Saturday, June 19, 2010

The factories of hidden waste that the awards failed to ventilate

Sunil Kumar Awasty, the CEO of the 100 Million $ public limited IT company was on the look out for a smart MBA to handle a very sensitive portfolio of managing press publicity and investor relations. Given the level of influence Balakrishnan Senior had as a board member, Sunil looked at the resume of Ramesh Balakrishnan, his only son, and decided to award the position to Ramesh. Ramesh having just then completed his MBA in the US, found a ready job in India too tempting to let go of and promptly assumed charge.

Ramesh took to the assignment with great enthusiasm. This job gave him a sweeping view of the operations of the entire company. In addition it gave him the much needed visibility with very well informed and forward thinking community of bankers, press and investment advisors. It was intellectually stimulating and financially rewarding as well.

Sunil, feeling he was not getting full value out of his investment in a US educated MBA, wanted Ramesh to design a media event that ventilated the unique achievement of their company. He asked Ramesh to consolidate all the relevant information about the various awards and citations they had won over the last ten years into a dossier. By projecting the company’s achievements as a highly distinguished and qualified practitioner of scientific management to the investors, they could improve the valuation of the company by several folds.

Unimpressed, when Ramesh continued to watch, Sunil pointed to the various audit certificates adorning the walls issued by bodies worldwide:

  • ISO 9000 and 14000. They are getting ready to be certified on ISO 22000 on CSR next
  • 300 people are certified as black belts; another 200 of the 8000 employees pursuing lean six sigma certification
  • They are challenging the MAKE award ( Most Admired Knowledgeable Enterprise)- next only to Infosys
  • They have been certified at Level 5 on CMMi thrice and PCMM twice by the Software Engineering Institute, USA
  • Their ERP is almost installed and fully automated

Sunil exhorted Ramesh to cheer up and appreciate the heritage that was going unnoticed and unappreciated. Could Ramesh consider the sterling opportunity his role offered him to educate the share holders about the virtues of the company they had invested in ? Could he get them to appreciate the value of the management practices that had stood an independent examination from so many bodies of international repute?

That night, at the dinner table, Balakrishnan Senior found a pensive and taciturn Ramesh. Something was definitely eating away Ramesh from the inside, felt he.

“Can I be of any help?” asked Balakrishnan Senior.

“ Dad, how do you refuse politely to do something to a CEO when you are sure he is headed up the wrong direction?”.

That shook up the father.

“Why do you ask? I have known Sunil Awasty for twenty years and he is a thorough professional ? He would never dream of asking you to do anything that was unacceptable. What has come over now?”

Ramesh continued. “ Sunil knows very well that our financials are so stretched every month that unless we bill for a clear 21 days of work every month, we are unsure of meeting even the monthly payroll. We had engaged a young team of Business analysts to trace the way our investments in cash go through various departments to generate cash and bring it back into the system. They not only traced the leakage at every step of the chain but also found out that it takes us 270 days to bring back a Rupee we invested. In other words, ( pointing to the illustration below) when you put in Rs 100 into the system, you get merely 70 rupees back because there is a leakage of 5% at every point it crosses the departments.”

Resources Invested

Talent Used up

Decision Quality

Supplier Quality

Product Quality

Quality of access to Market

Quality of Customer care

Quality of Financial prudence

















“ Tell me dad. You are on the board of this company. Where should Sunil Awasty focus his attention? Should be stop the ‘factories of waste’ he is overlooking or humor the shareholders about the colorful certificates he has managed to get from the world, over blowing up a fortune of shareholder’s money? Do we have a reason to celebrate at all?”

Balakrishnan Senior was perplexed about the situation but felt very proud of him.

Ramesh had inadvertently, but brilliantly, pointed out the failure of the CFO and the audit committee to alert the board to a potential business risk. He encouraged Ramesh to persist with his idea and resolved to precipitate the subject at the next board meeting.

Sunday, June 13, 2010

Retrospective commentary: Satwinder's predicament

Satwinder discovered that, regardless of seniority, if there was one common failing across the organization it was this: everybody knew about the problem but no one had the courage to ventilate it. Why? Fear of rejection or getting shot. When he learnt about the farewell party being organized on the eve of retirement of one of the senior directors, he slipped in a management skit that told the tale and no one could be blamed. Shakespeare was right: Many a truth is spoken half in jest!

Thursday, June 10, 2010

Knowing that we lose money, do we really want to know why?

This company, undertook turnkey projects globally and had sizable order books to last another 5 years. The board took a serious notice of the alarming rate of increase in the instances of customer complaints, legal suits on performance shortfalls and cancellation of orders. It was clear that competition from Chinese, Taiwanese and Korean companies was getting intense; they had acquired a reputation for undertaking larger projects lower costs and shorter delivery cycles. In a few cases, the Scandinavian companies were given the job of designing, which was more profitable and prestigious, reducing the role of the Indian company to being a mere labor supplier and site supervisor. The CEO was advised by the board to infuse fresh blood into the company to arrest the decline and present a clear strategy to regain their market share.

Satwinder Narang, one of the management trainees, vividly recalled the welcome address of the CEO during their induction program. Taking a great deal of pride in ‘his’ team, the CEO had proclaimed, “Everybody in my company works very hard. We have reached this far because of the untiring efforts of the workers and senior management. While extending a warm welcome to our ‘associates’ drawn afresh from colleges, I would urge you all to emulate the culture of dedication and transparency instilled by your seniors.” The meetings ended with a customary vote of thanks being proposed by one of the inmates of the incoming batch of fresh employees.

Soon thereafter, Satwinder was assigned the task of identifying the scope for making additional profits and containing the room for possible leakage of profits leading to losses. After having toured the various departments he had been assigned to study, it was time for him to turn in his report. A sample of 25 out of the 100 plus projects that he had studied showed that any project could potentially lose money under six headings.

All trainees, like him, were due to be assessed for their aptitudes by an assessment board that included the CEO. Candidates that came up with directly actionable findings will be given independent charge of managing the projects and posted overseas.

While the prospects for professional visibility and faster career growth were a distinct possibility, there was considerable anxiety about the level of readiness and receptivity of the top management to the somewhat ‘brutal’ findings the project report contained. Was the management really serious about knowing the shortcomings and doing something about the business?

When Satwinder alluded to virtues of openness that the CEO mentioned during the induction program, the seniors merely chuckled in discreet silence and persuaded him to exercise discretion. Satwinder became even more uneasy when he consulted his seniors. His HR guide encouraged him to be bold but advised him to verify the numbers and the logic so that his report could not be dismissed as the work of an amateur. On the contrary, his mentor, drawn from the business stream however, cautioned Satwinder on the need to contain his enthusiasm lest he be perceived as being a nit picker and an upstart.

Should he play safe or be bold and feel sorry?

Was there a danger of ruining one’s career prospects by tabling facts that may not be of very sympathetic towards the top management? How to know and whom to ask for advice, wondered Satwinder?

Saturday, June 5, 2010

Manage by Fact

Dennis Brown loved Indians for their spontaneous grasp of situations and ease of working with numbers. The decision to move their business involving business intelligence to India, in preference to Singapore or manila therefore required no debate. Given the generous advantage Indians had in communicating in English, managing a team of 200 odd researchers, he assumed, should be a piece of cake. In addition, the Tropical Sun, Golf at Deccan gymkhana and the salubrious weather in the evenings at Pune provided a refreshing departure from the headquarters at Boston, MA. Cheerfully, Dennis assumed charge as the Director for India Operations of their newly acquired establishment engaged in consumer research.

At the end of the first month of his stint in India, he invited the senior management team for a business review. The purpose of the review was twofold: to ‘take stock’ of how the month went and to arrive at a realistic projections about the business ahead.

Dennis was blissfully unaware of what he had let himself into. The Sales director presented his sales funnel making some projections about the order book that bore no resemblance to the estimates made in the three previous months. With revenue projections slipping inexplicably, confidence was not very high. On time delivery of research reports was yet another matter of deep concern; the research head was unable to make any firm commitments to Sales since he was unhappy with the quality of staff hired by the HR head. Quick to respond, the HR head bemoaned the fact that the Research team never used up even 60% of their workforce effectively; when employees were not fully engaged at work, they brought down the overall enthusiasm for work. Watching the proceedings in silence, the CFO felt it was his duty to inform the group that only 40% of the projected cash flow was realizable. He attributed the reasons to poor collections, free offers, undisclosed credit notes and undisclosed risk for which adequate risk cover had not been provided yet.

Dennis cleared his throat, a signal for everyone else to shut up and listen.

“For a company that provides high quality research to its clients, it is an irony that the quality of our own information on the state of business is fraught with so much speculation. We cannot have a business meeting if the credibility of the data presented is so low. This must stop. Here is what I propose.

    • In god we trust. Rest must have data.
    • Before anyone presents any data on the business relating to their performance, they should be doubly sure of the facts they present.
    • I have no time or patience for people using the meeting time to do reconciliation work because it shakes my confidence.
    • When I do not trust numbers, I lose my confidence in the people responsible for those numbers. Since I would like to have a team I can trust 100% I am instituting a discipline of ‘Manage By Fact’.
    • I want each one of you to present your performance trend in One page like I have shown across. I will work with each of you in developing this page.

We will meet again as a team next week to get familiar with the contents presented by the other. Thereafter, we will let the reports speak for themselves. It does not matter to me if you have not made your numbers; if we have to start fabricating numbers to look good in meetings, we won’t be in the business for very long anyway. I hope to see you next week”