Management Perspectives

Tapan was in deep thoughts while going to his office at Nariman Point, in Mumbai. He shifted to Mumbai only a few months back, joining the Sterling Insurance Company as CEO. Sterling Insurance is the latest venture of the conglomerate Sterling Group which has a presence in FMCG, retail, telecom, mining, and hospitality. On the day of Tapan’s wedding anniversary, Mr. Deepak Suri, the Group Chairman, called Tapan to his office in Kolkata. During that time, Tapan was looking after the Sales Department of the FMCG Division of the Group, which was registering a growth above the industry average on account of well-established brands in their respective categories. Tapan was anticipating that he had been called to resume greater responsibilities in the company as Mr Suri was known to handpick employees for top positions.

Tapan was almost sure that he would be offered the position of CEO in the FMCG Division. His expectation was not out of place as the position was vacant for almost three months after the resignation of Mr Ramesh Gupta, who switched over to Red bull, a big name in the FMCG sector.

Mr Suri began the meeting by praising Tapan and said, “You are associated with our Group for a long time and have played a key role in the rise of our FMCG Division. My conviction that you can show shoulder greater responsibilities has become even stronger. You and your team have achieved newer milestones in the business.” After saying this, he paused for attending a call.

Meanwhile, Tapan was fully convinced that in the context of what he heard from Mr Suri, he would be made CEO of the FMCG Division. He had spent 11 years in the Group and had refused many offers from other companies along the way. His wife, Smita, a PhD, worked as an associate professor in Kolkata. Isha, their only daughter, was in senior secondary.

After attending the phone call, Mr. Suri continued, “As I have said earlier, you are an invaluable asset to the organisation and I have called you based on my conviction that you should now assume greater responsibilities is in this Group. As you are aware that we have recently forayed into the insurance business and things are not going as per our expectations, we are not able to launch products as envisaged by us. We had put Mr Srinivasan, a veteran in the insurance business, at the helm of business expecting he would be able to establish our business well.

But he could deliver only assurances and gave newer deadlines for product launches and other essentials. We have sacked him from the post of CEO last week after paying a handsome compensation. We have invested heavily in this business and deliberately set up the Head Office in Mumbai, for speedy product launches. After pondering for long over who could deliver to our expectations, only one name came to my mind, and that is yours. I have consulted others also and they have shown great confidence in you.

I know that insurance is a new area for you but with your experience, people skills, and ability to face challenges, you will rise above our expectations. I have asked for necessary arrangements to the made for you to shift to Mumbai. If you have anything to say, you can say it can candidly. Tapan, while returning from the meeting thought about why he accepted the offer. He realised that the confidence posed by Mr Suri in him prevented him from expressing his true feelings. He was trying to avoid moving to a new location, but still accepted this offer without taking the time to think. Suddenly, his chain of thoughts was broken when his driver stopped the car and Tapan realised that he had reached office. Today he had to finalise the documents for submission to the IRDA office for the second product launch from the Company. After going through the papers, he realised the complexity involved in the procedure for the launch of the product. For getting approval from the regulator, detailed information such as features and benefits, terms and conditions, target market, distribution channels, pricing assumptions, and financial projections needed to be furnished.

Tapan realised the enormous groundwork needed to be done in preparing the proposal for approval of the new product. The words of Mr Suri criticising Srinivasan came to his mind. If Srinivasan, a veteran in the insurance business, could not deliver, how could he do it, since he was new to this field! Sales in the insurance sector were made through agents and required great push on the part of sales force. That very evening Tapan received a call from his daughter, Isha, who said “Papu (fondly called by Isha), for the first time I have received a B grade in mathematics. Why did you shift to Mumbai? When you know that I am so dependent on you for the subject. You devoted your weekends to teaching me mathematics which seemed to be pure fun. Now, I have started dreading the subject as I am not able to clarify my doubts. Though I discuss it with my teacher, your way of explanation made concepts so easy. Muma is busy in college and daily chores, and she cannot devote her time for my studies.

Tapan comforted Isha by saying that he would take a week-long leave and devote all his time to teaching her the subject. But he knew that it was very difficult to take such a break, as Mr Suri’s expectations were very high and things were not going at the desired pace. After that phone call, he realised how things have suddenly changed on both professional and professional fronts. Professionally he was satisfied in the FMCG Division as all brands were well-established.

Tapan thought of applying his motivational skills in the insurance division and called for a meeting of sales managers, during which, he highlighted the legacy enjoyed by the Group and how it could be leveraged to generate sales for the company. He elicited candid discussion over the issue of poor acceptance of the only product presently available with the company. Mr Deepak Gupta, Regional Sales Manager, Delhi, said “I agree with what you said about the Group but as regards our Insurance Company things are quite the opposite. As our sales are driven through agents, a large network is required to generate business. As you asked us to give our candid views, I am sorry to say that despite our good efforts we are not able to attract agents for selling our products. We are a new player in this business, but that is not the only reason for or damp interest exhibited by the agents. We need to offer the agents handsome commission, but on the contrary, we are paying them less than other companies. We are not able to sell because our agents are repelled by our commission structure. Mr Harsh Sharma, Sales Manager, Lucknow, said, “When our agents pitch, the [potential] customers ask for a different product, which we are not able to offer. Recently, one of our agents was told by a customer that all his insurance need is covered by term insurance and he needs only a children’s plan for his daughter. The agent had to cut a sorry figure before the customer, since we do not have that plan.”

Similar views were expressed by other sales managers. Tapan assured them that the Company would launch products for all segments in due course. He also explained the long and complex process for the launch of insurance products was due to pending approval by the regulator. Mr Suresh Mehta who was from Nagpur counter this explanation of Tapan by saying, “It seems that the insurance division was launched without proper groundwork. Most of the time, our agents face embarrassing situations for the non-availability of products. Insurance is a highly competitive industry and we cannot lose business on account of our deficiency. Commission structure and delay in product introduction is a double whammy for us. It is directly affecting both sales and motivations of the agent.” While going to sleep on the very day of the meeting Tapan felt very helpless. He felt that all situations in this new assignment are beyond his control. He was expecting elevation in the FMCG division in which he was a star performer achieving all budgets comfortably. Here, he was left to work from scratch, going through lengthy and complex processes for product launch. He believed that the sales managers were not giving their true effort, and hence, sales were not up to the mark.

Tapan believed that poor sales was due to the background of the sales staff, the majority of whom were either from other Divisions of the Group or had switched from other insurers, as they could not handle sales pressure there. He lamented not accept good offers from other companies. At least he would have remained in the FMCG sector in which he was confident and comfortable. He consoled himself by thinking that he is in a position which he did not desire. In a way, the present conditions were forced upon him and he shall try his best to overcome the problems facing the insurance division. After this, he was able to sleep peacefully with the resolve to work with new vigour and strategies to improve the present conditions. After reaching office, the next day, Mr Sumit Joshi, head of the Actuary Section came to meet him and said, “Our proposal for product approval has been returned by the regulator for want of additional information. Their main concern is about internal controls for which they have given us fifteen days to reply. I am working with my team and will submit the reply within a week.” When Sumit left his chamber, Tapan thought about how determined he was for setting things in order and now new challenges are confronting the product launch. Late in the evening, he received a call from Mr Suri who said, “I was very hopeful that we would be able to launch the second product but things seem to go as were during the tenure of Srinivasan. There is very little improvement on the sales front; we have invested a lot in this business and cannot afford to miss any opportunity. You need to tighten your laces so that our other product in the pipeline is not met with the same fate. You being the CEO of the company are in a better position to assess the problems and issues facing our insurance business. I have chosen you considering your past performance and believe that you will prove me right. Focus on all lacunae and leverage our legacy to capture the market.”

After the call, Tapan’s thoughts went to the day when he was called by Mr Suri to his office. Tapan thought that back then he had the opportunity to refuse the offer. He realised that now he has no option to opt out, and has to come out of this quagmire. What do you think are the main issues in the case? According to you, how should Tapan deal with the situation confronting him?