DID MILLENNIALS HIT THE REVERSE GEAR?

Much has been said after the recent statement by India’s finance minister Dr. Nirmala Sitharaman when she blamed the millennial mindset of using OLA and Uber, instead of going for the ownership of the vehicles, for the slump in the Indian Automobile Sector. The statement has been much politicized and debated across social media and news channels. However, the truth is not reflected in most such comments. Dr. Sitharaman’s remarks deserve a fair and objective analysis.

The slump in the Indian Auto sector is serious. The sector that employs close to 40 million people contributes close to 7% to the GDP. Car sales are down by more than 30%, motorbike sales are down by more than 25%. Companies have been forced to cut down on the production, triggered by this sharp fall in demand. There have already been job losses raising concerns of a further avalanche that might be catastrophic for the sector.

The question, however, is whether the millennials can be blamed for this fall in demand for vehicles. I must commend our Finance minister for getting the mindset part correct. When she points out at the millennial penchant for hiring vehicles, rather than buying them, she is correct. However, as much as understanding the mindset is important, understanding the reasons behind the development of such a mindset is equally important to take into consideration. Understanding what factors have played a pivotal role in shaping such a mindset goes a long way in engaging them as customers, as employees and as members of society.

There are at least three major reasons why such mindsets have developed –

• Millennials are the first generation that is actually earning less than their parents. In face value terms they seem to be earning more, but adjusted to PPP and inflation, they are actually earning less than the previous generation. The household income of millennials is down by close to 15% compared to the household incomes of boomers and generation X. Added to this the high cost of higher education and healthcare, gloomy outlook of the economy, job losses or potential job losses have not impacted their purchase of vehicles but also dampened their intention to own vehicles.
• The choice, convenience, affordability and ease (app-based) service offered by OLA and Uber have proved them to be a better substitute.
• Millennials also deal with a high degree of temporariness. They have grown-up at a time and continue to live in times where nothing is permanent. They have seen organizations, institutions, people vanishing in a matter of days. They have seen/experienced 9/11, Lehman brothers, recession and their trust about what future hold for them is bleak. They know that whatever they have today like their job, income, career, all could vanish tomorrow. Hence, they would rather live today and now, instead of postponing their gratification for the future. They would rather spend their money or even borrow from the bank for an exotic foreign holiday, which is more immediate gratification, rather than buy a car and keep paying EMIs for years together which is delayed gratification.

This is not only reflected with respect to ownership of vehicles but also in terms of ownership of apartments. Millennials would rather rent an apartment, instead of purchasing one and then repaying the amount for another twenty years. And yes, the slump in the auto sector has been triggered by reasons like mandatory BSVI norms compliance, the internal combustion engine issue, severe liquidity crunch over IL&FS crisis, recent floods in many states, higher ownership costs and general poor outlook of the economy.

So what’s the point? To rightly understand the millennial mindset, one needs to understand the underlying causes of shaping that mindset in order to decipher their preferences. The rise of OLA, Uber and other app-based cab services shows a rise of a different kind of demand. Millennials need to be understood to be engaged. Empathy and not blame would engage them and in a world that is soon going to be dominated by millennial workers and consumers, organizations cannot afford to keep them disengaged.

In my last more than ten years researching, writing on, talking to millennials and talking to countless millennials from across the world, one thing has become amply clear that only a deep empathy with them and the kind of paradoxical lives that they live, will help us to understand them, their mindsets, attitudes, and behaviours. This has been the bedrock of my engagement with the corporate sector in India and the Middle-East, helping them develop strategies to engage millennials as employees and customers.

Article Credits: Debashish Sengupta, author of The Life of Y

Do we learn from our blunders?

by Robin Banerjee, author of Who Blunders and How?: The Dumb Side of the Corporate World

How to learn from mistakes which we keep encountering? The question should interest most of us, as presenting the past can contribute to a less mistaken future. It should especially interest if you are engaged in businesses. You would have probably committed loads of errors in the past. But if you can learn from them and be more successful next time, it would be singularly salubrious.

I will begin with a mistake which I have made that have taught me a great lesson. This is about when to buy and sell.

In business, the price of commodities keeps fluctuating. As a buyer, there is the craving to procure more when there is a price dip; and as a seller, the inherent desire is to wait for higher prices so that one can make bonus-profits! But can one always buy low and sell when prices are high? The answer to the vexed question is: No. You can never time the market.

Let me cite an example. You would have heard of Nutrela soya chunks. The brand owner Ruchi Soya, India’s largest maker of edible oil, crashed into great financial distress when castor seeds procured to make castor oil turned out to be its nemesis. Dinesh Shahra, the company chief, a well-known expert on castor market, took positions on castor seed price. The castor price crashed globally in early 2016. The company got stuck with higher-priced castor seeds. The debt soared, resulting in the company falling into a disastrous debt trap.

The prime cause of the muddle was the speculative view on castor seed prices. It must have worked well in the past, but one bad decision, made the company go belly up.

I have learnt one crucial lesson in my life while buying commodities. Never buy long thinking you will out-smart others. It is always good to do replacement-buying. That means, procure as much as you will consume. Not more. Yes, you will definitely lose out on some opportunities. But historical evidence shows, that the risk of loss of one decision, could wipe out all the gains which you may have made in the past.

There is no shortcut to making money. Speculation and gambling could be someone’s trade, but for many of us, it is a mistaken trait that should be avoided.

Can we learn from our past mistakes? Yes, we can.

Take some time off and delve on the past and evaluate a bit for the future. You will be surprised that numerous lessons will emerge which business books or management classes can never teach you.

Team Work to Counter Stress

by Br. Prasanna Swaroopa, and T D Chandrasekhar

Co-authors of ‘Good Values, Great Business’

A recent survey stated that “close to 82% of Indians suffer from stress on account of work, health and finance-related issues”. [Ref]

A senior executive in the Insurance sector shared the following episode: “One morning, I was unable to get out of bed, feeling listless. I had been on the road for the past 3 weeks and just did not feel like working that day. It was not physical fatigue; but mentally, I was drained out.”

The causes of stress could be many and the ways to redress them varied. Some of the skills and practices which would help us reduce stress in the workplace are:

Togetherness in Team Working: Often, we tend to isolate ourselves, and are forced to fight battles alone. Phil Jackson said, "The strength of the team is each individual member. The strength of each member is the team." That ‘strength’ is what helps us deal with challenges at work – not just those relating to work content, but also of life in general. Acceptance, empathy, flexibility, and trust are values that help us build camaraderie.

Listening: Fred Rogers said: “In times of stress, the best thing we can do for each other is to listen with our ears and our hearts and to be assured that our questions are just as important as our answers.” Listening not only helps us strengthen our relationship with members of the team, but also helps us in being more productive and creative. Listening helps us clear many misconceptions, misunderstandings, and apprehensions about others and situations, which tend to become the most significant cause of stress.

Actively Practicing Openness: The Dalai Lama said, “I remain convinced that most human conflicts can be solved through a genuine dialogue conducted with a spirit of openness and reconciliation.” Being open prevents us from bottling up our thoughts and feelings, and reduces the opportunities for creating stress.

Showing Forgivingness: By not forgiving the words or actions of others, we tend to keep a scorecard against names. And any interaction with individuals for whom we maintain a scorecard is always stressful. Here is where ‘forgive and forget’ becomes the greatest stress-reliever.

Sharing: Having someone with whom we can freely share our thoughts, feelings, dilemmas, and conflicts is a very effective way of keeping stress at bay. Having a ‘sounding board’ or a confidant helps us reduce stress.

Reference:
Cigna 360 well-being Study: https://economictimes.indiatimes.com/wealth/personal-finance-news/82-indians-bogged-down-by-stress-cigna-360-well-being-study/articleshow/68615097.cms?from=mdr 

                                                                  About the Authors                                                     

Br. Prasanna Swaroopa

He began his career in the IT industry serving it in various capacities, including software engineering, design, project management, and general management. After having devoted 14 years to it, he exited the IT profession to explore and discover what lies beyond the usual avenues of employment....read more 

T D Chandrasekhar

He (called TD by friends) has been involved with businesses for three decades now, first as a practicing executive and later as an external expert. In his current role as a coach, a facilitator, and a consultant for over a decade, he has coached over 75 executives, and facilitated over 750 corporate programs, covering more than 15,000 executives...read more

Marketing-textbooks must make students hail, “I'm lovin' marketing”

Marketing is one of the most sought after fields today. Dr. Ramaswamy, author of our bestselling textbook Marketing Management: Indian Context Global Perspective, SIXTH EDITION published by SAGE, shares his views on what makes the students say “I'm lovin' marketing”.

'While agreeing to contribute to this Blog, I had failed to notice that the request had come with a stringent limit on word-count. I am used to writing books of 5 lakh words! Me, to write something within 350 words? No chance, used as I am for elaboration, not condensing. But, it had to be done. I picked a “mini-feature” of this book and wrote this “mini-blog” on it! The “mini-cases” in the book is the “mini-feature” I am referring to, and this “mini blog” is on this mini-feature.'

-Dr. Ramaswamy

Marketing books must make students say, “I'm lovin' marketing”. They must render teaching and learning of marketing so interesting. It is heartening that our recent book has made students say, “I'm lovin' marketing”.

The “Mini-Cases” does the trick

The “mini-cases” in the book is the main inducement for students to hail, “I'm lovin' marketing” while studying marketing through this book. The feedback from students and instructors confirm this. Some samples:

“I felt I have read a marketing book of an exceptionally high standard. The mini-Cases have greatly contributed to this outcome”.

“The mini-Cases bring in practical insight on the best practices of marketing”.

“The mini-Cases glitter as stars”.

 “The mini-Cases help the book distinguish itself from all other marketing textbooks”.

Why did we decide to bring in the “Mini-Cases” in the first place?

While developing this book, my co-author and I made one cardinal decision viz, every concept/strategy/technique of marketing discussed must be supported by examples/Cases. The space-limitation stopped us from bringing in lengthy Case-studies; we could not have accommodated even 4/5 of such Case-studies, whereas we needed around 30 to cover all the topics. The “Mini-Case” was the answer. It offered another advantage too. We could adopt the time-honoured “Indian technique of teaching through story-telling”. Our “mini-cases” are actually stories on the experiences and practices of Indian as well as global companies. Again, the stories are self-contained and do not need hours of class discussions by students for decoding.

Let me say, “ Oh ‘Mini-Cases! Thank you for making this book a most-loved text on the subject.

You can checkout the 5-star rated book here!

Are We in the Endgame Now??

We indeed have a long way over the past century in this glorious field of orthodontics, from non-programmed to fully programmed appliances, mandibular growth modulation, the extraction–non-extraction see-saw, self-ligation, the various surgical and non-surgical methods to manipulate the craniofacial bone biology in our favor, and a shifting focus on patient perceptiveness; the journey has been tumultuous but in a way rewarding as well. 

However, given the narratives of some prominent researchers and some of the ways orthodontic companies conduct their affairs, we are at an interesting crossroad for our profession. While some have considered this as the start of the “endgame” in the orthodontic chessboard, the actual situation may not be so bleak. 

We, as orthodontists, should strive to achieve excellence through what one described as “accepted orthodontic practice”, easily defined as “treatment based on credible scientific evidence published in peer-reviewed journals”. 

This is pertinent as we are slowly and yet steadily moving toward an electronic summation system (taking into account all the existing levels and volume of evidence) which would eventually have the capacity to suggest a specific mode of therapy based on the patient’s clinical history and presentation. 

But coming back to the present, a particular treatment course for a patient usually depends upon a healthy balance between clinical experience and the available research evidence. 

Commercialism and healthcare—

Lately, largely due to the increasing influence of electronic media and an influx of articles in favor of new and radical modalities with minimal or no solid scientific backing, many researchers feel that the scale is tipping in the wrong way in the favor of commercialism, risking the quality of accepted orthodontic practice we should ideally provide to our patients. In addition to this, the supposed conflict of interest of some of the authors in such articles has also become a cause of worry in the way certain methods are supposedly highlighted. 

Now there are 2 ways to look at this, one, accepting the fact that consumerism and commercialism have grown as a considerable factor in driving the orthodontic market. If it were not so, the “aligner” boom being observed would not occur at the rapid rate it is currently seeing. Two, accepting and acknowledging a sense of responsibility and understanding that we share as practitioners, researchers, caregivers and key opinion leaders. 

We must realize that every company marketing a particular product would look toward highlighting a competitive edge it holds over the others, which may not necessarily be in line with the available scientific evidence. But rather simply calling them out for the obvious flaws, it would be more prudent, in my humble opinion, to design well-structured high-powered trials around the same to see whether the claims hold true. 

Not only does this allow for the science to continue to have an existential meaning but it also fuels the fervour and temper of our younger fraternity members. The best on-field examples in this regard would be the outcome (objective and subjective) of over-the-top marketed products like clear aligners, self-ligation, and orthodontic acceleration. 

This approach requires us as a community to have an open yet cautious mind while attending the trade fair meets or sponsored programs of orthodontic companies. 

All in all, the true future of the field lies with us, and WE must introspect and question relevant aspects when a new technique/appliance is introduced, irrelevant of its media research but all the while maintaining a standard dignity that allows us to be called doctors of this great science. If we all do our just and rightful part, who knows we would not need to gather a fictitious gauntlet to snap away the follies of the past. 

—Taken from Are We in the Endgame Now?? By Puneet Batra, Editor of Journal of Indian Orthodontic Society.

The horror, the horror!

Studying Sexual Violence in India 

The gang rape of a student in Delhi in 2012 precipitated, on an unprecedented scale, a very public discourse on sexual violence in India. Violence against women, even in its most brutal forms, is not an uncommon event in India and, sadly, stories of the most horrendous violations have seemingly inured the state and citizens to inaction. The Delhi case is unusual in that respect. The case appears to have generated, for no distinct reason, both publicness and personalisation of rape in a way that has not happened before. 

Thus, there have been earnest efforts to unearth a cause—or perhaps, a chain of them—that might have helped explain not just what happened that night on the bus, but in the many, many instances before and since that day. Politicians, academics, social commentators, rape survivors, activists, bloggers and television talk-show hosts alike have attempted to identify a cause that in some way would rationalise an otherwise diabolic act and help construct an appropriate frame for justice that seeks redress not only in this specific case, but also recognises the fundamental right to safety for all Indian women. 

In news—

A scrutiny of the news reports, analyses, blog sites and commentaries, very quickly clarifies that there was a plethora of explanations around the act of rape in India that was circulated widely, some of which were and continue to be embedded in institutional discourse and responses in the name of justice. 

Informed by contemporary scholarship on justice that extends beyond jurisprudence and develops frameworks based on socio-economic equity, institutional parities and social voice (see Fraser, 1997, 2009; Sen, 2009; Young, 1990, 2002), this commentary surveys some of the discourses of rape currently being deployed in the public space in India, and the impact that it is having on remedial action and justice discourses. 

What went wrong?

The ‘failure of governance’ is a foremost discourse that has emerged since the rape incident. 

In the days following the rape, a shocked populace sought answers from their politicians: How is it that this crime was allowed to happen in a public space in the capital city? 

The bus in which the rape occurred was driven through the streets of central Delhi passing several police checkpoints. As shock turned to outrage, attention turned to the failure of the law and order system, and to those who execute the law. 

Amongst the shortcomings highlighted are—

» Narrow focus of the legal definition of rape (Baxi, 2012; Narrain, 2013),

» The insufficiency of the penalties,

» Low rates of convictions and the tardiness, often deliberate, of their implementation.

Corruption abounds, protecting perpetrators among the country’s powerful such as politicians and the police, and further, the excesses of the military in ‘secure zones’ are not subject to an open civil trial, if tried at all. 

These shortcomings, in particular, have been noted in the report of the three-member committee led by Justice J.S. Verma along with other eminent judges, which was constituted days after the incident to advice the government on the actions that needed to be taken to safeguard against other similar incidents. 

The Verma report—

The committee deliberated for 29 days taking into account the views of a wide cross-section of society, including women’s groups, intellectuals and jurists. The Verma report recommended severe penalties for rape and sexual crimes (but they were strongly opposed to capital punishment), improvements in the criminal justice system, reforms within the armed forces and the police, broader definitions of sexual crimes (including stalking and trafficking as sex crimes), clear protocols for dealing with victims of rape and the ban on the system of dowry paid by women to their husbands at the time of marriage. 

Some of the recommendations of the report have fed into the Criminal Law (Amendment) Ordinance passed on 3 February 2013. 

The Ordinance has substituted the word ‘sexual assault’ instead of ‘rape’, rejected the recommendation of the Verma report and has instituted the death penalty in certain cases of aggravated rape but not implemented the recommendations relating to political, police and military reforms. There has been criticism from feminists that the Ordinance is a watered-down response to the Verma report (Menon, 2013a, 2013b); nonetheless, this discourse of systemic failings currently dominates the institutional and policy responses to sexual violence. 

—Taken from Sexual Violence in India: The Discourses of Rape and the Discourses of Justice in the Indian Journal of Gender Studies.

ISRO Espionage case—What really happened?

On the wee hours of September 7, 2019, we were breathlessly watching the TV screen to witness that historic event—the landing of India’s ‘Vikram lander’ on the surface of Moon. The next day the electronic and print media were flooded with images of an emotional Indian Space Research Organisation (ISRO) chief, who was in tears, unable to come to terms overlander Vikram's unsuccessful bid to soft-land on the moon.

A quarter of a century back—many of us still recall; such an image of a senior ISRO scientist—bespectacled, white-haired and with a partially grey sporting beard- who was in tears, filled the columns of the printed media. He was the key-player of the infamous ISRO espionage case of 1994, the head of the Rs 350-crore cryogenic engine project of the ISRO. There were other characters too—a couple of Maldivian ladies with the built-up image of ‘Mataharis, Indian consultant of Russian space Agency, businessmen and bureaucrats.

The ‘sensational spy case’ built and undone by state police and investigating agencies had all ingredients of a spy-thriller—women, ‘honey–trap’, foreign agents, money, technology leak, etc. It had its ripples and unease in the political circles—from the PV Narshimha Rao’s government at the Centre to the veteran Congress leader, K Karunakaran’s downfall in Politics. Some space scientists claim that even our ambitious Cryogenic project was delayed for around one decade due to the demoralization of the scientific community.

In their zest to justify their actions, the "key players" of the case—investigators, media, and political parties—always tried to camouflage the truth. What exactly was the truth? Whether the ISRO espionage case was myth or reality? And if it was a myth, why did the investigation agencies pursue a mirage causing unprecedented damage to individuals and institutions?

Closely traveling along with the ‘storyline’ of the case, through interaction with the so-called accused, interrogators and investigators, media analysts and legal experts, K V Thomas, ex-IB officer have tried to give true answers to such crucial questions in the pages of the book ISRO Misfired: The Espionage Case That Shook India. And this title will really take you to many grey areas of our intelligence architecture, professionalism of enforcement agencies, approach of the scientific community, polity and established system and concept of public justice.

Rocketry-The Nambi Effect, a movie on the ISRO Scientist Nambi Narayanan’s life is set to hit the cinema halls soon. With renowned actor, R Madhavan playing the lead role the much-awaited movie is expected to be a huge hit!

But before that happens, grab your copy and delve into India's most sensational spy case because as they say,

"THE BOOK IS ALWAYS BETTER THAN THE MOVIE!"

Buy your copy now!

Image credits:https://www.imdb.com

DISPUTES DOOM

Combats, clangs, and clashes are inevitable parts of the business. They are mostly overwhelming, exasperating and financially draining.

Most managers dread disputes and litigations. But unfortunately, it is not going to ebb. Hence, it harms relationships and smudges reputations.

When conflicts are left unmanaged, it can indict severe damage to any team or organization.

The Indian corporate world perhaps had the most celebrated conflict between Nusli Wadia, chairman Bombay Dyeing and Reliance’s Dhirubhai Ambani, the man known to have the right connections. This was battled in the 1980s.

The fight was on Dimethyltryptamine (DMT), a vital raw material for synthetic fiber and yarn which Reliance made, but Bombay Dyeing sought government license to manufacture it. While Wadia had to contend with bureaucratic delays, Ambani, with the right connections in Delhi continued operation – when Wadia floundered, the Ambanis kept marching on.

The clash of the titans took a heavy toll on the Wadias. If the time and money spent on this epic battle involving even the media in a big way, could have been avoided given the uncertain outcome of any conflict, perhaps the story of the Wadias may have turned out differently to their advantage.

While confrontations and clashes cannot be eliminated in business, but they need to be resolved quickly. The delayed settlement could cost a business dearly. Justice delayed is justice denied.

Human behavior gives many a blow, with some landing knockout punches. Mortal mind is often unpredictable and complex. It is therefore hard to predict and plan for all disputes and conflicts. But it is good to have a risk management plan to either avoid bickering and brawls or should the unfortunate event arise, how to handle it with the least disturbance to the business. This truth is often overlooked by managers while running their day to day battle to do well in their professional endeavors.

Article Credits: Robin Banerjee, Managing Director, Caprihans India Ltd

                                                                                                                               

Did you find this case-study interesting?

Do you wish to understand many such famous, frequent and common mistakes committed by businesses over time?

Check-out  Who Blunders and How? by Robin Banerjee, a book that not only brings in light many famous business bloopers but also identifies the reasons for such mistakes and how managers can learn from them to build an enduring organization. 

Let Game Sutra be your guide for moving from paranoia to positivity!

Game theorists have built an elaborate intellectual machinery to analyze decision making in interactive contexts. But sometimes this very machinery masks the valuable insights of which it is made. Hence it is time to put the focus back on the homespun wisdom of Game Theory as I do in my book Game Sutra- Rescuing Game Theory from the Game Theorists.

For instance, when I play games in my Game Theory classes at MDI Gurgaon, I always amazed by a large number of students who adopt what game theorists call ‘max-min thinking’. Max-min thinking is assuming that no matter what you do, the other players are out to get you. Hence you choose a strategy that maximizes the minimum that you could get. For instance, if you are a product manager in an IT company, you would assume the marketing department is politically predisposed to undermine every proposal regardless of merit. Hence you would present an option that is least vulnerable to their inevitable criticism. This approach also implies that any positive feedback from them would be seen with extreme suspicion.

Game Theory teaches that such thinking is only appropriate in very specific situations which we call two-person zero-sum games. These are games where there are exactly two players and one player’s gains and the other player’s losses exactly equal in every instance. Chess is an example.

But most situations in life are the non-zero sum in nature, in that they involve a combination of competition and cooperation. An example is international trade. If you are short-term non-zero-sum interaction, it may still sense to negotiate hard to grab the lion's share of the surplus on offer, provided your brinkmanship does not result in the transaction being called off. This may be called the ‘Donald Trump Model of International Trade’. But in long-term non-zero-sum interactions, one has to bring a mindset of mutual gain. No one likes with a shark on a regular basis as the US is slowly finding out.

So, the first Sutra of game theory is: Don’t bring zero-sum thinking to non-zero-sum interactions.

Move from paranoia to positivity!

About the Author                                                                                 

Rohit Prasad is a Professor of Economics at MDI, Gurgaon. He has a PhD in economic theory from SUNY Stony Brook, USA. 

Check-out his book Game Sutra

Thought and Analysis are too slow to use in a crisis, but isn’t that when intelligence is needed the most?

Reactions are lightning-fast, they help us dodge bullets and escape a burning building. That is how the architecture of the brain has evolved through eons of trials and tribulations. Save life first, think later. Thought, language and problem-solving are relatively new abilities added atop the reactionary brain and these have grown too. In a crisis, the survival mechanisms trigger first. This necessarily disengages the bulky thinking new brain. Professionals learn to ‘Think on their feet’ to remain effective in a crisis. How is that done?

Present-day technical innovations have empowered neuroscientists and behavioral scientists to peep inside the working brain and to measure the speed of nerve signals. They tell us that a pause of just half a second allows us to engage the intelligent circuit. It sounds so simple! Knowing and understanding this fact is however not enough. We need the practice to train the inner action of flipping signal traffic flow to the slow lane, while instinct has already slammed the accelerator. Practice till it becomes a skill.

Learning to ride a bicycle is a classic example of training the brain to pick up a new skill. There is no substitute for the real experience and there are no short courses. Manuals and Youtube videos may inform but cannot shorten the time dedicated to practice. Presence of a coach helps with motivation and perseverance, but the pain of scraped knees has to be borne by the learner.

A novice trying to learn to retain the ability to think in a crisis begins with the use of perceptive ability known as Emotional Self Awareness, which informs ‘this is how I feel in a crisis’. There are other perceptive powers that humans are equipped with like Optimism, Intuitiveness, Accurate Self-Assessment and Humor, that can be polished and practiced to make a superior professional resilient and confident.

Article credits: Anjana Sen, author of What's Your Superpower

                                                              About the book                                                                        

A path-breaking narrative for better understanding and imbibing leadership traits and qualities and a self-Help for aspiring leaders and those interested in this important subject. Know more

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Familiar FAMILY-business faux-pas

A family business for many of us conjures the images of the neighborhood grocery stores selling from bread to batteries. Over four-fifths of businesses are family-owned, generating over two-thirds of global GDP, with mom-and-pop shops forming the bulk.

Strange as it may seem, but over 70% of the family businesses do not last over one generation. Family businesses run the world, and yet most of the time, they themselves cannot comprehend how to continue running. 

The biggest mistake family businesses commit is finding it difficult to handover the business baton to the next generation. Squabbles over succession and patriarch’s belief that he is indispensable, kill generational entrepreneurship.

It has been observed that when the patriarch hands over to the next generation, most businesses fail. This is the ‘crunch time’. It will be a mistake if business families do not take heed to this historical evidence. 

Let us take a few recent instances where lack of foresight on the part of immensely successful patriarch may kill their business in the near future. The veteran Italian octogenarian designer Giorgio Armani has not announced who would replace him at the helm of the company. A similar story goes for the other fashion designer known world over – Roberto Cavalli. He too has so far failed to find someone to take over the company that bears his name.

These two instances of Italian fashion gurus not deciding on their successors could be recipes for an impending disaster when it comes to maintaining the legacy of the hard work done to build the internationally known high-end style brands.

Statistically speaking, globally 1 in 2 families will need to pass their baton to their next generation in the next 5 to 7 years. Just imagine the risk these businesses run, if they do not handle the next-generation transition well. Theoretically, there is a fifty percent chance that these businesses may turn turtles sooner than later!

What is the lesson to be learnt from the mistakes of many?

Do as good chefs do for complicated recipes – break it up into stages and cook!

To avoid internecine tussles and to display professionalism, business reigns could be handed over in stages. First hand over the management control and ownership. The founder-entrepreneur could pass on the management to his children or siblings retaining the shareholding with himself. This is a good way to handle a generational transition.

Bharti, Bajaj, BMW, Fiat, and Ford have executed generational change very well down the ages.

Not taking seriously successful succession subjects will be a grave disservice to business continuity.

                                                                                                                          

To Know more about Family Business faux-pas check out our latest book Who Blunders and How? by Robin Banerjee 

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Systemic Risk⁠—the new-found villain of the financial space?

The just-released book SYSTEMIC RISK ANDMACROPRUDENTIAL REGULATIONS: Global Financial Crisis and Thereafter adds to the story of the last financial crisis of 2008-09 that threw the globe into the gutter of gloom. Learning from the reasons for that crisis, this book adds a new dimension on “how to reduce the severity of such crises in the future.” It starts with the various financial regulatory reforms undertaken by the G-20 and Financial Stability Board (FSB) in this direction and spells out an Early Warning Mechanism and a Crisis Management Framework which every financial institution should put in place. With the help of a forward-looking stress testing programme, the supervisory interventions should be intensive, while regulations aligned to requirements. 

The book identifies Systemic Risk as the new villain and finds macroprudential policies as the best bet to address them. A sweet blend of use of monetary policy along with macroprudential tools, in fact, could be the best possible solution to handle brewing points of crises.

It also finds the solution in the effective international coordination of monetary and financial stability policies for the global spill-over of policy actions initiated at the various end in the globe. While it recognises the contribution of the current arrangements in this regard, it recommends a “bottoms-up” a framework which should give better results to tackle the menace of potential financial crises.

This book is published by SAGE Publications with a 'Foreword' written by Professor Benjamin Friedman of Economics Department, Harvard University. 'Advance Praise' for the book has been showered by Professors/Economists - Charles A.E. Goodhart, Michael D. Bordo, Phillip Turner, C. Gopinath, Jeffrey C. Furher, Sheri Markose, Sanjay Kollapur, Shawn Cole, Eswar Prasad and Claudio Borio and former RBI Governors - C. Rangarajan, Y.V. Reddy, and D. Subbarao.

The book will be useful reading for (a) Students, Teachers, Researchers, and Consultants in the areas of Economics & Finance (b) Professionals working in the Financial Sector & Central Banks.

The Author of the Book is Dr. Rabi N. Mishra, Executive Director, Reserve Bank of India, Mumbai and the title is now available at Amazon (both Hardback and Kindle) and Flipkart. 

You can check out the book here

Is your firm fulfilling its social responsibility?

Intangible assets like corporate reputation are gradually gaining importance in the increasingly globalized business world. 

Corporate reputation is defined as ‘the overall impression reflecting the perception of a collective stakeholder group’. 

One of the possible ways in which a company can improve its reputation among senior-level executives, in general, is through corporate philanthropy. Corporate philanthropy is a part of corporate social responsibility. The European Commission has defined CSR as ‘a concept whereby companies integrate social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis’ (European Commission, 2001, p. 8). 

Relationship between CSR and a firm’s success─

CSR performance has been positively associated with markers of a firm’s success, such as

• Financial performance
• Customer trust
• Customer buying behaviour
• Stakeholder trust
• Employee satisfaction
• Firm attractiveness

CSR performance is a strong indicator of a firm’s sustainable success.

However, despite increasing interest, most of the research on CSR has focused on the direct relationship between CSR and business outcomes.

Types of CSR:

1. Ethical CSR focuses on justice and fairness in practices grounded in moral principles.

2. Strategic CSR focuses on catering to social services with some profit orientation for the firm.

3. Philanthropic CSR, the third type, mainly focuses on giving back to society without expecting anything in return.

CSR Activities and Trust

Trust refers to a relationship as well as an affect and is defined as a relationship in which one party has confidence in an exchange partner’s reliability and integrity (Morgan & Hunt, 1994). Integrity, fairness, and benevolence have been found to be the necessary ingredients for building trust. 

Trust is developed based on the assessment of organizations’ ethics and values. CSR activities create positive perceptions by sending positive signals to employees about the company’s ethics and values. 

The evidence that different groups of employees have different levels of trust and images of the employer indicates that employees evaluate the CSR activities of their employer from different perspectives. Therefore, organizations need to consider a bundle of CSR activities rather than focusing on a single initiative, which might hold minimal value for a majority of the employees. 

The Indian Companies Act (2013) has mandated organizations to spend 2 percent of their profit on CSR activities. The act will be applicable to approximately 6,000 companies, which will in turn generate a total corpus of `20,000 crores (about 200 billion) per year for spending on CSR. 

─Taken from Perceived CSR and Corporate Reputation: The Mediating Role of Employee Trust in Vikalpa: The Journal for Decision Makers