Ugro Cap­i­tal

U GRO Cap­i­tal founder Shachin­dra Nath has adopted a unique cul­tural strat­egy to give his ven­ture a long life. He shares philo­soph­i­cal and prac­ti­cal per­spec­tives in an ex­tended in­ter­ac­tion with Manoj Agrawal:

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Manoj Agrawal: The in­ter­nal and ex­ter­nal risks that NBFCs face are be­com­ing more fre­quent. As the chair­man of U Gro Cap­i­tal, what HR risks are you are mind­ful of?

Shachin­dra Nath:

Many ar­eas of fi­nan­cial ser­vices are very trans­ac­tional in na­ture. You do the trans­ac­tion and at the end you know the re­sult, then and there. In lend­ing, the ef­fect of your work is seen many years down the line, per­haps even 10 years later. The big­gest prob­lem, par­tic­u­larly with peo­ple of our gen­er­a­tion, is that they are im­pa­tient, and there­fore hu­man cap­i­tal is mis­aligned when it comes to long-term busi­ness. In the fi­nan­cial ser­vices space, if you com­pare the more suc­cess­ful vs less suc­cess­ful or­ga­ni­za­tions, in the for­mer, the top man­age­ment com­pris­ing say 50 peo­ple, would have stayed for at least 5-7 years. They would have thought and built that busi­ness with a long-term vi­sion. Now peo­ple want to come in to­day, earn ev­ery­thing to­mor­row and then go some­where else. No­body wants to wait to see the out­come. So, if I have to re­ward some­body, I want to re­ward at that out­come, not for to­day’s ef­fort. Find­ing such peo­ple is the most dif­fi­cult chal­lenge, more so for NBFCs. As an anal­ogy, peo­ple want the fruit right after planting the seed. They are not will­ing for the tree to grow and bear fruits.

What ap­proach have you adopted to at­tract mil­len­ni­als and max­i­mize their motivation?

Mil l e nni a l s would b a s i c a l l y b e young­sters with around 10 years of ex­pe­ri­ence. We do not hire Gen­er­a­tion Z. Fi­nan­cial ser­vices, es­pe­cially lend­ing, is a se­ri­ous busi­ness. It’s a busi­ness of in­tel­lect, knowl­edge, process, rigor and ex­pe­ri­ence. It is not a head­count busi­ness, un­like BPOs. There are de­fined pro­cesses, but there is an in­tel­lec­tual ac­tiv­ity go­ing on which re­sults from years of ex­pe­ri­ence. So, we need ex­pe­ri­enced peo­ple at all lev­els and that is why we don’t hire Gen Z.

As far as mil­len­ni­als are con­cerned, I have tried at­tract­ing a team or a tal­ent base, say­ing that this is a place where you get cer­tain things. First, if you do well and you cre­ate share­holder value, there is an op­por­tu­nity for wealth cre­ation for all of you, but for which you have to stay the course for 5-7 years. You should think it se­ri­ously and ask if you can build some­thing up.

Sec­ond big­gest motivation with which I drive peo­ple is say­ing that this the place where you can do what I have done. I spend x num­ber of years as a pro­fes­sional, I came out and be­come an en­tre­pre­neur. I want my top lead­er­ship team to do the same. I say I want each one of them to have the con­fi­dence, be­cause what they lack is the con­fi­dence to leave their jobs and com­forts and try do­ing some­thing of their own. They fear los­ing the reg­u­lar earn­ing. Be­com­ing an en­tre­pre­neur is a big fear which keeps in­creas­ing as you grow older. As you get mar­ried and have chil­dren, your risk seek­ing ap­petite keeps fall­ing. I tell my lead­er­ship team that I want you to feel con­fi­dent by virtue of be­ing here and do­ing al­most ev­ery­thing which is pos­si­ble, and that you should be able to take that call of be­com­ing an en­tre­pre­neur when­ever you want. Whether you do it or not is a dif­fer­ent mat­ter, but at least have that con­fi­dence. Look at the ex­am­ples of some of the lead­ing global suc­cesses among fi­nan­cial in­sti­tu­tions. Gold­man Sachs has the phi­los­o­phy that if you’re leav­ing the in­sti­tu­tion, it sup­ports your ven­ture. It sup­ports it be­cause it thinks that if it had con­fi­dence when the peo­ple were within the sys­tem, it should have the con­fi­dence in the same peo­ple go­ing out. We are too small com­pared to Gold­man Sachs, but at least philo­soph­i­cally I want these peo­ple to have the abil­ity to be­come an en­tre­pre­neur.

Our study had found that stress lev­els is min­i­mal for peo­ple in their 20s and peaks in a decade, and then de­clines. Have you ob­served this? What is your pre­scrip­tion for highly stressed em­ploy­ees?

I think that stress has noth­ing to do with age. I be­lieve my 17-year old daugh­ter has more stress than I have, be­cause stress is a fac­tor of what you want to achieve, so it is about manag­ing ex­pec­ta­tions. The rea­son why younger peo­ple ac­tu­ally have more stress is be­cause they have too

much ex­pec­ta­tion from life. 20 years ago, to grad­u­ate from a scooter to a car was a big achieve­ment. Now, some­body who is pass­ing out of a col­lege wants to be­come a Bill Gates or Michael Dell. It is ex­pec­ta­tion mis­match which is ac­tu­ally killing peo­ple. So I tell peo­ple don’t have too much of ex­pec­ta­tions, just live your life daily and have rea­son­able ex­pec­ta­tions. Sec­ond, I think peo­ple should be happy do­ing their job, en­joy when they come to work and feel mo­ti­vated. When they are not, I tell them this is not the right place for them. There is some­thing wrong when you don’t look for­ward to com­ing to of­fice and there’s some­thing wrong at home if you don’t look for­ward to go­ing back to your home.

What do you seek in char­ac­ter and per­son­al­ity in a po­ten­tial em­ployee to be a suc­cess­ful busi­ness and team leader?

I look only to char­ac­ter. We are not NASA or ISRO, so I don’t need top quar­tile brain qual­ity. What I want is per­sis­tent, hon­est and hard­work­ing peo­ple. They should be able to do the same – we don’t want vo­latile peo­ple. Hon­esty is most im­por­tant – in fact, it’s crit­i­cal. I don’t want them to slog, but they should be able to com­mit them­selves to work. In terms of the per­son­al­ity, we seek peo­ple who are col­lab­o­ra­tive and be­lieve in re­ally work­ing to­gether - one per­son can be a su­per star but win­ning still re­quires a team ef­fort.

Did you have a tough time at­tract­ing key em­ploy­ees? Did you do some­thing spe­cial or dif­fer­ent to win them over?

The an­swer is yes and no. We have very tough yard­stick on whom we would take. I re­mem­ber that even when look­ing for mid­dle and ju­nior man­age­ment, whoso­ever I met, I al­ways used to spend first half an hour sell­ing the idea. Peo­ple used to say you need not sell to say a re­gional guy or a level 2 or 3 guy. What I want is peo­ple should feel at­tracted and mo­ti­vated to work here. Even if a per­son does not want to join me, I want him/her to be im­pressed and leave as a brand am­bas­sador. We cre­ated an ESOP struc­ture that was avail­able from the first day. A siz­able 8% of the com­pany’s eq­uity is with the man­age­ment team. Also, we are fair pay mas­ters - we nei­ther un­der­pay nor over­pay.

There are l ots and l ots of suc­cess­ful peo­ple out there in the job mar­ket. But not all of them are ef­fec­tive. What is your for­mula to iden­tify the ef­fec­tive ones from the suc­cess­ful ones?

As I said, peo­ple who are col­lab­o­ra­tive can make suc­cess in or­ga­ni­za­tions. It’s not like a game of ten­nis or bad­minton – it is more like bas­ket­ball or foot­ball. So, un­less they can’t work to­gether, it’s im­pos­si­ble.

Given the dy­namic na­ture of the fi­nan­cial sec­tor, there have been a lot of peo­ple move­ments. Have you worked out some­thing to en­hance the sta­bil­ity of the hu­man cap­i­tal?

All our se­nior man­age­ment staff are on a 3-year lock-in pe­riod. For CEO-1, there is a 3-year no­tice pe­riod. We can­not fire them, and they can­not leave us. This is the first time this is hap­pen­ing in the fi­nan­cial ser­vices in­dus­try, and this was a com­bined call. When you are set­ting up a busi­ness, you need sta­bil­ity, you can’t judge peo­ple for their re­spec­tive work. The big dif­fer­ence be­tween 2 sim­i­lar set of ex­pe­ri­enced peo­ple would be mar­ginal to­day. What is the dif­fer­ence is their abil­ity to work to­gether. So, I have to force them to work to­gether and they have no other choice. Within the ESOP, the way the le­gal­ity has been cre­ated is such that a ma­jor­ity of the vest­ing is in year 4 and 5.

What have you done to make strengthen in­te­gra­tion?

We a r e try­ing to be an over com­mu­nica­tive or­ga­ni­za­tion. For ex­am­ple, I run this pro­gram called ‘ Coffee with Shachin’. The rea­son for that is in any or­ga­ni­za­tion there are hi­er­ar­chies. I am not di­rectly hir­ing peo­ple; they are be­ing hired by oth­ers within the or­ga­ni­za­tion. I do this ev­ery week - when­ever I go to a lo­ca­tion and I spend an hour out­side the of­fice with any 1 or 2 em­ploy­ees. It’s a for­mal thing. The HR would send in­vi­ta­tion for it and I would get their back­ground. The rule of the game is that we will chat about life and in­ter­ests and as­pi­ra­tions and all that, but not work. I largely talk about my­self. I talk about why I did so, what risks I took, what was the con­fi­dence I had and why I felt that I should be able to do it. It is not easy after 20-25 years of get­ting salary ev­ery month to all of a sud­den leave ev­ery­thing and re­main un­paid and un­em­ployed for 3 years at a time when my daugh­ter was in grade 10 and my son was in grade 6. I only tell them why I was able to do it and what gave me that con­fi­dence. It is just for peo­ple to think that this is pos­si­ble, and not im­pos­si­ble. The gen­eral per­cep­tion among mid-level peo­ple in fi­nan­cial ser­vices is that lead­ers are un­ap­proach­able. I want to make them feel this is not the case. The dif­fer­ence be­tween me and many oth­ers is only that I had the op­por­tu­nity and the per­se­ver­ance and the rigor. Any­one with these can do it. It’s not that I am God’s gift to mankind. It’s just a mat­ter of chance.

What about in­te­gra­tion and col­lab­o­ra­tion among em­ploy­ees?

We do 3 things. One is com­mu­ni­ca­tion, sec­ond is the cul­ture which we are build­ing of de­scent (say­ing no to your boss), and that

would not be taken as an of­fense. Third is the dis­agree­ment that has to be sorted on an im­me­di­ate ba­sis. We have put the seeds of all these and are de­vel­op­ing it all over a pe­riod of time. We are eth­i­cal, we are trans­par­ent, we are en­er­getic, and we have as­pi­ra­tions. So this is our cul­ture.

There is a lot of com­par­i­son go­ing on be­tween In­dian and west­ern man­age­ment philoso­phies. Which works bet­ter for you?

Fi­nan­cial ser­vices in In­dia is a sec­tor where In­dian com­pa­nies have suc­ceeded and out­per­formed for­eign­ers. There is no global fi­nan­cial ser­vices pow­er­house which is in a lead­er­ship po­si­tion in In­dia. This is true across sec­tors like bank­ing, in­sur­ance, as­set man­age­ment, etc. So I don’t think that we have to look at west, we have role mod­els here it­self and we have to em­u­late them.

Cor­po­rate cul­ture seems to be some­thing that suc­cess­ful or­ga­ni­za­tions are good at do­ing? How is cre­at­ing cor­po­rate cul­ture in to­day’s age dif­fer­ent from 10-20 years ago?

One of the things is that lot of cor­po­rates have to re­al­ize that the over­fo­cus on phys­i­cal con­nect is gone. The ear­lier tech­nique was to take peo­ple off­site. I think that is no longer rel­e­vant. The cul­tural de­vel­op­ment now is hap­pen­ing in a dig­i­tized world. To­day, ma­jor­ity of the peo­ple are con­nected to their school­mates and rel­a­tives over so­cial me­dia. Same for con­nect­ing with the larger fam­ily. I think the key dig­i­ti­za­tion is here. It’s a new cul­tural way. Com­pa­nies have to build their cul­ture in the dig­i­tal world in a dig­i­tized way; con­ven­tional meth­ods are gone.

As we grow older, we dis­cover new things about our­selves. Is there some­thing new you have dis­cov­ered about your­self and how are you us­ing it to be a bet­ter busi­ness leader and a bet­ter en­tre­pre­neur?

The big­gest learn­ing is that this whole process has hum­bled me. I want to make sure that I re­mem­ber this time 2.5-3 years ago when I was try­ing to be­come an en­tre­pre­neur and raise cap­i­tal. You never re­al­ize that when you’re work­ing for some­body and when you are part of a large cor­po­rate and you are in a po­si­tion of power, at that time peo­ple don’t come to you be­cause of who you are, they come be­cause the power of the seat which you en­joy. When I left and when I was on my own, I came to re­al­ize that peo­ple who would oth­er­wise wait for 5-7 days to get an ap­point­ment to meet me or come and wait at the of­fice, didn’t re­turn my calls or my emails. It is only your own cal­iber, skillset and con­fi­dence which ac­tu­ally make you suc­ceed – this is a very hum­bling ex­pe­ri­ence. I came to re­al­ize that all this power, po­si­tion, car, etc, have no mean­ing. If you don’t have sub­stance, you can be thrown out from the place any day be­cause no­body cares. You have peo­ple in fi­nan­cial ser­vices in­dus­try who were CEOs of very large banks. Do peo­ple ask them how they are now? Do peo­ple call on them and en­quire about their well­be­ing? I got all my help from peo­ple with whom I had no re­la­tion­ship when I was in the po­si­tion of power. I think that I want to make sure that I re­mem­ber that.

Shachin­dra Nath has a vi­sion to cre­ate a com­pany with a long life, and ev­ery strat­egy is wo­ven around that vi­sion

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