Asialink is Australia’s leading centre for building Asia capability, public understanding of Asia, and appreciation of Australia’s role in the Asian region. Mack Valves were recently fortunate enough to be asked to be part of a AsiaLink Case Study, this Case Study puts Mack in the amazing company of Bundaberg Brewed Drinks; Midway Metals and Infoactiv.
Mack Valves: key learnings
- Take a measured risk: Establishing a business in a developing country can be a gamble. Mack Valves demonstrated the benefits of listening to clients’ requests and pursuing an identified demand before investing in the market.
- Source and retain capable talent: Finding, developing and keeping talent are key challenges when operating in Asia. Mack Valves had to understand the capability gaps of its new Indian workforce to meet Australian standards. Its retention strategy incorporates building a supportive corporate culture with strong employee links.
- Proactively manage cross-cultural teams: Management and employees both need to understand the differences that exist within cross-cultural teams. Mack Valves has taken the approach of actively adopting best practices from both the Indian and Australian context to improve processes and relationships.
- Give back to the community: Expanding into India does not have to be about a low-cost option. Mack Valves strongly believes in its corporate social responsibility (CSR) and have introduced training for disadvantaged women to be international-standard welders.
Establishing a new enterprise in a developing country can be a double-edged sword – fraught yet full of potential. Mack Valves a business that has been providing specialised valves to various industries for more than 75 years, including defence forces in Australia and the US as well as leading mining and industrial gas companies – is a good example
When Ravin Mirchandani acquired Mack Valves along with his partners in 2013 and became chairman, he decided to take Mack Valves back to its roots as an Australian family-owned and managed company. This included placing a premium on quality innovation with a global manufacturing and supply chain outlook. The business has since had significant growth, expanding its operations in late 2014 with the commissioning of a new factory in Pune, India. To achieve this strategic direction, Mack Valves engaged a new senior management team, recruiting external Australian managers with significant international experience.
This was not Mack Valves’ first foray into India. Its previous American owners had expanded into India as a low-cost, offshore option to manufacture products. They established a plant in a remote town and faced challenges that included a low-skilled workforce and limited access to electricity, water and transport infrastructure. This raised difficulties with the production of valves, which required highly skilled teams and the use of leading technologies to ensure safe production.
The senior management team at Mack Valves envisioned something quite different with the new Indian factory. The company wanted to embrace the nation’s full potential as part of a growth strategy into the region, gaining access to the burgeoning Indian market while having the potential to supply products to Australia, China, the US, the Middle East and Africa. After equipping the plant with state-of- the-art machinery, the strategy was to complement the Australian operation in Melbourne by doubling the size of Mack Valves’ engineering and research and development teams, rather than offshoring production. But turning this vision into a reality was not without its challenges.
Taking a measured risk: listen to your clients’ requests
Ravin knew there was significant potential for growth in the area because he had listened to clients’ frustrations about the long delays in importing high-quality valves into India. But after two decades in the industry, he also understood the risks. The new factory has to be operating efficiently before it can acquire certification by the relevant authorities in each of the countries it intends to export to. This can take several months.
Despite not having any signed client contracts, Mack Valves invested in setting up the new plant in Pune, relocating from the earlier location that proved unsustainable. As Ravin explained: ‘It is a long process. It could take between three and five years until the Pune factory is at full capacity, but the potential is immeasurable. One has to have the stamina for the long run when investing outside of Australia.’ The gamble is already starting to pay off. At the function to inaugurate the plant in Pune, potential global clients, many of whom already had smaller contracts with the Melbourne-based operation, provided positive feedback and were impressed that the new factory was adhering to Australian standards. Once certification is received, Mack Valves intends to develop these client relationships to secure new contracts.
Sourcing and retaining capable talent: invest continuously in your Indian workforce
One of the bigger challenges for Mack Valves has been the recruitment of local talent for the Pune factory. India’s high-skilled and educated workers are in hot demand at home and abroad, where multinationals recruit them for projects in cities such as Dubai. Those who remain in India are recruited by leading corporations that offer attractive packages. Australian businesses generally underestimate the high competition for talent in India, making it one of the leading obstacles in establishing a business.
Once a preferred candidate is identified after a process of interviews and a technical assessment, Skype sessions are then held with the Australian management team to determine if there is an appropriate fit and to evaluate attributes. Even the recruitment process can present difficulties because often the prerequisites for a role in Australia cannot be applied in an Indian context. For example, the Indian sales team may have good sales experience but not specifically in the valves industry; in Australia, specialised knowledge of an industry is a must. This has meant that management has had to adjust its expectations and consider strategies and training to address capability levels of the new recruits to meet Australian standards.
Retaining talent has also been a challenge for many Australian businesses operating in India. Poaching highly skilled workers is common among multinationals and local Indian firms. Mack Valves’ Indian management team highlights this as a potential issue it is actively preparing for.
In an effort to retain staff, Mack Valves adopts a supportive corporate culture. This is fundamental to increasing employee satisfaction and commitment. ‘We don’t want sub-cultures and hierarchy throughout our plant, but rather a flatter structure where everyone is equal, approachable and willing to help each other for the benefit of the business as a whole,’ Ravin said. That’s a big ask in a country where a hierarchic caste system has flourished for generations.
Providing flexible hours, proper sanitation, a rooftop space to relax on breaks and a cafeteria has gone some way to creating the Mack Valves ‘family’. Staff members who work hard and follow and encourage safety standards are duly acknowledged, and this has forged good team morale. ‘You need to make your talent want to work for you,’ Ravin explained. ‘This starts with first having a mechanism of correctly identifying someone who supports your vision and shares the excitement of your company’s dreams and aspirations. Then you paint the picture and follow through with the promises that were made to them when they joined your team.’ The company has invested significantly in its engineers, dispatching them to Melbourne for training and committing to sending staff to overseas conferences where they can network and develop their knowledge and skills.
Proactively manage cross-cultural teams: understand different working styles and manage expectations
Mack Valves’ experience highlights the need for Australian businesses to consider the different working styles and expectations across their workforces in Asia. Tensions grow out of misunderstandings simply due to cross-cultural teams not being aware of the different contexts surrounding them. The Melbourne-based team sometimes felt the Pune team worked in isolation, while the Indian workforce believed the Melburnians had little confidence in their abilities. ‘It is vital that we [management] make it clear that the two plants are not separate entities,’ Ravin said. ‘They need to work together as one. Everyone needs to be aligned towards the vision of the company. This is practised and promoted by management with clear communication of each other’s expectations.’ Weekly videoconference sessions and regular phone conversations are also held to encourage relationship-building between the two factories.
One of the key cultural differences is that the Australian employees have traditionally taken a more measured approach compared with the Indian team. ‘Due to the incredibly fast growth rate of the Indian economy, the team in India is passionate and wants to move ahead in leaps and bounds,’ Ravin explained. This results in them wanting to make quick decisions without considering the broader issues of plant safety and product quality. Management intends to use this energy to drive the established Australian business to speed up its improvement effort and learn to think differently. Nevertheless, extra guidance and encouragement is required for the Indian workforce to ensure correct processes are followed.
Mack Valves also acknowledges that its Australian workforce needs to better understand the challenges of operating in a developing country. The Australian team is learning to appreciate numerous cultural sensitivities, including the Indian emphasis on multitasking and rapid turnaround in communications. Another is awareness that tasks such as engineering calculations and costing exercises in India may take two to three times longer to complete as the team in India expands its skills and expertise. Processes on maintaining quality also need to be enhanced and are more elaborate in the Indian context. Where a two-page document outlining a procedure is acceptable in Australia, more detailed explanations on standard operating procedures and work instructions are required by the Indian team. Approvals in India can also be challenging, particularly at a government level where timelines are often lengthy.
To prevent issues arising, management adjusted the business processes at both factories to ensure clear expectations and correct measurements of results. ‘The key is to take their energy and work with it,’ Ravin said. ‘Use it carefully, rather than squashing it and holding them back.’ Other strategies included the Australian team travelling to India to further build relationships and understanding with the Pune factory. Simple gestures such as giving the Indian workforce a cricket bat signed by the Australian cricket team have also assisted to develop strong ties between the two factories.
Give back to the community: encourage CSR initiatives to assist local development
There are also expectations on the increasing number of foreign organisations moving into India to embrace the low-cost environment. Concerns exist around the exploitation of local Indian communities by multinationals. Mack Valves has been conscious of these concerns and, as part of its Corporate Social Responsibility (CSR) program, has hired local disadvantaged women. The group of five young women in their 20s, some of them illiterate, had no prior skills in the industry but are now learning to be international-standard welders. The initiative has involved training them on welding simulators to provide them with strong experience in a safe and well-supervised environment. ‘It is a very long process with understandably numerous challenges, but to give something so precious back to these women and the community is a responsibility we will proudly embrace,’ Ravin said.
These challenges include a long development period of at least 18 months until the women are fully capable of deciphering industrial drawings, understanding the factory environment and acquiring an appreciation for safety and quality. Setting clear expectations is vital, with Mack Valves reassuring the women that if the job is too overwhelming, they have no obligation to stay. With no experience working with people from a disadvantaged background, management also supports the Indian teams with encouragement that everyone has to start from somewhere and to be patient in training the group to be competent.
Expanding operations into another country is not easy and involves a long process with commitment from all parties. Mack Valves’ experience highlights that India is more than a low-cost offshoring opportunity. As India’s socioeconomic environment continues to develop, Australian businesses wishing to expand overseas should consider the potential of operating in India as an effective strategy to access the region and the growing markets of Asia. With it may come challenges, but as Mack Valves demonstrates, knowing the risks, preparing for potential difficulties and understanding differences among your cross-cultural teams is crucial for success.