Aspirational Balance and Competent Diligence: ABCD of an Equilibristic Paradigm for Sustainable Achievement by Individuals and Entities

Aspiration and achievement are the two ends of a journey which need to be bridged consistently for one to feel fulfilled. Aspiration, which is a natural human tendency, has become an organizational characteristic too given that organizations are mere conglomerations of human beings. Aspiration itself varies significantly across human beings as much as it does between organizations too. Broadly however, positive facets such as knowledge, experience, growth, income, sustainability, and responsible citizenship mark the aspiration mix, whether of an individual or an organization. Each of the facets, of course, gets defined by one or more metrics such as educational degrees, career span, professional status, pay, income and savings, social recognition and goodwill in respect of an individual. Corporations also get judged on these facets by intellectual property, longevity, business rank, revenue, profitability and net worth, brand image and corporate citizenship. This simplistic array of metrics should not lull us into thinking that aspiration is a concept that can be easily managed.

At the other end, one has achievement which is reflected only when the set aspiration is achieved. The journey from aspiration to achievement can be casual or confident and fulfilling or disappointing depending on how insightful the goals are set and how surely one traverses the path from aspiration to achievement. The path from aspiration to achievement is rarely linear; external opportunities and challenges as well as internal competencies and deficiencies determine the relative ease and arduousness of the journey. Striking a right balance between staying laser focused on originally set goals and adapting them on a real time basis is the key aspect of achieving one’s full potential without undue stress or inappropriate laxity. There are four fundamental aspects that drive this process, namely, aspiration, balance, competence and diligence. These are factors that are individually relevant but become even more powerful when paired. This blog post develops a paradigm of aspirational balance and competent diligence as a guidepost to sustainable success.

Aspiration, balance, competence, and diligence

Aspiration is a strong desire to achieve something. Aspiration usually has a strong emotive driver, sometimes accompanied by inherent biases. Without aspiration, exceptional progress becomes impossible for individuals, organizations and nations. Rags to riches, Man on Moon, Rover on Mars, India in space club, Polio free world, Vaccine for cancer and Regenerative medicine are some of the aspirations that may have looked impossible at the time of their formulation but eventually became or are becoming realizable. Aspiration needs competence to enable performance. Studious and intellectual individuals as well as knowledge corporations and economies have deliberately focused on competence building as the foundational means to enable performance and fulfill aspirations. Aspiration and competence form a virtuous cycle, with each prompting the other to higher levels. However, the virtuous cycle is reinforced or eroded by the embedded behavioural balance and diligence, respectively.

Balance is the intrinsic quality of an individual or entity to appreciate the own strengths and weaknesses, or own highs and lows, and set himself or herself for success. It is an internal compass that gets fine-tuned continuously with learning and development.   Balance arises from a high level of sensitivity to facts and figures as well as insights and feelings, without any biases. Balance helps one overcome one’s weaknesses and reinforce one’s strengths. Diligence reflects an approach to work that is marked by focus, care and effort. Diligence involves a strong application of knowledge and experience to new problems. Awareness helps one look at possibilities and impossibilities while balance helps one choose the right aspirational goals. Competence provides the capabilities achieve goals but diligence is what makes the seemingly impossible eventually possible. Aspirational balance and committed diligence make the winning pairs for success. At various levels, from micro-local to mega-global, one can cite innumerable examples of aspirational balance and competent diligence leading to exceptional achievements.

Tightrope walker

The interplay of the four factors is best illustrated by tightrope walking.  Aspiration and balance are interlinked and interrelated as goal and moderator but the subtlety of their constitution and the complexity of their interaction are not well understood.  Aspiration is imitable while balance is inimitable. To amplify a little more, the human brain is naturally wired to seek satiation (through aspiration that comes out of social existence) but needs enormous rewiring to exert to achieve it (through balance that is enabled by individual effort). Aspiration is a social influence while balance is individual discrimination. Balance can be misunderstood as a limit to development; on the other hand, in reality it is an enabler to move to higher trajectories. The case of the tightrope walker is a perfect example of balance being an integral part of aspiration, serving as an internal compass and perfecting itself through learning and development.

Tightrope walking is not everyone’s cup of tea; while everyone is a natural walker only very few are natural tightrope walkers. Competence to be a tightrope walker comes with training but stays only with diligence. The tightrope walker cannot afford to miss even a second in applying his or her competence; that is where diligence counts. Competence through education is knowledge while that through practice is skill. Diligence through motivation is a practical phenomenon while that through inspiration is wisdom. Competence is visible and quantifiable while diligence is invisible and embedded. Human faculties respond differently to the tasks of aspiration (tempting to overestimate), balance (risk-averse to be safe), competence (resting on oars too soon) and diligence (failing to nurture oneself). The perfection with which an individual or an entity creates aspirational balance and committed diligence defines sustainable success.

AB, CD grids     

Conceptually, depending on individuals and corporations having low or high aspirations, balance, competence and diligence, we can categorize individuals and organizations into four quadrants on the two factor pairs considered earlier. The four quadrants of the Aspiration-Balance (AB) grid are: low aspiration-low balance (LALB), high aspiration-low balance (HALB), low aspiration-high balance (LAHB) and high aspiration-high balance (HAHB). It is self-evident that LALB individuals and entities would be Losers, baulking at all opportunities while HAHD individuals and entities would be Achievers, setting high competitive barriers for others. HALB individuals and entities would be Daydreamers, failing to walk the talk while LAHB individuals and entities would be Umpires, bringing their judgement to others. These classifications need not necessarily stay constant and consistent throughout lifespans of individuals or entities. Awareness (or lack of it) determines the entry and mobility drivers across the four quadrants. Given that careers and corporate longevity are like marathon races, a high level of awareness on aspiration-balance interplay is required for optimizing the Aspiration-Balance grid. In reality, AB grid is only an external reflection of another grid that may be termed Competence-Diligence (CD) grid.

Conceptually, depending on individuals and corporations having low or high competences and displaying low or high diligence in deploying their competencies, we can categorize individuals and organizations into four quadrants which are quite self-explanatory. The four quadrants of the CD grid are: low competence-low diligence (LCLD), high competence-low diligence (HCLD), low competence-high diligence (LCHD) and high competence-high diligence (HCHD). It is self-evident that individuals and entities who are LCLD would be Laggards unless they make conscious efforts to build competencies and inspire themselves to be diligent. On the other hand, HCHD individuals and entities would be Masters, winning all-round appreciation for their perfect synergy of capability and application. HCLB individuals and entities would be Mavericks, unpredictable in their performance and compliance. LAHD individuals and entities would be Followers, eager and willing to follow a leader.

World is a circus

We have seen tightrope walking as an example of how aspiration, balance, competence and diligence are required to perform and deliver beyond what a human body and mind is biologically and naturally accustomed to. On a broader canvas, the world is so competitive and volatile that one needs to be all what a consummate circus artist needs to be, whether a tightrope walker, trapeze artist, gymnast, acrobat, juggler or even joker. In a circus show the performers are few and applauders are many. In the real world, which is a circus of high performance of multiple talents, everyone is expected to be a performer. Consummate artistry in the chosen dimension of talent is inescapable to stay successful. As with a circus artist, maintaining the equilibrium while defying gravity is an essential requirement for a contemporary individual or entity.

Given that career progression and corporate longevity are like marathon races, a high level of awareness and a high level of focus on the four determinants of success, namely aspiration, balance, competence and diligence constitute the essential foundations of consummate artistry. Whether one would be a loser and laggard or an achiever and master (or any of the other categories of daydreamers and mavericks or umpires and followers) would entirely depend on how one sets about developing one’s own gravity-defying equilibristic capabilities. Successful artistes are those who learnt the ABCD of artistry from the very young age, and sustained it throughout the lifespan. For very fortunate few, world may be a ready-made canvas on which they can paint a picture of choice. For most, however, world is a circus of competitive performing artists where nothing less than consummate artistry gets the applause.

Posted by Dr CB Rao on October 26, 2014

Indian Institutes of Vocational Management (IIVMS): Institutes for Next Generation Management

My first brush with management studies was in 1970 when I took an optional course of production management as part of my final year mechanical engineering course selection. Thereafter, I had the opportunity to complete post-graduate and doctoral programs in industrial engineering and industrial management. Over the last 44 years, it has been my practice to keep in touch with the management disciplines as taught and as practiced. As an engineer who pursued management studies, I was variously intrigued, fascinated and circumspect, time to time, about the glamorous attraction of the management studies that tempted several thousands of engineers to branch off into management. The emergence of premium schools of business such as the Indian Institutes of Management (IIMs) only fueled the trend. The more established premium schools of engineering, technology and science such as the Indian Institutes of Technology (IITs) had to follow suit by establishing their own in-house departments or schools of business.   

Unlike engineering, management studies have remained largely static over the last four decades. While more nuances may have come about, and while other disciplines such as mathematics, statistics, economics, sociology, psychology, and information technology may have enriched management, there have been no new disciplines that have emerged out of management. Even Porter’s theories of competitive strategy and competitive advantage (of the 1980s) made for compelling reading but elusive application. Overall, over the last four decades management studies helped graduates improve their conceptual, analytical and communication skills and leapfrog in their careers, leveraging their institutional moorings. With mushrooming of management studies and the increasing need for companies to secure operational advantage rather than strategic advantage, management studies need to move from the (now threatened) vantage position of prescriptive studies to a (future secure) position that would be more value generating and value sustaining. This blog post discusses a few options, some merely extensional and some truly transformational.

Art, science, skill

For too long, the debate on management focused on whether it is an art or science; the former view because of the strong people element in management and the latter view because of the strong quantitative element inherent in performance. Neither is wholly right or wrong but what is more relevant is that management needs to be like anything else - a profession of skill. There is an oft repeated criticism that the Indian educational system focuses too much on information and theory and too little on knowledge and application. As a result, there is a strident view that the workforce is qualified but not knowledgeable and where it is knowledgeable it is not skilled. One of the concerns on ‘Make in India’ reaching its full potential relates to the skill deficit arising out of the Indian educational system. Prime Minister Narendra Modi’s very first exhortation has, therefore, been that India must focus on 3 S’s of skill, scale and speed. On these, a common view could be that individual efforts are required for skill development and management efforts are needed to achieve scale and speed. In a distorted view of this, managers tend to believe that only the employees at the bottom of the organizational pyramid need to be skilled while the higher levels need to be only well versed in managerial processes and focused on others’ outcomes than on their own contributions.

Historically, organizations have looked at skill only from a workman perspective and even categorized workmen as unskilled, semi-skilled, skilled and highly skilled. The fact of the matter is that everyone needs to be skilled; whether one is a material handler, forklift operator or machinist. It is only that different types of skills are required for different roles. As understood from serious incidents of quality, compliance or safety, lack of skill even at the lowest levels can cause serious dislocations or disruptions. Given this perspective, it would be an even greater organizational distortion to conceptualize that skills are required at frontline levels and higher levels need only capabilities of management and leadership,  classified as art or science. Management and leadership must move out of the exotic domains of visioning, strategizing and performance management and concentrate equally on individual contributions that are commensurately and consummately skilled. The synergistic arithmetic of organizations has two components; individual and team based. Managers and leaders are also governed by similar value arithmetic. There are two approaches to achieve this in a phased manner. The first is by redefining management curricula. The second is by making management studies completely vocational, and skill based.

Specialization and customization

A logical way to go is to increase the extent of specialization and customization. Specializations such as production, operations, marketing, finance, human resources etc., have always been there. The next frontiers of specialization must be three dimensional. The first dimension must be on specific industry orientation. There is no point in letting management studies remain generic and prescriptive. The least that can be done is to customize studies to industries, which will retain the basic scientific and technological foundations of one’s professional undergraduate studies. One may envisage at least 50 such industry specializations to start with. The second dimension must be on converting themes into subjects. Fashionable topics such as visioning, integration, diversification, costing, execution, self-realization and self-actualization which are nothing more than sections or chapters currently must be developed into holistic subjects. The third dimension must be on focusing on management for differentiated national cultures. Setting up and running industries or businesses could be significantly different across nations, and customization would help in making management graduates better.

The above is based on the requirement that management studies must not remain as generic studies as they now are. Two years is a long time in one’s educational career, especially as one gets closer to the career doorstep. By remaining generic, management studies not only make students unlearn their hard-learnt technical competencies but also make them managers of others’ competencies rather than contributors of their own intellectual might. Today’s generation has the opportunity to learn from diverse sources from the childhood days and it does not require a management capstone course to acquire soft skills. In fact, soft skills, including conceptual, analytical and communication skills, must be integrated from the basic school curricula stage. Management courses by becoming more specialized and customized will become more relevant to the industry. Possibly, educational institutions could be averse to such specialization as there could be uncertainty in securing high student intake. Specialized and customized management courses, not unnaturally, would require early career planning by the students (and their families who have a say over the career choices of students in the Indian context!).

Indian Institutes of Vocational Management (IIVMs)

Vocational courses are those that are directly deployable onto a work situation by teaching and developing work related skills. Industrial Training Institutes (ITIs) with their technician courses are typical providers of vocational studies. Even at a higher level, with reference to scientific and engineering studies, it is commonly understood in all engineering institutions that while class room teaching is essential and inevitable science is best learnt in laboratories and technology is best appreciated in workshops. Not only that, class room education is embedded with problem solving to illustrate and imbibe the theoretical principles. In contrast, management studies, despite the gallant efforts to bring in the case study approach and occasional industry guest lectures, remain theoretical and class room laden. In addition, the inevitability of reducing complex real world issues to manageable assignments leaves the students quite distanced from the complex realities. Added to this, the convenient management principle of holding someone else accountable and responsible for elemental projects makes management studies even more superficial. The earlier recommended approach of specialization and customization in subjects, industries and cultures is the first foundational step to make management vocational.  

To institutionalize vocational management studies, it would be necessary to establish a string of Indian Institutes of Vocational Management (IIVMs). The existing management institutes may be given options to convert themselves into IIVMs or establish adjunct IIVMs. Vocational management studies must have five essential components. The first is that an equal distribution of pedagogy between classroom and workplace must prevail. If it is a one year program, six months must be in class room and six months in a workplace, and in the case of a two year program, one year each in classroom and workplace. The second is that project work is not a surrogate for real time work experience. If there exist 12 courses in the theoretical curriculum, there must be 12 projects, each reflecting the main theme of each of the subjects. The third is that the faculty must comprise an equal number of fulltime academic faculty and visiting workplace managers and leaders. The fourth is that the curriculum should be managed and students’ performance evaluated by an academic board of both in-house faculty and industry experts. The fifth is that the vocational management institutes should run off-campus management programs aggressively on the lines of Birla Institute of Technology & Science (BITS), Pilani.  These five principles can transform the way management courses are conceptualized and run as truly application oriented vocational programs. This, of course, requires close collaboration between industries and IIVMs. The exciting opportunity of next generation management - vocational management - is well worth the effort to overcome challenges of collaboration.  

Posted by Dr CB Rao on October 22, 2014

Loyalty, Objectivity, Faith and Trust (LOFT) for Organizational Effectiveness: Managing the Human Paradox of Dependence and Independence

What makes organizations supremely effective? This is a question that experts in organizational behavior and strategic management have been grappling with in terms of multiple answers with less than optimal solutions. From Hawthorne Experiments to Theory X and Y, and from Core Competence to Competitive Strategy, leadership experts and management gurus have been examining the triggers and levers for effective performance. These theories and practices focus on facilitative behavioral processes such as motivation and empowerment, controlling behavioral processes such as responsibility and accountability, facilitative transactional processes such as goal setting and strategy formulation, and controlling transactional processes such as execution and moderating. With several extensions and nuances to these typical processes, and with confluence of several disciplines, the whole gamut of effective delivery by teams and organizations has become an increasingly complex mosaic that is increasingly fascinating but tantalizingly imperfect. The reason for the complex imperfection is rather simple.

Just as machines cannot replace people (because people are required to design, make and deploy such people-replacing machines) processes cannot replace people (because people are required to prescribe, understand and implement processes). As organizations and corporations are made up of several hundreds and even several thousands of people, understanding people (and people dynamics) is the foundation of organizational effectiveness. People can be understood through multiple attributes but the essential enigma is that every person experiences all through his or her life a very fundamental human paradox of wanting to be independent and dependent simultaneously. From the time a baby is born, the paradox of dependence and independence, whether it is called ‘dependent independence’ or ‘independent dependence’ becomes explicit. With age, education and experience, the paradox only becomes more complex with additional attributes and emotions getting embedded in human and organizational behavior. This blog post proposes a rather simple model to define organizational effectiveness through four fundamental human dimensions. These are Loyalty, Objectivity, Faith and Trust. Together, they constitute the LOFT Model of Organizational Effectiveness.  

Loyalty, the reality

From the days of royalty, loyalty has been the core of leadership expectations and people behavior. Royalty is defined as being supportive of, and attached to, a particular person or issue. The easiest example is that of a typical king and his loyal subjects. However, what made a good king a great king was when the king also felt loyal to his subjects, and reciprocated their loyalty. As modern organizations took shape with greater number of factors impacting organizational performance, loyalty has taken multiple hues; for example, loyalty to ideology, loyalty to goals, loyalty to nation or society, loyalty to values, besides loyalty to the leader. Loyalty, in fact, is the fundamental factor that promotes a shared concern or alignment between two or more individuals as a partnership, team or as an organization. Loyalty has several other dimensions too. Loyalty leads to a sense of belongingness and ownership. Loyalty, on the flip side, leads also to adulation and subordination of logic to adulation. Loyalty rarely stays constant and consistent as individuals and societies as well as products and services evolve. Loyalty gets positively influenced and modified by objectivity.

Objectivity, for selectivity

Objectivity is the ability to take a view based on data, evidence, logic, rationality and reasoning. Objectivity is the elevated faculty of an educated and experienced human being that tests one’s inescapable biases against the inputs that arise from facts and figures of processes and outcomes, all of these analyzed with logic, rationality and reasoning. Objectivity is at the core of shifting loyalties that occur in organizations, marketplaces and societies. Companies which are loyal to motor cycles, for example, change their views to also bet on scooters based on an objective analysis of consumer preferences. Similarly, long standing brand loyalty can be changed by objective analysis that arises from the factors of objectivity related to product features and performance. Objectivity need not always be based on proven processes or established results. Negative performance can lead to an objective reevaluation of loyalty considerations and shift allegiance based on hypotheses of future. In political campaigns or corporate strategies, more often than not, objectivity and expectations act together rather than only as total objectivity.

Faith, the foundation

Faith is one’s belief in a person’s ability or knowledge; it is also a belief that a particular leader, mission, strategy, ideology or organization would deliver. Despite, or arising from, loyalty and benefitting from objectivity, one develops faith. As the old adage says, faith moves mountains. Faith in technology makes engineers and scientists develop products that consistently outperform the current generation of products. Faith in leaders’ enables people to vote for them in democratic elections. While loyalty to oneself is negative and discouraged, faith in oneself is positive and needs to be encouraged. Faith that comes from knowledge and ability drives positive change in organizations and nations. Faith becomes stronger as human traits of skepticism and cynicism are dispelled by education and experience on one hand, and logic and reason on the other. Faith in medical technology and practice is enabling caretakers to invest their resources and efforts in extending life of even those who are chronically sick. Faith in the capabilities and aspirations of people of a nation motivate leaders to aim at developing economies into super-economies, a development that is evident in the resurgent aspirations of India and its leadership.

Trust, the bond

Trust is the belief that somebody and something is good, sincere, honest and reliable. Trust has a strong emotional element embedded in it. One may have a complete understanding of a team member’s capabilities but unless one believes that the team member would put to use all of his or her capabilities sincerely and transparently, the relationship would not be marked by trust. Trust develops with experience of proven outcomes. Trust develops with credibility. Constitution of a team in terms of its members and the leader needs to be based on trust rather than expediency. Trust based teams and organizations bond better and deliver better. Trust which is based on loyalty, objectivity and faith becomes unshakeable. The leader understands that he or she is placed in a position of trust, and team members believe that the members and leaders trust each other. Amongst the four factors discussed, trust is the team strength that is the most difficult to build and the easiest thing to destroy. Trust tends to be vulnerable to emotions and actions that are both intended and unintended. Objectivity to a large extent, and loyalty and faith to some extent determine the durability of trust factor in teams, organizations, societies and nations.

The LOFT model

Organizations need to understand the human dynamics that determine an organization’s effectiveness. History teaches that even under debilitating circumstances marked by heterogeneity and exploitation, the LOFT model can deliver results. The success of India’s independence movement under the leadership of Mahatma Gandhi is a classic example of the LOFT model that transcends all hurdles and delivers success. Mahatma Gandhi’s preaching and leadership reinforced loyalty of the people to Bharat Mata (Mother India) and to the spirit of independence, overriding all fissiparous tendencies and efforts. Although there were somewhat more aggressive and alternative leadership models, people on the whole were objective in determining who could be, and who would be, the real and enduring Jaati Pita (the Father of the Nation). The people developed a faith not only on Mahatma Gandhi as the leader of independence movement but also on themselves as capable of being the integral part of the independence movement. Individual and community examples of response to Mahatma’s calls, be it in the form of non-violent marches, fasts, salt satyagraha, forsaking of foreign goods or khadi movement, have reinforced trust in each other that all of the Indian population is prepared for sacrifices that would obtain for the nation her independence.

At a micro level in organizations, the LOFT model presents a winning combination of four simple human emotions that are universally present in all individuals. The LOFT model represents a unique resolution of the dependence-independence paradox of human behavior. People would like to be dependent yet independent or independent yet dependent. The paradox of ‘dependent independence’ or ‘independent dependence’ is resolved by these four factors. Leaders need to treat loyalty as a two way process; as much as they need, and revel on, team members’ loyalty, they must also earn loyalty through their thoughts, expressions and actions. Loyalty must also occur on multiple dimensions; to the leader, the organization and the goals. The organizational ecosystem must be one that encourages objectivity that builds on positive outcomes and rational analysis that arise out of education and experience. Loyalty gets stronger with objectivity. The organizational ecosystem must focus on developing a meritocracy that is marked by a belief in what one is capable of, and what the team together is capable of. Faith is the single ingredient that makes impossible possible. And finally, trust is the lofty and sublime emotion that makes individuals, teams, organizations, societies and nations stay together to achieve what they are capable of achieving. The aspiration to move from good to great is fulfilled by the LOFT model, in any domain and on any canvas.

Posted by Dr CB Rao on October 20, 2014         

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LAPSE (Loans against Poverty, Sickness and Education): The Ultimate Human Social Responsibility

Human life is God-given. Yet, all the time the human being is consumed with working beyond destiny. From decoding genes to encoding software, curing disease to extending lifespan and from stepping into space to exploring in the oceans human motivation accepts nothing as beyond change and seeks to improve everything. In all the human saga over centuries, there is one manmade creation called money that sets the limits for change. Money (or riches) has ensured that some are born rich and some are born poor. While hard and smart work helps some of the poor to become rich and indolence and negligence make some of the rich become poor, the cycle of born rich or poor continues unabated, and poverty tends to be more universal than richness. If human life is God-given, richness and poverty are also God-given. The passion that educated humans display to change the destiny, somehow, skirts the issue of making poor rich, or even better still eliminating poverty altogether. It is left to the political institutions and public governance mechanisms to use money to reduce, if not eliminate, poverty.

As important as money has been the vehicle created by the human race to channel money, namely the institution called bank. Banking has emerged as the most important vehicle to help people save their money through deposits and help them set up and run their avocations through advances. In developing economies banking has been the most important means to spur entrepreneurship, support economic growth and enable distributive justice to an extent. The former Prime Minister of India, Late Indira Gandhi nationalized several banks in the 1970s so that the Government could have a say on the flow of funds in the economy; in fact, nationalization of banks has been the most populist stroke of socialism of any government in India. The current Prime Minister of India, Narendra Modi has initiated Prime Minister’s Jan-Dhan Scheme to enable millions of underprivileged people open banking accounts with free insurance underlines, once again, the importance of banking in the economic affairs of India.

Banking (in)security

All said and done, however, the fundamental principle of banking, ie., advancing against security has not changed irrespective of ownership. Lending against crops (crop loans), houses (housing loans), vehicles (automobile loans), gold (gold loans), industrial fixed and movable assets (term and working capital loans) are all against mortgage of property, current or future. While relatively affluent sections of the society with assured earning potential may be able to provide security for advances and pay back the loans with interest, those who need funding most would be the ones who have no means at all of earning to pay. It is a rather sad Catch 22 situation for such people; without funding the underprivileged cannot even survive let alone establish their commercial activities, and without security banks cannot lend except at risk of massive write-offs.

Looking from a different perspective, however, the difference between lending against (future) security (for new businesses at least) and lending against (future) crops (for rain dependent agriculture at least) is only a difference in paper. Concept and presentation savvy business leaders can reduce their exciting dreams to impressive written plans while tradition-steeped farmers cannot express anything except their thumb impressions. Even greater vulnerability stalks hapless poor individuals seeking funds for education, non-earning jobless and those affected by sickness. Some questions of equity emerge. For example, is it justified to assume that those who do not earn presently cannot ever earn? Is it justifiable that loans should only be granted against property and certainly not for those in poverty? Conventional thinking cannot provide just answers to these questions even as those who need funding the most would continue to be denied access to funds due to certain behavioral assumptions on the needy.

Theory X and Y of the Indigent  

Douglas McGregor, the thought leader in organizational behavior enunciated Theory X and Theory Y on the negative and positive assumptions, respectively, on workers’ behavior in organizations. In order to transform the banking approaches towards the indigent population, similar Theory X and Theory Y are called for.

Theory X of lending against security has the following five assumptions: (i) dependent population develops a vested interest in perpetual dependence, (ii) less educated are more likely to fail commercially, (iii) financial banking has no scope for emotional connect, (iv) funding  without security is subsidy without recourse, and (v) poverty alleviation is governmental responsibility and never a commercial sensitivity. All the five Theory X assumptions are misplaced. Firstly, as demonstrated by millions of indigent households helped by micro-financing corporations in India and the rest of the world, with a little financial support indigent population could become financially independent. Secondly, education and skill are independent; skilled artisans may even better the ones versed in letters and generate wealth if financially supported. Thirdly, financing which provides livelihood has emotionalism embedded in it; the smile of the banker matters  to the borrower’s heart as much as the banker’s cheque matters to the borrower’s head. Fourthly, security on paper is less important than faith on spirit; all successfully funded entrepreneurs have succeeded on spirit than on security. Fifthly, poverty alleviation is not the sole responsibility of either governments or businesses; it is a total social responsibility.

In contrast, Theory Y of lending against property has the following five positive assumptions: (i) the pride of financial independence drives away the expediency of external dependence, (ii) craftsmanship can overcome any shortfalls in intelligence and education, (iii) emotive and empathetic lending is the most effective lending, (iv) relationship is the best security ever, and (v) people can do more than any government can in poverty alleviation. If Theory X is rejected and Theory Y is embraced, banking transformation would be ushered in, with the premise that those who need funding and who can offer no security are, in fact, in greater need of funding. There are three distinct segments of population that need Theory Y funding: those steeped in poverty, those rendered helpless by sickness and those seeking education. The statistics on these three segments in India are so compelling that there is an impregnable case for ensuring succor to these segments of population on an urgent footing.

PSI

Poverty, sickness and illiteracy (PSI) are three continuing scourges of India society. According to an expert panel headed by former RBI Governor and noted economist, Dr C Rangarajan, those who are unable to spend Rs 32 per day in rural areas and Rs 47 per day in towns and cities are considered living below the poverty line (BPL). Not many are convinced that this is a realistic indicator of poverty in India given the high prices and high inflation. Nevertheless, even by the above BPL definition, nearly 30 percent of India’s population of 1.2 billion (400 million) is estimated to be impoverished. No reliable statistics of people unable to afford quality healthcare are available. From one perspective, the entire BPL population of 400 million can be assumed to be unable to afford quality healthcare. Thanks to the government subsidized canteens, an idli (a South Indian breakfast item) can be had for one rupee but a strip of medicines cannot be had even at ten times the cost of an idli. The plight of population facing chronic sickness can only be imagined.

According to a report from the United Nations Educational, Scientific and Cultural Organization (UNESCO), India has the maximum share in global adult illiteracy at 37 percent (287 million). Taking all of illiteracy, the numbers would swell to 37 percent of India’s population (nearly 500 million). While, over the years, improvements have been made in alleviating poverty, providing healthcare and improving education, the combined picture of the painful PSI conundrum could be as high as half of India’s population of 1.2 billion (600 million). Providing succor to this huge indigent population needs a massive effort. Fortunately, a ray of light is seen to be dawning through the new Companies Act 2013 which mandates companies meeting certain business conditions to allocate 2 percent of their net profits to Corporate Social Responsibility (CSR). All banking companies and the big profitable corporations can play a very significant role in reaching financial inclusion to the large indigent sections of the Indian population.

LAPSE, a movement

This blog post advocates that the Indian banking mindset should shift dramatically from a mindset of ‘loans against property’ to one of ‘loans against poverty’. It also advocates lending based on spirit than on security. The suggested model is one of Loans against poverty, sickness and education (LAPSE).  The model suggests that 2 percent of the net profits of all profit making companies should be dedicated to LAPSE model. Nearly 90 scheduled banks have an interest income of 10,000 billion. A simple 2 percent allocation of net profit will place Rs 200 billion, by no means a small sum, for the LAPSE model. These banks bear a net non-performing asset (NPA) ratio of nearly 2 percent. If all NPAs are converted into performing assets, another 2 percent, and therefore another Rs 200 million, would be available for the LAPSE model.  Addition of non-banking finance corporations (NBFCs) and various other financial institutions as well as other non-banking and financial firms would add additional millions to the LAPSE model. From a different perspective 500 big corporations (ET 500) which have posted a net profit of Rs 4,200 billion in 2013-14 would provide a resource base of Rs 84 billion for the LAPSE model.

The combined impact of pooling together billions of Rupees (at 2 percent of net profits) for the LAPSE initiative, ie., Loans against Poverty, Sickness and Education could be dramatic and transformative. The author does not suggest this huge amount to be dissipated through individual loans whose beneficiaries would be difficult to identify, and engaging with whom for utilization and recovery would impose unviable transaction costs. The author suggests that this huge sum should be utilized on strengthening three critical institutional foundations. These are (i) micro-financing institutions and self-help groups to enable self-employment and alleviate poverty, (ii) service oriented hospitals and clinics to enable timely disease diagnosis and cure sicknesses for the poor and (iii) special schools, colleges and skill development institutes to provide formal broad-based education and instill or develop specific employable skills. The logic for channeling the support from the banks through such institutions of execution is that these types of institutional mechanisms are best positioned to achieve the set goals of poverty alleviation, sickness elimination and educational uplift. 

NCSRC, a special vehicle

It would be appropriate for the Centre to establish a National CSR Corporation (NCSRC) to which all the LAPSE contributions can be made. An institutional framework such as NCSRC would ensure simplicity in LAPSE fund collection and its subsequent utilization. It would also enable professional analysis in association with recipient entities as to how the LAPSE institutions are operating. A central institutional framework will help accept recoveries wherever possible. As an added advantage, such a holding corporation would enable governments, Central and State, to add their own funding towards corpus and distributable funds. Moreover, it offers discretion to contributors, individuals and companies, to contribute greater funds without a worry on the additional efforts of deployment.

Eventually, like provident funds and pension funds, NCSRC could invest its funds in debt, bond and equity markets, in a risk-free and capital accretive mode, to be able to serve LAPSE objectives even better. Contributions to NCSRC could be made tax-incentivized.   Once NCSRC is established, it can even create its own subsidiaries which are focused either on regions or on specific segments of LAPSE funding. With today’s information technology, any attempts to take double or multiple loans or evergreen loans can be identified. In the ultimate analysis, having created money as the force that rules human life, and banking as the institutional framework that grows the ruling force, the human being has the ultimate responsibility to help those who by birth or by circumstances are indigent, sick and illiterate, due to lack of financial wherewithal.

For a noble, 'must-execute' paradigm as discussed above of Loans against Poverty, Sickness and Education, the acronym LAPSE may appear to be paradoxical but ignoring the need for such a paradigm would certainly be a lapse against humanity.

Posted by Dr CB Rao on October 11, 2014

Global Education for Global Leaders: A New Bilateral Paradigm Towards 2030

Dr Marshall Goldsmith, one of the top CEO coaches of the world and the author of several bestsellers on leadership was in India recently to deliver a speech for the National HRD Network’s silver jubilee. Addressing the CXOs he made a point that despite cultural differences across countries, the CEOs of multi-billion dollar companies have a lot in common. Amongst such common characteristics, he mentioned Western education as an important feature even if they went to school in India. He also said that a future CEO should have five things that were not required in the past: global thinking, cross-cultural appreciation, tech-savvy, building partnerships and shared leadership. Though he was candid about the egoistic and other problems of leaders, his insistence on Western education seemed as his quick aid for global thinking, one of his five leadership ingredients.

To interpret Dr Goldsmith’s comments in a perspective, it could be that he views Western education as a surrogate for some of the important attributes of the Western (the US, for simplicity) educational system. These could relate to a graded educational experience that emphasizes logic, openness, boldness, expressiveness and experimentation, and benefits from superior laboratory and other facilities. These contrast with the Asian (Indian, for simplicity) educational experience that supports tradition, caution, deference and conformity, and suffers from constraints of campus infrastructure. Western educational system focuses on expressive, at times even overwhelming, competitiveness in everyday life as opposed to the Indian educational system that emphasizes competitiveness more in examination routines, and accommodation in day to day routines. Western culture promotes inter-personal independence of the individual with dependence on one’s head while oriental culture promotes interpersonal dependence of the individual with dependence on one’s heart.

Flood and trickle

American education continues to be the first choice for higher education for Indian students and parents, whether they have a strong materialistic mind or a strong nationalistic heart. As a result, the number of Indian students applying for US student visas has been growing exponentially. While 90,000 students went to US in 2012-13, 113,000 students went in 2013-14, registering an increase of 26 percent. In 2014-15, a further 40 percent increase to 158,200 is forecast as per current trends. Only, China sends more students to US. Together, China and India contribute to nearly 50 percent of US student visas. The question, however, is whether the students prefer the US educational system for higher education for the sheer educational experience for global leadership or to pursue an American dream of a career in a superior ecosystem. While both could be viable reasons, probably not many are so futuristic as to pursue American education as a global leadership qualification.

For the few who have become the CEOs or CXOs of multi-billion multinational corporations such as Indira Nooyi (Pepsico), Satya Nadella (Microsoft), Harish Manwani (Unilever), Ajay Banga (Mastercard), Anshu Jain (Deutsche Bank), Shantanu Narayen (adobe), Ivan Menezes (Diageo), Rakesh Kapoor (Benckiser), Vikram Pandit (Citi), Sundar Pichai (Google), Nikesh Arora of SoftBank and Ajit Jain (Berkshire Hathaway), the reason  is not necessarily the Western education as several had higher education in India too. Various others have occupied leadership positions in Indian multinationals without any Western degrees.  While Bloomberg commented that Indian cultural ethos of empathy, humility, patience, emotional bonding and passion for growth as a reason for Indians becoming CEOs in global MNCs, it is also clear that out of the flood of Indians seeking US higher education only a trickle makes it to the top. This leads us to wonder on the validity of Dr Goldsmith’s prescription of Western education is an essential prerequisite for future global leaders. In likely fact of the future, there could, on the other hand, be a dramatic shift in favor of Asian education and experience.

Asian resurgence 2030 

According to a report by PricewaterhouseCoopers (PwC) published in July 2014, India will be the third largest economy in the world by 2030. According to rankings of the top economies of the world, India would leap seven steps to become a USD 15 trillion economy by 2030, next only to US at USD 38.5 trillion and China (at the top) at USD 53.8 trillion. In fact, the five BRICS countries (Brazil, Russia, India, China and South Africa) would have an economic scale of over USD 85 trillion by 2030, far exceeding the scale of the five developed economies of USA, Japan, Germany, UK and France together at only USD 66 trillion. Clearly, the emerging economies of today would be the dominant economies of tomorrow in terms of workforce and population, economic scale, diversity of research and manufacturing and market potential.  Today’s drawbacks of the BRICS economies should not be viewed to conclude that the emerging economies would always be dependent economies.

Today’s challenges of the emerging economies in terms of deficient urban and rural infrastructure, underdeveloped transportation services, inadequate power and energy, rather uncontrolled population, poor healthcare and sanitation, and so many other shortfalls would be great opportunities of tomorrow, calling for massive investment in infrastructure development and economic growth. A qualifying requirement for this transformation would be the importance attached to organic technological innovation. India’s Mars mission (Mangalyaan) that has successfully placed India’s satellite in the orbit of Mars in the very first attempt at a cost lower than the cost of a Hollywood blockbuster movie (a point eloquently made by India’s Prime Minister Narendra Modi in his Madison Square, New York address) illustrates that Indian engineering and scientific talent can achieve technological self-reliance even in the most sophisticated fields, with a structured mission and progressive leadership. Indian Scientific Research Organization (ISRO), a Government of India body has certainly shown the way for a techno-savvy India.

Factors and markets

Eventually, global economic development would seek a global equilibrium, driven by differential factor advantages and differential market sizes.  Like water flows from a higher plane to a lower plane and heat transfers from a higher temperature heat sink to a lower temperature heat sink, technologies and finances would flow to economies where they can be best utilized. Global developmental equilibrium would need to happen, even if it were to take years and decades. In this process, leadership is a critical driver of how to access and deploy resources, be it finance, people and machines, or naturally occurring resources like oil, gas, water, wind, minerals, metals and any other element. Leadership is also a critical ingredient of understanding various local markets, developing customized products and services and integrating with local consumer needs. If these are the imperatives, leadership must understand local factor endowments and local market needs, and explore how multi-national resources can be networked to synergize each local economy.

It goes to the credit of global Fast Moving Consumer Goods (FMCG) companies that they ventured into underdeveloped markets decades ago despite several challenges and uncertainties and in the process secured a place in such countries that is on par with indigenous companies. As the underdeveloped economies moved on to become developing economies a few years ago, and now emerging economies with potential to become fully developed over the next two decades, the pioneering FMCG companies have discovered that their venturesome strategies fueled sustainable global growth for them. Companies like Unilever, Colgate-Palmolive, Proctor & Gamble, Gillette, GSK Consumer, Microsoft, Pepsi, CocaCola, Henkel and Reckitt Benckiser come to mind. In other fields as well, companies such as Suzuki, GE, Siemens, ABB, Nokia, Philips, Cummins and Alstom have taken early roots. All such successful companies viewed India as an important market and supply source but some like Unilever have seen India as a select leadership talent source for their global needs.

A new bilateral paradigm

As India and China match the five developed economies by value less than 15 years from now, global corporations must develop a significantly different paradigm for nurturing global leaders. The conventional models that local leaders must be Western educated to have global acceptance (typical Goldsmith’s type prescription) or that expat leaders must spend a few years each in several emerging countries (typical  global automobile industry’s practice) would be found wanting when India and China (as well as other emerging market economies) race at full economic throttle. Fundamentally, future global leaders would be developed with specific collaborating countries in mind. Such combinations could be US and India or US and China, Japan and India or Korea and India, UK and India or UK and China, India and China or India and Brazil, and so on. The Western origin person who would have graduate education of the West would be immersed in post-graduate education of the East while the Eastern origin person who would have graduate education of the East would be immersed in post-graduate education of the West.

Put differently, the new global leader would not rest content with viewing education as imparting only professional knowledge or leading to a different employment opportunity. Education would be seen as an immersive cultural experience of a different nation with a style of pedagogy and a community of co-learners and co-executors unique to that national culture. As much as an Indian student with US employment aspiration would like a US higher education so must a US student with the aspiration of becoming an India-centric leader should take to Indian higher education. Ahead of this paradigm being a part of mainstream general education, executive education could be the right vehicle to develop the new generation of focused global leaders. Executives should be encouraged to take up fulltime residential higher education courses in diverse emerging market countries on sabbatical depending on the global growth orientation of the companies. For the new bilateral global bilateral education paradigm to be effective, educational institutions in India and China (and other emerging nations) must elevate their campus ecosystems, learning communities and curricula to integrate the best of locally embedded and intrinsic culture, knowledge and practice with globally applicable professional knowledge, tools and techniques.   

Posted by Dr CB Rao on October 4, 2014

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