Dis-incentivising Prostitution

From a brief scan across all the proposals and demands from the industry one gets a feeling that government is out to dis-incentivise their particular industry and government is doing a damn good job of this. But look at prostitution, the world's oldest business. Many a government has tried to ban prostitution (dis-incentivising of course) to no avail. The worst affected by the ban were the prostitutes. They were exploited by various people starting from pimps to law enforcement agencies. And still there is no end to prostitution. Hence many governments have taken steps to legalise the system. Can then the government learn from its exceptional good job in other industries and use it where it matters most?

The Horns of the Devil!

If we observe this business we understand that there are three core players, prostitutes, pimps and customers. Prostitutes are the exploited ones, they are there (in most cases) because they do not have alternatives, they are helpless. The pimps are middlemen. But most critical element are the customers! At least in India they always try and catch and prosecute the "prostitutes" but customers are often let free. It the customers you have to catch if you want to eliminate prostitution!!

How do you do it?

The first way government can di-incentivise this trade is by taxing it! Simply take the details of the customers and put an additional 10% tax liability on these people. Or if I were Finance Minister I would call it a cess and channel the money into health care for these sections.

Second deals with the way British enforced law in India during their occupation. They used two major weapons. No it wasn't the baton or gun, it was information and social pressure. Lets say, if government were to take a photo and details of every person who is caught with a prostitute and publish the same on some website. Or track connected near ones like office, friends, home and supply this information across these places. Will social stigma not cause the customers' to vanish?

The Dance Bar Phenomeon

Mumbai now has another issues and its Dance Bars which government was trying to ban. The Mumbai High Court recent allowed these dance bars to operate. Using our earlier logic we can work on an effective solution to the Dance Bar problem.

First way is to simply get details of people who come to dance bars, the amounts they spend and share this information with income tax. Or simply make entry in the bar subject to swiping / scanning of PAN card! (India's equi-valent of social security number for tax purposes)

Second again will be to share the details with the friends and near ones along with details being publicly posted on some common website. Regulars should be tracked and traced across dance bars.

In sum...

Basic economic sense can be used to contain a lot of industries, often these techniques are used on legitimate industries in era of control. Same techniques may be deployed where it actually matters. What Say??

Inorganic Growth and Organisations' Risk taking ability

As students of business we understand that organisations can be classified into three types based on their growth strategy. Primarily organisations follow, Organic Growth, Inorganic growth and some use both. In many industries there are examples of players resorting to organic growth whereas some resorting to inorganic growth. I always wondered why is it that some companies cannot grow rapidly in organic way?

Growth Risk and Organisational culture

Risks associated with inorganic growth are well-understood and documented. In fact, it is easier to take "inorganic growth" risk rather than "organic growth" risk. Also the risk is taken by top management. Logically Inorganic growth requires risk taking ability at the top of the corporate hierarchy whereas Organic growth requires risk taking ability that is distributed across the hierarchy.

This leads us to a reasonable hypotheses about the organisation culture. Organisations that emphasise more on inorganic growth may be risk averse, explaining the association of risk with the top management. Conversely an organisation with high organic growth is almost always flamboyant, empowered down to the line functions.

Inherent disadvantages of Inorganically growing organisation

When you extend the logic a little further you realize the implications of both these strategies.

For One, a flamboyant organsiation has its ranks full with "risk-taking" experience across the hierarchy. Hence succession planning is not much difficult. Such orgaisations can find within its ranks potential leaders, CEOs etc. On the other hand in a risk averse organisation the ranks have no experience in taking risks. So effectively any modifications in the current top management shakes the very foundations of such a company.

Secondly, it is difficult for such an organisations to take-up new take-over/ merger options because it cannot find within its ranks leaders who can take up the integration work post the merger. A flamboyant organisation can effectively take up inorganic growth and thus be even more successful.

Finally, even in the middle of merger, a flamboyant organisation is more likely to energize the other organsiation, with its people taking up most of the challanging positions in the merged entity. The risk-averse organisation has to either find leaders capable of taking up this challange or resign to domination from the other organisation. (This is not a generally seen conditions because "risk averse" organisations do not take-over flamboyant organisations because of cultural issues)

Is your organisation risk averse?

How can one deduce if his/her organisation is "risk averse" or "flamboyant". Well, even though there is no track-record of inorganic or organic growth it is possible to decide where your organisation belongs. Of all people employees can definately decipher the actual behaviour from stated slogans. I believe these are some hypothese that will expose the true behaviour of your organisation. There are more and I havent thought of all of them so let me know if you think of any other.

Lets look at following hypotheses:

• Hypothesis 1: "If it aint broke dont fix it!" A performing function in a "risk averse" organisation is almost never challanged. Top management just lets them be. On the contrary, in a flamboyant organisation, a new wave of strategic initiatives is undertaken to improve the best performing function. Check in the best performing department, is it subject to improvement initiative? Are the processes in place?
• Hypothesis 2: New initiatives are always led by top management or identified leaders. A "risk averse" organisation never risks a new initiatives with unknown leaders. And this means new initiatives are all big initiatives. On the contrary, flamboyant organisations have smaller new initiatives manned across the ranks. Such organisations do not wait for "proven" "sizable" opportunity rather they explore every possible opportunity with the resources they have. List out the major opportunities your organisation has gone after? Do you see familliar faces manning them? Do you see enough grass-root level opportunity exploitation?
• Hypothesis 3: Flamboyant Organisations have a Fast-track program for employees. Typically, a team that takes higher risks needs higher rewards and this shows in the flamboyant organisation. A typical fallout of this is high person in-dependance in such organisation. The top performers are often moved across departments across functions to man the new initiatives. A fast track program may be a structured program or un-structured program but the key point is every employee knows how he can be selected for this program.
• Hypothesis 4: Meritocracy must for Risk taking organisation! Most of the Risk taking organisations have a mechanism to reward the best employees. GE consistently separates the extra-ordinary from the ordinary!
• Hypothesis 5: In flamboyant organisations, new Ideas get heard, financed and manned at first level where decision can be taken on them. If you have pitched for a new idea and your boss has referred it to his senior and you have not heard anything about it from then on, most likely you are in a "risk averse" organisation. In flamboyant organisations if someone is responsible he/she takes the decision and gets it implemented.