February 27, 2007

Nuggets of Management Wisdom #11

Posted by Bizaholic | 11:14 PM | with 1 comments »

Avoid being a perfectionist; it is the biggest hurdle to growth and success.

I have started getting a feeling that being a perfectionist is like having a serious illness. Having observed some successful as well as not so successful people in my immediate environment – work place, family, friends – I have come to a conclusion that an obsessive tendency towards perfection never allows you to reach the heights of success and greatness. The reason is simple – a perfectionist hates making mistakes, and without mistakes you cannot taste greatness or extraordinary success. Success always comes from experimentation, mistakes, and learning acquired in this process. As Dr. David M. Burns said –

Aim for success, not perfection. Never give up your right to be wrong, because then you will lose the ability to learn new things and move forward with your life. Remember that fear always lurks behind perfectionism. Confronting your fears and allowing yourself the right to be human can, paradoxically, make yourself a happier and more productive person.
Another problem with being a perfectionist is the tendency to hang on things till they meet the perfection benchmarks. This often results in unnecessary delay in making decisions and executing something. A perfectionist frequently forgets about timing and relevance of an issue to the solution he is providing. Instead of balancing multiple dimensions of an issue to come up with a balanced and relevant solution, the perfectionist loses focus and gets hung up on one dimension that may not be a significant dimension. When the enemy is in front ready to assault, prudence lies in firing at him with reasonable accuracy rather than set up the gun and the angle for a perfect shot at the heart! It is important to understand when something is good enough and any additional effort would only result in diminishing marginal utility.

It is important to understand that life is not meant to be perfect lest the entire fun element would be gone. Life is a challenge meant to be undertaken with some element of uncertainty and surprise. A perfectionist tries to make life linear and predictable, which is against the laws of Nature. It is important not to be afraid of experimenting and committing mistakes. Experimentation is accompanied by mistakes but history is a witness that nothing great on this earth has ever been achieved without the miraculous powers of experimentation and risk taking. Experimentation and resulting mistakes often open up vistas of opportunities that perfection can never dream of!

As a parting shot, it would be worthwhile to ponder on the words of Anne Lamott in “Bird by Bird” –

I think perfectionism is based on the obsessive belief that if you run carefully enough, hitting each stepping-stone just right, you won't have to die. The truth is that you will die anyway and that a lot of people who aren't even looking at their feet are going to do a whole lot better than you, and have a lot more fun while they're doing it.
Ladies and gentlemen, stop being perfectionists and get a real life full of happiness and achievement.

February 19, 2007

A few days back, I read a report in Business World about how little tax some companies in India pay, thanks to myriad exemptions and loopholes in the system to manipulate tax outgo.

I really fell from my chair on knowing that Reliance Industries pays much less tax (as a percentage of income) than what I pay. Yes, Reliance Industries paid just 8.41% of PBT as tax in 2005-06. To know how much tax some of the well known companies in India pay, see the graphics below (click and open in a new window for enlarged image).

Isn’t this shortchanging the Indian government? Not only is this resulting in a significant loss of revenues for the Indian exchequer but it is also giving unfair advantage to some companies who can manipulate the laws. But who is to blame? No doubt the culprit is the Indian government.

We Indians have a habit of holding on to things even after they have outlived their utility. Same is the case with tax exemptions in India, particularly in corporate tax segment. We introduce exemptions to encourage and develop a particular industry. When the objective has been met, we must remove the exemptions. But in our case we continue with the exemptions even when the objectives have been met and the particular industry has transformed itself into a behemoth. A case in point is IT industry which has outlived the utility of the exemptions provided to it. This is a fact that even Mr. Narayana Murthy of Infosys, the face of IT industry in India, admits to.

Another area of concern is the loopholes in tax laws and tax administration that can be manipulated with some creative structuring of the business and its investment. A complete set of finance professionals are out there with their services to ensure that all loopholes of the Indian tax system are fully milked to reduce the tax burden.

The problem is the complexity of law and administration. Complexity breeds inefficiency. The need of the hour is to simplify the tax laws and procedures in such a way that a common man can understand them. At the same time, transparency must be there. One way to start the simplification process is the do away with various exemptions. Exemptions are like plague.

Hope this issue is on the radar of our Finance Minister while preparing budget for 2007-08.

February 18, 2007

Never manage through reports; instead manage through your people.

It may sound moronic to even think that someone can try to manage through reports. But in a flash of corporate eureka moment, I realized that this is what many managers in many organizations do. They try to manage through reports instead of trusting the abilities of the people they manage. As a result, utter chaos prevails and things never get done. And to top up all these, everyone in the company transforms into a report jock churning out reports 80% of one’s time. Discussion and reports take center-stage while action and execution take a backseat.

Reports have a simple purpose – to give you a good enough view of the situation with reasonable accuracy so that you can plan and execute your actions wisely. Expecting anything more than this from reports is a sure shot way to bring gigantic inefficiencies in the system. Once the report has done its primary duty of giving a view, the ball should move to people’s court for action.

Why some managers manage through reports?
First, they are control freaks who want to control everything from top to bottom irrespective of whether it is worth their attention or not.

Second, they don’t hire right. Hiring becomes a playground for favouritism, promoting people to their level of incompetence, and wrong assessment of competencies. You can manage through people only if you have right people at right place. They just try to hire people who are their alter ego, and definitely not smarter than they are.

Third, they don’t trust the people they hire and are basically a great fan of command and control philosophy of management.

Fourth, they have poor delegation skills.

Fifth, they lack basic leadership skills like inspiring and motivating people to action. They just don’t know how to put the fire in their people’s belly so that people embrace their leader’s dreams as their own.

Sixth, reports are the ideal place to hide a manager’s own shortcomings under a pile of carefully designed sentences and tables of data that are creatively interpreted.

So what to do…
First, throw away all unnecessary reports from your system. Simplify the rest. If your people are spending more than 10% of their working time on making reports and MIS, then something is wrong with the system (at least in sales & marketing domain of consumer goods companies).

Second, hire bright people whom you can trust. Don’t shy away from hiring people who are smarter than you. People aspect is the most important aspect of effective management. Next on importance ladder is process.

Third, delegate effectively. Neither everything is worth your attention, nor are you competent enough to tackle everything.

Fourth, talk in numbers as they don’t lie. In my experience, reports are the most effective tool for rationalization with all those creative structuring of sentences and interpretation of data. Don’t fall into that trap as it is a vicious cycle with the potential to choke the system. Also, talk about solutions not problems. Reports have a tendency to focus too much on problem and too little on solution. Problems have no end, so better talk about solutions, one at a time. And to become solution oriented you need to become action oriented rather than reports oriented or discussion oriented.

February 16, 2007

The rapidity of change today is mind boggling. This is also significantly affecting the rules of the business. While technology is becoming obsolete faster than ever, the new technologies are also opening vistas of new social and business opportunities and trends. The entire system is going through an evolution process that is increasingly being governed by the laws of evolution rather than the laws of management. And in this new ecosystem, who will survive and who will die in coming years? Well, it is difficult to predict. But here are seven traits that, I feel, may dictate the longevity of companies in coming years.

Socially Oriented Capitalism
Businesses will increasingly get entwined with society in coming years if they have to survive the next 25 years. With globalization in its adolescence, the world is witnessing an increasing divide between haves and have-nots. Unless businesses come forward to understand the societal implications of their operations, and make appropriate strategy for constructive collaboration with society at large, things may become ugly in future to the extent that social unrest becomes hazardous for businesses.

The one and only solution for businesses to survive in the long run would be to enter into a partnership of progress with the society at large. It is only through ‘socially oriented capitalism’ that companies would be able to create a bond of trust and bonhomie with the masses that not only results in a symbiotic relationship but also results in the overall progress of mankind and a more equitable distribution of natural as well as economic resources and rewards. The concept of exploitation has to give way to the concept of co-creation.

Environmental Integration
How companies take a stand on environment is going to be a critical factor that will decide longevity of organizations in coming years. Days are not far away when companies who practice triple bottom-line accountability – profit, society, environment – would be toasted the world over. With the pace of development and the constraint of natural resources, time has come for companies to show concern and respect for natural resources. Very soon companies will realize that if they ignored environment, their very survival would be in doubt.

Managing Fluid Dynamics
If anything can be certainly said about business and technology, it is the fact that everything is in constant flux. Not only things are in flux, but the magnitude of change is unpredictable. So tricky the situations are that with one path-breaking innovation, an entire industry can prop up and another can go down instantly. How companies manage this fluid dynamics of the business and technological environment will decide how many of them survive over a considerable period of time. To manage this, great visionaries are needed at the helm. Exceptional leaders, who could see various possibilities, would be required to steer the company in a sea that in all likelihood would turn violent frequently.

Global interdependence
Never had interdependence been as visible as it is today. If Dow Jones sneezes, BSE catches cold. With globalization in full force, no country or individual or institution is self-sufficient. If economy of US slows down, impact is not only felt in US but also in the lives of Chinese workers who are engaged in manufacturing. A thorough understanding of the intricacies of this interdependence and managing them would be a key success factor in coming years. Leaders of tomorrow will have to do a lot of balancing act to ensure that uncertainties due to global interdependence are mitigated to a large extent. Companies that develop such leaders in its rank and file would find it much easier to survive and grow.

The era of individual genius is soon to get over. The era of “collective genius” is going to arrive soon. With each passing day, everything is getting more and more complex. Be it life, or business, or relationships, or communication, the complexity quotient is on the rise. And this phenomenon is being accompanied by the shift of focus from individuals to groups. The world is slowing waking up to the idea of “many minds are always better than one mind”. Moreover, the flattening of the world perpetuated by seamless communication, mobility, and blurring of time-zones is providing an opportunity for the confluence of multiple minds across multiple locations to solve the most complex problems in the most cost-efficient and effective way. The way open source software is bringing about a revolution in the software industry is one small indication of the power of collaboration in coming years. Companies that want to increase their longevity will have to ingrain the power of collaboration in their corporate DNA. And, perhaps, the right time to do this is now so that the foundation for a collaborative organization is in place at the earliest to reap the emerging benefits.

Just like “individual genius” will give way to “collective genius”, “individual power centers” will give way to “power networks”. The elevated role of networks would essentially be an off-shoot of the emergence of the era of collaboration. In future, the concept of leadership will emerge from the human networks in an organization. Concept of “first among equals” will take precedence over “paternalistic leadership”. In such event, power will neither flow from the barrel of gun nor from the authority of the top gun. Power, at least inside an organization, will flow from the dynamics of human networks.

With the flattening of the world, flattening of the organization would follow. Hierarchy based command and control model may start appearing like something from Stone Age. In a hierarchy-less organization, the way individuals interact and transact may start following the concepts of biology like osmosis, cross-pollination, cell multiplication, grafting, eco-system, evolution, synthesis, nutrient management, etc. All these will ultimately result in shift of power base from individuals within an organization to networks of individuals within an organization.

Entrepreneurial Culture
The future is going to be tough and unpredictable, yet it is bound to be promising with emergence of new ideas to make life better. In future, everyday will see the birth of new ideas and new opportunities. At the same time, rapid churn in technology will result in death of many an idea. Managing this cycle of opportunity and obsolescence will require the best of entrepreneurial spirits within an organization. An organization that develops the culture of entrepreneurship and promotes the entrepreneurial traits of identifying opportunities, risk taking, adaptability, and flexibility would find it much easier to survive and flourish in future. In coming years, the product life cycle will get extremely shortened due to rapid technological developments as well as equally rapid technological obsolescence. One of the keys to growth in such circumstances would be the ability of an organization to come up with new products and services at regular intervals that meet customer’s needs in better ways. This will entail managing current and future technologies, ever changing business environment, and increasingly demanding expectations of stakeholders – shareholders, customers, society. And there is absolutely no better way to do this than to create a battery of entrepreneurs within an organization to imagine, plan, direct, and lead change to create a virtuous cycle of sustainable growth in an era of continuous flux.

February 15, 2007

Very few business leaders are brutally honest and candid about issues that directly affect their own companies. Mr. N R Narayana Murthy of Infosys is one such leader. In a breakfast encounter organized by Economic Times between Mr. Murthy and Mr. Azim Premji of Wipro, he virtually dropped a bomb when he said, "I find it funny that companies like Infosys, with profits exceeding Rs 3500 crores, do not pay tax in India." Assertions like this put him on a higher pedestal, way ahead of the current breed of business leaders. He further said, "We use government infastructure in terms of education, roads, housing, and all that. I don't think Infosys is paying taxes commensurate with the benefits we derive from the local environment." So candid! Hats off to this man.

Leaders like Murthy have a special role to play in the present and the future. There is a myth surrounding business, though not fully unjustified, that business exploits society and environment and doesn't give back what it takes from its surroundings. There is a palpable growing divide between business and society and the buzz about corporate social responsibility and such stuff sounds hollow to the common man. It is in these times that people like Narayana Murthy have to play a constructive role to bridge the divide and mistrust between business and society for a healthy cohabitation.

This would be particularly significant in coming years when, due to acute pressure on available natural resources, the growth of companies would get depended on how well they engage society and the environment in a win-win relationship. Global business environment is, perhaps, entering a new phase where business leaders will not only have to create a symbiotic relationship with society and environment but will also have to work on marketing the concept of ‘socially oriented capitalism’ to the masses to make sure that it gets ingrained in the mass consciousness that welfare of business, society, and environment is mutually interdependent.

We need thousands of Narayana Murthy to lead this imminent paradigm shift.

February 10, 2007

These days the hot news from retail in India is the alleged letter written by the President of the Congress Party, Ms. Sonia Gandhi, to the Indian Prime Minister asking him to go slow on FDI in retail on the grounds of protecting the interests of mom-and-pop retailers. And all the media bytes going into analysis of this news is amusing me.

First of all, I don't believe that mom-and-pop stores would be adversely affected by the organized retail onslaught. Considering that 95% of roughly 12 million unorganized retailers have a shop area of less than 500 Sq Feet, having a unique set of niche customers, taking their slice of pie would be an uphill task. Impact would be the most on the 5% of unorganized retailers who have bigger shop area. But for the sake of argument on FDI in retail, let me assume that smaller retailers would get affected by organized retail in a big way. And in such an event, how would delay in allowing FDI in retail help protect smaller retailers in unorganized retail sector?

The argument that delaying FDI in retail would help the interests of smaller Indian retailers is nothing less that utterly-butterly hilarious proposition. Today, India boosts of companies like Reliance, Bharti, Aditya Birla Group, and Tatas who have immense financial muscle, global reach, and scale, and who are aspiring to be big players in Indian retail sector. They have even openly declared their war chest that runs into billions of dollars. These domestic biggies are out there to thrash the mom-and-pop stores. In such a scenario, how come delaying FDI in retail would protect smaller stores. The reasoning is sans logic. FDI or no FDI, the retail landscape is not going to change much for mom-and-pop stores, but for big domestic players a delayed FDI would seem like a boon straight from the Heaven (or 10 Janpath!). Now, this is something that is more than what meets the eyes. Was there serious lobbying taking place to get the FDI in retail delayed?

If the government really thinks about helping mom-and-pop stores, it should expedite the FDI in retail. FDI in retail would mean competition to big domestic players from big global players. This would keep the organized retail players, both domestic and global, on their toes and in all likelihood would result in a war of sorts that may ultimately lead to bleeding balance sheets for organized retail. And the customer wins too. In any case, competition is always good for the customer.

Or is it a case of protecting the likes of Reliance and Bharti that the government has been asked to delay FDI in retail? Does a behemoth like Reliance and Bharti need protection? They have financial muscle, global expertise, reach and scale. Then why we need to protect them? If these companies are aspiring for $25 billion revenue from retail, let them slog it out themselves. It's better to throw an equal global lion in the cage to keep these Indian lions on their toes, lest they turn monopolists using their immense power. If a small mom-and-pop store that does a monthly business of Rs.25000 a month can fight it out with biggies like Reliance and Bharti, who are talking about revenues of billions of dollars, then surely Reliance and Bharti can play it out with the likes of Wal-Mart, Carrefour, Tesco and their ilk. The rule should ultimately be same for all.