Empathy

The biggest challenge I face managing a business which is labor intensive is to understand the circumstances under which or the which have forced a person to react the way he/she is reacting. And one thing is sure that at that level, business can be managed by managing people who in turn manage processes. Hence managing people is the only thing a CEO or a person heading business is supposed to do.

Most of us reach this stage of our career due to abundance of Technical skills. But having reached this stage, many (might) find difficult to hold on due to immature people skills.

I do not consider myself as a Guru but still take liberty of offering basic advise. This will in some way help them in managing people better and accomplish better things.

  1. Be sensitive about the way you ask for work
  2. Be ready to manage conflicts
  3. Set easy goals for them. Congratulate them and make them feel great when they achieve those goals, howsoever trivial they might be
  4. The golden rule, before you judge me, walk a mile in my shoes. Practice this
  5. Know and understand your team. Develop them as a team and not as individuals
  6. Meet as often as possible with them. Give feedback, Ask for ideas, Motivate, Make them feel great
  7. Be visible and accessible. Practice and open door policy
  8. Reward them
  9. Coach them. Be a Mentor
  10. Soft skills are tough or almost impossible to develop. Hence rather than pushing people to pick up new things, ask them to better what they already have. If they had the knack of developing soft skill at that age, they would most certainly be in your positionMentoring-Pic-1

Point no. 10 throws up an interesting irony. It is true that soft skills cannot be developed. But they can be improved to such an extent that it almost looks like an innovation if not development. the greatest of tool to achieve that is to exercise empathy.

Empathy seems to be a simple world. Prophetically, everybody feels he/she is exercises empathy but it is a difficult and if you are a person who exercise selfdom, it is almost an impossible trait to exhibit.

To exercise empathy, one has to think beyond oneself and his concerns.

empathy

Ask yourself, can you or are you doing following. If yes, you are exercising empathy. If no, you may be extremely successful but when you retire, you may not have friends you can count upon.

  1. Looking beyond your own viewpoint
  2. Validating others perspectives
  3. Listening and giving importance to what others say

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The greatest service you can do to yourself is to develop an emphatic attitude. It is like Newton’s law. The more you want to understand people, the more they would want to understand you ans in the process you will build a progressive, co-operative and collaborative environment which is driven by teamwork.

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Jai Hind….. Jai Ho

It is a wonderful Sunday today. Personally it becomes more blissful for me as I am enjoying an exquisite family holiday in Coorg. It is in the midst of a coffee plantation and I am totally secluded from the mechanized world we live in.

Why I am bothering to tell this. There are many reasons for that. First and foremost reason is to remind myself that what a wonderful country we Indians possess. The second reason is that our dynamic prime minister yesterday addressed the nation with a zest and fervour which was missing from Indian polity for such a long period. Third and not the least important of these is that I was reminded yesterday of a press comment made by one of a visionary Industrialist Mr.Narayanmurthy. Very Very surprisingly, Mr. Narayanmurthy slammed Indians and especially the youth of India for not having an earth shaking idea for last 60 years. Following is the link.

http://economictimes.indiatimes.com/news/science/no-invention-earth-shaking-idea-from-india-in-60-years-nr-narayana-murthy/articleshow/48085732.cms

I have huge respect for Narayanmurthy. Every Indian should have. He is an icon. But with all due respects to him, I think he has gone berserk here. We as Indians do not have many Narayanmurthys to look upon and the youth of India need many of them to look upon. And for one of them to make such a statement is tremendously unfortunate.

Let us critically examine. Mr. Murthy talks about Invention and it is true we Indians may not have inventions in last 60 years to boast about but my question is what constitutes an invention. Does materializing the concept of steam engine only constitute an invention. Does only giving materialistic useables and wearables only constitute invention. Does a great Idea and a great practice does not constitute an invention. I am nobody as compared to Mr.Murthy but I would vehemently challenge him on this account.

Let us see what as a country we have achieved in last 68 years. I am more than 100% convinced that with the legacy we carried for ourselves, no other country in the world would have achieved so much as we Indians have. The listing is strictly not in chronological order as it hardly matters.

  1. At the dawn of independence our forefathers executed world’s largest merger and acquisition activity. 560 princely states of India were merged into a common dominion in almost bloodless operation.
  2. Few months into birth and we saved a disloyal and backstabbing neighbouring nation from going into bankruptcy. A deed we should never have done and should have allowed our neighbour to go into tatters. We still are paying a heavy price for that act of humanity.
  3. 18 bloodless change of power at centre. In a country which is plagued by illiteracy and caste divide, this is no mean achievement. We are probably the world’s most mature democracy.
  4. India was net importer of food grains and depended upon international food aid upto mid-1960s. We faced severe drought in 1965 and 1966 and were recipient of food aid under PL 480 act of U.S. government. However since than lot of scenario has changed thanks to significant policy reforms and green revolution in India. Today India has self-sufficiency in food production and exports various food grains. We are largest producers of fresh fruits, milk, pulses and oil seeds, sunflower seeds and second largest producers of wheat, rice sugarcane, potato, tea, cotton etc in the world. In addition to growth in total output, agriculture in India has shown an increase in average output per acre since independence. While our total population tripled since independence our food grain production more than quadrupled and there has been substantial increase in available food grain per capita.
  5. Indians have been able to develop one of the most envious space programmes in the world started in the year 1969 after their independence .Today we are launching various space programmes including Lunar and Mars mission,and commercial launching of satellites of developed nations at very low cost. We have benefited humanity by way of forecasting of cyclones in Indian peninsula thereby substantially reducing loss of life thanks to our space programmes.
  6. Indians have been able to pursue an independent foreign policy after independence and interference by outside powers have been zero, thanks to strides made by India in various fields like agriculture production, economic progress, space programmes, nuclear energy and defence.
  7. Only country in the world to give birth to another independent nation within 25 years of its independence. Indians waged the swiftest war in modern times with a technology which was dilapidated as compared to our aggressive neighbour. Mighty sabres were blown into pieces by tiny Gnats and the world watched in awe. It incidentally was a major diplomatic win also as the American fleet was waiting in Indian Ocean to launch missiles on us. Had we held the aggression for another 48 hours, there would have been a different map on google today.
  8. One of the five nations to develop nuclear submarines
  9. Lowest cost producer of Steel, Almunium, Cement, fertilizer. Lowest cost delivery of wireless telephony. Developed world’s lowest cost supercomputer.
  10. We are now the third largest economy in world in terms of size and is tipped to take over Japan and China in next 15-20 years.
  11. India gave birth to micro finance which now rules the development schemes in all underdeveloped nations.
  12. Fiscal policy given by Mr.V P Singh, the then finance minister in 1987 still is the backbone of all financial reforms in all underdeveloped economies of the world.
  13. Four major wars inflicted on a young nation. Comprehensively won three of them. Fourth one (China) was lost only due to a tactical blunder by the then polity which chose to still believe in the goodwill generated pre-war due to Panchsheel Principals. Else our country was on top of the situation in that war too.
  14. The only country to have a strong and mature political system in place. Look around us, every country around us has faced and is continuously facing military coup. Why we have never faced the same. If we believe in good luck, we all the sadly mistaken. Our forefathers painstakingly built up a system which political system thrived. If you do not believe it, please read this…. http://scroll.in/article/731426/why-there-has-never-been-a-military-dictatorship-in-india
  15. India is now the only developing nation sending satellites into geo sync orbit. And the cost at which it send is mouth watering. All the so called developed nations now line up at India’s doorstep to make that happen for them at that cost.
  16. India is the second country to send satellite to Mars. And the cost at which it has done it…. Well we all know what it means

I can go on and on. I have not yet even touched Yoga, Culture, IIT, Bollywood, Medical Sciences, Swami Vivekananda, Guru Gobind Singh. Most of you might be amazed at finding Guru Gobind Singh here. But Lord McCaulfey has written about Guru Gobind Singh that “If the english militia had even one general with the prowess, might, wisdom, courage, foresightedness and leadership qualities of Guru Gobind Singh, English empire would have survived for another 500 years.”

Sorry Mr. Murthy, your notions are misplaced. On one side we have you and on another side we have Mr. Modi who brings faith and hope upon all of us.

Today Salman Khan inspires me more than Mr. Murthy. In his not so noteworthy and dismissive movie “Jai Ho” he says just do three good deeds for every good deed which comes your way. We just are in need of that kind of motivation. Nothing else. What if every able bodied individual Indian follows the principal propagated by Salman Khan, where will we reach. Even sky is not the limit then.

Well I am exercising it in my life. So are wonderful people around me. In next 8-10 years, we are confidant to develop a mesmerizing aura around us and then we will create a snowball effect out of it.

What we need from you Mr. Murthy is a mentorship and a confidant atmosphere that all our endeavours will be recognized and if found palatable, will be nurtured. Only an approach like that will help us creating a strong India. The youth is energetic, hopeful, restless, and positive but at the same time is intolerant also. Cynicism is not going to work at all.

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Improving Cash flows – Inventory is the Key

I am currently following a very interesting discussion in one of Linked in groups. The moderator has raised a question “If you could do only one thing to improve cash flow, what would you do?”. There are variety of answers by some very top-notch and learned professionals. Statistically if I put it across, 80% of the answers are about managing Cash to Cash Cycle. 60% of these 80% suggest decreasing the AR (Accounts Receivable) cycle and increasing the AP (Accounts Payable) cycle. I must say, I was somewhat disappointed after reading these responses.

Decreasing AR and Increasing AP are sort of Quick fix solutions and are aimed at a very very short term gain/relief. None of these methods are sustainable in long run. The reason in simple. First of all, there is a paradox in the approach. On the one hand we are trying to decrease AR and are talking about increasing the AP without realizing that our AR are somebody else AP. Give me one simple reason as to why that somebody else is also not working on improving his own cash flow applying same philosophy.

Improving cash flow is a tedious exercise and there cannot be any short cut approach towards same. Both decreasing AR and increasing AP entail hidden costs which at the end of the day hit bottom-line very severely.

Every since I embarked upon lean journey in one of my assignments, one think came out very clear to me, “Inventory holds the solution to almost all the issues management faces”. Here we are talking about inventory in broader perspective. Not just like Stock or work in progress. Here we are talking about inventory in the value stream. This may of may not be in shape of merchandise.

Any current state value stream map will highlight, besides other following four important components  a.) Motion, b.) Waiting, c.) Transportation and d.) Inventory. Each of these components will be present with or without value addition. To move from current state to future state in value stream, we need to eliminate all non value adding components.

Inventory however remains a component where it is almost impossible to imagine any value addition stream. This inventory will be within or between the processes and will consume critical resources resulting in blockage of working capital.

On a financial report, inventory sits in form of Merchandise in process. A more drill view of inventory is Inventory + AR. In value stream map, however, inventory refers to queues of information, paperwork, electronic files, or project work in-development. More often than not, cost of inventory in VSM will be much higher than cost of inventory held in form of merchandise/AR.

The way to have a sustainable improved cash flow is to work on these inventories. This is time-consuming and intellectually taxing but definitely more rewarding and the icing on the cake is sustainability. Reducing this inventory will mean improved throughput, better yield, faster delivery and greater amount of customer satisfaction.

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The Emerging Role of CFO

The best place for assessing the role metrics for particular function is to skim through Job portals and look what potential employers are putting up as requirement for a particular function. This is an activity I undertake with lot of interest as it helps me to understand the moving trends in current scenario.

The most dynamic of current functions is turning out to be that of CFO. This function has come out of age and has moved from a mere custodian of finance and transaction, strictly speaking a technical profile to even beyond a techno-commercial profile. So much so that there is a need to coin a new term for this profile which should encompass Technical, Commercial and Operations. Maybe Techcomop is a better word. I invite suggestions for same.

The landmark event which triggered this transformation was the crisis of 2008. Post 2008, in order to survive, mature businesses streamlined their assets by divesting non-core assets, worked upon improving cash flows through better Cash to Cash cycle management. But these measures were not enough. The most important of all was to improve efficiencies in operations (core and non-core) in order to yield a better bottomline. 6 years down the line, we can witness that businesses which have treaded this path are fit than ever before, efficient and have beaten the economic growth rate. Time has come that businesses are looking beyond endurance to prosper more.

Another way 2008 influenced the way businesses operate was emergence of a complex control environment. Regulations were tightened and more transparency was brought in reporting and disclosure environment.

Owing to above CFOs started to have more personal stake in and accountability for their function. On behalf of the business they are accountable for, they have to put in place business processes and protocols which ensure that the objectives stemming out of changed business environments are being met and the finance function has the necessary expertise to handle the same.

In particular when I speak of personal experience, I was working for an Apparel business when the crash of 2008 happened. Prior to that industry had to absorb shock of withdrawal of quota system whereby preferential treatment to business according to geographical location was withdrawn. Suddenly the business which was truly local, became global. Pressures came on costs and operations. In order to be competitive, entire strategy of business was to be reworked overnight. Focus, which earlier on quantities was turning the business into more like a commodity business was shifted to efficiency. In order to sustain, the business had to be efficient in all terms – operational, costs and processes. CFO played a greater role in bring about fiscal and operational discipline. Primary responsibility of function changed from custodian of finance and data to guarantor of success of business objectives.

A collective influence of regulation and globalized environment ensured that traditional MIS setup no longer worked for any organization. The business truly had to be restructured and changed and to monitor the efficacy of this restructuring, more analytics came in the threshold of finance function. The data multiplied as the businesses grew in all direction and existence to large and complex data provides challenge and opportunities for more analytical and predictive insights. Today it can be safely said for any mature business that at any given point of time, data systems and hierarchy do not reflect business needs. This is so because the environment is ever evolving. Plays in dataset catches up and the team of CFO spends significant time in reworking the data to meet the business needs. Thus one of the most important challenge for today’s CFO is the emergence of Business Intelligence. CFOs are supposed to be natural analysts and modern day Business Intelligence falls under the realms of CFO.

Today’s finance function needs to have sufficient understanding of the business and its full operational complexity to report on non-financial KPIs – the publishing of which is a growing trend. These non-financial KPIs often don’t come through traditional accounting system. There is a growing appetite for non-financial KPIs another expectation from modern day finance team.

With changed scenario, business risk is now at a higher level than ever. Avoiding risks is no longer an option. CFOs are facing extreme circumstances whereby they are being asked to cut corners by budgetary practices and also being pushed by business necessity. At the same time, they are expected to derisk the organization from emerging risk approaches. CFOs are expected to scrutinize the effectiveness of risk management processes. The CFO is expected to bridge the gap between risk and opportunity and be proactive and prepared to take risks. Owing to access to data set and analytical capabilities, the CFO is better placed than anyone else to mitigate the risk associated with any appropriate business action.

Another area where the CFO of toady is expected to contribute is transformation of business. When we talk about medium sized businesses, transformation primarily comes from three activities a.) Reducing (or rationalizing) costs, b.) Improving efficiency and c.) Integrating the different business functions. Today’s CFO is expected to re-engineer and transform the business on an axis which encompasses these three activities. The function of CFO is today a catalyst of change across the business, driving changes which effect long term business performance.

From a stakeholder perspective, Bankers are perhaps the most important customers of a CFO. I may not win many friends for making this statement but more often than not, particularly for a small business, lending renewals become a period of pain and distress. An effective CFO is at a helm of banking communication. Being proactive, serving the bankers beyond the absolute necessity of protocols goes long way towards building a strong relationship. The days have gone when the only point of communication with bankers was submission of QIS/Stock and CMA statements.

Modern day CFO has to act as a perfect partner to the CEO. A modern day CFO is a person who owing to his unique position in organization is able to comprehend connections between all functions and make them agree on holistic view of the business. So he acts as a conduit between all stakeholders of business. Through this position, the CFO inform and contribute to strategy of the organization. This has become such an important relationship (of CFO and CEO) that in today’s time we see a growing trend from the role of a CFO to that of a CEO.

It can be safe to say that traditional roles of finance function are now taken for granted. The rules of the game have changed for CFOs, reflecting a more uncertain, dynamic and global economic environment in which their businesses operate. This is made more complex by extraordinary rate of technological change. This future environment presents enormous challenges for CFOs, but it also provides a great opportunity for ambitious finance professionals seeking a rewarding and enriching career. Aspiring CFOs with commercial exposure, who have developed their non-financial expertise are the ones to watch.

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Cost Cutting Vs. Cost Optimization

The latest buzzword in any business is budgeting and forecasting. A little bit of introspection and we find that budgeting practices are often aimed at cost reduction. Nothing but business environment is to be blamed for this. Growth rate of economy is dismal meaning consumption is not really increasing. Thus businesses are finding it difficult to increase top lines. RBI has refused to cut interest rates and inflation is shooting through the roof. This means improving bottom line whilst sustained pressure on topline seems to be a pipe dream.

Thus businesses across the globe are trying to identify means to cut costs in order to sustain bottom line.

Cost cutting is often taken up very aggressively within an organization. The most impacted function is often Human Resources. This coupled with reduced services and bringing redundancies in operation often have drastic side effects. Cost cutting program are the most difficult form of organizational change to maintain. It disrupts daily work rhythms by dampening morale, particularly when head counts are cut.

So what should be done?

There is a different philosophy than cost cutting called cost optimization. In short cost optimization is the process of determining the most cost effective solution under the given constraints without effecting the performance of business.

Cost optimization is a micro tool. The idea behind cost optimization is to sieve each element of cost to understand its impact on operation of business. These sieved costs are then prioritized against the constraints like capacity, demand and productivity.

Cost optimization entails a systematic and sustainable method to manage priority costs to ensure that operational capabilities of functions are not affected. A company’s growth is reflected by its capability to efficiently manage costs while ensuring optimum productivity.

Typically cost reduction programs deliver short-term tactical gains and do not deliver long-term sustainable improvements.

Cost optimization should be a priority for all businesses. Any businesses competitiveness depends on how well it manages its value chain relative to competitors. What differentiates any two businesses in this respect are scale of activities, technology, and resource intensity. More controllable factors are inherent process of business like continuous improvement, quality set up, efficiency matrix, capacity utilization, effectiveness of business processes, vendor/customer relationships.

The most popular tool for cost optimization is ZERO BASED BUDGETING. Under this technique, all the historical patterns of costs are ignored and costs are defined afresh, reworking the priorities and necessity for same. Other tools are Value Stream mapping, Benchmarking, Break Even Analysis, Shut down cost analysis and fixed cost analysis.

In the recent past, the focus for optimizing costs has moved to a more intrinsic resolution. Organizations routinely expect all functions to contribute to annual strategic targets by improving operational efficiencies.

In nut shell cost optimization is a much broader agenda than cost cutting. The exercise has permanent and sustained impact on working of organization rather than cost cutting the impact of which is temporary and most often detrimental. Cost optimization in effect encompassed cost cutting and further effective demand management, better skill management and better product quality.

 

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It is time to be little optimistic

Indian economy witnessed its maximum growth in recent years in FY 2006-07 where the growth was reported at 9.4%. Post 2006-07 the economy slumbered at an agonizing and painful pace.

According to a recent survey, Factory output in India for the September touched a record low owing to fewer export orders. The output indice is weakest since December 2013 and has gone down for a consecutive second month.

It has been four and a half months since the new government has sworn in. For normal times, this is just about the period when the honeymoon starts to finish and harsh realities face the incumbents. For some less fortunate like Arvind Kejriwal, it takes still lesser time.

But these are hardly normal times, aren’t these.

With every single passing day, expectations from Modi government are soaring. It seems, we still are in pre-election days of promises and more promises.

The current low output numbers could be shrugged off riding on the optimistic sentiments owing to high expectation from the (new) government. A youtube video of a pakistani journalist praising Narendra Modi went viral. Please see the same below.

It is not that things are not happening. But is the pace justified? There are many welcome developments like initiatives taken to repeal anarchic laws. Prime Minister’s efforts to reach out to people at a personal level are also heart rendering.

But all these will be seen as mere propaganda if something concrete and lasting is not done. The sooner the better. Else there is a chance that our dynamic Prime Minister will find himself in a whirlpool where he will raise the expectation level on daily basis and will fail to deliver.

India is at a very precarious stage demographically. The most important strength currently India can boast of is presence of almost 60% of its population under the age of 35. Our Prime Minister does not leave a chance to harp upon this fact in any of his public interaction.

But this strength will become a burden if India fails to create jobs for such massive young population and that is no mean task. Industry estimates suggest that a growth rate in the region of 9.5% is required to meet that target. This means India will have to nearly double its Industrial Output.

This in turn mean a very tight leash on government expenditure and boosting exports to ease the pressure on current account deficit. Increasing industrial efficiency by leaps and bounds. Fueling consumption to sustain growth and reviving investment.

Things are not going to be easy. It is evident so as RBI refused to cut lending rate despite business clamoring for same.

Make in India is a great philosophy but it has to be implemented in spirit. More concrete steps to be taken on FDI. Merely proclamations of intent will not be of any use. Real changes and commitment is needed. The whole mindset has to change particularly with respect to FDI.

And also it is time to be little optimistic.

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Sustainable Business – Need of the Hour

From the traditional goal and objective of business of  maximizing  profits, Managers are now talking about creating values. It can be safely said that the neo age managers look upon maximizing prosperity rather than maximizing profits. Prosperity is a greater  challenge  than profit as former is more wholesome than latter. The former is long term whist the latter is short lived. In today scenario, a responsible society will always attach higher value to long term well being of its population than to short term spurt in GDP. It may sound weird but perhaps this may the reason for slowed growth rate of Indian Economy over last few fiscal year. I may not gain many friends for commenting this.

2008 financial crises of US was an eye opener. If anything we learned from that period, It was that the boom of an unregulated economy might benefit consumers in the short run, it is a luxury often short lived. In the long run, profits that come from a unregulated market boom are ultimately condensed into pockets of few corporates but when those markets bust, common consumers are forced to pay the price.

Above was a clear cut indicative of keeping profits above prosperity. However if we have to create prosperity, many other issues needs to be tackled apart from profits. At times the other issues might have to be preferred over profits, but in the long run, there will be a definite payback.

Sustainability of business is the key. This  sustainability  comes from many factors. But for the sake of brevity, we will touch upon only a few in this write up. My favorites are a.) Processes, b.) Business Models and c.) Environment

a.) Processes: Time and again it has been proved beyond doubt that Incremental process and product innovations have brought us cleaner, more efficient, more socially conscious products and services. There are a huge number of ways that businesses can change, for example adopting cleaner production techniques, developing resource and energy efficient processes and examining the transportation of goods. As well as creating a lean operation and generating cost savings, these refined ways of working can enhance your reputation, building a positive image both with customers and staff alike.

People are critical to business success. Integrating good employment practices into business, such as family-friendly policies, flexible working and access to training, will help to create an environment where people feel valued and content. In today’s tight labour scenario, this could well prove crucial for ability to attract and retain the right people.

b.) Business Models: Having said what I have to say, it is also true that many novel or even radical new process or product innovations have fallen short of their potential because they were unable to compete within the constraints of an existing or traditional business model. This at times happen because more often than not vast majority of consumers and companies remain unwilling to pay a premium for such advances.

The biggest reason for companies to embrace business-model innovation is the threat that current models will ultimately slip or even fail. Examples of business models that have quickly transformed – or even become obsolete – abound across sectors: media (the decline of print), retail (the rise of online shopping and the sharing economy), education (the growth of online degree programs), music (the boom in digital music services), telecommunications (the proliferation of smart devices and associated services) and even finance (the creation of peer-to-peer lending). Many traditional business models that still remain viable today may rely on mispriced resources (from customer perspective) and other market distortions that make them more competitive than they would otherwise be.

To innovate within systems, companies need to be able to see and adapt to shifting market conditions and other changes by identifying trends and engaging stakeholders. Leaders must respond to, but also create, systemic change to build new markets while protecting themselves from any dramatic systems shifts that could present a risk. To do all this, companies must be willing to see beyond the obvious, short-term business case.

Rewards await those who can do it right. In health care, Narayan Hrudayala Hospitals, winner of a Financial Times’ Boldness in Business award in 2013, provides a good example. The hospital uses innovative process efficiency, revenue generation, cost structure and financing to make a profit while providing both rich and poor access to vital health care services. The company, along with others such as Arvind Eye Care, is changing the way medical providers in India think about the cost, quality and reach of their services. At Narayana Hrudayalaya, the average open-heart surgery costs less than $2,000, compared to well over $100,000 in the US.

c.) Environment: The greatest risk to the business sustainability is the struggle struggle and failure to articulate a vision of a future that is both prosperous while remaining within planetary boundaries. Until a business is able to showcase a paradigm shift, then no-one is going to feel safe letting go of the current system that is driving us towards the edge of an environmental and social disaster.

Given rising natural-resource scarcity and frail ecological balance, companies can no longer afford to ignore impact of their activities on environment. Forward-thinking business leaders already recognize that, in the twenty-first century, competitiveness will hinge largely on using natural resources more efficiently and cutting carbon emissions.

In addition to the obvious benefits, this approach will bring reputational advantages, as consumers – whether through education or first-hand experience – become increasingly aware of the environmental and social impact of the goods and services that they purchase. Companies that adhere to unsustainable, damaging practices and continue to pass on the associated costs to consumers may find that their customers start shopping elsewhere.

Many large companies have established sustainability goals and targets, and it is becoming increasingly common for these goals to address significant environmental challenges like climate change. More efficient use of natural resources, like energy, reduces operating costs and therefore makes business sense. In response to consumer preferences, some companies are also taking steps to reduce the environmental impact of their products and services as well as their supply chains.

Managers today are looking at long term sustainable values. It is a concept now deep rooted in the wellbeing of present and future generations. Businesses today are trying not to encroach upon the rights of future generations to meet the present needs.

People say about Bhutan’s focus on wellbeing as irrelevant as they’re just a little kingdom out there in the foothills of the Himalayas. There are questions as to whether the effort can be scaled up to deal with overdeveloped and highly  industrialized  nations? Of course, Bhutan’s  endeavor is on a different scale but what it does is it simply opens up the imagination that this kind of thinking is possible and the tiny country is taking small steps in the right direction.

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Performance Vs. Conformance

January 1948. Mohammad Ali Jinnah had decided to be adventurous and had pushed mujaheedeens in Kashmir Valley. India had just gained independence and was under charm of Lord Mountbatten and Mahatma Gandhi. Though it is ironical in many ways but Indians were under impression that only Mahatma Gandhi’s ahimsa has proven instrumental in gaining independence. Indians had drifted away from Krishna’s discourse to Arjuna on the battlefield and battle cries of Shivaji, Maharana Pratap and Guru Gobind Singh to defend motherland and pride associated with it.

Indians deliberated for two full days for action to be taken next. Indians had smoothly played into Mohammed Ali Jinnah’s hands who has decided to push mujaheedeens on the battle and had kept Pakistan’s militia away from the battlefield. Indians looked upon it as an internal problem rather than an external aggression. In those two important days, mujaheedeens (read Pakistan) had taken full control on three fifth of Kashmir Valley.

It was only when they were barely 50 kms away from Srinagar and Baramulla was brutally raped, Indians came to senses. Army was pushed onto the battlefield and further advances were stopped. Whilst Pakistan took control of majority of Kashmir, India was able to defend strategic part of Kashmir. The situation exist as same even today.

In those two days, Indians were going by rule book. Since Pakistan militia was not involved, Indians also deliberated whether to press own Army into action. Indians were following SOPs.

It was a classic case of Performance Vs. Conformance.

Don’t we face the same dilemma everyday at our work desk.

Organizations swear by internal controls now a days. ERM and COSO are the keywords which are prevalent and relevant in today’s corporate world. Today governance has become the top agenda not only in business but also in political scenario. Entire accountability structure of organizations is being recast today to bolster corporate governance. Even with such focus, we see failures on governance all around. In all this brouhaha, quite often, due to excessive obsession, one very important dimension of governance is forgotten. This dimension is called Performance.

None of the functions in organization can succeed if it does not move in strategic direction and ensure that top line objectives of business are achieved. Conformance, which emanates out of governance, must ensure that ERM constitute the entire accountability framework of the organization.

In a mature organization, performance metrics are constituted as a dimension of Corporate Governance. This dimension focuses on strategy and value creation within the organization. This dimension will identify the risk environment in the organization and create decision making points within this risk environment.

Quite often governance is confused with an Audit regime. But when a dimension of performance metrics is added to same, this boundary dissolves. Instead the function extends itself to the process of creating best practices tools and strategic enterprise systems that can be applied at various levels of organization.

Culture and tone at top, top management and internal control environment are few key corporate governance drivers which can decide the fate of the function. Though Enron’s undoing was improper accounting and corruption, the culprit was entrepreneurial culture in the organization. The organization failed because it relentlessly promoted entrepreneurship in shocking and daring absence of usual corporate checks and balances.

In an environment of growth, organization undergoes transformational changes.  Many a times, organization gets into a trap of strategic oversight . In an aggressive growth environment if incremental changes in strategy fails to match incremental transformational changes, health of underlying business may deteriorate. This is so because organization will become reactive to change and may fail to question or challenge what is happening around. Enterprise governance will then not have a mechanism to detect the oversight. This is the point of time, when the ERM environment has to strike the right balance between Performance and Conformance.

Enterprise governance framework faciliatates key management personnel in organization to balance conformance requirements with the need to deliver longterm strategic success through performance. There is no guaranteed formula for business success.  However greater attention to strategic oversight through the use of tools like Scorecard, enterprise risk management will go some way towards ensuring effective conformance and performance.

At the heart of enterprise governance is the argument that good corporate governance on its own cannot make a company successful. Achieving a mix of good corporate
governance that is linked strategically with performance management will enable companies to focus on the key drivers that move their business forward. This is both a
challenge and an opportunity.

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The Art of Storytelling

Image

Above is a famous photograph. Almost everybody of us would have seen above and have admired the deception it portrays. The wow factor in the photograph is amazing and so is the strong underlying message it conveys.

This photograph has a lesson for almost everybody and for every walk of life. Whether you talk philosophically about life as a whole or about your relationships, emotions, the work you do, It can teach a lesson or two on almost all topics you can think of.

We will continue to talk about communication today.

The biggest challenge we managers face in execution is of communication. In today’s world when businesses have transcended regions, boundaries, cultures etc. effective communication is becoming more than a necessity.

As we understood in earlier post, quiet often we are fraught with a fear that have we communicated well?

Taking personal example, working in India where no less than 25 languages are spoken and having crossed over to a different functional domain, a different cultural region, a challenge is always there to effectively communicate the needs, the requirement and the urgency. Many a times a situation was faced by me where there were a sea of difference between what was conveyed and what was understood.

Quite often leaders, when they communicate, they talk about concepts. To begin with, when you are communicating with your team for first few times, this is an effective strategy as you have to demonstrate that you “understand” and you “know” but when habitual references to concepts happen, the communicator dons the mask of “talker” and not “doer”.

The habit of talking in concepts is deepening as we are living in a technology oriented world. Twitter limits your expression to 140 characters and that is the way people have been going. Sharp to the point and that’s it. The pain to explain and connect is considered as an unnecessary ritual.

Many a times I have come across a situation where the communicator starts the discussions with the Phrase “You have to catch my wavelength”. The moment communication begins with this phrase, communication dies and authoritative, instructional and directional management takes over.

This is where the art of storytelling kick in. The most effective way to communicate is to communicate in disguise. To weave a storyline and to engage the audience and to deliver the content in a very sublime way. When a story arrives concepts, which usually bores and trouble the audience take a backseat and are delivered intellectually and not intrinsically. This is what makes a sea of difference. Storytelling allows you to establish that missing connection between the audience and yourself.

If communication is repeatedly delivered in concepts, it will be like above photograph. Everybody will draw his own conclusion and many a times, they will all be different.

I close this post with this very interesting, fictional, funny and to an extent dumb question posted on Quora.com. The question is hilarious but please go through the answer. The explanation is to the point, elaborate, conclusive and yet not tedious. This is communication through the art of story telling at its best. Kudos to Mr. Pratyush Kumar for this wonderful piece of work.

http://tinyurl.com/az3a297

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Persuasive Communication

I am a big fan of Jagjit Singh. 20 years back, I got a chance to attend one of his concerts in New Delhi. More than the excitement of listening him live; it was the prospect of getting face to face with him which energized me. I went to concert hall with two clear objectives, a.) I will make him sing couple of my favorite Ghazals and b.) I am going to meet him and talk to him face to face.

One hour into the concert and the maestro started inviting requests. I did the polite act of sending few hand written notes of my requests through organizers. I waited with abated breath for next hour or so for maestro to belt out my favorite no.s but he did not obliged. I lost patience. Just when he finished one of his popular no.s, I shouted at top of my voice requesting him to sing my request. Such loud and vociferous was the request that the whole concert hall burst into laughter. Maestro too giggled and relented, first objective was met.

During mid-break, I went to one of the organizer lady and asked her to put me face to face with the man. “Wait till concert is over” was her curt reply. I pleaded, told her that he may just walk away but she was adamant.

When the concert was nearing end, I moved three rows towards the stage and just when maestro signaled curtain to be drawn, I ran towards the stairs to stage. The same lady organizer ran towards me signaling me to get off the way. “Don’t you even think of trying to stop me. You are not going to succeed” was my reply. Such was the conviction in my voice that she stood aside and I was right there standing in front of my Idol. Second objective was also met.

On both occasions, I believed that it was a classic case of persuasive communication. Tried and conventional ways had failed and unorthodox and perhaps mischievous ways and means were adapted to convey the message. In both cases, strong and unconventional communication influenced behaviors, beliefs and acts of people involved and in process end goals were achieved.

20 years down the line I realize how wrong I was.

People who execute spend at least 70% of their time communicating. Even with 70% of the time spend on this important activity, at times managers are fraught whether or not they have communicated well. Whenever we apply root cause or 5Y analysis to a failure, 80% of time it comes out that the belief that proper communication was done was, at some stage, an illusion.

In last post we discussed about the importance of Human Assets. Taking same forward, we need to acknowledge that Management cultures are changing at fast pace. The key ingredient for success of a business is that it has to be people centric. Due to technological changes, people are expected to work harder than ever. They need to be more informed, more in control and more in action than ever before. This implies that the management and the people who execute need to be connected at a different level altogether. If, in today’s scenario, business need to perform exceptionally well to be successful than people who execute need to execute more effectively which in turn means that management needs to be more supportive than ever.

Gone are the days when “Familiarity breeds contempt” was believed, staff was in awe of management and was spending most of their time worried about their jobs, position or future as they were not kept aware what was going on. Now people are more informed and can take better decisions and constructive communication has become the key to good management.

Constructive communication is a two way process, rather it has to be circular process as it has to flow upward, downward and sideways. And to bring effectiveness to this circular process a bit of persuasion has to be added.

In a passage from the celebrated book “Freedom at Midnight” Lord Mountbatten fumes with anger when Sardar Patel encounters him with an orthodox and one way communication technique – A written Memo. A deep study of the book reveals that Lord Mountbatten was able to execute the difficult task he was given just because he broke all conventional methods of communication and overhauled entire contact mechanism in Indian Administration.

In these trying times, to be successful, one need to redefine all conventions and influence deep rooted attitudes of the people in a big way. This is where, constructive and persuasive communication plays a big role. Attitudes can be changed through persuasion and a changed attitude can bring about a sea change in performance of business.

In times of stress, the most common mistake a manger does is to express a state of hopelessness to team down the line. The feeling of “Nothing is well” is contagious and it soon becomes a force to reckon with. Once this feeling makes its home in minds of people and is not tackled, it will die only with exit of people. In such case it will create whirlpool effect in business. Such a feeling is nothing but negative persuasion. Whilst positive persuasion can do wonders, negative persuasion can spell doom.

Many a times persuasion is seen as a straightforward process where the manager

a.)    Makes a strong statement – This is often done with a strong undertone of position of authority in the organization

b.)    Presents supportive arguments – often backed up with sea of data

c.)     Engages in aggressive discussions without obtaining agreement of others

Whilst doing so, it is a strong belief that either the position, authority, charm, enthusiasm, logic or persistence will work. Unfortunately it does not.

The only thing which can effectively work in persuasion is negotiation. This has to be coupled with knowledge sharing and learning and it cannot be done in a jiffy. It is a time consuming process.

Persuasion is nothing but a technique of influence. Through persuasion, people are guided towards an idea and are cultivated with an attitude. Persuasion is a problem-solving strategy, and relies on “appeals” rather than force. It is best carried out or actioned out by rational and symbolic and quite often by unconventional means.

Crudely persuasion can also be defined as manipulation. The catch here is that this manipulation is with an intention of benefit of all involved.

In today’s scenario all communication has to be persuasive. However a clever manager will stay away from negative persuasion. Goals cannot be achieved and targets cannot be met in today’s scenario by instilling fear in minds of people. People do not take cognizance of threats anymore. In today’s times a caring management is considered as just an adequate management. People are pro-active and in order to be effective, management today need to have high visibility. Dissemination of information through E-Mails, Phones, Internet is fast, quick, accurate and accessible than ever before.

To take advantage of above, topline managers should exercise clear and purposeful communication. With this clarity, they will be able to make people feel important and realize the importance of work they are doing. This in turn will remove many obstacles in line of performance. This setup, when nurtured properly and is supported with a good upward communication system builds massive support system in the organization.

For persuasion to be effective one need to establish his credibility, bring about a commonality in ones, organizations and peoples objectives, do an honest attempt at knowledge sharing and has to bring about an emotional pitch to the exercise. The last part is important but if overdone, can be counterproductive.

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