Friday, March 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

Sunday, March 18, 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 ( 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

Sunday, March 11, 2012

From IIMs to IILs: From Masters in Management to Leaders in Leadership?

The Indian Institutes of Management (IIMs) have been the most successful of the Indian efforts to clone and absorb, and even excel over, the Western educational thought. The IIMs are a group of public, autonomous institutes of management education in India. The institute at Calcutta was established first, on November 13, 1961, and was named Indian Institute of Management Calcutta or IIM Calcutta. It was set up in collaboration with the MIT Sloan School of Management, the government of West Bengal, the Ford Foundation and the Indian industry. The institute at Ahmedabad was established in the following month and was named Indian Institute of Management Ahmedabad. Like MIT Sloan in the case of IIM Calcutta, Harvard Business School played an important role in the initial stages of IIM Ahmedabad. The success of these two premier institutes prompted setting up of more Indian Institutes of Management (IIMs) from the 1970s. Today, India has thirteen IIMs. The success of the IIMs triggered the mushrooming of standalone management schools and establishment of management divisions within general and technical educational institutions.

The IIMs offer a wide variety of management courses. They were established with the objectives of providing high quality management education and to assist industry through research and consulting services, and have more than fulfilled the vision and objectives. IIMs are considered to be among the most prestigious and elite business schools in India. Like the Indian Institutes of Technology (IITs) which attract the best school leaving talent through nation-wide Joint Entrance Examination (JEE), the IIMs attract the best graduate talent through their Common Admission Test (CAT). The IIMs primarily offer postgraduate, doctoral and executive education programs. The two-year Post Graduate Program in Management (PGP), offering the Post Graduate Diploma in Management (PGDM), is the flagship program across all IIMs. Some IIMs also offer a one-year Post Graduate Program for experienced executives. Some IIMs offer the Fellow Program in Management (FPM), a doctoral program. The Post Graduate Diploma and Fellowship are considered to be equivalent to MBA and Ph.D., respectively. Many IIMs also offer short-term executive education courses and part-time programs.

Expectations and realities

According to IIM Ahmedabad (IIMA), students admitted to the Post-graduate Program in the past have had scholastic achievements in different disciplines such as arts, commerce, science and professional streams such as medicine, engineering and agriculture. Some of the qualities which characterize past students include high levels of initiative and energy, capacity for hard work, strong task orientation, willingness to learn, and a temperament suitable for teamwork. The PGP classes have had a mix of fresh graduates and persons with work experience. Among the recent PGP students, a significant proportion has had full-time paid work experience of more than six months after their graduation. The influx of experienced graduates into the IIM stream reflects the gap between the expectations developed in fresh students by the IIM education and the experienced maturity levels that most brick and mortar organizations need. The IIMs typically prepare the students to leapfrog over the first executive steps to become managers straightaway. The fundamentals of products, processes and the marketplace are therefore not mastered to the requisite extent by the management graduates. Many times, the intelligence and grasp of the management graduates enables them to overcome the lack of frontline experience. Even so, the gaps between the demands posed by the role intricacy and peer group imbalance in organizations on one hand, and the aspirations fueled by the strategy oriented management education and the initial jumpstart of the career, on the other hand remain high.

Despite this realization and the influx of experienced personnel into IIM studentship, even if the majority is with experience of six years or lower, the challenges of expectation-reality gap and aspiration-delivery gap have not dimmed. The practical circumstances force that, out of the thousands of IIM alumni that join the ranks of industry and business each year, only a few become the most successful entrepreneurs or most effective leaders, managing total enterprises meeting all the benchmarks of true success and effectiveness. In a career, spanning four decades leading to enterprise leadership, so much emphasis is put on just two years of management education at the base of the career, which is subject further to the rollercoaster of organizational dynamics. One way of looking at the elite management education system of India is that the IIMs teach leadership to the unprepared far too early, actually make them managers quite early and let them lose the leadership potential eventually. Given that India’s quest for global economic position requires leadership in multiple domains, clearly time is opportune to define the limits to management education and also explore the next frontier of leadership education.

Early genesis and emerging logic

Despite the adverse image India’s post-independence socialistic polity has, many of the more progressive institutional initiatives of India owe their origin and inspiration to administrative analysis and political wisdom. The Indian Institutes of Technology (IITs) were established by the Government of India, under the leadership of Jawaharlal Nehru, the first Prime Minister of India who believed in scientific and technological self-reliance. The IITs were set up as a group of autonomous engineering and technology-oriented institutes of higher education, declared as “institutions of national importance”. They were created progressively from 1951 to develop a talent base of scientists and engineers, to support the economic and social development of India. Today, India boasts of sixteen IITs. The establishment of the IIMs was also envisioned and initiated by the Indian Government, based on the recommendation of the Planning Commission. India grew rapidly in the 1950s, and in the late 1950s the Commission started facing difficulties in finding suitable managers for the large number of public sector enterprises that were being established in India as a part of its industrial policy. To solve this problem, the Planning Commission in 1959 invited Professor George Robbins of the University of California to help in setting up an All India Institute of Management Studies. Based on his recommendations, the Indian government decided to set up two elite management institutes, Indian Institutes of Management. Calcutta and Ahmedabad.

India today has a civil service cadre of over 20,000, manning the huge all-India governmental and administrative apparatus. These belong primarily to the all-India services and the central services. The all-India services consist of the Indian Administrative Service (IAS), Indian Police Service (IPS) and Indian Forest Service (IFoS). The personnel of these services are allotted state cadres and primarily work with the State Governments. They also serve on deputation to the Central Government. The Indian Administrative Service, with its federal nature, forms the backbone of the delivery of basic services and poverty alleviation programs. The seven central services comprise Indian Audit & Accounts Service (IA&AS), Indian Foreign Service (IFS), Indian Revenue Service (Income Tax), Indian Revenue Service (Customs & Central Excise), Indian Railway Personnel Service (IRPS), Indian Railway Traffic Service (IRTS) and Indian Postal Service (IPoS). The cadre of all these ten services is perhaps insufficient to cater to the needs of the huge 1.3 billion population and their development needs in India.

India has over 3000 central and state ministries and over 650 administrative districts, each of which requires several individual service heads, over 300 major central government owned public sector undertakings (PSUs) and over 5000 state government owned PSUs, and over 100,000 joint stock, public limited and private limited companies, each of which requires multiple corporate officers and enterprise leaders. The leadership pool is supplied by scientists, engineers, professionals, some of them with formal management qualifications; all of them acquired at the starting phase of their careers. Most of the leadership capabilities and competencies are acquired by these officers as they progress through their three to four decade careers. Given that the environmental context, in terms of political, social, demographic, economic, business, and technological trends, changes significantly every five years it is a moot point if the currently available educational structures, including the management capstone education offered and acquired typically in, and by, one’s mid-twenties would be adequate in one’s later half of the career between forty five and sixty five years of age when the leadership impact is expected to be the maximum. There is, typically, a mid-career inflexion point in one’s leadership journey which is completely unattended to in the current educational system.

Breaking the journey

The mid-career point, say the period between forty and forty five years of age (corresponding to fifteen to twenty years of experience) is the inflexion point when typically a mature manager begins to morph into a potential leader. By then, a successful manager would have reached a level of functional mastery and cross-functional capability demonstrated by successful headship of a function, division or a region. What lies ahead is the opportunity to head a business with profit and loss responsibility and later the total corporation. In some cases, the emerging leader would be required to even start up an entirely new business or open up a new region for the corporation. The leadership skills for this transformational journey would be significantly different in terms of developing a business or enterprise vision, formulating a transformation strategy and executing it through a leadership that walks the vision and strategy. The mature manager’s skills of orderly resource management, compliance to established systems and procedures and programmed people management would be necessary but would fall short of the leadership needs. Non-recognition of this inflexion requirement causes managers to continue to act as managers even when they are catapulted to leadership positions.

The answer to this lies in the managers and the companies as well as the civil servants and the governments retooling the mature managerial talent base and transforming it into an emerging leadership talent pool at the above identified mid-career point. The transformation requires the reinforcement of the managerial skills in the new-generation and next-generation contexts and the absorption of what it takes to be a leader in the changing environmental context. For example, the contemporary marketing head must understand the importance of social networking and how it could further change in future and the transformative products and services that are needed to leverage the social networking. Amazon leadership, for example, transformed the industry through electronic book, Kindle and online digital book libraries, leveraging the Internet and telecommunication technologies, and built for itself an industry dominating position. Online music technologies and cloud platforms demonstrate the need for leadership to transform lives through transformed corporations. This transformation requires the mature managers to shed the past partially and take on leadership development fully.

Indian Institutes of Leadership (IILs)

Just as the IITs and IIMs provided a fundamental and lasting breakthrough for India in the scientific, engineering and management education from the 1950s and 1960s, a new network of Indian Institutes of Leadership (IILs) would mark a pioneering transformation in the buildup of leadership development in India. The IILs, like the IITs and IIMs, should be deemed institutes of national importance, and set up as autonomous institutions under the Act of Indian Parliament. The admission to the IILs should be open only to the practicing civil servants or corporate managers in the age group of forty to forty five years, with a corresponding experience of fifteen to twenty years. The admission should be open to mature managers who qualify through a Common Admission Test Customized for Leadership. The admission should also be open to those managers who are sponsored as well as those who reigned from their managerial services, with appropriate years of experience as stipulated. The Government, the industry and the industry associations have a role in supporting the establishment and ramp-up of IILs. It also requires that IIMs confine themselves only to their current educational formats and not open up new leadership course streams for highly experienced candidates. However, IITs and IIMs should be encouraged to establish either on their own or in partnership with the government and the industry discrete IILs.

The curriculum of IILs should obviously be innovative and challenging and also state-of-the-art in terms of adaptation to the dynamic external environment. It should focus on transforming functional managers into business leaders without losing the core technical and professional strengths. Capabilities and competencies to start and grow startups, green field expansions and diversifications, achieve globalization and leverage pioneering technologies should be the unique deliverables of the programs. The curriculum should promote networking between industrial leaders and civil servants as well as between entrepreneurial leaders and professional leaders. The sponsoring corporations should treat the study period of twelve to eighteen months as paid sabbatical period, and seek no direct relationship between the study stream and the company domain; on the other hand, the companies should see the IIL programs as multifaceted leadership development initiatives. The faculty competencies should also be commensurate with the lofty and challenging goals of the IILs; the best of business leaders from India and abroad should constitute the core faculty with fulltime involvement. The IILs would be as transformative in India’s leadership drive as the IITs and IIMs had so far been, and would continue to be in India’s educational drive.

Posted by Dr CB Rao on March 11, 2012

Sunday, March 4, 2012

Total Quality, Cost and Time Management (TQCTM): A Relevant Competitive Paradigm for India, Inc

The issue of industrial or manufacturing competitiveness has been engaging the attention of the Government of India (GoI) for the last several years. The GoI had taken some salutary measures in the past, through its enactments and the requirements of its agencies such as Securities and Exchanges Board of India (SEBI) to enhance the disclosure of information by certain categories of corporations for review by their stakeholders. While aspects like Management Discussion & Analysis have trailed the trends in other advanced countries, certain disclosure requirements on R&D expenditure, technology imports, technology assimilation, development of indigenous technologies, energy efficiency, payables to small and micro enterprises, installed capacities and production, imports and exports have been uniquely Indian, and have helped shine the light on certain important operational parameters of companies. The mandatory requirement of independent cost audit for certain category of firms has been another uniquely Indian requirement of corporate introspection and disclosure, mandated by the GoI, although it has never reached the status of statutory audit of accounts.

The new enactments on the Cost Audit Report Rules (CARR) and Companies (Auditor’s Report) Order (CARO) by the GoI represent an attempt to sharpen the cost audit principles and also expand their applicability. Simultaneously, they seek to reduce the hitherto prevalent resistance of the companies to external cost audits on the grounds of confidentiality of cost data. They also ensure greater teeth through a performance appraisal report that focuses on key operational metrics such as capacity utilization, productivity improvement and so on. Currently, The National Task Force on CARR and CARO of The Institute of Cost Accountants of India (ICAI) is engaged in a nation-wide discussion with industry associations, captains of industry and professional experts. Hopefully, the final outcomes would have the acceptance of all the stakeholders. While such Government and ICAI sponsored cost audits have their utility in terms of focusing attention and ensuring compliance, the real benefits of cost audits would accrue to the company only when the companies understand the concept of cost in its totality and put in place systems of rigorous and meaningful cost management. This blog post proposes a new paradigm of total quality and cost management against a time perspective for India, Inc.

Cost, quality and competitiveness

Cost management is the most important instrument in the quest for globalization by India, Inc. Cost, however, should never be seen independent of Quality. In all ways, cost and quality are significantly interrelated. There are several myths surrounding the cost-quality equation. The most prominent one is that cost and quality are inversely correlated. In other words, it is assumed that higher quality leads to higher cost and somewhat conversely lower cost implies lower quality. While higher levels of quality do require higher levels of product specification, material strength, manufacturing integrity and service delivery, the relationship is neither linear nor proportionate. A higher quality product or service actually creates and expands demand, enables higher scale of production and distribution, improves overhead absorption and ultimately results in superior cost position. Quality integrated cost management is the essential tool for competitiveness.

An ability to successfully operate on low margins is the ultimate test of the cost-competitiveness of a firm. Many times, firms, especially those operating in innovation and niche space believe that cost is secondary and differentiation is primary. Some firms may even believe that pursuit of cost leadership and product differentiation are contrarian activities. There is, in fact, no conflict in the pursuit of these twin goals. Elimination and avoidance of all non-value adding and wasteful activities, and infusion and integration of value adding activities is a primary strategy of all corporations which have accomplished sustainable profitable growth for decades. A review of all corporations which have had decades of such growth over the last several decades in multiple industries and multiple regions, from Toyota in Japan to IBM in USA reflects the basic philosophy.

Controllable factors, all?

Many times, firms have a rather simplistic view of costs and competition. Many leaders are apt to exhort their employees that they should control what is under their control, namely costs, capacity and production, and not worry too much about the factors which in their view are not under their control, for example prices, demand and competition. Nothing can be farther than truth in this. In fact, all factors mentioned above, whether apparently controllable or not, squarely fall within the responsibility and control of the firms. The fact that market demand is at a low level oftentimes is an indicator of the unacceptable quality-cost position of a product or service. The fact that some other player has a lower priced, equivalent or superior quality product or service in the market is an indicator of the superior cost position such a player has been able to achieve relative to the incumbent. The phenomenon of competition in an industry indicates that the industry is attractive in terms of growth and profitability parameters. In essence, therefore, a firm cannot believe that its costs alone are a concern but not how a competitor prices its products.

The belief that a firm should continuously work on a best-in-class quality-cost position is the fundamental tenet that differentiates an industry leader from the rest. This is not to suggest that all firms in an industry must aspire for such an industry leading position. A firm’s strategy is a resultant not merely of a firm’s leadership aspirations but also of its technical and managerial capabilities, capital and other resource endowments, and the legacy issues relating to historical evolution. The point is that a firm should anchor its growth and sustainability strategies on a comprehensive strategy of quality integrated cost management. To be able to do that, firms must recognize that quality and cost are supported by individually unique set of cluster factors that determine the levels of quality and cost, and their interrelationship that a firm can enjoy.

Cost-quality cluster metrics

Cost is a powerful indicator of the ultimate competitiveness of a firm in an industry in which all the constituent firms are able to provide products or services of a comparable quality. The levers that a firm has in its possession to establish a position of superior cost are: productivity (or efficiency and effectiveness combined), scale, scope and speed. Encompassing all this is a zero-waste approach. Each of these factors is interrelated and their harmonious integration requires detailed planning, and correct execution with high forecast and delivery accuracy. Here, forecast accuracy is a broad concept covering not merely demand forecasting but also forecasting of all resource requirements including people, finance, materials, equipment, and various other inputs that are required for operations and delivery. Total cost management, therefore, requires application of the appropriate levers as identified herein across the entire value chain.

Quality is a powerful indicator of the ultimate competitiveness of a firm in an industry in which all the constituent firms are able to provide products and services of a comparable cost. The levers that a firm has in its possession to establish a position of superior quality are: innovation, product and service specifications, process specifications (covering both technical and non-technical processes), safety, skill levels of employees and compliance systems. Encompassing all this is a zero-defect approach. Each of these factors is interrelated and a superior position on quality can emerge only based on integration of all these parameters across the value chain, with a ‘first time right’ approach. Concurrent engineering is a methodology that has been successfully deployed by the automobile industry, especially the Japanese automobile industry, to ensure that quality is ensured in a seamless and unfailing manner across the total value chain. Here, compliance is an important concept in terms of establishing stringent benchmarks and the organization simultaneously conforming as well as innovating to meet such benchmarks. Total quality management, therefore, requires application of the appropriate quality levers as identified herein across the entire value chain.

Technology and management as integrators

The foregoing discussion may lead one to consider Total Cost Management (TCM) and Total Quality Management (TQM) to be two independent, though quite interrelated, streams of a firm. The point that each influences the other positively is well-taken but how such integration would need to be accomplished in practice is as yet unclear from the discussion afore. The key to such integration lies in technology; be it product technology, service technology, manufacturing technology, distribution technology or information technology. Product and process technologies present themselves in terms of the right form factor, appropriate levels of consumption of appropriate types of materials, the conversion efficiencies in terms of uptime, yields and so on. Service and distribution technologies present options for the firms and consumers to interconnect the supplies and requirements in a seamless function. Information technology helps the total value chain to be efficient and effective, and to eliminate waste and ensure compliance to specifications.

Equally important is the management of a firm, which comprises a host of factors from organizational culture to individual competencies. TCM and TQM aspirations cannot be fulfilled merely by deployment of technologies. Like every firm activity which is fundamentally behavior driven, cost and quality require a managerial mindset that utilizes technology and human resources in perfect harmony. The overall industrial context, including its strategic evolution, and the nature of competitive forces determine how management should deploy technology and human resources. What industries considered as a luxury in research and workshop settings a few decades ago, namely automation has become common place with the advances in mechatronics (electronics integrated mechanical engineering) and vastly changed expectations on what constitutes good ergonomics and wise economics. At the same time, the employee’s fundamental capabilities continue to determine how a national or global value chain comprising several functions, sites, teams and technologies can be seamlessly integrated.

Time as the ultimate arbiter

With several firms competing for similar strategic space, and all of them pursuing superior quality-cost options, it becomes necessary to identify one additional calibrator for superior positioning of the firms of the highest order. In this context, time which is the most precious, non-renewable and non-regenerative resource becomes critically important. Here again, myths surround the concepts of quality-cost execution in a time frame. It is not true, for example, that faster work could carry the risk of lower quality or that greater time allocation would ipso facto provide greater quality. Many times there are hidden or implicit activities that need to be performed, not performing which could have adverse quality and cost implications. Curing of concrete in a construction activity is one such example. There could also be limitations in the extent of parallel processing that can be carried out in a multi-tasked project. Components of a new design watch, for example, cannot be ordered unless the basic design parameters, both product and manufacturing, are frozen.

The laudable initiatives of the GoI in cost audit and the recent enactments on CARR and CARO themselves are reflective of the importance of the temporal dimension. These projects were initiated by the Ministry of Corporate Affairs, Government of India, in January 2008 with the constitution of an Expert Taskforce, which submitted a report in a timely manner by December 2008. However, the time taken to translate the recommendations into enactments and furthermore the far longer time that appears to be required by the Indian industry to go beyond the statutory audit requirements and establish in-house cost management efforts point to a need to integrate time as an essential third dimension in the quality-cost-time triad of competitiveness. The very special attribute of rendering the highest quality work at the lowest cost possible, and in the shortest time frame possible differentiates the firm that is solely and uniquely positioned in an optimized quality-cost paradigm. The Total Quality, Cost and Time Management (TQCTM) paradigm as a completely integrated and holistic strategic platform of competitiveness is highly relevant for an India, Inc that is seeking an ever expanding presence in the globalized economic and industrial world.

Posted by Dr CB Rao on March 4, 2012