Future Work 01 - Work not education makes people dumber!

How can we ensure that the workforce in a country continues to create jobs, create value and economic and other returns for its people in the current environment? The current environment is quite challenging for the employees. Those laid-off due to automation feel frustrated and find that they cannot find equivalent employment.

Economic value chains are changing rapidly. They are spreading out geographically. Skill obsolescence is quite high too with robots and computers being able to take up quite a bit of work. The profile of jobs is becoming polarised - extreme high value adding jobs (chip designer, chef, super specialist surgeons etc.) and extremely low-end (janitors etc.) Further, it is happening at an unprecedented pace.

On the contrary, the speed at which skills are being acquired and developed is quite slow. Thus, the people who have lost their manufacturing jobs to automation are not quite employable in similar pay-grade in as quick time. Two factors hinder in the process. First, the laid-off people are older and thus slower learners. Second, the skill spread is so wide that betting on the right skill, acquiring it and making a life by using it is difficult. Few unlucky ones have seen their new skills become obsolete too.

This dichotomy is a mismatch between the job profile of the economy and the skill profile of the economy. As the mismatch widens people feel more frustrated.

This wasn't the case in early years because of the nature of manufacturing jobs. The skills gained by the people working in the first factories were about organising and basic skills (turning, fitting etc.) These skills did not become obsolete only their demand did. But today these skills have been replaced by better fabrication machines and instrumentation. Thus, the skills that the workers have are not required.

The job profiles so developed as to reduce the judgement factor within the job. This makes people dumber as Adam Smith notes. Here is the quote from Adam Smith

"In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations, frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging, and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard with abhorrence the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance in any other employment than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilised society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it."

Thus drained of the vitality of growth, initiative, the determined decision-making, the application of thought and the generation of ideas, such worker is thrown into the open world which values exactly that. So it may have been work and not education, as argued by Sir Ken Robinson,  that makes people dumber.

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Combining Managerial and Economic theory of the Firm

Understanding Firm - A Manager's model of the Firm presents a new model combining managerial and economic theory of the firm.

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My book: Understanding Firms

My book Understanding Firms - A Manager's Model of the firm is now available. 

The book presents a unique model at intersection of economic and managerial theory. The model uses five elements - the concept of transaction chains, Coase transaction cost hypothesis, Porter’s bargaining power theory, a new way of profiling transaction and new types of roles undertaken by employees. 

This model provides insights into which mergers will work, how to make them work, how to promote disruptive innovation, how to manage knowledge oriented teams etc. It explains why sometimes our strategy fails, why we are blind to competition and inefficiency. This model provides a new framework for thinking about firms. This framework will help us make firms better.

I say the book is essential read for managers, investors and everyone who works in organizations. The kindle version is available at $5 (£ 3.50 and € 4.00) and print at $8 (£ 5.50 and € 6.50)

Let me know what do you think about ideas presented in the book.

Future of Financial innovation

There has been a lot of talk about financial innovation being bad for general populace. Economist blogs about it Financial innovation in the rearview mirror quoting Tyler Cowen and Felix Salmon. This pulls up a paralled to pharma industry in my mind.

Just like we have drug testing labs for pharma companies, we need labs and regulation for finance innovations too. In a sense, sub-prime was a drug being directly tested on population. The result is predictably disastrous. The Consumer Financial Protection Agency (CFPA) could take up such a role. Then, if pharma is any indication, we will have lot more innovation in the near future.

Pharma industry also created higher cost structure to foster innovation. The regulatory burden along with pseudo-barriers in the name of intellectual property created unaffordable costs. The opportunity before the CFPA is to set the benchmark for simplied, easy to athere but difficult to cheat, low cost regulatory structure. CFPA, all eyes are on you!

Newer Orgnisation Structures

One of my pet implication of the global slowdown is changes in organization structures. I think this is one of areas where organization-citizen relationships are going to be redefined. We are going to see restoration of balance in this relationship. Currently, organizations have disproportionate leverage that is being misused. It means new value-chains, new types of organizations based on skills.

No one has noticed but Apple just did that - the application part was moved out of the organization into public domain - modifying the traditional value chain that Friedman mentions.

Further I think organization-employee relationships are going to change fundamentally. We will have new loose forms of organizations that can fail easily and not become tighly controlled - economic behemoths that can hold entire economies to ransom. The new form of organisation will most likely have Schumpeterean creative destrution switch built into their DNA making them more efficient, vibrant through fail-fast, fail-safe means.

The Core of the organisation - the Honda story

I have read a lot of talk about Core-competency in the past decade. I have seen companies make a mockery of the core-competency issue. I often look at the top management and check how many of the top management team came from "core-competency team". In most - hardly any. Many in fact absued it so much that management gurus like Tom Peters were left screming on their blogs!

Organisations have to evolve an ethic of honouring its core-competency. Forbes highlights how Honda promotes in engineers to top ranks - and not marketers or accountants - engineers! This is the truest way to honour your commitment to "core competency".

Hat tip - Paul Buchheit

The economics of labour market intermediation | vox - Research-based policy analysis and commentary from leading economists

David Autor has a fantastic post on Vox on economics of labour market intermediation. Labour markets are imperfect and they are kept that way by interest of recruiters and employees. In the end both loose but still there is enough weight in status quo.

Let us consider an employer and a prospective employee. There is no way for the employer to know the employees performance in previous organisation. Therefore the metric is salary drawn currently.  Now if, by any chance, an employee accepts a job with lower salary then his salary growth is lower! This appears unfair - but its actually a manifestation of inefficient market at work. The only way this situation corrects is when imperfection on other side - i.e. you have a desperate employer. 

As per my experience the intermediaries actually twist this situation to the benefit of the employer. Hence most of the time employees distrust HR managers and intermediaries. That is the reason salaries are secret. Often even though companies treat everyone fairly - employees still feel distrust.

In sum, there needs to be two areas of research in this. First - does this behaviour actually benefit the employer at all. Second - does this distort the labour markets to an extent that it impacts the economy. My intuitive guess is no on first count and yes on second. 

Links:

The economics of labour market intermediation | vox - Research-based policy analysis and commentary from leading economists.

Strategy for Corporates’ under media scanner

Just today an employee is suing KPMG for sexual harassment at workplace. The company’s apathy towards her internal complaints forced the lady to involve media. The company, like many others, now finds itself in a precarious situation. A lot of its brand-building initiatives are nullified through one indiscretion of the management. Surprisingly Corporates are not able to deal with media attention. Yet corporate chieftains can draw parallels with two people to learn the do’s and don’ts of media behavior.

Learning the Don’ts
Her story would read like a normal girl’s tale if it weren’t for one critical detail. The name is Britney Spears. Britney was a siren who lured media with her simpleton charm. Media noticed her for her talent and then seduced her into letting her guard down. Relentless media pressure has driven her to wits ends. Once a girl media darling and now the one media loves to hate, Britney epitomizes the way one should avoid dealing with the media.

The do’s
On the contrary Sachin Tendulkar is still standing. From the time he was sixteen a billion people have been crazy about him. In India cricket is a religion and Sachin is the God. Yet that hasn’t affected him. He distances himself from the media and maintains impeccable conduct. The master blaster has always said that he will let his bat do the talking. And boy has he done that! Just today he became the second Indian batsman to score 1000 runs in 2007 and the first one in cricketing history to achieve the feat 7 times! Yet he rarely interacts with media and almost always gives rehearsed answers. To him media a siren whose lures with her song but like Ulysses he never left his boat.

In Sum
If you maintain an impeccable conduct and refrain from acting smart with the media you will go a long way in avoiding such blunders. Impeccable conduct and cautious nay over cautious approach is the best way to deal with the media.

"Basics" In stints

As I write this Indian cricket team is playing Sri Lanka in world cup. India, as usual, have got themselves into a hole early in the tournament by losing to a minnow team. What happened in that match often happens with Indians. To put it simply, India went wrong in basics. The cricketing basics were simple; bowl straight, close to the batsman, get a little bit of swing and field well. Indians went wrong in these basics while trying more esoteric ideas and experiements.

Importance of "Basics"

While Srinath discovered this fundamental truth in final series, yours truely has discovered this a long while ago. (If only the cricket team would ask me). Yet the question remains if I have discovered the "basics" related to my work. Frankly, I am not sure! As apalling as it sounds, I am not alone. Almost everyone knows only a part of the real basics required in the job. So how can we ensure that we get out basics right everytime.

Know the basics

It is not so simple as it sounds. We almost never know what are our employers basic expectations from us. This is primarily because the expectations keep changing often and we are not informed as frequently. Unfortunately we never take the initiative to ask! Also it is important to ask often enough.

All basics Right All the time

I often found myself incorporating too many "experiments" into my project work. These take up lot of monitoring, focus and therefore energy. This induces a loss of foucs on basics. I have found an easier way by limiting "experiements" and giving adequate focus on basics.

Find an "articulate" mentor!

Often the immediate supervisors may not be able to help us. We need to find enough people who can give us the organisational view-point and explain the changes in the role expected of us. I really have never found mentors who can articulate "basics" (thats "spoon-feeding"!), but the perspective really have helped me in getting closer to what are the base level deliverables.

Finally

It has been a learning process for me till today. I believe I havent even scratched the surface. Feel free to let me know the secret if you have found it already!

Individualism and Innovation

Very recently I read an article that explained that Indians are rather individualistic and general process principles are not well adapted to mass manufacturing. This, the author deduced, manifested in higher dominance of Indian products/services in creative space. There also appears to be a lesson in this history.

This explains to a certain extent why there are no truly national parties in India. In fact, never in the history of India has there been a single leader ruling the entire Indian subcontinent. The only exception to this rule was Indian National Congress (founded by Alan Hume counting Mahatma Gandhi, Lokmanya Tilak and Subhashchandra Bose amongst its members). After the Indian National Congress (that was gratefully buried after independance; the current congress is a version used to be called Congress I), most of the current crop of political parties are essentially agglomerations of regional parties including the BJP. At one level this is the very core of democracy and possibly the single most important reason why Indians have taken to democracy like no other nation has.

This traditional Indian mindset is most apt for start-up ventures or companies that are just finding their feet on global stage. To my mind this explains the Indian successes in IT and manufacturing (in specific cases involving commodity products). Using capital better and more creatively Indian companies have created enough wealth to buy-out global giants.

Sadly, this is also the reason why Indians have not innovated most of the new path breaking products. In industry driven by creativity, like advertising, Indian companies have not been able to sustain innovation in a people-independant manner. Path breaking innovation needs the bedrock of processes. It needs standard, non-deviating operations to release the time and free the energy required to design and bring to fruition a path breaking innovation.

To a certain extent, these changes are visible in the software industry particularly in the BPO business where process orientation is a prerequisite. The next phase of Indian corporate development will essentially revolve around the way companies are able to assemble an efficient, non-deviating operational core to free up talent and resources for great more impactful innovation.

Looking for Performance?

Getting people to perform is the single biggest challenge for organizations. Of course, people in organizations work. But do they perform to their potential? Generally I don’t think so! There is huge untapped potential within people and it simply never comes out. However great leaders are somehow able to ignite a passion for performance that makes people put in that extra little bit for them. What magic potion do these leaders have that makes performers out of ordinary people? Is it a rocket science? Can I have it?

Of course you can!
Like everyone else I am too searching for that potion, but in the course of my search I have found some tidbits that I believe will be helpful. I have found that

• Everyone has a performer within them. Often the performer is sleeping. Awaken that performer in your team.
• Performers are wary of politics! But given that organizational politics is a reality, Performers see a performer who is good in organizational politics as more worthy adversary than a non-performer! If you can discourage organizational politics, at least shield your team from the pan-organisational politicking.
• Performers are not wary of other performers. In fact they love performers. Promote the performers in your team to get together, act as a team, take on bigger challenges!
• Performers are not hugely motivated by money alone. Along with money, performers need recognition. As a leader, it is your responsibility to advertise the performers in your team! Performers will love you for it! Yet remember performance love genuine appreciation and can see through fakes!
• Performers want preferential treatment over non-performers. Any indication of socialism in reward allocation is a big put-off for performers. After all there has to be enough motivation to perform. A healthy bias towards performance is a good performance initiator! Remember show the bias to performance and not to performers!

What has been your experience? Have you experience this as a leader, or as part of a team? Let me know.

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.

Happy New Year!!!

2005, by all means, was a very tough year. But nestled in the tough twigs of challanges, there were tender eggs of promises. I managed some unbelievable things in 2005:

• Lost everything in the Mumbai Floods but put it back together very soon. Rented a new place near Office cutting commuting time by solid 3 hours!!!
• Got married to my sweetheart!! Had a dream honeymoon in the hills of Sikkim!
• Won more deals than I could recollect till March! Lost more deals that I recollect but managed enough to achieve my targets till December!
• Went on a Cruise and tried to imagine myself with Captain Cook!

What an eventful year!!!! And now to top it all 2006 is here!! Here is wishing everyone a warm prosperous and cracking 2006!!!

Organisational Roles for 21st century Business

INTRODUCTION

One of the key questions faced by leaders and managers is how to tap new opportunities through creative and innovative use of resources. The dimensions of this question are very vast. Some teams within the organization seem to be regularly innovative and creative in identifying and encashing opportunities in the business environment. Some others are lost in dealing with the daily grind. Organizations seize opportunities much better under some leaders than others. Why is this so? Is there any particular way or method to structure the organization to identify and tap new opportunities?

A FRAMEWORK FOR ORGANIZATION STRUCTURE

Organisations comprise:

1. Skill sets: These represent areas of expertise available within the organisation. So Accounting is a skill set and so is Production.
2. Relationships: These represent how the skill sets are interlinked to achieve the objectives of the organisation.

Tapping new opportunities requires developing "new" skill set or "new" inter-relationship between skill sets to achieve the new objectives. This determines how effectively we can tap the opportunity. If the "new" is a radical depart from the "old" we have disruptive change.

SNIFFING AND TAPPING OPPORTUNITIES

Unleash the "scouts": The job of the scout is to explore the "new" and translate it into meaningful opportunity relevant to the team and communicate it to the team. Organizations seldom have "identified" or marked" scouts. I cannot comment if scouts can be trained or they are born but I can definitely tell you that they have unique set of skills that are hard to find.

Bringing in the commandos: Commando teams have been seen in movies and their potential glorified. Here is a recap of characteristics of commando teams in organizations:

• They are "multi-skilled team".
• They have "authority" to call-off or take forward the venture.
• They are expert trainers (they have to train people to take their roles).
• They have very detailed knowledge of organizational capabilities.
  organizations use Commando units as a pilot. Commando units often "bootleg" resources throughout organizations for the new venture. Scouts work closely with commando units initially. As soon as the success is ensured scouts move out of the business to get back to scouting.

Bring in the "bureaucrats": Bureaucrats is a wrong term to use (as it maligned) but these are system specialists. They setup vital processes that take the focus away from day-to-day details to value adding activities. They create skill sets at required points in the chain. Commandos usually do not form the systems as their multi-skilled approach is in direct contradiction to this concept.

Setting the course: During the course of time a leader emerges and he sets the course of this venture.

TYPICAL PITFALLS IN TARGETING OPPORTUNITIES

Losing the scouts: Scouts are hard to find. Organization often lets go of the scouts during the phase it is involved with setting up the processes. Motivation for the scouts comes from the "new". Indulgence with the old is frustrating for these. Scouts' job is different as often they come up with nothing. Organizations set up wrong expectations from scouts similar to what can be done for process based skills. Scouts cannot be put to 90% success rate rule. It stifles creativity. Do you know who the scouts are in your organizations?

Forgetting the commandos: For each new venture in the initial stage a lot of work is done unsystematically. Often the team does not know what are the challenges in store for them and are faced with precarious situations. Organizations that jump into new ventures minus the commandos fall flat because no amount of systems and processes can replace the thinking-on-the-feet commando. If luck prevails and there are no significant challenges in the new venture (then it hardly is a new venture) then it’s an exception. Are there enough commandos in your organization?
Morphing the commandos: After successfully starting the venture the organization expects the commandos to man and run it as efficiently as the bureaucrats, a tough ask. Organization almost always will lose able commandos to either bureaucrat or they may just leave the organization. Have you seen a commando sitting in as a bureaucrat?
Forgetting the bureaucrats: organizations based on commando culture have their survival dependent on key people. These people are often identified with the organization, but as soon as they leave they leave a huge hole in the organization. The skill of bureaucrats is that they embed organization knowledge into systems thus making organization's survival independent of the people. If you are working for company that survived for a few years, I bet you have seen them somewhere up there and wondered why they went there. Have you?
Leadership dilemma: Typically “bureaucrat” leaders prefer “bureaucrat” top management and so on. This is not conscious but a commando “understands” the working style of other “commando” better than others for obvious reasons. This kind of working is unfavorable for the organizations interest in the long term. Intuitively it seems that leaders are a different breed in themselves.