At the end of the 1990s, the group they had founded in 1969 was over-stretched. After defaulting on $250 million of bonds raised overseas (£157 million), it looked like it was all over.
Fast-forward a decade and the now $18 billion (c£11.4 billion) global company operates in 20 countries and employs some 75,000 people, of which 25,000 are outside India. The third-largest corporation in India, Essar is one of the biggest steel producers in the world and is also in construction, oil and gas, shipping, mining and communications (although a joint venture with Vodafone ended this year). It owns business process outsourcing firm Aegis and last year floated its Essar Energy arm on the Stock Exchange, catapulting straight into the FTSE 100. It has been averaging four acquisitions a year for the past five years and expects to generate revenues of $30 billion (nearly £20 bilion) by 2013.
The strong culture of the business – what they call an institution of family – together with a clear strategy and total focus on reducing debt (apparently Shashi checked the debt balance three times a day when they pulled out of the financial mire they were in) have made Essar one of the world's business success stories. Last year, Business India presented the Ruias with its prestigious Businessman of the Year award. Standard Chartered Bank CEO, EMEA, Vis Shankar, told the publication: "Its ability to dream big with heavy-duty stuff such as engineering and infrastructure, and stay united, with the next generation joined at the hip, is what differentiates it from other Indian business houses in the country."
Sitting behind all this is a clear focus on value creation, epitomised by the HR vision: "…Emotionally connecting people to positively engage in value creation."
"The three dots at the beginning indicate a continuity of culture," Essar group president HR, Adil Malia (pictured), tells HR in an exclusive interview to coincide with its latest acquisition, Stanlow oil refinery, near Ellesmere Port, Cheshire, which it bought in March.
"We do not want to throw the baby out with the bathwater – it is important to remember what was good before. But we are now on a journey to help our people to value value."
Sitting in the group's UK headquarters in Berkeley Square, Mayfair, Malia has just come back from meeting employees at the refinery, which it acquired for $350 million (£219 million) from Royal Dutch Shell, with a further $916 million (£590 million) being paid for the crude oil and fuels already on site. The second largest refinery in the UK, the acquisition is not the first in the UK for the group: Essar Steel purchased a steel processing and distribution business in Dudley, West Midlands, last year. It has since moved its business model from processing steel on behalf of customers to also bringing in Essar's own steel from India and selling into the market. But Stanlow is Essar's largest foray into the UK – and indeed into Europe.
"We believe Europe offers great scope for us," Malia says, explaining that the group's strategy of owning the end-to-end value chain has given it a major competitive edge. For example, crude oil is transported by Essar vessels, is taken from the vessels and stored in tanks owned by Essar Shipping Ports and Logistics, reaches a refinery built by Essar Projects (or, in this case, acquired) that is operated by Essar Oil and powered by Essar Power, then is refined and exported back down the chain. The expansion strategy provides the group with access to the raw materials and processes needed to support India's booming economy. It also helps Essar achieve its overall strategy to be global leader in its markets.
"Having successfully grown over a period of time as an Indian entrepreneurial organisation, the company realised it had global aspirations and, to drive business successfully, we needed to look at both organic and merger and acquisition-based growth," says Malia, who joined the group in 2006, after stints at Coca-Cola, Mumbai-based conglomerate Godrej Group and GE Appliances, where he worked in HR, marketing and business management.
"First, we did an entire analysis of our portfolio and came up with a vision statement. For several years, we had been working with the credo, 'power of positive attitude'. As we took that into our people, we said, if we really want our global footprint to be stronger, we need to move from attitude to action. So it is now 'power of positive action'."
The important word here is 'positive', for Malia is convinced people are no different across the world, with all seeking a positive approach and positive engagement.
"My experiences of working in the US, India or the Middle East have led me to conclude that if you communicate sensitively with honesty and integrity, if you have a sense of purpose, are fair and go in with an open mind, then any programme can work anywhere in the world," he says. "Human behaviours are similar. What is different are the specific legislations and local sociologies."
His theory has just been tested at Stanlow - a refinery that produces 15% of UK petrol, but which suffered from lack of investment and focus as Shell concentrated on higher-margin upstream technologies. It has been running at 70% capacity and under Shell its workforce reduced from several thousand to just 900 full-time, though up to 1,000 contractors can be involved on the plant at any one time.
Malia calls the acquisition a "natural matrimony of value chains for us" and says that presenting the deal positively and in an open- minded way was critical. Many of the employees at Stanlow, he says, did not understand how the business world had changed.
"They had been isolated in cocoons in their location. But the people are raring to go – they simply were not getting the opportunity and support and an understanding of the wider business context.
"We bring the ability that comes from running similar operations elsewhere profitably. But we are a younger organisation and our experience in refining is not as great as some of the people at Stanlow. We are equally open-minded about taking some of their best practices. Between the two of us, we will create real magic."
Malia recounts asking the Stanlow team for an analogical 'potted plant' to take back to their Indian counterparts, representing a successful best practice. Stanlow put forward its apprenticeship programme. Now India needs to bring a best practice back to Stanlow.
Essar plans to invest £250 million over four years in Stanlow and is a third of the way through a 100-day plan to integrate the site into Essar Energy. As part of this, it is identifying cost savings and productivity improvements. The company says there will be no job losses, with the focus being on invesment to upgrade kit. But even if there had been the need for redundancies, Malia believes that people would understand, provided the company were transparent in its explanation and communication.
"Redundancies are business requirements depending on business cycles, the level of technology you have, value chains, outsourcing and so on. The people requirements here are that you are fair, open to discussion and communicating well," he says, adding: "We have not had a single day shut-down in any operation, even in highly unionised environments where we have made lots of changes."
One area where cost savings could be achieved is outsourcing. In July, Essar announced it was bringing global outsourcing services provider Aegis to the UK, with the launch of a customer service centre in Manchester. The centre, opening in the first half of December, will ultimately create 600 jobs and will kick-start expansion for the $700 million (£440 million) firm across Europe.
"The Essar model is not the classical Indian model. We do not take services to India," Malia explains. "To us, the unique model is to use local talent." There is a further advantage, he stresses. "Today we can offer people at Stanlow a career not only in oil but also in power, steel, mining and business process outsourcing. If you are open to looking at a career outside your sector, we can offer a huge opportunity."
Together with Stanlow, the 80 staff at Essar Steel in Dudley and 50 in head office (with another 50 planned this year) and the opening of the Manchester centre, the number of UK staff will grow to some 1,650, with a further 1,000 contractors. Local HR heads, such as Inga Kalinowska, head of HR Europe and Africa, report to the regional CEO, with a dotted line into Malia, who reports directly to group CEO Prashant Ruia. Across the total business there are 450 HR managers.
It is in the area of organisational design that Malia thinks global firms often fail. "Most HR organisations define a cookie-cutter kind of model, not a global delivery model, and presume it will be applicable down the line in all geographies and locations," he says.
"We realise that to be a global organisation it is not only about being physically present in countries. That is the difference between a multinational company and a global one. Multinationals are present with their value chain in different parts of the world, whereas global ones have systems, processes and an understanding of local sociology in such as way that they are able to successfully drive global focus with local sensibilities."
To give an operational example, the structure is organised into 'conceptualisers', 'consolidators' and 'activators'. Conceptualisers are the people who conceptualise the products and services needed in the entire group, under a common set of programmes and framework. They pass this to the consolidators, in this case the HR leaders of each business vertical (shipping, energy etc). They take the overall programme and look at how relevant it is to their value chain and if it needs to be tweaked to make it more sensitive to their sector. Consolidators have an expert knowledge of the sector and business cycles.
Once they have shaped it, the framework moves to the activators. These are the people who take the product or service and add local sensitivities. For example, the customs and cultures at Stanlow and India's Vadinar refinery differ, so a learning and development programme may need to be modified.
This sits well with Essar's journey to help people "value value". Malia identifies three kinds of value: the value propositions for why people join; the financial/business value; and the cultural values.
"Each person joins you with their own personal expectation and, unless you are mindful of fulfilling this expectation, they will not get job satisfaction. We need to fulfil the value proposition of what people uniquely expect," he explains.
"Then you need to ensure you continuously make people understand the goals and create a performing and rewarding culture that helps them achieve. People uniquely bring with them capabilities and competencies that create the value we are looking for.
"Finally, there are values that represent our culture: caring and nurturing; participating, rewarding, winning and celebrating; globally focused and locally sensitive; inclusive without being intrusive; and knowing when to be a champion and when to be a cheerleader."
So often we hear HR directors wax lyrical about values and culture, only to discover that the reality is far removed, as far as employees are concerned. In this case, it appears Essar is walking the talk.
"There is definitely a better working relationship and a more positive culture than with Shell," reveals Ron Wood, former union branch secretary, who now runs an external website for Stanlow employees, having retired in August. "There is also a feeling of more autonomy on site and that decisions can be made quicker."
Wood, who was involved in the union negotiations with Essar, had close dealings with senior vice president and head of HR for Essar Energy, Kaustubh Sonalkar, whom he describes as "very professional, courteous, open and honest".
"We were also involved in negotiations with Ifty Nasir, now CEO Essar E&P, who was similarly open and honest, which bodes well for negotiations in the future. The working environment has improved at Stanlow and expectations are higher than they were with Shell."
With Malia saying the group is "constantly fishing for opportunities and alternatives" and staff at Stanlow impressed with their dealings with management, Essar could well be welcomed with open arms.
Essar in a minute
- Nand Kishore Ruia, father of Ravi and Sashi, moves to Chennai in 1956 and begins a shipping and exports business and mentors his sons on business
- On their father's death in 1969, Ravi and Sashi began building a breakwater in the southern Indian port of Chennai and Essar Group is born
- Essar Group is now 'a family' of more than 75,000 people in five continents
- Revenue $18 billion (c£11.4 billion)
- Essar Energy listed on London Stock Exchange in May 2010, with a valuation of more than $8 billion (c£5.1 billion) - the largest ever London listing of an Indian company
- It is among the top five Indian players in each of its core businesses
- Essar operates in six business sectors: steel, energy (oil/gas and power), communications, shipping ports and logistics, projects and minerals
