Running The Show: K. Rajaram, CEO, Al Nabooda Automobiles
The CEO of Al Nabooda Automobiles draws on four decades of in-market experience to get things done (right).
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In the year since he was awarded the Lifetime Achievement Award at Entrepreneur Middle East's 2014 Indian Innovator Awards, Al Nabooda Automobiles CEO K. Rajaram has seen his UAE-based enterprise go through quite a few choppy scenarios this year, from a business point of view. Not only did he have to weather through a plateauing of the Middle East luxury goods market in 2015, Rajaram was, like most of us, also taken unawares by the unfolding of the Volkswagen emissions-cheating scandal in September. Now, while Al Nabooda is the exclusive distributor of the German carmaker's brands like Volkswagen, Audi and Porsche in Dubai and the Northern Emirates, the company has not been directly affected by the crisis, since Al Nabooda doesn't sell diesel cars here, as Volkswagen offers only petrol cars in its portfolio for this region. "We've not had a problem in the showroom or in attrition, but people do come and ask questions- which have to be answered," Rajaram says. "You have to give them the satisfaction… We have informed them that this has got nothing to do with us. We don't sell diesel cars. We are a petrol-driven economy. And the customers are well aware of the fact of the quality of Volkswagen- it doesn't change the way the car drives or how it feels on the road… But time will tell what is going to happen now, because, essentially, the decisions that Volkswagen as a group takes in the next six months are going to have a telling effect for all of us- you must not forget, it was the world's largest car company. And now, they have to redefine and redesign themselves."
Rajaram is calm and composed as he responds to my queries on the Volkswagen story (he lighted up a cigar during our conversation, and casually took a puff of it every now and then), and while I was a tad worried if my barrage of questions on the topic would ruffle his demeanor, I soon realize that this shouldn't have been a concern at all- the man sitting opposite me is a seasoned businessman with more than 40 years of experience in his trade, and from his perspective, issues like these are just storms that one has to simply –and slowly- navigate smartly through. "Hope springs eternal, in the human heart," Rajaram declares. "I am sure that things will turn out to be okay, and things will go on. Because, at the end of the day, do not ever forget, we still have very good products. There's no taking away from that fact." His pride (and faith) in the Volkswagen brand not withstanding, when I asked Rajaram if he had any points of advice for the Volkswagen leadership team in how they move forward with the situation in front of them, he highlighted a pertinent point about the company maintaining its relationships with its partners around the world. "I just want them to make sure that they now comfort the dealers," he notes. "You see, that's another thing that everybody hasn't looked at- its dealer network. Because it is the dealer network that has put in billions, worldwide, to run their brands. They also owe it to them, to come out and give us the confidence that, you know, they are going to take care of it, everything is going to be okay, and we need that to happen. Because I can't even hazard a guess how much people around the world have spent in building showrooms, workshops, etc. across the world- and they all did it because of their faith in Volkswagen."
For its part, Al Nabooda Automobiles has certainly invested a lot in its business- the company's website proudly declares that it has spent "over US$1 billion in several phases and ventures" of the organization. It opened the world's largest Volkswagen showroom in 1999, the world's largest Volkswagen service center in 2005, and the world's largest Audi terminal in 2012, and it continues to be the world's largest Porsche dealer, an accolade that it has been holding on to for more than eight years now. "In 1995, when we started off, we used to sell 300-odd cars in a year," Rajaram remembers. "Last year, I think we did 9,000. That's been our growth. The way we set ourselves up is not just to excel locally, but to excel in the international sphere. That is why whatever we have built, we have created it to international standards, and we at Al Nabooda are extremely proud of the fact that we have a lot of firsts- and first not [just] on a regional basis, but on a worldwide basis. We set up the world's largest Volkswagen workshop first- that was way back in 1998. And I think a lot of people laughed at me when I did that- today that workshop is full. Because when I built that workshop, we used to sell 500- 600 Volkswagens. Today, we sell 6,000 Volkswagens. We are the world's largest Porsche dealer- that's a thing that we have held for eight years now. We are now in the process of building the world's largest Audi workshop. We have the world's largest showroom. Therefore, our entire emphasis has been [on] not just being regionally excellent, but being excellent worldwide. And to our credit, Volkswagen have sent their German dealers down to us, to see what we have built, what we have created and how we run our business."
While it may be easy to be swept away by the sheer scale of the Al Nabooda enterprise now, one shouldn't think that setting this company up was a walk in the park either- there were, for sure, several obstacles along the way, and as the one running the show, Rajaram had to have made tough and critical decisions throughout as well. So what was his formula to lead and navigate his company through the business landscape of the region? "The only way you get past hurdles is by having faith in yourself," Rajaram replies. "People will come and tell you a million things. You know, when you are sitting in this office, this room, you have your customers who tell you one bit, you have your staff who tell you one bit, you have your managers… At the end of the day, your gut tells you what is right. And the most important issues never waver from it. Once you have decided that this is the path you are going to choose, just stick to it. Because one of the worst things that can happen in business is when you start changing your mind halfway through, because then, you do nothing right and you're always in the state of confusion… When I took over the company, we had 68 employees. We now have 1,500, and I owe a livelihood to 1,500 people. So every decision I sit here and make, I have to make on many counts: my board, my owners, my shareholders, their interests. I [also] have to look after the interests of the people who work for me. And based on all this, you make decisions, and once you have made the decision, never look back."
That's an inspirational statement all right, but I can't help but be cynical and ask Rajaram what's the way to go when one's gut is, well, just wrong, and results in an incorrect decision being made in business. Rajaram agrees that things like that can sometimes happen, and notes the importance of having a Plan B in case such a scenario arises. But perhaps more importantly, the Al Nabooda CEO highlights the need for leadership to take charge when things do go wrong: "You have to take responsibility," he says. "You can't sit in a board meeting and try to push blame on other people. All that you can [do is] turn around and tell stakeholders that yes, this was not a right decision and we're going to change it; we are going to make dead sure that we are going to recover what we lost. That's all- and that's all the stakeholders want to hear… In life, everyone makes mistakes. Nobody is perfect; I don't think anybody can sit down and say, "I've run a business for 40 years without making a single mistake.' If that's the case, then he has done nothing with his business. But if you have to grow from [an establishment selling] 300 cars to 9,000 cars, then you have to have had made some mistakes on your way. The important thing is what you've learned from them."
When it comes to running a business, Rajaram is also emphatic on the importance of taking care of one's people- regardless of whether you are a startup, or a multinational. "Our people are everything to the business," he declares. "Without them, the business is zero." And ensuring the welfare of one's employees is not merely a pragmatic detail, he notes- there are cost factors to be taken into consideration as well. "The cost of training a person in the present environment is huge," he explains. "If the person is unhappy and he goes away, all the cost you have spent on his training is gone; it is irrecoverable. Somebody else is going to make use of it, when he leaves me and goes and joins somebody else." Rajaram also notes how the efforts a company's management makes in securing the welfare of its employees can go a long way: "Creating a working environment, and looking after the people who work for you, also gives them a feeling of belonging." Rajaram recalls how, long before the UAE made it mandatory for employers to provide their employees with health insurance, Al Nabooda went about insuring all of its staff, a move that he believes brought about rich dividends for the company in the long run. "My people feel that the company went out and did something for them- all of those who did this when it became law, the people feel, what the hell, the government gave you instructions, you went and did it; you are not giving me anything. This is why we have taken pride in the fact that people have worked with us for so long, and we've grown over the years, and we are very happy." (Incidentally, in an impromptu speech at the Indian Innovator Awards last year, Rajaram made it a point to thank his team at Al Nabooda, who made his dream of "not selling cars, but experiences, come true.")
This feeling of kinship that Rajaram strives so hard to instill in his company's employees is perhaps a reflection of his own feelings toward the Al Nabooda enterprise, and the family behind the same. A chance meeting in the nineties with Khalid Khalifa Al Nabooda, Managing Director of Al Nabooda Automobiles' parent company, Khalifa Juma Al Nabooda Group, is how Rajaram became a part of this organization, and now, more than 20 years later, his passion and dedication to both the business and the Al Nabooda family remain as strong as ever. "This company and the family are a part of me," he says. "I may not be a Nabooda, but I have always been made to feel like I am a part of the family. I've been very close to the whole family, for many, many years now and I think we run the business in a fashion where we all have ownership of it." Rajaram also doesn't shy away from singing praises of the UAE and its governing leadership for making the country a fertile environment for doing business. "Look at where they have taken this country in the last 25-30 years!" he exclaims. "How many countries in the world can even come close to what they have achieved? The whole world -and especially this region- looks at the UAE as a role model." And his thoughts on Dubai Expo 2020? "I am really looking forward to 2020, because I think great things are going to happen to this country at that time. I think the world is really going to see us for what we are."
Speaking of role models, Rajaram can easily be counted as one of the most inspirational figures in the region's business arena, be it among peers in the industry, or even up and coming newbies who are in universities now. So when I asked him for any advice he had for the entrepreneurs of the region, Rajaram –in what was perhaps a nod to the current business climate he was seeing with his enterprise- urged them to tread with caution. "Because, the thing is, in business, there are factors you control, and there are factors you don't control. You don't control the Chinese devaluing the yuan. You don't control somebody attacking somebody somewhere. These are things you don't control. But unfortunately, those are the factors that are ruling the world today. So, when you are sitting here as a businessman, you have got two components of problems you are looking at: one is your own problems internally and how you can handle them, and two, the external problems you have absolutely no control over. So this is where you have to tread with extreme caution. Because if you overstretch yourself and a problem were to hit, you are in deep trouble." So what should be the modus operandi for new businesses? "Scale it up slowly. Test the markets. See what's happening. And then start growing." As for making one's way to achieving success, Rajaram simply says one just needs to stick with whatever it is one is doing. "Where you are is [based on] a series of experiences you have got and it can be different for different people." However, Rajaram quickly also adds, "But one thing I always say: never discount being at the right place at the right time, because that's just pure luck."
The Executive Summary
K. Rajaram on business, people, money, and more
On Al Nabooda and future plans
"We've had our infrastructure plans in place, and most of them are on their way [to completion] now. We are going to complete the new Audi workshop, the new setup in DIC and after that, we will then sit and evaluate what we need to do. We had budgeted for a certain growth in the years to come, but next year will tell us which way we are headed and what is going to happen. This year has been fraught with difficulty, and I am sure it is not only for us, and not only for the automobile industry, but for various industries… To a large extent, we have got our infrastructure mapped out. Now we just have to do all the fine-tuning and processes have to change, because we have become so large that we also have to learn how to govern ourselves."
On the UAE's SME sector
"In terms of SMEs and what H.H. Sheikh Mohammed bin Rashid Al Maktoum [UAE Vice President, Prime Minister and Ruler of Dubai] has done to help entrepreneurs, I think it is tremendous the amount that has been done by the government, making it as easy as possible [to start a business]. Of course, that also leads to the fact that there's enormous competition. But then, at the end of the day, what makes you strong is competition, and how you handle it."
On being safe with financial matters
"Do not over borrow. Because the easiest thing is [to say] money is [at an interest rate of] 2-3%, let's go and borrow- but that doesn't work out in the long run. We have run this company for 40 years: we have not borrowed one dirham from the bank. Everything we have built and created has been with self-generated funds. Our company does not carry one dirham of debt."
On the value of human capital
"My first foray into business was in shipping, which is a people-intensive business. Because you are giving somebody an asset which costs 40-50 million dollars, and it is in his hands. He is the master of his ship. Either you have good people and you trust them, or you are in deep trouble. Because each of those ships to run, it costs 15-20,000 dollars a day. So even when they do nothing, they are burning 20,000 dollars of your money and that is where you realize it is very, very important having the right people, because, let's see, he's sitting in Paramaribo in South America; you're sitting in your headquarters in Bombay: what control do you have? If the guy who's on the ship, the master and the chief engineer, are those who are running everything, you need to have people whom you trust and rely on."