Friday, 12 July 2013
Shortcuts, Managers, KRA -Focus and Business Loss
A small incident in a retailer's outlet today has set me thinking... I was asked by this retailer in Mumbai about a brand in telecom (a new local brand). I immediately replied that my experience of this brand in MP has not been too healthy; we had a common distributor, who was running to huge losses on account of several issues in terms of service failures and product failures. I shared this experience with him, and accordingly advised him to be careful. Note how a chance interaction in Indore has impacted a business deal 600 Kilometers away. I could not do otherwise: I, too, had a business dealing with him- and for the sake of that association, and maintaining trust - I had to be truthful with him. But this has impacted the other totally unconnected brand...
And yet, corporate managers tend to disregard this for shortcut methods - only to attain short-term numbers. This is not an isolated incident: my mind went back some 12 years to when I was managing a packing assembly at Visakapattanam port. I was getting jacked daily for bagging losses, and was at wits' end as to what to do. To cut a long story short, I was able to prove that the losses were due to a reason entirely out of my control, and slam-bang in procurement. The pressure eased; but no appreciation or regret was ever shared with me for the tough time I went through. In another incident, I came across a market that was destroyed on account of claim pendency and push-sales; from a high of 7200+ units, sales had crashed to negative 1100 units; the company concerned had to shell out huge amounts to the channel, and suffer business losses from that territory. I asked the supposed perpetrator as to why he did such foolishness - his answer floored me. "I survived for nearly 3 years, and have moved on. They (the bosses) were saying do - or quit. So, I did it, took the benefits and quit!" Such is corporate life.
Each of the 3 cases - real life, true cases - highlight how the company at large - which is supposed to be above the individual - has been taken for a right royal ride by individuals focussed on self, and used short-term tactics to further their own ends. The third case highlights how it is a chain, and how the pressure distorts perspective, and leads juniors on the same path. The cases above span functions - from procurement and materials to sales. In each case, the losers are the employee who has been sacked, or not promoted; and the company, which has lost profit and marketshare. This is a simple truism - and yet short-termism is rampant - as Cobrapost and Ranbaxy as well as many, many other scandals have recently highlighted.
Quite simply, this is a systemic failure cutting across all functions; KRAs are not designed well enough to capture or arrest this reality; internal checks and balances are not identifying, isolating and checking errant behaviour; internal systems are not in pace with the external market. This is what is evident in most scandals as well as the cases above- the pressure to perform, and the fear of a job-loss is leading the weaker (or smarter - depending on your viewpoint) employees to take recourse to short-term tactics.
How is it an acceptable business practice to send erroneous bagging material to a plant? How did it go unchecked? How is it a good business practice if your product fails 38% of the time? How is it an acceptable practice if your sales are growing at an alarming rate on the back of pressure sales involving heavy discounts, shy-high inventories, sky-high cheque bouncing, unordered material being pushed in, abject lies to channel partners etc? How is advocating - shall we say - innovative ways to save tax - an acceptable business practice? How is falsifying documents and data an acceptable business practice?
Unhealthy business practices ultimately hit the company and the economy hard: witness the Sub-Prime scam, and how falsifying documents and chasing crazy targets led to the greatest crash of modern times. The people who paid for it were not the ones who committed the errors: as my friend so glibly stated. The ones who pay are the customer who buys your faulty product; the employee who misses on a deserved raise, or who gets sacked, or who gets his career royally screwed.
But, as scam and scandals have shown, it is the organisation who stands to lose the most - over and above all these. The economy will recover, employees will find new jobs and move on (again, like my friend) - but the company is stuck with the fruits of its past negligence. The company has to face the ire of regulators, of customers, of employees - everyone; and that too on a daily basis. The company, on occasion, loses its existence even - as innumerable examples will tell you. The company loses sales, marketshare and profit; it loses employees as well as market trust...
And yet, there is rampant short-termism; it is everyone for himself... Anyone thinking of the organisation as a whole????? Doesn't look like it - for if that was the case, these corporate scandals would not have happened. Furthermore, gone are the days when bad tactics and their ill-effects could be limited to one area, as the opening example shows. The impact spreads, thanks to the free mobility of people as well as through the internet and social media. And it spreads fast, blindingly fast. There is no way you can limit the damage.
In a city I visited, all the Channel Partners in the entire market had got together in a forum - the result was the the company was not able to find a distributor. Reason? sky high inventory holding, unsettled claims and lack of trust. Before you could adjust to this new reality, this forum had spread to the entire state. Instead of asking itself why the dealers and the channels ganged up, why were the claims not settled - the firm pulled up the local, regional and zonal sales teams! Excuse me, you dont settle claims, force 120 days stock down a partners throat, dont settle service issues in the entire product basket- and ask why did the forum start? All this, when the concerned Regional Manager was consistently following up on issues, and warning of things getting worse? The learning for us is the speed of the spread - it had even led to the entire central zone meeting up at Nagpur - all this in a matter of a short time. In the modern world, the power of the channel is increasing, lessening the ability of the short-term gamers to play their games. But, yet again, internal systems and employees are slow to respond. Too, too slow.
And in all this, it is Brand India that is suffering... it is not my case that all of cororate India is like this; but the above are examples that I have observed often enough across industries, functions and levels. I can also state glorious examples from corporates - but that is not the purpose of my blog. I want to engender change - and one does not bring in change by skirting the real issues. And the real issue is that the market has changed, leaving companies behind. The reality is that short-termism needs to be stamped out ruthlessly - even at the cost of numbers and short-term targets - or you pay for it later.