Ultimate Mantras of Management Success


It was the BEST OF TIMES, it was the worst of times”-- Charles Dicken’s description in A Tale of Two Cities perhaps best describes the scenario facing Indian Companies today. On the one hand, unprecedented growth in the Indian economy has led companies to post record revenue and profits. On the other hand, the spectre of a world recession threatens to play spoilsport.

At Earnst & Young, we have been studying corporate performance over many years. Our research tells us that while business goes through cycles of boom and bust, some companies are successful in riding the boom periods and defying the period of bust. These companies consistently outperform the market and deliver superior results on an ongoing basis. These successful companies cut across industries, have disparate backgrounds, some are mature and established, and others are newer and younger.

These companies are more successful because of the quality of their management processes. As we conducted a study of India’s best managed companies, our aim was to identify what is it that makes one company better managed than another and what are the leading practices that India’s best companies adopt to outperform industry and competitors.

Our survey revealed several common threads that run through India’s best managed companies. We summarized these as “10 mantras” of management success. Many companies focus on one or some of these mantras, but when practiced together, these mantras churn out a “best managed” company.

Mantra #1: Be audacious in your vision

Sam Walton once famously said, “Capital isn’t scarce: vision is.” However, looking at the best managed companies of this year, there seems to be no dearth of vision. In fact, these companies have displayed a boldness of vision that was quite unimaginable for Indian companies a decade ago. If one were to select the leading beacon for its vision, it would undoubtedly be Tata Motors. Who would have thought that a company, which started making passenger cars barely a decade ago, could even think of making the world’s least expensive car, and that too half the price of the cheapest car available in the market. But this should not come as a surprise. Over the past few years, Tata Motors has time and again set out to achieve targets that skeptics have proclaimed to be unattainable. But every time it has delivered on these promises—be it in Indica or the Ace.

ITC is another interesting case in point. A strong vision not only helped it recover from not-so-successful forays into finance, trading and real estate but also galvanized the company to brace for a new round of Growth. It sets itself an ambitious target to become India’s biggest FMCG Company and then went on to launch a product blitzkrieg, unleashing a new product in the Indian market every quarter. Today, after successful competing against the FMCG majors in the foods arena, ITC is entering the highly-competitive personal care market with a new-found confidence. This new approach of Indian industry is perhaps best summed up in Ratan Tata’s modest words: “We rescaled our thinking in term of growth and cajoled our business to make this happen.”

Mantra#2 : Focus on what you know Best

In a rapidly expanding economy like India’s, diversification into unrelated but high growth sectors becomes a tempting proposition for companies. However, if one looks at the best managed companies, they have largely achieved growth by leveraging their value chain inter-relationships or through geographical expansion. The classic example of growth through backward integration is Reliance Industries. Starting with textile in the late ‘70s, Reliance pursued a strategy of backward vertical integration in polyester, fiber intermediates, plastics, petrochemicals, petroleum refining and oil and gas exploration and production—to be fully integrated along the materials and energy value chain, while also emerging as a leader in each of the industries it entered.

On the other hand, a remarkable case of sharpening focus through divestiture is L&T. In 2003, L&T’s cement business accounted for more than a quarter of L&T’s turnover, but it was still proving to b a drain on resources that could otherwise have gone into growing the core businesses. As L&T’s top boss A.M.Naik says: “It was only because of cement that the company’s financial parameters were depressed. L&T could have grown much faster without the cement business.” Finally in 2004, L&T bit the bullet and divested its cement business and decided to focus on engineering. The success of the measure was evident in the financial results of that year when, despite the divestment, the company’s revenues saw a minor dip and the profits actually grew by 23%.

Mantra#3: Trim flab to achieve operational excellence

For the best managed companies, cost efficiency is more than a source of competitive advantage. This has pervaded the companies’ philosophy to become an ongoing exercise. Innovative solutions are helping the best managed companies reduce costs without compromising on quality. Though a blend of backward integration, competitive sourcing strategies and efficient systems, these companies have managed to significantly rein in costs.

The best managed company in the material sector, Grasim Industries, is the lowest cost producer of viscose staple fiber in the world. According to the management, the company is the most-integrated fiber producer, with the chain stretching right from forest to pulp to fiber to yarn. Almost all the intermediate inputs are captive. Besides, Grasim’s in-house engineering division enables the company to grow in the most cost-effective way. Other winning companies are also undertaking several initiatives to trim the flab.

Tata Motor’s landmark exercise conducted in the wake of a Rs 500 crore loss in 2001 helped it return to the “black” and gave it the confidence to produce the world’s cheapest car. Tata Steel has long maintained its position as one of the lowest-cost producers of steel in the world.ITC’s e-Choupal initiative has revolutionized the agricultural supply chain, creating value not only for the company but also for the farmers.

In an increasingly globalize playing field, operational excellence, as the best managed companies illustrates, has become a necessity. Cost efficiencies are instrumental in helping these companies defend their turfs from foreign players. More importantly, these companies are now taking the war abroad by effectively wielding the cost advantage to emerge as a serious threat to global incumbents.

Mantra#4: Good governance makes business sense

Corporate Governance has become a priority for a world recovering from the shocks of scandals such as those as Enron and WorldCom. In India itself, Clause 49 of the listing agreement, which contains the corporate governance requirements, has been revised at least four times in six years. Most Indian companies have been struggling to comply with the mandatory requirements of this clause. However, we noted that the winning companies go much beyond what is mandated by the law. All but one of these companies has a documented Corporate Governance Policy and a
Whistleblower policy. Most of these companies provide formal training to their Directors and have instituted mechanisms to track the performance of their Boards.

The Tata Group stands out as leading practitioner of good Governance. It claims that adherence to ethical business conduct is rooted in the vision of its founder, Jamsetji Tata, for whom the ‘end’ of entrepreneurial triumph was always secondary to the means’ by which it was achieved. It is this very reputation for honesty and integrity that has helped the Tata Group immensely in its bid to grow internationally. This was reflected at the time of the corus acquisition; when Jim Leng, the Chairman of Corus, went on to call Tata the right partner at the right time for Corus shareholders and employees alike.

Mantra#5: Develop leaders from within

A common feature across the best managed companies is that their leaders have grown from within. A.M.Naik started his career as a Junior Engineer with L&T in year 1965. Y.C. Deveshwar, the CEO of ITC, began his career as a management trainee in the company in 1968. K.M Sheth joined Great Eastern Shipping in 1952. B Muthuraman started off as a Graduate Trainee with Tata Steel. The list goes on. These companies have made a conscious effort towards creating talent pools within the organization and grooming employees for leadership positions.
L&T has launched a company-wide endeavor covering more than 4000 managers to enable them to hone their abilities in people management, and translate those skills into effective leadership and motivation. To ensure quality and depth of leadership, L&T has linked the leadership process with consistency of performance. Select employees are also sent to premier business schools and management institutes to gain experience and knowledge through their Advance Management Programs.Another best managed company, Grasim, believes in identifying and grooming management talents as also undertaking leadership development across levels through various initiatives such as ‘Competency Honing and Leadership Development’ programme at Gyanodaya, the company’s institute of Management and learning.

Henning Holck-Larsen, the co-founder of L&T, couldn’t have been more correct when he said: “ If you want to belong to a country that is becoming a nation, you have to keep the economy growing by creating jobs. And you can only do that by investing in tomorrow, and tomorrow is made by people.” Quality and commitment of workforce can make a significant contribution to the company’s success. India Inc. is becoming well aware of this and is making an effort to take care of people through initiatives that range from providing better facilities at offices, regular trainings and development programs as well as liberal leave policies. Findings from the survey
reinforce this trend: 67% of the best managed companies have specifically documented policies offering sabbaticals to employees and 78% of the best managed companies have institutionalized ‘Fast Track’ programs to recognize high performers. This year’s best of best winner, L&T, has been the recipient of number of awards for its innovative HR practices. One such initiative is the Hitori Yatai Seisan or the Single Workman Station, at L&T’s electrical engineering division. Employees are challenged to take complete responsibility for a product instead of letting them work on individual components. “Ever since we introduced the concept of the Single Workman
Station, our productivity has increased, as the employee has a sense of ownership for the final product. This is a great motivation,” said R.N. Mukhija, President (Operation), L&T. Best managed companies use a variety of approaches to reach out to their employees and go beyond the conventional offering of responsibility, security and salary. They create work environments in which their employees can flourish and dream the organization’s dream.

Mantra#6: Forge stronger partnerships with your supplier base

The top companies in India realize that their performance is inextricably linked with that of their partners. As one of the CEOs put it, “The strategic vision of the company must get absorbed and assimilated across the entire value chain.” To this end, companies are increasingly sharing their vision with partners and seeking active participation in realizing their growth objectives. Our study shows that the best managed companies in India view development of vendors as a key investment towards value creation. It was interesting to note that each of the best managed companies conducts quality audits at vendor sites and has structured systems for vendor performance appraisal. Indian companies are also actively partnering their suppliers in planning, procurement, research and development, quality assurance mechanisms and process improvement initiatives. Two-third of the best managed companies is actively investing in enhancing the technology of their vendors.

Bharti Airtel exemplifiers this mantra in that it has integrated the partnership approach in its business model. Deviating from the conventional model wherein telecom companies owned network equipment, Bharti strategically outsourced the entire network infrastructure to its vendors and incentivised the arrangement by offering 1% of the company’s revenues through SLAS. To allay vendor concerns regarding sustainability of the business, the company further outsourced network management to vendors.

The results that the partnership approach can yield are perhaps best visible in the case of Tata Motor’s breakthrough car, the Nano. Auto component suppliers played a key role in the development of the car and ensured that it met the cost target.

Mantra#7: Pursue quality with Zeal

Best managed companies use quality to do what they do best—create values. These companies devote significant efforts towards achieving the highest levels of quality. Our study confirms that quality is a concept that pervades all sectors and each business. Each of the best managed companies had process quality certifications and 78% of these companies had undertaken organization-wide six sigma exercises. Importantly, all of these companies’ strategic plans include targets for process improvements.

At ICICI Bank, increasing customer grievances and service lapses made the management set up an organizational excellence group (OEG) in 2002. Its aim was to engage in building, sustaining and institutionalizing quality in the bank by facilitating development of skill and capabilities in various quality frameworks. In the industrial products sector, L&T’s Heavy Engineering Division is focusing on improving manufacturing operations through automation, TPM, Six Sigma and ITenabled re-engineering.Tata Steel’s focus on quality led it to launch the ASPIRE program, incorporating best practices of different improvement initiatives such as TOC (Theory of Constraints),TQM(Total Quality Management) and technology. Unrelenting commitment to quality, which is a defining features of each of the best managed companies, creates that all important value among stakeholders—trust.

Mantra#8: Innovate to create value for customers

L&T’s definition of technology “as the springboard for the future and a bridge between aspiration and accomplishments” typifies the new-found attitude of business in India. The new mantra is to indigenize technology, which is evident from the increased R&D expenditure incurred in better managed companies. Companies are increasingly emphasizing on R&D for reducing costs and developing new products. A case in point is Tata Motors, whose new business strategy is focused around the development and production of technically advanced commercial vehicles and passenger cars of world-class quality. The recent launch of the first of its kind goods career, Ace, and its passengers-carrying variants, is the result of the company’s aggressive new product development programme. Innovation in products and services has helped ICICI address the needs of various customer segments. A recent example is the introduction of an end to end technology solution in rural geography that provides customers with biometric -enabled smart cards.

To sustain strong growth rates companies need to look for creating know-how in new areas by building in-house technological expertise and the best managed companies are constantly working towards this very goal.

Mantra#9 Give back to the Society

Corporate social responsibility (CSR) in India can probably be traced back to when the Tata Iron and Steel Company was floated in 1907. the Jamshedpur plant today can be described as a mammoth social out reach programme that covers 600 hundred villages in and around its manufacturing and raw materials operations through initiative in the areas of income generation, health care and education, a good example of linking business goal with a larger societal cause is ITC’s e-Choupal initiative, which has proven to be a digital revolution and has been reshaping the lives of farmers in remote Indian villages.

The Aditya Birla Group believes that CSR id textured into the group’s value systems. The group has created a whole parallel organization to focus on CSR under the stewardship of Rajshri Birla. Its vision is “to actively contribute to the social and economical communities in which we operate. In so doing build a better, sustainable way of life for the weaker section of society and raise the country’s human development index.”

L&T believes that the true and full major of growth, success in progress lies beyond balance sheet or conventional economic indices. It is best reflected in the difference that business and industry make to the lives of people. Today, it views itself as a company engaged in a higher cause of Nation building. In the case of Tata Motors, Singur was chosen by Ratan Tata as the location of the new plant because he believed that eastern India should not be deprived of the economic development enjoyed by the rest of the company. His decision may not have been an economically-prudent one, but it was backed by a strong commitment to the cause of social development. The CSR agenda of Indian companies, indeed, boarders on the extraordinary in vision. The leading Indian companies do not view CSR as an instrument of enhancing their reputation; instead they display an earnest desire to gives back to society and to contribute to the Nation’s progress.

Mantra#10 The Indian Edge

Management thinkers have often talked about the differences in management philosophy and practices as developed in the US, Europe, Japan and even China. Of late, there have been calls to identify what can be termed as the “Indian Approach to Management.” While we can not venture to define the Indian approach to management here, we noted one key difference that distinguishes the approach Indian companies from those of others. This difference lies in their inclusive nature and manifests itself in the way Indian Companies deal with their stakeholders. Today, as companies the world over struggle to show their more humane face and find the balance between profitability and social responsibility, Indian companies are comfortably partnering with their stakeholders to create value for society. Our companies often allude to their business partners as part of the larger corporate family. Employees are treated with respect and hardly any Indian company hands out pink slips in times of diffic ulty. Indian companies often engage in societal upliftment and nation-building projects, not due to any regulatory pressures but from a natural sense of duty. It is this attitude of inclusiveness that is giving Indian companies a strategic advantage in areas where other companies failed. Indian companies are far more successful in reaching out toward sly different customer segments-reach and poor, urban and rural. So they endeavor to globalize, they gain easier acceptance across diverse countries. The support they get from the extended organization multiplies their capabilities. Their strong talent pools par them to successfully compete with the best companies in the world. The mutually-beneficial relationship that the companies have with the community preempts conflicts and ensures smooth conduct of their businesses.

We believe that the inherent trait of inclusiveness that Indian companies posses, in addition to the “10 Mantras”, could well be the defining factor of their tremendous success in the years to come.



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Currency of trouble

Currency of trouble
The rupee's downward march leaves many companies with an inflated debt
By Shriya Bubna

I got this article in The Week, CLICK HERE for the original article.

The fall of the rupee against the dollar is hitting hard the Indian companies that had relied on the relatively cheaper dollar funds to fund their growth in the boom time. Telecom major Reliance Communications' debt stood at Rs 25,820 crore on December 31, 2008. It was Rs 17,440 crore at the end of March 2007. Significantly, about 70 per cent of the debt is in foreign currency. "Although the company has benefited in terms of competitive interest rates on foreign currency debt, adverse movements in currency rates have affected its financial profile," says a release by credit rating agency ICRA on Reliance Communications. As the rupee continues its downward march, many companies are faced with the prospect of an inflated debt on its balance sheet.

Till early 2008, companies which had left their foreign currency positions unhedged had emerged gainers. As the rupee appreciated against the dollar to below-40 levels, their dollar debt fell significantly in rupee terms. But in 2008, the rupee was the second worse performing currency, falling 19.2 per cent against the dollar. This calendar year, it has already seen a markdown of 5.7 per cent, says a Kotak Mahindra Bank research report. "For a lot of companies whose debt is largely in dollars, repayment obligations would increase in a similar magnitude if they have left their positions open," says Vikas Aggarwal, senior vice-president, ICRA.

Companies that have hedged their currency risks are safe to the extent of the cover. "But we see that it is difficult to hedge oneself on long-term loans fully as the market is very illiquid and one does not get good rates and quotes for that," says the chief financial officer of a large public sector bank. Also, there was the belief that the rupee would appreciate.

Many companies borrowed using foreign currency convertible bonds. FCCB is a debt instrument with an option to convert to equity. But if this option is not exercised, it remains as a bond to be repaid on maturity. "Given the buoyancy of the stock market, the issuers would have expected the bonds to be converted into equity. And expecting this conversion, most companies would not have hedged these positions," says the treasury head of a private sector bank. Between 2004-05 and 2007-08, Indian companies are estimated to have raised about $20billion through FCCBs.

The erosion in FCCB prices prompted the Reserve Bank to allow Indian companies to buy back them. "However, due to limited funding, companies have found it difficult to buy back FCCBs. Reports indicate that just 9 of the 156 companies that raised FCCBs have exercised the premature buyback option so far," says a Citigroup report. Companies are not allowed to borrow from Indian markets to buy back these bonds. With other funding sources drying up, they would have to turn to banks to help them repay the loans on maturity.

Meanwhile, a Kotak Mahindra Bank research report expects that "by end-December, the rupee would recover to 50.5-52 a dollar." According to a Credit Suisse research report, "beyond 2009, the rupee could rally below 50 per dollar, as capital inflows potentially pick up and growth accelerates."

The uncertainty about the direction of the rupee has resulted in companies hesitating on taking a hedging call. Says Aggarwal, "Companies are wondering whether to hedge at current levels because what if the rupee comes back to 48 level. A prudent company would be one that is largely hedged."



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The trianlge Harmony

This article is published in Business-Standard 23rd March 2009 ,CLICK HERE for the original link, written by Mukul Pal...

A simple triangle can integrate all market theories. Can we spot it?

While writing ‘Theory of Moral Sentiments’ in 1776, Adam Smith would never have thought that after two centuries people will find it oxymoronic to see morals and sentiment in the same phrase. Now, sentiment creates the popular news, lack of morals are ascribed to capitalists and what is left of the father’s work are fragmented theories.

Today, markets and prices are believed to be efficient, inefficient, random and/or ordered. All efficiency experts won’t subscribe to the mathematical order and some believers of inefficiency will call randomness preposterous.

If this was not enough, we even have a few thinkers defining a new model of finance different from economics. Unlike the coherent attempt to find a universal scientific string theory, there is no attempt to look for an integrated market model. A few behaviourologists are trashing efficiency theorists, who in turn call behavioural finance as nothing more than ‘anomalies dredging’.

Meanwhile the other two viz. random and order experts tune their trumpets. It is a cacophony out there, exacerbating the confusion as the historical crisis unfolds.

There is one thing common in all these market specialisations. Implicitly or explicitly they all look at patterns. Behaviourologists are trying to model human emotion. Fundamentalists attempt to model market information. Random experts wait for the recurring odd event.

And, order driven experts call the market model a pattern or fractal. Behaviourologists raise some questions like, “Can the human mind count?” There are of course limitations to the human minds computing ability, the very reason we cannot be called pure rational beings.

This is the same reason why even if there was complete order till infinity, we would find it muddled with randomness. What if the whole debate regarding market type is because even specialists, like rest of us all suffer from biases? What if markets were efficient, inefficient, ordered and random on the same scale but on a different time? What if order or chaos was a factor of time?

If we assume this to be true, we start answering most of the discrepancies between the various theories. Behaviourologists say humans suffer from an extrapolation bias, suggesting that we can’t see the future and we judge the past and present to estimate the future. This is why when we are on the efficient side of the market mountain, we just see efficiency. Simply putting it, we just see positivity when we are on a rising trend.

When markets are inefficient or say falling, we just look down and are unable to see the bottom or impending order. This extrapolation bias also explains why humans under-react or over-react. When we cannot see the top of the market mountain, we cannot judge how far the high is, this is why we under-react. And, when we are on the declining face, we just can’t seem to place the low and we tend to over-react.

Behaviourologists call it momentum and reversal dichotomy as they don’t see the market mountain. We can explain every other behavioural human error of loss aversion, disposition, ambiguity, validity, representativeness, winner’s curse, gambler’s fallacy, heuristics, framing, risk return distortion, over and under confidence, hope and anxiety, optimism and pessimism, if we continue to look at the market as a two dimensional triangular pattern, a face up and down, a low- high - low, cycle. One can see how the errors start getting polarized along the positive and negative slope, order being the positive and flip side of the negative uncertain chaos.

The triangle also explains why behaviourologists see the fundamentalist’s conservatism in earning predictions as the reason positive surprises tend to be followed by further positive surprises. The unanticipated surprise is the hallmark of overconfidence, a positive slope characteristic of the cycle.

The three-phased glitter and stock selections linked to excess volume, recent news and extreme price reaction is another up cycle character. The unending debate of the Fama and French three factor model, one side talking about efficiency and other side challenging it are also on different slopes of the same triangular cycle. Psychologists say fundamentalists select stocks like bonds, “good stocks are stocks of good companies”.

The reason they follow thumb rules and extrapolation is because the ongoing polarity of the up cycles, makes them comfortable and complacent. This is why a high degree of sentiment interest is followed by subsequent low returns. The turn down catches a majority by surprise. This is why psychologists compare option traders to farmers, taking more risk with cash crops after planting sustenance crops and hedging the downside. It is our way to take more risk, inefficient risk when we feel hedged. This is the reason we always misprice options.

The same triangle can explain why buybacks happen more at market lows and cause under-reaction compared to over-reaction, meaning though buy backs end up performing better, they get less attention from investors, investors under-react. Possession and dispossession of dividend also leads to over-reaction and under-reaction. When investors feel they own a dividend, they tend to over-react and take more risk and vice versa.

The behavioural criticism that humans are naive trend watchers is because humans don’t understand cyclicality. It is this same lack of understanding of cyclicality why past performance fails. The holistic pattern can also explain why prices will always keep oscillating between efficiency and inefficiency? Why riskless pair trading done on price will never be riskless? Why long-short funds playing on price are not hedged like LTCM thought and can fail? Why there will always be psychologists writing ‘trading is hazardous to your health’? Why existence of markets is linked with our inability to see the triangle? Why flipping coins can explain randomness, order, efficiency and inefficiency? Why there will always be a conflict and challenge to earn profits in economics? Why capitalism will always be driven by crisis? Why correlations are cyclical like performance? Why behavioural strategies have more tests to pass?

Why saving for tomorrow is a hindsight bias? Why we save when we should invest, and why we invest when we should save? Why Mandelbort and Taleb work together, though one is the father of mathematical order and the other claims to be the philosopher of randomness? Why ordered fractals are very close to chaotic randomness? Why the Nobel Prize winning prospect theory is about ownership and disposition that blinds humans against cyclicality? Why Prechter-Parker’s Financial-Economic dichotomy in social behaviour dynamics is not the new model of finance, but the other face of the mountain? Why demand sensitivity to price can rise and fall? Why we can make money in markets through physics, mathematics, history, psychology and so on? Why access to information and belief in it is triangular?

The two-faced cycle links everything. We are not trying to simplify 200 years of market knowledge. It was always like this, simple. Psychologists are as biased as everybody else, even if they claim to be otherwise.

Time contrarianism is not for everyone, as the preordained harmony kills all the beautiful stories.

The author is CEO, Orpheus CAPITALS, a global alternative research firm.



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Change is Constant By Venkat Mangudi

I got this article on Business gyan CLICK HERE for the original article...


Every organization goes through tremendous change as it grows. In fact, change is what keeps it going. Adapting to change is a great asset to any organization. Take the case of Oracle which started as a database company. Today, it has grown into one stop shop for enterprise applications. With the economic downturn that the US is facing today, it is one of the few organizations with the resilience to weather the recession.

Willingness to change is strength, even if it means plunging part of the company into total confusion for a while. - Jack Welch

As an organization matures, it has to increasingly find opportunities to enhance productivity. This does not mean that it must implement software. Refining strategies and business processes is often at the heart of such productivity improvements. Often times, small and medium organizations become enamored by the lure of Enterprise Resources Planning (ERP) applications. One is led to believe these days, that software is the panacea for all problems plaguing the organization. And this is additionally fueled by reports of organizations making dramatic improvements in productivity or profitability. While such results are not impossible, they cannot be used as yardsticks to determine your needs
A detailed analysis of the organizations strengths and weaknesses is the first step to bring about change. While every management consultant will swear by Strategy Maps, Balanced Scorecard or at least a SWOT (Strengths Weaknesses Opportunities Threats) analysis, it might boil down to a simple process documentation to identify the pain points. Every small business owner will agree that the biggest challenge facing them is, not surprisingly, a lack of time. Senior Management's time is spent mainly on ensuring that the business is able to keep up with the daily challenges. One has to take time out to moving from a reactive state to a proactive state. Making small changes in the way you do business is going to make a world of difference to its profitability
Let me explain using a simple illustration. A well known manufacturer of Pneumatic products in Tamil Nadu has followed a no questions asked return policy since the inception of the organization two decades ago. The company is now one of the most profitable in the region with very loyal customers. If a customer complains that the product is defective, they just ship them a new one immediately. The customer has an option to send back the defective one at the earliest available opportunity. Why do I think this example is relevant
Typically, a manufacturer sends someone onsite to investigate the cause of the issue and then replaces it. What this means is that there are additional support costs. Not that the cost of replacement goes away, either. The customer will still insist on a replacement because he does not trust that unit anymore. If, on the other hand, you do not have a field support staff at all you save considerable travel and support costs. The customer feels happy that the replacement is sent immediately. The defective product can be added to the QA team that will then dissect the product to identify the fault and eventually build a solution into the manufacturing process
Another company that follows a similar principle is Intuit. They do not have a support staff at all. They offer free support and the software developers themselves attend support calls. This enhances the feedback mechanism and reduces overhead costs for the company that can be passed on to the customer.
Both these companies have proven without a doubt that, traditional ERP or CRM processes are not the only way to realize profitability and productivity gains. It is unique to each organization and takes a time and effort to change.
One method that is used by sales people of enterprise applications is to identify the tactical pain points in the organization. These tactical pains then group into logical strategic issues. These in turn affect a key business objective. Therefore, if one can attempt to resolve the tactical pains one by one, it will lead to fulfillment of a key business objective over time.
Such initiatives involve great amounts of energy from the top management in identifying the need, analyzing the situation, designing a solution and propagating that solution throughout the organization. Change management plays a very important role in such situations, much more that the process changes itself. As Mr. Welch says, willingness to change is strength. Make sure your employees, customers, vendors and partners know that you are attempting to make a change. This will in itself boost the confidence in the organization.
Make sure your employees, customers, vendors and partners know that you are attempting to make a change.
In short, change is something many of us are not ready to welcome in our lives, be it professional or personal. We tend to maintain status quo to a great extent. In the end, change wins. Even if you oppose it and do not give in, you have learnt something new in the process.




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Personal values for a recession

Business Line Article (Link) - Date 16th March 2009


A young professional who considers me an aunt (the agony type) came to me in a state of distress. With a career graph similar to that of other executives who were considered hot until now, he was gnawed by thoughts that he may be unemployed in a few months from now. Having lived through a few economic downturns myself, I counselled him on some valuable traits which could keep him afloat.

Bill Cosby, arguably the best comedian in the US, once said: “Is the glass half empty or half full? It depends on whether you are pouring or drinking.” Many of us are now on the undesirable side of long-term prosperity, either for the first time or definitely after a long time. In these vulnerable times, here are some thoughts on qualities that will help us in a recession.

Follow your heart

Some B-schools, particularly those that are not considered ‘premier’, seem to be victims of a ghastly whisper campaign. Students of these institutions, who have to opt for their specialization, are being warned of hardships if they make a wrong choice. To me, the only wrong choice to make is to be in a field you don’t want to be in.

Sir Ken Robinson, the internationally renowned expert on creativity who has lectured passionately on education, has beseeched parents and students to pursue what they love doing. He says, “We cannot prepare for the future because the future is unknown.”

Frugality and simplicity

The Ireland-born English writer and poet Oliver Goldsmith said, “If frugality were established in the state and if our expenses were laid out to meet needs rather than superfluities of life, there might be fewer wants and even fewer pleasures, but infinitely more happiness.” My maid is a cheerful lady who lives in an 8x8 feet hut with her mother and daughter. She has aspirations, particularly for her child, and is a good bargainer when it comes to her salary. She goes about her work with a smile on her face and a song on her lips. I do hope this thought helps you imbibe and practise the next attribute.

Attitude of gratitude

Almost all holistic systems of healing, including those that claim to be life altering, have one aspect in common. They encourage you to say “thank you”, be it for the music, the food or the blue skies; whatever you take for granted. In simple terms, ‘count your blessings’. Envy on the other hand is defined as the art of counting other people’s blessings and is best kept on a tight leash.

Sense of Humour

Humour will probably seem too trivial in a time of such hardship. But to look at life seriously, one needs a sense of humour. Oscar Wilde, my favourite humourist, said: “It is a curious fact that people are never so trivial as when they take themselves seriously.”

I believe that more than IQ or EQ, HQ or the Happiness Quotient is what we should look at. If on picking up a copy of Reader’s Digest, you go straight to ‘Laughter, the Best Medicine’, ‘Humour in Uniform’ or ‘College Rags’, you score highly on HQ.

Art Buchwald was able to find mirth even in the process of dying and wrote a book on it called Too Soon to Say Goodbye.

grab opportunities

A young entrepreneur called Manjunath used to run an electrical products shop in Chikpet in Bangalore and worked hard to make his business a success. He noticed that it took a long time and many trips to the tea shop to get beverages like tea and coffee supplied to his shop. He also found that all the other businesses in the area faced the same problem. Therefore, he set up a hot beverage delivery service where local businesses could order tea by giving him a ‘missed call’ on his mobile. Alerted by the ‘missed call’, Manjunath sends a delivery man with tea and coffee to the customer’s premises. Today, he has a roaring business popularly called the ‘mobile tea shop’. He has also expanded the menu to include seasonal drinks like buttermilk. This may not be his ‘dream’ enterprise, but it is one that can definitely fund almost any dream of his!

In a story made popular by Abraham Lincoln, it is said that an Eastern monarch once charged his wise men to present him with a sentence which should be true and appropriate at all times and in all situations. They presented him with the words: “And this too shall pass away.” Appropriate words those for these tough times for they inspire us to focus on the simple qualities required to keep marching ahead.




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Trust me, I'm the boss

This is the article published in Business Line(16th March 2009)
Source of this article is http://insight.iese.edu/doc.aspx?id=954&ar=20 , article by Pablo Cardona, Wei He

Transformations and adaptations cannot take place within an organization unless the employees trust their leader. Studies have shown that transformational and charismatic leaders are able to build this trust in their followers, and that there is a correlation between leadership and effectiveness.

Conversely, if there is a lack of trust within an organization, employees are more likely to take a defensive stance, which can be detrimental to the organization and its performance. Given the current economic climate and prevalence of downsizing, creating trust is a challenge like never before.

Recognizing the seriousness of this issue, IESE Prof. Pablo Cardona and Wei He look at how trust is initiated, developed and maintained in organizations. Their paper examines the factors that influence trust levels in boss-subordinate relationships, and they suggest some ways of restoring the trust that is so essential for the successful running of any organization.

What Is Trust?
Though trust has been studied across a variety of fields, from history to psychology, the concept remains difficult to pin down in one universal definition. Generally speaking, however, trust can be understood as a relationship that involves a “willingness to be vulnerable to the action of another person, based on positive expectations about the other person’s intentions and behavior,” according to Cardona and He.

Based on this definition, trust becomes not necessarily a choice, nor a specific behavior, but more an attitude toward a particular person who can be the cause of another’s choices. Trust, therefore, is the attitude someone takes based on direct or indirect experience with another person, past interactions or personal observations of how that person behaves toward others.

The Trust Factor(s)
By definition, the boss wields power over the subordinate. However, this does not mean that the worker is a passive receiver of trust. Rather, the worker’s perception of the boss will determine his or her participation in “an interaction of trust.”

What factors encourage trust or distrust between workers and their supervisors?

First, there are the personal factors – characteristics of the boss and the subordinate – that affect the extent of the subordinate’s trust in the boss. These factors include demographic characteristics, personality traits and the professional competence of each.

Second, the boss’s behavior during interactions with subordinates will also determine the boss’s trustworthiness. The five key types of behavior are consistency, integrity, communication, delegation and consideration.

The Matrix Applied to China
Trust is a dynamic relationship, and the interaction process involves both the boss’s personal factors and his or her behavior. Obviously, the personal factors are concerned with the characteristics of both parties involved in the interaction, while the boss’s behavior is concerned with the relationship between boss and subordinate.

Cardona and He provide an illustrated matrix of this dynamic relationship. This matrix reveals a variety of dimensions, including the idea that, at the start of a relationship, favorable personal factors are necessary for trust. However, those factors may become less important as time goes by, because they could be compensated by accumulated past experience.

While their trust matrix is based on Western-based cultural studies, it can just as easily be applied to China. The authors take the four categories of the matrix and match them with four Chinese counterparts: the fast-dying paratroopers, the slow-dying old fellow, expatriates and successful entrepreneurs. Combinations of personal factors and the boss’s behaviors will lead to different perceptions from subordinates: respect only, trust or distrust.

Developing Trust Over Time
The length of a relationship can often indicate the degree of trust between parties, with the number of years between a boss and subordinate thought to have a positive correlation in terms of the level of trust. However, trust does not automatically come with time, but rather with the quality of the interactions between the boss and subordinate.

In general, the subordinate will develop an initial trust or distrust of the boss based on personal factors. Competence and trustworthiness are often based on information received via third parties or on direct observation of how the boss behaves toward others.

When boss and subordinate begin to interact, trust will develop based on the quality of their interactions. The boss’s behavior and subordinate’s response provide a dynamic relationship of mutual influence. Obviously, as the boss is in a position of greater influence, his or her behavior is critical as to how it affects the subordinate’s motivation.

The interaction will continue with the boss’s initial judgment of the subordinate’s capabilities. From that initial interaction, the relationship develops. While a boss might trust a subordinate, it does not mean the subordinate trusts him or her back, though it is essential to have some degree of reciprocity.

Potential Risks
While many bosses express a strong desire to build and maintain trust, not everyone is able to achieve it. This is due to four issues in the boss-subordinate relationship: the nature of the relationship, unclear principles and values, incongruence between words and behavior, and misuse of power and authority.

But if bosses and subordinates are able to interact effectively and achieve the desired trust, the results will be positive all around. Indeed, the level of trust can eventually be such that, according to one American survey, the majority of workers polled said they would trust their boss with babysitting their own children, and 77 percent said they would actually hire their own boss. Now that’s trust!



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