The Capital market is always choppy and wavy, like the high seas. That is the nature of the beast. There is no moment of rest. Each trough spreads its share of gloom, negativity and suicides and each crust bring with it euphoria, splurges and binges. We have seen many across centuries; Tulip Mania of Amsterdam 1637, South Sea Bubble 1720, Wall Street Crash 1929 and again in 1987, Harshad Metha driven boom in India 1992, South East Asian melt down in 1997, internet boom and bust around the world of 2000 and now the mayhem in world financial market.
I was looking at an article that I had written in 2003, when the sentiments were down after the tech bust, 9/11 Iraq war, Enron, Worldcom and Arthur Anderson scams. The BSE Sensex was around 3000. Paul Krugman’s observation in Fortune in September 1998 that ‘never in the course of economic events-not even the early years of economic depression- has so large part of the world economy experienced so devastating a fall from grace” looked relevant in 1998, 2003 and even today.
My article was an expression of my optimism that what goes down will come back. Since then we have gone up and now come down again. The Sensex in the region of 9,000 – 10,000. At this stage I feel it is relevant to feel optimistic again. I wanted to pen my thoughts about it and I realized that I don’t need to write a new article again. Just a few edits of my old article. And that is what I have done. For the sake of convenience, continuity and a bit of wry humor, I have retained the original parts in (bracketed small font) that I have edited out and marked the additions in italics. This is how it goes.
With (war clouds looming large) the world of financial markets having experienced a worldwide melt down, the world of investment seems to be in a state of limbo. Adding to this woe has been a spate of poor corporate performance (in developed) around the world, few high profile bankruptcies and accounting scams which have literally pulled the rug from under the leg. All in all the general perception seems to be in hoarding money in cash or near cash equivalent or park in yellow metal.
Let us take a look at it from a different perspective. I believe that this is the time for investors who are looking for value opportunities. A time to pick up shares at real good value. To get some good returns in medium term you don’t have to be even adventurous in terms of investing in speculative and high risk ventures. Just look for few well established and well performing conventional companies. The chance of disappointment is really low. What gives me this confidence? The same reason the prices are down today; the uncertainty around us. It has been always seen that at times of uncertainty the investor looks for a high risk premium and it translates to a lower price for stock. This means that the investor is willing to pay a relatively lower price, compared to times when the uncertainty is low, to buy a piece of the same company. Today we are surrounded by innumerable of factors of uncertainty, which leads to depressed prices.
There is certainly a very high probability that at least some sources of this uncertainty will get sorted out in the near future. This means that general level of depression will certainly pass and this has to convert to better valuations. We have seen this in all markets at all times. Look at what happened after the Gulf war in the US market. The markets have produced above-average gains following U.S. involvement in the World Wars, the Korean War, Vietnam and the Gulf War.
From the general let me venture in to specifics. Let us look at what can be one of the winning markets for the coming year. One of the winners definitely will be the Indian Market. The factors in favor are just too many.
Indian economy in general has been on a high gear. With a GDP growth of around (5%) 6.5% in 2009 compared to an average of about (2%) 3% for the world as a whole India has been one of the fastest growing economies in the recent past. Even the projections for the coming couple of years seem to be in the same direction.
Corporate Sector in India has been performing outstandingly till last year. The current year has witnessed the aftershocks of the worldwide melt down. (When the general results from the corporate sector around the world has been filled with more bad news than good, Indian corporates have been showing a different color.) Indian companies in the earlier era of protected markets had significant inefficiencies inherent in them. Now that they have been exposed to global competition, they have tightened their belts and released significant gains. (During half year ended in September 2002 the net profit of the Indian corporate increased by more than 50%. In the third quarter ended in December 2002, the results of the major 679 companies which released their results shows that the sales has increased by 70% and net profit has increased by 15%.) CMIE expects aggregate profit after tax (PAT) of listed Indian corporates to rise by 77.3 per cent in 2009-10.The detailed analysis by CMIE is given at the bottom of this article
The foreign exchange reserves have been growing at a quicker pace. For the first time after 1978 the year 2002 showed a surplus in the current account. With more than $ 290 (72) billion in foreign exchange in September 2008 Indian government has now allowed Indian citizens to buy and own foreign assets out of their rupee earnings in India.
(The external debt situation has also reduced significantly to 21% from a peak of 39% in March 1992. This has resulted in debt service ratio improving from 27% in 1992 to 17% in 2002). As per Ministry of Finance Press Release India’s total external debt stock at end September 2008 stood at US $ 222.61 billion, which is marginally lower than the level of US $ 223.81 billion at end June 2008. The ratio of foreign exchange reserves to total external debt as at end September 2008 stood at a comfortable level of 128.6 per cent.
(Realizing the reversal in the Rs /US$ exchange rate Indian companies are today taking un-hedged US$ denominated loans.)The recent depreciation of the Rs on account some capital flight has given some jitters to such companies. In fact these companies have been lobbying to get teh accounting standards modified so that they will not have to show the marked-to-market losses in their annual report.:-)
Even infrastructure sector has improved in an encouraging fashion. The telecom cost which was one of the most expensive in the world has seen price reduction of more than 50% since the complete decontrol of this segment. Today in spite of recession it is one of the fastest growing segments in India and one of the most attractive by world standards. Roads and Ports are getting significant investment.
With so much to go for India is an excellent bet for investment in medium term. Although I have been in the Industry for a long time I am normally very conservative and very guarded. But I have very little reservation in being bullish on India in the near future.
Corporate India’s PAT to grow by 77.3% in 2009-10 - CMIE clarifies
CMIE expects aggregate profit after tax (PAT) of listed Indian corporates to rise by 77.3 per cent in 2009-10. This robust profit growth projection is based on the expectation of the petroleum products sector returning into profits from the March 2009 quarter. The losses incurred by the petroleum products sector had eaten away more than a third of the aggregate profits made by the rest of the Corporate India during April-December 2008. Benefiting from the fall in the crude oil prices, we expect the petroleum products sector to make net profits of Rs.11,225 crore in 2009-10 as against the net losses of Rs.56,533 crore estimated for 2008-09.
The aforementioned profit figures are exclusive of prior period and extra-ordinary income. CMIE always uses PAT figures exclusive of P&E as it enables meaningful inter-period comparison.
We have excluded Rs.60,967 crore received by the petroleum products companies during April- December 2008 from the government in the form of oil bonds. The oil bonds are not with respect to the sales made during the quarter in which they were received. It is a reimbursement of the loss suffered by the petroleum products companies.
We expect the petroleum products sector to show a major turnaround at the PAT (net of P&E) level in 2009-10. This will have a major bearing on the overall profit performance of Corporate India as the petroleum products sector contributes 25-30 per cent to the aggregate net sales.
Excluding the petroleum products sector, the rest of the Indian corporates (listed on Indian bourses) are expected to report a 22.7 per cent rise in aggregate PAT in 2009-10. The healthy order-book positions of the construction companies and the machinery companies are expected to help them report robust sales growth. Sharp rise in sales, softening of interest rates and fall in commodity prices, particularly metals are expected to help the construction and machinery sectors to report 40- 50 rise in PAT in 2009-10. A gamut of other sectors such as commercial vehicles, wires & cables, tyres & tubes, plastic products and polymers are also expected to benefit from the fall in input (commodity) prices and low interest rates.
Non-financial services such as hotels, health services and LNG storage & distribution are also expected to report over 20 per cent growth in PAT in 2009-10. The hotels sector witnessed a fall in income and PAT in the December 2008 quarter because of the fall in occupancy rate following the terror attack and slowdown in the global market.
We expect the sector to show an improvement in income and PAT growth in 2009-10 backed by improvement in occupancy and hike in room rates. Similarly, the health service sector is also expected to report a healthy growth in profits backed by capacity
additions and higher average revenue per customer. Doubling of capacity by Petronet LNG and the additional transmission volumes of gas from the KG basin of Reliance are expected to help the LNG storage & distribution sector report a healthy income growth in 2009-10. This coupled with the lower raw material prices is expected to help the sector to report a 47.4 per cent rise in PAT in 2009-10.
We expect the profit performance of the banking segment in 2009-10 also to be healthy. The sector is expected to report a 28.3 per cent rise in PAT owing to continuation of healthy over 20 per cent growth in credit, lower operating expenses and lower provisioning levels compared to 2008-09.
Finally, it is not unusual for Corporate India to report very high or very low profit growth. In 2002-03 and 2003-04, PAT had grown by 70.2 and 76.0 per cent, respectively. In 1994-95, PAT had more than doubled (104.2 per cent) in a single year.
Saturday, March 28, 2009
Saturday, March 21, 2009
Call of Duty
Meera Sanyal, the country head of ABN Amro has announced that she is going to stand for the coming election. I don’t know if she will win or what she will do if she wins. But I salute this initiative and I believe more of us should follow.
When we were under the colonial rule a large number of brilliant, highly educated people joined politics and played very active roles. May be what prompted them was the yearning to see our country independent. Once we got our independence, many of us decided that we have done our duty and now we are left to reap the fruits of our labor.
We realized that there are many opportunities for the educated people in our country without the travails of a political career. The civil service gave power and status. IITs degrees gave us the visas to the land of opportunity and IIMs opened doors to lucrative careers in industry. No need to cover street by street kissing little babies and asking how the family is doing. No uncertainty of elections.
When we abdicated our social responsibility there were many who were too happy jump to the fray. Because it gave them power and it gave them opportunity to enrich themselves. We have a saying in our tongue which translates as “if you don’t sit where you are supposed to sit the dog will come and sit there”. This is what happened to Indian politics the dogs took over the vacuum that was left.
We have no right to complain; because we allowed many goons to sit there. Now that they have taken over, naturally they try to protect their turf. That gave us more excuses to run for cover and curse politics. I don’t mean to say that all our politicians are goons. But many are. There are many who are gems and give their best for the country and that is why we are not a banana republic.
In the recent past we see more educated people willing to join politics. But they were mostly the ones with political lineage. It is at least a new trend.
I agree the degrees don’t ensure maturity or make good and honest leaders. If it was so, the bureaucracy should have been outstanding examples of social responsibility.
I hope more people with capability and principles will be willing to join the fray. With an intention to make a difference and not to make a killing. If this trickle turns to a tide, we will definitely be able to repeat the history of ousting the evil with no bloodshed.
Keep praying and keep hoping.
When we were under the colonial rule a large number of brilliant, highly educated people joined politics and played very active roles. May be what prompted them was the yearning to see our country independent. Once we got our independence, many of us decided that we have done our duty and now we are left to reap the fruits of our labor.
We realized that there are many opportunities for the educated people in our country without the travails of a political career. The civil service gave power and status. IITs degrees gave us the visas to the land of opportunity and IIMs opened doors to lucrative careers in industry. No need to cover street by street kissing little babies and asking how the family is doing. No uncertainty of elections.
When we abdicated our social responsibility there were many who were too happy jump to the fray. Because it gave them power and it gave them opportunity to enrich themselves. We have a saying in our tongue which translates as “if you don’t sit where you are supposed to sit the dog will come and sit there”. This is what happened to Indian politics the dogs took over the vacuum that was left.
We have no right to complain; because we allowed many goons to sit there. Now that they have taken over, naturally they try to protect their turf. That gave us more excuses to run for cover and curse politics. I don’t mean to say that all our politicians are goons. But many are. There are many who are gems and give their best for the country and that is why we are not a banana republic.
In the recent past we see more educated people willing to join politics. But they were mostly the ones with political lineage. It is at least a new trend.
I agree the degrees don’t ensure maturity or make good and honest leaders. If it was so, the bureaucracy should have been outstanding examples of social responsibility.
I hope more people with capability and principles will be willing to join the fray. With an intention to make a difference and not to make a killing. If this trickle turns to a tide, we will definitely be able to repeat the history of ousting the evil with no bloodshed.
Keep praying and keep hoping.
A Japanese Lesson
This happened about two decades ago. I had just passed out from IIM and had taken up my first job. I was sent on an assignment in a group company that was a joint venture with a large Japanese company as a part of the “new projects” team.
One day I was asked to prepare a request for approval about a new idea we had developed. Using all the ‘fundas’ that I had learned in IIM and all the creativity that oozed out of every pore, I prepared the approval request. I was asked to forward the same to the Japanese headquarters.
This meant that I had to forward the same through the Japanese Director who was based in our office (Let us call him Shira San; San is the word the Japs add to your name when they addresse you with courtesy and respect).
Shira san was a quiet, elderly, soft spoken gentleman who always kept a dictionary handy with him. He often referred to the dictionary during conversations to ensure that he got the right meaning. Especially when we cracked some jokes it was funny to see him laughing with a time delay on account of this need to refer to the dictionary.
He looked at my note and shook head and told me.
‘Koshy San, this is not correct’
‘What? How can this be wrong? Then Show me how do it correct” Pat came my reply with all the haughtiness that matched my age and temperament.
Shira San quietly took a piece of paper (PCs were not so common then) and recast the whole approval note.
One look at what was made and I realized that it was a different presentation of what I had made.
With a chest full of pride about my brightness, I quickly showed him how both these approvals were the same and how my way of presentation was even better.
He looked at me with an indulgent smile and told me.
‘Koshy San, you are very intelligent like many Indians I know. But you see I not so intelligent. When we know we have to deal with people not so bright, our company has standard forms for presenting such approvals. If you present your request in this format, I look at it and in two minutes I can decide if I should recommend this. Then I sign here and send to Singapore to my regional boss. He looks at it and in two minutes decides whether to forward to Japan. If he forwards this, Japanese boss will approve as per the norms”
“What happens if you forward my proposal. With the more powerful presentation that I have made, this has a better chance to clear” I was eager to point out.
“ No Koshy San, I would take one hour and your help to understand this first. You my friend and I may actually do it for you. But my Singapore boss may straight away throw it in dust bin, as he will surely won’t think it is worth his time to understand this.”
“How can you be so stiff? This really straightjacket the employee and kill whatever creativity he has” I was ready to give my free advice.
“Koshy San, Our company has systems in place to handle such creative minds like you.” He took a format and gave it to me.
“Bright boys like you can give your suggestions on how to improve any system using this format and forward to the specified department. They will evaluate all such great ideas and if they find them good, will make it the company standard. Then ordinary people like me will follow this like bible. If your ideas are accepted you will even get money award”
The lessons sank in to my mind.
You need to use your brightness to add value and not to show off your smartness. If you establish standard practices you can avoid waste of lots of time; especially when you are working as a team.
It has been two decades since this happened. I have worked in a number of assignments in number of positions. I still see enormous waste of time on account of lack of well defined systems and processes. But I realize that this is a learning that is difficult to come by. Still I try hard because I believe it is worth it.
One day I was asked to prepare a request for approval about a new idea we had developed. Using all the ‘fundas’ that I had learned in IIM and all the creativity that oozed out of every pore, I prepared the approval request. I was asked to forward the same to the Japanese headquarters.
This meant that I had to forward the same through the Japanese Director who was based in our office (Let us call him Shira San; San is the word the Japs add to your name when they addresse you with courtesy and respect).
Shira san was a quiet, elderly, soft spoken gentleman who always kept a dictionary handy with him. He often referred to the dictionary during conversations to ensure that he got the right meaning. Especially when we cracked some jokes it was funny to see him laughing with a time delay on account of this need to refer to the dictionary.
He looked at my note and shook head and told me.
‘Koshy San, this is not correct’
‘What? How can this be wrong? Then Show me how do it correct” Pat came my reply with all the haughtiness that matched my age and temperament.
Shira San quietly took a piece of paper (PCs were not so common then) and recast the whole approval note.
One look at what was made and I realized that it was a different presentation of what I had made.
With a chest full of pride about my brightness, I quickly showed him how both these approvals were the same and how my way of presentation was even better.
He looked at me with an indulgent smile and told me.
‘Koshy San, you are very intelligent like many Indians I know. But you see I not so intelligent. When we know we have to deal with people not so bright, our company has standard forms for presenting such approvals. If you present your request in this format, I look at it and in two minutes I can decide if I should recommend this. Then I sign here and send to Singapore to my regional boss. He looks at it and in two minutes decides whether to forward to Japan. If he forwards this, Japanese boss will approve as per the norms”
“What happens if you forward my proposal. With the more powerful presentation that I have made, this has a better chance to clear” I was eager to point out.
“ No Koshy San, I would take one hour and your help to understand this first. You my friend and I may actually do it for you. But my Singapore boss may straight away throw it in dust bin, as he will surely won’t think it is worth his time to understand this.”
“How can you be so stiff? This really straightjacket the employee and kill whatever creativity he has” I was ready to give my free advice.
“Koshy San, Our company has systems in place to handle such creative minds like you.” He took a format and gave it to me.
“Bright boys like you can give your suggestions on how to improve any system using this format and forward to the specified department. They will evaluate all such great ideas and if they find them good, will make it the company standard. Then ordinary people like me will follow this like bible. If your ideas are accepted you will even get money award”
The lessons sank in to my mind.
You need to use your brightness to add value and not to show off your smartness. If you establish standard practices you can avoid waste of lots of time; especially when you are working as a team.
It has been two decades since this happened. I have worked in a number of assignments in number of positions. I still see enormous waste of time on account of lack of well defined systems and processes. But I realize that this is a learning that is difficult to come by. Still I try hard because I believe it is worth it.
Real Graduation
India is uniquely placed today, by an accident of history, with a predominantly young population. This coupled with a reasonably good education system and proficiency in English provides enormous opportunity for building on our strength to become the primary provider of variety of services the aging world around us need.
In this article I don’t intend to discuss the magnitude of this opportunity or the strategic priorities for exploiting this opportunity. The primary intent of this article is to reflect on the cultural and attitudinal reversals that are expected when a young graduate joins an organization. This is also a reminder on the special attention that the organizations need to give to facilitate a smooth induction.
Now let us take a look at the major changes required for a student to graduate to being an employee, a part of the team with delivery obligations.
1. Neither a prima donna nor a recluse
A student has infinite choice of whether to study, when to study, where to study and what to study. His choice is of no concern to his peers of for his profs. He is really not answerable to his classmates and his choice doesn’t affect their life.
An employee of an organization becomes a part of the team with very heavy interdependence on what he does, when he does, where he does and what he does. He is an inherent part of a team that delivers and his pace will affect the delivery of his team.
2. From independence to interdependence
It is true that the colleges need students and the students need colleges. But in short term the interdependence of student and the college is quite limited and both can exist with limited ritualistic interaction (attendance, exam etc)
An organization cannot be successful without active and strong employee engagement. Without this the organizations will have a team of drifters or at best those who or just ‘jamming for their daily bread”
3. Exams are over
A student’s life in general is directed by syllabus for the year, assignments, FAQ, possible questions, short cuts and exams etc etc. The real cool guys/ gals are considered to be those who don’t study (or appear not to study) the whole year, copy all the assignments and finally ‘crack’ the exams. He can afford to forget everything that was learned once the exams are over.
In an organization there is no exam to prepare and pass. One needs to get things done day in and day out; continuously upgrade knowledge and skill and keep building on and improving upon.
4. Who pays whom
In a college the student pays for being there and he chooses what he studies
In an organization en employee gets paid and the organization needs return on investment. The organization expect the employee to play as per its dreams and act as per its plot
5. No more an affair
When a student joins a college he normally knows how long he will be there.
When an employee joins he doesn’t normally know his period of stay. Either he or the organization can choose to terminate the relation fast or the relation may extend a lifetime. One is an affair and other could be a marriage.
6. From chaos to structure
A student’s life, except for attending classes, is the life of a free bird. No boss(es) to report to, no client to please..
As an employee, life gets a lot structured and there are lots of expectations to live up to (a much unstructured freewheeling organization is still a utopia)
7. From structure to chaos
In a different plane, the employee life is a transformation from structure to chaos. In a college the defined curriculum, syllabus etc etc gives enormous certainty on the demands of daily life.
In an organization, the life is uncertain. The environment is transient and the demand on the employee’s life is even more transient.
A total reversal of life style... We need to take this into cognizance when we design and implement the induction programs.
Keep in mind that such changes don’t happen overnight. Keep in mind that this transformation doesn’t kill the openness and curiosity and scare the fellow away. Therefore we need to have well planned processes and rituals to manage this transformation, develop a new habit and spot a new attitude.
The above thoughts are based on the conditions prevailing in most of the educational institutions in India. I acknowledge that there are number of institutions that are exceptions and outstanding and a number of pupils who mange the transformations smoothly.
But there exists large number of institutions which are quite mediocre and which are nothing but factories producing degrees (often sub-standard). Similarly there are many organizations that treat their recruits as nothing but another input and not an asset that can appreciate in value. If we really need to scale our global offerings we need to enable this vast source of raw material and not just the cream.
In this article I don’t intend to discuss the magnitude of this opportunity or the strategic priorities for exploiting this opportunity. The primary intent of this article is to reflect on the cultural and attitudinal reversals that are expected when a young graduate joins an organization. This is also a reminder on the special attention that the organizations need to give to facilitate a smooth induction.
Now let us take a look at the major changes required for a student to graduate to being an employee, a part of the team with delivery obligations.
1. Neither a prima donna nor a recluse
A student has infinite choice of whether to study, when to study, where to study and what to study. His choice is of no concern to his peers of for his profs. He is really not answerable to his classmates and his choice doesn’t affect their life.
An employee of an organization becomes a part of the team with very heavy interdependence on what he does, when he does, where he does and what he does. He is an inherent part of a team that delivers and his pace will affect the delivery of his team.
2. From independence to interdependence
It is true that the colleges need students and the students need colleges. But in short term the interdependence of student and the college is quite limited and both can exist with limited ritualistic interaction (attendance, exam etc)
An organization cannot be successful without active and strong employee engagement. Without this the organizations will have a team of drifters or at best those who or just ‘jamming for their daily bread”
3. Exams are over
A student’s life in general is directed by syllabus for the year, assignments, FAQ, possible questions, short cuts and exams etc etc. The real cool guys/ gals are considered to be those who don’t study (or appear not to study) the whole year, copy all the assignments and finally ‘crack’ the exams. He can afford to forget everything that was learned once the exams are over.
In an organization there is no exam to prepare and pass. One needs to get things done day in and day out; continuously upgrade knowledge and skill and keep building on and improving upon.
4. Who pays whom
In a college the student pays for being there and he chooses what he studies
In an organization en employee gets paid and the organization needs return on investment. The organization expect the employee to play as per its dreams and act as per its plot
5. No more an affair
When a student joins a college he normally knows how long he will be there.
When an employee joins he doesn’t normally know his period of stay. Either he or the organization can choose to terminate the relation fast or the relation may extend a lifetime. One is an affair and other could be a marriage.
6. From chaos to structure
A student’s life, except for attending classes, is the life of a free bird. No boss(es) to report to, no client to please..
As an employee, life gets a lot structured and there are lots of expectations to live up to (a much unstructured freewheeling organization is still a utopia)
7. From structure to chaos
In a different plane, the employee life is a transformation from structure to chaos. In a college the defined curriculum, syllabus etc etc gives enormous certainty on the demands of daily life.
In an organization, the life is uncertain. The environment is transient and the demand on the employee’s life is even more transient.
A total reversal of life style... We need to take this into cognizance when we design and implement the induction programs.
Keep in mind that such changes don’t happen overnight. Keep in mind that this transformation doesn’t kill the openness and curiosity and scare the fellow away. Therefore we need to have well planned processes and rituals to manage this transformation, develop a new habit and spot a new attitude.
The above thoughts are based on the conditions prevailing in most of the educational institutions in India. I acknowledge that there are number of institutions that are exceptions and outstanding and a number of pupils who mange the transformations smoothly.
But there exists large number of institutions which are quite mediocre and which are nothing but factories producing degrees (often sub-standard). Similarly there are many organizations that treat their recruits as nothing but another input and not an asset that can appreciate in value. If we really need to scale our global offerings we need to enable this vast source of raw material and not just the cream.
Wednesday, March 11, 2009
Teams that Scale
One of the most critical ingredients for a growing organization is a leader with a vision. It would be ideal if he has a team whose members who dream together, is motivated and capable to decide on the course of action to make this dream come true. Such ideal team I suppose happens only in heaven and fairy tales or may be in Google :-)
In real life when you take a leadership position, you need to identify a core team who will share your dream. In my opinion you will be lucky if you can manage to get 5% of your team to be of this variety. If you are successful and lucky you may be able to increase this to 20%.
Then you need to find a way to get the best of the remaining.
Does it mean that the majority is not capable and don’t have the potential. The answer is yes and no.
Yes, because for all practical purpose, majority of people in most organizations are just doing a job. “Jamming for daily bread”.
No, because I accept the possibility that there could be many reasons, some correctable and some not correctable, for this state of affairs. You may not have been able to trigger their imagination or some of the team members are misfits in the current environment or some are slow starters and so on and so forth.
If you want to succeed in building and scaling up a team you need to accept this reality.
When you identify a core team of self starters who are able to tune-in to your dream and take the necessary initiatives you should do it with utmost care. If you are not careful, these catalysts may be seen as or degenerate to a coterie restricting and limiting you from reaching out to others.
Your next challenge is how to get the best out of the big majority. For this you need to break down your dream to well-defined actionable tasks for the vast majority who have been grouped around these tasks. This is one of the most difficult challenges in scaling up. If you don’t do this well, these members who are not yet ready to manage the uncertainty will become very inefficient and unwieldy or even de-motivated.
I am not suggesting that the vast majority is incapable of independent thinking and you should treat them like robots who will dance to a tune.
I am suggesting that you accept the reality that the vast majority will need time to get to speed and the systems and procedures in place and clear delineation of tasks will help you to achieve maximum productivity. As Chris Argyris observes in the article ‘Empowerment: The Emperor’s New Clothes’ published in Harward Business Review “Both research and practice indicate that the best results of reengineering (a change management program embodying empowerment) occur when the jobs are rigorously specified and not when individuals are left to define them”
Some of you who have read Richard Bach’s Jonathan Livingston Seagull may remember what Jonathan told Fletcher when Jonathan realized that Fletcher, to begin with, was at awe at the concepts Jonathan was expounding and unable to get going. Softly he tells Fletcher:
‘Let’s start with level flying.’
You may need to get each of your members to perfect the art of level flying before you push them to do loops.
Do you stop here? No. You need create an environment that will spark more of your team members, even though some may take longer to spark.
“A rule book to follow for daily chores and an environment that brings out the innovative spirit of each team member” is what you need to build
Your skill in managing this spiral will determine your ability in scaling up; whether you can scale up your road side mechanic shop to a chain of service centres or your specialty clinic to a large hospital or your mom and pop restaurant to a chain of hotels.
The last and one of the most difficult part in managing this spiral is weeding out the misfits. I am not suggesting that you have to identify some as useless. But develop the skills to identify the misfits in your team and help them to find where they can fit in. It is better to spend your time on enabling those who can fit in. In this world of political correctness, this may sound like blasphemy.
In real life when you take a leadership position, you need to identify a core team who will share your dream. In my opinion you will be lucky if you can manage to get 5% of your team to be of this variety. If you are successful and lucky you may be able to increase this to 20%.
Then you need to find a way to get the best of the remaining.
Does it mean that the majority is not capable and don’t have the potential. The answer is yes and no.
Yes, because for all practical purpose, majority of people in most organizations are just doing a job. “Jamming for daily bread”.
No, because I accept the possibility that there could be many reasons, some correctable and some not correctable, for this state of affairs. You may not have been able to trigger their imagination or some of the team members are misfits in the current environment or some are slow starters and so on and so forth.
If you want to succeed in building and scaling up a team you need to accept this reality.
When you identify a core team of self starters who are able to tune-in to your dream and take the necessary initiatives you should do it with utmost care. If you are not careful, these catalysts may be seen as or degenerate to a coterie restricting and limiting you from reaching out to others.
Your next challenge is how to get the best out of the big majority. For this you need to break down your dream to well-defined actionable tasks for the vast majority who have been grouped around these tasks. This is one of the most difficult challenges in scaling up. If you don’t do this well, these members who are not yet ready to manage the uncertainty will become very inefficient and unwieldy or even de-motivated.
I am not suggesting that the vast majority is incapable of independent thinking and you should treat them like robots who will dance to a tune.
I am suggesting that you accept the reality that the vast majority will need time to get to speed and the systems and procedures in place and clear delineation of tasks will help you to achieve maximum productivity. As Chris Argyris observes in the article ‘Empowerment: The Emperor’s New Clothes’ published in Harward Business Review “Both research and practice indicate that the best results of reengineering (a change management program embodying empowerment) occur when the jobs are rigorously specified and not when individuals are left to define them”
Some of you who have read Richard Bach’s Jonathan Livingston Seagull may remember what Jonathan told Fletcher when Jonathan realized that Fletcher, to begin with, was at awe at the concepts Jonathan was expounding and unable to get going. Softly he tells Fletcher:
‘Let’s start with level flying.’
You may need to get each of your members to perfect the art of level flying before you push them to do loops.
Do you stop here? No. You need create an environment that will spark more of your team members, even though some may take longer to spark.
“A rule book to follow for daily chores and an environment that brings out the innovative spirit of each team member” is what you need to build
Your skill in managing this spiral will determine your ability in scaling up; whether you can scale up your road side mechanic shop to a chain of service centres or your specialty clinic to a large hospital or your mom and pop restaurant to a chain of hotels.
The last and one of the most difficult part in managing this spiral is weeding out the misfits. I am not suggesting that you have to identify some as useless. But develop the skills to identify the misfits in your team and help them to find where they can fit in. It is better to spend your time on enabling those who can fit in. In this world of political correctness, this may sound like blasphemy.
Saturday, March 7, 2009
Lessons from Garry Hammel (Book Extract)
I recently read a book titled ‘Future of Management’ by Garry Hammel. Quite a great book. He has summarized his analysis and observation of some of the characteristics that have helped entities to survive for long periods of time. I felt that these concepts are worth sharing. This means that his article is essentially interesting ideas from his book.
I was quite fascinated by his analysis of the five things that have survived for long periods and the key attributes that have contributed to this longevity.
1. Life
Life on earth has sustained for centuries. Life does not do any strategy planning. The monkeys never developed a long term strategy for turning to man. Then what helped them sustain and evolve?
Experimentation and Adaptation; the mutations are experiments and the life forms continuously adapted and sustained those mutations that survived demands of the ever changing habitat.
2. Religious Faith
As scientific revelations proved many religious explanations wrong, it was expected that the religion would die. It has not. It has sustained with same vigor.
It was on account of the sense of purpose that faith gave. Not the ‘when’ and ‘how’ of natural phenomenon. But an answer to ‘for what purpose’. We often observe what this powerful attribute can motivate human beings to achieve.
3. Democracy
Amartya Sen observed that there is no history of a serious famine in a working democracy. Winston Churchil’s take was Democracy is the worst form of government there is, except every other that's been tried.
The democracy offered opportunities for various lobby groups to push their agenda and this acted as a check and balance in the evolutionary process. It gives the participants the right to choose.
4. Cities
The cities like Athens, New York, London, Tokyo have sustained for centuries in spite of cultural and scientific upheavals.
Was it just geographical advantage? What helped them to sustain is the diversity of people the city attracted which made these cities crucibles for innovation. Institutions where such diversity is limited, you see them perishing.
5. Markets
Wherever there is a functioning market, innovation flourishes as the markets give opportunity for innovations that are relevant to sustain.
Markets can’t generate new business models or new products, but they can create powerful incentives for individuals to think up new things.
What is the message from this for us? Encourage and nurture theses attributes in our organizations for us to succeed and sustain. You may want to know more on how to do this. The book gives you excellent insights. Read on..
I was quite fascinated by his analysis of the five things that have survived for long periods and the key attributes that have contributed to this longevity.
1. Life
Life on earth has sustained for centuries. Life does not do any strategy planning. The monkeys never developed a long term strategy for turning to man. Then what helped them sustain and evolve?
Experimentation and Adaptation; the mutations are experiments and the life forms continuously adapted and sustained those mutations that survived demands of the ever changing habitat.
2. Religious Faith
As scientific revelations proved many religious explanations wrong, it was expected that the religion would die. It has not. It has sustained with same vigor.
It was on account of the sense of purpose that faith gave. Not the ‘when’ and ‘how’ of natural phenomenon. But an answer to ‘for what purpose’. We often observe what this powerful attribute can motivate human beings to achieve.
3. Democracy
Amartya Sen observed that there is no history of a serious famine in a working democracy. Winston Churchil’s take was Democracy is the worst form of government there is, except every other that's been tried.
The democracy offered opportunities for various lobby groups to push their agenda and this acted as a check and balance in the evolutionary process. It gives the participants the right to choose.
4. Cities
The cities like Athens, New York, London, Tokyo have sustained for centuries in spite of cultural and scientific upheavals.
Was it just geographical advantage? What helped them to sustain is the diversity of people the city attracted which made these cities crucibles for innovation. Institutions where such diversity is limited, you see them perishing.
5. Markets
Wherever there is a functioning market, innovation flourishes as the markets give opportunity for innovations that are relevant to sustain.
Markets can’t generate new business models or new products, but they can create powerful incentives for individuals to think up new things.
What is the message from this for us? Encourage and nurture theses attributes in our organizations for us to succeed and sustain. You may want to know more on how to do this. The book gives you excellent insights. Read on..
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