Buoyancy of water, thought and spirit - Promoting Innovation in the workplace

Today at the swimming pool, the moment I jumped in I came to the surface, without any effort.   I felt buoyant, like never before.   And I swam and swam, but did not get tired like many times before.

It made me wonder. What was different?  The water’s buoyancy?   Can’t be.  My own buoyancy.  It seems so. What made me buoyant?   I examined my system.  I saw that my mind was completely uncluttered and clear.    I had had a fantastic and deep meditation in the morning.

Now what happened then was even more interesting.  Some complex problems which seemed to be troubling me due to their unsolvability, started getting solved.  I had some illuminations which made me feel “This was staring at you, stupid.  You just didn’t pay attention.”  And mind you, these were out-of-the-box ideas.

So, a big learning : out-of-the-box ideas come to your consciousness, when the mind is light and relaxed.

What is so new about this simple learning?  Why is it so BIG?

Because when it comes to managing organizations, we often forget such simple truths.

Watch this video and what I’m saying will be clear :

https://www.youtube.com/watch?v=jgvx9OfZKJw&list=PLEAwtroPh6ZC3Y9m04CEHx6kB6WRmnhtr

We want our personnel in the middle level and down below to be “innovative / creative” , but we simply ignore our role in providing an enabling, light and buoyant atmosphere.  We expect them to be light in the mind and spirit……by doing their own meditation, but we simply do not provide the opportunity for them to learn meditation in the workplace.

Just thinking.

Shridhar Thoda

Can Harmony harm an organization?

Many cultures, especially the Indian culture, have an undertone of “integration” in all walks of life.  Harmony is to be preferred.  Avoid conflicts.  Many a times this is so overemphasized, that we even close over eyes to the need for natural conflicts, which are innate, nay necessary in situations.

Take for example the Production Manager and the Quality Control Manager.

What if these people decide “Let’s not create any conflict.  Let’s be friends.  Let’s have peace.”

Would this be right?  Imagine what would happen if they indeed became friends?

                                          

QC is passing all sub-quality products which the market will ultimately, and sometimes catastrophically, reject. The company is doomed.   

Life teaches us that conflicts are natural and necessary for growth.  

The conflict between Production & QC are “Role Conflicts” which are necessary for hygenic growth of a company. These need to be addressed, not suppressed.   But since these Roles are performed by human beings, there is a tendency to personalize these.

Next, life also teaches us, there is a constructive way to harness conflicts.

The inability of people to deal with conflicts constructively makes them suppress it, all in the name of promoting friendship and brotherhood.  India is highly susceptible to this.

Managerial Training imparted to managers does not often deal with developing such skills and even if they do there are very few who can do it effectively, sustainably.

Even the offsite “team building” programs cannot develop this emotional maturity.  Why?  Because climbing a mountain together on a weekend may give a temporary feeling of unity, but what happens when the Production Manager and QC Manager are back in their work “environment” , that is their plants/offices on Monday morning? 

Just thinking.

Shridhar

PS : To keep digging deeper into this rabbit hole , please watch the video “What is a Leader” by Dr. Ichak Adizes : https://www.youtube.com/watch?v=obVFglp2Oh4

[Note : Adizes programs help organizations deal with seven sources of conflicts.  This insight deals with just one of these seven – the “Role Conflict”]

Is Private Equity or IPO an enabler or a deterrent for Growing Private Businesses

I feel very concerned to see that the corporate world has a predominance of “Finance”.   

Finance was originally and rightly a service to Business.  Now it has become Primary and the Business itself, secondary.

If a Founder/Owner of a high potential business, wants to grow his company, there’s a tendency to jump to a “I just need Finance” solution.   As if getting the Finance will make the business automatically grow…..and all other aspects will fall in place, automatically.

This mindset has been created and reinforced by the hordes of Finance MBAs who, mostly without Business/Operations experience, become deal making Investment Bankers.  “If you want your company to grow, but naturally the FIRST step is to get Finance.  I can get you an investor.”

This is a big mindset problem and guess who profits from this the most?  The Investment Banker.  He has to just broker a deal and he goes away with his hefty brokerage commission … leaving the Owner/Founder to “manage” thereafter.

 Let me illustrate with an old joke …..

Jim, an HR Manager died, reached the Pearly Gates and was given an promo offer.  “You can go and tour both Heaven and Hell personally and make a choice.”  Down in hell it was like one big party – beautiful people laughing, drinking, gambling.  Exciting and action packed.  In Heaven, it was quiet chanting , soft music, white clouds, wings & robes and serenity all round.  Quite boring, he thought compared to Hell.  “What’s your decision Jim?” God asked.  “Heaven is nice, but hell is better.  I choose hell.”  He was reminded that there’s no going back once the contract was signed.  But he was clear. Hell.   Upon arrival into hell, he was immediately chained and thrown into a vat of boiling oil. He couldn’t understand what was happening. This was nothing like the hell he visited earlier. He called out to the God for an explanation. “Don’t confuse recruitment with induction!” replied God.

Same tragic comedy awaits when Founders/Owners are lured with offers for PE Funding or IPO.   Founders/Owners are often blinded by the beautified hell.  They think, or rather hope, that the equity infusion will solve all problems of their companies.

The fun starts after a year or so.   Once the Private Equity infusion deal is signed or IPO done, the pleasures of recruitment start dwindling and the pains of getting inducted surface. 

What is really happening?

The Founder/Owner who once had a calf (business) and a Vision…..A Vision to nurture and grow it into a healthy cow….. so it can give a lot of milk and …….birth to more calves ..…..nurture these calves to become cows and so on.  

What does the Private Equity or IPO Investor want?  “Just shut up and milk the calf.  No need to grow the calf.  I need an exit.”

The Founder wants to make his company healthy ….balanced between Short Term and Long Term goals……where professional managers and employees too can thrive.

The Private Equity or Stock Market wants quarterly performance reviews.

I’ve seen this story unfolding so many times.   Ad nauseam.

In all those cases, the problem was that the Founder/Owner was made to sacrifice the “create a healthy company” goal for the “make money” goal.

Read this twice.  It is not easy to accept.

If the Founder/Owner has no substantial majority stake in his company or has given away disproportionate rights to the Investor, he becomes an employee in his own company…….forced to the “milk the calf” at the cost of “creating a healthy company”.  In the worst cases, PE Funds are known to be micro managing the Founder/Owner in the name of helping with Strategy/Management, thus restricting the flexibility of the company.

Let me put it clearly.

The focus of the Owner/Founder should be on ensuring GOOD HEALTH for his company.

At each stage of the Lifecycle, if the Owner manages in a way that creates a “healthy company”, then “making money” would have been an automatic outcome. 

The reverse in not true.  Focus on “making money” is myopic and can deter to the health of a company.

What will ensure a “healthy company”?  Good Management.   

The role of Management is to make the company healthy, whether it is an “struggling to grow” company or a “struggling with growth” company or a company making a treacherous transition from Owner led to Professionally Managed organization.

I’ve seen strong Family Managed Companies asking for Equity from PE Funds, with a begging bowl.  What a pity!   In case of a healthy company, I dare say, the PE Fund will chase it.   The company will have a bargaining power equal to, if not more than, that of the PE Fund.     The deal will be between equals.

The questions that remain :

-          What exactly is a “Healthy Company”

-          Is the definition of “Health” same in the Infancy, GoGo, Adolescent and Prime stages of the Lifecycle?

-          What constitutes “Health” at each stage of the Lifecycle?  Is there an elaborate description of “good Health” at each stage?

-          What is the role of “management” to ensure good Health?  How does it change at each stage of the Lifecycle?

-          Does it mean that Equity infusion by PE/IPO is per se bad or completely unnecessary?   How can good management ensure bargaining

Let's deal with these questions in Part 2 of the Blog.

To conclude this insight : “Healthy Company” should be primary goal of the Founder/Owner and the way to ensure that is “Good Management”.   If it is, then equity funding via PE/IPO can be an enabler to growth.   

Slow Down to Move Faster

“Fast is good” seems to be the mantra.  Speed is gratifying.  Going slow is boring.

More and more I am noticing organization cultures plagued by this “Fast is good” syndrome.  Maybe it is good if it found in the lower levels of the organization.  Or when the problems are not complex.

But when the top management exhibit this, it can be disastrous. 

At the top, “Slow is better”.

Thinking needs time.  Creative thinking needs more time. 

The larger the decisions, more time is needed…… to assess all sides of the problem, prioritize the tasks, think of the what/how/when/who of a solution…… a solution that will meet the least resistance while implementing. 

The larger the decisions, the more the need for a collaborative process to arrive at a decision as it impacts the various stakeholders adversely.  This dialogue needs even more time.

“Run the show” and “manage Change” – these are the two buckets under which all tasks of a manager can be put.  And both have their demands on his/her time.

The trouble is when the top managements are overburdened with “running” the day to day show.  They are left with no/little time to think creatively and consult the other stakeholders – i.e. “manage Change”.

The trouble is that "running" requires speed and the managers have become slaves of the go fast habit.  And given that a habits is a habit, this habit stays when they "manage Change" or when they handle complex problems.  Decisions have to be taken, even if the decisions is "let's not decide".

No doubt such organizations show performance in the short term.  But since their responsiveness to change is very low, they find it difficult to survive/thrive in the long run.

Just thinking

Shridhar

PS : I’m not saying that going fast is completely wrong.  There are situations where it is needed and others where it is warranted.  Will cover it in Part 2 of the Blog.

Which MF will outperform in the Future - A New Paradigm of Assessing this

Investors in Equity Mutual Funds are often confounded with the job of assessing which Asset Management Company is the best and will remain the best for the next 3-5 years.

The current methods of assessing this ARE OUTDATED.

Very often, the data given to investors is pertaining to past performance. 

While all agree that this is just indicative (no guarantee) of future performance the question remains - how can we really assess future winners?

No one has attempted an answer, at least not a convincing one.   Let me attempt one. 

An AMC whose management is able to create and sustain a vibrant internal culture of Mutual Trust & Respect (MT&R) will outshine. 

Let me use a formula to explain :

Any AMC, even the largest one, has limited energy.   There is no unlimited energy.  And this energy is allocated predictably. 

First, the energy is allocated to “Internal Marketing” and only the surplus is available for “External Marketing”.

Let me explain.

This AMC’s limited energy is needed to do all the activity that leads to satisfy the clients (“investors”) – Fund Management, market segmentation, fund distribution/channel strategy, etc.    In Adizes, we call it “External Marketing”.

But all this energy is not available.  There is a leak. Why?

Because “Internal Marketing” robs the AMC of some portion of the energy.   Each team has to “sell” its ideas to one another team – the Investment Managers, Marketing, Sales, Compliance, etc.   This is inevitable.  Teams have diversely opposite Roles & Interest and each team spends energy to “explain, convince and sell” its ideas to other teams.

When MT&R between the teams is LOW…. there is a lot of politics in the AMC…….a lot of energy gets consumed in “Internal Marketing” and such AMCs do not have energy to give to the client. 

When MT&R is HIGH, the energy needed for “Internal Marketing” is low.  A lot of energy is conserved.  This energy is very useful in serving the client better.

Let’s face it. Capabilities wise each AMC has almost equal level of talent, at least over a period of time.  So “capabilities” are not going to give them a competitive advantage.   Any other AMC can replicate it.

What cannot be replicated is a Culture of Mutual Trust & Respect.   And that can be the biggest and sustainable competitive advantage.   In the words of Dr. Ichak Adizes :

“What is the biggest asset a company can have?  It’s not what you have, but what you ARE.  What you have and what you do will change with time.  It will become obsolete even before you blink your eyes.  What you are is forever.  What is the biggest asset a company can have – it is a culture of Mutual Trust & Respect.    What is the role of Management?  It is build and nourish the culture of Mutual Trust & Respect.  That is you biggest asset and unfortunately it does not appear on the balance sheet, but it should.”  

It is very easy for a wealth manager to assess an AMC.  It is his role.  He must do it before recommending the products (especially Equity Schemes) of an AMC it to its investor clients.

For that he must focus on finding out what’s happening in the AMC?  Is there excessive politics, back-stabbing, rumors machine??  Or is there a proactive and dynamic system in place that helps the AMC’s teams to resolve (not bypass) conflicts and generate an atmosphere of Mutual Trust & Respect.

Wealth Management Firms and MF Distributors who can know each AMC from inside must use this knowledge to recommend or give “avoid this AMC” calls to investor clients. 

Just thinking.

Flipkart's "Performance Improvement Plan" - will it really do so

Flipkart's layoff program disguised as "Performance Improvement Program" is in news.

At the end of the Program some 600 employees will be sacked.

Will this improve Flipkart's performance?  Yes and No.

Yes, in the short run.

No, in the long run.

You see, sacking employees has "short term" and "long term" implications.   Both are loggerheads with each other.

Short term benefit :
- Saving cost of sacked employees
- A clear message to the remaining employees that "performance" matters

Long term costs :
- a fear laden atmosphere amongst the unsacked employees (will this promote "performance"?)
- a chink/dent in the culture of "Mutual Trust & Respect" that has been built so painstakingly till now
- an negative atmosphere in which an extraordinary person too may perform below-ordinary

Next question : what made the employees non-performers?   Their innate "individual" qualities?   Or the "atmosphere" of the organization?

The atmosphere is composed of Vision/Mission/Values, the Structure and the Managerial Processes.    Who creates it?  The management.

A management's primary role is to proactively and continually "change" the organization's Vision/Mission/Values, Structure and Processes to adapt to change in its lifefcycle stage.

What is the use of blaming and sacking employees (individuals) who were once recruited through the stringent processes of the company itself?

In short, "changing people" is God's job.  The best managements cannot do it.  Then, shouldn't the management focus on providing an "atmosphere", a culture replete with Mutual Trust & Respect.......in which an ordinary person can perform extraordinarily?

Just thinking

Are Promoters with minority holdings “LIVING IN DENIAL”

“Change is constant” is a common cliché we hear all the time.

But promoters of many listed companies having holdings less than 50% seem to be not accepting this.

Let me explain.

Once the shareholding of an owner in a publicly listed company comes below 50%, technically he or the family can remain “managers” of the company only on merit.

The other shareholders (> 51%) can topple them over if they mismanage.

There are 4 ways in which a company can be mismanaged :

1. Unable to meet current clients needs (Producing results)
2. Unable to do #1 profitably (Administrate)
3. Unable to adapt to CHANGE i.e. the changing needs of the clients/market (keep alive the Entrepreneuring spirit)
4. Unable to keep the stakeholder “integrated” towards the mission of the company

I have observed that the Promoter Managements manage to be in the good books of the Majority Shareholders by addressing #1 and #2.   While running the current show, they stop all change (#3) because they know that they will be forgiven for it.

In India, the majority shareholders seem to have been quite benevolent till now.  Sometimes they have no choice but to be so.

But now things are changing.  These shareholders seem to be getting aggressive.

After a lot of patience, Institutional shareholders CAN lead a “revolt” in at least two ways :
- Take over the management, displacing the Promoter managers
- Sell the company to a strategic investor

My prediction is that they WILL.

Promoters of listed companies have managed to LIVE IN DENIAL till now.  The question is “HOW LONG?”