United Group: A tale of meritocracy

The United Group has added another feather in its crown in 2020 – a complete execution of its succession plan at a time when everything else was going haywire in the pandemic.

The home-grown conglomerate's founders have handed over the board's reins to their next generation in a spectacular show of meritocracy.

Moinuddin Hasan Rashid, managing director of the group, became the chairman of the board of young directors in the middle of this year, on the group's 43rd foundation day.

In a recent interview with The Business Standard, Moinuddin said the United Group believes in meritocracy within the organisation, and the founders have been practising it for a long time.

"Our first-generation had rotated the group managing directorship thrice in their journey of four decades to ensure the best performance and accountability," said Rashid who got his first business assignment in 2007 following his engineering graduation from the United Kingdom a few years earlier.

Over the last one and half decades, the second generation members of the founding families were inducted into the group through executive roles in suitable fields after graduation. They climbed the organisational ladder based on an objective evaluation of their performance as managers, team leaders, and board members.

Rashid got a leadership role in a power venture as its managing director more than a decade ago and took only two years to prove himself and become the entire group's managing director.

He said the United Group founders learned the importance of succession from a multinational company's local agency firm when the foreign entity asked for the details of the agency firm's succession plan before a mere business contract renewal.

Some 20% of the board meetings in the developed world discuss succession, while lenders and investors also consider succession plans to assess potentials and risks.

"In 2020, our founders left the board to induct us there. But they are functioning as advisers to the board."

What is most remarkable is that they handed over their reins much earlier than their expected retirement date so that they can come back to the board and pick up the reins again if the young talents cannot deliver well.

"They are physically fit and ready to come back if necessary."

Success mantras

Rashid also shared his view on what helped grow the group of young friends' small enterprise that took shape in the late 1970s to today's multibillion dollar business empire with more than 30 successful entities operating in the fields of power and energy, real estate, construction, manufacturing, port terminal and shipping, education, healthcare, retail and services.

"Commitment for quality and socio-economic impact, and prudent investment principles are the keys to why almost every single United Group venture yielded gold," said its new chairman and managing director.

To describe United Group's commitment to quality, Rashid said, "We do not sell any product or service that we ourselves cannot consume."

"Our family members go to United Hospital for all their medical treatments, except for treatment that United Hospital's portfolio does not cover, we are the first families to dwell at United City, we buy our daily needs from Unimart. My younger brother has graduated from the United International University although we could have afforded any foreign university programme for him. Our kids go to Sir John Wilson School; they spend leisure time in the best food court, Chef's Table – all are United Group concerns."    

It does not take long for customers to learn how much quality and value they are being offered, and United Group is very successful in getting the best out for the consumers.

The group, in its history, has opted out from only one venture – United Maritime Academy. It was not because that education and training was lacking there, it was rather the professional education institute was struggling to ensure quality local internships due to a de-facto mutual priority between the state-run marine academy and the shipping corporation.

"We closed the very potential academy only because we did not want any uncertainty over our students' future," he said.

Contribution to socio-economic development

If a Bangladeshi entrepreneur works here for an hour, they can yield double to what they could somewhere else in the world, believes Rashid, like his predecessors.

The local group focused on local market's needs in diversified sectors which also enabled it to contribute to the ongoing socioeconomic development as well.

Rashid is proud to be a part of the country's power and energy story, which fuelled Bangladesh's GDP growth and supported self-sufficiency in food.  

The group believes in the effectiveness of joint effort by the state and private sectors. They have built the first public private partnership (PPP) power plant in Ashuganj, the first land port in Teknaf, and are also building a modern hospital in Chattogram under the PPP.

Also, the private sector has already developed know-how and skills in sophisticated fields like power generation, which is an outstanding achievement, Rashid said currently, state organisations hire engineers and experts from private companies.

"Skill is a soft but very significant part of development," said Rashid who has tremendous efforts for his learning of technical know-how.

He travels abroad mainly to witness and explore technological wonders in the fields where the United Group operates at home.

The supporter of the government's priority for electricity at any cost a decade ago said the government did the right thing, despite some inefficient power generation modes initially.

"Cost of power generation, even in the most expensive plants, has never surpassed the cost of not generating the power," he said, adding, "And most importantly, as the power emergency is over, Bangladesh is opting for large efficient power plants now."

There is a temporary mismatch in demand and electricity supply, which raises questions about the government's power generation policy.

Moinuddin Hasan Rashid believes power generation capacity is now slightly underutilised because other projects are taking longer than expected to finish. Things will be alright again when the national manufacturing master plan in hundred economic zones will see the light.

"Power plants are bound to commence operation on time to avert penalties, while other projects are not," he reminded.

Also, a rapidly improving lifestyle will exhaust all the power that Bangladesh generates when Bangladesh adopts electric vehicles. There will be another round of demand for power, he anticipates.

Prudent investment

Prudent investment – be it in ventures or financial portfolios – is another key that made the United Group a top one.

The group's founders embraced the most straightforward approach in investment, that is – buy low, sell higher, limit liabilities, and do not invest for the sake of putting capital anywhere that does not offer a fair return.

"Our Founders taught us that investment must have a social impact, it must offer sufficient return and growth, and avoid leveraged investments as much as possible," said Rashid.

Over the last four decades, they never had to take any unpleasant step to survive in business, and limiting liabilities is a simple secret there.

"Projects might need loans but the United Group tries to repay the sum as early as possible," he said.

Another reason behind its success as a group is that it looks for viability in each of the business units. It never thought of offsetting one business' underperformance with the success of another one.

"Propping up one business at the expense of another one is a bad idea," we believe.

However, the whole story is not about being conservative in investments.

The group is "prudently aggressive," said its new chairman. "You have to be aggressive when it is needed for making a good investment, and opportunity does not come every day."

There are dozens of examples in United Group's history where the entrepreneurs preferred new challenges to going for traditional low-hanging fruits.

Investing in the country's first-ever independent power plant, partnering with Japanese textile giant Gunze to manufacture high-value yarns instead of dominantly selling average standard ones can be recalled as examples.

The group is a significant investor in the local capital market, having a strategic shareholding in many blue-chip companies both from private and public sectors.

Over the latest round of the stock market downturn since 2018, the group injected nearly Tk1,400 crore into the stock market to buy and hold fundamentally sound stocks.

Of course, it was a tough decision, especially when no one was willing to buy stocks in the bear market.

The risk proved to be worth taking when the stock market bottomed out in the middle of this year.

"Capital gain should be a by-product of a good investment, not the key target," said Rashid who wants to price a stock based on dividend yield and strictly manages his expectation while anticipating returns.

He looks for growth because it is crucial to sustaining a business by retaining internal talents, customers, suppliers, and investors.

On the other hand, growth needs to be sustainable to retain what a business has already achieved.

"There will be growth, plateau, and correction – nothing to worry about as long as there is potential to grow again," his approach to view ups and downs.