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case study n k kakani, CFO, simplex inFrastruCtures p. 36
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vOlume 03 issue 09 75 septemBer 2012
THE
WORLD IS NOT ENOUGH Globalisation is the name of the game. But are CFOs of trailblazing Indian companies ready for the challenges?
a 9.9 media puBliCatiOn
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CFO september | 2012
feature 22 bridging the gap
Inside
14 COVer story
Handling a multi-generational workforce is one of the key challenges that needs to be addressed in order to get the best out of a team
in practice 32 CIO & CFO: two faces of a coin Both the CIO and the CFO are equally important for an enterprise to achieve the designated goals it sets to achieve
INSIGHT 39 why bad multiples happen to
good companies
A premium multiple is hard to come by and harder to keep. Executives should worry more about improving performance
i think
devraj doss
10
The CFO of Diageo India thinks aloud about stifling regulations and challenges of the alcoholic beverages industry and the twin concerns of risk management and talent retention that keep him alert and on his toes as a CFO
the world is not enough Asian MNCs, and indeed many Indian ones among them, are on ‘mission globalisation’. But are they ready for the challenges that such growth throws up?
case study 36 mantras for managing manpower N K Kakani, ED & CFO, Simplex Infrastructures talks about the challenge of training and retaining skilled manpower along with budgeting for safety
Cfo lounge 46 ON WHEELS | Renault scala 49 M&E | citrus
leader’s world 44 sustaining a
50 TRAVEL | bastar
winning culture Creating a win-win situation at work and sustaining it can drive great results for the growth and development of the organisation, says David Lim
i tHink devraj dOss, diageO india
p. 10
case study n k kakani, inFrastruC CFO, simplex tures p. 36
on wHeeLs renault sCala
Regulars 04 LETTERS TO THE EDITOR 52 NOT JUST THE LAST WORD
vOlume 03 issue 09 75 septemBer 2012
p. 46
cFo i ndia i think: devraj
THE
doss 10
WOR IS NOTLD ENOU GH
case study: n k kakani
Cover design anil T
36 on wheeLs: renauLt
Globalisat ion is the But are CFOs name of trailblazinof the game. companie g Indian s ready for the challenge s?
scaLa 46 voLume
AD index 03
issue
09
a 9. 9 media
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Concur IFC | Sodexo 03 | Financial Executive 05 | Bharti Airtel IBC | India Factoring BC
50
from the
managing editor
dhiman chattopadhyay dhiman.c@9dot9.in
Managing Director: Dr. Pramath Raj Sinha
The pains and joys of
‘Mission Globalisation’
No, that man on the cover page you just turned is not jumping off the face of the earth! There is nothing suicidal being suggested here but just an image that symbolises the amazing strides that Indian companies have taken in the past decade to extend their footprints across the globe while retaining the hunger for ‘more’. There is a direct presence of at least one Indian company in over 150 countries today across six continents. Now, if that is not a sign of a nation that is on ‘mission globalisation’, tell me what is. But with such rapid growth comes an element of risk and multiple challenges. These range from human resource management and cultural issues to financial, legal, environmental and many other areas. Is India Inc and more importantly for us, our CFOs equipped to face these hurdles? The success stories of Tata Motors, Birla Corp, Airtel and Havells in the M&A sphere and the rapid expansion of many other Indian firms into Central Europe, Latin America and Africa in recent years have made sure the world is aware of how powerful India Inc has become, even on a global platform. But as a recent survey of over 100 Asian MNCs shows, there are issues these companies need to look at and solve fast. As Gavin Watkins, Director, International Consulting Group, Asia Pacific at Towers Watson, the HR consulting group that carried out the survey, told us, “In many ways, successful Indian companies exhibit the best of Asia – they have capital, are agile and have a clear vision.” But he also warns that unless Indian companies step up a gear and look at some critical gaps that exist, they may “simply float like a butterfly and sting like a bee” instead of continuing to punch above its weight and become “heavyweight champions”. To know more about the report and our analysis of it, read this month’s cover story “The World is not enough” (page 14). In other sections this time, the primary focus is on leadership. Read the piece on “Bridging the Gap” (page 22) to understand how CXOs are looking at handling a multi generational workforce. Also on leadership is the McKinsey article on “Why bad multiples happen to good companies” (page 39). Of course we have our regular features as always – the ‘Case Study’, and ‘I Think’ columns and the entire Lounge section. We hope you will enjoy reading this issue and await your feedback.
Editorial EDITOR: Anuradha Das Mathur managing editor: Dhiman Chattopadhyay Assistant Editor: Purva Khole SUB EDITOR: Radhika Haswani Design Senior Creative Director: Jayan K Narayanan Art Director: Anil VK Associate Art Director: Atul Deshmukh senior Visualiser: Manav Sachdev Visualisers: Prasanth TR, Anil T & Shokeen Saifi Senior Designers: Sristi Maurya & NV Baiju DesignerS: Suneesh K, Shigil N, Charu Dwivedi Raj Verma, Peterson, Midhun Mohan & Prameesh Purushothaman C chief photographer: Subhojit Paul SENIOR photographer: Jiten Gandhi The CFO Institute Executive Director: Deepak Garg national head, cfo india: Seema Menon Assistant Brand Manager: Nisha Anand ASSISTANT MANAGER: Dr Leena Narain Assistant Manager - Corporate Initiatives: Deepika Sharma Sales & Marketing Senior VP SALES & MARKETINg: Krishna Kumar KG ASSISTANT REGIONAL manager (sales): Rajesh Kandari (+91-9811140424) National Manager (Events & Special Projects): Mahantesh Godi (+91-9680436623) Assistant Brand Manager: Arpita Ganguli South: Vinodh Kaliappan (+91-9740714817) West: Sachin N Mhashilkar (+91-9920348755) Production & Logistics Senior General Manager (Operations): Shivshankar Hiremath Manager Operations: Rakesh Upadhyay Asst. Manager - Logistics: Vijay Menon Executive Logistics: Nilesh Shiravadekar Assistant Production manager: Vilas Mhatre Logistics: MP Singh, Mohamed Ansari officE addrEss Nine Dot Nine Interactive Pvt Ltd Office No. B201-B202, Arjun Centre B Wing, Station Road, Govandi (East), Mumbai 400088 INDIA. Published, Printed and Owned by Nine Dot Nine Interactive Pvt Ltd. Published and printed on their behalf by Kanak Ghosh. Published at Bungalow No. 725, Sector - 1, Shirvane, Nerul, Navi Mumbai - 400706 Printed at Tara Art Printers Pvt ltd., A-46-47, Sector-5 NOIDA (U.P.) 201301 All rights reserved: Reproduction in whole or in part without written permission from Nine Dot Nine Interactive Pvt Ltd is prohibited.
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Letters
CFO INDIA
september 2012
Great Cover Story Thank you very much for a wonderful August issue (The 2015 CFO – A juggler par excellence). The idea to bring out the summarised versions of many of the presentations and discussions at your CFO Conclave was a novel way to reach out to thousands of your readers, many more than the 60 CFOs who were priviledged to attend the conference. I particularly enjoyed reading the articles by Mr Suresh Senapaty and Mr Hari Mundra. There was much food for thought in both their presentations. — Debnath Pal, CFO, RP Group, Kolkata
09.12 INSIGHTFUL issue, smart website The August issue was very different in a way and yet fun to read. I liked the way you presented the cover package, with the articles presented almost in a conversational way. I particularly enjoyed reading the thoughts of Mr Sathya Kalyanasundaram and Mr Devraj Doss on how to handle the new generation workforce and how they have been doing it in their organisations. I also recently visited your re-launched website and loved the new look and feel of the site. Easily navigable and lots of stuff to explore. I hope your CFONEXT100 which you have prominently put up on the site, becomes a great success. — Amrita Sharma, GM Finance, Techpoint Solutions, Pune
A CLARIFICATION Our August 2012 issue carried an article by Mr Hari Mundra, former Joint MD, Essar Oil, currently an Advisor to Wockhardt and a visiting faculty at IIM Ahmedabad. The article, a part of our cover package, was a summary of his talk at the recently held 3rd Annual CFO Leadership Conclave organised by CFO India at Kochi. Some readers have written in expressing concern that certain observations made in Mr 4
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cover story
The 2015 CFO
cover story
THE 2015 CFO A JUGGLER PAR EXCELLENCE
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Which technology would be most beneficial for the organisation? Which one would drive efficiency? Is the organisation doing enough to retain skilled manpower especially if the company has already invested time and money on them? How to tackle the new age investor who is more aware than before and who demands a lot beyond just quarterly performance? Is the senior finance team well-versed in new regulations, tax laws and compliance standards that will soon determine the way in which India does business? Dhiman ChattopaDhyay
T
here are so many new areas, that till recently were only of peripheral interest to the CFO, but have now become part of his core job role. And the excitement is just beginning! Clearly the CFO role is becoming far more complex with newer areas beyond core finance being attached to the portfolio every year. This might mean the CFO will have to relearn and ‘unlearn’ where needed, add new skills to his repertoire, expand his knowledge horizon and collaborate with fellow C-suite colleagues wherever needed. In more ways than one, he (or she) would have to be a ‘juggler par
excellence’. In the following pages some of the country’s leading CFOs discuss key challenges before the finance community in the years to come and point out ways to stay on top of the game. This package comprises excerpts from presentations made during CFO India’s 3rd Annual CFO Leadership Conclave that was held recently in Kochi. Of course there were several other sessions at the conclave, which we will cover in subsequent issues. Do visit out website www.cfoinstitute.com for the complete audio versions of all the sessions at this year’s conclave. Till then, turn the page and let us know your thoughts. au g u s t 2 0 1 2
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Your voice can make a change: Share your viewpoint on what’s happening in the community and your feedback on the magazine at editor@cfo-india.in
Mundra’s article may be misunderstood as cynical, pessimistic and demotivating. Our conference agenda was far from cynical – it was inspiring, uplifting and thoughtful. The 60 CFOs who were there went back charged and keen to make a difference. Perhaps the gap lies in having been there – versus a summary of his presentation. In his well received talk, Mr Mundra highlighted several things that are rampant in corporate India – specifically in promoter-driven companies and urged CFOs to be aware and know where to draw the line. He encouraged them to go into these roles with their eyes and ears open – and know which trade-offs to make and which not to make. He said there is rampant immorality – but as a CFO you will need to know how to deal with it given your mandate and when to walk away. In fact in the summary which we have carried, he says very clearly: “to prepare and prevent is infinitely better options than to repair and repent.” And in conclusion too, he reiterates, “have courage of conviction and communication. Be prepared to quit when certain lines, cast in stone, are about to be crossed.” We hope this clears any confusion and once again our apologies if any message to the contrary got conveyed. — Editor
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09.12 BUZZ
A new cure for depression
As per a recent study, a drug that eases inflammation may offer new hope for people who find it difficult to treat depression. The study was conducted to find out whether blocking inflammation would be a useful treatment for a wide range of people with difficult-to-treat depression or only those with high levels of inflammation. “Inflammation is the body’s natural response to infection or wound,” says Andrew H. Miller, senior study author and professor of Psychiatry and Behavioural Sciences at Emory University School of Medicine. “However, when prolonged or excessive, inflammation can damage many parts of the body, including the brain,” says Miller, the journal Archives of Gen6
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eral Psychiatry reports. Infliximab, one of the new biologic drugs used to treat autoimmune and inflammatory diseases, was used for the study. A biologic drug copies the effects of substances naturally made by the body’s immune system. In this case, the drug was an antibody that blocks tumour necrosis factor, a key molecule in inflammation that has been shown to be elevated in some depressed individuals. When investigators looked at the results for the group as a whole, no significant differences were found in the improvement of depression symptoms between the drug and nomedication groups. But when subjects with high inflammation were examined separately, they showed a better response to the drug than the ones without medication. Inflammation in this study was measured using a simple blood test that is readily available in most clinics and hospitals and measures C-reactive protein or CRP. The higher the CRP, the higher is the inflammation, and higher is the likelihood of responding to the drug. This study has opened avenues to a host of new approaches that target the immune system to treat psychiatric diseases.
What’s AROUND ZONE CFO Book: Sujit Sircar ���������������������������������������� Pg 08 Jargon Decoded: Arrow to fire ���������������������������� Pg 08 People Movements................................................Pg 09 An App to test water.............................................Pg 09
THE CFO POLL result
25% Maybe
Is S&P’s downgrading of India’s growth estimate to 5.5% for the coming 15% No year a fair call?
60% Yes
current POLL question
Are multiple window clearances the biggest obstacle for infra projects in India? Vote now at www.cfoinstitute.com/poll
HEALTH
Not checking emails could benefit you FINANCE
photos.com
Banks to issue uniform cheques The Reserve Bank of India (RBI) has directed all banks to issue cheques with uniform features conforming to the Cheque Truncation System ( CTS) 2010 standard by the end of September 2012. Adherence to CTS-2010 standards has inherent advantages as the security features in cheque forms help the presenting banks to identify the genuineness of the drawee banks’ instruments while handling them in the image-based scenario. In a notification the RBI said that the homogeneity in security features acts as a deterrent against frauds, and the fixed field placement specifications facilitate straightthrough processing at the drawee banks’ end through the use of optical or image character recognition technology.
A new research suggests that ignoring your email inboxes can reduce stress which will further have a positive effect on the heart. While there has been an improvement in communication speeds, there have been concerns that electronic messaging is harmful to physical as well as mental health. To assess the effects, University of California researchers recruited 13 men and women who used computers in the workplace, ranging from chemical engineers to psychologists, reported the Daily Mail. Speaking to The Times about her experiment University of California informatics professor Gloria Mark said, “I had this crazy idea that people were addicted to email. So I started thinking, the way you can test that is if you take people away from email cold turkey. You should see symptoms of withdrawal, the same way people wjoare addicted to alcohol or drugs behave.” During this exercise, the volunteers were asked to ignore their ‘’you’ve got mail’’ alert for five days. With this, a software was also added to their computers to measure how often they switched from what they were working on to their email inbox. On the fifth day, it was noticed that the volunteers were less stressed after being away from email. There was an interesting thing that people did because they were away from the email – they were seen interacting with people face to face. The study also suggested that limiting email access might boost workers’ concentration levels as study participants reported that they were more productive. september 2012
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O-ZONE cfobook
JARGON BUSTER
Sujit Sircar Wall
Info
Boxes
THE PHRASE: Arrows to fire
+
What’s on your mind? Attach
Share Sujit Sircar has a new member in the house - Fido! September 4 at 18.35 · View all 10 comments · 18 people like this
Personal
Sujit Sircar had a great time holidaying in Europe and clicking some lovely snaps
Z odiac: Taurus Views: Liberal
August 13 at 22.01 · Comment · 23 people like this
WORK
Sujit Sircar is friends with R Natarajan and 7 others September 1, at 18.05 · Comment · 14 people like this
Vice President-Finance, iGate Global Solutions from 1998 to 2008 Chief Financial Officer, iGate Corporation, 2008 - present
I Read... NA
PAST Worked in Wipro before joining iGate in 1998
I Listen... Old Hindi film music & English country numbers 2 comments · 4 people like this
EDUCATION
Recent activity Sujit Sircar likes South Point Yearbook and 2 others
South Point High School, Kolkata - 1986
03 volume 08 issue
E , PROFiL arajanp. 30 CFO inFra r. dharm Gvr cFo,
, 10 i thinkam kamath ies p. trivikrsecurit kotak
S On WhEEL t duster renaul
75
auGust
2012
p. 54
3rd Annual hip Leaders CFO e Special Conclav
CFo Ind Ia CFo PRoFIle:
The O CF r Par 20A15 Juggle nce
ajan
R. dhaRmaR
B.Com, University of Calcutta
30 lounge: Renault dusteR
s for enge be Excelle e challthey can how key futur ssed s and CFo addre
54
Gold’s Gym, CFO India & South Point Yearbook I thInk:
tRIvIkRam
kamath
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9 media a 9.
10
publicatio
Septmeber 13 at 11.55 · Comments · 2 people Like this volume
03
Issue
Chartered Accountant since 1993
08
security
An invisible anti-theft system Researchers have come up with a unique anti-theft system, based on a woven fabric that triggers an alarm when penetrated by intruders and also indicates the precise point of forced entry. This woven fabric is a suitable ‘invisible’ means of protecting entire buildings as it incorporates a fine web of conductive threads connected to a micro-controller that detects warning signals emitted when the fabric is cut and triggers an alarm. The textile could be laid on the rafters of a roof as an additional layer to the vapour barrier underlay, underneath the tiles. Another way is to integrate the fabric in concrete and blockwork walls. Another possibility is to use it as a backing material for floor coverings, in combination with pressure sensors that signal an alarm if an unauthorised person enters the room. 8
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THE MEANING It basically refers to sharp and insightful points or arguements that a person maybe using in a meeting THE USAGE Your colleague simply wants to head for lunch if he says: “If you don’t have anymore arrows to fire, let’s call it a day.” He isn’t referring to your shirt brand!
O-ZONE
PEOPLE movement TECHnology
An app to test water After he left the US National Aeronautics and Space Administration, Environmental Engineer John Feighery tested well water in Bangladesh for a job funded by the National Institutes of Health, part of the US Health and Human Services department. While working on this, he felt the work, which involved using heavy equipment, charting notes and locations by hand and transporting samples in incubators to a distant laboratory could be simpler and less expensive. With this, he came up with the idea to use inexpensive testing equipment
in the form of mWater - an Android app that records the data results of water quality tests and maps them. The application allows people to track water quality tests at any given water source over time, providing instant results which are put in context with other tests. The app, which is available in the Google Play Store, allows users to leave notes for other users about the appearance of the water, its scent, and how the water is flowing from the source, building up an archive of information over time.
ENVIRONMENT
photos.com
Fighting against global warming As per a new study, transporting materials into the stratosphere that can reduce the amount of sunlight hitting the Earth could lower the effects of global climate change. Researchers in the US found that the basic technology to transport solar geo-engineering materials in the atmosphere currently exists and could be assembled and implemented in a number of different forms for less than $ 5 billion a year. The cost of reducing carbon dioxide emissions is currently estimated as roughly $200 - $2000 billion. Solar radiation management seeks to reflect sunlight and thus reduce global warming. This technology creates stratospheric sulfur aerosols but the study found that it was not a preferred strategy as reducing incident sunlight does nothing at all to reduce greenhouse gas concentrations in the atmosphere. The researchers noted that other research has shown that the effects of solar radiation management are not uniform, and would cause different temperature and precipitation changes in different countries.
Sudhir Mathur joins as Cairn India CFO Cairn India has appointed Mr Sudhir Mathur as chief financial officer (CFO) and member of the company’s executive committee. Mr Mathur joins Cairn India from Aircel Cellular Ltd, where he was the CFO responsible for strategy, finance, supply chain management and regulatory affairs.
TATA BP gets a new name & new CEO Tata BP Solar India has changed its name to Tata Power Solar Systems, as part of a restructuring and appointed Mr Ajay Goel as the CEO. “Tata BP Solar India has formally announced itd name change to Tata Power Solar Systems. As part of a previously announced restructuring. Tata Power Solar is now a whollyowned subsidiary of Tata Power,” an official statement said.
Manisha Girorta joins KPIT Board Manisha Girotra has joined the board of directors of KPIT Cummins Infosystems Limited, as an Independent Director. Ms. Girotra presently heads the Global Independent Investment Bank – Moelis & Co. in India as its Chief Executive Officer. Prior to joining Moelis India, Ms Girotra was the Chairperson and Country Head of UBS India from 1998 to 2012.
september 2012
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i think
Facts & Trivia EDUCATION: Don Bosco Park Circus, Kolkata & St Xavier’s College, Kolkata QUALIFICATION: MBA from IIM Lucknow LAST JOB: Director-Corporate Finance Audit, Siemens AG Middle East CAREER: Finance Director, Procter & Gamble Malaysia; Associate Director Homecare GBU, Asean/Australia/India at P&G, CFO P&G India
THERE ARE TWO dimensions or two distinct areas when it comes what is keeping me awake these days. There are the micro-level, industry specific concerns and of course there are more general areas of finance where a few key areas remain top-of-the-mind. Broadly, there are three areas in the alcoholic beverages industry that continue to be challenges for CFOs.
Top industry-specific concerns The industry, as we all know, is massively regulated. The regulations cover not just taxation but several parts of the value chain including the manufacturing and sales structure and all of that differs by state. Therefore, as a CFO my role is to ensure enough knowledge about regulations and find ways to create competitive advantage in each envi10
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DEVRAJ DOSS The CFO of Diageo India thinks aloud about stifling regulations and challenges of inorganic growth that plague the alcoholic beverages industry in India apart from the twin concerns of risk management and talent retention that keep him alert and on his toes as a CFO
ronment, and find ways to ensure value can be sustainably created. While Diageo is the world’s largest alcoholic beverages firm, in India we are now growing rapidly from a small
“The governance levels and product quality differs a lot across most of the players in the industry and is a serious concern whilst evaluating possible assets”
entity to a large mid-sized entity. And while organic growth is comparatively easier, if I may say so (and that is indeed the larger part), the problem or the challenge lies in the area of inorganic growth. Here, the governance levels and product quality differs a lot across most of the players in the industry and is a serious concern whilst evaluating possible assets to drive the inorganic growth agenda. The third challenge stems from growth as well. As we grow rapidly into a much larger entity in India it is critical for us to make sure we remain very agile and nimble as an organisation despite the fact that a larger organisation will obviously need more processes and systems in place. How are we going to achieve this balance? The CFO involvement here will be to ensure that while putting in
stronger processes and systems, the decision-making and decision support system remains smooth and efficient without getting bogged down in red tape.
So the CFO would essentially have to decide on how much authority to delegate (and where) and also structure business analysis on decision support.
Macro-level concerns In the larger areas of finance the two areas of perpetual concern are risk management and manpower management. september 2012
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cfo
“As we grow into a much larger entity in India it is critical for me to make sure we remain agile and nimble as an organisation despite the fact that a larger entity will need more processes and systems in place” RISK
MANPOWER
Traditionally companies have always measured risk as a static thing. But today increasingly, business is being exposed to a range of outcomes. So we need to move to an approach that is more dynamic in nature. It has to be done in a way so that a company can look at more than just two options. Then there is reputational risk, liquidity risk...When you tackle reputational risk for instance, are you triggering off your liquidity risk as well? As a CFO, one needs to synergise and understand the value of interdependency very clearly so that you are able to trigger off multiple action plans.
The area of manpower and talent management needs more of a multipronged approach. A lot of money and time is spent now-a-days in training and re-training manpower and so a CFO and his team will also have to have a strategy in place to make sure that returns on such investments are maximised. In other words manpower retention is a challenge that needs to addressed by going deeper in the issue and understanding the psychology of employees across age groups and geographical locations. One big question is: how are you developing your talent? Talent pools
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are becoming increasingly polarised today. People are way too ‘specialised’ in one area, sometimes to an extent that they have neither the inclination nor the skill to understand associated areas of business. The need of the hour therefore is to develop well-rounded leaders. This is a big challenge for all leaders of today. We need to leave a legacy, we need to ensure that the good work done, is continued over the years and to do that, we need to understand the nature of the next generation of workforce and then, train and guide them accordingly. Of course, there are other challenges associated with this. We will have to increasingly deal with situations where a person backs out of a job just a day prior to joining since he or she has received a better offer. The norms of acceptable behaviour and the definition for what is proper and of etiquette seem to be changing. And when this has an effect on the budgets as well as on the returns on investments, a CFO needs to step in. One of the reasons for polarisation of the workforce talent pool perhaps also lies in the over-dependence since bigger parts of the value chain including finance and accounting are being outsourced. Per se I am not against shared services, or outsourcing some work. But when key areas of finance are outsourced, there are inherent risks. And one of them is that you are not developing an internal chain of experts. You are not grooming people to step in in tough times, people who have an overall view of the finance function and who are adept at deputing for a colleague in an associated function. No outsider will step in at such times. As a CFO we should realise this risk and so, while I have nothing against shared services, I would advocate that every team should have enough well-rounded executives and leaders who are multiskilled and have a 360 degree view of the business.
Jiten Gandhi
i think
FOR THE FIRST TIME IN INDIA!
2012
DO DO YOU YOU KNOW KNOW A FUTURE A FUTURE CFO? CFO? NOMINATE YOURSELF OR YOUR COLLEAGUES TODAY!
The CFONEXT100 is a first-of-its kind initiative from CFO India magazine, to identify and recognise 100 of the brightest rising stars in the field of finance – future CFOs. A 35 – member strong jury of leading CFOs – most of them winners of our CFO100 programme will identify, evaluate and pick the winners.
If you are a CFO or a non-finance professional – please nominate a team member/ colleague by sending us the name, email id and contact number of the nominee on
cfonext100@cfoinstitute.in
APPLY NOW
If you are one of our future winners, please apply at
www.cfoinstitute.in/cfonext100
Event by
The winners will be felicitated at a gala event in Mumbai in December 2012.
cover story
globalisation challenges
The World is not enough
cover story
Asian MNCs, and indeed many Indian ones among them, are on ‘mission globalisation’. But are they ready for the challenges that such growth throws up? Dhiman chattopadhyay
anil t
T
that India companies are on an aggressive growth path, extending their footprints across Africa, Latin America, the Americas and Asia, is not new news. But as they increasingly look at both M&A as also the organic growth as avenues of reaching out to a global audience, there are several challenges that are cropping up, not just on the legal or financial side but also in areas of human resource management, cultural issues and risk. As a recent study of 104 MNCs based in 10 Asian nations, including eight in India shows, an increasing number of Asian companies have grown enormously in size, reach and importance — many of them becoming significant global players in the process. The study, undertaken by HR consulting firm Towers Watson (TW) has looked at what they term the “Asian Trailblazers” and the “Indian Trailblazers” – analysing the challenges that lie before them and also the wide realm
of opportunities that stare them in the face. The study provides new and relevant insights into the globalisation strategies and HR practices that have enabled Indian and other Asian MNCs to achieve so much in a relatively short time. But it also highlights the nature and extent of the accompanying risks. The study respondents, including those from India, indicate that while continuing to invest in developed markets, they are also planning to expand to countries closer to home, especially China, India and other emerging markets in Asia, Africa and Latin America. It is interesting to note that these global ambitions are pursued not only by large, well-established organisations, but by companies of all sizes. When entering new markets, most of these Indian multinationals say they have traditionally preferred to make greenfield investments (establish new operations from the ground up in foreign countries) or engage in joint ventures (JVs). “But we expect to see a
Cross-border investments by Indian MNCs in 2010-11 was the second largest by sharepurchase value among developing nations (M&As) and the sixth largest globally September 2012
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cover story Entry drivers
Entry drivers
Close to key markets
63%
Remain competitive
46%
Gain expertise and special skills
37%
Access cheap labor
28%
Integrate value chain
26%
Access raw materials
22% 0%
10%
marked shift, depending on the nature of the opportunity in the target market, toward combining increased M&A activity with traditional entry modes,” says Mr Gavin Watkins, Director, International Consulting Group, Asia Pacific at TW, who led the research project. However, as the number and value of M&A deals made by Asian companies increase, the study warns that organisations will need to be cautious of the risks involved, especially given the changed nature of M&A transactions since the global financial crisis. According to the study findings, in the past five years Asian acquirers have invested more in crossborder deals in other emerging regions than their North American counterparts. Moreover, the total value of Asian companies’ cross-border M&A deals within the Asia Pacific region since 2008 is 2.5 times higher than that of Western European and 1.8 times higher than that of North American MNCs in the region. Most interestingly, post the 2008 global meltdown, M&A deal data reveals that these cross-border deals are, on average, about one-quarter (24%) smaller, and less varied in size, than North American and Western European deals. In other words, although they have been careful about size when choosing their deals, Asian MNCs have been the main M&A acquirers in Asia. 16
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20%
30%
40%
50%
60% 70%
CHALLENGES Needless to say, the path to globalisation is not simple, and Asian multinationals have had their share of challenges. The study found that the top three globalisation challenges stem from the financial and regulatory aspects of deals, management of a global company and lack of experience in globalisation. However, another important challenge is developing cultural understanding of the markets and countries the Asian MNCs are entering; the study suggests this remains a major challenge for globally experienced and inexperienced Asian MNCs alike. MNCs based in developed countries have had Asia and Latin America on their radar
for some time. With the increased interest of Asian and Indian MNCs in these regions, the competition for talent and strategic resources is expected to intensify significantly. Asian MNCs must, therefore, develop effective HR, talent management, compensation and employee benefit governance systems if they are to manage their globalisation processes effectively, the report observes. Asian MNCs have accompanied their globalisation process with the development of key human capital to manage their businesses globally. This is especially true at senior management levels and for jobs that require specialised skills. According to the study, more than three-quarters (77%) of respondents appoint internationally mobile employees (IMEs) to senior management positions , and 54% hire IMEs to positions requiring specialised skills. Over the years, many Indian as well as Asian MNCs have nurtured a cadre of IMEs responsible for strategic initiatives such as overseas expansion, knowledge transfer and key client management. The organisations understand that these global employees are highly sought after, and that it is essential to develop specific plans to attract, motivate and retain them to ensure success on a global scale.
Entry Strategies: M&A and JVs set to increase
Entry Strategies: M&A and JVs set to increase 60%
53%
50% 40%
35%
30%
33% 26%
21%
24%26%
Past Future
20% 10% 0% Greenfield
companie
38%
M&A
Joint venture
Combination
Key globalization challenges cover story for Asian Trailblazers TOP globalisation challenges for Asian Trailblazers
48.8% Financial and regulatory aspects
32.1% Global management
41.7% Cultural understanding
ties outside their headquarter country, and about half (52%) say they have no established method of monitoring their compensation arrangements in foreign locations. However, most respondents say they realise their structures have shortcomings and are currently in the process of developing consistency across a range of HR programmes. The Indian companies surveyed showed that not only were they globalising rapidly, they also understood the need to evolve quickly and adapt to the challenges of the new global landscape they are shaping. In that sense, these MNCs are pioneering the path for a whole new generation of Asian organisations, both large and small, to take the leap toward becoming genuine contenders in the global marketplace.
The World at their feet
Total may not add up to 100 due to overlap
The ROLE OF GOVERNANCE Governance plays a critical role in managing a global business, especially if risk management is driven by more than simple compliance. This involves appropriately guiding and managing key stakeholders, driving operational efficiency, and aligning people assets and liabilities with business objectives. The starting point of an effective global governance structure is to define a clearly stated global governance philosophy and establish a global governance framework. Such framework includes clear guiding principles, governance responsibilities, key financial and risk metrics, and an agreed level of risk tolerance or appetite. It is also essential that global companies maintain a balance between central and decentralised HR
programmes. An effective global governance framework helps companies oversee and monitor outcomes, costs, risks and liabilities from a distance. Most Indian MNCs surveyed said they were aware that, due to their rapid pace of globalisation, they need better global governance systems and should improve their benefit and HR practices. This is not the case with just Indian MNCs however. The study found that many participating Asian MNCs have weak governance structures for compensation and employee benefits. Only a third of respondents control compensation and benefit programmes centrally, i.e., at headquarter level. This lack of governance can pose serious risks. Indeed, nearly two-thirds (64%) of respondents state they do not fully understand employee benefit liabili-
Companies from the mature globalised economies of Asia (e.g., Japan, Korea, Taiwan and Singapore) have gone global for many decades. However, most companies from the region’s newly globalised markets (e.g, China, India and Thailand, etc.) have increased their share of the global business pie only in the last decade or so. Their ambitions to become competitive global players is evident from the size of their overseas investments — both organic and inorganic. Building on the strengths of companies from both globalised and newly globalised economies, Asia has become an economic powerhouse with an ever-increasing share of the global economy. According to the United Nations Conference on Trade and Development (UNCTAD), the value of outward foreign direct investment from Asia Pacific — in the form of M&As and greenfield investments —increased at an annual average of 13.1% over the period 2004 to 2010 (UNCTAD, 2011). Though greenfield foreign direct investment has remained the dominant September 2012
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cover story Extent of Globalisation
Central & Eastern Europe
Western Europe
56%
78%
Middle East
North America
33%
67%
India
Latin America
Africa
89%
56%
entry mode of the Asian trailblazers while expanding abroad, M&A transactions appear to be gaining in popularity and deal values have increased at a blistering pace in recent years. The average annual increase in the value of outbound M&A deals made by companies from the Asia region was 40.5% between 2006 and 2010. In 2010 alone, the value of outbound M&A deals made by Asian Trailblazers increased by a massive 190.3% (UNCTAD, 2011). Also, in 2011 Asia Pacific had 701 companies in the Forbes Global 2000, more than Europe, the Middle East and Africa (613) and the United States (536). Of particular note is the increase in the number of Asian companies in the Global Fortune 500 from 2006 to 2011. However, globalisation appears to have had no negative impact on Asian MNC margins. On the contrary, profits of these companies increased by more than 100% in the years 2010 and 2011. It is also worth noting that, while M&A deals by Asian acquirers in 2008 accounted for less than 8% of the value of M&A deals by North American and 18
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Western European MNCs from 2009 through 2011, Asian acquirers represented nearly one quarter (23%) of the total value of North American and Western European deals.
WHERE IS INDIA HEADED? Africa has been the main market for Indian globalisers in recent years, with well over 89 per cent of the companies showing some investment in the continent. Cross border investments by Indian MNCs in FY 2010-11 too was the
second largest by share-purchase value among developing nations as far as M&As were concerned and the sixth largest globally. There is a clear pattern that has emerged as well, when one looks at the way this globalisation has happened. Till the 1990s Indian companies venturing beyond their border, would usually set up shop in neighbouring nations or those in the region which had a similar or lower level of development. In the 1990s and till the initial years of the 21st century, this expansion moved into the developed countries of Europe and North America, mainly through setting up of new offices with a few acquisitions being exceptions rather than the norm. In the last six years, however, Indian companies have moved in into the emerging markets of Africa, Central and Eastern Europe, taking the M&A route wherever needed and also setting up their own offices.
A THORNY PATH? But as these Indian multinationals shape their global ambitions, they are likely to confront risks from various sources. The risks depend on the entry strategy used, and the study shows a reasonably even spread in the past, when joint ventures and greenfield investments were the dominant entry strategy for Asian multinationals. In the
Top 3 most important regions for projected growth
Top 3 most important regions for projected growth 22% 44% 22%
0%
44%
Raw materials Cheap labour Gain expertise/skills Closer to key markets Remain competitive Value chain integration
44% Total may not add up to 100 due to overlap
Biggest Globalisation Challenges Biggest Globalisation Challenges
Cultural Understanding Financial & other aspects Talent Management
future, it seems imminent that these companies will rely more on cross-border mergers and acquisitions. Since the global financial crisis, M&A transactions have become riskier. The amount of time between deal announcement and deal completion has declined, a larger proportion of acquirers are overpaying, and most of the value created is being mopped up by the target rather than the acquirer. Even so, 70% of respondents (as mentioned earlier) agreed they are likely to engage in multi-country M&A activity in the future. Indeed, the number of M&A deals by Asian acquirers has displayed a steady upward trend since 2009. Even though all forms of globalisation are risky, general economic uncertainty and the changing nature of M&A are likely to bring new risks to the table for Asian MNCs.
Competition for mobile employees will increase Asian multinationals have intensively used IMEs to fill positions at the senior management level, as well as for jobs requiring critical skills. It appears from the research findings that many such Indian companies have developed cadres of internationally mobile talent, an attribute they share with their Latin American counterparts, the Multilatinas. Such a workforce planning model indicates a high level of knowledge transfer across an organ-
Others
isation, and in-house investment in the development of global leaders. In the future, however, employers will face stiff competition for IMEs in key positions. Multinationals from Asia, North America, Latin America and Europe are developing their own ‘Asia expansion’ strategies. These ‘trailblazers’ will need to manage people risks by providing optimal career progression opportunities for these employees — and making continual investments in succession planning. Of course, there are many gaps that need to be filled. For instance, HR practices directly related to the globalisation process, such as global talent mobility programmes, show significant differences from those of developed-economy multinationals. According to TW’s 2012 Global Talent Mobility Study, only about half (51%) of Asian MNCs have a global talent mobility programme, compared to more than 85% of North American and Western European respondents. Moreover, less than a quarter of Asian MNCs report having a management group devoted to global talent management, in contrast to 53% and 67%, respectively, of North American and Western European MNCs.
Understanding cultural differences One critical challenge, especially for the CFO community, is the financial, regulatory and political aspects of the
cover story expansion. When some of the spokespersons of the companies surveyed were asked to describe challenges associated with globalising, their most common answers related to the lack of sufficient due diligence, especially in HR — and specifically, the inability to integrate new businesses and legal and political risks. During discussions with respondents, it was found that organisations with a history of operating in multiple countries overcame these challenges more readily than companies that had started international expansion more recently. Another significant challenge faced by Asian MNCs relates to the complex issue of cultural understanding and assimilation. This includes a general understanding of the local culture in a foreign country, the ability to manage brand perception, obtaining buy-in from key local customers, managing a culturally-different workforce and overcoming language barriers. TW found that these cultural challenges impacted seasoned and new players equally. A third major challenge related to globalisation is the management of a global company. Respondents mentioned challenges such as: Clear definitions of roles and the authority of different stakeholders; Incentivising local leadership to work toward common organisational goals; Achieving synergies and efficiency in global operations by aligning processes; Setting up common technology platforms for various business functions and identifying and rationalising non-performing lines of business. The good news is that many of these challenges can be effectively addressed through appropriate governance philosophies and frameworks. Clearly, as India Inc moves ahead in leaps and bounds on ‘mission globalisation’ (notwithstanding the pessimism that surrounds the slowdown in domestic growth), CFOs and the entire leadership team will have to prepare well to face the many challenges and the often thorny path that lies ahead. September 2012
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cover story
OPINION
The
Indian MNC and the challenge of globalisation Punching above their weight, Indian companies are successfully going global. But are they really serious heavy-weight contenders? Gavin Watkins
O
ver the last decade, Indian companies have started to flex their global muscle. The Tata Motors acquisition of Jaguar Land Rover PLC is probably the best known acquisition by an Indian company of one in Europe. The success of the acquisition – and the turnaround of the company’s fortunes – has surprised many. Is this a flash in the pan or are Indian companies starting to show what they are capable of on the global stage? The other impressive aspect of successful global Indian companies is their size, diversity and stretch growth targets. The Tata Group of Companies,
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Aditya Birla Group and Mahindra and Mahindra are examples of large conglomerates that have been successful in building global businesses that are profitable, diverse and competitive yet seem to retain strong family values and loyalty. In many ways these successful Indian companies exhibit the best of Asia – they have capital, are agile and have a clear vision. Unlike China, India has a large number of mature, experienced HR professionals that seem intent on making the most of their human capital both at home and abroad. But like many other Asian MNCs there is a question as to whether Indian companies really understand the com-
cover story
In many ways these successful Indian companies exhibit the best of Asia - they have capital, are agile and have a clear vision — Dr Gavin Watkins Director, International Consulting Group, Asia Pacific, Towers Watson
pensation and benefits risks that exist outside the home country. There is an evidence from Towers Watson’s Asian Trailblazers study of 104 MNCs headquartered in Asia Pacific of significant weakness in Asian MNCs global governance and oversight of compensation and benefits and a lack of understanding of the nature and size of compensation and benefits risks – especially liabilities – outside the home country. This presents a challenge to Indian MNCs as well. Lack of familiarity with defined benefit arrangements and associated liabilities and lack of experience outside Asia could prove costly to Indian companies as they grow and acquire overseas. The Tata Motors acquisition of Jaguar Land Rover however, demonstrates the ability of Indian companies to manage complex industrial and union based environments such as that of the automobile manufacturing industry in the UK, their ability to grow new markets and to improve quality and brand recognition. It is interesting to compare and contrast MNCs headquartered in China,
Growth Pangs • India has a large number of mature, experienced HR professionals that seem intent on making the most of their human capital • Successful Indian companies exhibit the best of Asia - they have capital, are agile and have a clear vision • Lack of experience outside Asia could prove costly to Indian companies as they tend to grow and acquire overseas. • China has very few recognisable global brands yet the largest number of companies in the Global Fortune 500 of all countries in Asia.
Japan, India and Korea. Japanese companies have been global the longest yet are relatively immature in respect of global HR and people management and oversight. Korean and Indian companies both ‘punch above their weight’ as relative newcomers on the global scene –Samsung and Tata are well known global brands. China has a surprisingly
small number of recognisable global brands – Lenovo, Haier and Huawei stand out- yet in 2012 has the largest number of companies in the Global Fortune 500 of all the countries in Asia. Both China and India have large populations, yet India still ranks behind China in many areas. Will the success of companies such as the Tata Group of companies, Aditya Birla Group and others help India to position itself as a serious global contender? It seems that it might, provided Indian MNCs don’t underestimate the human capital and other risks associated with operating a global business in multiple countries with different cultures, demographics, regulations, compliance and workforce institutions such as unions. Will Indian companies continue to punch above their weight and become heavyweight champions or will they simply float like a butterfly and sting like a bee? Dr Gavin Watkins is the Director of Towers Watson’s International Consulting Group for Asia Pacific and is based in Hong Kong. September 2012
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feature
leadership
Bridging the Gap Handling a multigenerational workforce is one of the key challenges that needs to be addressed in order to get the best out of a team Atanu Kumar Das
H
andling a multi generational workforce has been a persistent issue that organisations have been dealing with. Fixed mindsets are the root cause of differences among employees of varied age groups. With organisations having both, the young and old, working side-by-side, it becomes a challenge for business units heads and the CEO to create a conducive working environment that meets everyone’s expectations. For a technology leader, it is no different. Enterprise technology decision makers have their task cut out. Not only do they have to add to the top line, they have to increasingly look at creating new revenue streams for their enterprises. This is possible only if they have a team that is innovative, cohesive and works as a well-oiled machine. What could come in the way of a CIO is the multigenerational workforce within his depart-
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ment. The younger generation is restless and wants things to move fast. The middle and the older generations have their own concerns. The middle aged, though not too resistant to adopting new technology, feel that consistent change is an irritant. The older generation, meanwhile, lacks awareness. For them to adopt cutting-edge technology, a CIO has to hand-hold them and make them understand the benefits accruing from the technology. According to Jijy Oommen, Executive Vice President and Group IT Head, Bajaj Capital, “The younger generation today is very difficult to handle. The young are fueling the BYOD trend. For a CIO, it is increasingly becoming difficult to manage the proliferation of gadgets within the organisation.” “As a CIO, I have to understand that handling a multigenerational workforce is a tricky thing. Instead of forcing a technology on the user, it is important to come up with innovative technologies that can be adopted by users of different age groups within the organisation.”
Oommen feels that the younger generation wants to explore more – a trait that is rarely found in the older generation. “I have seen several youngsters in my organisation bringing gadgets that the IT department has no clue about. In fact, they know many more functionalities of such latest gadgets than the IT department,” she says. According to Vilakshan Jakhu, CIO and Sr. VP, BPTP Ltd, “All the problems that persist in an organisation regarding handling multigenerational workforce is because of mindset issues. For example, people who have been traditionally Microsoft and dot Net server deployers may not consider open source architectures at all. Of course, Microsoft products are good, but there are products that promise to change the IT landscape and the approach to computing these days.” Echoing Oommen’s sentiment on the fast-emerging trend of BYOD, he avers, “It is because of the younger generation that organisations now allows employees to buy or bring their
in practice own iPads, Macbook or iPhones. It also allows them to connect to corporate infrastructure using a BYOD software like MobileIron which secures all corporate data on these devices and when the employee leaves that data is removed from their PCs/ tablets/mobiles. This is contrary to the traditional IT setup where Windows domains, anti-virus software, exchange, Windows OS, Microsoft office applications were provided by the corporate’s IT department.”
subhojit Paul
Different generation, different aspirations The opportunity to bridge the gap between the young and the old also throws up an opportunity for a CIO himself to emerge as a leader. There are CIOs who don the leadership mantle and train the youngs members of their team in a manner that they understand the values of the organisation. According to U C Dubey, Executive Director, IT, Iffco-Tokio General Insurance, “When I was working at the Rourkela Steel Plant, there was a very innovative exercise that was started by the organisation.” “The company would select seven to eight youngsters who were newly joined and assign them to a senior manager. The latter would spend a couple of hours with the youngsters every day. With each passing day, the youngsters would understand the older generation better and vice-versa. I feel it is was a very good way to not only enhance professional knowledge but also get to know the other person better.” According to Jakhu, “Mindset, awareness and breaking out of the comfort zone are things which no one is born with.” He feels an old-aged person can also take to technology if he understands its benefits. Giving an example, he says, “I remember seeing a 70-year old seasoned professional being forced to use Blackberry smart phone. Now he can’t live without it. To overcome such
“I feel quite enthusiastic working with youngsters because it gives me more energy to perform” —U C Dubey, Executive Director, IT, Iffco-Tokio General Insurance
obstacles we must make the older generation see the benefits and address their concerns. With time I have seen a fresh fondness to new technologies across all ages.” According to Paul Farmer – Chief People Officer, Qlik ech International AB, “Typically, generational differences are seen through technology used and career growth expectations. As a result, we utilise a multi-media approach for communicating within the company, as well as with our customers.” “To manage career growth expectations, we encourage conversation on managing your own career, providing various opportunities for formal and informal development and discussing the need to be skilled and perform well
in current role prior to looking for the next opportunity,” he says. Communicating is one of the important things when it comes respecting a employee. It is important to understand that when one communicated with the youngsters, the conversation should be short. Many a times it happens that the older generation will try and narrate history before coming to the topic and this is not appreciated by the younger generation. So, it is important to just talk about what the fact is, rather than talking about the whole context. Oommen feels that CIOs should always keep in mind that there is no point pushing a person beyond a point. “In our organisation, we have three to four people who are old and they do not want to learn anything about technology. We have to make them understand how to open a email or send it. I feel that at this age they are not equipped or interested to learn new technologies, so we have to understand and respect it. But on the whole I have seen that both the younger and older generation have leveraged a lot of benefits from technology and it has helped a lot to bridge this gap of generations,” said Oommen.
Handing ego hassles effectively One of the key concerns which can be witnessed today is that there are lot of younger bosses in the organisation and sometimes it is very difficult for a older generation employee to report to a far younger boss. According to S R Balasubramanian, Former CIO Godfrey Phillips India, “I have seen in my tenure as a CIO that there are a lot of people who are older than me and reporting to me. We have to handle each of these scenarios on a personal level and listen to the older person and make him comfortable so that he does not feel any ego as that would harm the team. I believe that as a leader it is important to understand that a person who is older than you will september 2012
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in practice
Handling Generational Gap with Care In a conversation with Atanu Kumar Das, S R Balasubramanian, a veteran CIO with over 35 years of experience, talks about his experience of handling a multigenerational workforce
Q
What are the generational differences you have witnessed in your working experience as a CIO and what have you done to overcome them? Please share with us a couple of examples?
Q
Generational deference has been there since many years and I could witness the same when I started my first job. I will give you a couple of examples. In 1991, I was involved in deploying a database system and one set of employees wanted me to implement it in COBOL and the other set wanted SQL. I did due diligence and ultimately went with SQL, but there was a lot of resistance from some of the employees and I had to convince not only the management but also the employees on a personal level that what I was doing was for the organisation’s benefit. Another interesting example was when I was working with Godfrey Philips, and we were planning to implement virtualisation. I wanted to go ahead with VMware, but the management was convinced that we should use Microsoft or Oracle. People have their own notions when it comes to adopting technology, but as a CIO I have to understand that whatever technology I deploy, it has to work in the long run.
Social media has today become a very important tool and as a CIO I always felt that it has to be used judiciously where the organisation benefits from it. There are some enterprises, who believes in not letting their employees use social media at work, I am not for it because with technology, younger generation have many ways to use social media. Moreover, it will virtually become impossible to control anyone if they are using it in their own smartphone or laptop. In terms of adoption, the older generation takes time to adopt to social media as they are slow starters, but once they are made to learn the benefits, they can use it as efficiently as any other employee in the organisation. The usage of social media at work will always remain a tricky question, but it has to be dealt with sensibility.
Q
Being a experienced CIO, how easy or difficult it is to work with the younger generation? Have you seen that the younger generation are too restless and are always on the look out to have some new platform or technology to work on? Today, the youngsters are very restless and ambitious. Young people who join work today are less committed towards the organisation and are more interested in their own growth. It is very important for the senior management to mentor them properly and make them understand that it is the organisation’s preferences, that 24
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What is your take on adoption of social media by the older generation and in comparison do you see the younger generation using social media at work more for their own entertainment?
S R Balasubramanian, Former CIO, Godfrey Philips comes first and growth will subsequently happen on an individual level. I advice today’s youngsters to be a little patient and think for the future before taking any professional decisions. When we started work, our goal was to be with the organisation and grow with the organisation, but today that feeling hardly exists.
Q
What has been your experience in handling the older generation? Aren’t they more reluctant and resistant in adopting many new methodologies in the organisation? Managing the older generation is also a problem. They start feeling insecure if they see some youngsters growing fast in the organisation. The best way to make the older generation adopt new technologies is to make them go for trainings and attend technical seminars where they understand the need for that technology in the organisation. So, once they come back from the training, they will try and make others learn what are the benefits of adopting a particular technology and this also boost the confidence level of the older generation.
Q
How important is the function of human resource in ensuring that the generational gaps are addressed effectively? Human resource can play an integral role in bridging the gap between generations and that can be done via numerous activities, be it in office or outside office. The more we witness youngsters interacting with the older generation and getting to know them, the less differences are going to crop up at work. One of the important thing that we have to understand today that the aspirations of the youth and older generations are very different. So, it depends on the individual, how they handle that situation. I believe that even if a youngster becomes the boss of someone who is elder, he should ensure that proper respect is given to him.
in practice always have some problems in reporting to a younger boss and this needs to handled very sensibly.” Human resource also has a very important role to play when it comes to handling such issues.“Human resource plays an important role in organisation dynamics. Organisational training programmes, events mixers create a feeling of camaraderie which bridges the age divide. Our organisation is quite young and has a lot of young personnel. Organisational announcements of birthdays, anniversaries, new joining, all add to bridging fences and brings people close,” said Jakhu. According to Dubey, “I feel quite enthusiastic working with youngsters because it gives me more energy. If the older generation people are understood properly and given the time frame that is required for them to adopt a particular technology then there will be very less generational challenges. Since today’s youngsters are more concerned about themselves, the best way is to mentor youngsters in a proper manner so that they work with patience and get to know the older generation in a better way.” “Human resource is the central point of contact in the organisation and they can play a very vital role in terms of organising various training sessions and other fun activities that can help in building the relationships between different age-group of people. Strong HR policies to bridge the gap between generations will go in a long way in effectively handling people across different verticals in an organisation,” feels Oommen.
subhojit Paul
Social media and multigenerational workforce The advent of social media has also brought across numerous challenges for CIOs in the organisations. Social media is today seen as a tool which can help an organisation’s cause and while the youngsters are enthusiasti-
cally using it, the older generations are finding it quite difficult. “The way older generation view social media is quite different from the younger generation. Older generation people would rather enjoy playing gold rather than spending time on Facebook or Twitter but it is quite the opposite for younger generation. Organisations are now trying to motivate older generation to use social networking sites so that they can promote their organisations activities,” said Oommen. The integral part that CIOs point out is, there are no set of rules which are required for handling a multigenerational workforce. It can be done differ-
Transfer of knowledge from the older to the younger generation is also one of the most important factors that a CIO should always keep in mind. The best way of doing this is fostering an environment where there is collaboration between the younger and the older generation. A CIO as a leader knows that to have a team which works seamlessly, needs collaboration and that can only happen if there is an environment for the same. So when the top management of the organisation creates such an environment then once can witness brainstorming between the youngsters and the older generation and that would result in collective creativity.
“I have seen that the older generation needs a lot of hand-holding. This is not the case with the younger generation” —Jijy Oommen, Executive Vice President and Group IT Head, Bajaj Capital
ently at an individual level but the most important thing is to remember that the organisation’s objective has to be taken into consideration. While there will be hiccups when one a handling a new employee in his 20s and someone who has worked for more than 20 years. The beauty though is, both can learn innumerable things from each other and if the camaraderie happens in an effective way, the solution of handling people of different generation is not a difficult task. The key is to be open to ideas and act in a manner where teamwork becomes the mantra for success.
This will also ensure better productivity and coordination. A convenient environment can be the stepping stone for seamless collaboration between different generations. Transfer of knowledge happens on both the fronts and as youngsters get to learn about the organisation and social networking, the older generation also get to know a lot about new technologies, be it on the software or the hardware side. With this, older generation will feel that their skills are valued and the youngsters will also realise that the organisation is open to new ideas and thoughts. september 2012
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in practice
strategy
Engagement provides fuel for productivity Certain behaviors of senior level financial executives and have been identified as having a quantifiable and measurable impact on their teams’ engagement and performance Scott K. Edinger
C
onsider the contrast between the most successful financial executives and the average or even poor ones. An executive’s success likely has little to do with just technical or financial expertise. Most financial leaders, by the time they reach a level of significant responsibility, are quite accomplished in this area. Many will have degrees from top schools and nearly all will possess superior analytical and technical skills. What is often interesting about the difference between great financial executives and their less accomplished counterparts is how they lead their teams, how they interact with people, how they connect with clients and how they pay close attention to the non-technical elements of their responsibilities. For financial leaders, technical abilities are the table stakes that provide the opportunity to create value for an
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in practice organisation. They are necessary, but not sufficient. Renowned management guru Peter Drucker said “The most valuable assets of a 20th century company were its production equipment. The most valuable asset of a 21st century institution, whether business or non-business, will be its knowledge workers and their productivity.” While all organisations preach that people are their most important asset, few actually behave accordingly. To drive productivity, both qualitatively and quantitatively, paying close attention to the factors that drive the engagement of the people in the organisation or on the team is the key to success as a finance leader. Consider just a few of the results of improved productivity: • Efficient processes for workflow from simple reporting to complex tasks. • Lower costs and the ability to deliver greater value while keeping up with the evolving regulatory environment. • Reduction in re-work, errors and information overload (filter failure). • A greater sense of work/life balance from lower levels of frustration and higher levels of satisfaction. • Stronger relationships and teamwork with other organisational functions by creating value with insight to the business. The preceding is an enviable list that any leader would want for their team or organisation. When evaluating employee engagement, several trends have emerged that have the greatest influence on employees. When applied specifically in the finance function, these leadership behaviors have an impact on engagement and performance.
photos.com
Balance the requirements of output with genuine concern for those providing the input That is, they pay attention to the manufacturing idea of production versus production capability and recognise that the people who work for them are
not machines. Not being emotional or displaying emotion wildly, but rather understanding that the person on the other end of an interaction has personal needs, desires, goals and his or her own unique way of working that require attention in order to sustain performance. They are not tasks or jobs, nor are they objectives to be completed. They are people, and people can’t rev at 7000 rpm for 60 hours week after week. Good leaders who demonstrate concern and connect with those they lead by recognising this and helping to manage the balance of their personal needs will produce big dividends.
Bring energy and inspiration to work Sometimes the amount, complexity or stress of work to be done is overwhelming.
not, there is a reliable source to find nearly any technical solution to a problem. Applying answers and using those solutions to create insight comes only with experience that has a high value to people’s careers. When they know they are improving, gaining expertise, learning and growing, employees tend to give greater effort because there is just as much benefit to them personally. When employees see someone taking an interest in their growth and development, it becomes quite natural to give more effort.
Connect meaning to the work The ability to connect the big picture of organisational strategy and goals to the details of each job is critical in helping people understand their role in the suc-
“It is easy to neglect coaching people as a finance leader because, more often than not, there is a reliable source to find nearly any technical solution to a problem” In order to lead teams through these all-too-common conditions, leaders need to inspire their people to high levels of performance. Such leaders create confidence and an environment where it is the cultural norm to go an extra mile and feel good about doing so. It is rare that a team can be inspired and engaged if the leader is not.
Focus on the development of team members It is easy to neglect coaching people as a finance leader because, more often than
cess of the organisation. Without that connection, team members fall into the trap of being mired in tasks and to checklists and potentially getting lazy about the output. On the other hand, if someone is clear about how the completion of analysis is a vital component of enabling the understanding of customer behavior in order to make investment decisions, then that project has a different tone. Translating or clarifying strategic objectives and their clear line of sight to the work done by each individual has tremendous power in driving productivity. It is all about purpose. september 2012
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in practice Represent the finance function admirably in other parts of the organisation and externally While a team is undeniably a reflection of the leader, so is a leader a reflection of the organisation or division, as its most visible member. Particularly when the finance function is still (though not always) too frequently considered an administrative function versus a value-creating function, it is important for people to feel good about the leader who represents their interests to the rest of the organisation or to the external environment. Additionally, the ability of the leader to foster a sense of teamwork and partnership with other functional groups that builds alliances. This allows for value creation and the ability of financial professionals to help identify issues and to work collaboratively with colleagues to determine solutions to problems.
Place high level of importance on reciprocal trust It is more than walking one’s talk (though the importance of this can’t be overstated). The best leaders have a high standard for their own character and apply that standard to those with whom they work. Team members respond positively to high standards, particularly in the area of character, trust and integrity — an area especially vital for financial executives. Everyone will perform better when they can trust their leader, and just as important, when they know and feel that they are trusted in return. This element of reciprocal trust is frequently described by members of a team as knowing that “they have my back, and I have theirs.” When trust is reciprocated, leaders can count on greater levels of commitment. That commitment and reciprocity provides alignment and goal congruence that enables effective delegation, innovations that yield process improve28
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ments and unfiltered news about what is really happening.
Think about communication Everyone knows that most issues can be traced back to a communication failure of some kind, and still there is precious little time devoted to thinking about communication. Leaders are constantly communicating with both actions and words — even when they think they are not. The best leaders spend time considering what they need to communicate and how. What is the best form (email, phone call, Skype, face to face) and forum (meeting, group discussion, off-site retreat, one-on-one) for a message to be received? How to ensure that the strategic intent is communicated as well as expectations? What is
nological concerns are important, but those are the things to do to just be in the game. The profile of most financial professionals is that they focus on this arena to the unfortunate exclusion of the prior seven elements. Ironically, this list doesn’t vary that greatly from the finance function to manufacturing, to information technology or nearly every other part of the organisation. While each organisation will inevitably benefit more from some of these characteristics than others because of the unique elements of the culture, all of these have an impact. Why? Because good leadership is good leadership, and it centers on how leaders engage with those they lead. The higher executives climb in an organisation, the more important is his or her ability to lead and inspire their people. There are obviously nuances in leading differ-
“The best leaders have a high standard for their own character and apply that standard to those with whom they work” the essential content that must be conveyed? What can be done to make this message content inspire or motivate? It is unrealistic to think that everything a leader communicates can be thought of with this kind of depth, but taking even a little extra time, is an investment.
Understand the technical elements of the work and bring innovative solutions to problems Most financial leaders don’t need to pay any further attention to this characteristic than they already do — that is why it is listed last. Keeping up with the trends, regulatory issues and tech-
ent functions but the basic principles of how leadership drives engagement remain a constant among many other variables. Focusing on those constants will produce a very engaged and highly productive team, which in turn allows the executive to create the kinds of outcomes referenced earlier. By paying special attention to the constants in this equation, the financial leader is also likely to become more engaged and productive as well. Scott K. Edinger (scott@edinger group.com) is founder of Edinger Consulting Group, a boutique consulting firm that specializes in leadership, strategy implementation and sales effectiveness. He’s also co-author of The Inspiring Leader (McGrawHill 2009).
in practice
Thought leadership
Growth and leadership thoughts for tomorrow’s enterprises ‘Thinking out of the box’ still means the thoughts are in comparison to what’s inside a box. Dissolve the concept of a box and thought leadership can take on a new meaning argues Santosh Sharma*
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rowth and leadership in the present day scenario has been very narrow and limited in approach. We’ve failed to be inclusive and sustainable and we are seeing its consequences all across the globe. Did we take a wrong turn then? I believe yes. Our growth was more focussed on the outside leaving the inside unattended. And this is the reason why we have all the worldly pleasures but we are still incongruent within. Reports suggest that our coping mechanisms are on the decline, lifestyle diseases are on the rise and we are getting more and more idiosyncratic. I was at one of the leading IT companies of the world mentoring the mid level executives to take on the top level positions. I found that the nature of their leadership was only positional and nothing more and this is the situation with all the organisations barseptember 2012
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in practice
“Dissolving the internal boxes is a process and not an event” Santhosh Sharma, author of the upcoming book on leadership ‘Dissolve the Box’ talks about the concept and throws in some radical thoughts. Dhiman Chattopadhyay
Q
Why do you feel the concept of ‘Dissolving the boxes’ won’t just be another business jargon that shall also fade away in some time?
It is not a management fad but something very basic to our life and work. It is derived from nature and is powered by the designing intelligence of 15,000 years and much more...influencing everything - individuals, civilisations, countries and corporates across the globe, guiding the present and shaping the future!
Q
Is Dissolving the boxes really practical?
It is. Greed, hidden fear, ego, etc. pours into our decisions and pollute it. These decisions can never be inclusive and sustainable and lacks the designing intelligence to be relevant in the short, medium and long term. More than 50 CEO’s, 3,000 CXOs have actually been introduced to this idea successfully both nationally and internationally. It has become a part of the IIM Ranchi Syllabus and many other institutions and sports clubs like East Bengal Club have started embracing it. Dissolving the boxes is not just a method but a way of life.
Q
You mean to say by dissolving the boxes we can be completely free of our internal limitations?
I feel dissolving the internal boxes is a process and not an event. Even a five per cent reduction in our internal traps can lead to a huge shift in the way we think and act. This will differentiate between success and failure, being a leader and follower or health and sufferings. This will be a great leap for individuals, organisations and the world as a whole.
Q
How did this idea germinate?
My life and nature have taught me a lot. Like others I was also suffering from
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“Thought depends upon intent and when the intent is to genuinely lead, then your thoughts and actions will also have the designing intelligence to find a way out” what I term as ‘internal slavery’ and I was realising how this was polluting my decisions and actions. I decided to work out of it. I went through the Gita, Bible and the Quran and tried to relate them to my life and work. I also went through the books on management, psychology, science and philosophy trying to understand and bridge the gap.
Q
What is your message or what have you tried to say to the business leaders in India?
I would like them to upgrade from
‘Thought’ to ‘Intent Leadership’. Thought depends upon intent and when the intent is to genuinely lead, then your thoughts and actions will also have the designing intelligence to find a way out.
Q
So this is basically your next project?
My next book “Dissolve the box” is in the making. However, I am currently also mentoring students and professionals through our International Growth and Leadership Foundation. I am also working on a project called World Vision 2030.
in practice ing individual exceptions here and there. These so called leaders were themselves following their own mental biases which were automatic and compulsive. Can they lead when they were themselves following their stereotyped thoughts? Growth and leadership till now has been dealt traditionally or by ‘thinking out of the box’ only. Though we have been trying for an inclusive and sustainable growth, in crucial situations our decisions and actions are found wanting. The result – we are still experiencing the global economic meltdown, the ever increasing economic divide and the LIBOR crisis globally. Corruption, corporate and political misgovernance, terrorism, indecision and the unfortunate Manesar incident at Maruti are some of the incidents from which we should take the hint before we go too long and reaching the point of no return. In spirit we are left far behind because we are still guided by our internal vicious traps like our unlimited greed, hidden fear, ego etc. We have only been diverting our problems and not really solving them. In fact, going deeper we will realise that we have only created bigger and trickier problems later. Our growth is like a tumour which is self-destructive. We have blown the external growth out of proportion at the cost of internal actualisation. The answer lies in dissolving all the boxes and repositioning our thoughts and strategies. It is very different from just thinking out of the box. Let’s see how, through the analogy of a thief. If you ask a thief to think out of the box what will he do? He will steal better and manipulate the laws more cunningly. Won’t he? This happens because he still thinks from the platform of the thief which is his basic self-understanding. While thinking out of the box the reference of the box still remains. But if the same person dissolves the box, then he realises that he is not just a thief but it is a habit he has picked up and also gets the designing intelligence to reposition
“We have blown the external growth out of proportion at the cost of internal actualisation. The answer lies in dissolving all the boxes and repositioning our thoughts and strategies” —Santosh Sharma, Author of the books ‘Next What’s In’ and ‘Dissolve the Box’
himself. This is not just an incremental but a radical shift. Just like the thief individuals and organisations keep responding from their internal vicious biases, boxes and traps. Thinking out of the box is simply taking us further in the wrong
direction which we had earlier chosen. The West which guided us then is now beginning to realise its mistake and is looking for answers. But the irony is that the Orientals are now blindly running after the West. It’s a wake-up call. The outer journey has reduced man from a human being to merely an economic entity. We need to reclaim ourselves and our society from the market forces and curb the present growth on steroids. The society must come forward and give a more holistic definition to success which is currently driven by power ignoring other vital aspects. If you consider Jim Carrey is successful then look what he has to say “I hope everybody could get rich and famous and will have everything they ever dreamed of, so they will know that this is not the answer.” Come out of the rat race because even if you win it, you will remain a rat. The basic assumption in economics that “human beings have unlimited desires,” was based on a limited and polluted understanding of human beings. All the laws in economics was based on this basic assumption which itself went wrong and thus we kept on encouraging greed, ego and hidden fear. Most of us mistake this as natural but if you go deeper you will realise it is all self created. GDP as a measure for growth has failed to bring about a holistic development of human beings and the Human development index (HDI) is just an out of the box solution. Gross Universal Index (GUI) is what I have discussed in my book “Next What’s In” which brings about a seamless integration within and with the outside world by dissolving all the internal boxes. Therefore, I say, “He is very poor. He only has money”.
Santosh Sharma is Founder of Conscious Advisory Services (CAS); Mentor of International Growth and Leadership Foundation and author of the bestselling book ‘Next What’s In. His next book, soon to be released, is called ‘Dissolve the Box’ september 2012
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in practice
COLLABORATION
CIO & CFO: Two Faces Of A Coin Both the CIO and the CFO are equally important for an enterprise to achieve the designated goals it sets to achieve Atanu Kumar Das
O
ne crucial question that has been doing the rounds for the last couple of years is how relevant will be a CIOs role in the coming years considering that a lot of information technology can now be outsourced by any enterprise. There are also suggestions that a CFO can very well do the job of a CIO. With changing business needs, the job of a CIO is less of technology deployment and more of business growth in the company. Some analysts have also pointed out that a CIO who has a sound knowledge in finance can also do the job of a CFO. So, the important question is, can any organisation run without a CIO or a CFO? Can a CIO do the job of both the CIO and CFO or can a CFO do the job of both the CFO and a CIO? Here we will try to find the answer to this complex question, and also highlight the other critical changes that are happening in the CIO and CFO domain. 32
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How relevant is a CIO today? Many organisations are outsourcing their IT needs, but does this mean that they can do without a CIO. CIOs and CFOs across different verticals think that with the dominance of IT in everybody’s life, the life of a CIO is far from over. Rather his/her job becomes far more critical for the organisation. According to Rajeev Batra, CIO, Sistema Shyam Teleservices, “If we talk about an organisation outsourcing the work of its technology department, then too someone in the company has to take the responsibility of owning the job. Someone has to interact with the outsourced company to get the work done in the proper manner. According to me, a CIO’s job will never be redundant. I remember reading an article in Gartner five years ago that CIOs will become redundant, but they still exist and their job has become more dynamic than what it was before. A CIO should ensure that
that his organisation should be ahead of the technology curve and be costeffective in whatever project that he/ she implements.” Sathya Kalyanasundaram, Director Finance & Operations, Texas Instruments, feels that technological requirements can now be outsourced in an extremely efficient and cost effective manner. But that doesn’t mean that an organisation can run without a CIO. He says,“I do believe the need for a thought leader such as a CIO is important in organisations that are looking to create long-term sustainable value to their shareholders, employees and the consumers in general. The value that a thought leader in IT can bring from imbibing the culture, strategy and vision of the organisation, and helping achieve these objectives by implementing effective technological solutions, cannot be measured.” According to Giri Giridhar, President–Finance, Wockhardt Global, “I don’t think that the job of the CIO is
in practice
“A CIO should ensure that his firm should be ahead of the technology curve and be cost-effective” —Rajeev Batra, CIO, Sistema Shyam Teleservices
getting redundant. On the contrary, it is going up. Technology is reshaping the business and operating models and the role of the CIO is up there in enabling the companies to keep up in order to be competitive.” One of the important thing that comes out of this is the fact that a CIO today needs to upgrade his skill set and be aware of finance and business dynamics to ensure that his position in the company is viewed with equal importance like that of a CFO. On the other hand, a CFO also needs to get close to the CIO and understand technology so that they both can work
together and implement the best possible solutions in their organisations.
Upgrading the skill-sets Gone are the days when a CIO needs to have only technical skills. Today, a CIO is much better off if he possesses finance background. It not only helps him to understand the business better but also ensures that his interaction with the CFO becomes much more enthralling and understanding. According to GG Rao, CIO, HCL Infosystems, “Today, a CIO is also the
finance guy. I have done my Masters in Technology and then after 10 years of my job, I did MBA from IIM Calcutta where I got to learn a lot of things starting from operational excellence, human resource behaiviour and all this helped me a lot in my job as a CIO. After I did my MBA it helped me understand the business benefits much better. For example, when I am implementing SAP in HCL, then I realise that I can appreciate it much better than someone who has only technical background.” He adds, “I also believe that today, business managers must have a MBA degree or some finance background. Whenever, there are candidates who come for interview I ensure that I interview those people who have some business background because in the long-run, this is going to help them grow in the company.” Batra feels that transformation from technological to business side is crucial for a CIO and some CIOs can do it on the job without getting a finance degree, but having a finance background is definitely an added advantage. “My transformation as a CIO started around 10 to 12 years ago when I did the first outsourcing job for the company and this project allowed me to understand the business dynamics of the organisation. Having a finance background definitely helps because you understand what are pros and cons of doing a particular project in money terms,” said Batra. This transformation holds true even for the CFOs as they are also making efforts to understand technology and be close associates of the CIO in most of the projects implemented. According to Kalyanasundaram, “As the CFO, I believe it is essential to understand the technological and operational expertise that the IT organisation brings to the table. It is equally important for the IT organisation to be aware of the overall strategy of the organisation and how IT can help enable / drive the same. The cost mindset is important but it is more imporseptember 2012
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in practice tant for the CFO to create a value mindset within the IT organisation. Driving long term sustainable value in operations will help increase operating and financial effectiveness. Thus, technological solutions driven by the IT organisation will drive greatest performance when their expertise is leveraged with a proper value mindset.” Rao feels that he is lucky to have a CFO who is actively involved with IT projects because the latter is also responsible for part of the business within the organisation. The CFO also actively participates in all the IT projects that goes around in the organisation. “I am lucky that I have for a CFO who understands technology thoroughly and reviews every ongoing project. He also doesn’t always look for return on investment (RoI) when sanctioning a project as he himself is working as a business head of a particular department. I believe that a CFO today has to be closely associated with technology if the organisation’s future is assessed,” adds Rao.
The key to success for an organisation is when the CFO and the CIO strikes the right balance and working in tandem to achieve organisational goals. It is imperative that the CIO and CFO understand that at the end of the day, the objective is to achieve the set goals and not step on each others’ shoes. According to J.S. Puri, Former CIO, Fortis and Mentor, Strategic Management Solutions, “It is in the interest of an organisation to strike a fine balance between the roles of the CIO and the CFO. Meanwhile, for a CIO to hold his own, there is a need for him to take up additional responsibilities. He should not limit himself to the IT department and should instead handle additional roles. This would not only increase his stature within the organisation but also add value to his own profile. Puri further adds, “A CIO should also grab whatever opportunity he gets 34
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“It is imperative for a CIO and CFO to work together and bring the best of each other to the company’s plate” —Anup Vikal, CFO & Head of Strategy & IT, Interglobe Enterprises
to make his presence felt within his organisation. This opportunity could be in a meeting with the top management. The CFO should realise the fact that he can’t work without the support of the CIO and vice-versa. The two should collaborate if they have to take their company to the next level of growth.” According to Anup Vikal, CFO and Head IT & Strategy – Interglobe Enterprises, “I have been handling both the portfolio’s of a CIO as well as of CFO in this organisation for the last two and a half years and one has to have immense knowledge of both the domain to do justice to the positions. I have worked
with the organisations where the CIO and CFO are on the governing body because these two are key positions in an organisation. It is imperative for a CIO and CFO to work together and bring the best of each other to the company’s plate. Both have to collectively work to enhance the growth of the organisation.” Both the positions of CIO and CFO are equally important for an organisation. The debate of whether CIOs position will be relevant in the future will solely depend of how CIOs strengthen their with skills apart from technology and become leaders in their organisations.
jiten gandhi
Striking the right balance
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Case
Study
Project Map The challenge: Training, re-training and retaining manpower to increase productivity and efficiency TIMELINE: Ongoing People Involved: Finance, HR and Operations teams KEY CFO TAKEWAYS: Finance strategy has to keep in mind employee demands since every infra project is like a different business and there is no common solution
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Case Study
Monetary Mantras for Managing Manpower The challenge of training and retaining skilled manpower is one of the biggest issues for infrastructure firms. And budgeting for safety of the workforce is no easy task either. N.K. Kakani, Executive Director & CFO of Simplex Infrastructures Ltd tells us how the company is meeting these challenges head on Purva Khole
jiten gandhi
I
nfrastructure projects are all about the long haul. The Returns on Investment (RoI) sometimes comes after a decade. But the part where the RoI is almost always visible within a short span of time, is in the area of training manpower to increase their productivity. Simplex Infrastructures – one of the larger players in the infrastructure sector India has road and rail projects across most geographical locations. On an average 12 per cent of its revenues come from overseas projects. In fact it is the varied nature of its projects that leads to the challenge Kakani and his team face all the time. The company has a presence across
nine verticals in the civil construction arena. This includes roads, bridges, flyovers, power plants, ports, high rises and railways among others.
The Challenges “Since growth in the infrastructure sector in the last four to five years has been good, managing the growth profitably and sustainability has been a big challenge,” says Kakani. This is where the ‘manpower management and efficiency’ challenge kicks in. Shortage of construction workers, especially skilled ones, is an ongoing problem. In India, there aren’t professional construction workers also there is no formal training for masons, car-
penters, plumbers, fitters, electricians etc. “Getting manpower is always a challenge compared to getting white collared employees,” says Kakani. “For a majority of our projects, we have to employ the local populace for construction work and since the old system of one generation passing on a skill to the next, is gone now, we at Simplex decided to fill that gap as a policy and created a budget to identify local boys and train them in various building skills. For example, if an unskilled labour who gets paid `3,000 a month, earns about `6,000 a month after he gets trained by us, the job becomes sustainable for him as well as a more lucrative one. september 2012
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Case Study
“If an unskilled labour who gets paid `3,000 a month, earns about `6,000 a month after he gets trained by us, the job becomes sustainable for him as well as a more lucrative one” “In this way we manage to not just train, but retain talent as well – so the RoI is good,” smiles Kakani. Another ongoing challenge says Kakani, is managing the working capital. “We are cash contractors, so we aren’t supposed to finance the clients working capital requirement but Indian practices are such that if a client does not get money in time, they squeeze the vendors. If you look at the infrastructure industry as a whole, financing is of six to eight months of working capital. Within the industry, we are doing well, our net working capital is 115 days, which is quite good. But we have been growing at almost 29 per cent for the last 10 years, so this has resulted in the need for infusion of sig38
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nificant working capital for construction equipment,” he says.
How are they being tackled The company currently manages more than 200 construction sites. “As I mentioned, one of the most effective methods we are using is to invest in the local talent, train them, make them more skilled – so that they stay with us and earn more,” he says. Training construction workers and keeping a flexible budget for this is no easy task however, since the cost varies greatly from site to site and area to area. So a novel way that Simplex has come up with is to create ‘champions’ from the best of the ‘trained’ workers and then deploy these men and
women as ‘trainers’ in other locations. “We have tie ups with institutions like the CIDC-run NICMAR. Also we hire fresh engineers and train them to be construction engineers through NICMAR courses and on-the-job training. CIDC, NICMAR and Simplex have also joined hands to train unskilled labour in batches,” he reveals. Clearly finance is playing a larger role than just creating a budget for manpower training here! In case of working capital challenges, Kakani and his team have sometimes gone beyond their call of duty to solve a pressing problem. As he says, each infrastructure project is like a separate business, so there is no ‘one-solutionfits-all’ answer that he and his team can come up with. “Sometimes, a client has a problem raising money, so we offer to finance them upfront so that they can present their project better and get better and quicker financing. This way a project gets a faster approval. So in a way, we solve a clients problem which then solves our problem,” he laughs.
Lessons Learnt In such cases when the challenge is ongoing, the ‘lessons’ can be tricky at times. But the one true learning for Kakani has been that a CFO and his team cannot ever rest on their laurels. Monitoring is essential. “Every person who is trained, is re-trained after a fixed period of time. Re-training is required for safety reasons as well. We have made it is compulsory twice a year. Safety is a huge matter of concern, so there is a safety drill everyday,” he says. Another thing he learnt is that constant supervision and action is required because in all infra projects, there are a lot of young boys and girls working and they can tend to act on impulse. “People skills are also important because we come across different kinds of people with different personalities. Understanding your people and creating strategies based on their needs, is essential. Even for a finance professional, the happiness of employees, the manpower is crucial,” he concludes.
insight
LEADERSHIP
Why bad multiples happen to good companies A premium multiple is hard to come by and harder to keep. Executives should worry more about improving performance Susan Nolen Foushee, Tim Koller, and Anand Mehta Foushee
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E
arnings multiples, particularly the price to-earnings (P/E) ratio, are a common shorthand for summarising how the stock market values a company. The media often uses them for quick comparisons between companies. Investors and analysts use them when talking about how they value companies. That there are generally more detailed models behind the shorthand seldom makes the headlines, and this contributes to a problem: executives who worry that their multiple should be higher than the one the market currently awards them. “We have great growth plans,” they say, or “We’re the best company in the industry, so we should have a substantially higher earnings multiple.” Their logic isn’t necessarily wrong. Finance theory does suggest that companies with higher expected growth and returns on capital should september 2012
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insight have higher multiples. And the theory held true when we analysed large samples of companies across the economy. However, within mature industries, our analysis showed that regardless of performance, multiples vary little among true peers. Companies may occasionally outperform their competitors, but industry-wide trends show a convergence of growth and returns that is so striking as to make it difficult for investors, on average, to predict which companies will do so. As a result, a company’s multiples are largely uncontrollable. Managers would be better off focusing instead on growth and return on capital, which they can influence. Doing so will improve the company’s share price, even if it doesn’t result in a multiple higher than those of its peers. Many executives who worry that their multiples are too low are simply comparing their company with the wrong set of peers. In one case, we found that executives were comparing their company’s earnings multiple with those for a set of companies in a faster-growing segment of the market than their own. While the company aspired to shift more activity to this segment, its current level of activity was generating less than 10 per cent of its revenues at the time of the analysis. Because investors evaluate companies
Companies that are growing faster than their peers today are not likely to continue growing faster than their peers for the next five years based on what they are, rather than what they aspire to be, the multiples analysis was flawed. The only relevant comparable companies, for the purposes of multiples analysis, are those that compete in the same markets, are subject to the same set of macro economic forces, and have similar growth and returns on capital.
Exhibit 1: Leverage distorts P/E multiples
The operations of 2 companies are equivalent, except that 1 is financed partially with debt and the other is financed only with equity In this example (which excludes taxes), the company with higher debt will have a lower P/E 1 ratio
Company with debt
Company with only equity
50
50
–20
0
30
50
Enterprise value (EV)
1,000
1,000
Debt
–500
0
500
1,000
EV/EBITA
20.0x
20.0x
Debt/interest
25.0x
N/A
P/E ratio
16.7x
20.0x
Earnings (EBITA2 ) Interest Net income
Market capitalization
1 Price-to-earnings
ratio. before interest, taxes, and amortization.
2Earnings
40
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Some multiples are also better than others for comparing performance. Ubiquitous as the P/E ratio is, it is distorted in its traditional form by differences in capital structure and other non-operating items. For example, as Exhibit 1 illustrates, when one company is financed partially with debt and the other is financed only with equity, the one with higher debt will have a lower P/E ratio, all else being equal, even though they have the same ratio of enterprise value to earnings. As a result, most sophisticated investors and bankers compare companies relative to peers using an enterprise-value multiple 1— usually either EV/EBITA or EV/EBITDA. Such multiples are preferable because they are not burdened with the distortions that affect earnings ratios. Yet comparisons based on enterprise-value multiples typically reveal a very narrow range of peer-company multiples. A closer look at the US consumer-packaged-goods industry is illustrative. From 1965 to 2010, the difference in EV/EBITA multiples between top- and bottom quartile companies was, for the most part, Less than four points, even though the industry is fairly diverse, including companies which manufacture and sell everything from household cleaners to soft drinks. When we examined more closely matched peers at a given point in time, we found even narrower ranges: for a sample of branded-food companies, for example, EV/EBITA multiples ranged from 10.6 to 11.4. For medicaldevice companies, the range was 8.4 to 9.7. In ranges this narrow, any differences between true peers at a given point in time are typically unremarkable. A company’s position in the ranking is likely to be quite variable simply as a result of normal share price fluctuations. One explanation for the narrow range of multiples is that investors, as a population, tend to assume that all peers will grow at roughly the same rate. Whether or not executives think this is reasonable, the evidence is on the side of the investors. Companies that are growing faster than their peers
insight
According to finance theory, companies with higher returns on capital than their peers should also have higher multiples—but in fact, these companies’ multiples are not as high as one might expect if investors believed their stronger returns were sustainable today are not likely to continue growing faster than their peers for the next five years. Across the economy, we have found substantial convergence of revenue growth across companies (Exhibit 2). Even energetic efforts to communicate to investors that a company will grow faster probably won’t help, since almost all companies predict they
will outgrow their market. And while equity analysts sometimes forecast that companies will grow at different rates, investors know that analysts are consistently overly bullish as well. According to the finance theory, companies with higher returns on capital than their peers should also have higher multiples—but in fact, these compa-
nies’ multiples are not as high as one might expect if investors believed their stronger returns were sustainable. As with revenue growth, the logic could be that investors assume that incremental returns on capital across the industry will converge or that competition will bring them down toward the cost of capital. Once again, the investors have
Exhibit 2: Outperforming peers on revenue growth can be difficult to sustain
US nonfinancial companies 1 grouped by comparable revenue growth at time of portfolio formation Median portfolio growth,%
Growth rate at portfolio formation
>20%
35 30 25 20
15–20% 15 10–15% 10 5–10% 5 <5%
0 –5
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Years since inception of portfolio with inflation-adjusted revenue ≥$200 million that were publicly listed from 1963–2000. We divided companies into 5 portfolios based on their growth rate at the midpoint of each decade (1965, 1975, 1985, and 1995). We then aligned the portfolios chronologically from Year 0 to Year 15 and compared their median growth rates. Source: Compustat; McKinsey analysis
1 Companies
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insight
Exhibit 3: Investors may be skeptical of high ROICs that exclude goodwill
Example of US packaged-goods companies ,1 n = 109 Median return on invested capital (ROIC) , % 34 32
Without goodwill
30 28
+17 percentage points
26 24 22 20 18
With goodwill
16 14 12 10 1963
1968
1973
1978
1983
1988
1993
1998
2003
2008 2009
1 Companies
with real annual revenue >$1 billion for any year between 1962 and 2009; excludes companies with ROIC >10%, with or without goodwill.
some evidence on their side, and the packaged-goods industry is illustrative (Exhibit 3). To be sure, the power of their brands have helped companies in the industry increase their operating returns on capital over the past 15 years. But operating returns exclude an important piece of the balance sheet— the premiums over book value paid in acquisitions, or goodwill. Some companies in the industry have used the cash flow that comes from having high return on invested capital to make acquisitions with lower return on capital. As a result, the industry median return on all capital including goodwill has remained within a tight band, between 15 and 19 per cent. Investors as a whole appear to assume that acquisitions will continue to eat away at returns on capital. And they tar all companies in the sector with the same brush. Companies might argue that they are more disciplined than their peers, but investors aren’t buying it. There are exceptions, of course, among a few companies with a truly 42
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durable competitive advantage. For example, from the mid-1980s to the middle of the last decade, Wal-Mart’s unique business model earned it premium multiples as it consistently posted double-digit top-line growth, far higher than for most other retailers. But today, Wal-Mart has become so large that it is less likely to outgrow the economy, and its multiple has fallen into line with those of its peers. Starbucks, similarly, earned premium multiples for over a decade beginning in the mid-1990s, during a period of rapid expansion. But as its rate of store openings and top-line growth have slowed, its multiple has also fallen. Of course, not all investors will be so skeptical about a company’s ability to outperform its peers. After examining the company’s track record, its competitive position, strategy, management strength, and credibility, sophisticated investors—including those we have elsewhere called intrinsic investors do place their bets that some
companies will outperform others. These investors are looking to purchase the shares at an attractive price and minimise their downside risk. Sometimes they turn out to be right, though they may not have enough buying power to push the companies’ multiples to a sustainable premium to peers. And in fact, they are likely to stop purchasing if share prices rise to include even a small premium. Clearly, executives focused on having the highest multiple are missing the point. Rather, as companies with high total returns to shareholders (TRS) know, executives should focus on the amount of value they create— with regard to growth, margins, and capital productivity. Doing so won’t necessarily lead to a higher earnings multiple, given the trends we have outlined. Take, for example, the TRS of US household-products manufacturer Church & Dwight compared with the broader consumer-goods sector. Over a 15-year period, the company grew, both
insight
Executives should have realistic expectations about how much they can raise their share price above those of peers through investor communications organically and through acquisitions, as it effected a turnaround and reshaped its portfolio of businesses. The company’s EBITA margins increased by 13.9 percentage points, compared with only 2.5 percentage points for the median company in the sector, and its TRS beat the sector and the S&P 500 handily— yet its earnings multiple fell from 16 to 10. This is likely because its multiple
had been high at the outset, in spite of low earnings, suggesting that investors had assumed earnings would gravitate toward the median for the sector. Finally, executives should have realistic expectations about how much they can raise their share price above those of peers through investor communications. Although such communications seem like a natural first step if inves-
tors truly fail to see the value in, for example, a company’s product pipeline or geographic expansion, jawboning has its limits. Eventually, investors as a group are likely to revert once again to their perceptions of convergence. That doesn’t mean companies should abandon communications entirely. Communicating with the right investors, and making sure they understand the company’s performance and strategies, can at least keep a company’s share price aligned with peers’.
Susan Nolen Foushee (Susan_Nolen_ Foushee@McKinsey.com) is a senior expert in McKinsey’s New York office, where Tim Koller (Tim_Koller@McKinsey.com) is a partner and Anand Mehta (Anand_ Mehta@McKinsey.com) is a consultant. Copyright © 2012 McKinsey & Company. All rights reserved.
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leader’s
world
Sustaining a Winning
Culture Creating a win-win situation at work and sustaining it can drive great results for the growth and development of the organisation David Lim
ABOUT THE AUTHOR David Lim, Founder, Everest Motivation Team, is a leadership and negotiation coach, best-selling author and two-time Mt Everest expedition leader. He can be reached at his blog http:// theasiannegotiator. wordpress.com, or david@everestmotivation.com
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A year ago, we concluded a global poll which comprised about 20 per cent C-suite executives, 20 per cent Vice Presidents and 60 per cent office professionals with a sample size of just over 1,000 respondents. In this poll, we found out, which they believed were the five most under-rated leadership skills. Here are the five skills that were identified as being rather underrated: • Negotiating skills • Managing expectations and performance • Creating a winning culture at work • Winning buy-in • Strategy implementation In 2011, the ‘winner’ by far was ‘Creating a Winning Culture at Work’. This had over 50 per cent of the votes with the distant second placed ‘Managing Expectations and Performance’ with just 22 per cent of the voted. Around the same time this year, we ran exactly the same poll, albeit with a reduced base of respondents. We found that the winner, by a significant margin once again, was ‘Creating a Winning Culture at Work’ with 43 per cent of the votes. The second place would have gone to the same leadership skill (‘Managing expectations..’), but was replaced by ‘Winning Buy-in’ at 25 per cent.
leader’s world Last year, in this publication, I explored three key points as to why a ‘winning culture’ could drive workplace results, and three ways how to create one; these were: 1) Cultures drive behaviours 2) It’s free 3) You don’t have to police a culture. To create one, you needed to a) Assess the present culture if one exists to see how far it is from the desired state, b) Identify culture ‘champions’ who would, by their actions and behaviours, drive the culture c) Celebrate successes to further encourage winning attitudes. So, how do we now sustain the culture we have (hopefully) assiduously been cultivating? The secret lies in to keep doing what we are good at. Time and history have shown that whenever we try to extend our brands and buy into a business we don’t not truly understand, we take huge risks, and often fail. By being great at what we do, we keep winning, and a winning team has the confidence to know what it takes to secure the next contract, or agreement. In reality, many organisations that succeed at winning soon, forget to remind themselves what they did in the past that helped them succeed. They also need to keep celebrating what brought them to their present apogee or pinnacle of success – so the issue of ‘celebration’ I raised in 2011 is still the key one. What else? If you have been watching the Olympic or professional team events, you will notice how team managers often insert a key culture champion in the team at a key moment or from the onset. Think of the influence of Usain Bolt on the Jamaican sprint relay team that brought them gold medals and record timings. Think further back, as to the influence of Tenzing Norgay on his team of Darjeeling sherpas in 1953. As the most experienced high-altitude mountaineer of the expedition (even compared to the British mountaineers), he was widely seen as the ‘leader’ and driver of a key part of the whole machinery that eventual won the summit of Mt Everest that year. At the start of the expedition in Nepal, they were slighted in Kathmandu by the British High Commissioner, who made the whole sherpa contingent take quarters in the stables, while the British Commonwealth members made do in the much more salubrious diplomatic quarters. The sherpas, to show their displeasure, lined up against a wall nearby and emptied their bladders in full view of the rest of the expedition. John Hunt, the expedition leader never forgot this letdown, and worked hard shortly afterwards in forging a team on the mountain that was united. In an effort
“Sustaining a winning culture involves engaging with your culture champions, and acknowledging their contributions” to display mutual trust, this made Norgay and full and equal member of the team. Sustaining a winning culture involves engaging with your culture champions, and acknowledging their contributions. You will also notice that this has been widely recognised as a key performance motivator in younger workers, or Gen Y, as they are sometimes called. Just because your generation didn’t value a little deserved stroking here and there does not mean the upcoming one shares the same position. Last but not least, sustaining wins over the long run and the engagement required demands high quality listening. By listening, you will be able to not only engage champions and the rest of the team, but also calibrate your own leadership style and pace. I like Doug Larson’s take on this when he said, “Wisdom is the reward you get for a lifetime of listening when you’d have preferred to talk.” So that’s it, keep doing what you are good at, engage and use your culture champions tirelessly, and listen attentively – these simple actions will help your organisation sustain a winning culture. David Lim is the Chief Motivation Officer of the organisational and team development firm Everest Motivation Team. He is best known for his leadership of the 1st Singapore Everest Expedition in 1998. Get to the top at http://www.everestmotivation.com september 2012
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Lounge
09.12
CFO
This month, we test the Renault Scala which offers great driveability and highway performance. Wanna go for it? Visit Bastar and get drenched in nature with the breathtaking waterfalls that spell energy. Get smart and catch up with whats happening around the world and your favourite shows on the Samsung UA55ES-8000 RLXL.
Renault Scala
Mission: Scale-up!
A Nissan Sunny under the skin with a more beautiful face, the Scala is an attempt by Renault to ramp up their operations in the country. Is the Scala good enough? Amit Chhangani The Scala is to Sunny, what the Pulsae was to Micra â&#x20AC;&#x201C; a visually tweaked version of exactly the same car. Renault, however need to be credited for having carried out the design exercise with an air of French panache. The Scala managed to look reasonably better than the Sunny, its original incarnation.
Design The front end, thanks to the big hexagonal nose that combines the radiator grille and central air dam lends the Scala a face which is aggressive, stylish and purposeful. Angular surrounds for the fog lamps contribute their bit to the chiseled, athletic look. The face of the car may have looked
DID YOU
KNOW?
The Renault corporation was founded in 1899 by Louis Renault and his brothers Marcel and Fernand. The first Renault Voiturette 1CV was sold to a friend of Louisâ&#x20AC;&#x2122; father after giving him a test ride on 24 December 1898.
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on Wheels a tad too belligerent without the silver. The profile of the car is rather simplistic, and matches the Sunny completely, except for the chrome lining on the window sills and a different design for the alloys. At the rear, the designers have worked their magic, and made the Scala look better than the Sunny.
the profile of the car is rather simplistic, and matches the sunny completely except for the chrome lining on the window sills
Engine and gearbox Powered by the familiar 1.5 liter (1461cc) K9K diesel engine with a peak power output of 86PS at 3750 rpm, the engine is mated with a five speed manual gearbox. We chose to drive the 1.5 liter diesel variant, for obvious reasons. The K9K engine is known to be an efficient, reasonably powerful power plant with acceptably linear power delivery – and the traits were amply exhibited by this iteration of the mill as well. The engine noise was surprisingly low. The engine begins building momentum from 1500 rpm on, and provides enough thrust at around 1800 to overtake average traffic on level highways. The Scala is a decent performer, with most of its juice residing in the mid revs.
Cabin features Being a Sunny under the skin, and sharing all its USPs, the Scala too offers unmatched back seat legroom for the segment. From inside, the Scala is exactly same as the Sunny, with that circular center console, grey-beige interior, and an air-recirculator for the back benchers. The only difference we could spot was the glossy finish gearstick with leather inserts on the top-of-the-line RxZ variant, unlike the plastic finish on the Sunny’s Shifter. The stereo delivers decent sound, but doesn’t have a USB-in slot. Steering mounted audio controls, twin airbags, tilt-adjustable steering wheel, height adjustable driver’s seat, remote bootfuelcap-bonnet opener and auto folding electric ORVMS – the Scala’s cabin has ample functional features.
Scala ENGINE: 1.5 liter petrol / diesel Power: TORQUE:
86PS / 99PS 200Nm / 134Nm
Price:
NA
Positives • Acres of legroom in the backseat • Good fuel efficiency • Nice aesthetics Negatives • Average looking interiors • Renault’s limited sales and service network VERDICT The Scala, isn’t a car meant to thrill. It’s an everyday car with acceptable driveability and reasonable highway performance.
Handling and ride quality As we mentioned earlier, the Scala isn’t a car meant to thrill – the trait is evident in the way the car handles too. The light steering doesn’t quite have the feedback you require to feel what’s happening under the running board. Having said that, the steering feels neutral in a straight line as well as around bends. There is no irksome torque steer, and the Scala offers a comfortable steering experience to those who aren’t too fond of hurtling their machines wildly around the first corner they spot. The Scala behaves admirably well for its size around corners and offers a predictive set of four wheels.
Summing it up Nissan Sunny is a success, for it represents terrific value for money, for it ticks all the right boxes, keeping out only the frills. The Scala offers all that, and then aces its cousin with a far more desirable design. For the same price, given a choice to pick between the two, I would any day get behind the Scala’s wheel. If, however, Renault, plan to charge a hefty premium over the Sunny, it may just be their undoing. september 2012
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Gizmos new launches
Galaxy Note 10.1 1.4GHz quad-core processor, 2GB of RAM, a 10.1 inch 1280x800 display, 5MP rear and 1.9 MP front camera, USB 2.0, MicroSD expandable memory and of course Android 4.0 Ice Cream Sandwich. Can it take on the iPad? You’ll have to spend close to `32,000 to find out.
Hot Spot
Samsung UA55ES8000RLXL Smart TV Have money? Should buy! Vishal Mathur
There are a lot of shiny elements to this TV despite sporting a brushed finish. The TV features a split stand that’s sturdy and looks brilliant. The bezel is also very slim and even manages to integrate a webcam. The TV comes with two remotes: a conventional one and a touch sensitive remote as well. The latter is essentially a stripped down version of the primary remote, with only the very essential buttons on it, the major area being taken up by the touchpad. Compared with say, LG, the Samsung Smart Hub offers a lot more variety in terms of apps. It also allows for network sharing so media can be directly streamed to the TV. This Samsung TV showcases its smartness via the unconventional control methods that it features. First up is voice control, which works surprisingly well. It did not seem to have any issues with accents or ambient noise and man48
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aged to understand our commands without any problem. The second method of control is via gestures. The webcam tracks your movements, we wouldn’t recommend it though. We found that its contrast ratio stood at 983:1, a decent score. Colour reproduction is nice and even and watching HD movies via Blu-ray is fantastic. We played 3D content off a 3D Blu-ray disc and also tried 2D videos in 3D mode, converted via the TV. In both cases, the effect was quite good, even for non-3D content. Worth buying if you can afford it. Specifications: Size: 55-inches; Panel type: LED, with micro dimming; Ports: 3 HDMI, 3 USB ports, composite, component, Ethernet, integrated Wi-Fi, optical audio out; Clear Motion Rate: 800Hz; Active 3D: Yes Price: 2,67,000
Canon EOS M Canon’s first mirrorless compact, the EOS M has an 18-megapixel APS-C sensor. The magnesium body houses a DIGIC 5 processor, and the camera can shoot upto up to ISO 12,800 and 1080p video at 24, 25, or 30 frames per second. The camera will set you back by approx `45,000
Samsung Galaxy S Duos Featuring a 4-inch screen TFT (480 x 800) and powered by a 1 GHz processor the latest Duos has the ability to run two SIMs at once. Use data on one and answer calls on the other for instance. It’s got a 1500 mAh battery and 4 GB of internal memory. No word on pricing though. powered by
ad Re Y st OG Mo L E ’s NO ZIN dia CH GA In TE MA
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M&E
India’s coolest Meeting & Eating places
A Colonial Weekend The Citrus in Mahabaleshwar is no five star. But it has good conferencing facilities and the breathtaking views make up for any other shortcoming Dhiman Chattopadhyay Mahabaleshwar is not the first name that comes to mind when you think of hill stations (unless you are a Mumbaikar) since at 4500 feet, it is a relative dwarf to the likes of Darjeeling, Manali, Ooty or Shimla. But there are two things that make it stand out. Unlike the other hill stations mentioned earlier, Mahabaleshwar retains much of its quiet charm. It is surrounded by forests and has an easy paced way of life. But to me the biggest charm were the old, renovated British bungalows, some of which have been converted into three-star hotels. The
THE CITRUS Location: Mahabaleshwar Reaching there: 5 hrs drive from Mumbai, 2 1/2 from Pune USP: Good conferencing facility + family entertainment options Reservations: +91 2168 260432 / 632 1800 3001 4001
the suites are larger than any average mumbai 2bhk home with a large balcony overlooking the lawns
Citrus is one such, spread over five acre of lush green hilly terrain. The hotel has 29 deluxe and standard rooms and six luxury suits (named after different British governor generals). The Canning Suite where we stayed, was larger than an average Mumbai 2BHK, with a large balcony overlooking the lawns, a drawing and dining room, a large bedroom and a bathroom. Amazingly, for a hill station resort that doesn’t boast of five stars, the Citrus has good conferencing facilities. The banquet accommodates 60 heads in classroom style and 30 in ‘U’ style seating. Assuming one would come here with family even if the reason is a conference, the hotel has a outdoor play area, a giant outdoor chessboard, a swimming pool, a spa and options of playing TT, carom and chess indoors. Apart from the rainy season, the hotel also pitches small tents for guests who can sit inside them in the evenings and enjoy a ‘different kind’ of dining experience while listening to live music or watching a magic show. The food options are probably the only negative point. The hotel’s lone restaurant provides Indian, Continental and Chinese options, but the quality is quite average. Of course, a five minute walk from the Citrus will take you to the town centre with multiple dining options. It’s a hill station after all. So spend at least a day travelling around town visiting the many ‘points’ with breathtaking views, taking a boat ride on Lake Venna, visiting the famous Mapro factory (and their vast strawberry fields) in nearby Panchgani. If you are lucky, you might come face to face with a scared deer, closely followed by a panting jackal like we did! september 2012
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travel
BASTAR
The scenic beauty of Bastar Bleessed with cultural heritage, Bastar, lesser known amongst people offers breathtaking waterfalls and handicrafts Anil Mulchandani Rich in scenic heritage, Bastar district of Chhattisgarh offers a great package when it comes to scenic beauty. The place has Chitrakoot waterfalls which is one of the most voluminous ones in South Asia, caves with pristine formations of stalactites and stalagmites, and beautiful hill forests. Bastar is also known for its handicrafts and folk culture. To reach Bastar, we drove from the coastal city of Vizag in Andhra to Jagdalpur via the national highway that winds up at the Eastern Ghats through coffee-planted slopes, woodland and tribal villages before entering Orissaâ&#x20AC;&#x2122;s iron-rich zone and proceeding to Jagdalpur. After checking in a good hotel, we set out to see the Chitrakoot waterfall, which is said to have about two thirds as much water as the famous Niagara Falls. Though the height of this fall is not exceptional, the 300m width of the falls is simply breathtaking. The water tipples over a horse shoe shaped cliff in numerous cascades. In September just after the rains, these falls were at their roaring best. From Chitrakoot, we drove to the Kanger National Park. Here we had made prior arrangements with the forest department to visit one of the caves with a forest guard. We 50
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could discern the formations of stalagtites and stalagmites with the powerful flash lights and also got a remarkable sighting of a brightly coloured fungoid frog. Ram, the forest guard told us we had missed seeing a small group of the Greater Indian Hill Mynah (Gracula religiosa peninsularis), a magnificent bird with bright orange-yellow patches and purple tinges on a greenish black plumage. As we were driving through the forests we saw a swift-moving bronze-
cfo lounge
travel LEFT: water tipples over a horse shoe shaped cliff into numerous cascades BELOW:villages around kondagaon have active ngos that support the artisian communities
Dinesh Shukla
LEFT: stalagtites and stalagmite form in one of the caves in the kanger national park FAR LEFT: the rooms at the palace had intricate carved antiques, curios and old furniture
back tree snake and a variety of other birds. We drove along the Kanger River to the Tirathgarh Falls where water falls from 100 meters through three cascades. From Jagdalpur, we took the road to Kanker Palace, an attractive palatial mansion with a huge crest of the family on the rooftop set in sprawling grounds. The palace is set near a lake. Here we witnessed flocks of painted storks on trees in the surrounding area. We also saw wetland birds at a water body. At the palace, we tucked into a delectable home-cooked meal. Our rooms at the palace had intricate carved antiques, curios and old furniture.
The following day post lunch, we left for Kondagaon with our guide. This place is known for its handicrafts. The villages around Kondagaon have active NGOs like Saathi and Sanskriti that support the artisan communities. At Kumhar Para, we saw drying tanks filled with a black mud and red soil mixture which is passed through a sieve to remove any foreign particles. After drying, the soft clay mixture is made into a fine paste and given to potters for throwing on the wheel or hand-building into figures of elephants, horses, deities, tribal forms, etc. At another village, we saw wrought iron work. Here, the artisans would hand forge the metal and then heat it in charcoal and iron ore. First a clay model is made and a wax duplicate, called the positive, is cast according to this mould, and covered with a ceramic shell in a klin whose heat causes the wax to be lost. Metals melted in a furnace are filled into the shell quickly and precisely. When the molten metal alloy solidifies, much work goes into refining and finishing the surface of the sculpture that comes out of the shell. Woodcarving too is a multi-process craft in this region – separate people do the drawing, the carving and the finishing. Kondagaon is known for the famous bell metal figures that have come to epitomise Bastar. HOW TO GET THERE: Fly to Raipur or Vizag from where you can drive to Jagdalpur WHERE TO STAY: The Kanker Palace september 2012
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not just
the last word
‘Lakshman rekhas’ and more…
G
overnance, corporate reputations, ethics and integrity have been beaten to death - as mere words – in corporate conversations, workshops, training programmes and motivational speeches. But what does all this hype mean for us in our daily lives? Two recent incidents triggered me into thinking about this issue a little harder over the past weeks… The first was CFO India readers’ reactions to a talk given by one of the most senior and respected CFO, Hari Mundra, at our Annual Conclave in July. He talked at length about the realities of the world we operate in. He highlighted how, when lip service often dominates corporate culture and the translation of stated values into daily operations is weak – loftier objectives take the back seat in the face of performance and numbers. How there are expectations of ‘toeing the line’ of management decisions – this is even more acute in promoter driven companies. And therefore how CFOs have to be ever more cautious about tradeoffs expected of them. How they must be conscious and aware of their role and mandate – and make decisions accordingly. Readers asked whether we should accept this reality and succumb to it…
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The second arose in the process of ranking India’s top 500 high-growth, mid-sized companies for our Inc. India 500 list published every year. The pre-eminent jury asked us questions beyond performance and growth in these candidate companies. These related to the quality of growth, nature of business (pan masala – should a company manufacturing such products be recognised), disclosure standards, and finally the reputation of the promoter. For a variety of reasons, Inc. India only rates growth – it is an unimpeachable process. How would we be able to judge the other parameters? Is there any way to know what a company’s promoter will do in the future? Is he honest and will he stay honest? The list can go on.
These questions are tough to answer. If I place myself in a CFO’s shoes, how should I decipher the grey zone? Despite best intentions and high levels of integrity, people get into a bind. I find it hard to accept that we actually have the number of crooks that scams and frauds suggest in corporate India. Is it a combination of poor judgement and circumstances? Or have we really turned into semi-criminals? On the issue of disclosure and promoter reputations, where do we begin? Some of our largest conglomerates have thrived and grown despite an abysmal record on these parameters. On the other hand, honest businesses have died. What should drive you – organisational growth and survival or your own barometer of integrity and ethics? It is easy to point fingers each time a fraud occurs, muddy hard-earned reputations and declare people dishonest. But does each one of us know where to draw our ‘lakshman rekha’? I am not quite sure. What do you think? Anuradha Das Mathur, Editor, CFO India