The key lesson: Corporate governance must always be on top of an organization’s agenda. Failing which, one must be prepared to risk sudden death.

Fundamentally, corporate governance implies management assuming the role of “trusteeship” with all the attendant checks and balances that can create a high performing organization. This was advocated by Mahatma Gandhi early in the twentieth century. These trustees must aim to deliver balanced results in the following dimensions:

1. Customer satisfaction and loyalty
2. Employee satisfaction and commitment
3. Superior shareholder value
4. Societal responsibility

In India, while the movement towards more effective corporate governance has gathered momentum, much remains to be done. In several cases this concept is being observed more in its form than spirit to gain respectability. There is still strong temptation to hold vital information close to the chest and present a fait accompli to the board merely for ratification. But in the case of Satyam the board was learned and well balanced. There were several global gurus of management serving as independent directors. Could their expertise not penetrate Raju’s strategy?

Performance of companies cannot be judged merely by the price of their shares in the stock market as that depends largely on perception of investors at any given time about the future prospects of a particular industry and the valuation attached to it. Satyam has dragged the entire Indian IT sector into a credibility vortex.

In the quarters to come, the essential litmus test will be on how efficiently and productively companies in the IT sector utilize resources entrusted to management for the benefit of shareholders, customers, employees and society.

The threat of volatility is here to stay. 

Volatility can be managed only with agility.

Agility is primarily driven by a moving target, namely, changing customer needs. It is also driven by the desire to simplify operations, improve productivity, and lower costs.

Traditional analysis and improvement of work processes enables organizations to perform faster, better and cheaper. But does this satisfy changing customer needs, at speed?

For agility, in addition to the above, we need to be different. Traditional approaches are less likely to succeed.

Agility therefore requires a strong dose of innovation.

Innovation in the product/service development process; as well as product/service delivery planning process.

Agility is about being faster, better, cheaper and different. 

Agility is about being first in the market place, satisfying the changing needs of customers.

There is no consolation prize for being second in the market place.

These measures will only delay the inevitable, if not supported by recession-proof actions.

2009 is going to be a challenge for the auto, metallurgical, engineering, chemical, hospitality, banking, aviation, and BPO sectors. There will be more. These sectors are characterized by an extreme polarity of salaries (read cost-to-company). Our economics of conscience demands that the MD/CEO to shop-floor worker salary ratio should not be greater than 40! I recommend rationalizing salaries as against salary cuts across the board.

But rationalizing salaries is only the urgent-and-important step. We also need to declare war on waste, that is, chronic waste. The cost of chronic waste in any organization is at least 20 per cent of total costs. Try the BestPrax Cost Benchmarking Tool for soul searching. It’s available absolutely free. Use the tool, find your cost of chronic waste, and set a strategic goal to halve the wasteful cost in one year. You could double your profit without any capital investment.

This approach will lead you to breakthrough efficiencies in business processes. It will also push you to think creatively to generate intelligent cost reductions.

In all the recent Singur turmoil, what struck me most was Mr Ratan Tata’s consistent and persistent concern for the safety of his Tata Motor workforce. Ultimately, when matters heated up, he walked his talk by exiting Singur. He paid a staggering price, but earned the trust of the Tata Motor workers and their families; as well as set a benchmark for industry leaders.

By contrast, in the current economic turmoil, leaders in the aviation sector, Mr Naresh Goyal and Dr Vijay Mallya, of Jet Airways and Kingfisher Airlines respectively, reduced their workforce to reduce costs. I wish to share one more lesson learnt by me from Dr Juran: “Over 80 percent of problems in an organization are management controllable, not worker controllable.”

The indignity of being laid off means losing face with one’s peers, family, and neighbours. This is totally unacceptable to any worker, regardless of level of education.

A better practice for intelligent cost reduction is to identify the chronic waste locked in the managerial processes of an organization, and then to systematically reduce the same. The chronic waste can translate to 40% of total costs at Jet Airways and Kingfisher Airlines. The two aviation leaders should set strategic goals to halve the chronic waste in their respective organizations; deploy senior improvement teams to solve the chronic problems; and thereafter comfortably pay salaries of the workforce. As a carrot to these two customer focused leaders, customers will also enjoy increased efficiency when chronic waste is reduced in managerial processes.

This is a win win solution for all.

Employee delight must precede customer delight.

NTPC seems to be truly committed to its tagline, “Generating smiles beyond megawatts”, applying it not only to external stakeholders but also to its 23,500 employees. The company’s HR strategy, which is closely aligned to NTPC’s overall strategy, has four focus areas – Competence, Commitment, Culture and Systems. Apart from an elaborate one-year induction and training program for new employees, NTPC has also put in place a formal mentoring system through which senior executives facilitate the new recruit’s integration into the organizational fabric. Training is in fact the soul of NTPC’s competence building initiatives – the company has 15 project training centers, 2 simulator training centers and a Power Management Center for senior management training.

True to the spirit of a learning organization, NTPC has launched several events to nurture creativity and innovation. In the annual Open Competition for Executive Talent, teams are judged on the basis of oral and written presentations on work-related themes. Quality Circles have been institutionalized, and “professional circles” in each department meet every fortnight to brainstorm on specific issues and share their insights and experience.  The company’s comprehensive talent recognition system uses a combination of monetary incentives and other rewards to celebrate individual and team achievements. The NTPC Development Centers are dedicated to mapping the current and potential competencies of employees and helping them to enhance their capabilities. NTPC also has many programs which propagate the vision and core values of the company across all employee levels.

The organization’s commitment to nurturing its employees has helped create a highly competent and committed workforce with a strong sense of belonging. For those who are not impressed by awards and accolades, here is a more “solid” metric – NTPC has an attrition rate of 0.17% – one of the lowest among Indian companies.

BASF is the first paint manufacturing company in India to receive the award, which is based on rigorous assessment of a firm’s quality systems as well as several other criteria including communication, teamwork and strategic alignment. A noteworthy example of the harmony between Ford and BASF is the creation of the sensational new automotive color, “Brushed Steel”, which BASF specially formulated for Ford’s Indian market. Another delighted BASF customer is Audi, the German luxury car manufacturer, who handpicked the company’s eco-friendly “Glasurit” as its official refinish paint.

It is one thing to declare customer delight as your primary objective, and another to actually attain it in tangible terms. So how does BASF manage to do it repeatedly in an industry that is equally competitive and controversial? To answer this, you needn’t look beyond the group’s four-pronged strategy for value-adding growth. The strategy has four objectives or “guidelines” – earning a premium on cost of capital, helping customers to be more successful, forming the best team in the industry and ensuring sustainable development. BASF deploys the strategy through a combination of measures like rapid acquisition and integration of firms, restructuring, research and development, market-driven innovation and most importantly, a strong commitment to the environment.

So that’s one more case in favor of a well-formulated, well-rounded and well-deployed strategy that is based on complementary – rather than mutually exclusive – strategic objectives.

In other words, a leader essentially can create a lasting legacy for the organisation through the spirit, energy and thought that s/he helps foster within the organisation.  As we delve on this point, I am tempted to think – how do these leaders build and shape their people, and literally transmit the ability to preserve and enhance the sanctity of the legacy into the next generation?  What really sets their organisations apart?

I believe the leadership of Dr. SS Badrinath, Chairman Emeritus, Sankara Nethralaya (SN), and ET Corporate Citizen Awardee 2007, offers a fine illustration. Having founded the hospital with nothing but donations (he did not believe in taking a loan, as that would imply “making money” for repayment) with a vision for quality eye care – especially for the poor masses, he has fostered over three decades a world class institution which is also Asia’s only ophthalmic hospital with ISO 9002 certification. On a typical day, around 125 surgeries are performed in the hospital, on patients from all parts of the sub-continent and over 50% of the cases are supported free of cost.

Of course, commitment of this magnitude requires a solid foundation – and for Dr. Badrinath this foundation is his focus on research. Sankara Nethralaya has several research departments, each dedicated to a specialized area such as genetics, histopathology, microbiology and ocular pathology. These departments are recognized worldwide for their path-breaking research publications that appear regularly in medical journals. The hospital’s National Institute for Research in Visual Sciences and Ophthalmology is dedicated to pioneering world-class research and innovations in nano-technology and stem-cell applications relevant to eye care. Dr. Badrinath has also initiated some novel technology-enabled practices like teleophthalmology and mobile ophthalmology that literally take eye care to the masses.

Dr. Badrinath stepped down in 2007 and passed the baton to Dr. Lingam Gopal, as an affirmation of his belief in nurturing younger talent and fresh perspectives. I would reckon it takes little exploration to understand the legacy that Dr.Gopal has inherited from his mentor – an institution that thrives on team work, well organized processes validated by quality standards, high professional standards, an incessant emphasis on research and learning – and above all else, an unwavering commitment to service.

Now wouldn’t you consider this the legacy of a “visionary” leader?

Let’s examine this closer – walk into the hallways of any knowledge organization, and you are likely to find yourself in the midst of a very diverse pool comprising of people from all parts of the nation, more women and more representation of disabled employees. This probably stems from the fact that organizations in the sector are increasingly moving towards a system of benchmarking themselves against socially relevant goals – such as workforce diversity and inclusiveness – all of which make for sound business sense.

Take the instance of Infosys and its support network for women employees – Infosys Women Inclusivity Network (IWIN). The network provides a forum for the organization’s women employees to bring forth and address their unique aspirations with the management. The program has enhanced the organization’s ability to create a flexible, responsive and gender-sensitive working environment, and has paved the way for initiatives such as the All Women Facility – a city based office in Bangalore for the organization’s expecting and young mothers.

Needless to mention that such initiatives have helped the organization reap significant benefits in today’s competitive talent landscape – such as a highly integrated workforce (with women constituting 30% of the workforce) and effective management of employee attrition, which at less than 12% is significantly less than the industry average of 16%.

Clearly the secret recipe for success in today’s business scenario is all about being innovative – wouldn’t you agree?

India’s per capita consumption of aluminium is 0.7 kg as against 25 kg in the US. Hindalco, one of Asia’s largest manufacturers of primary aluminium, realized that the Indian consumer did not have opportunities to really see the product “in action”. Through its market-driving move of opening aluminium galleries in Mumbai and Bangalore, the flagship company of the Aditya Birla group aims to spread awareness about product quality and transform the brand image of aluminium. The galleries function as showcases for products ranging from roofing sheets and ceiling panels to windows, doors and outdoor furniture. The products are available through franchisee outlets across the country. Hindalco’s objective is to create new applications and markets for aluminium.

Of course, being a market driver is a major strategic choice and needs to be backed by superior product quality and marketing initiatives. Hindalco’s high quality standards at all its facilities have won the group several awards over the years. Market driving involves a high level of risks – but it holds the potential for revolutionizing entire industries, and can deliver huge returns in terms of customer value and first-mover competitive advantage. A risk well worth taking, if you ask me!

Dr. Reddy’s Laboratories is among the world leaders in the generics market. The company has evolved a meticulous system to measure and account for its intangible assets. The organization assigns numerical values to intangibles by using a combination of accounting techniques/metrics including Market Value Added, Calculated Intangible Value, Brand Valuation and EVA. Among the intangible assets measured are technical know-how, marketing know-how, trademarks and designs.

When a company discloses the value created by intangible assets, it empowers investors and stakeholders to make better-informed decisions. Besides, it enables the organization to streamline its investment in these assets particularly in knowledge-intensive industries. Looks like the adage “Knowledge is Wealth” has acquired an entirely new meaning!