Subramanian Sarma didn't have to try too hard to do well in school. Or in college for that matter. Sure, he worked at it, but he was never the kind who would bury himself in books and spend all his energy studying for the next exam. That he got into IIT Bombay and did his M. Tech in one of the toughest branches at the Institute – Chemical Engineering, was as much the result of his academic brilliance as it was due to his inherent ability to focus on the important stuff. Sarma always seemed to know what he needed to study and what to avoid. He had this rare, almost innate, practical awareness that only a fortunate few seem to possess.
This feature has served him well and remains with him to this day. At 59, as he finds himself reshaping the fortunes of L&T Hydrocarbon Engineering (LTHE) Ltd., one of L&T's more ambitious enterprises, his ability to identify the important from that which is not and forge ahead with confidence is proving extremely handy. Nearly two years in, Sarma has already managed to stanch the losses and began turning things around for LTHE. The business, in the last few months, has won a slew of orders thanks largely to the measures he brought in and the efforts of his team members after he took over as the CEO & MD in August 2015.
An outsider, not just figuratively but also in a literal sense of the word (he had been living outside India for 25 years when he joined L&T) Sarma joined LTHE during a rather challenging period in the Company's history. The external economic environment was extremely challenging and several of LTHE's international legacy projects had been going through a difficult phase. To complicate matters further, there were multiple organizational issues confronting the business.
Far from ideal, it was a heady mix that Sarma had entered. However, not perturbed by the enormity of the challenge facing him, he hit the ground running from day one. At a townhall meeting on the day he assumed charge of LTHE, he made his intentions clear to everyone by articulating his vision for a faster, leaner, and a more agile L&T Hydrocarbon. Speaking to his colleagues, he told them how he saw the company, its areas of strength and weaknesses, the gaps in its strategy and how he planned to shake things up.
Sarma's playbook for turning things around for LTHE rested on unlocking what he calls “the true potential of L&T Hydrocarbon" and he began by figuring out ways in which he could do that. He stuck to the basics, working on things like streamlining the organization structure, rationalizing the cost base, and assessing whether the company was able to leverage its capabilities effectively wherever it operated.
Having spent a majority of his time working internationally, he had developed an in-depth understanding of the global markets and he could see that while Hydrocarbon had done well to expand beyond Indian shores, the rapid expansion had spread the organization too thin and the international operations were not well integrated with the capability centres in India.
There was a clear need to restructure and in November 2015 Sarma kicked off with his Business Transformation Plan. The move resulted in a much more cohesive LTHE that could better leverage its various capabilities residing in different parts of the business.“By consolidating our efforts and doing away with the cluster concept," he says, “we managed to tear down our silos and made the organization more centered."
Part of the consolidation strategy also focused on making the organization more India centric. There were two distinct reasons for this. One because of the volatility in the then external environment and two because India was where most of LTHE's resources resided. “We are an Indian company. Our people are here and so are most of our capabilities. I wanted to use this as a differentiator," Sarma explains. His logic was simple. He wanted to follow the example of other global businesses which while present in locations all across the globe, always operate from the country of their origin.
Rationalizing the cost base was the third and perhaps the trickiest of all the strategic calls Sarma took as part of transformation agenda. Considering the external environment, the company's operating costs were “too high" in his view and thus the organization went through a painful, but necessary, process to rationalize costs, improve operating efficiency and enhance competitiveness. The move brought down the costs by approximately 25% without any negative impact on business operations.
The swiftness with which Sarma was able to put his plans in motion would not have been possible had it not been for the unstinted support of the Group Executive Chairman, Mr. A.M. Naik and other senior colleagues.
His next focus was to grow the Order Book to bring stability and sustainability to the business. This concerted effort led to the business securing nearly Rs. 18,500 Crores (~USD 2.8 Billion) worth of new awards during FY17, its highest ever achieved till date.
This uptick, according to Sarma is the result of the increased agility that was infused in LTHE's operations. “We spent a lot of time on optimizing internal costs, rationalizing our bidding processes, fine-tuning execution strategies, figuring out how to better assess & manage risks among a whole host of other things and our success is due in great part to this concerted effort which we put in," he says.
Today there is a newfound self-belief permeating through the entire organization and the course correction affected by Sarma appears to have set LTHE for more prosperous days ahead.
Despite the external environment remaining pretty tough, Sarma believes that LTHE now has the maturity to not cave into market pressures. With oil prices at 50-55 dollars a barrel, he knows that customers are going to squeeze as much as they can out of the business but they now have the control and the discipline to be wary of jobs which are likely to yield little or no value.
“We continue to learn to do things more efficiently and that's going to remain our area of focus. Chipping away at inefficiencies, working smartly, and becoming more productive through automation and digitalization wherever we can," he adds.
Sarma believes LTHE to be grossly undersold. Alluding to its broad range of offerings, he says that LTHE's capabilities whether in upstream, downstream, refineries, pipelines, construction, or fabrication are at par with the best in the world and they have all the ingredients to continue to be successful.
The idea springs from a rare sort of truth. It's not a smug, faux belief that CEO's generally tend to project when speaking of their companies. It comes from knowledge and self-awareness. LTHE is more surefooted than it has ever been. Much like its Chief, who always seems to know where to land his next step!
