Indigo paints a high-reward strategy

Indigo paints a high-reward strategy

November 23, 2019

Youth’s example leads firm to growth path; paints company eyes ₹850 cr. in FY20

Kerala youth Pradeep M.G.’s ambition to achieve a ₹1-crore target in sales for Indigo Paints so that he may win a Hero Honda bike costing ₹55,000 as incentive, has helped the company in framing a highly-motivated employee reward and retention programme.

It was at a depot review meeting in Kerala in 2007 that Mr. Pradeep, then 27, stood up and wanted to know the incentive for achieving a ₹1-crore annual sales target.

“Then an average salesperson was doing about ₹25 lakh in annual sales. And suddenly this new boy stood up and asked me what he would get if he achieved ₹1 crore in sales target.

“I thought, ‘was he alright’? He said he just wanted a Hero Honda Passion bike. I inquired about the cost and immediately gave him an undertaking and forgot about it,” said Hemant Jalan, founder and MD, Indigo Paints.

“After 11 months, he called up and told me he could achieve ₹92 lakh in sales and if he could still get the bike without reaching the target. I said ‘no. You can only get a bicycle.’ And this boy worked hard and achieved his target. He got his dream bike in May 2008,” he recalled.

“I [then] realised, if one person can do it, others can also be motivated to do it by setting their own targets and getting the rewards they wanted. Since then, we started adding huge incentives to wages to create high achievers and performers.”

Having understood from Mr. Pradeep’s achievement that a highly motivated sales person can be four times more productive than the normal staff, Indigo institutionalised this high incentive scheme in 2009. The company developed a differentiated people’s strategy that rewarded high performers and promoted youngsters to high-responsibility jobs.

Better staff retention

In the process, it had been able to achieve a high rate of employee retention and had been growing over 40% year-on-year for 10 years compared with the industry’s growth rate of 11%.

“From 2009, we have been growing at a CAGR of over 40%. The revenue has grown from ₹12 crore in FY09 to ₹600 crore in FY19. In FY20, we will close with a turnover of ₹850 crore,” said Mr. Jalan.

Indigo Paints, in which Sequoia Capital had invested ₹150 crore, has a flat organisational structure with just two layers compared with six to seven layers in traditional companies.

Here people are more empowered and are self-motivated, Mr. Jalan said.

“They have a very high variable component of pay and thus, automatically become motivated to ensure that they earn more. Across our 600-odd employees, 85 have stock options and one can encash them after four years. People who have sold stock options have taken home between ₹30 lakh and ₹50 lakh, which is highly rewarding,” he said.

“We don’t keep after them; their spouses keep monitoring so that they take home more money,” Mr. Jalan said.

“A flat organisation can work if people become self motivated and we have become successful in making that,” he added.

With this, the company has managed to achieve high rate of employee retention. It’s attrition rate has been only 1 to 2% during the last five years as compared to industry attrition rate of 25%.

Mr. Jalan also said the success in retention is due to very high variable pay component along with stock option and the atmosphere which promotes independence.

“We recruit the best talent from colleges and after six months of training give them unreasonably high responsibility and they do it better than the experienced people,” he said.

“At Indigo, we believe in a two-way opportunity. We hire young minds who are well-qualified, but may have limited experience however should possess great passion to succeed. They bring fresh ideas on the table and are fearless to presents them,” said Mr. Jalan, an IITan from Kanpur who also holds an MBA from University of Chicago Booth School of Business.

“We focus is on training them and give them a very high level of responsibility at a very young age. The experience in doing so has been very good and such people usually come off with flying colours, and perform much better than older ‘experienced’ people doing the same job. The high level of responsibility which young people enjoy in this organisation is unique, and is very ‘addictive,’ ” Mr. Jalan said.

Essentially, the aim is to look for people who are self-motivated, entrepreneurial, with high degree of confidence. These skills and very important and form the base when it comes to cracking an interview at Indigo.

Apart from a high degree of independence, people have a very high sense of ownership and responsibility. The atmosphere at workplace is friendly and family-like, but ruthlessly efficient and goal oriented, he said.

Since inception, the company did not have an HR team. In its 19th year of operations, Indigo Paints recently hired a young HR person.

Mr. Jalan said there is a concept of profit sharing all across the organisation, which serves to reward the productive personnel very well.

“Our aim is not just to grow as a brand but as an organisation. To do so we focus on the growth and overall development of all our employees. We believe in making our company ‘a pool of entrepreneurs’ for a brighter future and consistent performance,” said Mr. Jalan who was earlier with Sterlite Industries.

“At Indigo people think they are not in a job, they are working in their own company where they can earn as much they want,” Mr. Jalan added.

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