Engineering High-Performance Organizations: Fundamental Principles Rather Than Transformative Technologies

One of the concomitants of the digital age has been the advent of the concepts of electronic commerce and virtual organizations. With cross-functional and cross-border networking becoming features of competitive and globalized corporations, organization design has entered a phase of matrix complexity. For all of this, digital technologies are seen to offer an instantaneous and elegant solution. These developments and organizational thought processes have unfortunately resulted in an unfortunate short shrift to the classical principles of organization design. Random design and expansion of organizations to meet current or short term exigencies has resulted in organizational asymmetry, as a systemic feature. Overarching global monolithic structures have resulted in structural rigidities and process impedances. Technology, while seeming to aid flexibility and strength of organizations, has unwittingly resulted in these imperfections.

The concepts of digital economy or automated factories can never eliminate brick and mortar support systems or human brain and brawn enablers. The only differentiation of the former (digital automation) is that the latter (physical humanism) is less visible  under a digital hood. The requirements of Google and Microsoft to build huge server farms for Web and Cloud support systems, of Tesla and Toyota to build giant battery farms and robotic factories and of Amazon and Flipkart to build huge product warehouses reflect different ways of doing business rather than obliterating conventional businesses. Technology makes this shift possible but cannot eliminate conventional organizational principles which remain still relevant. This blog post argues that simple engineering principles are relevant for designing and operating high performance organizations even if they are digitally enabled and globalized. Five simple engineering principles of structural design and five fundamental principles of thermodynamics and fluid dynamics are utilized to explain the hypothesis.

Structural symmetry

Symmetry is one of the important principles of engineering design. Symmetry lends stability to structures besides providing elegance. It also simplifies design itself. Symmetry goes hand in hand with standardization as an underlying enabling concept. Organizations, like buildings, gain from structural symmetry. Symmetry has both external and internal dimensions. An organization which desires national marketing coverage has to create a symmetrically designed (centre, regions, states and territories) organization to work effectively towards its objectives. Global organizations also need regionally or nationally symmetric organizations to think globally but act locally. One of the best examples of structural symmetry is Rensis Likert’s Linking Pin Organization where the overall organizational pyramid is composed of several small pyramids linked with each other from the bottom up and sideways. It reflects a principle that individuals make teams and teams make organizations.

Centre of gravity

Centre of gravity is the unique point of a body that provides stability to a structure, and even to a human body or an organization. Civil engineers take special measures to ensure that asymmetric buildings do have their centres of gravity nearer the centroid. A structurally symmetric organization automatically results in a supportive centre of gravity. If organizations have to be asymmetric for some reason it is important that the layers or components are so arranged that the organization has a centre of gravity that is well understood and experienced with an appropriate distribution of mass. Organizations find structural asymmetry a little unavoidable when venturing into sunrise technologies or unexplored regions. It is important for the original established organization to reconfigure (actually cantilever itself as an engineering concept!), to support the new initiatives but at the same time be sensitive enough to establish symmetry at the earliest opportunity (as we know, cantilevers can only support certain weight!). The slide of Tata Motors in the passenger car segment after the initial corporate driven successes has been due to a failure to create symmetry across different product lines.

Strategic symmetry

Strategy is often seen to be as unidirectional (specialized organizations) or multidirectional (diversified organizations). It is less understood that strategies of all types gain from symmetry. Hindustan Unilever in its fourth generation growth strategy created symmetry in favor of emerging markets to ensure that they would contribute an overwhelming share of the company revenues by 2020. Even qualitatively, strategy gains from conceptual clusters. Harish Manwani in his role as the COO of the company conceptualized his 4G sustainable growth model  in terms of Competitive, Consistent, Profitable and Responsible components to requisite thrust. Strategic symmetry is a key driver for structural symmetry, given that structure follows and enables strategy. Organizational scale and scope as well as symmetry need to reflect longer term goals rather than shorter term compulsions.

Future is foundation

Visionary engineers look into the ground as they envision ever-high skyscrapers; they ensure that the foundation is designed to enable vertical growth and resist seismic shocks. Organizations must lay foundations that support sky high aspirations and endure unanticipated pressures. Typically, successful CEOs design, ab initio, organizational foundations that last at least ten years of establishment and growth at each time. An approach of tinkering with the base organization as an annual exercise leads to weak joints and imperfect foundations. Structural base of an organization should not be viewed in terms of people numbers; it must be understood in terms of functional support that enables an organization to be successful as an end-to-end connected enterprise.

Talent is material

Modern structural engineering continues to develop to amazing heights because of the impressive strides in material technologies. Apart from the inherent characteristics of load bearing materials, development of superior metal and non-metal joining and bonding materials has resulted in the design and execution of high integrity structures. High integrity and strength do not mean non-moving structures. From buildings (example, the columnar structure) to automobiles (example, the chassis) well-designed flexibility promotes resilient strength.  In a similar manner, by focusing on more robust talent and developing intra-organizational collaboration as a specific set of talent attributes, organizations can cement their talent to a perfectly optimized balance of strength and flexibility.

If organizational structure is akin to a civil engineering structure, organizational processes are akin to thermodynamic and fluid dynamic processes of an entity-environmental system. Several laws and principles, ipso facto, apply to organizational principles but only five significant ones are discussed below.

Knowledge as driver

Talent, which comprises knowledge and experience, is the motive force for organizations. In fact, even experience translates itself into knowledge. Whether a device is mechanical, electrical or electronic, heat is an essential element of its operation. However sophisticated an organization is, the level of knowledge shall only be the primary driver of its operation. Like particles (and molecules) that collide in a material system but are designed to become a concentrated heat source, people talents (and egos) do collide in an organizational system. The biggest challenge of leadership is to ensure that interactions are collaborative and the cumulative knowledge of an organization is at such level that it drives the organization on its chosen path, despite competitive gradients and turns, with requisite thrust, acceleration and velocity.

Knowledge equilibrium

The zeroth law of thermodynamics states that thermal equilibrium is reached whenever bodies in different temperatures are in contact with each other. The knowledge levels of individual people in an organization determine the level of knowledge at which the knowledge equilibrium in an organization is set. If an organization inducts pedestrian talent in a large measure even the few brilliant ones would decay. A firm which faces a superior competition must appreciate that it must consciously upgrade its knowledge to ensure that it always stays at the superior knowledge gradient. Equally, it must appreciate that the rest of the competition would also work towards higher knowledge levels to achieve knowledge equilibrium with the leaders. A continuous induction or generation of knowledge is essential for the knowledge system to serve as a perpetual heat pump for organizational momentum.  

Internal energy

The total energy of a system is the kinetic energy of the system plus the potential energy of the system plus the energy transferred into the system. The competitive agility of an organization, the competitive pressures from the environment and the energy accessed by the organization determine the total energy of an organization. Like all natural processes, the human organizations have an inherent property of dissipating useful energy. However, as a synthetic form, organizations can be led and managed to an appropriate thermodynamic organizational state that minimizes wastage of energy and maximizes the total organizational energy. This stems from an appreciation of knowledge as the natural energy of a human organization rather than misconstruing authoritative power as the synthetic energy of such a system.

Pressure boosters

The simplest of the laws of fluid dynamics clearly states that fluid flow and pressure are adversely affected by the length of the piping from the supply point to the delivery point. The more complex and the more diffused an organization, the less intense the organizational processes become from the supply point to the delivery or recipient point. Given that organizations typically have goals and strategies developed at the very apex level while the ground level execution and competitive realities are discovered at the basic ground level, the mechanisms of free and effective transmission of information across the organization is a challenge. It is important that managers and leaders act as pressure boosters in an organization ensuring that the processes move seamlessly without pressure drops.

Bottlenecks as venturis 

Organizations typically have bottlenecks. In fact, inherent in the pyramid design philosophy of a typical organization is the concept of organizational bottlenecks. Typically, these occur as information has to pass through restricted bridges between subordinates and bosses, and between functions or organizational units through specified individuals. Fluid dynamics, however, illustrates the venture effect in piping whereby constrictions accelerate the flow of fluids across. It is necessary for organizational managers to view the traditional bottlenecks as opportunities to create venture effects. The pressure of knowledge accretion at source (whether at bottom frontline level or the apex leadership level) and the vacuum of knowledge seeking (again, at either points) would turn typical organizational bottlenecks into desirable venturi phenomena.

Engineering high-performance

The ten engineering principles enunciated above are relevant for multi-people organizations. Even a one person organization is a singular and natural embodiment of symmetry, intrinsic gravity, internal energy, knowledge drive and so on. As organizations are built and processes are established, it would be necessary to design them with an engineering flair as much as with behavioral approaches. Fortunately, as discussed in this blog post, creating high performance organizations is more of simple and conventional civil and mechanical engineering principles than exotic electronic and digital technologies. As long as organizations remain as human systems, the simplest of natural engineering principles would add strength, agility and sustainability to organizations. It would be appropriate to invoke some basic engineering flair for designing high-performance organizations.

Posted by Dr CB Rao on October 2, 2014    

   

 

             

Institutional Actualization: The “5 A” Process of Virtuosity

If actualization is defined as becoming what one is capable of becoming, who would not want to reach a point of actualization? The desire to actualize one requires a process of virtuosity. Nothing comes easy in life, more so actualization. In a previous blog post, “Self-actualization by One’s Self for Oneself: An Enlightened Process for the Elusive Goal” published on April 21, 2013 in Strategy Musings (http://cbrao2008.blogpost.com), I proposed a model of ten-component self-actualization that had strong performance and philosophical undertones, and traced several phases and steps that need to be gone through during one’s lifespan.  The blog post postulated and demonstrated that the ten components, namely, self-awareness, self-appraisal, self-confidence, self-control, self-development, self-discipline, self-expression, self-improvement, self-motivation, and self-respect, together, constitute an enlightened process to achieve the typically elusive goal of self-actualization.

The above mentioned approach to actualization was proposed as a holistic solution to handling life’s challenges and opportunities for a human being in a social or organizational context. One question we face is whether the model of actualization for institutions would be any different from that of individuals. The answer probably is in two parts. One, to the extent that institutions are led and managed by individuals, individual actualization should lead to institutional actualization. Second, institutions are also like citizens and need to fulfill certain responsibilities and also seek fulfillment. That said, institutions have a life of their own and individuals may not be able to influence a particular course of actualization, without institutions themselves taking up actualization as a process. This blog post proposes a simple model that would capture the process of virtuosity by which institutions can achieve actualization.

Institutional actualization

Actualization of human beings and of institutions makes the world a better place to live in. There is no single benchmark of what actualization means. In fact, it is established that actualization varies vastly for individuals even within the same trade. For a particular actor or musician, for example, actualization could mean winning of an Oscar. For others in the same artistic domains, actualization could mean mass popularity amongst the audience. For a particular corporate executive, actualization could mean being a generation ahead in growth and creation of personal wealth. For another, it could mean training a vast pool of leaders and creation of institutional wealth. Whatever be the gross difference or subtle nuance, actualization is a key driver of social and economic progress.

For institutions too, actualization could be different even within an industry. For certain organizations scale is important and for others scope is important. Some are inspired by market share and some by profit share. Some aspire for growth while others are content being model corporate citizens. Whatever be the actualization benchmark, it is clear that when actualization ceases, progress plateaus. There was a time when the government-owned public sector corporations were a showpiece of India’s engineering progress. This arose as the bureaucrats and executives found actualization alike in laying the first foundations of national technological development. However, as monopoly power stalled and licensing raj stymied competition, complacence set in and actualization faltered.

Actualization, beyond strategy

Institutions rely on structures and processes to govern growth. Strategic planning or long term planning is one such systemic discipline adopted by corporations. Starting with vision, the process develops a strategy, guides execution and measures progress as an iterative process. The strategic process, unfortunately, is both an enabler and an inhibitor to institutional actualization. The SWOT analysis of long term planning, for example, is akin to the processes of self-awareness and self-appraisal, and lays the foundation for development of a corporation. However, once a strategy is developed metrics take over. Achievement is measured against hard metrics rather than soft aspiration. The even more qualitative goal of actualization never gets assessed. Strategy, while being an important enabler of actualization, also cannot be allowed to dampen the quest for actualization.  

The issue with strategy is that past performance or current competition almost always serves as a benchmark for vision and strategic goals. Strategy is rarely determined in a corporation by a true understanding of its actualization potential. That hardly does justice. Actualization is pushed to limits when a person or institution charters into a completely unchartered territory or imagines a completely invisible. Actualization for a corporation is a lifetime experience rather than the result of a five year strategic planning process. A review of the multinationals, such as Lever, Glaxo, SKF, GE who entered India more than 100 years ago and have tasted a level of growth in, and integration with, India, that would not be visible to the trained mind even at the time of entry, demonstrates how actualization of a lifetime actualization differs from a limited perspective strategic goal setting. Most pioneering inventions and most path-breaking businesses, national or multi-national, and in India or abroad, owe their success to higher levels of actualization inspired by an unknown but imagined future.

A 100 year horizon

Institutional actualization, as a process, has a horizon of several decades. While institutions exist in perpetuity, and therefore have no specified life as individuals, probably 100 years, in rests of 20 years, as with individuals is a good way of establishing actualization horizon even for institutions. Continuing that concept, a corporation can be postulated to grow up in the first twenty years, become established in the second twenty years, season itself in the third twenty years, emerge as a bellwether in the fourth twenty years and become an icon in the fifth twenty years. Today’s corporate analysts and business historians judge corporate evolution far too early. As a result, young startups are praised as bellwethers and icons even in the first decade of their growth. Like individuals, institutions are also prone to the adverse consequences of headiness caused by premature recognition, which may impact their ability to secure lifetime achievements.  

This is not to suggest that corporations do not or cannot become innovators or pioneers in the first twenty years of their life, or even within the first few years of inception. Certainly, they do and can as demonstrated by many young achiever-companies. Success of entrepreneurial efforts or competitiveness of business models, however, does not ipso facto imply sustained institutionalization of a corporation or its actualization of a lifetime. A whole series of Internet product or service companies have made their mark in their first years in the recent post but it would remain to be seen whether they would keep up a sustained momentum and achieve actualization. A process that helps institutions target actualization as a lifetime objective would be well-merited. This blog post proposes a five component process, comprising Aspiration, Ambition, Analytics, Achievement and Actualization (called the 5 A Process) that would be particularly relevant for institutions. 

The "5 A" process

Aspiration, which implies a strong desire to achieve something, is largely seen as an individual trigger. At an organizational level it gets translated into getting into a business or growing a business based on targets of revenue and/or profitability. The real aspiration for a corporation, however, must be in terms of making available to customers or society something which has not been available thus far and thereafter remaining a leader in that pioneering business for a lifetime. Whether it is Lever, Glaxo, Philips, SKF, Tata or GE who entered India over 100 years ago with consumer products, healthcare products, electronics, bearings, steel or infrastructure equipment the rule of making something available for the first time, and remaining a leader for decades in that business reflects an aspiration that lays the foundation for lifetime institutional actualization.

Ambition is aspiration reinforced with the determination to achieve and succeed. The difference between ambition and aspiration is same as the difference between determination and desire. Corporations need to be fired with an ambition to succeed. Pioneer-entrants mentioned above and a host of other private sector and public sector firms in India made their entries, braved near hostile circumstances, brought in novel products, opened up unreachable regions and all the while successively introduced new technologies, products and business models. Determination helped these corporations become institutions. Even ITC, which depended only on the socially regressive tobacco and cigarette business demonstrated pluck and determination to re-charter its course into multiple socially acceptable businesses to survive and grow.

Aspiration and ambition need to be channeled through a robust framework of analytics for corporations to achieve their aspirations. Analytics is the science of analyzing data to develop trends and providing guideposts to future. That said, decades ago there was no analytics as a domain, yet the pioneers did successfully what they did over hundred years ago. The reason lies in the fact that there is no better analytical tool than the human brain. All of GE’s inventiveness is no match to the invention of GE’s great founder Thomas Edison and his analytical ability that foresaw the need for a corporation based on technology in the 1800’s. So has been the analytics of Henning Holck-Larsen and Soren Kristian Toubro, the two Danish engineers who foresaw India’s future and established Larsen & Toubro (L&T) in 1938 in India. Human analytics still remains the best bet for providing a framework for channeling aspiration and ambition.

Measuring achievement is apparently the easiest of the five step actualization process which moves as per set aspirations. If achievement is to be measured against revenue/profit metrics, it is indeed an easy task. If, on the other hand, it is to be measured in terms of sustainability of the aspiration, it is indeed a hard task. However, there are ways to measure the sustainability of the transformation. The robustness and scalability of technology deployed in a corporation is the first measure of achievement. The breadth and depth of market reach of a corporation is the second measure of achievement. A corporation which consistently maintains its high score on these two dimensions would be on a sustainable path of actualization. Toyota and Sony are examples of such sustainable achievement; they are helped to overcome financial setbacks on the strength of sustainability of their technological depth and market reach.   

In a process of institutional actualization, why should actualization figure as a discrete process component instead of as the final outcome as would be in the case of individual actualization? The reason is fairly simple; corporations are expected to be perpetual in life while individuals are not. For individuals, actualization is nearly an end-of-the-active life experience, almost synonymous with nirvana. On the other hand, for corporations actualization is a reminder of how they can transform themselves into institutions and how they can contribute to societies in a perpetual manner. Each actualization cycle should ideally lead to the next one. In institutional actualization, the very fact of actualization should spur thinking on the next frontiers. This applies whether corporations see a 20 year horizon or a 100 year horizon for institutional actualization.

Leaders’ responsibility

Corporate leaders and their boards must, from time to time, take time off to assess their corporations on their actualization journey. Even if their corporations have met all the performance metrics and even if they are the preferred ones of the Street (and in some cases, in spite of their not being so), the leaders and boards would do well to introspect and review whether their corporations have become what they must become, and actualized themselves to the best extent. Institutional actualization tends to be a perfect blend of all the positive faculties of the individuals comprising an organization, in time spans appropriately visualized.  

Posted by Dr CB Rao on May 19, 2013

Organizational Dynamics: Social Forces and Interpersonal Skills

Organizations are structures created to bring together people who possess requisite competencies and attitudes to deliver common organizational objectives for the companies they represent. The theories of organization have evolved over the years to identify appropriate methods and approaches, and tools and techniques by which an organization can function efficiently and effectively. The need for such theories arose because some of the fundamental and essential building blocks of organization such as departmental arrangements, performance management systems, business priorities, leadership opportunities while ensuring organizational delivery also generate forces of impedance. This, coupled with the fact that people tend to have dissimilar backgrounds despite sharing common criteria and objectives makes people management in an organization truly challenging and complex.    

Several types of organization structures have been devised to enable organizational dynamics that support rather than impede business objectives. Functional, geographic, business, project, matrix, and flat organizational structures are deployed to meet specific requirements. It has, however, been found that structures rarely solve anything by themselves and management of interpersonal relationships is something that has enduring substance and challenge. This blog post hypothesizes that organization being a social structure at its core interpersonal management needs to recognize and understand the social forces that operate in an organization. While interpersonal skills are important to ensure organizational harmony, the social forces in an organizational setting must first be understood.

Social forces

Just as an industry has competitive forces that impact firm performance, organizations also have social forces that impact team and individual performance. Similarly, just as there could be industry specific generic competitive strategies, there would be generic organizational strategies to manage the social forces effectively. Social forces in themselves fall under two categories, neither of which is necessarily bad nor good on an individual basis. Collectively, however, one set of social forces that are called Type A Forces collectively generate impedance while the other set called Type B Forces generate synergy. Both the types do exist in organizations. The challenge is to enable Type B Forces.

Type A Forces are typically five in number, and have a significant impact on how people, teams, departments and domains work together in a firm. These are rivalry, paradoxes, conflicts, misalignment and silos. It is easy to appreciate that each of the five forces is a natural corollary of organizational diversity while together they form a counterproductive set. Type B Forces, on the other hand, are inherently more positive, individually as well as collectively. These are collaboration, clarity, harmony, alignment and “one firm” as an operating paradigm.

Individual comparison makes it clear why Type B Forces are eminently more desirable for an organization. Collaboration, as opposed to rivalry, enables synergy of mutual strengths. Clarity as compared to paradoxes avoids loss of time and effort on confusing paths. Harmony as contrasted with conflicts ensures positivity and fulfillment. Alignment helps the value chain function seamlessly while misalignment leads to broken processes. And finally, when specializations and departments turn into silos processes slow down in an organization while the organization functioning as one firm works with synergy.

Generational styles

Type A and Type B Forces are not new to discover or aim for in organizations. They have been in existence from the very beginning of organized activity. Over time, conservative and non-competitive organizations are characterized by a preponderance of Type A Forces while proactive and competitive organizations are characterized by a preponderance of Type B Forces. Leaders have tried to manage these forces with different management styles. These styles are both the causes and result of the respective forces, and often represent generational differences in people management philosophies of managers and leaders.

Certain leaders facilitate and manage the Type A Forces in an organization by their Command and Control Style (CCS). Leaders adopting the CCS model simply direct people to obey. They typically let the Type A Forces build up and when they feel that such forces have become inimical to the organization they used their CCS model to root out the negative forces. This approach works in spurts, and is both a cause and a result of Type A Forces. In fact, team members who are observant of the CCS model adopt that in their own behavioral approaches leading to greater generation of Type A Forces.

Certain leaders facilitate and manage the Type B Forces in an organization by their Influence and Deliver Style (IDS). Leaders adopting the IDS model consciously inculcate in their people positive aspects of collaboration, clarity, harmony, alignment and one firm. They articulate a shared vision, detail out a workable strategy and demonstrate execution through constant employee engagement.  They are observant of the emergence of Type A Forces and work towards converting them into positive Type B Forces. As with the CCS model, team members who are observant adopt their own positive behavioral approaches, creating a virtuous organizational ecosystem.

Interpersonal skills

In the context of the foregoing, it is easy to observe that interpersonal skills would tend to be more impactful in an organizational ecosystem that has IDS leadership model and Type B Forces. In ecosystems marked by CCS models and Type A Forces, interpersonal skills act as temporary palliatives. The effort must therefore be focused on creating a positive organizational ecosystem that enables the full play of interpersonal skills. That said, there is considerable misreading of what interpersonal skills mean in an organizational context. While these are, no doubt, social skills they are not all about being nice to each other. In an organizational context, they have certain deliverables too.

Interpersonal skills, though falling under the category of social skills, are driven by technical or professional competencies. In today’s competitive world, managing people or partnering people is impossible without an ability to understand and analyze issues and present solutions. Strange as it may seem, competency is the foundation of successful cultivation of interpersonal skills. The foundation of being skilled interpersonally lies in the ability to build trust and rapport. Trust and rapport between individuals, whether they are colleagues or bosses and subordinates, are built based on three fundamental appreciations.

To be acceptable in an organizational setting, one should be aware that an issue or a problem exists, should be able to understand the ramifications and empathize with the other person who has the problem. This ability to build trust and rapport comes with the technical and professional competency to grasp problems and issues. In the absence of such an ability, the statements made by different individuals and departments  to each other in the ordinary course of business become positions of silos, rather than approaches of collaboration. Competency and trust thus coexist but can find the linkage only when people are able to connect through communication.

The third equally important enabler of interpersonal skills is communication. Communication, in an organizational context is not a matter merely or solely of language or grammar, which, of course, are nice to have. Communication is relevant and complete only when it comprises an equal and equitable measure of listening and speaking, enabling both the parties to communication developing a common platform, from which they can work together.  

Skill triad

Successful organizations approach organization dynamics in a holistic manner. While organization structures are drawn up to meet business needs, the real emphasis will be on creating an organizational ecosystem that promotes the positive Type B Forces of collaboration, clarity, harmony, alignment and one firm concept, managed by an Influence and Deliver leadership style. In such a solution, interpersonal skills are developed on a triad of professional competencies, trust and rapport building and communication. Organizational efficiency and effectiveness require a holistic approach as outlined in this blog post.

Posted by Dr CB Rao on December 30, 2012  

 

 

 

 

       

 

 

 

Management by Projects: A Paradigm Shift in Performance Appraisals

The other day Adobe Systems, the global software company known for its digital documentation technologies announced that it would be scrapping the annual performance appraisal process and would instead opt for regular feedback to its employees. The plan is to have managers regular feedback to their teams to ensure a quicker and continuous self-actualization, rather than wait for the year-end. The company now says it would provide feed-forward instead of feedback. Not a borrowed practice, the roots can be traced to management guru Marshall Goldsmith's theory on how instant and real-time feedback can boost performance. “Course correction is also faster and more immediate this way," says the Company. Considering that annual performance appraisals have been a direct result of management by results or managing for results, the quest for alternative is both natural and surprising.

Companies have always been challenged by the complexities and sensitivities of conducting performance appraisal in manners that are not only comprehensive and performance supportive but also equitable and developmental. Towards this objective, firms tend to constantly innovate and tweak their appraisal systems. Some companies emphasize a 360-degree appraisal where employees are assessed by peers, bosses and subordinates. Some others now place greater emphasis on employee behavior rather than on targets. Most others emphasize adding additional dimensions such as managerial aptitude and leadership skill inventories as appraisal platforms in addition to goal oriented rating systems. All these have only added to paperwork or portal work (where appraisals are digitized) without making any fundamental difference to the timeliness and effectiveness of appraisals. Management by, and for, results continues to be somewhat elusive for firms.

Baby and the bath water

The mainstay of the traditional annual performance cycles has been the specific linkage with goals, though assessment of developmental needs and an understanding of the managerial and leadership potential became integral part of the process. Standardization of appraisal templates, harmonization of rating scales and simultaneous assessment of employees across the company serve to ensure relative equity at least as a conceptual goal. The failure of the annual appraisal systems can be related more to the inability of the managers to provide objective and honest feedback and provide tangible mentoring and support for overcoming gaps and developing the employees. This is further compounded by the linkages of ratings with salary increases and promotions. A play-safe bias gets introduced in the appraisal processes at one end with managers becoming paternalistic as an extreme. At the other end, the role played by the appraisals in determining the career development makes employees to be excessively submissive towards the supervisors.

While companies have been cognizant of the deficiencies of the annual performance appraisal systems, hardly any company has gone as far as Adobe in terms of scrapping totally the annual appraisal systems. Companies have been trying to address issues of “halo” and “bias” as well as seeking to avoid the temptations of excessive generosity and criticality through appropriate counseling for objectivity on one hand, and prescription of normal distribution in ratings on the other. In practice, these guidelines do little more than sober down excessive variations, reaching rarely to the core of objectively yet empathetically appraising performance and potential in all the complex facets. As a result, annual performance appraisals continue to have their critiques. It is, however, doubtful if continuous feedback, as a substitute for an annual review, would lend itself to personalized flexibility and standardized efficiency of annual appraisals and provide the anticipated motivation for self-actualization. Firms with larger staff are likely to struggle to get superior options relative to the established and well-oiled annual appraisal systems. And, without a simultaneous and relative assessment of employee performance, company-wide, working out salary increments and career promotions could be quite difficult.

Annual results and specific projects

The root cause for the unhappiness with the annual performance appraisals lies in the assumption that all the results achieved by an individual can be assessed after each period of twelve months. Reducing the review period to six months or even a quarter does not take away the basic deficiency. Neither does focusing on inter-personal relationships and delivery through 360 degree feedback and assessment centers compensate for the deficiency. Taking focus away from metrics and bringing it onto behaviors also does not resolve the problem. This is because neither day-to-day processes and behaviors nor annual performance snapshots truly reflect what individuals, teams and organizations need to deliver against performance goals. Moreover, abolition of annual reviews and substitution by ongoing feedback requires maturity on the part of the team members. The organization also needs to overcome the diffidence and weariness caused by frequent feedback, and stay alert with the needed checks and balances.

The challenge with either sporadic or frequent feedback system is that with targets being hard to quantify on a high frequency, appraisals tend to focus only on behaviors and other qualitative aspects. Supervisors and team members could lack the maturity to handle work without targets. The problem is bound to be more acute with remote working virtual teams. Considering that feedback processes involve considerable allocation of time, daily or even weekly feedback is likely to divert significant amount of productive time to appraisals which could be emotionally consuming for their lack of novelty. While substituting the annual reviews with frequent, say weekly, reviews will help prevent 'the top of the mind recall' and “recency” biases the benefit is too small relative to other difficulties. It also appears that there are very few ways to retool the managers and employees to achieve frequent feedback capabilities.

Management by results vs projects

The performance appraisal systems typically assess performance in terms of results (vis-a-vis goals), work (vis-a-vis time) and competencies (vis-a-vis requisites) in three different buckets, each as a snapshot at the end of a year. If, in addition, peer and other stake holder inputs are required though they demand additional tools such as 360 degree feedback. A paradigm to integrate all the three appraisal components and other stake holder feedbacks can be made possible by a conceptual shift from Management by Results to Management by Projects. Management by Projects or MBP is a logical evolution of a performance management process which started with the once famous Management by Objectives (MBO) and got stuck in Management by Results (MBR).

All work, professional or even personal, is nothing but a series of projects, each with specific start point, end point, work flow, resource commitment, result delivery and stake holder acceptance. These projects could be short term in nature, beginning and ending within an appraisal cycle or long term ones starting prior to and/or ending later than a current appraisal cycle. Regardless of the overall timeframes, projects will have milestones which invariably fall within an annual appraisal period. Compared to the individual components of an appraisal process, projects are more amenable to a holistic appraisal at the end of each milestone as well as at the conclusion of the project.

The case of car design

It would be best to illustrate how MBP can positively influence a performance appraisal system by a case example. For simplicity let us assume that a car body is to be redesigned by a team of engineers in a period that falls within an appraisal cycle. Typically, the redesign will involve body design, head lamp design, tail lamp design, dimensional redesign, compatibility check of the new body profile with the other new or existing components, manufacturing feasibility, marketing acceptance and so on. While each work stream would have functional specialty and several engineers for each team, the entire design group has to work together with several other non-design functions, teams and team members to deliver successfully.

The project of redesigning a car typically tends to be in terms of a series of steps, some sequential and some parallel. For example, these could be understanding of on-road performance of the current model, understanding of new material, component and process technologies, creation of new design specifications, development of manufacturing process parameters, sourcing specifications, development of new designs, development of samples, integration of components and body, laboratory testing of new materials, components and body, on-road testing of new body, limited market acceptance testing, finalization of design and manufacturing , and sign-off by the project and management teams. Several of the above will also be iterative.

Stage gates as assessment centers

The essence of project management lies in the judicious identification of milestones, and stage gates which need to be successfully crossed to proceed to the next stage. Typically, these involve the presence of all members of the larger team and sign-off on each successful milestone. In the case of the car example, for example, the design teams in charge of current product analysis and new material and component trends would make presentations on their findings and seek the group's approval to proceed to the next stage of developing design specifications. How well the two teams perform in their studies and how the peer teams perceive their performance would be well reflected in the presentation.

The senior leadership team and the human resource team that participate in such stage gate presentations would have a wonderful 360 degree view of the performance of the presenting teams, and the members, that no further performance appraisals or assessment centre or peer review methodologies are required. Even more significantly, the leadership teams can participate in the stage gate processes through questions and suggestions, making the whole system inclusive and virtuous. The challenge, if at all, lies in capturing the essence of performance through appropriate templates by leaders who are well tuned for the selection process.

While stage gates are important, the ability of the team to successfully complete the project to the stipulated specifications and time lines within the approved budgets would be the ultimate reflection of the success of the project, and with it of the team members. These conclusive events serve as events that foster team bonding and development based on demonstrated success. Even when the success falls below the expected level such stage gates as well as concluding events would help members to learn appropriate lessons and prepare themselves for handling future projects better. Ideally the stage gates should receive fifty percent of weight and the project conclusion receiving the remaining fifty percent in the performance appraisal of the MBP process.

Organizational requirements

The MBP approach to performance appraisal is unique in that it is universally applicable to all types of industries and all sizes of firms. Projects, defined in a manner broader than setting up physical brick and mortar, projects are the core of work flows in any setting. Each goal of any organization needs to be accomplished through a project or a set of synchronized projects. By focusing on projects as living or real time platforms of goal delivery and performance appraisals absolute harmony can be achieved between organizational goals, team results and individual performance. For the business leaders, functional leaders and human resource partners to effectively participate in MBP, an open organizational architecture which discourages silos is required. To leverage it as a performance appraisal tool, the leaders and more particularly the human resource experts would require an ability to appreciate and analyze work flows in terms of projects, and only projects. The appraisers would need to be learners in the MBP system, and not mere judges as in the traditional appraisal systems.

MBP also requires an organizational culture which is collaboration and communication oriented and which has the true professionalism to discuss project performance transparently despite the knowledge that it would constitute a part of performance appraisal system. The advantages of MBP based performance appraisal system are many. Fundamentally, it institutionalizes a goal driven project management culture in the organization with emphasis on cross-functional team work. Secondly, it makes performance appraisal meaningfully calibrated with logical milestones and process parameters. Thirdly, it transforms performance appraisal into a real time virtuous process which knits together the basic performers, supporting and associated team members as well as peers and leaders. Fourthly, MBP helps leadership development across all levels and makes performance appraisal, leadership development and achievement of individual, team and corporate goals truly harmonized. Given the multifarious benefits, it is time for companies to adopt Management by Projects as a required paradigm shift in performance appraisals.

Posted by Dr CB Rao on March 30, 2012

Gender Diversity in India: Number Game or Talent Paradigm?

On March 8, 2012 India, like the rest of the world, celebrated the International Women’s Day. The day as usual was marked by several events and media outpours. Celebration of one assigned day for women, however, does not solve the challenge of ensuring gender equality in our social life and enabling gender diversity in all aspects of political, economic and business life. India, like in many other aspects, presents a paradox in its approach to women. At one level, the social firmament is male dominated, requiring women to be domestically oriented and followers of male members in building families. At another level, however, women are respected and accepted for their leadership in education, employment and governance. The role of women in differentiating the Indian society is also well acknowledged. When qualitatively optics tend to be confusing, and even somewhat misleading, metrics help clarify the true situation.

Indian women in nation building

India ranked 98 in women’s participation in parliament, based on a worldwide survey. While India’s Vijaya Lakshmi Pandit was the first female President of the United General Assembly and Indira Gandhi was the first woman Prime Minister of India, the overall representation in India’s parliament has been low. Lok Sabha, the Indian parliament of democratically elected representatives, has 59 woman members, constituting just 10.8 percent of the total membership while Rajya Sabha, the higher house, has only 25 members, representing 10.3 percent. These numbers compare adversely with the global average of 19.1 percent for representation of women in parliaments. Interestingly, small (and some of them affluent countries) seem to have significantly high levels of women representation in parliaments as these statistics show: Cuba, 43.2 percent, Iceland, 42.9 percent, Netherlands, 40.7 percent, Finland, 40.0 percent, and Norway, 39.6 percent. Even more interestingly, the Arab States have more than doubled the membership of women from 4.3 percent in 1995 to 11.7 percent in 2010. Against these trends, India has yet to ratify the Women’s Reservation Bill that sets apart 33 percent of parliament seats for women.

It is, however, creditable that Indian women politicians have been able to withstand the challenges of India’s democracy and rigors of electioneering and able to secure parliamentary and ministerial positions. It is also appreciable that Indian women have been able to secure significant leadership positions in the Indian administrative and economic services. However, it is surprising that the representation of women in the Indian corporate sector has been significantly low. According to Catalyst India Benchmarking report for 2010, only 17 percent of Indian companies offered target leadership development programs for women. Another study by Women in Leadership (WILL) Forum shows that Indian companies have much lower women representation in senior positions compared with multinational firms. According to the Community Business Survey conducted by Cranfield University, School of Management Studies (“Standard Chartered Bank: Women on Corporate Boards in India 2010”), out of the 1112 directorships on the BSE-100 companies, only 59 are held by women. This represents just 5.3 percent of the total directorships. This percentage compares poorly with other countries: Canada at 15 percent, US at 14.5 percent, and UK at 12.2 percent, Hong Kong at 8.9 percent and Australia at 8.3 percent. Of the 323 executive directorships only 8 are held by women, representing just 2.5 percent. If these statistics are titrated for the women directors who happen to be members of the promoter families, the representation of women professionals on corporate boards and as executive directors would be abysmal. It is gratifying that two of the largest private sector banks have women as the CEOs. While proving the feasibility and potential of women in organizational leadership roles, such rare instances prove an exception rather than a rule.

The climb on a corporate ladder, leading to the apex of the organization, whether it is the C-suite or the Board is steep, tough and all-consuming. Given the conservative attitudes in India to women employment and empowerment as well as the family-shared preferences for bringing up children and taking care of the elders, the low statistics are not surprising. It is actually of some comfort that an advanced country such as UK had also similar low figures in the late nineties. Even in a highly empowered country such as the US that has been practicing gender diversity for decades, the proportion of women dwindles in terms of the climb to the top. According to statistics in the Website Women on Business (www.womenonbusiness.com) while women make up 50.6 percent of “management, professional and related occupations” they comprise only 14.8 percent of Fortune 500 board seats and a mere 2.8 percent of Fortune 500 CEOs and 2.2 percent of Fortune 1000 CEOs. Despite the low overall numbers, the record of India for women in certain sectors such as information technology, banking, medicine and financial services is certainly quite impressive. A large IT organization has, for example, women taking 50 percent of the positions at the entry level. The difficulty is that the percentage drops to 20 percent for the middle level and to low single digits at the top levels.

Attitudes and policies

This drop-off in women representation in corporate climb seems to be related as much to individual attitudes as to the corporate policies. Within India itself, multinational corporations have a better representation than Indian corporations. While large Indian companies had 5 to 6 percent women in senior positions, some multinationals have 15 to 20 percent women at the same level in 2010, the WILL study shows. During the same period while a select Indian bank had around 20 percent women participation in its total workforce, in comparison a select multinational bank in India had around 40 percent women representation in its total staff strength. The WLL study also shows that 84 percent of Indian subsidiaries of multinationals have adopted women's advancement strategy, compared with only 37 percent of India-headquartered companies. Clearly, directed and emphatic corporate policies can help double the representation of women in the Indian corporate sector notwithstanding all the individual and familial limitations. If, in addition, specific initiatives are taken to offer more distinctive and differentiated policy support, the impact could be positive and exemplary.

Fundamentally, policies towards women executives should have a long term perspective. Given that child bearing is the most challenging obstacle in the path of women’s taking up of jobs or staying on in employment, policies must focus on mitigating the impact of this particular tender period. The customary paid maternity leave periods of say 4 months for the women employees would need to be supplemented by additional paid paternity leave periods for the spouses and partially paid leave periods taking the combined child protective period to a year. In a career span of 35 to 40 years, investment of two years of leave on two children would emerge to be a worthwhile one for the individuals as well as corporations. By combining such extended (beyond the 6 month) periods with work-at-home options as well as online informal educational options the employees could even supplement their competencies and reinvent themselves as well. This coupled with policies on flexible working hours and safe on-station and off-station travel policies can help the women employees compete with men employees and push their envelope of performance. That said, major attitudinal changes in male members in terms of family development are also essential to ensure an equitable balance.

Empowering families

The role of the husband and the family, especially the elders, in supporting long term career development for women is critical, especially given the joint family system and lack of public or private geriatric care systems in India. The onus of child development and geriatric care almost entirely falls on female members of a family in India. By sharing these responsibilities of grooming and teaching children, and of supporting and tending the elderly, husbands can take a vast load off the women members and enable them perform with continuity and confidence in the job environment. Many of the women directors covered in the Standard Chartered Bank study felt that the role of the family in determining the career success of women in India is critical – in terms of providing support at a very practical level and also in terms of acknowledgement and recognition by family members of the role of the women outside of the home. Having the support of the older women in the family (particularly the mother-in-law and the mother) as well as the husband and children was seen as extremely important. If female members who have reached board positions have such limitations to cope with, the challenges facing the normal working women can be even more daunting. The family, as a whole, needs to be completely aligned and harmonious, with equitable allocation of responsibilities amongst all the members, for a woman to be self-actualize herself to the fullest extent in the career.

It is often hypothesized in the Indian context that considerations of supplemental income and lifestyle motivate female members to take up employment, and their families to support the. This, however, is a simplistic view. The real unexpressed motivation, however, is in terms of intellectual and economic independence. The typical Indian girl child is today much better educated than ever. It would be tragic if only one half of the talent base of a family is leveraged for economic development of the nation. An economically independent and professionally networked female employee is often able to bring to her family more enriched perspectives, and also develop her children in a more competitive manner. Professional engagement also helps the women to keep in touch with contemporary developments and even upgrade their competencies with additional qualifications. Families that support full employment could be contributing to national development to a greater degree than is apparent.

Public-private support

The governments as well as public-private partnerships have a great role to play in supporting gender diversity. The role of government sponsored communication in managing family welfare has been substantial in India. Apart from health related communication, the government communications can focus on the positive aspects of employing women in terms of supporting meritocracy and not as a matter of gesture. The themes could include how patience and attention to detail as well as the multitasking capabilities which are an integral part of a woman’s psyche could bring about certain special competencies to jobs that require such capabilities. Other themes could include how women could be good in seeking and giving advice, and also being high on integrity and principles. The female directors surveyed by the Cranfield University stated that their constant teaching of the good and the bad to the children helped them to take right approaches as part of the decision making processes. Overall, the thematic emphasis could be on the participation of women correcting the skew of a male-dominated decision making system and bringing the all-round family welfare at the centre and core of social and economic development.

Infrastructure support can be another great way by which public-private partnerships could support gender diversity. Most prominent would be to set up baby and child day care centers wherever clusters of industries and businesses are situated. This would have a salutary impact in motivating women to reach out to the geographic areas where their skills are needed most. The transport systems should be made female commuter friendly by providing more ladies-exclusive rail coaches and buses. Private cab services must also institutionalize female cab services with alarm systems and GPS fortified taxies. Rather than follow the model of limiting nighttime travel for women protection, night patrolling should be made more pronounced with more women patrol crews and more self-help groups active across all residential and work communities. The rapidly increasing fitness centers must incorporate self-protection as a part of the stay-safe, stay-fit curriculum for the female members. While offering all financial incentives for girls to complete their collegiate and professional education without interruption, the school and college curriculums must focus on the nation-building role of women, and bring out case studies of how women can transform families and societies.

Self-employment as paradigm shift

With India's talent crunch and with women representing a huge untapped talent resource, it is important to leverage the vast valuable pool of talent that the women represent. Surprisingly, nearly 70 percent of women graduates of even elite institutions such as the Indian Institutes of Management (IIMs) do not reportedly pursue a higher career. Many women, however intelligent and qualified they are, tend to subsume their ambitions and dreams in the interest of family and society. All the guidelines discussed above could enhance the participation of women at work and enable greater initiatives in career building but it is still doubtful if the fundamentally rigid organizational and family structures which are built around fixed concepts of time can fully utilize the talent of women. A paradigm shift in favor of self-employment could potentially help educated and creative women set up and run enterprises that are better aligned with their time systems. A large number of service businesses and online ecosystems are ideal platforms to combine their home and work environments and still weave businesses around their core competencies.

As Indian economy develops further, research and development and service industries would gain prominence. Higher levels of affluence may boost service businesses such as fashion design, advertising, hospitality and media, to quote a few. Genuine and sustainable competitive advantage would accrue by women focusing on businesses of lasting value creation, not merely those driven by conspicuous consumption. All domains which provide knowledge services and deal in intellectual property creation should be domains of choice for the contemporary Indian woman. Starting a business is probably the best way of starting at the top for women and stay on there.

Leveraging talent

Gender diversity is more than providing more jobs to women or having more women in organizations. Diversity centered on talented women leads to diversity of culture, thinking processes and differentiated business approaches. It not only opens up a larger talent pool but also leads to enrichment of thought and experience. However, for gender diversity to succeed in a sustainable manner it must be based initially on certain special efforts including training and mentoring of the women employees but eventually on deployment of equally and equitably high standards in education, recruitment and performance management. A few organizations in India have demonstrated as to what it takes to get women on the top of a structure of meritocracy; there is no reason why more organizations cannot be adept in advancing gender diversity. Quite apart from professional employment, entrepreneurship would be an area for women to self-actualize themselves by developing micro and small enterprises around their core competencies. In the long run, it could be the preferred route for women to demonstrate their leadership capabilities.

Posted by Dr CB Rao on March 18, 2012

Leadership Succession: Nexus as Success Factor?

In many ways, this blog post is a sequel to the earlier post by the author on leadership succession, also set in the context of Tata Group leadership succession (“Successful CEO Transition: Model of Continuity with Change”, Strategy Musings, August 9, 2011). Together, both the posts develop a wealth of practical insights into leadership succession relevant for the Indian industrial and business context.

The saga of identifying a successor to the extraordinarily famous Ratan Tata, the Chairman of the USD 83 billion Tata Group of India has ended with the selection of Cyrus Pallonji Mistry of Shapoorji Pallonji Group as the successor. Cyrus would be under the care of Ratan for just over a year as Deputy Chairman and take over as the Chairman when Ratan steps down in December 2012. As one is aware, the Shapoorji family, holding 18.4 percent stake, is one of the largest shareholders of Tata Sons, the holding company of the Tata Group. The selection of Cyrus after months of global search begs the question if some kind of prior ties are essential for high profile leadership successions. Clearly, the Tata Group has its evolved over the years as a conglomerate of solid institutions, and therefore, independent of the choice of a new steward the Group could still make itself proud on the strength of the leadership at Tata Sons, the holding company as well as in the individual companies.

The succession saga, however, brings forth several important questions. The first relates to the value proposition, either of the conglomerate or of the candidates that could influence the succession process. The second relates to whether an Indian conglomerate could ever seek to have a rank outsider, even an expatriate, as a Group leader. The third relates to whether an Indian conglomerate could seek to have an executive head who is completely unconnected with the founder family. If the answer to the preceding two questions is in the negative, the fourth question is how a conglomerate would develop internal leadership talent that could take over the stewardship. The fifth question is whether the singular leadership model loses its relevance at some point and a format of collective responsibility becomes expedient, if not imperative. The sixth question is how intimately would the Board or the outgoing chairman need to be associated with the selection process. This post discusses some of the above issues while welcoming the apex selection at the Tata Group.

Thematic proposition

The starting point for any recruitment effort is the value proposition. In terms of apex leadership succession, crafting of a value proposition could be challenging. While one cannot be a privy to the value proposition that the Tata Group would have laid out, one could postulate that leadership at that level requires a thematic proposition rather than a job description. For example, having made respectable strides in globalization with acquisitions such as Tetley Tea, Daewoo Commercial Vehicles, Corus Steel and Jaguar-Land Rover automobiles, the Group could have looked at a more aggressive globalization as its next trajectory. The Group also could be looking at additional sunrise sectors to enter and grow. This could have been a reason for the Group to look for a global executive, among others, to take over the reins.

Conglomerates and corporations alike need a strategic vision to inspire succession. While the new incumbent would certainly be capable, and even expected to develop a new vision and strategy, a thematic direction is clearly needed as the first step. For a group like Reliance it could be a theme of becoming a globally dominant oil and gas player or even in a broader sense an energy behemoth. For a group like GMR it could be a theme of become a global infrastructure developer. Yet, it could be open to debate if a single thematic proposition could be developed for a conglomerate having companies with widely varying product lines and business models. The thematic proposition (or propositions depending on the plurality of purpose in a conglomerate) would be the essential platform to discuss and debate the fit between the competencies and aspirations of the corporation (or the conglomerate) and the prospective leaders.

Cultural differentiation

One can presume that the Tata Group would have had a value proposition, if not a thematic proposition, that was inspirational and exciting. Yet, it has not been possible to secure a global leader from outside the extended Group or from outside the country. The Group's inability to get one such candidate makes one doubt if national and cultural factors have a strong play. Potentially, each potential successor from the external world would have been a successful player in his or her culture, or even in multi-cultural environments. That said, unless the home country culture is a strong component of the multi-cultural background it is likely that both the corporation and the candidate would be reluctant to make the switch.

That said, successful leaders could look beyond national cultures in their career journeys. The culture of the corporation could itself be distinctive and be adding an overlay to the national cultural factors. The challenge is whether value systems would be seen as a sufficient indicator of the culture or past performance record and whether the espoused plans would be a sufficient indicator of corporate and conglomerate culture. Whether a firm has been a revenue driven or profit driven company, whether it has been an innovation driven or imitation driven company and whether it has been risk averse or risk taking company could all be seen by potential leaders in making their assessments. However, if the succession itself is planned as a tool to change the cultural dynamics the corporation would need to articulate that as a component of the thematic proposition.

Promoter connectivity

Many large corporations and conglomerates in the Asian economies, including India, China, Japan and Korea have strong promoters and entrepreneurs as the founding members. In many such companies, family succession is taken for granted. When a Group such as Tata, Birla, Murugappa or Reliance deliberately initiates a global search, perceptions on whether the lack of promoter roots would be a positive or negative factor could be a major influencer. When at the end of an extensive global search the Tata Group fell back upon the scion of the major shareholding family there indeed developed a clear perception in the Indian analysts that promoter connectivity could tip the balance in selection.

As a corollary, it is open to debate if for heavily promoter influenced corporations or conglomerates, external professional leaders would be willing to take the bow. In successful promoter driven Indian corporations, while the promoters do build a large professional leadership bench very often that leadership team would prefer to work for the promoter than for another professional leader. The Indian corporations and conglomerates have probably to look for internal talent from the group rather than embark upon external search as the Tata group has done somewhat futilely. The pointer for the other Indian groups is clear; develop leadership that combines professional competencies and entrepreneurial spirit through customized programs.

Developing internal leadership

Development of internal leadership is neither a simple task nor a complex endeavor for today's Indian enterprises. Most firms are sufficiently globalized and have varied operating environments that could make them on par with any multinational corporation in terms of diversity and global challenge. The career pathway for any aspiring CEO should comprise the following essentials. Fundamentally, he or she should have led growth or turnaround in any enterprise through multi-functional expertise. He should have led global foray of businesses through overseas entity formation or growth. He should have led strategic transformation of the enterprise by identifying and establishing new businesses. He should have played a notable part in recruiting and nurturing top level talent.

Some companies have tried to integrate expatriate leaders into the Indian organizational system. Examples are Kim as the CEO in Videocon and Forster as the Group CEO in Tata Motors. Though such leaders accomplished much in their stints with the Indian companies, their personal and other considerations could not let them grow to the highest levels within the Indian companies. There seems to be, therefore, a case for focusing on internal development of leaders who would not have or perceive cultural barriers or founder barriers. As Hindustan Unilever demonstrated it would be possible for Indian leaders to assume global positions. There is no reason why Indian multinational corporations cannot develop Indian leaders to manage their global operations. It could be quite a simple process of passing them through targeted domestic and overseas assignments.

Singular versus collective leadership

It would be of interest to speculate or hypothesize what the Tata Group would have done if it had no Cyrus Mistry to fall back upon. Would the Group have considered a model of collective leadership? The experiences of having co-CEOs have not validated the hypothesis that two brains are better than one. Neither the Indian Wipro nor the Canadian Research in Motion have been able to fight competition despite having two CEOs. On the other hand, European firms, especially the German ones, have routinely co-CEOs. How should the Indian groups respond to any failures in getting singular leaders in succession searches? The answer may lie in stretching the available organizational structures and talent pools.

Typically, even the current structures provide for at least five positions at the top which could lead to certain collective leadership. These are the positions of Chairman, Vice Chairman or Deputy Chairman, Managing Director or CEO, Joint Managing Director, and Deputy Managing Director. In the event Groups fail to get a potential stalwart to succeed another stalwart, they could attempt to split the responsibilities amongst the above five positions and proceed to put in place a format of collective leadership. Under the model, there could be several options to delineating responsibilities. These could range from allocating companies in the case of conglomerates (and businesses in the case of companies) to different leaders to allocating individual stretch tasks and projects such as startup, turnaround, M&A and global assignments to individual leaders, both approaches involving significant rotation. As the collective leadership, with sequential experience, hones and institutionalizes itself there could also be a possibility of singular leadership emerging out of the process.

Leadership engagement

An important question in leadership succession is who gets engaged to the process of selection. In the case of Tata Group it has been a committee specially constituted by the Tata Sons Board and comprising Tata Group stalwarts, including ironically Cyrus himself. There are usually alternatives with the outgoing Chairman himself being actively engaged as in the case of GE and GSK or an independent search committee of the Board being engaged in CEO succession efforts. The level of engagement is relevant in terms of the ability to trace the past and present, and lay out a future. At the same time, the rapport that an outgoing leader and an incoming leader would develop is an equally determinant of the selection.

It is quite conceivable that an independent search committee which does not involve the outgoing leader could be objective and clinical but fail to be emotionally connected while selecting the new leader. On the other hand, the outgoing leader could be emotionally connected not only in terms of continuity of values but also in terms of protecting his team. The body that selects the new leader may therefore have to be constituted in the context of the break or continuity with the past that is envisaged, in terms of both the business model and the leadership team. The period and intensity of overlap between the outgoing and the new leader could also be dependent on the nature and extent of change that is sought after.

Change with, or sans, continuity

Selection of a new leader is always a momentous opportunity to script a new path for a corporation or conglomerate. Many organizations gain by leadership stability and internal succession. Marriott Hotels, for example, only now has the current Founder-Chairman who has been at the helm for 40 years handing over the baton to the Chief Operating Officer who has been in the firm for the last several years driving global expansion. On the other hand, a global IT major has suffered because of mercurial changes in not only executive leadership but also the board of directors itself. Planning for succession and executing for succession are extremely important for corporations and conglomerates to revalidate, rejuvenate, retool and regrow themselves from time to time. In the ultimate analysis, there is no substitute for the leadership to be always at the edge of futuristic and competitive business development with a well prepared leadership team to ensure seamless change with continuity.

The successful nexus in terms of leadership selection in such a context could only be in terms of an ability to develop and execute a thematic vision, in alignment with cultural factors and in cognizance of stakeholder interests (and promoter proclivities). A visible mark of potential backed by a proven record of success could strengthen the new leader's ability to put his stamp on the corporation’s growth path. The concept of change with continuity is balanced by a concept of nexus with the leadership ecosystem appears to be the leading lesson from the Tata Group's leadership selection saga. A strong internal leadership pipeline and a collaborative collective leadership could act as appropriate supplements and substitutes for the Tata model. The composition of, and the role played by the selection committee, could shape the focus and the forces of change in leadership succession in an influential manner which the outside world may not be able to perceive.

Posted by Dr CB Rao on December 18, 2011