Global Gyan

Random Nuggets of Wisdom :-)

The Jugaad problem

Innovation in India has always been about overcoming constraints. And it has led to several success stories and accolades. Some have called this 'jugaad' - a word that is apt for the situation but has slightly negative connotations. Jugaad, generally, gives an impression of side-stepping the problem or finding additional resources - in a clever manner - to achieve one's goals. The problem with jugaad is that, often, it does not address the underlying issue (or constraint) that led to the problem in the first place. So, there's no guarantee that the problem will not recur. Or create new problems in its wake. But, in the short term, there's action and it appears all's well.

Two incidents prompted me to lament on Twitter today that India's becoming a jugaad nation, in a negative sense. The first one is my pet peeve of traffic in Mumbai.

Twice in three days, I experienced the same situation. We were driving on one of the 'highways' that connect various parts of Mumbai. For some unknown reason, we saw traffic jammed up ahead. Vehicles were turning around; some crossed over to the opposite side and were trying to move forward. Most others drove straight back towards the previous intersection - to find an alternative route. I told my driver to stay put and figure out what was happening but we were in a sea of vehicles wanting to go in the opposite direction. So, we joined them and after a lot of maneuvering and honking and scrapping, found a service road. This road was also jammed by now. Thirty minutes later we joined the highway, perhaps a hundred metres ahead of the original jam. The traffic appeared to be flowing smoothly. Whatever had caused the initial problem had sorted itself out. It was just impatience on the part of some drivers and the consequent jugaad of finding some short-cuts that created new traffic jams elsewhere. In a strange coincidence, almost the same incident played out twice this week.

The second 'incident' was really a few discussions that I've had recently, online and offline about the lack of capacity creation in India. Demand growth is dramatic; competitive intensity is increasing. The focus is on serving the demand but this is (often) not accompanied by investments in developing talent, creating systems and empowering people. Every time we hear a horror story of poor customer service - usually from the biggest brands, in telecom, banking, media or retail, we wonder what's causing this? And can this growth be sustained without investing for the long term (at the cost of short term profits / returns)?

Maybe I am low on confidence about the India story (not the opportunity, mind you) after all that's happening around. If I am unduly worried, let me know and boost my confidence. :-) If not, still, we must keep the faith as SamK reminded me and work at this problem resolutely.

You cannot treat a fracture with lots of Band-Aids, but you cannot become a doctor overnight either.

Cracked the Scene. So?

My friend from school and I met for dinner after a very long time and got chatting about our other friends. He said, you know nobody from our 1993 batch at high-school has really cracked the scene. Is that really true, I countered, somebody had become a Partner at McKinsey, one co-founded a hedge fund at New York, some others were hot-shot investment bankers in India, Singapore and elsewhere and there were others moving up the corporate ladder. Seemed to me that everybody was doing reasonably well. But nothing spectacular, he said. 

Most of us have been working for about 10-11years, assuming that we spent 5-6 years studying further (BE+MBA, in most cases!), and are nearing our mid-thirties. Not bad, I'd say, if I compared this to what our parents' generation might have achieved. But nobody is a CEO of a big company yet. Or a well-known scientist or a management guru. 

You know, I have no idea what the hedge fund founder's kids' names were or what the Singapore I-banker did beyond I-banking... the occasional Facebook update tells me that most of us have put on weight, added new faces to the family photos and took an annual vacation somewhere. Everybody is happy. So it appears. 

If any of us had become the youngest CEO in the history of our companies, would it have made us happier than what we were now? We would have surely cracked the scene, but would it make our 3 or 5-year old kids happier? As CEOs, we might even install Telepresence at home, and meet the family face to face when on the road, more often now. Did we need the additional responsibility of being a CEO just when the responsibility as a parent was beginning to peak? 

Is it really progress (or cracking the scene?) if the envelope of a professional career is shrunk rapidly? Earlier CEOs were typically 50-year olds, now its passe to reach the top in the 40's and the target is to get there before the 40th birthday. So during the most productive years, all attention is focused on professional excellence and "success", with the hope that one can retire early and then enjoy life. But it is difficult to go trekking at the age of 45 when you are under medication for diabetes and hypertension. It is difficult to lift your fifteen year old child and fling her in the air while playing in the garden. So we cracked the scene at work but what about life, in general?

Anaggh Desai tweeted today, "Isn't it surprising that only Head Honchos talk and manage to practice Work - Life Balance?" I believe that though Head Honchos talk a lot about Work-Life Balance (WLB), most don't really practise it. There are very few who have the aptitude as well as an environment conducive to WLB. Balance is usually a euphemism for compromise; and when Head Honchos compromise between Work and Life, it is not difficult to guess which direction the scale typically tilts. 

I read somewhere, very long ago that the best way to plan one's life's goals was to write your own obituary. What would you like your near and dear, at home and at work, to think of you when you are no longer around? What are the first things that you want others to say about you? 

Are our actions today helping us achieve that "end-goal"?

Entrepreneur or Entrepreneurial?

Had an interesting discussion on entrepreneurship with my friend Janani who has recently started out on her own. In fact, she and her hubby (& my classmate) Marlee gave up fundoo MBA careers (bank/consult) to start an interesting concept in the education space. We were chatting about start-ups, and what helps/impedes their growth.

An important element of entrepreneurship, in my opinion, is the ability of the visionaries/owners to attract professional managers into what might seem like a 'family' concern. A successful start-up has to eventually morph into a large business/organization - that requires building a good management team. Can the entrepreneur attract, encourage and retain high quality managers who can help scale up the business? Can you share control with other qualified professionals and let them handle key elements of growing the business? 

This can become a critical issue if the business requires external funding to scale. Venture capitalists back entrepreneurs and concepts; private equity investors, on the other hand, back business models and management teams. The most successful Indian start-up (in my view), Infosys, made the transition from being an entrepreneurs-led start-up to a professional organization early in its journey. The founders behaved, through the company's history, as "managers" and not "owners". In fact, two of them have even "retired" from the company and let others take on leadership roles. At the same time, they created a company where many of the employees work in an entrepreneurial manner.

How can that happen in large organizations? How can thousands of employees/managers develop the same passion and innovation that entrepreneurs bring to a business? We need leaders/entrepreneurs/investors to create an environment where every manager believes he/she has an equal stake in the success of the venture. And this goes beyond stock options/profit sharing. It is to do with trust, delegation and respect. You have to make each employee feel that they have a say, the right to determine the future of the business as well as a duty to.

I have often been asked by friends, why don't you do something on your own? Perhaps it is a risk thing, but also, maybe because I feel that my "job" lets me do my own thing. Lets me dream big and go after it. How many entrepreneurs let their "employees" determine the direction and pace?

What do you think?

Note: I have no experience of being an "entrepreneur" though I have watched / heard from others. I have advised entrepreneurs and (through my company) invested in entrepreneurial ventures. I would like to hear other perspectives / alternative views. 

Business of Education

Why isn't there a national chain of K12 schools in India? In fact, why aren't there many?

I understand that education in India is for non-profit only but is there even a debate on the topic? And I can't believe that all the politicians who have set up schools in their names have been done out of only good intentions!!

When a manufacturing major decides to set up a mega-plant, it asks the Government for mines and power and other essential raw materials. They look for vertical integration to protect their long term interests. Then why are IT and BPO majors depending purely on Government action to provide them their essential 'raw material'? Every year they are hiring tens of thousands each, yet they have no control over the quality or mindset of the people they employ. No wonder they have to invest in almost recreating their education. The Knowledge Economy is predicated on India churning out sufficient numbers of well qualified youngsters. Note we are not just talking of call center execs or software code writers; the opportunity is in design, animation, law, financial analysis, research, education, management.... almost endless, if only we had the right talent. After years of suffering whimsical and incompetent people, the HRD ministry seems to now have a leader who appears to have his heart and mind in the right place. But can we let India's future: Vision 2020 and beyond, be left to the luck of the political draw?

Shoot those I-Bankers!!!

The "vulgarest" of them all are the bankers! Most of them work for unlisted companies, so we don't even know how many digits are there in their salaries. And that, btw, is in US $.

So should we shoot them or easier still, take away their Mercs and sea-facing apartments?

Why are we grudging them their earnings in the first place? Nobody seems to be complaining that Dhoni makes Rs 50 crores for his skills and good looks or Akshay Kumar makes Rs 100 crore for neither.

And if that's what their customers paid them, then why would they look a gift horse in the mouth? Corporates are willing to pay bankers 0.5% to 2% of the deal value for any fund-raising activity or M&A deals... a bit like what real-estate agents earn from rental or buy/sell deals. The cost of doing the deal is quite limited - they just have to pay for plush offices and assistants to make wonderful slide packs. It's skills and good looks all the way.

Except when a deal goes sour after months of work (like the Bharti-MTN one), most bankers end up closing a few deals every year. Most large banks do not touch a deal if they cannot earn a minimum $1mn fees. If it is a large deal (by Indian standards), they ought to earn at least $3-5mn. Of course, that won't get split evenly... like everywhere, the big fish make much more than the junior analysts. An entry level banker (in India) should be making at least $50K (25L INR); successful senior folks wouldn't settle for anything less than $1mn. The CEOs obviously make several of those millions.

Do you need these guys to make deals happen? Many corporate executives will tell you, We don't really need these suits to come in; anyways we end up doing all the intelligent work. The bankers just look pretty at all the meetings. But, face it, can you do an M&A deal on magicbricks.com? Or launch your public offer at giveindia.com?

Corporates ought to re-look at the way I-banking fees are determined. Most companies don't want to pay for a failed transaction, and therefore, settle for a 1% success fee: if I am spending 100, what is 1 more? The i-bankers take all the risk of the deal, and end up getting a huge upside when a transaction is consummated. Perhaps, a fixed retainer that compensates the bankers for their work (like consultants get paid), even if a deal breaks, could reduce the super-normal upside of a successful transaction.

Till then, die you bankers!

Vulgar salaries down down!!!

... or so our politicians would have us believe.

Having imposed cattle class on their ilk, the high-priests of austerity have turned to a new, softer target: executive salaries. Never mind, that in our so-called "liberal" economy, the Government has no locus standi on determining or even influencing salaries in private sector enterprise.

It is the owners of the enterprise, the shareholders who must decide what they want to pay their managers. If they believe that a CEO is worth paying Rs 50 crores, so be it, even though it might be 12,500 times the per capita GDP of India (as TOI informed us recently). Remember, there are many CEOs, including those of blue-chip companies, whose CEOs get paid far less. Far, far less, in fact.

That is the question investors (and perhaps the Government as the regulator) must try and solve. Why can some companies attract CEOs - highly experienced professionals - for a compensation of about Rs 1-5 crores whereas other companies end up paying 10-50 times as much? It is very obvious that owner-CEOs have a significantly higher level of compensation than professional-CEOs. In a large Indian telecom company, the owner Executive Chairman received almost 8 times as much compensation as the professional MD.

Are the public and institutional shareholders exercising any control or influence over executive compensation, particularly when the "executive" is a significant shareholder himself/herself? The blame, if any, must then lie with the "independent" Directors who are letting the promoters decide how much to pay themselves. (Btw, politicians have the same problem: MPs vote for their own salary hikes in Parliament.)

So, Mr. Minister, the answer does not lie in "regulating" executive compensation and/or asking for "restraint". The Government needs to ensure, through regulation and education, that our publicly listed companies behave like public companies, with active public shareholders (represented by strong, knowledgeable and truly independent Directors). We have too many private fiefdoms masquerading as public companies in India.