital. And, it’s not business as usual. This is business unusual. And so, one has to also plan for a possibility that it could well be an L kind of recession. So, plan for that. But, also we have to remember that as a business we are a part of society. We are not an appendage to society. We are an integral part of society. If society and the country do not survive, a business won’t survive.
23. So, connected to that Sanjeev was another linked question which is a lot of our people are from the IT sector and industry. And, just as the West slows down will that bring enough pressure on the IT companies. Here where we see some serious slowdown on that and, what your working professionals do to really reinforce themselves?
You know I have a very different take on this. I believe that this could be another Y2K kind of opportunity for India. During these tough times, if the Indian IT is able to ensure that the service they provide to the global customers goes uninterrupted and remains of a very high level, the credibility of Indian IT will move to a new level altogether. We have always been talking about that, these are the moments you get when you also move up the value chain.
So, there should be part of the IT team focussing on how does it upgrade to a higher order in the value chain; the other is to be absolutely relentless in ensuring flawless service. If we do that, the credibility of Indian IT would move to a new level altogether. I think this is a great moment for us.
But, also there is an onus on the country to ensure that power supply doesn’t get interrupted, your people are allowed to work where they need to go to the office, requisite passes should be issued because here you are not just talking about servicing the country. Indian IT serves the globe and this is an acid test for us, but what a massive opportunity.
24. What should the government do to improve the economy?
I’ll give you a few ideas on what I believe the government ought to do because there’s something that they will have to necessarily do. If I look at rural areas, there are few things we will definitely have to do because rural is going to get even under more stress as the migrant workers come back. The alternate incomes that they have will dry up. And, there will be more stress on already a scenario in rural India where the wage rates were very low.
So, one is the direct transfer of money. And the other thing, the government also has to see, is those people who do not have Jan Dhan accounts. How do you provide them with money? The second is FCI godowns have got about 70 million tonnes of food and what they normally require, I would believe, is about 20 to 25 million tonnes. Use this to ensure that no one in India goes hungry. That’s the second very important bit.
The third is if we can practice a discipline of social distancing. MNREGA should be reactivated to keep the people gainfully engaged in rural India. Fourth and very important, we are getting into the harvest season. And this is the time, when, whether it is the harvester, whether it is the worker, whether it is the supply lines to the mandis (grain/vegetable/fruit markets) and the cities that should not get interrupted. So, that’s very important for the government to ensure in rural India.
As far as urban India is concerned, we have to protect our small and micro enterprises. Whether it is deferring their loans or the government absorbing the interest rates, there could be different ways of doing it. But, more importantly, you provide the funds so that there is enough liquidity in the system. And, even during stressful times, when the demand goes down, our enterprises are able to survive because livelihoods are linked to it.
Similarly for large enterprises, one, the government would have to come up with a scheme which allows them to function, maintains enough liquidity in the system. So, they don’t go bankrupt and the wheels of the economy start functioning again. On the other hand, as far as the demand is concerned, there are various ways they could be doing it. One is they could underwrite the wages so that people do not separate the workers. Or, they could have a direct transfer of subsidy so that people do get earnings even in case they don’t have the small business running or are laid off. So, it will have to be worked both on the demand side and the supply side.
At the same time, RBI will have to ensure that the health of the financial institutions remain strong enough for them to bear this loss. Look at the U.S. Unfortunately, we do not have the deep pockets of the U.S. but they have. They are talking about 2 trillion dollars. Two trillion dollars is two-third the GDP of India. And, within this 2 trillion dollars, they’re talking about 450 billion dollars going to the Fed, which will have a multiplier effect of 10x.
So, you’re talking about several measures being taken, and when you have a war kind of scenario, then you should not worry about the deficit. The deficit, we’ll have to park it by the side. We have to first ensure that the economy doesn’t stall, people have livelihoods, they have food to eat. And then, even if, for instance, the rating comes down, if the economy picks up, it will again go back. A mid- to long-term attractiveness of India is not going away.
- What are the one or two sectors over the next 6 to 12 months that’ll really shine?
First, let’s take healthcare. This is a fabulous opportunity for India to build healthcare infrastructure. You know, we are talking about 0.5 beds per thousand and this is where the resources of the country, resources of the corporation should be deployed. Not only we expand, but more importantly, we build the capabilities of healthcare. India, because of our low wages, we could really become the medical capital of the world. Just like during the Y2K crisis. It gave a fillip to IT. Can we use COVID-19 to give a fillip to healthcare? This could become a big employer and it could attract massive foreign exchange. And, this could really also help the country tremendously. So for me, healthcare is absolutely important.
26. Estimates vary at about 20 million job losses over the next 6 months. What are your thoughts on that?
Right at the beginning of my chart, I said let’s not put a figure to it because no one can. Today, let me tell you no one is in a position with a fair degree of accuracy to predict what is going to be the impact. The only thing we could do by predicting is to give credibility to astrology. So, let’s not worry about that. More important is that these are times where we should not have political differences.
We should come together as a nation, join hands with the government. You may have different political affiliations, but you have a decisive government. Help the government to control this, to contain this. And, that is what we need to do as individuals, as organizations and, in whatever way we can, follow the instructions, help the communities. And, this in many ways will set the tone for even the businesses to step up and ensure that they don’t shed workers.
COVID-19 has changed the world like nothing before. The level of global lockdown as is happening with COVID-19 is unprecedented and unknown to human minds. With no history or past exposure to such complete global lockdown, extrapolations and projections may well border on astrological predictions – even that too without any empirical evidence. Already we in India have changed the way we operate, work and think. Uncertainty is a word in most adult minds. Yet, amidst all this, opportunities lurk. As in games, it is time for governments, businesses and individuals to prepare for the worst but also usefully get into readiness for the opportunities that present themselves.
For India, opportunities lie in the fact that global businesses may no longer depend entirely on China. India may well seize the opportunity. For the IT sector, post COVID-19 may well harbour another Y2K type window to take the global centre stage. The agrarian economy backbone may well be the economic stabiliser for India. And, the scenario of gloom that many seek to paint in all likeliness may well transform to a newer, stronger and reinvented India.
Investing in yourself and updating the skills that you can take and apply at any point in time, regardless of which direction the economy moves. Checkout upGrad’s limited time free courses to utilize this lockdown to upgrade yourself.