What game do your managers play? Cricket or Football ?

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Corporates of 90s play cricket and corporates of 2020 play football.

Cricket and Football, both are team games but are as different as Chalk and Cheese.

A Cricket team is collection of specialized skills, like bowling, batting or keeping wickets besides some general skills that everyone has, e.g. fielding and throwing a ball. Every player has a role and performs within the parameters set for it, to the best of his/her ability. For example, a bowler gets freedom to decide his field placing and how he would bowl. The captain has a key role and takes most of the decisions such as batting order, bowling changes and field placings. A captain who follows participative management style, may discuss with couple of his team mates, his seniors or his peers. Most members of the team may have some or limited say during team meetings when they may discuss strategies for various batsmen or bowlers. That is also a function of culture in the team. In some cases, only seniors join the discussions. Cricket also has different rewards, man of the match/tournament, batsman of the match/tournament or bowler of the match/tournament.

Football is a very different game. Most players have the basic skills related to ball control and passing such as dribbling. There are players who might have additional skills. Like cricket, football also has different roles such as goal keeper, striker, defender etc. but unlike cricket, the players often change their positions and take on different roles as per the need of the game. A striker may fall back to defend or in extreme situation, a goal keeper may go upfront to score a goal. Interesting thing is that in football, the captain does not direct or no one asks a captain before switching his role. There is fluidity and positions and roles change as per the need of the game. This is not to say, that the team does not meet prior to the game and has no strategy, but the strategy and tactics evolve or change during the game based on response from the opponent team. Football does not has individual rewards. Either the team wins or loses. Players may get rated for their performance, but there are no rewards for extraordinary performances or punishments for blunders. The biggest shame is facing your team or fans. It is collective win or loss. While a captain may get credit for win or blame for losing a match in Cricket, captains hardly find a mention in win or defeat in football. It is the coaches who are feted or blamed.

Corporate teams in 90s resembled cricket teams. People were drawn from different functional areas. Each person specialized in an area of knowledge. The team members were expected to contribute based on their knowledge and skill sets. The performance appraisal was that of individual with performance in the team as one of the criteria, it had no relationship with performance of the team as a whole. 

Football is very different. Every player understands the purpose of the team and has all information of the match. The person is able to take his own decisions and responds to the situation.  The business environment today resembles a football team. With advances in information technology, the information exchange is very fast and information asymmetry is minimal. The companies tend to lose any strategic advantage due to its innovations or strategic initiatives within a quarter or two. Market rewards companies that are nimble, responsive and can respond to tactical opportunities, like a football (https://rajneeshrastogi.wordpress.com/2017/02/26/what-corporate-managers-can-learn-from-football-teams/) .

The idea of structuring organizations and rewarding individuals is deeply ingrained. Unfortunately, most of the organizations have not been able to develop a culture of collaboration and cooperation and achieve the levels as seen in football. Besides appraisals systems, the organizations would have to change their work processes to empower teams that lead themselves ( https://rajneeshrastogi.wordpress.com/2017/03/18/building-football-teams-at-work/)

Cricket or football, whatever your game is, give it your best and enjoy.

Can we cross the hump and grow from small to large?

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Last Friday, I was talking with a friend of mine who owns a paper manufacturing company. On Saturday, I attended a conference of Garment Exporters. There was data presented on how Garment Industry is stagnant in India while Exporters in other countries like Sri Lanka, Bangladesh and Vietnam are making merry by cornering all the growth in the market. There was also a presentation on a Sri Lankan company, that has grown to 2 Bn USD with hundred thousand employees in a segment that was new to Sri Lankan exporters, swim wear. It was an inspiring story and made me think on how come we in India have very few stories to tell. Why is that most founders of our companies are not able to break the glass ceiling and grow from small to big? The answer could be one or a mix of the following:

  1. Proactive Leadership – Building a good company is also a vision. The founders of Google, Facebook or MAS holdings had a vision that went beyond market opportunities. Just like they pushed their employees into delivering high quality products, they worked to deliver a high-quality company/ companies. That is, companies where people had a purpose, people learnt from other companies and industries and had a quest to improve, to work towards perfection.
  2. Flexible mindsets – The leaders need a flexible mindset to adopt change and technology. The assumptions that worked in yester years have to change. Instead of inward focussed, the founders and CEOs have to look outside the company and industry for inspirations and learnings.  Most importantly they have to change and lead the change. http://mentorsunlocked.com/business/getting-personal-about-change/
  3. Win-win situations – Most medium sized business owners still operate with assumptions of past. They see their business as zero sum game where they would make more money only by reducing costs. This results in very transactional relationships with vendors and employees instead of creating an environment of co-operation and collaboration. It could be employees collaborating with each other or vendors collaborating with the company or the company collaborating with its customers. The biggest casualty in transactional relationships is lack of experimentation and hence innovations. For example, employees are hesitant to try new things, lest they fail or told that they are going beyond their brief.
  4. Delegate and build teams – Most of the owners or founders of mid-sized companies are still hands-on. They are not able to make the transition from hands-on management to metrices driven management. Hence, they are not able to delegate and build teams, build a group of people who are empowered to take decisions, or who have high level of ownership etc, a group of people driven with purpose and not obeying commands.
  5.  Walk the talk – Invest money in vision of company. A company that is growing and ever-changing needs money. Business owners have to plan their investments needs. They need to divide the profits in four pockets that is,
    1. Reinvestment
    1. Contingency fund
    1. Distribute it amongst stake holders
      1. Share holders
      1. Employees

While all other steps are not difficult, the first one is where the journey has to start from. The business owners have to think themselves as business leaders-people with a vision, instead of business owners. This belief will automatically help them develop a vision and rest all will follow.

How to determine if real estate is over-priced?

Real Estate in India has had a very long bull run in India. Some people feel it is high priced other feel it is still undervalued.

Two indicators that can be used to determine this are 1) Price to Rental Ratio and 2) Demand Supply gap, 3) Spread between buy and sell rates for the same property and 4) Return from real estate sector vis a vis other investments.

Price to rental ratio is a good indicator to gauge valuations in real estate irrespective of nature of property. This is somewhat similar to price to earnings ratio in stock market. Higher price to earnings ratio means that the company’s returns are lower vis a vis a price. A higher ratio would be sustainable only if the company grows at a high rate and delivers higher earnings in future. A higher price to rental ratio would indicate the same. If a property has a rental to price ratio of 3%, then it would have to deliver another 2-3 percent in capital appreciation or price appreciation to match returns of Fixed Deposits.

Capital appreciation is a function of demand and supply gap. In a country like India, demand supply gap varies for different cities or geographies and for different segments within a geography. The demand may not only be a function of demand for use but could also come from demand for investment which could arise due to excess liquidity, under-valuation. Real estate for a long time was also favourite of investors. Easy liquidity may also create asset bubbles.

Another indicator for stability of the market could be the difference in purchase and selling price. Taking stock market as an example, there was a time when market had “jobbers”. The role of jobber was to provide both buy and sell quote for a scrip. The difference between the quotes indicated stability of the market and turnover of stock. Higher the turnover and stability, lower was the difference between buy and sell quotes. Lower the turnover, higher was the difference. Some of the cities under Delhi NCR reflect the same where brokers provide two very different quotes for the same property.

The third and final angle for triangulation is to remember that real estate is also an asset class and just like other asset classes. It cannot beat the market consistently. Over a period of time, all asset prices end up giving similar kind of returns especially after adjustment for risk. Some of the assets like real estate and gold may not show high fluctuations, unlike stock markets. A comparison of returns across financial assets also gives us a good idea about how much returns can we expect from an asset class over the years. Real estate is no exception. Please see the charts below to see returns from different asset classes in US and India.

If we draw similar chart for India, Equity has given returns of 17%, with real estate at 15%. The bonds and Gold have returned lesser returns than both these asset classes.

We can use Noida as an example to see how we can use the above triangulation points.

If we look at residential sector in Noida. The land prices peaked around 2014-15. At that time, the price to rental ratio was more than 50 years (ranging from 50-55 years, depending on sector). The prices have come down around 30% of the peak rates. The flats have seen marginal increase in rates.

At current prices, Noida has a price to rental ratio of around 45% with the rental income ranging from 1.5-2.5% in the city. With banks offering FD rates of around 6%, either the rentals should increase to that level or rental returns should be supplemented with increase of prices. The price increase should be more than 3.5%.

If we look at the demand-supply situation, the city has a population of around 1.1 million which is growing at a rate of round 8-10% p.a. That implies adding roughly 100,000 persons every year. Assuming a family size of 4, the total demand would be roughly 25,000-35,000 every year. But the real estate in the city is not focussed on EWS which would be roughly 40% of the population. If we take out 40% population which is not target of builders, the additional demand each year would be roughly 15,000-20,000 flats (assuming a family size of 4).

This translates to roughly 4.5 years of demand. This does not include inventory held by investors who are looking to sell their properties. Now with economic conditions deteriorating due to Corona, the demand will come down further. Given the demand-supply, the prices should not increase. The only way, current investors can get a return of 6% is if the prices come down further and rental to price returns equal 6% for the next 4-5 years.  Hence, we can say that residential real estate is overpriced in Noida. The same framework can be used to evaluate prices in Industrial and commercial sector.

Empowered teams are the way to go

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A major change eCommerce has brought to business is increased transparency. It has moved the markets closer to perfect markets by making information available at a click of button. Take sites like Trivago which make price comparisons so easy and help consumer choose best option at lowest price. People can compare brands and choose the best deal. The competitive market also ensures that companies are under tremendous cost pressure and hence cannot make super normal profits. The companies have to redesign and re-work on their strategies as mentioned earlier in https://rajneeshrastogi.wordpress.com/2017/06/21/changing-management-paradigms/.

The classical management solutions will not help companies beat markets in this new age. The companies would need better products and cost-effective operations. More importantly the companies would not be able to beat the market using their strategic advantages but will also have to rely on making use of tactical or short-term opportunities in the markets. This would call for faster decision making. Many of the decision calls may not allow sufficient time for the people in the field to wait for while the information goes up and decision comes down. This makes a case for devolution of decision making to the people in the field. Since, teams collectively take better decisions than individuals, it would be better to delegate decision making to teams.

These self-managed teams would take responsibility for their performance and take their own decisions. The responsibility of the senior managers would be to provide conditions that facilitate such decision making. Some of the enablers for empowered teams are ( please also see https://rajneeshrastogi.wordpress.com/2017/03/18/building-football-teams-at-work/)

We are now seeing a trend where some of the companies have adopted this. Harvard Business Review in its recent edition has carried the story “Harnessing Everyday Genius” and explains how Jean-Michel Guillon, head of personnel department and Bertrand Ballarin worked together and launched their project MAPP (Autonomous management of performance and progress) in summer of 2012 with the aim of redistributing authority and creating empowered teams.  

Some of the other companies, mentioned in HBR are

  • Nucor: An American steel maker that allows operating crews to take responsibility for business development, capital planning, product innovation, process improvement etc.
  • Buurtzorg: Dutch health care service provider which is organized into more than 900 self- managing teams.
  • Svenska Handelsbanken:  A Swedish bank that treats each of its branches as standalone business. Branch teams take on decisions on credit, loan rates, deposits, customer communications and staffing levels.

Holacracy is another concept that operates with similar organizations. Lot of companies today are adopting Holacracy. Zappos is one of the largest companies to adopt Holacracy. Some other companies that have created self-managed teams are Morning Star, a ketchup manufacturing company and W.L. Gore, a material science company that specialises in PTFE (Teflon). The movement is now gathering critical mass and snow balling into a revolution.

Roman Empire teaches us importance of culture and values in building great companies

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Roman Empire lasted some five centuries and at its height spanned from England to most of Europe, stretching from England to Greece, North Africa, West Asia. Romans dominated Mediterranean Sea. More importantly it was known as Empire without an end, that is neither the time nor space limited it. The empire became a role model for other empires and rulers. It changed the world. For example, Britain was a geography with multiple smaller kingdoms. Each group thought the piece (of land) that they had was their own. There was no political unity until Romans brought them under one rule. There by, in a way, Roman empire created Britain.
Interestingly we do have companies that have survived five hundred years but they are not widely known. The oldest one, Kongo Gumi, was setup in Japan in 578 A.D., within 100 years of decline of Roman Empire. Studying about Roman Empire made me realise importance of culture and its contribution in making companies great. Some of the cultural aspects that companies can adopt are:
1. Cultural Integration –
a. Governance structure and rules – Everywhere in Roman Empire the governance structures and rules were the same. The rules were inscribed on the walls of public buildings so that everyone could read them. Most companies today put their policies, processes and procedures on intranet for the same reason. To be consistent, the companies ensure that policies are interpreted the same way by everyone.
b. Architecture – Whole of Roman empire had distinctive architecture- grand community buildings such as amphitheatres, baths, forums, race tracks etc. These buildings fostered a feeling of being Roman. It would not be uncommon to find these buildings even in Algeria, part of which was once part of Roman Empire. While on one hand Romans built typical Roman buildings in acquired territories, they also replicated the best of what the acquired territory had to offer to Rome.
c. Citizenship Rights – All romans had same citizenship rights irrespective of which territory they came from. Hence a slave who was granted Roman citizenship, had same rights that any other citizen of Rome had. This is also important in companies especially now that we have multi-national companies with people of different religions, regions, colour and genders. Companies make HR policies for harassment and to prevent sexist or racist comments. But these are not inclusive actions, inclusiveness is attained by giving even minorities equal voice as Romans did.
2. Core Values
a. Inclusiveness – Romans did not force the territories to adopt their lifestyle or language. They adopted and included them, e.g.
i. Religion and Gods – Romans had multiple Gods. They included gods of acquired territories within fold of their Gods. At times, even giving them joint name for example Goddess Senua (of Britain) became Goddess Minerva Senua. The relationship with God was similar across the empire.
ii. Language – Though Roman and Greek were official languages, all the acquired territories were free to use their language.
3. Decisions made on Merit and Democracy – Romans had emperor but also had senate and four assemblies and local groups. The assemblies or different bodies met at Forum; a building built through out Roman empire. Candidates were selected by citizens who were allowed to vote. This promoted a system of merit since, as mentioned aforehand, Romans had strict and very defined rules on governance. This allowed even slaves to graduate and become Roman citizens. Similarly, anyone could become an Emperor. Their emperors did not come from Rome but from Spain, North Africa, Syria, Balkans etc. The citizenship to Roman Empire had to be earned. For example, soldiers could become citizens by completing twenty-five years of service or performing exemplary act of valour in the battlefield.
4. Role of women – Women played important role in Roman society not only in trade and craftmanship but also in royal household. For example, Livia, wife of Augustus, built buildings, organized religious festivals and reached out to other women. She was not an exception and many of the emperors had influential wives, mistresses, mothers and even mothers-in law. The companies are also now increasingly being gender conscious. More and more women managers are breaking glass ceilings.
If Roman Empire was great, it was because Romans developed a culture of discipline, inclusiveness, democracy and merit. One of the reasons for decline of Roman Empire was in-fighting between Romans over religious beliefs with advent of Christianity which believed in One God instead of multiple Gods (Core beliefs and values were being questioned). Today, when the work has become complex and inter-dependencies within roles has increased, when most companies are now promoting team work, these values (of inclusiveness, promoting merit, being democratic and discipline) have become even more important. The founders have to work on it from the day one. True to the saying, ‘Rome was not built in a day’, a company’s culture too cannot be developed in a year. It is a continuous process. Any IBMer would tell you that !( https://www.ibm.com/blogs/jobs/2018/12/20/i-think-therefore-i-am-an-ibmer/).

Design Thinking and Town Planning

The other day Mr. Ratan Tata mentioned that developers should be ashamed of creating slums. He is very correct in many ways. But the problem of slums has more to do with town planning than with developers. Take example of Noida which has been developed by a PSU, a UP government agency. The sector in which I live in, Sector 119, itself has provision for roughly 5000 HIG families. There are adjoining sectors which would also have similar number of flats. All these flats would need atleast 1 support staff each. But has NOIDA Authority provided for it? The support staff like drivers, maids, guards live in two adjoining villages. As the occupancy in these flats goes up, the load on villages will increase and I would not be surprised if we would see other NItharis developing in Noida. Interestingly Noida was supposed to be an industrial township. Any factory or industry would have a pyramid. With more of workers, fewer managers and may be very few owner(s) at top. Hence the housing facilities should reflect that pyramid structure with LIGs and EWS at the bottom and HIGs and Super HIGs at the top of pyramid. Design thinking can be used everywhere. Be it designing towns or designing Business Processes.

Click on link below and watch the Powerpoint Show
Design Thinking and Town Planning

Reviews – are key to learning and success

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Most business owners are involved in all aspects of their business and know every small thing in their business. That’s like knowing the wood or in other words, knowing all trees intimately in a jungle. That’s why most business owners get flummoxed when told that they should conduct reviews. The typical response being, why do I need reviews when I already know everything in my business?

A review allows us an opportunity to detach ourselves from the business and look at it from a distance. While engaged in day to day operations, we are getting a 30 feet view of our business, a review helps us step backward and get a 30,000 feet view of our business. We are able to see the forest instead of trees. Hence we get a more holistic view of our business. For example, how our credit policy is affecting not only our sales but also our cash flow.

Periodic Reviews also help us gauge scale of movement and hence provide inputs in planning course correction(s) and in gauging impact of new initiative(s). For example, how costs have changed in last few years.

A review would typically start with a comparison. Mostly it is comparison of budget vs actuals. The review could also be a comparison of performance in current period with that of a past period. Most organizations use budget vs actuals for reviews. This helps them gauge progress against plan. It also allows companies to revisit assumptions that they made in their plans. The assumptions could be related to any aspect of sales or costs. For example, percentage bids won or lost, number of inquiries generated or average order size.  This allows companies to revise their assumptions and make course corrections.

Good planning processes and reviews allow managers to zero in on problem areas and move from 30,000 feet to 30 feet. This reduces there day to day involvement in operations and allows them to delegate.

Given the importance of reviews, it is important that they are conducted in a friendly and positive atmosphere, are scheduled on regular periodic intervals. Most importantly, they should be structured in a way that they help us learn and take action.

Some ground rules for review meeting

  1. Psychological safety – for a meaningful review, it is important that employees feel comfortable in speaking up. It is important that employer provides a psychological safety. As Amy Edmondson, Professor at Harvard says, “Psychological safety is a belief that one will not be punished or humiliated for speaking up with ideas, questions, concerns or mistakes.”
  2. Everyone has equal voice. Everyone can raise an issue and respond to an issue. Listen with an open mind and remember that everyone’s experience is valid.
  3. Don’t make it personal, don’t take it personally.
  4. Avoid blame game. Take learnings and think of improvements. Look forward and Think Positive

 

Structure of reviews

It is necessary to ask three questions in reviews

1 . What has worked for us?  What is it that we need to do more?

  1. What did not work for us? What is that we should change or avoid doing?
  2. What should be next steps? What should be our action plan with time frame?

Plan and review. Your business will go places.

Al Qaeda – Demonstrating team based organizations

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With the advent of Information Technology, the business has become very competitive. Technology has led to disruption. Today aggregators like Uber, Zomato are disrupting markets for automobiles by taking away reasons to own a car. Competitors are quick to respond to strategic initiatives making everyone fight for tactical advantages. This requires a new way of structuring organisations, working and communications. The organisations of today are competing not only with their traditional competitors but also with start-ups. They are competing not only for customers but also to retain skills and talent. They have to work at speed with inter-dependencies. They cannot afford bureaucracy. The only way they can achieve this is by developing team based organizations. (https://rajneeshrastogi.wordpress.com/2015/02/26/team-based-on-organisations-a-new-organisation-structure/ )

Al Qaeda, though a terrorist organization, is a very good example of it. Organizations and management Gurus can learn from Al Qaeda on how to structure their operations and be effective.   Al Qaeda has functions similar to most corporates have. It has to raise funds, recruit zehadis (employees in another sense), induct and train its manpower, market itself and publicise its acts. Most importantly it has to carry out its work clandestinely so confidentiality is very important.

Al Qaeda, like most corporates, has a distributed structure with its operations across countries. It is continuously trying to increase its global footprint. It works across multiple languages and cultures. Its leadership is also distributed across countries. Al Qaeda is able to achieve its objectives due to its innovative structure and the fact that its recruits (or employees) are aligned with its purpose (however flawed it may be) and committed enough to lay their lives for the purpose (thanks to its recruitment, induction and training systems).

Structure of Al Qaeda

Al Qaeda is structured around teams and committees.  The leader of Al Qaeda consults and works with Shura, which means “Consultation” in Arabic. The Quran and Prophet Muhammad encourage Muslims to decide their affairs in consultation with those who will be affected by that decision. Consultation and decision making by consensus are the basic principles of democracy. Shura is committee of elders and all major decisions are taken in it.

Al Qaeda has committees for military operations, finance and information sharing. Its leaders communicate with its affiliates through these committees.  There are no hierarchical controls.  It works on system of role and responsibility and not hierarchy. An undated document, believed to have been written in the late 1980s or early 1990s, provides an extensive description of the roles and responsibilities of each of Al-Qaeda’s committees and sections. (https://www.hudson.org/research/14365-how-al-qaeda-works-the-jihadist-group-s-evolving-organizational-design).

Decision Making

Al Qaeda leaders are focussed on strategy and messaging or communications. The messages have to be consistent and aligned to strategy. The affiliates plan and execute their own operations. They do need to double check with central leadership before they carry out a large operation.

The affiliates adhere to its strategy, objectives and goals, but adopt tactical approach based on the local dynamics.

Al Qaeda is demonstrating how to operationalize key principles of team based structures:

  1. Operations delegated to teams with Board focussing on Purpose, Values, Strategy and Accountability
  2. Hierarchy and designations replaced by roles and responsibilities. Some roles could be more important than others.
  3. Tap on to entrepreneurship of its workforce by allowing them to take initiatives, fail and learn from their mistakes.
  4. Allow everyone (in team) to participate in discussions they feel are important for them. Give them a voice and a chance to shape those discussions.

We may not agree with the purpose of Al Qaeda and its acts. But we have to acknowledge that they have shown the way how the future organizations would be. That is Organizations where Boards will lay down the purpose, values and accountability structures while they would delegate operational responsibilities such as planning, implementation, monitoring and control to the teams.

Learning Organization: Structures that facilitate learning

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There is an idiom in English language. “All good things must come to an end”. That is nothing great will last forever. And so it is with civilisations, countries and organizations including companies. Civilisations like Greek, Indian and Egypt have lost their status and so have countries like England, France and Germany. Tom Peters and Robert Waterman researched and put together a list of organizations that they said were excellent (Please refer to the book “In Search of Excellence”). They put together a list of companies they felt were great but by the end of 10 years, 7 out of 10 companies had lost their status. Companies like Nokia, Firestone and Toshiba which were industry leaders are now struggling to survive.

A key question that keeps on bugging us is that can we design Learning Organisations? Smart machines are machines that can think, that is they can process new data and adapt themselves based on the incoming data. Can we, human beings design organisations that change with time?

This should be feasible provided we can break “The Trap of Success”. Success is the biggest block to learning. Success reinforces our mind-sets and reinforces our beliefs. It makes us repeat what we did before in a changing environment while the competitors try new things and hence one day competitors overtake successful companies till the time, another company comes and changes the rules of the game. How can companies avoid this trap?

The key to avoiding trap of success is to keep on questioning our mind-sets especially the mental models that helped us win. We all are more comfortable with and like people who share our mental models. But this creates a trap. Its like everyone is looking in same direction and the group fails to watch its back. We all have blinders, a group with same set of blinders would fail to look at 360 degrees.

The easiest way to look at 360 degrees is by allowing a diverse group of people to challenge our mindsets. That is have teams of peers with no hierarchy so that people can challenge each other’s mindsets and the team would not only be taking optimal decisions but would also be creative or innovative. For this we need to structure an organization around teams (https://rajneeshrastogi.wordpress.com/2015/02/26/team-based-on-organisations-a-new-organisation-structure/ )

Teams allow us to develop an organisation without hierarchy and where people can question each other and challenge each other’s mindsets. This not only improves quality of decision making in the teams but also makes them more creative and innovative. Teams built around roles and without hierarchy would encourage people to take on roles of others just like in a game of football or basket- ball unlike Cricket where the captain takes all the decisions (https://rajneeshrastogi.wordpress.com/2017/03/18/building-football-teams-at-work/). An unlikely fallout of it is increased ownership of employees, which in a competitive market is a big advantage.

We can design a learning organization by designing an organization around teams and

  • building a culture where people affected by a decision or people taking a decision can participate in decision making. Decision making is by and large by consensus.
  • Providing psychological safety to staff and assuring them that they would not be punished for calling out if they are affected by a decision or in a discussion, and https://rajneeshrastogi.wordpress.com/2017/03/15/indian-experience-with-democracy-2/
  • promoting diversity. Diversity not only in demographics but also diversity in thoughts.
  • Processes that facilitate team members to cooperate and collaborate and not compete with each other.

Is that all what we need to develop learning organizations? There is more to it but then teams is a good starting point.

Why SMEs find it difficult to scale up

After working with SMEs for last few years, one of the reasons why most SMEs are not able to scale up their operations is because the day is usually spent in firefighting. A typical day may start at 8.30 AM or 9.0 AM with messages from customers, vendors etc. By the time, the person reaches his office, his day is almost cut out for him. He has to find resources and soothe his customers. I describe it as “Vicious Circle”

One of the reasons why SMEs struggle is because they lack a team. A team that can take responsibilities and deliver them instead of taking on tasks. This is due to many factors. One is poor risk taking appetite where the entrepreneurs. Some entrepreneurs do not want to incur or want to avoid cost of learning. Some are very hands on and find it difficult to delegate. So they typically end up working with under-qualified staff.

But increasingly I am finding that they realise that they have reached the critical mass but now cannot scale up as their employees are not confident to take responsibilities. The cost of new hires with relevant skills becomes a deterrent for the entrepreneur. (S)he is afraid of the new hires not delivering.

This vicious circle can be broken only once the entrepreneur starts developing a business plan. Take time off, reflect and work on the roadmap for next two to three years with an operational plan for the first year. This also provides clarity of thought on manpower and other resources required, expectations from them and a framework ( how to monitor and when to monitor) to gauge company’s progress and monitor performance of the employees. The “Vicious Circle” would not turn to “Virtuous Circle.

Planning, developing robust systems that are customised to the culture they want to develop and needs of their business can help the business men scale their companies.