It's hypothesis Testing: Manish Sabharwal, Ashok Reddy & Mohit Gupta
The only way you can grow the business, is if you view the people below you as those who can grow to take on your rolethat you are playing”
Here is a unique story of the trio from elite academic backgrounds, who began their careers as investment bankers in Bombay, but found themselves in a core HR business, much as a result of their belief in the need to evolve the business idea per market demand. Manish Sabharwal, Mohit Gupta and Ashok Reddy are three friends from school, with very complementing personalities and work approaches, who decided to join hands in 1998, and haven’t looked back since.
Their first venture, India Life started with the idea to create an insurance company, specifically health insurance, but the government regulations then did not allow them to take it forward. But learning from starting an entrepreneurial venture was so attractive that they decided to evolve the business idea and substantially morphed the business over the years. And India Life first began as an investment advisory firm for pension fund benefits. But when they actually approached the market, companies explained to them the limitations of the scope of advisory in this space, being a regulated market, and that forced them to evolve their business further. As Ashok rightly said, “Starting a business is like hypothesis testing; you don’t know that is right until you do it.” The journey helped them understand that the real pain-points were in the administration of pension funds in the highly regulated market. Thus, through 1998-2001, India Life Pension Service was established to focus on pension administration, transaction processing and regulatory compliance.
As the business evolved, clients demanded that India Life also take care of their payroll processing, and once again they revised their business plan. And in 3 years, they built the largest payroll and pension administration company in India. India Life was fortunate to have initiated the right business at the right time, as there was a latent need for this service and India Life managed to get their first client, Siemens, within 3 months of starting business. Siemens was going through its VRS process at the time and wanted to cut down their employee count by about 4000, from its total 40,000 employees. India Life took on the task of settling the benefits for all 4000 employees. With no resources and experience, servicing Siemens was exciting and full of learning. They worked in partnership with Siemens as opposed to looking at it as a mere transaction. So together, they identified solutions, problems and resolved them. Churning out reports and calculations for each employee from decade old ledgers that came filled in cartons was a challenge that they delivered upon and that led to other clients like Levi’s, SAP, Wrigleys, etc., and then there was no looking back. India Life began its journey wanting to become a scale business, and the trust, conviction of the team and the idea itself brought them a venture capitalist, View Group which funded the business on day zero and they raised 2 million USD (then about 8-9 crores Indian rupees).
Alongside, India Life was also in dialogue with a Bangalore-based CA who had about 20 customers. India Life acquired his business along with the nine employees who then became its first employees. This base allowed India Life to make Bangalore its headquarters, along with the fact that Bangalore was an easy city that more people were open to migrate to when they set out looking for talent.
In the first 2 years, India Life never made any profits but ample investments were being made in technology, processes, people and office. By the end of year 1, they grew to 24-25 employees, since they soon acquired more clients. Attracting the right people to work for India Life was critical. And the fact that they, had their customers on board, were committed to the long run, were making investments, and had the money from the VC, helped attract people. The business took off early and became cash positive within the first 3 years.
By 2001, there were 250 members and India Life had extended their product offering from administration of provident fund, gratuity and superannuation, to actuarial valuation, to consulting, to conversion of defined benefits plan to defined contribution plan, and even ventured into payroll process outsourcing. Since most of the inputs for pension actually came from payroll, so it was a backward integration and became a greater lock-in on the customer. By 2001, India Life also grew to become the largest player in the country in that space. It was at this time that Manish, Mohit and Ashok knew that the way forward for India Life was to go global. But they personally did not want to venture out yet as they believed there was enough opportunity in India itself. This led to the merger of India Life and Hewitt, the second largest player then, which wanted to go global and required their processes, technology and people and the trio thought this was a good opportunity for India Life to spread its wings. When India Life got into the strategic partnership with Hewitt, Manish stayed on for the year to enable the transition, while Mohit and Ashok withdrew from the business.
Though extremely different personalities, the three have been absolutely effective when working together and that to a great extent, also allowed them the bandwidth to scale much faster. So, even as they were exploring on the deal with Hewitt, they were also evaluating what they could do next towards the end of 2000. A constant point of reference that they got from their customers was that while companies needed people, they were unable to necessarily hire them or find them. On studying this opportunity, they realized that temporary staffing was a 120 billion dollar business globally then. And India had no single provider. But the challenge again was that the concept of temp staffing never existed in India then, and therefore it was a concept sell, especially on the candidate side, as ‘temp’ is not a lifestyle choice in India unlike rest of the globe. So, TeamLease began its journey and once again they hit the ground running, given the latent need for temp staffing with no existing service provider. While the plan was to start business in June 2002, TeamLease had to pre-date its business date to April as their first client, Intel needed to migrate its employees with immediate effect.
TeamLease began operations with the exit money from India Life and by the end of its first year, it had about 1200 employees who were temped out. The strength of the three friends once again afforded them the bandwidth to initiate operations out of Delhi, Mumbai and Bangalore in the first year itself. And with three initial employees, they began to grow their second venture, and today TeamLease is a 750 member organization, which includes many people from India Life days, who returned to join the trio. While TeamLease has grown to become a large business, it continues to be entrepreneurial in nature with its features of quick on decision making, absence of red tape, organizational hierarchy, and a risk taking approach.
A critical aspect that has worked for TeamLease in growing its business and team, is that the three founders always told their people that their ‘chair is on offer’. Each time someone has made Manish, Mohit or Ashok redundant in their respective roles, it was an opportunity to concentrate on other aspects of the business. As Ashok affirms, “The only way you can grow the business is if you view the people who are below you as those who can grow to take on the role that you are playing. If you view them as competition, you will never nurture that element of bandwidth within the organization.”
The reality of the sickened state of ‘employability’ dawned upon TeamLease when, while they hired a person every 5 minutes of their existence, less than 5% of those who came in, got a job. This became even more evident during the downturn when rejection rates began to soar, as while candidates had the necessary qualifications, they did not have the skills for the job. And this led TeamLease to explore the possibility of entering the training space. The downturn also took a hit on the temping business and from 80,000 employees, the number fell to 45,000 employees in 2008. TeamLease used this time to overhaul their IT system, processes and training, which helped them prepare for its growth phase when the market bounced back. Presently, TeamLease is back to having 65,000-70,000 employees and growing on a healthy margin.
While India Life and TeamLease were B to B businesses, where they serviced and earned revenue from the corporate side, training was a B to C model. But since training would address the employability aspect, it was a backward integration to the TeamLease business. Therefore, a Greenfield venture was initiated until the opportunity to acquire IIJT came. This was funded by a first round of fund raised from Gaja Capital. IIJT was a company that had grown fast but did not invest right in building its basic framework, but TeamLease saw it as a platform to speed up learning on the training side. The last 20 months have seen a huge focus on the training front, in terms of building the team and bandwidth.
The business idea saw a full circle, when along with employment and employability, they also saw a huge need to address the education part to meet the larger need to address the issue of skilling in India in a macro sense. While, ‘employment’ is catered to through TeamLease which focuses on matching the problem of bringing the element of supply and demand together, the element of ‘employability’ is addressed by IIJT through its focus on ‘repairing’ the people for the job requirement. The latest inclusion is the ‘education’ part, which aims at ‘preparing’ people to bridge the gap of inadequate vocational education in India. The TeamLease University, due to start in Gujarat, is the new venture which is vocation-oriented and will aim to prepare talent for the element of the job market and skills required by the industry.
Keeping in mind the additional funding required at the time, that is, more investment for IIJT and funding to set up the TeamLease University, the group raised the second round of fund with ICICI Venture and Gaja Capital in April 2011. For TeamLease, the growth and scale has been possible all through because of their ability to gauge the market need and make the right investments in infrastructure, technology and people. Their continuous focus on treating the business idea as a hypothesis testing, which allowed them to redefine the business focus with the changing customer demand, is perhaps what led to their success in every new venture. While the business idea continued to evolve to cater to customer needs that changed over time, certain elements like transparency, hard work and growth for its people did not change. Even today, the belief that the growth of the business is a result of the effort of its people, drives TeamLease and IIJT to reserve upto 20 percent of their share holding for ESOPs to its employees.
It is the mindset of a large organization despite being an entrepreneurial venture that has today led them to address the macro aspect of skilling in India. Their focus on transparency and believing that sunshine is the best disinfectant encourages an environment of open discussion, which enabled them to take quick decisions and create a resilient workplace. As an organization, they strongly believe in not waiting for all the lights to be green to initiate something. A learning they nurture is that action must come before approval, for it is impossible to convince the authorities until they can be shown what is possible. While in the early stages, people called TeamLease an illegal business, today that business has led to a new industry in staffing.