Dhirubhai Ambani and Reliance

Introduction

Dhirajlal Hirachand Ambani lovingly called Dhirubhai gave few public speeches but the words he spoke are still remembered for their value, “I am deaf to the word `no`”, an Indian business tycoon who founded Reliance Industries in 1958 in Bombay. As a quality of business leader he was also a motivator. His success in the petro-chemical business and his story of rags to riches made him a cult figure in the minds of Indian people. Dhirubhai Ambani was the most enterprising Indian entrepreneur; built India`s largest private sector company has created an equity cult in the Indian capital market. Reliance is the first Indian company to feature in Forbes 500 list.

Reliance Industries holds the distinction that it is the only Pvt. Company whose several annual general meetings were held in stadiums. We will focus on one of the most successful businessman in the world, Dhirubhai Ambani’s management and leadership style.

Reliance History

The Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is India's largest private sector enterprise, with businesses in the energy and materials value chain. Group's annual revenues are in excess of US$ 44 billion. The flagship company, Reliance Industries Limited, is a Fortune Global 500 company and is the largest private sector company in India.

Backward vertical integration has been the cornerstone of the evolution and growth of Reliance. Starting with textiles in the late seventies, Reliance pursued a strategy of backward vertical integration - in polyester, fiber intermediates, plastics, petrochemicals, petroleum refining and oil and gas exploration and production - to be fully integrated along the materials and energy value chain.

The Group's activities span exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals), textiles, retail and special economic zones. Reliance enjoys global leadership in its businesses, being the largest polyester yarn and fibre producer in the world and among the top five to ten producers in the world in major petrochemical products. Major Group Companies are Reliance Industries Limited (including main subsidiary Reliance Retail limited) and Reliance Industrial Infrastructure Limited

Reliance – Anil Dhirubhai Ambani Group, ranks among India’s top three private sector business houses in terms of net worth. The group has business interests that range from telecommunications (Reliance Communications Limited) to financial services (Reliance Capital Ltd) and the generation and distribution of power (Reliance Infrastructure Limited).

Reliance – ADA Group’s flagship company, Reliance Communications, is India's largest private sector information and Communications Company, with over 80 million subscribers. It has established a pan-India, high-capacity, integrated (wireless and wireline), convergent (voice, data and video) digital network, to offer services spanning the entire infocomm value chain.

Other major group companies — Reliance Capital and Reliance Infrastructure — are widely acknowledged as the market leaders in their respective areas of operation.

Reliance growth Stages with Dhirubhai

Backward vertical integration has been the keystone of the evolution and growth of Reliance. Starting with textiles in the late seventies, Reliance pursued a strategy of backward vertical integration - in polyester, fibre intermediates, plastics, petrochemicals, petroleum refining and oil and gas exploration and production - to be fully integrated along the materials and energy value chain.

The Group's activities span exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals), textiles and retail.

Reliance enjoys global leadership in its businesses, being the largest polyester yarn and fibre producer in the world and among the top five to ten producers in the world in major petrochemical products.

Greiner's Growth Model describes phases that organizations go through as they grow. Each growth phase is made up of a period of relatively stable growth, followed by a "crisis" when major organizational change is needed if the company is to carry on growing.

Phase 1: Growth through Creativity

Here, the entrepreneurs who founded the firm are busy creating products and opening up markets. There aren't many staff, so informal communication works fine, and rewards for long hours are probably through profit share or stock options. However, as more staff join, production expands and capital is injected, there's a need for more formal communication.

This phase ends with a Leadership Crisis, where professional management is needed. The founders may change their style and take on this role.

Dhirubhai Ambani started his business with the worth of US$300 with his cousin and he was the only manager of his organization with his relative. It was very small organization at that time and was selling polyester. They used to buy polyester from different countries and used to sell in INDIA.

Initially they had ground level competition with their low level competitors who used to sell clothe material in open and wide market.

Time after time as Dhirubhai Ambani got good growth in his initial business then he opened his first factory for producing polyester instead of buying from another country and selling in India.

The time when he started his business he did not have good work force and talented worker to handle each and everything.

Dhirubhai Ambani is credited with starting equity investing in India. More than 58,000 investors from various parts of India subscribed to Reliance's IPO in 1977.

Phase 2: Growth through Direction

Growth continues in an environment of more formal communications, budgets and focus on separate activities like marketing and production. Incentive schemes replace stock as a financial reward.

However, there comes a point when the products and processes become so numerous that there are not enough hours in the day for one person to manage them all, and he or she can't possibly know as much about all these products or services as those lower down the hierarchy.

This phase ends with an Autonomy Crisis: New structures based on delegation are called for

Dhirubhai concentrated on production and advertisements to make it a brand.

Phase 3: Growth through Delegation

With mid-level managers freed up to react fast to opportunities for new products or in new markets, the organization continues to grow, with top management just monitoring and dealing with the big issues (perhaps starting to look at merger or acquisition opportunities). Many businesses flounder at this stage, as the manager whose directive approach solved the problems at the end of Phase 1 finds it hard to let go, yet the mid-level managers’ struggle with their new roles as leaders.

This phase ends with a Control Crisis: A much more sophisticated head office function is required, and the separate parts of the business need to work together.

Dhirubhai appointed people who were working for him as managers.

Phase 4: Growth Through Coordination and Monitoring

Growth continues with the previously isolated business units re-organized into product groups or service practices. Investment finance is allocated centrally and managed according to Return on Investment (ROI) and not just profits. Incentives are shared through company-wide profit share schemes aligned to corporate goals. Eventually, though, work becomes submerged under increasing amounts of bureaucracy, and growth may become stifled.

This phase ends on a Red-Tape Crisis: A new culture and structure must be introduced.

Dhirubhai distributed the dividends and the profits among the shareholders regularly. But the political fights and the fights with rivals is the proof that how Ambani was efficient to tackle odds in necessary.

Phase 5: Growth through Collaboration

The formal controls of phases 2-4 are replaced by professional good sense as staff group and re-group flexibly in teams to deliver projects in a matrix structure supported by sophisticated information systems and team-based financial rewards.

This phase ends with a crisis of Internal Growth: Further growth can only come by developing partnerships with complementary organizations.

A good team person was Dhirubhai proofed himself again a good leader.

Phase 6: Growth through Extra-Organizational Solutions

Greiner's recently added sixth phase suggests that growth may continue through merger, outsourcing, networks and other solutions involving other companies.

Growth rates will vary between and even within phases. The duration of each phase depends almost totally on the rate of growth of the market in which the organization operates. The longer a phase lasts, though, the harder it will be to implement a transition.

Dhirubhai Management Style

Dhirubhai Management

Style

Theory Z

American Management

Style

Japanese Management

Style

Indian Style (Gujrati)

Figure 1 Dhirubhai Management Style

Theory ZTheory Z is an approach to management based upon a combination of American and Japanese management philosophies and characterized by, among other things, long-term job security, consensual decision making, slow evaluation and promotion procedures, and individual responsibility within a group context. Proponents of Theory Z suggest that it leads to improvements in organizational performance.

Theory Z as an approach to management supports to following statements also followed by Dhirubhai:

Long-term employment Consensual decision making Individual responsibility Informal control with formalized measures

American Management StyleAmerican management style can be described as individualistic in approach, in so far as managers are accountable for the decisions made within their areas of responsibility. Although important decisions might be discussed in open forum, the ultimate responsibility for the consequences of the decision lies with the boss — support or seeming consensus will evaporate when things go wrong. The up side of this accountability is, of course, the American dream that outstanding success will inevitably bring outstanding rewards. One of Dhirubhai’s styles shows a major point of American management style which is capital and prioritiesJapanese Management StyleThe key task for a Japanese manager is to provide the environment in which the group can flourish. In this case Dhirubhai was accessible at all times and willing to share knowledge within the group. In return he got team members to keep him fully informed of developments. This reciprocity of relationship forms the basis of good management and teamwork. Individual personality and forcefulness are not seen as the prerequisites for effective leadership.Dhirubhai Ambani worked using many of Japanese techniques in managing Reliance. Japanese management techniques include:

Extensive use of quality control methods

Emphasis on creating harmonious relations among workers

L3SAAM

ManagementBy

ASSOCOATION

L2DAAM

ManagementBy

ATTRACTION

L4BHED

ManagementBy

DELEGATION

L1DAND

ManagementBy

DIRECTION

JOB INSECURITY

SATVIC RAJASIC RAJASIC TAMASIC

GYANYOGI

BHAKTIYOGI

KARMA YOGI

HIGH

LOW HIGH

MOST CAPABLE LOWEST CAPABLEFOLLOWERS TYPES

VISIONARY

FOLLOWERSHIPBLIND

HU

MAN

TOU

CH

Indian Management Style (Gujrati)

Figure 3: Indian Management Style

Indian managers use the above managerial matrix in different situation as it is so much traditional. Dhirubhai as a Guajarati by born used this sometimes with the mixture of Theory Z.

Management & Leadership Qualities

Leadership Qualities

Leadership is nothing but the quality which makes a person stands out different from other ordinary employees. It is associated with such a person who has aggressiveness in speech and action, love for the employees, and who can handle pressure under different circumstances and a person who is always ready to fight for the rights of employee. A leader is useless without followers. It is the followers who make a person as a leader and if required overthrow him.

Leaders play a critical role during change implementation, the period from the announcement of change through the installation of the change. During this middle period the organization is the most unstable, characterized by confusion, fear, loss of direction, reduced productivity, and lack of clarity about direction and mandate. It can be a period of emotionalism, with employees grieving for what is lost, and initially unable to look to the future.

HR ISSUES

Asia Times quotes: "His people skills were legendary. A former secretary reveals: "He was very helpful. He followed an 'open-door' policy. Employees could walk into his cabin and discuss their problems with him." The chairman had a special way of dealing with different groups of people, be they employees, shareholders, journalists or government officials.

Ambani's competitors allege that he bought off officials and had legislation re-written to suit him. They recall his earlier days and how he picked up the art of profiteering from the then-Byzantine system of controls of Indian officialdom. He exported spices, often at a loss, and used replenishment licenses to import rayon.

Later, when rayon started to be manufactured in India, he exported rayon, again at a loss, and imported nylon. Ambani was always a step ahead of the competitors. With the imported items being heavily in demand, his profit margins were rarely under 300 percent."

Personality Traits: Dhirubhai Ambani was well in intelligent, convincing, task oriented & self-motivated, lastly he was both high on IO & EQ.

Behavioral Theory: We would say that he is at (9, 0); Production-Oriented.

Figure 4 Managerial Grid

The Managerial Grid as another Human Relations Model

Robert Blake and Jane Mouton (Robert Blake and Jane S. Mouton, the Managerial Grid (Houston: Gulf Publishing, 1964). This book describes the nature of a number of managerial styles in some detail. Three dimensions of organizations: purpose (production), people, and hierarchy. The Managerial Grid maps possible relationships between these dimensions relative to managerial styles. (Blake and Mouton, p. 10). Each style is related to communication. Communication is increasingly open, two way, and adaptive, as the style moves along the diagonal from 1, 1 to 9, 9.

At point 9,1 communication is highly formal, task oriented, and one way. At 1,9 it is very informal, social, and approval oriented.

At 9,9 “the goal is open, authentic, and candid communication; that is full disclosure” (Blake and Mouton, pp. 160-61.).

Idea behind Setting up of Enterprise

Dhirubhai started off as a small time worker with Arab merchants in the 1950s. In the 1950s, the Yemini administration realized that their main unit of currency, the Rial, was disappearing fast. It was found that a young man in his twenties was placing unlimited buy orders for Yemini Rials. Rials, pure silver coins and was in much demand at the London Bullion Exchange. Young Dhirubhai bought the Rials, melted them into pure silver and sold it to the bullion traders in London. In 1962, Dhirubhai started the Reliance Commercial Corporation with a capital of Rs. 15, 000.00 The primary business of Reliance Commercial Corporation was to import polyester yarn and export spices. Dhirubhai was able to convince people of rural Gujarat that being shareholders of his company will only bring returns to their investment. Ten years later, Dhirubhai returned to India and started the Reliance Commercial Corporation with a capital of Rs.15, 000.00. The primary business of Reliance Commercial Corporation was to import polyester yarn, textiles.

The business was setup in partnership with Champaklal Damani, his second cousin, who used to be with him in Aden, Yemen. The first office of the Reliance Commercial Corporation was set up at the Narsinathan Street in Masjid Bunder. It was a 350 Sq. Ft. room with a telephone, one table and three chairs. Initially, they had two assistants to help them with their business. In 1965, Champaklal Damani and Dhirubhai Ambani ended their partnership and Dhirubhai started on his own. It is believed that both had different temperaments and a different take on how to conduct business. While Mr. Damani was a cautious trader and did not believe in building yarn inventories, Dhirubhai was a known risk taker and he considered that building inventories, anticipating a price rise, and making profits through that was good for growth.During this period, Dhirubhai and his family used to stay in an one bedroom apartment at the Jaihind Estate in Bhuleshwar. Mumbai. In 1968, he moved to an up market apartment at Altamount Road in South Mumbai.

Reliance TextilesSensing a good opportunity in the textile business, Dhirubhai started his first textile mill at Naroda, near Ahmedabad in the year 1966. Textiles were manufactured using polyester fibre yarn. Dhirubhai started the brand "Vimal", which was named after his elder brother Ramaniklal Ambani's son, Vimal Ambani. Extensive marketing of the brand "Vimal" in the interiors of India made it a household name. Franchise retail outlets were started and they used to sell "only vimal" brand of textiles. In the year 1975, a Technical team from the World Bank visited the Reliance Textiles' Manufacturing unit. This unit has the rare distinction of being certified as "excellent even by developed country standards" during that period.

How you are linked to the enterprise

Initially I was heard about the Reliance group but when this group started the telecommunications that time one of my friend joined this group. He told me about this group after that I used reliance mobile phone. This way I linked with this enterprise.

Introduction of the enterprise

Dhirajlal Hirachand Ambani, one of the leading Indian businessmen, was born on December 28, 1932 in Chorwad, Gujarat. Popularly known as Dhirubhai Ambani, he heads The Reliance Industries, India's largest private enterprise.

Dhirubhai started off as a small time worker with Arab merchants in the 1950s and moved to Mumbai in 1958 to start his own business in spices. After making modest profits, he moved into textiles and opened his mill near Ahmedabad. Dhirubhai founded Reliance Industries in 1958. After that it was a saga of expansions and successes.

Reliance, acknowledged as one of the best-run companies in the world has various sectors like petrochemicals, textiles and is involved in the production of crude oil and gas, to polyester and polymer products. The companies’ refinery at Jamnagar accounts for over 25% of India's total refining capacity and their plant at Hazira is the biggest chemical complex in India. The company has further diversified into Telecom, Insurance and Internet Businesses, the Power Sector and so on. Now the Reliance group with over 85,000 employees provides almost 5% of the Central Government's total revenue.

Dhirubhai has been one among the select Forbes billionaires and has also figured in the Sunday Times list of top 50 businessmen in Asia. His industrious nature and willingness to take on any risk has made him what he is. In 1986 after a heart attack he has handed over his empire to his two sons Anil and Mukesh. His sons are carrying on the successful tradition of their illustrious father.

Success factors

Right from the childhood he showed his knack for entrepreneurship by undertaking small business activities and making money out of them. During weekends, he started his entrepreneurial career by selling up onion/potato to pilgrims in Mount Gimar and at villange fairs over the weekends. At the age of 16, he moved to Aden Yemen. He worked with A.Besse & Co. for a salary of Rs.300. Two years latter A.Besse & Co. because the distributor for shell products & Dhirubhai was promoted to manage the company’s filling station as the port of Aden.

Ambanis greatest achievement was that he showed Indians what was possible with no oxford or Yale degree and no family capital.