Tuesday, November 30, 2010

Shareholder vs Stakeholder

Future of Indian IT Industry with growing Salaries and reduced billing rates lesser Dev projects due to “buy instead of build” strategy?

One of my favorite Leader has seems taken oath to find an answer on how to manage Indian IT which is caught between raising Cost (Employee Demands) , Reduced Bill rates due to competition, Decreased build needs with Buy strategy – Thus challenging the sustainability of Indian IT reign for/till next generation. While his thought is primarily to drive points like Company needs to be profitable end of day to sustain against acquisition or extinction. To do that we need to see how we be cost efficient, Value adding to customer to raise top-line and work through this Buy strategy of various industry through various differentiating roles.

Stepping back we will come through different perspective - One of the Ten Strategic thought or schools is “Organizational Purpose” as per management books. Tension on this is Profitability vs Responsibility. Perspective is pulled between shareholder and stakeholder. [[[Note not sure why people can’t catch a fact that shareholder is one party of many that constitutes stakeholders]]]

One more perspective - For initial few years of My company gone public in 2004, I wondered why it is not faring well compared to its next biggest IT company. Profit – was the unanimous answer then, as long as you are not most profitable you are not going to get better visibility and mileage than your competitor who is nowhere near your revenue (note NOT profit). I also felt my company was lacking marketing, but what marketing you need than your P/E ratio.

It is undisputed fact that we need to be Profitable to satisfy shareholder, but not at the cost of key stakeholder employees (or as they officially called as “associates” to make people feel that they are not COST to company but assets). It is pendulum though it might achieve profit for a while but would come back a blow to other side as attrition evident through recent Attrition rate of the other company which I envied all along. But I could see same situation round the corner to my company unless stringent steps are taken to do something rather than go on jolly ride for a while satisfying shareholders at cost of stakeholders (customers, Employees, Society etc.,).

Interestingly there are many views that Profits are proportional to market share

It’s easy to point the problems! So what’s the solution???

Ever understood why Japanese industries are far more successful than Corporate American peers post Second World War during 70’s. Industry after industry, including steel, watches, ship building, cameras, autos, and electronics, the Japanese were surpassing American and European companies. Initially one key factor Management Gurus felt was the cost structure is in advantage of Japan, but after detailed study it seemed that Japan’s cost structure is inferior to American. SO there is some beyond Cost which is behind the avalanche of Japanese success.

7S Model – Is the answer for this question (Link)


• Strategy: the plan devised to maintain and build competitive advantage over the competition. (We will go into Porter and Blue Ocean Thoughts in detail later)

• Structure: the way the organization is structured and who reports to whom.

• Systems: the daily activities and procedures that staff members engage in to get the job done.

• Shared Values: called "superordinate goals" when the model was first developed, these are the core values of the company that are evidenced in the corporate culture and the general work ethic.

• Style: the style of leadership adopted.

• Staff: the employees and their general capabilities.

• Skills: the actual skills and competencies of the employees working for the company.

Though Americans had greater control on hard parameters and Japanese mastered on the soft parameters and the results speak. Shared Values: Great value on corporate culture, shared values and beliefs, and social cohesion in the workplace. Style: In Japan the task of management was seen as managing the whole complex of human needs, economic, social, psychological, and spiritual. Pascale also highlighted the difference between decision making styles; hierarchical in America, and consensus in Japan.
Many Management guru's are thinking that era of hierarchial management started after second world war is ended - I think key of current IT orgs change should be aligned to non-hierarchial model for it to sustain the gain momentum and not fall into any other industrial sector where process managment dominated innovation (innovation in tranditional industries are done mostly at R&D labs ?)

VALUES – The epicenter

I always wondered if companies’ values (should be shared) are epicenter contributing to centrifugal and centripetal binder for the wheel of success (Fortune?), is this values valued to the extent its required ? Not being critic, but I feel the Values are paper protected these days. Take for example “Respect for Individual” retrospect the same. What goals on this Value is cascaded to the middle management, except for profitability and Growth? I wondered can we get back the confidence of employees fear and resentment that hangs over many employees, still tender from years of layoffs, salary freezes, pay cuts, Promotion delay and furloughs. Liked the answers @ HBR blog . Forget gaining Trust work win-win

“The organization will provide interesting and challenging work. The individual will invest discretionary effort in the task and produce relevant results. When one or both sides of this equation are no longer possible (for whatever reasons) the relationship will end. So if the organization no longer has interesting or challenging work for the individual to do, or if the individual is no longer willing or able to engage in the work — to invest the levels of discretionary effort required for excellent results — it is in everyone's best interest to part ways.

This new equation has significant implications for our talent-management practices. To start:
  • It reinforces the premium many organizations have wisely put on engagement.
  • It calls for new approaches to performance management — ones that gauge the evolving needs of the task, as well as the individual's skills and contributions.
  • It requires tighter integration of learning and work.
  • It raises the need for on-boarding processes that are quick and efficient and exiting approaches that are nonjudgmental and designed to encourage the individual to return if appropriate work opportunities arise.”
HR has always been tactical in many ways needs to innovative in implementing this with consensus in phased manner.

(Thoughts are flowing and to be continued)

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