Sunday, April 1, 2012

Leading India to Growth with Equity through GLAM: The Generic Leadership Accountability Model

India needs leadership, in all its facets to become economic superpower. In this, industrial and business leadership has a major role to play, in terms of driving economic activity through industrial and business ventures and in the process generating employment. The word “leadership” is rather freely used in contemporary times, and is conferred even on professionals who are at best managers of status quo. Even more worrying, leadership is seen as synonymous only with driving growth of the enterprise, without a view on a larger purpose. An article in The Smart Manager attributed to Jason Jennings talks of six guiding principles, the first of which is that smart leaders are committed to double-digit revenue and profit growth! The other five principles relate to delegation, risk taking, strategy articulation, grassroots ownership and stewardship. None of these is beyond common sense, and none is nationally contextual. Leaders surely are those who can manage a total enterprise or those who can manage businesses, sites or functions with a total enterprise perspective.

Driving growth is a key facet of leadership but mere firm level growth need not necessarily contribute to national development. In the context of India's socio-economic profile marked by lack of access to minimal services to an overwhelming proportion of population, an industrial and business model that is predicated upon only growth would be inadequate. Rather, industrial and business leaders must focus on growth with equity. Driving growth with equity requires leaders who are leaders in the true sense of the term. Leadership is also working successfully under multiple constraints and fulfilling multiple objectives simultaneously. The cornerstone of leadership for India, Inc is therefore growth for the country and equity for all the stake holders, most importantly the common man. This blog post proposes a Generic Leadership Accountability Model (GLAM) for driving India's equitable growth through ten relevant native leadership principles of accountability.

Principle # 1: Priority Pyramid

The principle of priority pyramid encourages leaders to focus on what different strata of the Indian society requires and not just what the most elite or the most affluent needs, although the latter could provide a quick route to entry, growth or profits. The example of Indian Hotels, owned by the Tata Group, is a good case. From being a luxury hotelier the chain has moved to become a multi-segment accommodation provider with different brands, and properties, catering to luxury, business, family and budget categories. Both the Tata Group and Mahindra Group which are into high end commercial and residential spaces are looking at affordable housing too. Luxury and economy can never be mutually exclusive in India where over sixty percent of the population has no access to basic amenities and services. Between a Maruti-Suzuki or Tata Motors which cater to every segment of car users and Audi or BMW which are focused on the few affluent, the former are more relevant automobile enterprises for India surely. CK Prahalad's Bottom of the Pyramid theory is exceptionally applicable to Indian development and enterprise growth. Leadership for a contemporary India is thus all about having a degree of social accountability to the national needs.

Principle # 2: Rural Integration

An interesting data set emerged that the demand for the Indian consumer goods and white goods demand is being increasingly driven by rural consumption. The rate of growth for rural demand has outstripped that of the urban demand. Encouraging as the trend is we need to be cognizant that nearly seventy percent of India's population is still rural and thirty percent of India's GDP needs to be generated out of agriculture. The proportionality of rural-urban demand can change only when India moves into the rural areas with a complete package of mixed use economic infrastructure comprising modern agricultural inputs and services, rural bazars, agricultural and food processing industries, supply chain and distribution centres, schools, colleges and hospitals, BPO units and call centre complexes. In other words, relevant customized urban clones need to be created to bring urban development to the door steps of rural households. This would not only reduce cost of urbanization and urban production but also place wealth directly in the hands of rural population without the costs of intermediation.

Principle # 3: National Research

Notwithstanding the progress on several fronts, India still trails the advanced world in original research, product innovation and generation of patented intellectual property. Quite apart from the resource and talent bottlenecks, mindless pursuit of product specifications of the Western world has led to skewed and infertile research efforts. Research on product and process technologies relevant for India would have reversed the trend of dependence on the Western models of innovation. The Economist has recently carried an article on how products developed in India based on frugal engineering are disrupting the traditional high specification and high cost models of the West. While the more sophisticated equipment may continued to be developed in the West and Japan and Korea, there is no reason why more products for the bottom and middle of the pyramid cannot be invented, developed and patented out of India. We need to develop national specifications eschewing the imported specifications. The Bureau of Indian Standards (BIS) should focus on defining the kind of products and product specifications that India needs as a research mandate, and the government should strengthen the higher research institutions and the patent offices to give a leg-up to truly national research. Leadership needs to be accountable to a nationally relevant product and process development strategy as GE India with the India-smart diagnostic devices and Tata Motors with Nano car have done.

Principle # 4: Manufacturing Core

India cannot be the super economy of the world without a superlative manufacturing core. The recent travails of the India's capital goods industry in a background of more competitive imports from European and Chinese manufacturers is a clear alarm that India's manufacturing needs to reinvent itself. In a globalizing world, customs tariffs and indigenization schedules have ceased to be triggers and protectors of local production. The enigma of Indian manufacture is proving to be somewhat counter-intuitive after decades of manufacturing infrastructure development. From furniture to toys and tableware to toys imports are dominant while the whole spectrum of high end automobiles, white goods and electronics goods is import-dependent. Statistics of increasing manufacturing output in India hide the fact that most high technology production is based on imported precision manufacturing equipment and incorporate high technology components. Leadership has to eschew the expedient route of ready imports And encourage local capabilities. World-class industrial design would be one priority area that could help commonplace manufacturing goods regain their competitiveness. Progress in microelectronics and tool and die manufacture would help the Indian manufacture get toeholds in the technology intensive manufacturing sector.

Principle # 5: Clean Environment

The Indian census 2011 has brought out the dramatic fact that over fifty percent of India's population has no access to basic sanitation services. The Indian civic and industrial society generates millions of tonnes of waste of all types which is neither segregated and treated well at source nor recycled and reused safely. Non-renewable and slow-renewable resources are consumed indiscriminately. Waste management and resource protection offer a huge potential for corporate entry and growth. Leaders who have recognized the potential are few and far between. Ramky group has shown that waste management makes both civic and economic sense. Leaders of major corporate groups need to demonstrate their social commitment and environmental sensitivity by establishing companies which treat, recycle or otherwise dispose of waste and effluents on one hand and also which limit indiscriminate use of non-renewable resources. In several cases, resort to superior process technologies and materials can eliminate waste. High capacity coolants high eutectic cutting tools can reduce the waste of coolants and coolant water. Solvent-free manufacture of bulk drugs and other fine chemicals reduces effluent load dramatically. Leadership has to take the technological and business route in ensuring a clean and holistic environment. Planting of trees, though essential and positive, hardly compensates for lack of fundamentals of clean living and clean production.

Principle # 6: Cultural Sensitivity

It is important that Indian leaders are sensitive to the Indian culture. The Indian culture is not a religious culture although Hinduism as the largest religion of India, with its several universal teachings, has a profound impact. The Indian culture, also absorbed the good points from the several nations which occupied India for over three centuries. India became independent on August 15, 1947 due essentially to a grassroots nationalistic and patriotic peoples movement led by the Apostle of Nonviolence and Father of the Nation, Mahatma Gandhi. As a result, the Indian culture tends to be nationalistic and patriotic, reflecting unity in diversity. The Indian culture respects the woman as the builder of the family and therefore the society but has also been open to encourage the women to take up professional work. Leaders have to be cognizant of the several hues of the Indian culture. When leaders seek mute compliance to their diktats what they actually get is simmering dissent. When leaders run their airlines with air hostesses dressed up the western way they make both the visitors and Indian hosts uncomfortable. Indian leaders of MNCs have a responsibility to explain the nuances of the Indian culture to their global colleagues and also vice versa, and develop models of positive cultural fusion. Good culture leads to good business too.

Principle # 7: Quality Revolution

If there is one ultimate and sustainable determinant of competitive advantage, it is quality. Positions of cost and differentiation may provide initial as well as growth advantage but quality determines who would remain in the competitive game. The Indian leadership has not played its due part in making quality a national asset rather than a firm-specific asset. Several companies, surprising amongst all of them, Toyota, the gold standard in quality, have realized that quality requires the continuous attention of the entire organization for sustainability. Quality also covers the total value chain, from design on the drawing board to the delivery to the customer, including also vendors and suppliers making it necessary for all the internal and external stake holders be aware of the quality needs. Leaders in India would need to ensure that quality gets the highest priority. Quality encompasses all behavior and leads to compliance with various other critical parameters such as safety and productivity.

Principle # 8: Women leadership

Leaders of modern India must make special efforts to bring women into the leadership rungs. The author’s previous blog post on gender diversity dealt with this issue at great length (“Gender Diversity in India: Number Game or Talent Paradigm?”, Strategy Musings, March 18, 2012). If corporations are willing to just invest two years of career support in talented women professionals, the goal would be entirely realized. Other strategies could be to enable reeducation and lateral entry to capable women managers who had to take a break for family reasons. There is a larger national purpose in having home makers as business makers. Would a woman leader at the helm of a sugary carbonated fizz drink company lead a diversification into health foods with greater understanding, empathy and passion? Would a woman dean at the hem of an educational institution make special efforts to steel the women students to the rigors of professional life better? The answer, probably, is yes to both the questions.

Principle # 9: Infrastructure Reinforcement

Not all leaders are expected to be in infrastructure companies. Those who are must obviously aim at executing the long gestation infrastructure projects with utmost speed. Leaders in infrastructure companies in India must possess exceptional skills to structure projects with environmental sensitivity, cut through land acquisition difficulties, choose appropriate technologies, tie up mega finances, interact with myriad government, non-government and private agencies and have longevity greater than the long gestation times of infrastructure projects to make sustainable impact. Does L&T with continuity of leadership of its CEO better than BHEL which sees quick periodic changes of its CEOs? The answer probably is yes. It is, however, possible for leaders who are not in infrastructure companies also to influence the development of infrastructure; in fact they have all the stake in good infrastructure. The role played by a bold and vocal leadership of Electronics City companies for building of road infrastructure in Bangalore is a case in point. Leadership that participates in industry associations such as CII can view things in broader perspective and advocate infrastructure. Bold leaders would make India infrastructure savvy.

Principle #10: Safety Net

India, like many other oriental countries, is not opportunistic. India Inc does not consider employees as a variable factor. During the global liquidity crisis of 2008 and 2009, amongst all the countries India has been the only country that avoided job cuts. Indian employment carries its own safety net. However, there are vast sections of population employed in the unorganized sector for whom minimum wages are abysmal. There are also employees, both in organized and organized sectors, who do not have adequate medical insurance. The travails of senior citizens who are no longer in employment for healthcare are particularly severe in India. Leaders need to plan the compensation policies not necessarily on current market forces but more in terms of greater retirement security. Safety net can be created when operations and businesses have long term sustainability. Given the talent crunch, employee loyalty can be nurtured in creative India-specific ways, for example, through healthcare options. Similarly, corporatization of unorganized sector could help improve living conditions for the indigent labor.

India-specific leadership

As the above discussion shows, leadership in India can be, and needs to be, on a plane larger than growth and profits. Corporate and business initiatives need to be contextually relevant to Indian environment to usher in growth with equity. There needs to be a unique Indian leadership model built on the classic global leadership principle but with accountability to the Indian needs. The Generic Leadership Accountability Model (GLAM) discussed for India could have wide applicability for emerging nations, and even for the advanced nations with faltering economies.

Posted by Dr CB Rao on April 1, 2012


preeti said...

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