From Unrest to REST (Recruitment Engine and Skill Transmission): An Automotive Inspiration to Human Resources Drive Train

Contemporary organizations are in a state of continuous unrest. Competitive conditions are no longer the only pressure for survival or superiority. Disruptive conditions make even the most recent strategic scripts obsolete. Governments and regulators assume an increasingly activist role in support of their constituencies or in pursuit of their mandates. When Chinese manufacturers offer smartphones, telecommunication gear, bulk drugs, power plants and bullet trains at amazingly lower costs relative to suppliers in the developed and developing world, competitive conditions turn into disruptive conditions for such vendors. Within India, low entry barriers and fragmented industries have been disruptive to orderly development and growth. Organizations, therefore, are in a state of perpetual unrest as they retool their available skills and retool with new skills. That, however, is hardly the answer because the changed competitive conditions tend to become real and ravaging well ahead of anticipated occurrences, and worse still in a completely unanticipated manner. Neither subdued organizational fatalism nor excited organizational unrest is hardly the answer to meet such surprises. ‘Anytime organizational readiness’ as a concept requires the adoption of REST model as it is the only way for organizations to be in a state of perpetual readiness.   

Automotive analogy

It is well known that the drive train that comprises the engine and transmission is the key enabler of automotive efficiency. The nature of the engine, whether it is gasoline or diesel, and the type of the transmission, whether it is manual or automatic, together determine the onroad power, torque, performance and economy of the automobile. The matching of the engine and transmission as an integrated system of drive train on one hand and the matching of the drive train to the driving conditions on the other are essential for optimal performance of an automobile in different countries. The automotive designers, therefore, commit considerable innovation and effort to optimize the drive train to internal and external conditions. While there exist several other design factors that impact automotive performance such as the profile and weight of the automobile, for a given set of non-drive train factors, it is the efficiency and economy of the drive train that determines the internal and external performance efficiency and driving compatibility of an automobile.

This blog post proposes that two essential components of the human resources function in an organization, namely recruitment engine and skill transmission constitute the drive train of an organization and impact the overall performance of an organization in the competitive traffic of business competition. As with organizational design there exist several other factors of organization design that impact organizational performance. These are, for example, the profile and size of the organization (akin to the profile and size of an automobile). Be that as may, the way the recruitment engine and skill transmission in an organization are designed and tuned determines organizational performance, other factors remaining constant. This blog post proposes an optimized model of Recruitment Engine and Skill Development, with the acronym of REST that can provide a meaningful conceptual and analytical framework for driving human resources efficiency and effectiveness in an organization. The drive train needs to be continuously optimized as driving conditions and preferences evolve; so does the organizational drive train need to be continuously optimized as business conditions and strategies evolve.

Recruitment engine

The automotive engine is characterized by three fundamental characteristics, the power, torque and specific fuel consumption (SFC). The power curve provides the ability to accelerate the automobile and carry the load while the torque curve provides the ability to start the vehicle with loads and in upward gradients and the SFC curve reflects the ability to run economically at different power and torque levels. The recruitment engine in an organization provides a similar function set; an ability to take the business challenges against adversity (the torque), an ability to cruise competitively on the business pathway ahead of others (the power) and an ability to use resources judiciously and economically while meeting the other two traction needs (the fuel economy).  Just as these three characteristics are integral and integrated part of an engine design (despite being three separate performance curves), the three characteristics of resilience, competitiveness and economy must be the integrated and integral part of recruitment engine design and delivery.

Different engines are designed for different purposes in classic automotive design. Similarly, different recruitment engines are required for different business purposes. Startup phase requires high resilience of the human resource base (high torque talent). The growth phase requires an ability to accelerate and stay ahead (high power talent). The maturity phase requires the skill to be cost competitive and achieve long term sustenance (high economy talent). Firms that desire to stay in the game as long as possible in the maturity phase or extend the product life cycle through a fresh startup and growth phase require all the three characteristics in varying measures. Just as a unitary engine design is today being re-tuned to meet different characteristics (for example, Tata Revatron engine which is controlled by microprocessor technology to meet three different driving needs of city, sport and economy), the organizational recruitment engine must also be capable being one in constitution but multiple in recruitment characteristics. This requires extreme sensitivity (akin to microprocessors) on the part of the recruitment engine to varying internal and external needs.  

Skill transmission

The automotive gear box plays an extremely important role in enabling the basic performance of the engine to be matched and amplified based on the driving gradients. The gearbox technology has moved from manual four speed gearboxes to automatic and continuously variable transmissions capable of matching the engine performance to road requirements at different engine speeds. In organizational settings too systems of skill transmission can play a great role in ensuring that the available skills brought in by the recruitment engine are amplified and conditioned to meet unanticipated and challenging business requirements. One is habituated to expect skill transformation to accomplish such arduous transportation on business highway to future. Skill transmission, however, is an altogether different concept. It is the ability of the team managers and corporate leaders ensure that the available skills are matched or enhanced to levels that are required. Managers and leaders are habituated to assume themselves to be the steering wheels of an automobile in a classic automobile analogy but they actually need to play a less visible and more appropriate role of a transmission that is consistent with their accumulated knowledge, experience and intuition.

Managers would need move from coordinating and controlling roles to progressive roles that excel in imparting their skills to reshape or augment their team members’ skills and, in some cases, let their own skills work directly with their team members’. Leaders would need to transform themselves from oversight and judgmental roles to judging business gradients and competitive conditions. Over time, the behaviors of managers and leaders tend to be predictable, from their periodic exhortations to quarterly expectations. Over time, in organizations,  innovation and creativity of executives tend to be subservient to the directions and boundaries set by the managers and leaders. As the competitive intensity increases managers and leaders become skill demanders rather than skill enhancers. Their expectations lie around transformation of the skills of their team members (which is a required long term fix) rather than devising ways by which available skills can be redeployed to maximal efficacy. Managers and leaders need to recognize that they are an integrated part of the human resources drive train and the converter between the raw power, torque and economy of their teams and the rough conditions of their businesses.

From unrest to REST

Organizations cannot afford to ever rest in the task of organization building and talent development. New entrants must see their entry as only the first step to develop skills that are industry-specific and application oriented. Managers and leaders cannot afford to consider the journey of competitiveness as a steady state cruise. Disruption, whether by competition, regulation or globalization, is the order of the day. If unrest in organizational performance and infrastructure is a way of life, REST as a model of organizational competencies is the elixir of organizational life. Recruitment engine in a growth oriented high performance organization never gets switched off; it remains in perpetual throttle to balance the skills at a basal level and rev up as required. Skill transmission enjoins the leadership to be in a continuously variable application mode to deliver maximum value by combining the executive, managerial and leadership skills that are already resident in the organization.

Like the best automotive drive train that remains invisible under the hood but purrs to perfect performance, REST, the human drive train, is the invisible force that remains in perpetual throttle with an automatic transmission of combined human capabilities of the organization to meet variable business requirements. This, however, requires a major shift in the mindset of managers and leaders (and organizational expectations) from visible direction-setting and judgmental oversight to invisible skill amplification and augmentation of their teams and organizations. This also requires a shift in the mindset of team and organizational members (and manager, leader expectations) from compliant direction taking and performance excellence to active knowledge seeking and competitive collaboration with their managers and leaders.   

Posted by Dr CB Rao on September 21, 2014  

 

               

Smart Cities With Smart Villages: Need for 'Capital' Paradigms for People Development

The announcement of the 100 Smart Cities concept is one of the visionary moves of the new NDA Government in India. While there is no definition of a smart city (articulated more to support increased urbanization), one may assume that a typical smart city would have high level social and industrial infrastructure with a robust digital backbone. A smart city may have metro rail and highway connectivity with international airports to boot. It would have certain pre-existing core industrial and commercial activity that can be leveraged for expansion and diversification. It is not, therefore, surprising that Tier 2 and 3 cities like Visakhapatnam, Madurai, Kurnool, Nagpur and Cuttack, to quote a few examples, would be qualifying as smart cities. 

Clearly, development of smart cities requires not only a more precise definition of the concept but also a more clear pathway for execution. It is for this reason that the Union Budget envisages‎ an allocation of Rs 7600 crores in the Union Budget 2014-15 to develop a clearer grasp over the concept and make a start. With only 6 months to go before the next budget, it looks as if the States are yet to make specific smart city strategies.  It is hoped that the development planning exercise will be specific to each city selected as a qualifying city (rather than as a generic concept for all the cities). Specific studies will recognize the peculiar needs of each city in terms of geo-economic and demographic profiles and develop plans that would be ready to execute. This blog post suggests a few ways to lead the smart city concept to execution but more importantly touches upon the need to develop a smart village concept as well.

 

Smart villages

 

It is well-known that nearly 70 percent of India's population still lives in India's 600,000 villages. There can, therefore, be no equitable development unless the villages are also brought into the smart paradigm. If 100 smart cities are seen as the magnets to spur overall urban development, probably the country would need about 20,000 smart villages in the first phase. Smartness is the ability to be contextually efficient and effective. Given that villages are dependent on natural resources for day to day living smart villages must aim at leveraging technology for more efficient and effective use of technologies and generating surpluses that can be sold in the urban centres to generate rural wealth.

The smart villages must aim at being the nodal hubs for the balance ‎580,000 villages. While each of the 600,000 villages must be covered by total sanitation, drinking water and housing for every family, the smart villages must have certain additional capabilities. Typically, each smart village must be strategically selected to support a cluster of villages in an accessible distance; it should be the centre of a cluster of villages in a 5 kilometre radius. It should have a 3 tier school structure to support universal education, a multi-utility agricultural resource complex to support smart agriculture and a healthcare infrastructure to provide life support systems. The agricultural resource centre would be the core of a smart village. 

Smart agriculture 

India has fairly long monsoon season, extending between 4 and 5 months in different regions. What is unpredictable, however, are the start and end ‎dates as well as the curves of ramp-up extension and ramp-down withdrawal, impacting the seeding, sowing and reaping phases. In addition, unseasonal rains and floods caused by the low pressure areas in the long coast line cause damage to standing crops and produce. As all the villages are solely and wholly dependent on agriculture, the smart villages must emerge as the protective umbrella for the larger village clusters as agricultural resource centres. In addition, they must lead a smart agriculture revolution across the villages.

Each smart village must have ‎a multi-utility Agriculture Resource Complex (ARC) comprising a meteorological centre, fertiliser centre, a pesticide centre,‎ a seeds centre, a threshing centre, a drying centre, a testing centre, a grain warehouse, a crop planning centre, a logistics centre, a leasing centre (for tractors, trailers, vehicles and implements), a grameen bank, a telecommunications centre, and  a crisis management centre. The ARC in each smart village would be the key to develop and implement smart agriculture strategies in the villages covered by each smart village. All the ARCs would be digitally connected not only among themselves but with leading agricultural universities.

Smart industry

Just as smart agriculture is the core to wealth generation for sustainable rural development (all towns and cities), smart industry is the core to wealth generation to sustainable urban development. The development of smart cities must be accompanied by a smart industry strategy as well. Smart industry policy must incorporate strategies to develop custom-built industrial parks that can can cater to the entire value chain of each industry. Typically, the parks should have equal share reserved for end-products and component makers. Even if a component supplier is centrally located and well-established elsewhere there is no reason why a finishing operation cannot be decentralized locally. Bharat Forge may produce and rough machine all of its forgings for India in Pune but can set up the fine machining facilities wherever major automobile firms are. 

Smart industry policy also involves creation of the entire comm‎ercial and governmental infrastructure that is required to serve the industrial park through single window clearances and commercialisation. Smart industry policy should aim at crating product-specific logistics and transportation hubs and parking terminals (for both cargo and people) and container terminals for mulltimodal transportation (of incoming and outgoing goods). Most parks are developed only for bare factory requirements and not for the whole series of support centres and hubs that are mentioned herein. New industrial parks in smart cities should, therefore, be conceptualised with foresight and industry collaboration.

Smart residence 

 

As much as industry is important, civic life is equally important. Indian residential market has been progressively moving out of the reach of the lower and ‎middle income groups, essentially due to escalation of land prices and construction costs. The efforts by the governments to develop low income houses in far flung areas has increased the distance between the workplace and homespace for vast tracts of workforce. The affordable homes conceived by certain reputed builders, such as Mahindra and Tata, are too few and isolated to make an impact. As the Governments set about building smart cities and smart villages it is time to do away with the concepts of economic isolation that have taken root over the years. 

Indian cities as they historically evolved had little planning for integrated residential habitats. From Mumbai to New Delhi and from Chandigarh to New Raipur, one can see multiple models, none of them fully thought through for a sustainable high quality living with socio-economic integration. Alternative models do exist; the campus of the ‎Indian Institute of Technology Madras is a good example of harmonious housing colonies with multiple templates co-existing.  As the smart cities get built, integrated planning of residential and commercial spaces would be required. There is no reason for abandoning the weaker sections to isolated existence and tardy development in the fringes. On the other hand, there is every need to use the smart city and smart village as well as new capital developments to integrate all sections of the population, socially and economically.

Renewing the core

 

An important component of developing the smart cities and villages is the renewal of the core. Any observation of historical development indicates that civilisations deve‎loped on river banks, sea coasts or hill valleys for good socio-economic reasons. While developing smart cities and villages, efforts must be made to renew the core to retain traditional advantages while injecting contemporary land use planning. Just as land pooling is being planned for construction of a new capital in the Vijayawada region, building pooling can be considered for renewal of old urban centres. This must focus on unplanned, impoverished, dilapidated and bottleneck parts of the urban centres to convert them into more vibrant zones which can meet the needs of the coming decades. 

An aerial view of any of the cities identified as smart cities would reveal congested building clusters which are not only partially constructed but are also unsafe. Yet they constitute valuable property and the only means of security to the owners. A major people's initiative would be required to achieve productive renewal of the core. It is likely that a well conceived and apolitical plan in public-private participation would help achieve the objectives. The renewal can be an opportunity to create large horizontal free spaces for movement and parking while going vertical for creating commercial and residential space. In the urban renewal, care needs to be taken to avoid wall to wall packing of buildings, a legacy or temptation to which even the world's greatest cities have succumbed.

 

Waves and ripples

Along with the identification and renewal of a core, new zones must be created for expansion of smart city areas from the available basic stages. There are two ways the development can be effected; one as waves and the other as ripples. A wave form of development starts from a developed core and moves towards an unexplored horizon. The development of Hyderabad which proceeded from the core Ameerpet are‎a to Banjara Hills, Jubilee Hills, Hitex City and now Gachi Bowli is an example of wave development. The advantage of wave development is that the existing connectivity options can be progressively extended while new enclaves get developed. The disadvantage of wave development is that the constraints of a previous development tend to impact the newer developments as the core is what provides the basic development backbone.

The ripple  development is based on choosing new nodes far away from the core, and developing them towards one another‎. The development of Bengaluru with new distant clusters like Sarjapur, Whitefield, Peenya and Davanahalli serving as the four new clusters expanding and rippling outwards from each of the new cores is an example. The advantage of ripple development is that it enables a much larger canvas and a much faster pace of development. The disadvantage is that it tends to be a connectivity nightmare if people need to commute across work areas of one location and residential areas of another location. Bengaluru is an example of both. As the governments embark upon converting the existing cities into smart cities, the need for orderliness and convenience cannot be ignored.

Managing expectations

It appears that development of smart cities and smart villages could be at high land costs. The (already costly) experience with the new capital of AP suggests the need for tempered visions and calibrated communications. Farmers who have inherited the lands in and around Vijayawada, and have been living in abject poverty thus far should feel happy with the smart developments that fetch huge land values. On the other hand, if they have already sold their land parcels months earlier for small incremental appreciation to 'smart' people, then they may have unknowingly skirted the once in a lifetime development opportunity. Media reports suggest that this indeed could be the emerging story. Reports suggest unprecedented spikes in the land prices in and around Vijayawada, expected as the new capital city of Andhra Pradesh ever since the bifurcation of the AP State a few months ago (and announced accordingly on September 4, 2014 in the AP Legislative Assembly).

Other reports suggest that the Governments would go in for joint development for the new capital with land pooling with 40 percent share to the land owners and the skyscrapers getting built free on the land on the basis that half the number of floors would go to the Government with the balance half being retained by the developers for their sale. This has a hidden high cost element while being low on visible expenditure. The other alternative, possibly less speculative and more cost-effective, is to limit new capital development to only clusters that have government land and avoid private acquisition of land. Even if such clusters are separated, top class road and metro rail connectivity can be ensured to keep them networked. This could be a better model with each cluster focusing on one specific part of governance. 

Digital connectivity

 

An avowed objective of the NDA government is digital integration. Smart cities as well as smart villages must lead in this. Digital connectivity is more than wifi enablement or iPad deployment. An ability to access information through a private device in any public spot is only a battle half won. Digital connectivity must provide access to information for all people at all places without having to resort to private devices.‎ Announcing arrival and departure times through mobile applications may be an improvement over telephonic enquiry service but does not represent real and total digital connectivity. Digital connectivity needs time to speak and time to listen. The new Government has asked for people's  suggestions on the body to replace the Planning Commission. However, only few suggestions have flown digitally while fewer have been analyzed. When digital universe is opened up, time needs to be allotted to make use of the information highways by all stakeholders. 

Digital connectivity must facilitate instantaneous access to desired information by public. ‎This is enabled largely by major upgrades in digitization of all activities starting from one digital card for each individual to total digitization of all transactions. The Income Tax department has demonstrated how several economic transactions can be interlinked with one PAN card number. The experience can be more profound if, for example, the labour market and employment market are fully digitised with access of real time information on vacancies and candidates. A national information exchange could be a national repository of public information with a dedicated search engine. Even in today's times, ministers cannot be reached by general public. In a true digitised state, digital outreach (as organized for the Prime Minister on the Teachers' Day) would be a daily feasibility. There should be digital highways that carry the citizens' pains and pleasures to the administrators and ministers anytime. 

Smart India Authority 

The plans that are being laid out are so great with development aspirations all across India and with investment needs so huge that the development paradigms need to be created carefully. Centre could enable a centralised model based on central and global institutional funding or allow the States pursue their own models of smart development. Whichever route is taken, the development paradigms must be empathetic to the needs of the poor and downtrodden as the smart city and village concepts are the one last chance to bring people onto the developmental mainstream. Whether a new body to replace the Planning Commission takes shape or not, a new Smart India Authority seems to be definitely required so that the smart visions and raised expectations are aligned with empathetic strategies and ‎invigorated execution.

Posted by Dr CB Rao on September 8, 2014

 

 

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Stock Markets for the Masses of India in a De-risked Manner: The Concept of Social Stock Investment and Trading Corporation of India

There was an interesting article in the Business Standard of August 29, 2014 that those who invested their savings a year ago in three blue chip stocks of India would have seen their net worth double effortlessly by today. These three stocks, Axis Bank, Maruti Suzuki and L&T belong to three different sectors, banking, automobiles and capital goods. Interestingly, four blue chip companies Reliance Industries, Tata Power, ITC and Infosys which belong to four other sectors oil & gas, power, FMCG and IT provided no more than 20 percent growth. All the 7 companies are leaders and blue chips in their sectors but the diversity in growth in market capitalization has been remarkable. A deeper dive in each sector and across sectors reveals that several firms that qualify as blue chip companies have demonstrated similar divergent rates of growth.

Neither is it easy to hypothesize that sector outlook has a greater say than company’s outlook in driving a company’s market capitalization. A study of each sector demonstrates that there is a high variability in the performance and market capitalization of various firms in each sector. This applies to defensive sectors like pharma, forex driven sectors like IT, consumer based sectors like FMCG, economy based sectors like automobiles, metals and infrastructure, to quote a few. Over and above, governance issues in companies tend to convert high growth stocks into either highly volatile or free fall stocks, just in a matter of days. Managing the excitements and pitfalls of Indian stock markets has become a frighteningly hazardous exercise for the retail investors who put their hard earned savings into the stock market with expectations of high growth.

Virtual Reality

Stock market has been the most innovative financial forum that has been established by the business ever. It is the only forum that brings the companies and investors face to face based on goals and performance on one hand and expectations and resources on the other. For the company, it offers a foundation to build market capitalization to attract risk capital into the shareholding structure at the right time and at the right price. For the investors, it offers a forum to participate in industrial growth based on their understanding of the sectors and companies. Over time, with the evolution of mutual funds, emergence of high net worth investors and entry of domestic and foreign investment houses, the domestic small retail investor has become marginalized. Expectations have turned virtual while volatility has become real for the small investor.   

Over the last several years, the level of independent analyses that are available on Indian companies has grown manifold. The number of business papers and investor forums has also grown substantially. With availability of software, minute by minute tracking of individual stocks and highs and lows as well as volumes is available at the click of a mouse to individuals. For those who want to rely on knowledgeable advisors, portfolio managers have emerged. Yet, there is no clarity  if all of these serve to provide greater assurance or insurance to the retail investors. There is no hard research on how and to what extent the stock markets benefit the small retail investors. There is no research on the benefits of investing through mutual funds vis-à-vis direct investments. There is also lack of clarity if the scores of analyst reports that are available are of any help for the retail investor.     

Managing expectations

Over the last several years, many steps have been taken by the Securities and Exchanges Board of India (SEBI) and the Bourses (Stock Exchanges) to protect the investors. These steps focus on improved corporate governance, better regulations for initial and follow-on public offers as well as other equity and debenture issues, more evolved systems for mutual funds, foreign institutional investors (FIIs), circuit filters on regular and volatile stocks, greater oversight on insider trading and operator driven trading, wider public information campaigns and so on. That said, the small domestic investor continues to be vulnerable. Highly capitalized and leveraged companies in high market capitalization mode have seen their stock prices collapse by 40 to 50 times in just matter of days, with no understanding or clarity on what would it take to recover, and when as well as to what level. While such cases may be attributed to tainted stocks or misgoverned companies, it is clear that such companies continue to beat the elaborate financial and securities systems. Even well governed companies are induced to focus on the short term quarterly profitability than on long term sustainability.

Over and above the above, Indian stock markets have become coupled with global economic developments on one hand  and the movements of funds by FIIs and other global investors across countries based on their needs and perceptions. These two factors, including global geopolitical risks, make the Indian stock markets a slippery ground waiting for the unexpected to happen.  Public information campaigns advise the investors to be watchful. However, given the variety of investment options for several hundreds of stocks, the daily masthead news on exuberant appreciation as well as unstoppable collapse of stock prices, lack of knowledge and time on the part of small investors, such well merited advice can only moderate expectations but not prudentially manage them. Clearly, in a growing economy like ours it is important to have healthy and vibrant capital markets with as much investor participation as possible. This blog post suggests some unique ways to manage the all-round expectations with focus on productive wealth generation as opposed to wasteful wealth circulation.  

BRL, like BPL

All said and done, India is committed to an egalitarian society. The several schemes that successive governments have initiated such as ration card systems, subsidized food systems, rural employment schemes, subsidized transport fares, price and tariff regulations and several others seek to help the people below the poverty line (BPL) cope with the stress caused by unemployment and underemployment on one hand and scarcities and inflation in factors of living. Irrespective of party ideology, all leaders and governments in power have endeavored to be creative on this score. While skeptics may dismiss them as populist schemes, it cannot be denied that they help the people in the BPL category.  Inclusive development is the sine qua non of a stable democracy. The latest policy initiative by the Prime Minister of India, Shri Narendra Modi, the Pradhan Mantri Jan-Dhan Yojana (PMJDY) is an innovative and bold step for universal financial inclusion. With a target of opening bank accounts for 7.5 crore families in a year, PMJDY comes as a package of more than account opening. It also offers RuPay debit card, Rs 1 lakh accident insurance cover and Rs 30,000 life insurance cover for accounts opened before January 26, 2015.

Taking a cue from this, this blog post proposes Below the Risk Level (BRL) as a foundation concept for universal capital market investment. Unlike the BPL and PMJDY schemes that reach people directly and are intended to protect the people, any move to make the common man participate in the stock markets directly has the potential of destroying the meager wealth. A risk-proof plan for inducting the BPL population into the capital markets with the assurance of long term capital appreciation would be ideal but has to be carefully developed. Fundamental to that strategy would be the definition of BRL concept. The BRL concept should provide a definitional basis to identify the section of the population that should qualify for participation in the universal capital market scheme. An easy way to kick-start the concept is to define BRL population as those earning a multiple, say up to 10 times, of the BPL earnings level. Such BRL population should be linked to special bank and DMat accounts under the PMJDY.  

Social Stock Investment and Trading Corporation

Social Stock Investment and Trading Corporation of India Limited (SSITC) will be a wholly owned enterprise of the Government of India with a corpus contributed by the Government of India. The corpus would be say Rs 20, 000 (X) multiplied by twice the number of BRL accounts. All those who open the PMJDY accounts and qualify as BRL members would be provided a stock holding of Rs 20,000 in the SSITC, free of cost. The balance corpus would be used by SSITC to invest in Indian companies and trade on them. SSTIL would act as the umbrella stock investment and trading company for all the BRL members. The stocks issued for a BRL member would have a lock-in period of 5 years. At the end of the 5 years, the holding can be sold in part or full but only to another BRL member or to SSITC itself. If the holder sells the holding and the value of the holding increases by more than 1.5 times (base plus appreciation), SSITC would retain the excess over the 1.5X amount and return the 1.5X amount to the holder. The shares of the SSITC would be traded in the National Stock Exchange.

The financial burden on the Government of creating the corpus for SSITC may be reduced by making contributions to SSITC an admissible activity under the Corporate Social Responsibility rules under the New Companies Act 2013. SSITC as an investment arm of the society, for the society and by the society can do wonders in terms of bringing the stock markets within the reach of the masses in a risk free manner. It would be risk free because the original investment is a government subsidy on one hand, and is managed by SSITC as a professional organization on the other. As the SSITC holders get to know the value of their holdings through periodic newsletters, they would be encouraged to invest their savings as additional contributions in SSITC. Such contributions would not have any restrictions of sale, lock-in or retention of excess value appreciation. There would be an expert professional management team to oversee and run the day to day operations of SSITC. Obviously, a lot more thinking and strategizing would need to happen before the SSITC concept can be finalized, including how to consider members who graduate above the BRL.

Markets for masses

India’s two top bourses, NSE and BSE have an average daily turnover of Rs 376,391 crore (August 2014 data) comprising both Cash and Futures & Options segments. It would be tragic if most of the massive trade were to be in the categories of wealth circulation, with wealth erosion for the unwary, completely skirting the masses who do not know the outlines of the stock markets. The SSITC concept with its social objectives can not only bring the stock markets to the masses of India in a risk free manner but also act as stabilizing ballast for the choppy and deep waters of the stock markets. It is hoped that the proposal of bringing the stock markets to the masses of India through the Social Stock Investment and Trading Corporation of India would bear fruition sooner than later.

Posted by Dr CB Rao on August 31, 2014                                   

 

Advocacy, Influencing and Directing (AID): A Leadership Aid to Aligned Progress

The human race, by and large, is genetically programmed to keep the interests of self ahead of satisfying the interests of the society. Fortunately, civilization has devised, over the centuries, a number of structures and processes to achieve alignment between social and individual interests. Organization is one of the most important structures that are designed to achieve alignment. Goal setting and goal realization is one of the most important processes that are designed to achieve progress. Progress would be optimal when it is achieved by organizations with alignment of all the members of the organization. Several leadership and managerial processes have been designed and practiced to achieve aligned progress. Yet, a successful model to achieve aligned progress could be surprisingly simple in its components though complex in practice.

Advocacy, influencing and directing are proposed in this blog post as the three core components of the aligned progress model. Interestingly, all the three are facets and forms of communication, each of which requires not only a different skill but even more importantly results from a personality type. The Advocacy-Influencing-Directing (AID) leadership communication model is a three step sequential yet iterative process that enables leaders to accomplish aligned progress of their organizations. Advocacy is the ability to argue a public cause or an individual view that could qualify as a public cause. Influencing is the ability to steer a person or group of persons to a particular view.  Directing is the ability to make people execute as per the agreed thought. Clearly, advocacy is a prerequisite for influencing which is, in turn, a prerequisite for directing. When all the three take effect in a seamless manner, aligned progress tends to be an automatic result. Interestingly, each of the three components has different shades.

Advocacy

Advocacy is the espousal of a public cause for a definitive positive judgment. The courts of law and the judicial system are the primary areas of advocacy. In the context of social or business organizations, however, advocacy works two ways. It requires private acceptance of public causes as well as public acceptance of private causes. A couple of examples illustrate. Corporate Social Responsibility (CSR) as mandated by the new Companies Act 2013 in India, or CSR even otherwise commonly understood, is a positive public cause. However, how the agencies of government interpret CSR and how the business organizations perceive their own responsibility towards CSR require advocacy. This is a classic case of a well accepted public cause requiring private or individual advocacy to gain traction. The ongoing advocacy efforts on establishing the new capital for Andhra Pradesh is another example of advocacy of a public cause from multiple angles. The takeaway is that however well conceived or well merited a public cause is, it triggers and requires advocacy with multiple stakeholders in relevant forms.

The example of a private or individual viewpoint gaining a more public or total public advocacy can be had from business. An entrepreneur who has an innovative technical idea or a viable business idea needs to mount an advocacy campaign at multiple levels; with professionals to build his or her management team, with investors and lenders to attract the resources, with governments to secure the necessary approvals, with vendors and channel partners to become a part of value chain, with customers to establish a value proposition, and even more fundamentally with his or her own family members to become an entrepreneur. The strength of advocacy of an individual viewpoint into wider public consensus is the core of entrepreneurship. Even in established organizations, the ‘command and control’ approach has to be replaced by an ‘advocate and influence’ approach if the plural intellectual views have to be harnessed for the best possible outcomes. With advocacy comes the next step of influencing.  

Influencing

Language being what it is, the word ‘influencing’ evokes both positive and negative connotations, often caused by the interpretative mindsets of the viewer or bystander, and not necessarily of the participants. For the purpose of the AID model, we may assume all influencing to be positive only. Influencing is the way of getting an important constituent to accept the proposed viewpoint. Influencing cannot occur without advocacy. Powerful and cogent adequacy makes the job of influencing easy but not necessarily automatic. To return to our examples, a public cause such as CSR becomes an individual leadership or business cause when the outcomes impact the individual leader or the business in some manner; like, CSR in community education improving the quality of people a firm can hire from the local community. The committee constituted to recommend options on AP capital, Sivaramakrishnan Committee, may advocate decentralized capital(s) model but the AP Government itself may not be influenced by the recommendation. If the Committee also had the powers to allocate financial support to different capital models possibly such advocacy would have led to influence.  

In organizations and businesses too, influence has a capping up role to advocacy. Advocacy, especially for a cause or a change, often challenges established mores and positions. The entrepreneur who advocates his technology solution or business model challenges the status quo and is typically met with skeptical response initially (“if you are novel, what is the guarantee of success”, and “if you are a follower, what is the guarantee of superiority”, for example). When the entrepreneur offers stock options to his or her startup team members sharing his wealth, he or she would be following up the advocacy with positive influencing. In the case of established organizations, the stakes of individuals in established structures and processes tend to be so enormous that they tend to be resistant, if not impervious, to change. A logical extension of ‘advocate and influence’ approach, for example, would be to create organizational or business think-tanks which can serve as forums to pool in diverse thought processes and develop advocacy and influencing choices. These channel the intellectual power of large organizations towards convergence.

Directing

At the end of advocacy and influencing processes, the need for directing inevitably comes. Directing, as a process, involves establishing goals and moving the organization towards accomplishment of the goals. In the standard managerial template, the leader is expected to direct. However, that is not the only option in the emerging managerial context. Self-directed management of organizations is entirely possible, especially if the processes of advocacy and influencing have been gone through. In fact, these processes bring in ownership and accountability that makes self-directed management at least as successful as leader-directed management. Organizations can excel in CSR activities through such self-direction. As we may note, self-help groups have been an important success component of the microfinance movement in India. Building of a new capital could be a self-directed effort if the interests of land owners and the capital builders are aligned through a special purpose vehicle (SPV) for ownership.

In organized businesses, managements and leaderships find it difficult to strike the right balance between decentralization and centralization (self-direction and command-direction, correspondingly). Skeptics may wonder the need for advocacy and influencing (or such other participative concepts) if the final need is to direct. This skepticism arises from the inability to appreciate the power of an aligned individual. Truly entrepreneurial organizations are self-directed organizations that clock rapid growth on a number of fronts. Large organizations and businesses should establish several incubators for business ideas and technology solutions, and follow through the successful ones with business units. Yet, many firms would be reluctant to adopt a diversified federal structure until the whole monolith becomes completely unwieldy and unviable. The AID model of leadership communication would result in aligned progress of societies, organizations and businesses.

Aligned progress

Certain minimal factors support progress of organizations and businesses as well as of societies and economies. The issue is whether the full potential of an organization or a business is reached in such routine ‘lowest common multiple’ manners. Despite the anecdotal evidence of weak strands of thread when intertwined forming a strong rope, the powerful impact aligned progress can have on enterprise activity and outcomes is not fully appreciated. Aligned progress typically gets viewed in a gross manner than in a subtle way; for example, a common slogan that is accepted by all or a common brand that is related to by all is considered good enough reflection of alignment. In a conglomerate setting all constituent companies buying each other’s products may also seem to be aligned development. True aligned progress, however, gets accomplished based on advocacy of the best causes or ideas, influential stakeholder participation and self-directed management of affairs.

The concept is not necessarily an inversion of the classic pyramid of power; nor is it an abandonment of the concept of organizational pyramid either. On the other hand, it is a unique pyramid which has three sides of advocacy, influence and direction converging into pivotal power. Just as there can be no pyramid without three sides aligned progress cannot come about without these three planks. It is a sequential and iterative interaction between the three aspects; the leader at the helm needs to be an advocate, influencer and director – all rolled into one. The issues to advocate, the outcomes to influence and the efforts to direct would constitute a holistic communication competence for the AID leadership communication model. In their heydays several topnotch business leaders of India could achieve unique combinations of advocacy, influence and direction for their enterprises with aligned progress for them. Dr Homi Bhabha for BARC, Dr Abdul Kalam for DRDO, V Krishnamurthy for Maruti Suzuki, N R Narayana Murthy for Infosys, Azim Premji for Wipro, A M Naik for L&T, Dhirubhai Ambani for Reliance and Ratan Tata for Tata Group are just a few examples.

Posted by Dr CB Rao on August 29, 2014

        

 

Less and More as Combinations: Intriguing Contextual Connotations

An interesting life mantra is that we should achieve more with less. The entire productivity paradigm is based on achieving higher output with lower input. The ratio of output to input is defined as the efficiency index. A criticism of this simple approach has been that it does not integrate other tangible parameters as quality and other intangible dimensions such as esteem. The simple model can therefore be expanded to integrate such tangible and intangible factors both on the input and output sides. Despite doing all that, the ratio tends to be one of output to input, with a higher index meaning higher efficiency or productivity. Another alternative critique has been that efficiency by whatever way measured is not the whole thing but effectiveness is!

If efficiency is the way of doing something well with no waste of time or resources, including money, effectiveness is producing a result that is wanted or intended. Efficiency and effectiveness may exist independent of each other but together they ensure competitiveness. Effectiveness is achieved when one is clear on the intended or desired result, understands the inputs required to achieve the outcome and deploys them in the right manner. If ‘less is more’ exemplifies the efficiency mantra, ‘right is right’ probably reflects the effectiveness credo. That said, life is more than efficiency and effectiveness. ‘Less’ and ‘more’, the defining blocks of any effort or result, have contextual combinations with interesting and intriguing connotations. This blog post considers some of these, as useful pointers for life journey.   

Counterintuitive

It is not necessarily true that less would need to be more. We know that only a small percentage of human brain is typically used for human faculties and actions. If only the humans are able to use more of their brains (no pun intended!) the human race as a whole would be more accomplished. There are operations, occasions and transactions when more tends to be more. For example, a higher load factor means higher profitability to an airliner. An event of celebration generates more happiness with greater attendance. A higher investment transaction, judiciously made, should generate higher returns. These truisms do not necessarily mean that the less is more efficiency paradigm is inappropriate; on the contrary, it is still appropriate and both approaches are synergistic. Any airliner would be more competitive if it is able to carry more passengers (more load factor) with less number of aircraft. Such proportionality may not work out in other two examples, however.

Rather than consider that less is more and more is more are intuitive or counterintuitive, one may hypothesize, therefore, that there is a contextual dimension in all these relationships. The context depends on the entities involved in any interaction. The nature of entities and the nature of relationship often determines how less and more interact in terms of accomplishment. As a general principle, one must have the ability to use more of one’s faculties. There is, however, little point in deploying excessive intellect of repetitive minor or mundane matters. To understand the contextual nature, we may appreciate that for any activity there would be a trigger and a receptor or a provider or receiver. A 2X2 matrix of less and more would provide contextually meaningful frameworks to conceptualize and analyze internal and external interactions for optimal outcomes.

Value arbitrage

In every interaction, there is a possibility for the giver to give less or more; equally for the receiver to receive less or more. There is thus a 2X2 matrix possibility in every transaction. We can see the power of this concept by way of a few illustrations. A Guru just needs a short profound verse to convey its deeper meaning to a group of accomplished sishyas. The same guru would need to annotate and explain in detail if the sishyas are first time learners. There are therefore situations when the giver needs to modulate between less and more depending on the receiver. Whether the giver gives more or less, or the receiver receives more or less depends on the nature of the entities. While ideally less should lead to more there would be occasions when more would lead to less or more would need to be provided to achieve the maximum, or even the very minimum.

In every interaction, there would be a perceptional, and at times real, arbitrage. An intelligent student may think that an hour of study is less important to him or her than it is to a less intelligent student, and may therefore while away time. But as a unit, time has equal importance to both types of students, albeit at different levels. A rich man may think the a hundred rupee note is less valuable to him than a thousand rupee note and may feel inclined to donate the former than latter. However, for the charity that receives the donation while the hundred rupee note is more valuable in its hands than in the rich man’s hands, the thousand rupee note helps the charity more than proportionately in its objectives. While there is a perceived value arbitrage, more fundamentally there is only a value exchange in the transactions. Dysfunctional economies are characterized by huge gaps between perceived value arbitrage and real value exchange.

True value

Every transaction or activity involves value exchange. When an unknown person asks and pushes the right lift button for another person in the lift and the other person thanks him, there is a value exchange. A lecturer teaching the students may seem to reflect a transaction of knowledge transfer for a salary. However, the lecturer derives value from the record of teaching students over time, getting challenged with new questions that prod him to gain new knowledge. A student may seem to reflect a transaction of getting taught for a fee to the institution. However, the student derives value from the experience of learning with other students (ie., in an ecosystem) and the learning of a behavior pattern besides the subject. The point is that in addition to any product/service or money exchange that occurs in any transaction there is inevitably an embedded value exchange.

In a competitive world, the monetary levels of a product or service are set by the level of competition. Products and services are offered discounts. When a product or service is offered at a lower price, it is considered a value for money for transaction. However, the true value that is embedded is neither the discount nor the money saved; rather, it is the value accrual that takes place for the buyer through the saving of money. For the company that offers a ‘value for money’ product, the true value that is embedded is neither the additional sale or additional market share achieved; rather, it is the value accrual that takes place for the company through better sustainability of business.  The true value for the economy lies in the improved domestic savings and enhanced business sustainability. The need, therefore, is not a blind perception that less is more but that multiple combinations of less and more are value accruing.

Less and more

In transactions, the giver can provide low or high effort. The receiver may receive low or high value.  There exist four quadrants: Low Effort – Low Value (LELV), Low Effort – High Value (LEHV), More Effort – Low Value (MELV) and More Effort – More Value (MEMV). Of these, LELV and MEMV represent the rule of proportionality intuitively. MELV quadrant is clearly an unacceptable quadrant while LEHV is the most desirable quadrant. The entities (givers and receivers) could be businesses and societies, businesses and customers, businesses and businesses, businesses and governments, governments and societies, and so on. They can even be the internal self and external person, even within an individual. There are contexts in which the true value moves across the quadrants. The typical journey is from LELV in the startup phase, to MEMV in the growth phase, to LEMV in the maturity phase to MELV or LELV in the decline phase.

The conceptualization, analysis and management of product life cycle or business life cycle that governs business development must be based on true value analysis. Driving numbers, either of investments or of revenues without regard to inherent value that is generated and accrued would lead to sub-optimization. Business strategies and/or functional strategies such as marketing strategies, talent or manufacturing strategies must look beyond value arbitrage and focus on exchange of true value between entities. Perception of true value increases stakeholder loyalty and makes the wait for successive generations of development exciting and rewarding. The relationship between successful alumni and prestigious alma maters is an excellent example of how embedded value exchange continues to provide lifetime value alignment.  

The ability to calibrate effort and value is an important characteristic of development psyche, individual or institutional. Typically, the life of a product in use is a multiple of the time span put in the development and manufacture and delivery of the product. The life multiple is a function of the true value embedded in a product. The higher the true value, the faster a product moves into the LEMV quadrant and the longer it manages to stay in the quadrant. True value would be a better metric to judge the worth of a product strategy than the compression of time to develop. The principle holds good for individuals as well as institutions operating in the respective ecosystems, or the products and services they generate and offer to the ecosystems.     

Posted by Dr CB Rao on August 28, 2014