You are aware that the traditional style of running business is undergoing a great change. The old pattern of ownership and management are making way for more participative and professional modes. The Indian economy is fast becoming a part of global economy. The commitments made to World Trade Organization have to be honored and these will become more onerous to comply with in coming years. You must understand its full implication and adapt yourselves in order to carve a niche for India in the emerging scenario.
This requires a total change in the mindset of authorities as well as who are involved in the production and distribution process. The idea that the state should occupy the commanding heights of the economy and should control every aspect of production and distribution has now become old fashioned. The function of the Government is to regulate the economy in public interest through fiscal and monetary measures and to help its growth.The government should come forward to accept the role of the producers in decision making with regard to the economy.
Business and industry should also look at new horizons. There is need for restructuring of existing enterprises to be in tune with demands of globalized economy. Firstly, every business should stick to its own core strength and not diversify into unrelated fields, however attractive they may appear to be
Happily, many of the larger groups have already started the process of divesting themselves of peripheral activities and concentration on their core business. In every business, value addition by use of modern technology, development of human resources and empowerment of people, is important. There can be no compromise on technology.Today's best is not good enough for tomorrow. Industry should also growingly draw upon research and development for innovation. All these activities will not bear fruits unless there is a deep study of the marketing conditions. Producers must become sensitive to changing customer demands and tastes.
We have now to learn to operate within the framework of global economy-shutting our eyes to such a reality will only invite disaster. This will call for greater professionalisation and also corporatisation of the economy. The future belongs to those who dare to dream and act on the basis of such dreams.
Management practices being a marketable product, needs to be repacked and given a new look from time to time. Recipes for success of executives and corporations change with almost the same unpredictability and frequency as fashions in the length of women's skirts or men's ties.
For an MBA, an examination really does not matter. An examination is hardly a realistic assessment of a manager's abilities.By cramming for a few hours a student can get high marks. But, management education is not about cramming a few definitions and jargons and getting high marks. It is about transformation. It is not about passive listening of lectures. It is about challenging some of those concepts and ideas. It is about scoring high in the business world.
The current prescriptions for success of corporations should be known and understood. Let us discuss it:
Almost all organizations are giving a relook into their whole gamut of activities and evaluating the impact and profitability of each of them, further relating them to the infrastructural strengths and weaknesses in India, proliferation of activities or unrestricted diversification was a product of license/permit raj of the past. Many over ambitious and some unscrupulous traders turned entrepreneurs jumped into bandwagon and went on to make quick money and disappeared thus the term, 'Fly-by-night operators' was born.
I do not agree with the management consultants. Warning: Do not venture into activities about which you know nothing. We have in this great country entrepreneurs and visionaries who have ventured into uncharted waters and who developed competence in entirely unfamiliar areas or simply building managements or in creating investors confidence. We all know Jamshedji Tata and Brij Mohanji Birla forsook their trading background in pursuit of a modern Industrial India. These great people considered interest of the shareholders as one, though an important one, of their objectives.
Fortunately entrepreneurs continue to flourish and to establish major companies. But for the vision and courage of such persons, the newer industries-plastics, information technology, bio-genetics, cable T.V. and many more would not have developed so spectacularly and many of the older industries would never have flowered.
Down Sizing: There is no question about the need to dramatically increase the efficiency and the productivity of all economic enterprises in India, to better utilize all resources: material, financial and plant, as much as there is the need to enhance employee productivity. No company or country can for long survive, particularly in an integrated global economy, if it's resources are not used at efficiency levels comparable to those of the other countries and companies. It is unquestionable that almost all resources in India-working capital, fixed assets, managerial time, distribution channels and employees-are inefficiently used though emphasis seems to be given primarily to the generally abysmally low level of employee productivity. The need to reduce our employee numbers, to ensure discipline in the workplace, to enhance the productive efforts are all accepted and need to be vigorously pursued, though the short term consequences of these in any industrial organization may be reduction in employment specially in industries, such as banking, where technology has revolutionized the processes. Technology has also dramatically reduced the need for shopfloor employees but they can be retained or redeployed. Employment growth comes through ancillaries and supporting industries.
It does seem strange to me that successfully down-sizing, which is generally euphemism for reduction in employee numbers, has become a matter to boast of or to be proud about rather than to consider it a matter of regret and economic compulsion. Surely the creation of additional productive employment should be as much an objective of responsible corporate endeavor as a creation of economy surpluses, especially in countries such as ours which have no social security and high unemployment.
K.K.Modi declared that antiquated labour laws need to be repealed and others suitably amended to achieve corporate objective. This cannot be denied that the rigidity of our labour laws greatly impedes the growth of labour employment in organized industries and leads to substitution of labour with capital. When this happens, you will have fresh challenges to encounter.
It is obvious that no corporate individual, institution or organisation can long survive without producing an economic surplus. Those who contribute resources to an enterprise - capital, labour or any other asset-expect a return, which over time must atleast, equal that obtainable from alternative uses. Such return may be contractually fixed or be the residual surplus- the profit of the owner. While the measurement of this surplus may become more sophisticated and precise and bear different names-the concept of profits is surely coterminous with economic activity.
What is alarming is the current insistence of may that the sole and exclusive objective of the management is the maximization of owners' or shareholders' profits, All other consideration being secondary or irrelevant. To this notion is added the deceptive precision of several performance measurement formula under various names-Economic Value Added (EVA), Return On Net Worth (RONW) and the like.
Comparative assessment of management efficiency is, of course, essential. However we need to be aware that profitability is so often and so largely dependent on external factors: a significant variation in the rate of interest can dramatically alter EVA, particularly in capital intensive activities. It is relatively easy to have a large and positive EVA in an environment characterized by a BSE expectedly hovering at 6000, high consumer confidence and low unemployment: however, even for management of equal caliber, a large EVA is more difficult to achieve in a situation of recession, high unemployment and endless corporate failures
'Toms' - Tomorrow's Managers- must be exposed to the cardinal truth that industries do not run as per textbooks. The variable are so many and continuously changing. Therefore, it is imperative to understand the complexities of running business under ever changing industrial scenario. Isolation and Protection offered by geographical location and political compulsionsare disappearing very fast.Reverberation are felt very quickly from any global event.
Toms should also clearly understand that the traditionally managed companies are gasping for breath.Commitment to the process of change, its speed only can help them to survive. It is a fact that under the thunderstorm of change lies opportunities for talented people. The talent is to be acquired by hard work and exposition to facts.
Corporate Governance :
Corporate Governance practices have been focus of last various associations and confederations for last two years. It has received wide appreciation and the need to improve it was voiced by all the bodies including the Prime Minister. Confederation of Indian industry developed 'Code of Desirable Corporate Governance'-a 17 point specific recommendations. These guidelines will ensure greater focus on certain areas of governance and will create confidence among the investors.
Giant finance company like ICICI initiated the process of corporate governance in early 1997. Board was made the centre of corporate governance.
They have constituted
Audit Committee : President Mr. R. Seshasayee
M.D., Ashok Leyland
Board Governance Committee : President Mr. N.R. Narayan Murthy
Chairman, Infosys Technologies Ltd.
Credit Committee : President Mr. Ashok Ganguly
Chairman ICI (India) Ltd.
Investment Committee : President Mr. Harti Subramanyam
Prof. Stern School of Business.
Management Committee : President
MD & CEO, ICICI.
Human Resource Management:
Has been identified as key focus area. Mr. Kumar Mangalam Birla, Chairman of Aditya Birla Group identified following key issues while speaking at national convention organized by HRD Network Forum - " HRD challenges in 21st Century".
Shareholder value creation.
Ever increasing expectations of the customer.
Developing the employees with a global mindset.
Corporate HR is the key member of cross-functional team to inculcate a mindset to focus on value-added growth rather than just asset added growth. Leading to value creation. The world's best corporate houses such as Ford, GE and Pepsies have always focussed attention on value creation.
Some Predominant Focus Areas for Business Ethics.
Total Quality Management programmes of companies - Predominance of moral muteness
'Greening' of supply chain-Environmental concerns in decisions making.
Radical changes in designs-For totally recycling of waste.
Xerox has developed 'Reverse Logistic's Process' where it removes old equipment from the customers facility to recycle it back.
Business Ethics : Time has come to appreciate ethics not only as a moral but as a strategic concept. The business corporation that will lead the way in the years to come will be the ethical corporation.
Values are based on one's innate belief system and therefore are a thought based system. Ethics are behavioral norms springs from one's own view of good or bad, right or wrong. It is an activity based concept. Business ethics deals with policy considerations founded on organizational values and core beliefs.
Very few examples are there where managers, when confronted with an ethical dilemma stood up for their convictions. They have reasons. It may be because uncertainty in employment conditions and absence of any social security system. So you have to compromise to yourself for survival.
Have you ever considered the relevance of following key areas in background of business ethics.
Social responsibility in corporation is proving essential to the long term success of the companies in today's globalised economy. It is not merely a public relations posturing. Managers often say that pursuit of business ethics can cost money. It can lose sales to less scrupulous competitors and drain management time and energy. But Harvard business professor points out that ethical scandals can severly damage a firm, with punishing legal penalties, bad publicity and irrepairably injured customer relations. More importantly, even without public scandals, unethical behavior can undermine a firm's organisational spirit.
In order to thrive on the cutting edge of competition there has to be an inevitable change in the corporate mindset from the feudal merchantile competitive mode to the innovative-entrepreneurial-competitive mode. And during and after this process of change in the corporate mindset that business ethics assumes greater and greater importance.
I have tried to update you on the current scenario of industry. All the organisation are looking for 'leaner and hungrier' outlook. Extra flab cannot be tolerated by the market so, now the game is how your expectations from industry is matched by the value addition you promise in short and long run. All the talk and system of training is towards building potential for future input from you. Since loyalty from either side - employee or employer - is a disappearing commodity, job security is also on line. So you must concentrate on:
Promise of future potential
Continuous search for excellence
Cost consciousness and reduction
Emphasis on strategy
There is no room for complacency.