Sunday, December 19, 2010


A garden does not become great, merely by sprinkling it with enriched seeds and left to be taken care of by itself. It is great gardeners that groom them into a beautiful feast for the eyes and a timeless treasure to behold, for the future generations to savor.

Likewise, without the inspiration, nurturance and the guidance of the board members, it is almost impossible to build great corporations. I was privileged to share twenty-five illuminating instances from my work life, that highlighted the insightful contributions the board members made to their shareholders and employees.

From some of the queries, criticisms and generous comments from readers like you, I drew the inspiration to carry on with my notes. I do hope, the contribution here, however humble it be, was found useful. As I draw this series to a close, I do hope you found parallels in your own organizations too. I do wish that these ideas stimulate your future as much as they did to me.I wish to thank you for your esteemed patronage.

I conclude this series with the fond hope that these columns would continue to be a source of inspiration and wealth aggregation for the times to come.

Sunday, December 12, 2010

What qualities to look for in the next Chairman to be ?

What qualities to look for in the next Chairman to be ?

The 35 year old company had gown into several divisions and exported the products to over 98 countries. The current Chairman was nearing 70 and the board wanted a relatively younger team at the top to head the business. With Gen Y constituting the bulk of their consumers, now, it was important for the company to think young.

What should be the qualification criteria for the new management team to be ?

The company invited a seasoned expert from the field of management to address the potential contenders who numbered over 70. What should they look for in the 70 people to decide who to hand over the reins of the company to?

“ If you have a visionary amongst you, then this company will be most safe," began Dr. Patel. He had served on the boards of several Fortune 500 companies and has been an advisor to many a CEO on the art of grooming their successors. “ Let us identify the visionary amongst your aspirants and ascertain the traits do they demonstrate for leadership,” said he.

Foresight: First, do they see the future ahead of the others? Akio Morita, of Sony created the phenomenon of Walkman that revolutionized the Music industry. Eiji Toyoda of Toyota created the luxury of a Mercedes Benz at half the price - Lexus went on to become a legend. Before laying down the office of the Chairman, Soichiro Honda wanted the world’s cleanest car, HONDA CIVIC to be created. Jeff Immelt at GE believed in reducing the energy demanded by airplanes, ships, railroad engines and power plants to 40% what they were consuming then. The consulting house of McKinsey believed in working like a single large family of business they called ‘One firm firm’ with knowledge as being the only differentiator of seniority in the company. The head of Royal Dutch Shell, Arie De Guys, believed in creating everlasting corporation that invented the way it learnt daily.

In India we have Kalaam, the missile man, Kurien, the father of White (milk) revolution, Thomas Thomas, who invented the use of non edible oils to make soap so that millions of kitchens could get an uninterrupted supply of cooking oils. MS Swaminathan helped self sufficiency in food by revolutionizing the way rice is cultivated . Quietly, Rajendra Pawar promoted computer literacy through NIIT and Janak Mehta introduced the TQM Revolution through CII way back in 1988.

All of them had the gift of seeing 20 years and beyond. Does your top team have the power of prophesy, the ability to look beyond? Does your CEO possess it?

Vision: Second, do they believe in something as a core message that needed to be reflected uniquely in every aspect of the offerings of the company, like the corporate signature. For Sony, it was the respect for nature (Mottainai- in Japanese)and miniaturization; everything had to get personalized and pocket sized! For Toyota their ability to grow the pie of the car market by making them cheaper and better was more important than fighting for market share. Environmental friendliness was the theme for Honda. Energy saving in every aspect of life is GE’s motto. Superior thinking was the motto for McKinsey. Corporate longevity was the theme for all of them; they continue to be in the top of Fortune 500 even today and have become timeless legacies for their investors.

The scientific temper promoted by Kalaam is as timeless as the success of cooperative movement among milk producers for Kurien. Indigenous R&D for Thomas was as significant as putting the nation through computer literacy and modern methods of production and management for Pawar and Mehta respectively.

All of them, not only dreamt big but were far ahead of their times. They placed an abiding faith in the power of India to renew itself and gave it one key ingredient to success; they sowed the seed and tended the garden for it to flower and flourish for generations thereafter. Does your CEO have such a message?

Staying power: Whenever any new idea comes, do people like it? No way. There is always entrenched resistance. Yet these people had the singular ability to appeal to the imagination and ignited the passions of the entire generation; inspired them to take on the hardship of change. They took on their successes and failures with the same level of ease as they endeared themselves to their friends and treated their enemies with respect. Charming their way through a crisis that was legitimate, they engaged the mind and spirit of the people to respond to a call to action that was very significant. Does your CEO to be demonstrate such a staying power?

I think as a senior team you will be failing your shareholders if you do not clearly communicate what you are looking for in the next CEO. So communicate first and get all the 70 of them contest of this position openly and fairly. Let each one of them paint a scenario for the future that we are would love to envision and hear about. Let them identify the message that will take us there. May they also demonstrate their tolerance for those who are unable to appreciate the future, by demonstrating the will to carry them along, without denigrating or dispensing with them.

If we found such a person, the current team would have discharged their debt of gratitude to the trust placed on them by the shareholders. Thank you.”

Dr,. Patel sat down having satisfactorily seeded his message for one more time in his illustrious life.


Sunday, December 5, 2010

Revenue scoping policy

Revenue scoping policy

The press were waiting for the press note on the annual business performance to be released. The release of the press note was delayed because the board had not yet approved of it. The board could not approve of it because the auditors had yet to sign off the balance sheet. The auditors will not sign off the balance sheet because the CFO was still to provide satisfactory clarifications they had sought earlier from the company. Whereas the press was to have got the note at 1100 hrs in the morning, they got it at 6 p.m. after a harrowing wait of over seven hours.

Ravi Ratnakar, Director appointed by the institutional investors was visibly irritated at having to cancel his flight for the night and go the next day morning . He pulled the CEO aside and told him that financial results must be published to him by the 3rd of every Quarter ending month. A delay of 20 days and doing it on the morning of the board meeting was simply not acceptable. The CEO, as if he had nothing to do in the matter, pointed to the CFO and asked the latter to get his act together.

The CEO and the CFO both knew what the problem was but were unwilling to face up to it. They both blamed it on the failure of the quality of the accounting Software that made the consolidation of quarterly accounts very difficult. Ravi Ratnakar was not prepared to be taken so lightly. Upon his return home, he called up the CEO and told him that an auditor friend of his will help them in the matter. Helplessly, the CEO was forced to accept the offer without protest.

Next quarterly board meeting passed off peacefully without any problem. The auditor had very little to do because the CFO, keen to avoid getting exposed, had already managed to address all the problems. How did he mange it this time?

Delay in release of invoices on customers: Usually, in order to show good revenues, the books were kept open for a week after the month got over. Consequently, the generation of invoices too were postponed by as much, flowing into the next quarter as receivables. The is time, it was closed promptly on the last working day. This, quite obviously improved the working capital situation but went down poorly with the customers who were denied the extra time to enjoy free credit.

Doubtful debts not recognized: The collections team likewise, was often given time well past the start of the next quarter to show that the status of accounts receivables were in very good shape. That once again was not allowed owing to the timely closure of the bank books. The amounts outstanding beyond 180 days were clearly highlighted as doubtful debts; each one had a clear status note explaining whether they will become delinquent and if they did, how they will be dealt with.

Delayed release of credit notes: Errors in invoicing and the issue of credit notes for goods returned back unsold was often kept pending. While it looked good artificially in the short term, by the end of the year it reflected poorly on the results of the last quarter. This too was remedied forthwith.

Adjustment of advances: Although the issue of travel advance and timely settlement was a mandated policy guideline, employees had the habit of submitting travel expense statements very late. With over 40 % of the employees traveling for as much as 100 days overseas, the amount shown under loans and advances was inordinately high. Worse yet was that much of it remained under suspense until the true levels of expenses became known much later on. In most cases, the employees had spent in excess of the amounts advanced, reflecting poorly on the cost of operations.

Surprise expenses incurred without prior approval: Although there was a strict guideline on discretionary spending towards unbudgeted expenses, every month, a substantial amount was incurred and justified post facto as a fait accompli. There was very little for the CFO to do except to accept the expense under protest.

Posting delays: All these factors resulted in inordinate delays that allowed very little time for the MIS department to post the vouchers into the system. When the automated MIS system released the provisional reports, there were obvious and glaring omissions and errors that required correction and reprocessing before the accounts could be clearly squared off.

The results of the next quarter were poor. But Ravi Ratnakar knew why. He was happy that his timely threat had resulted in a one time poor show; since all the accumulated problems of bookkeeping disciplines had been addressed, he was not unduly worried. Now that people had owned up to the bad news, he was confident that they will act more responsibly in the future.


Saturday, November 27, 2010

The hard side of addressing the soft issues

The hard task of addressing the soft issues

Everybody in the board loved Chandrasekhar. He carried himself with grace and was deeply human in the way he came across to people. He seemed unhurried despite his busy schedule and was always approachable. The CEO Ravichandran had assembled a team of great of experts who were quick to address technical challenges and redress customer complaints with remarkable ease. However, the workplace was very machine like and lacked any energy or enthusiasm. Where could he be going wrong? He valued the difficulty of keeping people motivated and was anxious not to allow the enthusiasm of the youthfully capable team to come down for any reason.

Chandrasehkar listened for a while.

He asked the CEO if he could be permitted to walk about all alone, unescorted by the senior managers, across the shop floor and the offices of the middle management? The CEO saw no reason to object and let it happen.

Chandrasekhar went about in his natural style shaking hands, meeting a cross section of the people enquiring them about their welfare and work. He apologized for dropping unannounced and took permission from people if it was all right for him to talk while they worked. In some cases, he waited until the operators and staff finished their work and got free to talk to them. He graciously accepted the insipid tea and soft biscuits that were offered to him and demonstrated enjoying it with great relish. After touring the workplace for almost three hours, he returned to the CEO’s room for lunch.

The CEO expected Chndrasekhar to say something about the mission he had undertaken in the morning but the discussion seemed to include everything but the topic that was far too dear to the CEO. That after noon Chandrasehkar asked for the services of the CEO’s secretary and dictated a brief note on his findings.

What junior employees wanted their senior to do:

  1. State expectations clearly: Bosses are often vague about what they want and often fore away instructions to juniors without telling them the significance of the task they are being asked to undertake.
  2. Be reasonable; do not expect miracles: Target are set so high that the seniors manage to raise the blood pressure and anxiety levels rather than the enthusiasm to exceed expectations.
  3. Give us decisions with the same speed you want to get results: Avoid creating interruptions to work by delaying decisions making them wait in suspense.
  4. Find the time to ask me how I am doing instead of pouncing on me in the last minute: Managers vanish from the scene indefinitely into meetings only to appear at the last minute and create excessive rework for them.
  5. Do not set me up to fail or knowingly let me down: Sometimes they wonder if the boss is really their friend and would like to see them succeed.
  6. Be honest: If yo do not trust me, say so: some of them believe their bosses merely suffer and tolerate them.
  7. Don’t lie; we are intelligent enough to make out: This is self explanatory and erodes trust completely.
  8. Shoot the messenger: “We are afraid to ‘bell the cat’ because we know we will be shouted at for brining, not creating, the bad news.”
  9. Micromanaging: Sometimes, the boss better leave us to ourselves and not be hanging around waiting anxiously for us to complete the work.

What the senior managers expected the junior employees to do:

  1. Inability to say “No”: Say ‘No’ if you mean NO. Don’t say ‘yes but’
  2. Anxiety to please at all costs: Why do they say yes to everybody creating a lot of confusion?
  3. Over commit and under deliver: Why be shy to admit what yo cannot instead of building an expectation and disappoint at a later stage.
  4. Admit ignorance upfront: No doubts are raised when the instruction is given; all problems come up only when they sit down to execute; why not do some anticipatory thinking?
  5. Withhold resources: Knowing full well they need resources, no one releases surplus and idling resources. People enjoy merely holding onto them.
  6. I don’t know: Please do not pass your half baked opinion freely n every subject.
  7. Allow problems to fester until it blows up: Let the boss find out culture has to go. Please should if there is ‘fire’
  8. Safely stay in the middle: don’t be a middle of the roader and forever feel shy about taking sides.
  9. Over communicate please, rather than holding back: If you do, err on the side of speaking more than not speaking at all.

When Ravichandran read it, he said, “This is fine; how do I implement it ?”

“Whenever bosses and juniors exhibit the right behavior, give them a chocolate. Count the number of wrappers at the end of each month to know how many of the positive behaviors they exhibited.

Measurements help change behavior.

Positive appreciation helps change happen faster.

It is easier to manage technology; the soft side of business is harder to walk on !”


Monday, November 22, 2010

What is our intellectual horse power?

What is our intellectual horse power?

“Do we hire people in this company to think at all?” asked Raghu Parthasarathy who had assumed charge as the Chief Knowledge Officer. Raghu had returned to India after spending over 20 years in the US. He holds several patents and helps companies develop the capacity of the people to innovate and enhance the intellectual capital base.

He was making his observations known to the CEO and the board on why he is compelled to ask that question. He revealed some interesting statistics:

Against the 2.5% of the turnover the company was spending in R&D, it was ‘importing’ knowledge and outsourcing thinking that costed the company nearly 30% of the revenue! In other words for every one rupee spent on commercializing new ideas, the company was spending 12 times that borrowing it from elsewhere. Therefore the company’s ability to think, that he termed ‘intellectual horsepower’ was at mere 8.33% If the company was content to encourage so little thinking and do much shopping for ideas from external sources, why at all hire top flight engineers and MBA’s from Ivy schools at exorbitant starting salaries?

He reeled off examples:

The human resource department does very little thinking or even doing. They outsource everything from climate surveys, Employee satisfaction surveys, recruitment and selection of senior and junior personnel, annual compensation benchmarking, skill assessment for all new positions and even 60% of the training. The cumulative financial load of all these outsourced activities was equivalent to one month’s wage bill for the entire company, 20 crores! The HR department had become a buying agent of HR services. This does not include payroll processing and the HRIS platform under automation.

Marketing itself does very little thinking related to their function. Everything from creative advertising, to consumer research, brand equity assessment needed to be audited, analyzed and reported for market share gain and loss; all these were offloaded on to third party suppliers. All that Marketing did was to arrange them make presentations to the CEO and settle their bills. They gave away almost 30 crores of business in the previous year and felt the spending should go up higher! When will they learn to do these works in house?

The Director of Communication had appointed specialized agencies to bring out the company brochure, design the balance sheet, edit and print he monthly newsletter, convene all promotional events including press meets and the maintenance of the company’s Intranet. That cost another 24 crores; down the drain.

Information processing department outsourced all their data entry work and the related analytics to a specialize agency that is supposedly statistically more literate then us. No single agency within the company was capable of generating any special reports or analysis of our own.

Raghu parthasarathy highlighted the need for the company to institute a policy that will make the ‘import of thinking ‘abilities far more stringent. He went on to categorize knowledge work into five:

  1. Internally developed proprietary know how: Ready made, tried and tested proven application
  2. In house research and analysis: Confidential and tightly managed development program
  3. Fully outsourced projects: Routine and cost effective to get done from the outside
  4. Off the shelf bought out solution: Import ideas if they are it can be developed faster and better buy
  5. Custom designed package development: What is needed to develop it in house?

The first and second should be actively encouraged.

The third and the fourth seriously debated.

The last one actively discouraged; it should either belong to the first two or the next two.

Else it will become prohibitively expensive to maintain and upgrade. .

Unless the estimated 80 crores on outsourced knowledge work is actively tracked and brought down, not only would the company be at a disadvantage, it will also affect the morale of the people who have to look up to outsiders for creative solutions. will that not be counter productive in the longer term?


Saturday, November 13, 2010

To trust or not to trust my deputies

To trust or not to trust my deputies

Coming from Singapore to take over the Indian operations, for Peter Chen gaining trust with people should be the least of the issues. Yet what he took most for granted turned out to be the most challenging for him. He had completed a few rounds of meeting all his deputies and was reasonably pleased with each of them, the spirit of professionalism they demonstrated and the self assured way they carried themselves about the office. It should be a professionally challenging and intellectually stimulating to grow a market that offered so much diversity at such a scale he could never have imagined Singapore to offer. However that was not to be.

Peter’s family could not relocate to India. So the board allowed Peter to be in India Monday through Friday and return to Singapore for weekends. One such weekend, he was surprised to run into one of his deputies in Singapore. He let it pass thinking that people are entitled to their privacy and made no effort to make any connection with her. A few weeks later he received a confidential call from one of his Board members asking Peter if he was aware of the concerned employee being away from the country, as was required by the company policy? She, Meenakshi Khatri had obviously not done so.

Peter approached one of his long time India based Director, Gopalan, and expressed his displeasure at employees not following company rules and setting a poor example of themselves to the rest of the staff. Gopalan thought for a while and suggested that he cannot go by hearsay. Peter must possess an irrevocable evidence; when confronted the employee concerned must have no choice but to realize and own up the default. If they are given an opportunity to explain, it will drag the organization into a loop that they cannot afford to create.

Gopalan knew of an ex Army officer who was reputed for carrying out confidentially checks on the conduct of a sample of the employees and table it to Peter for him to take action. When Peter called up Col Preetam Singh, the head of the surveillance agency, Preetam expressed happiness to undertake provided the company had an explicitly state policy note being put out to all employees on the need for them to observe the code of conduct and obtain their signature on it. As a first step, Peter should give the employees an opportunity to voluntarily disclose any anomalies either they are aware of or are currently engaged in. By getting them to disclose, Peter was fortifying his stand. Peter would be better off forming a sub committee of the board of Directors looking such cases of voluntary disclosure and making a recommendation for the board to approve of. By doing so, Peter would be above board and not get pulled into the political repercussions such decisions are bound to have.

Peter faithfully went by the advice of Col Preetam Singh. Two weeks later, he received a dossier, passed on to him by the subcommittee with their recommendation on the disclosures made by his closest deputies.

Sunil Shah, Manager-Transport and Logistics admitted taking a fee for allotting loads on a priority basis so that the transporters did not have to idle their trucks outside the factory gate. A faster turnaround time for trucks need a premium to be paid to him and his staff. In turn they would ensure that the transporter’s bills were passed with minimum of delays.

Bikash Kalra, Manager distribution accepted that he charged a premium whenever the products were shipped to dealers prior to a price increase. The differential between the new price charged to consumers and the old price at which the goods were shipped would be passed back for a consideration to Bikash.

Deepak Battacharya: The ad agency and printers were mandated to pad up the fees charged on their services in order to accommodate the princely life style maintained by Deepak.

Sunil Srivatsava’s popularity with the dealers stemmed from his arbitrary division of territories and induction of new dealerships for a consideration of course. He was always kept in good humor both ways; existing dealers rewarded him for not further fragmenting their territory while the new ones were fed the hope that their allotment was imminent any time.

Kishore Rajavanshi, made a cut on every real estate deal and government liaison, while Om Prakash Gupta, Head of Procurement and import licensing collected a fee for faster goods inwards and acceptance past the income QA. Raj Sekhar, the Head of HR ran his own private agency for testing candidates and intake of temporary and full time manpower. Meenakshi Khatri handled outbound tours for her ‘friends’,which explained her being spotted in Singapore.

Peter shook his head in disbelief not so much at the recommendations made by the subcommittee on how to deal with them. It was more to do with how naive he was in assuming his deputies to be above board and the image of themselves they revealed to him thorough such a disclosure.

Preetam computed the loss to the company to be of the order of 85 crores apart from the lost productivity, internal politics and a bad reputation for being a value compromising institution. Erosion of share holder value stared Peter in the face. Should he keep them or let go?


Friday, November 5, 2010

How to blend diverse management cultures

Kaz Petrosky was the head of sales. His ancestors came from the Urals in Russia but he is a naturalized US Citizen. He was on deputation to India and ran his sales team like the US Army. His team was disciplined and very sales focused. When they are given a target, they have to go after it like war had ben declared. It did not matter what it cost or who came in the way. You just went ahead until the victory was all yours. They were ethical in what they did but were mercenary like. They believed that rules were meant to be broken and relations bent at will to get the job done. They were all very focused, sure of their financial figures and up to date in the facts that mattered. Speed and surprise were the name of the game and the sold like it was an extreme adventure sport. They worked alike a great team, consulted each other, partied together and went about their work and life in a no nonsense and business like. Kaz was very proud of his team; he rewarded them well when they delivered the results. As long as they met their goals, Kaz was completely hands of and gave them full freedom.

Louis Camino, headed manufacturing. He was a quint essential European of Spanish origin. Very soft spoken and always well dress in his three piece suit, he was meticulous about meeting, reports, schedules and protocols. Every activity was planned well in advance and life happened like clock work, all on time per scheduled time. He was focused and time conscious; met people only by appointment and went about his work in an unhurried and purposeful way. He too hated surprises and relied upon methodical working, detailed documentation and maintained a factual historical record of everything as if someday he may be required to reexamine the history of how he functioned. The team in manufacturing adopted his work style.

Hitoshi Kobuse, is a quintessential Japanese. As the Head for customer Service,work is religion for him. Accordingly he cultivated a team oriented work culture where everybody was equal. He believed in keeping his team fully knowledgeable on all the products technically that required every one of them to attend training programs regularly, make intensive research and present proposals for simplifying work and generate savings. He rewarded people’s effort to publicly announce and track the incidence levels of problems and recognized their efforts at problem solving. He made hero’s out of anyone that recovered a lost or annoyed customer. He never behaved like a boss, he was a coach.

Ravindranath is a profit conscious and bottom line oriented Purchase manager. He was relentless in negotiating opportunities for waste avoidance and cost reduction. There was a popular joke in the office where a beggar took pity and donated his days collections of coins after meeting Ravindranath! He had cultivated a solid reputation for demanding justification for every paisa invested. His motto was: if you do not survive the short term, there is no long term. So, focus on managing profits at any cost; even if it meant overcommitment because people have short memories anyway.

The CEO was perplexed by the sheer contrast in the styles of the four key managers at work and wondered if he can get them to subscribe to a common work culture. We must value diversity, no doubt; but wonder what is may be costing the company?


Friday, October 29, 2010

Who will stop the buck

Karthikeyan topped the Business School upon graduation this July. He joined the world of business directly from campus with no prior experience. Many of his batch-mates had been assigned to functional departments like production, procurement, finance, marketing and so on. He was singled out to work directly with the CEO as an Executive assistant. Karthikeyan had heard that an assignment with the CEO’s office meant being used up in all ways possible with nothing concrete to show by way of his own achievement; his career growth could be at risk. Karthikeyan aired his concern to the CEO in private at an informal dinner convened for the fresh batch of incoming MBA’s by the CEO at his home.

Much to his surprise, the CEO welcomed Karthikeyan’s candid confession of anxiety and his keenness to prove himself. Expressing great confidence in Karthikeyan’s judgement, the CEO sought his help in establishing top management accountability. Karthikeyan could not believe that the CEO, of all the people, could have difficulty enforcing accountability with the top management. Equally surprising was that the top management, who should themselves be anything but accountable, being otherwise.

Problem: The company had been consistently missing to meet the monthly profit projections to the board. The shortfall had been at 50% of estimates for the last six months. If every department was doing what they had committed to do, as they claimed to, why should there be any gap? Since no one came forward to clarify, the buck eventually stopped at the desk of the CEO. Can karthikeyan investigate and report to the CEO in complete confidence?

Karthikeyan’s confidential note to the CEO:

After due study, Karthikeyan proposed an objective examination of the following six factors that could possibly contribute directly to the shortfall in profits:

Budgeting: The severity of assumptions made in the plans varied with the actuals by a large margin. Likewise the unplanned investments and expense overruns had no way of being flagged off in advance and approved before incurring them. Even though the policies provided for it to be ventilated in advance as a risk, such a practice is non existent. The CEO may like to call for monthly alerts before according approval for spend. How does he propose dealing with the defaulters?

Investments: Several projects seem to have been started but only a third of them had got off the ground. Some were false starts, while many others were either closed prematurely or left hanging midway because of unresolved disputes. Some projects were declared successful although they were still to secure the completion certificate from the clients. Does the CEO get reports on these?

Revenue capture: Poor quality of order intake, unrealistic delivery commitments and acceptance of penalties for non delivery were not made public as potential risks. In addition, delayed and error prone invoicing did not make any provisions for delays in recovery due to the rework and excessive follow up effort required to mobilize collections. Would the CEO like to call for comments?

Cost management: While the budgets where signed off for a specified number of discretely identified heads of expenditure, new heads of expenses had been included without any reason for them to be created in first. Besides a number of surprise entires of out-of-budget items, there was also considerable delays in the booking of expenses. Did the company have norms on revenue recognition and closure of accounts on time?

MIS: While the HRIS was maintained at 99.5% level of up-to-dateness and accuracy, for all the heads of business information it was at a mere 65%. The Information Management policy is silent on the standard of quality of information reported and accepted. The confidence level of decisions arising out of poor quality and out dated data is a deeper question for the top management team to examine..

Culture: Noting the gaps and anomalies between what was happening and what was meant to happen, Karthikeyan was pained by the functioning styles of the each of the individuals. They varied so widely that several questions had not been answered to his satisfaction by many of the seniors. Karthikeyan confessed at mistakenly assuming his seniors to be sympathetic to his lack of industry experience and expecting them to guide him resolve the problem. Instead they not only were unsympathetic towards his challenges at work but were equally dismissive of the importance of his assignment to the company’s future, merely testing his wits in the process.

How could an organization remain young in thinking and become adept at learning if the top management acted so difficult. If people were made to struggle to get to the facts and teased for asking elementary but significant questions, how will the CEO earn the trust of the board and the shareholders.

Young MBA’s will soon lose their enthusiasm and play safe, quite like their bosses?

Who then will have the enthusiasm to question and stop the buck?


Friday, October 22, 2010

Top management on the ‘bench’

Vinod Nagpal had been invited to serve on the board as an independent director of a large corporation. After the incidence of Satyam, where several highly qualified professionals needlessly sacrificed their good will and reputation, he decided not risk it. After considerable pressure and persuasion from one of his friends from the board of another financial institutions, he allowed his name to be referred to the current company. The first few meetings passed off peacefully to make him wonder if such a position of directorship was even essential. Nevertheless, he decided to serve his term and exit peacefully.

Almost by accident, he was approached by one of his friends for help. This friend in particular wanted Vinod’s help in stopping the transfer of his middle aged son in law employed with the company whose board he was a member of. Reluctantly, Vinod spoke to the Chairman and sure enough he was promised it would be looked into.

A few days later, the HR Head sought a personal meeting with Vinod. As they began talking, Vinod discovered a unique challenge the HR head was facing. Almost the top 200 senior people in the company rarely ever went through any performance appraisal. They merely lingered on year after year without any pressure on them to deliver any results. most of them were in their mid forties and the retirement age was 58. So they had a 10 to 15 years ahead of them before retirement that had to be spent meaningfully.

At this age, they felt they were beyond training and rarely needed any need to stay professionally in shape. They were all socially well connected that moving them out of their current roles was too disturbing a thought to consider. Insecurity from exposure of non performance and complacency with whatever they were habituated to delivering was the accepted norm. In this context, appraisal of performance was either a total farce or an unnecessary ritual. Vinod recognized that the move to block the transfer of his friends’ son in law qualified itself along similar lines of reasoning.

Vinod was visibly disturbed. He would not like to be a party to such an unprofessional practice. Asking the HR head to drop the request would have been the easiest to do. His conscience was ill at ease. He felt compelled to get the organization to face up to the need to address the real issue of declining levels of performance, contributed largely by an inactive top management layer. If there is one irrepressible problem with Vinod, it is this: he cannot sit still. He tends to look around and has this uncanny gift for picking up something that sticks out oddly enough that no one would dare to question. The more elusive the subject, the more determined Vinod would get to dig deeper. Since the performance of the company has been a persistent worry lately, he persisted in getting to know more. The HR head, unaware of the implications ahead, was only too eager to supply the information needed.

He discovered that there was a sophisticated equivalent of the ‘bench’ that is often created as a temporary berthing space for people at junior levels. Bench is where they wait for assignments between short term projects. While they have no assignments to work on, they may attend to anything that catches their fancy. They will however continue to receive all their entitlements; if is not their fault if there is no work found for them by their employer.

The practice of ‘bench’ for senior management, he noticed, carries a fancier description. For example, Seventeen people were on leave preparatory to transfer. Twenty one were awaiting order for deputation elsewhere. Four awaited a promotion, although these positions were to be approved by the board. Seven cases were termed OSD, Officer on special Duty. Fourteen were on ‘sabbatical’ and eleven were sent on an indefinite study mission abroad. One served as an alternate to Ombudsman while three more headed some sub committees and enquiry commissions. A three member team scrutinized the affairs of the Charity fund they managed. Vinod shook his head in disbelief. They totaled up to Eighty one positions!

If anyone wanted evidence for choking the future of bright young minds, this was enough! ‘Bottleneck at the top’ suppressed the opportunities for the youthfully intelligent workforce; no wonder they were disengaged and were attritting at the first opportunity. Experience measured in years was being mistaken for expertise.

Vinod looked up at the HR Head and wondered what he should do with this insight he had just now picked up.

He asked the HR Head to make a note at his request to the CEO asking for the need for all these positions to be examined, justified and put up to the board for approval. These eighty one positions added no value but cost the company Rupees forty Crores that would go to the profit line every year. Not a bad start for his first experience as an independent director on the board he felt!


Friday, October 15, 2010

Overstaffed and underutilized

Ramarao Patil is feared and respected most for his very deliberate approach to cracking any business problem. Unlike many of his other Vice Presidents in the company, he is neither flamboyant nor speaks an extra word. He is cautious about what he has to say. When he speaks, there is a note of finality that, eliminates a request for anything to be to be repeated twice or ignored.

The business was growing no doubt, but not exactly booming enough to merit a celebration. The issue in question was: the HR manager had put up a budget for 15% increase in wage bill towards promotion and increment. Many of his peers also wanted the HR manager to push it through so that they can ‘please’ their subordinates. There was a popular perception that people stayed back for money; if increments are substantially higher than earlier times, it will contain the levels of attrition as well.

Ramarao was simply shocked to learn about the proposal to increase the wage bill by 15%. The business had not grown so substantially to merit such a raise, he reasoned to himself. He unilaterally endorsed the principle of recognizing and rewarding the deserving people; but such people were a minority and did not account for more than a mere 10%. The balance 90% of the workforce, regardless of the levels of inflation or market pressure, definitely did not make a strong case for a 15% raise. Anyway, he decided to keep his reservations to himself. He expected a better sense of judgement to prevail upon the minds of the HR head, the CEO and the Board of directors. Should an occasion arise, he decided to table some facts that should help them reconsider the budget.

Just as predicted, the HR head convened a special meeting, chaired by the CEO and the CFO seeking an approval for the request for the increment budget to be approved. Everybody around the table stayed silent, hoping that the meeting will pass off peacefully without any protest so that they can return to their departments and pass on the cheerful news. Predictably, Ramarao broke the silence and challenged the HR head to justify his request.

“ The mood around the table suggests that I too join everyone round the table and let the proposal go ahead. I wish I could. I am not a HR professional. Yet, I am troubled by a few aspects that this committee should consider before according it the final approval.” Turning his attention to the HR head, “Sir, can you help me understand a few realities we have”?

  1. The salary bill for the company rides at 70% of the revenue, while for Infosys it is only 48%. These are the published figures from their balance sheet. It is therefore a fact that we are paying 22% more wages than the Industry leader. To raise the wage by another 15% on top of that would mean growing the gap with the industry leader to 25.3%. Should our endeavor be to reduce the gap or widen it?
  2. We have 400 managers and supervisors managing 2000 employees. That means we have one manger for every 5 workmen; the corresponding number for competition is 15. If we were to apply the ratio of one of supervisor for every 15 employees, we should have only 135 managers on our rolls; we have 265 managers in excess. What does it mean? Our supervisors are only 33% as productive as their counterparts in the best companies. Alternatively, the quality of our workforce is so poor that it needs three times more supervision. I am not asking for retrenchment; I want our team to address the pressing need for us to increase not the number of supervisors but the managerial productivity of the supervisory personnel.
  3. The 400 supervisors and mangers are stacked one upon the other in 11 layers of titles and subtitles. The competition has only 5 layers from the Chairman downwards to the level of trainees. Do these inflated titles and twice many layers give people the empowerment necessary to generate four times the productivity levels of our industry leader? We earn a mere US$ 3000 as profit per employee against their US$ 12,000 annually.
  4. Finally, we must dispense with this illusion that seniority should reflect the quantum increase in salary levels. Is each level made out to be distinctive enough to differentiate itself by competency levels and justify the wage bracket it is assigned?

I wish I could support everybody but I cannot. If all the profits earned are paid away as wages to employees, I am sure the CEO and the CFO will have to find additional ways of funding for depreciation, dividends to shareholders, money for launching new products, opening up markets and undertaking research & development. Kindly rethink this proposal from the standpoint of shareholders; after all, as senior managers, we also need to earn a dividend on the stock options we hold. Is a wage increase is really affordable and necessary? Please reconsider. Thank you.”


Friday, October 8, 2010

Communication gap

Rohit Pasricha, the CEO was surprised at the question posed by a fellow traveller sitting next to him on the flight from Seattle to New York. “When was the last time you asked a customer how easy it was to get through to your company?”

“ It never crossed my mind to do so. Why would you ask, I am curious to know,” replied Rohit almost defensively.

“Hi, I am Prasanth Jajodia, and I do angel investing. I was recently approached to finance a company that aims to enhance productivity in organizations in a highly innovative way. I was challenged by this team of youngsters who told me that most CEO’s don’t know how their people come across to their customers. If only the CEO’s focused upon improving the quality of interaction their staff have with their customers, they can gain substantially. Looks like they are right!”.

Rohit was very curious to know more. He waited till the cabin services were over when he asked Prasanth if he could know some more about what the youngsters had found.

“ I am not canvassing for their business. I can get them to talk to you provided you see value in what they have to say. I do not want to waste their time and yours. Not everyone likes to hear what they do not want to hear. Yet, in this case, I believe it may benefit you to hear what they have to say.

Unable to contain his curiosity, Rohit persisted, “ Just give me a hint of what they are talking about”.

“ I do not recall the full details”, continued Prasanth,” but here is a flavor of the communication gaps afflicting large corporations that their CEO’s haven't got the faintest clues about ”.

  1. Punctuality: How many of your staff are ready at the appointed time in their seats ready to go live on time with their customers? Do you know how annoying it can be to be kept waiting? How long do you think customers are put on hold before they hang up frustrated?
  2. Homework: How many of your people, in spite of knowing who they are talking to, are clueless about the status of relationship the customer enjoys with company and what unfulfilled needs she may have?
  3. Market orientation: Most customers who seek to be informed about the future, feel disappointed when the ‘experts’ on phone are so poorly prepared and ill informed about the future. Is the company being run by amateurs, they wonder!
  4. Handling questions: When customers ask a question, they expect a straightforward, ‘black or white’ answer. When the answers are evasive or vague, customers lose trust.
  5. Empowerment: To how many questions from customers will your staff say “I will have to check with my superiors and revert”. And how many of them will revert, if at all, without the customers having to remind them?
  6. Attention to detail: It is so annoying for the customers when the staff at the other end of the phone state the obvious and refuse to get to the bottom of the issue and resolve them
  7. Commitment to revert on queries, complaints and suggestions rarely follows a standard turnaround time commitment. The customers feel tired enforcing a deadline on the staff unilaterally.
  8. Ability to say ‘NO please’ politely and firmly. Most customer refuse to get pleased when your staff try to please them. When, they wonder, will people openly say what they will be unable to do, so that the customers can stop asking and go elsewhere.

Rohit wondered what he should do with this insight he had just now picked up. Guess what he did upon landing?


Saturday, October 2, 2010

Gardener & the guardian

It was time for getting away from the B School for summer internship. Students got busy with getting their bio-data readied and prepare themselves for Group discussion and personal interviews. If they did a good job during their internship, they may look forward to getting placed in the organization.

Raju Dayani was however not worried because he had his family business to get back to. Still he was asked to find out the nature of his summer project and notify his professor about his area of focus. At first Raju thought he will fabricate something and pass it on to the Professor. On second thoughts, he thought of calling up his Grandfather and asking him to assign a project. He was surprised to hear what his grandfather came up with. He was assigned a project code named ‘Project Green’ that required him to supervise the staff employed by the company to maintain the garden estate surrounding the office premises. Raju was disappointed that while his friends were doing advanced work of market research, business simulation and financial modeling, his genius should be spurned away attending to farm labor.

Raju has always been deferential towards his grandfather and trusted his judgment. Although his grandfather had started his family business of assembling home made Air conditioners just after he passing out of school. He never had the money or the time to attend college. Singlehandedly, he had built up the business from scratch that his father managed now. So why would the Grandfather think of this project for him? Raju chose to talk to him after dinner; being an early riser, his grandfather would retire to bed early, saving him the time. Else, the old man may take the whole morning to explain his rationale for the chosen project.

Me: “ Dadaji, I was wondering if we could talk about the summer job you wanted me to take up,” I asked.

GF: “ Ok, we can talk. What do you want to do “

Me: “ I wanted to do something more substantive involving thinking and financials. Supervising the staff assigned for upkeep of the greenery around me was not going to help me any way. how will I use anything of what I learnt at MBA?”

GF:“Why, what is wrong with it?”

ME: “ My work has to be evaluated and graded for creativity and distinctiveness. This project will give me no scope for that. Honestly, I do not know how my contribution will make any difference to the balance sheet.”

GF: “ There is a lot you can learn from the project work if you are open minded. Let me share with you what they do not teach you in your MBA. did they ever tell you why every organization is like a tree? The very word ‘organization’ comes from the word ‘Organism.’ An organism is anything that has life, grows and bears fruits. You sow seeds, it blooms, flowers and bears the fruits for us to eat. To have good fruits, you need strong roots. Strengthening the roots is the job of the gardener. You will have to provide timely nourishment and ensure that you do not allow the weeds eating away the food supplements.

Do they teach you in MBA where the roots of the organization are? Do they tell you how to distinguish between the seeds and the weeds? Do you get trained on the contents of the nourishment needed to strengthen the organizational roots?

Upon your return from your college with an MBA degree in hand, you will have to work with people only, not the balance sheet. I am not expecting you to keep my books or advise me on how to make more profits. I have enough people already hired to do that. What I need is a HR manager who will be the gardener and the guardian for the people we employ. They are the lifeline of the company. It is the most important function and that is why I want you to earn their respect this summer.

Once you earn their good will, automatically, I can turn the more operational side of the business over to you. Do you think this is not important enough?”

Me: “ Dadaji, you have really thought through this assignment of mine. I will convey this perspective of yours with my guide and ask him to decide upon the criteria for evaluation. Good night.”

Raju returned back to his college to surprise his classmates with the interesting analogy drawn by his grandfather between the organization and the tree.


Tuesday, September 28, 2010

Why be honest when it is inconvenient to be so?

Peter Kolaco is a tough no no-nonsense CEO of a National Insurance company in the US. He knew his subject well and treated all his employees, suppliers and stakeholders with great respect. He is always empathetic to wards his people because he knew he demanded a lot more from them than what they were capable of. That is why he rewarded them at a 20% premium over the others in the market place.

Yet, if there was one thing that annoyed him most, it was this. He hated nasty surprises. Especially so after sufficient opportunity is given to people to clarify issues in advance, air their difficulties and renegotiate the commitments they make to him. If ignorance was thoroughly unpardonable, dishonesty was totally unacceptable.

He learnt that the Indian Software supplier had failed to keep his delivery commitments for one more time. He had served them an ultimatum, very politely but firmly though, at the last meeting with the Indian CEO, Mr. Kedlaya. He just then called up Mr. Kedlaya and told him that the contract for the project stood terminated. He had consulted his lawyers who found enough grounds for breach of contract and non fulfillment of the terms of the agreement. Regrettably, he will have to turn the matters over to his attorneys to serve the notice the following week.

Kedlaya convened an emergency meeting immediately. He was fuming at his executives that he had not been kept informed about the displeasure of Peter well in advance. The adverse publicity generated by the legal notice will go around the industry making it harder for them to book more business. After a lot of deliberations, he was informed that the project delivery team had shipped the product in spite of the Quality Assurance team not approving of the despatch.

Kedlaya appealed to Martin Bird, the newly hired Director of Quality Assurance, to call up Peter and somehow placate him to hold off his ultimatum for now. Peter, an Irish National was fanatical about Quality and enjoyed the highest reputation in the industry for enforcing the most stringent standards of commitment to quality. Peter knew about Martin’s unimpeachable track record; after listening to Martin patiently, Peter elected to wait for 48 hours by when the “promised miracles must happen” he said.

Martin lost no time. He studied the various weekly progress reports thoroughly and concluded his investigations within an hour. Promptly, Martin convened an emergency meeting of the CEO and the sales team. “ We all know about the gravity of the issue here. I will get to the point straight. Peter is right. Whoever gave them the wrong commitment needs to step forward and repair the situation or face the consequences.

As you all very well know, the Quality Policy is very clear. Ms Kamala, the QA officer was perfectly justified in holding back the shipment. She did her job. I want you all to appreciate her for her diligent efforts to do her job to the highest standards we expect of QA staff. The team round the table applauded her after which she excused herself. The project director felt let down and protested that if QA is given a free hand to stop shipments, he would find it very hard to show profits.

Kedlaya concluded, “We cannot undermine Quality. That is why we have brought in a person like Martin with a fine reputation. His decision will be final and binding on all of us. We must appreciate that this is the last straw. Either we produce quality or face the consequences from high profile clients like Peter. Time is running out. I trust Martin’s judgment and will empower him to take appropriate measures.” Returning to his desk, Kedlaya called in the CFO and asked him to brief Martin informally on how he can avoid the inconvenience of the company by adopting a more ‘practical view.’

Martin chuckled to himself at the diplomatic doublespeak and the convenience with which Kedlaya tried to escape from his commitments made to the client. He also noted the tacit support Kedlaya extended to the project team when Martin, as a Director, was obliquely advised to take a more balanced view. Implicitly, the pressure of commercial considerations were being cleverly passed on to the Director Quality. He felt it was his moral duty to remind the CEO of his role in the matter. He was in no dilemma as he walked out into the cool December night of Chennai, after dictating a note to the board for approval.

Guess the message Martin would have put out to the board invoking the CEO’s responsibility for Quality?