Strategy For Funding Risk Management Departments

Organizations want risk managers to focus on reducing costs of doing business, especially the regulatory costs. However, when risk managers ask for resources and budgets for running the department, they have to compromise. Lack of budget is generally the main cause for not implementing enterprise risk management, doing strategic risk management, building a risk management culture and providing consulting.

Generally, the budgeting process starts in the last quarter of the year. When the budget committee is approving other revenue earning departments budgets, risk management department heads present a cost budget. This does not go down well with the budget approval committee. They cut ten to thirty per cent of the budget despite risk managers giving valid justifications.

After budget approval, risk managers spend the year trying to squeeze in as much as they can. Sometimes it results in limited coverage and high stress levels for risk managers. With the increasing focus on risk management, the heads of risk management departments need to form a strategy to obtain the required funding. Look at the tips below to navigate the tricky budget approval process.

1. Start at beginning of current year

Start preparing for next year at the beginning of the current year. Identify the long-term and short-term projects. Commence influencing the key stakeholders of the long-term projects from the first quarter of the current year. If risk managers are the last one to submit their budget, they are unlikely to get heard.

2. Analyse the reasons for past failures

Assess the reasons for non-approval of the budget in previous years. Was it because the management thinks risk management is unimportant, is concerned about costs or it harms the interests of the key political players in the organization. After determining the reason, formulate strategies to change the mind-set for next year’s project approval.

3. Build relationships with key political players

Chances are that risk managers focus on the budget committee members for approval. Instead, identify the key power holders within the organization. Identify their relationships with the budget committee members. Before influencing the budget committee members, build relationships with key power holders. Get their support for the risk management function by understanding their drivers and motives.

4. Participate in business strategy formation

Involve yourself with the business strategy group. Identify various risks of the changes in business strategy and recommend the mitigation costs for the same. Attempt to incorporate the risk management budget in the strategy implementation costs. Align risk management budget with corporate goals and strategy.

5. Calculate the Return on Investment (ROI) for various projects.

Robert Biskup wrote an excellent article on Corporate Compliance Insights – “Making the Bottom Line Case for Compliance: The ROI of a Robust Compliance Department”. The nine points give superb ways of calculating ROI. Use the methods to negotiate with the business teams as the department can give a clear demonstration of cost savings or profit earnings. Do ROI calculations for previous years’ projects to demonstrate the value that risk management departments brought to the table.

6. Make business teams bear the cost of the project

For the projects, identify the stakeholders in the business teams. Categorize the projects as critical, necessary and optional from risk management perspective. Sometimes, risk managers spend time doing optional projects at the expense of critical projects, as they cannot refuse powerful business heads. In such cases, present the advantages of getting the assignment done. If possible, check whether business team will merge the cost of desirable projects in its budget next year rather than have it in risk management budget.

7. Build flexibility in budgets

The budgets go haywire when unexpected risks arise or regulations change. Suddenly risk management departments are in fire fighting mode and regular work is ignored. That is bad for business, since other critical risks remain un-monitored. Hence, estimate different cost budgets with probability of various risks and disasters occurring. Present these as contingency budgets to the management and take advance approval for the same. Risk mitigation efforts are delayed when risk managers take approval after a disaster has occurred. Revise the budgets quarterly as the business budget changes.

Closing thoughts

 Generally, risk managers have a financial background so they are outstanding at preparing the budgets. However, problem occurs when they do not have the negotiation skills and political strategy in place. Last quarter efforts do not work because everyone is on the same bandwagon. Gain a head start by starting in the first quarter itself. Be the first one to get the required approvals, so that the function gets what it wants.

Related article: Political Strategy for Risk Management

 

Political Strategy For Risk Management

A recent report published on Harvard Law School blog stated that in 81.2% of manufacturing and 73.6% of the non-financial sector companies have not appointed Chief Risk Officers (CRO). Interestingly, 83.3% of the financial services organizations have appointed a CRO with direct reporting to the CEO. This indicates, that unless mandatory, the risk managers do not have high visibility. Though their role is important in all sectors, they are unable to leverage themselves among the senior management. This issue is not new, and most complain at not getting a seat at the table.

 1.     Develop Political Skills

We need to look this issue from another lens. We need to develop a political strategy for the risk management department. Reason being, technical expertise on a subject takes one up only to the senior middle-management level. At senior management level organization politics dominates decision-making. Hence, risk managers need to develop political skills and astuteness to survive and thrive at that level.

However, the challenge is that though risk management job requires high political skills, very few work at developing them. According to an organizational study, ~ 65-80% employees avoid politics, ~15-25% indulge in negative politics and ~5-10% participate in positive politics.  Risk managers need to develop skills in positive politics to influence senior management.

The positive politics players have win-win, ethical, organization focus, enlightened self-interest, collaborative and best interests of the business mindset. Indulging in negative politics will be harmful as the group has  win-lose, non-ethical, upward focus, self-interest, competitive and personal gain mind-set. Viewing politics as dirty and avoiding it, isn’t an option. Politics prevails in organization DNA and one has to choose how to play it.

 2.     Implement a Political Strategy

Another aspect to look into is that risk managers have to influence the organization to build a risk culture. The concerns of the junior managers differ from those of middle managers and senior managers. Moreover, different business units have clashing interests and priorities. Stumbling from one person to the other and trying to influence them on a random basis will not benefit the organization or the department. Therefore, to influence each sub-group positively, risk management departments need a political strategy.

After developing the political strategy, risk managers need to implement and run with it consistently over time to reap success. It will involve getting supporters, appointing campaign managers, forming coalitions and doing some secret handshakes. Risk managers of course have to walk a fine line of maintaining independence and objectivity while implementing the political strategy.

 Closing Thoughts

Success in organizations depends on how well a person manages their own expectations by understanding the political game. Corporate world is a jungle. One cannot expect that people will make rational and logical decisions in the best interest of the organization. Risk managers will remain on the side lines unless they learn to trapeze the political web. The good news is one can learn political skills.

References:

1. Risks in the Boardroom – Harvard Law School
2. Investigations in Organizational Politics

iGate’s Failures in Risk Management

iGate fired its CEO Phaneesh Murthy for sexual misconduct after Araceli Roiz; an American employee accused him of sexual harassment. As per media reports she has claimed that the relationship started soon after she joined the organization in 2010 and is pregnant with his child.

Mr Phaneesh Murthy has the dubious honor of facing two similar charges while working as a senior manager in Infosys in 2002. Reka Maximovitch and Jennifer Griffith had both received huge out of court settlements previously. Now he faces the similar charges from Araceli Roiz. Mr Murthy has acknowledged that he had sexual relationships with Ms Roiz. However, it was with her consent. He has alleged he is being defamed and this is an attempt at extortion.

With the limited information available in the media, one cannot comment on the details of the personal relationship.

However, this disaster teaches a few lessons. iGate could have prevented this reputation damage and legal risks if it would have taken a few timely steps.  iGate board and senior managers failed to take due care of the following risks.

1.     Pre-employment Background Screening

Mr Murthy has an excellent academic and professional achievement record. He was credited for taking Infosys turnover from $ 2 million to $ 700 million. However, when he was hired by iGate in 2003 he was in the news for all the wrong reasons. The sexual harassment cases were all over the media.

iGate needed a CEO who could deliver results. My guess is the board looked the other way or considered Mr Murthy’s infidelities small or insignificant. However, if a junior or middle manager had the same reputation, his career would have been over. No organization would have hired him.

Hence, when generally senior managers background screening is more stringent  than junior or middle managers, iGate board took the opposite stance.  It appears that the same yardstick isn’t being applied for background screening or it is being given lip service.

2.     Failure to Monitor & Control CEO Behavioural Risks

iGate board and senior managers chose to ignore the CEO behavior  As per media reports, the relationship was known to the staff. However, it appears no action was taken to guide or coach Mr Murthy.

Read these statements of Mr Murthy from prior interviews at the time of Patni takeover.

The National – “Everyone says that M&As are about ego. I’ve been a salesperson for 10 years. For every 100 doors that you knock on, 98 get shut in your face. That has knocked away most of my ego. I have two teenage boys who whip my butt in every game. They have gone from wanting to be on my team to not wanting to be on the loser’s team. Because of that, I have no ego left.”

Livemint – “Not at all. I am basically a conservative, middle-class south Indian Brahmin. As it is, we don’t like debt, and I am very uncomfortable with a $700 million (around Rs 3,180 crore) debt.”

Ms Araceli Roiz is 31 years old and Mr Phaneesh Murthy is 53 years old. In conservative South-Indian Brahmin families “divorce” is taboo. With two teen aged boys at home, he started an affair, if Mr Roiz version is true, when she was in her late twenties.

From a psychological perspective, it is a classic case of a talented man unable to deal with his own fallibility and mortality. Mr Murthy is a competitive man and the yearly success in his career may have made him feel invincible and powerful.  He is raised on Indian middle class values that look down on promiscuous behavior  He competes with his own children in games. He was heading an Indian IT organization where the average age of employees is 25-26 years. Does it look like he was suffering from mid-life crises?

The board members and other senior managers could have identified the emotional baggage he was carrying around and addressed the issue. The question arises, when the board knew about his weakness and character problem, was he provided any coaching or mentoring? Or did the board take the view, that as long as he is delivering the numbers, everything will be tolerated.

3.     Lack of attention to work culture

The board and management knew that Mr Murthy had a marked reputation in respect to female employees. Secondly, it appears that is relationship with Ms Roiz was an open secret. From his own words, it doesn’t seem that he took sexual harassment or company policies seriously. In the interview, he stated:

“It was a personal relationship. The company policy states that any two employees having a relationship have to inform the superiors. It is a small note in an employee handbook. I did inform the company about the relationship. Though it was a question of timing from my side as I disclosed this only a few weeks ago, only after the relationship was over.”

According to him, “it is a small note” in the company handbook.  He didn’t believe in walking the talk in personal ethics or corporate code of conduct. Hence, the question arises, what attention iGate paid to maintain the corporate culture.

With previous cases of sexual harassment against the CEO and an on-going affair, did iGate management ensure that the sexual harassment policies were implemented in spirit? If a woman, as per Roiz’s claim, was forced into a sexual relationship by the CEO, what effect did it have on other female employees and work culture? Did it not set the stage for the hostile work culture where women would feel insecure to report cases of sexual harassment? Let us say, another female employee was harassed by a male senior manager, what options does she have when she knows that the CEO is doing something similar? How seriously was sexually offensive behavior taken by the management?

 The organizations pay a heavy price in respect to sexually harassing culture. The direct costs are of course legal penalties and cases, however, the indirect costs are absenteeism, disengagement, high turnover and lower productivity. The iGate management appears to have ignored these aspects while hiring Mr Murthy and during his tenure.

4.     Ineffective Crises Management

iGate public relations team issued the statement – “The investigation, which is on-going, has reached the finding that Murthy’s failure to report this relationship violated iGATE’s policy, as well as Murthy’s employment contract. The investigation has not uncovered any violation of iGATE’s harassment policy.”

It gave information on the interim CEO and search for the new CEO, to rest fears of the investors.

This appears more of an attempt to limit legal risks. According to US laws the company is responsible for sexual misconduct by its employees. Subsequent to the above news, the company has not made any statement or explanation on what it did to prevent such incidents.

According to media reports, the Indian employees received an explanation from the senior managers on the incident and were instructed not to talk to people outside and within the organization. An instruction not to communicate with the media or put comments in social media is sound. However, not to communicate with fellow employees sounds like an attempt to silence. Can management stop the discussion outside office hours between the employees?

In such instances, various stakeholder expectations need to be addressed. It is a sensitive issue that gets the attention of public, bloggers, activists, women lobbies etc. Even the employees psychological stress levels increase and they need to be managed. However, from the information available in the media, there isn’t much effort being done to manage the crises.

Closing Thoughts

Sexual harassment cases cause huge reputation damage and legal risks. I am not sure whether after Mr Murthy’s previous cases, iGate got proper insurance coverage for directors and senior manager liabilities. Implementing sexual harassment policies and holding everyone to high standards of conduct is something organizations need to concentrate on. The issue was taken lightly previously, but now women workforce is increasing and so are the cases of harassment. Unless companies wish to have their name tarnished, they need to take the right steps.

References:

1. Read more: http://www.thenational.ae/business/technology/rise-and-fall-and-rise-again-of-it-star-phaneesh-murthy#ixzz2UBKIGikk
2. http://www.financialexpress.com/news/phaneesh-murthy-i-will-fight-sexual-harassment-charges-vigorously/1118857/1
3. http://timesofindia.indiatimes.com/tech/careers/job-trends/Murthy-scandal-iGate-staff-gets-social-media-code/articleshow/20222185.cms

Missing Men of Honor

The Story of Disgrace

A wave of shame and disgrace washed over Indian Premier League’s (IPL) Rajasthan Royals team. Three players of the team – S Sreesanth, Ajit Chandila and Ankeet Chavan – were identified as part of the spot fixing racket. Eleven bookies were involved. Investigators have found some evidence connecting it to underworld don Dawood Ibrahim.

As per police disclosure Chavan was paid Rs.60 lakhs by the bookies, Sreesanth and Chandila got Rs.40 lakhs each. By the number of matches they have played they would have earned a few crores each. The bookies lured the players by throwing parties and providing female escorts.

It is shocking that players with such international repute and excellent career opportunities would take a criminal route to earn money. One wonders what they were thinking. Were they joyously throwing up their hands in the air and dancing with happiness. Did they think that for a few millions they would be breaking the hearts, trust and expectations of billions of people, starting with their family?

It is reported that Rahul Dravid, the captain of the team suspected something. He made Sreesanth sit a couple of matches and the team managers asked him to leave the team. How painful it must have been for Dravid, a man reputed for gentlemanly conduct.

This isn’t the first time followers hearts have been broken by their idols. It started with the political leaders. Now the cancer has spread through all facets of life. Indian politicians – Gandhi, Nehru, and Azad – were known for their impeccable behavior  Congress leaders fought for Indian independence. They spent years behind bars to fight for a cause. Now Indian politicians spend time behind bars for corruption and fraud. Instead of feeling shame or humiliation, they get back into public life with renewed vigor to mislead people and make money.  Over 30% of Indian politicians have a criminal track record.

The new breed, who have joined the infamous bandwagon are senior managers of Indian corporates. After Satyam and 2G telecom scam, their names appear frequently for being interrogated by CBI and spending time in jails.

Valuing Honor in Our Lives

So where has honor disappeared? Previously, the mark of distinction for a man was when people referred to him as – “he is an honorable man”.  Having a dishonorable reputation was disastrous socially and professionally. Now, honorable men among leaders can be counted on figure tips.

As a world civilization, we need honor back in our bloodstream. Without it, humanity will reach new levels of depravity. We require men and women to work dedicatedly to get it back for the sake of next generation, though it is a challenging task.

The cynics will say it is a pipe dream and point out various flaws. The idealists look at the times gone by and wish the same could somehow come back. The practical breed has learnt to work like an automaton to earn a living and look at nothing else.

So where do we get our heroes who will change the world for us?  The heroes have to pay a price. Lincoln, Gandhi and King – were all assassinated because they dared to bring about change. From the first step to the end of their journey they made personal sacrifices. They repeatedly saw failures, their hearts sank with despair and somehow they gathered their strength to walk on thorns again.

In the present world, who would wish to trade the high life, luxuries and comforts for a life full of dynamite?

But unless we do so, we are bestowing the next generation a dangerous life.

So our choice is between our generation and the next. Do we want to look that far ahead?

Closing Thoughts  

When we talk about change, our hackles rise. Even when it is obvious that we should change, we don’t want to. That is a human failing which 100% of us have. Our best excuse is that we can’t change the world, who would listen to us, how can all the people change? But if we study change, we just need 10% of the people to believe in our cause. That is, we need to influence just 1 in 10 people in our life. That doesn’t sound very difficult; all of us are capable of doing it. So why not give it a shot, and bring honor back in our lives. I leave you with words of Dorothy L. Sayers from Gaudy Night:

“If it ever occurs to people to value the honor of the mind equally with the honor of the body, we shall get a social revolution of a quite unparalleled sort.”

References:

IPL match fixing 

Risk Managers – Tone Down That Report!

This week three renowned figures – Angelina Jolie, Larry Page and Christine Quinn – disclosed their medical problems to the world. They discussed battle with breast cancer, paralysis of vocal cords, and struggles with bulimia and alcoholism. Jolie, a woman famous for her beauty bared her mastectomy details. They talked about fear of death and handicap, and frailty of human character. They risked high-profile careers by being candid. One word describes their actions – Courage.

However, the corporate world wants to hide behind lies and window dress their weaknesses. The corporate leaders sometimes threaten risk managers and auditors to tone down their reports. The messengers of bad news get shot. Risk managers face bullying, retaliation and threat to their jobs for showing courage to speak the truth. If they refuse to bow down to pressure, the business teams label them as politically dumb or difficult to deal with. Question is – should risk managers tone down their reports to please the business teams?

I want to discuss a couple of scenarios here and you decide the course of action.

Scenario 1- Don’t report correct facts to avoid giving bad news

Let us say, you are a CXO of an organization. You have a heart problem and visit a doctor who is a good friend of yours.

The doctor realizes your heart condition is bad. You require a heart surgery for four bypasses. The doctor doesn’t want to deliver the bad news to you, because he doesn’t wish to hurt your feelings.

The doctor tells you  – “You just have too much stress. You need a vacation to relax and have some fun.” He prescribes you some vitamins and discharges you.

You follow your doctor’s advice, take a vacation. You swim and jog for a couple of days and have a heart attack. You arrive at the hospital with a survival chance of 5%.

Did the doctor do the right thing by not telling you the truth?

Scenario 2 : Don’t report correctly to protect a friend

A civil engineer responsible for doing quality and inspection checks of a bridge notices that sub-standard quality of material is used. There is a high risk of bridge collapsing. However, he issues a clean report to his seniors because the engineer-in-charge of the bridge is a friend of his.

An organisation’s senior managers drive daily across the bridge to reach their office. One day all of them are on the bridge and it collapses. All die.

Would the families of the senior managers be happy with the quality control engineer’s for not disclosing the risks?

My guess is most of the corporate readers would have answered no. You would have preferred the truth when it is a question of your own life being at risk.

Corporate Scenario

So why don’t corporate citizens hesitate when they put other people’s life at risk. See the Bangladesh factory fire, Japan’s nuclear disaster or US banks home foreclosure and mortgage mess. Employees, customers and public lives or life savings were put at risk.

Wouldn’t a few honest risk management reports helped in fixing the problem in time to prevent the disasters?

The corporate world maintains double standards on reporting risks. They want full disclosure of the risks to them but not to others. Before setting these expectations, corporate citizens should answer these questions:

1) Isn’t it a risk manager’s job to identify the health problems of the organization, prescribe a cure, suggest amputation where required and nurse the organization back to health?

2) Is it right to compromise professional ethics and code of conduct to keep a few people happy?

3) Aren’t risk managers responsible for calculating the direct and indirect cost to others for non-disclosure of risks?

4) Shouldn’t risk managers hold their ground and stick to their independent advise as you will benefit from it in the long-run?

Closing Thoughts

Moral courage is one of the most difficult qualities to acquire. Larry Page, as CEO of Google fulfilled his responsibility to the investors by publicly disclosing his medical problems. Now the investors can make an informed decision. One has to admire Page for taking such a difficult call. It takes guts. Disclosing personal weakness makes one feel vulnerable, exposed and fallible. He has shown the path for corporate leaders to follow.

Justin Bieber’s Lesson For Risk Managers

Surfing through Twitter one gets deep insight of human behavior. I am sharing a couple of tweets that got me thinking on our (risk managers) approach. The hat tip goes to Justin Bieber and Mark Robinson for the post.

 1. Get a tribe

 Justin Bieber tweeted the message below and it got 119,562 retweets and 62,959 favorites at the last count.

“Live life full”

— Justin Bieber (@justinbieber) May 10, 2013

Now you might say, what is so original in this message. Nothing remarkable, except that Bieber has 39,087,920 followers.

The message for risk managers is that if we want business team to listen to us, then we need to get a tribe of followers. Sitting in a corner or a cabin, writing reports isn’t going to help us. We need to be on the floor  interacting with the business teams daily.

2. Connect with a popular leader

Then Mark Robinson tweeted this message:

“Justin Bieber got 100,000 retweets for tweeting “Live life full”. That’s just 3 random words. I’m going to try now.

Nipple squirrel ham”

— Mark Robinson (@robboma3) May 11, 2013

The message was retweeted 26,972 times and favorited 4379 times. Mark has 23,694 followers. While Bieber’s message was tweeted by just 0.3% of his followers, Mark’s message was tweeted more than the number of his followers. Isn’t that fascinating.

This is a trick which risk managers need to learn. Even the most mundane message of a popular leader will be followed more ardently than their sanest advise. People don’t follow bosses, they follow leaders whom they like. Hence, risk managers need to identify the popular figures in office, ask them to give their message or link up their own version to the popular person’s message. Risk management advise is going to spread faster then, rather than with all the technical stuff.

I am dedicating Justin’s song to all of you. We need to believe it too – “I got that power”.

Leadership of Dead Bodies, Stones and Flowers

In April, two Air India pilots handed over the controls in auto-pilot mode to two female cabin attendants to take a short nap. They decided that their sleep was more important at 33,000 feet while flying the 160-passenger flight from Bangkok to Delhi. They returned to the cockpit after 40 minutes when one of the cabin attendants accidently knocked off the auto-pilot mode.

The angry Twitterate asked for pilot’s license suspension, removal from job and legal charges for culpable homicide. Everyone questioned their work ethics and shock at their irresponsible behavior. Air India investigated the incident, suspended the pilots and sated that passengers’ safety was never compromised. Unbelievable, how can passengers be safe without any pilots at the helm?

1.     Double Standards in Evaluating Corporate Leaders

 The pilots were crucified for risking the lives of passengers. However, surprisingly the pilots of the corporate world do not suffer the same fate. The wizards and titans of the banking industry crash landed the world economy, but they didn’t lose their CXO seats.

Look from another lens. Did any senior in Supplier Company or the multinationals lose their job in the Bangladesh factory fire? In Foxconn, the Apple contractor, 11 employees committed suicide, four died in an accident and one collapsed after continuously working for 36 hours. However, Steve Jobs was rated as the second most popular leader by the CEOs in a survey conducted by Price Waterhouse Coopers. The first and third were Winston Churchill and Mahatma Gandhi respectively.

Now this is going to rattle my readers but let me say it. Steve Jobs was a great inventor, designer, strategist and marketer. However, when it came to people, his employees considered him rude and manipulative, and his competitors found him uncivil. Though Apple achieved great heights, he paid low salaries to the employees in the Apple stores, paid no dividends to the shareholders, pushed down suppliers to manufacture at lowest possible rate and didn’t believe in charity or corporate social responsibility. His behavior and actions weren’t people centric or humanity oriented. So my question is – do we consider him a great leader because he managed to put Apple on top? That makes him a great CEO, not necessarily a great leader.

2.     Misconceptions of Leadership

 The problem arises due to the definition of leadership. Read the dictionary meaning:

Leadership is “organizing a group of people to achieve a common goal”.

- We don’t focus on how the group of people were gathered; by inspiring them or arm-twisting them.

-  We don’t focus on the nobility of the goal; was it to exploit others or liberate them.

-  We don’t focus on the method adopted to achieve the goal; was it by breaking the rules or a journey of virtue.

In the present world we see leaders leaving dead bodies in their path, walking over people as if they were stones and sucking the life out of them. Great leaders create leaders not followers, they make others blossom like flowers.

Be it a corporate leader or political leader, we don’t wish to question the leadership methods. Our thinking is, how it matters to us, we have nothing to lose. We have everything to lose, and Martin-Niemöller-Foundation words at Hitler’s time still resonate:  

“First they came for the communists,
and I didn’t speak out because I wasn’t a communist.

Then they came for the socialists,
and I didn’t speak out because I wasn’t a socialist.

Then they came for the trade unionists,
and I didn’t speak out because I wasn’t a trade unionist.

Then they came for me,
and there was no one left to speak for me.”

Our own silence will kill us and the society we live in. When humanity is at stake, can we close our eyes and say nothing is at stake.

3.     Leadership Training

The Institute of Strategic Change reported that – “the stock price of ‘well-led‘ companies grew by over 900% over 10 years, compared with 74% for poorly led companies”. Warren Bennis in 1998 said – “The Truth is that no one factor makes a company admirable. But if you were forced to pick the one that makes the most difference, you’d pick leadership.” However, how many companies train on leadership or do a performance evaluation on leadership qualities?

Quite a few would be saying we do it. So let me clarify. In organizations bosses tell the juniors what to do and how to do it. They give rave reviews to the employee who completes the task as they had stated. They promote that employee and now he becomes a boss. At best, he will be a good manager, not a leader.

Corporate world determines success rate by title and salary.  Neither guarantees leadership skills. Employees aim to become a boss, not a leader. The terms are not synonyms.

According to Malcolm Gladwell,  all outliers practiced their talent for over 10,000 hours to achieve greatness.  In the corporate world, how many hours are dedicated by each employee to learn leadership? Learning leadership is a by-product of the main job, till CEO level. Then isn’t it surprising that we do not have many great leaders in the corporate world.

 Closing Thoughts

Maximum damage in the world was caused by people who got powerful positions without good leadership qualities, be it Hitler, Jeff Skilling, Bernie Madoff or Lance Armstrong. The biggest risks in the corporate world are leadership risks. It is the leaders who make the decisions, so unless we have a system of putting the right people in leadership positions we will continue to have these disasters. Hence, our job is to develop good leaders, select good leaders and continuously monitor the leaders.

 Wishing my readers a Happy Mother’s Day. Being parents is the toughest job in the world,. They are responsible for raising the next generation of leaders.

References:

1. Air India Pilots Story  
2. Deaths in Foxconn
3. Price Waterhouse Coopers report on best leaders

 

Two Ethics Questions to Mr David Cameron

David Cameron recently visited India with a huge trade delegation to improve the bilateral relationships. Of course, with India’s growing power, world’s senior politicians and business heads are now coming to India every week. However, what made Mr Cameron’s visit remarkable were his two comments he made in respect to British colonial rule.

Though I generally keep away from commenting on political aspects, the hypocritical stance was just too amazing to ignore. Indians sometimes see this behaviour from whites in India. For instance, a British man recently said to me – “All Indians are slaves, we British are superior.” I have no idea on superiority or inferiority of any human race but Indians are definitely not slaves. Obviously, the deluded old chap lived in a different world. Point to note is, Roman traders introduced the concept of slaves to India, and Mughal rulers practiced slavery in India for the first time.

The British rule was an attempt of minority ruling the majority. That is only possible by fear and terror. While Indian rulers believed in servant leadership. British ruled the population in a significantly inhumane autocratic leadership style that Indians did not have much experience in dealing. That resulted in quite a few atrocities and it brings me back to Mr Cameron’s comments.

1.      Jallianwala Bagh Massacre

David Cameron, the British Prime Minister, visited Amritsar’s Jallianwala Bagh and laid a wreath at the memorial. Cameron considered the massacre “deeply shameful event in British history” but did not apologise for it. Before this, Queen Elizabeth had paid a visit to the same memorial in 1997 and laid a wreath. One is not sure what the British leaders are attempting to convey by these gestures.

Here is the historical perspective. On April 13, 1919, British troops opened fire on unarmed civilians, including women and children who were celebrating the Sikh festival Baisakhi at Jallianwala Bagh. The British estimated 379 dead and approximately 1100 wounded. Indian National Congress estimated 1000 dead and 1500 wounded.

The order was given by Brigadier-General Reginald E.H. Dyer. He was forced to retire from army, however was celebrated as a British hero. His actions were so twisted that when an Englishwoman, Miss Marcella Sherwood reported she had been molested on the streets of Amritsar, he issued an order requiring all Indians (men) using that street to crawl its length on their hands and knees. General Dyer said that – “Some Indians crawl face downwards in front of their gods. I wanted them to know that a British woman is as sacred as a Hindu god and therefore they have to crawl in front of her, too.” He was never punished for any of his actions nor was tried in court.

Under British rule, Indians suffered numerous inhumane acts. From the present day British leaders’ perspective, I would say that they cannot undo the past. Indians definitely are not waiting for an apology. However, using the gesture for political mileage, most probably to get Indian votes in Britain in the next election is a little bit too much to swallow.

The other aspects I find hypocritical are the double standards maintained. When Germans killed Jews, it was an inhumane act – “crime against humanity”. The Nazis were tried in Numerban trial and hanged for their war crimes during Second World War. Even until date, a list is maintained of the missing Nazi’s. American President Mr Franklin D. Roosevelt  and British Prime Minister Mr Winston Churchill, both were involved in the decision.

I absolutely agree that Hitler’s rule was atrocious. I have one observation – If atrocities are done on Americans and British it is a crime against humanity. If they do atrocities on people of other countries, then those people do not even deserve an apology.

How does one justify this stance on ethical standards?

2.      The Kohinoor Diamond

India requested David Cameron to return its Kohinoor Diamond and he responded – “I certainly don’t believe in ‘returnism’, as it were. I don’t think that’s sensible.”

Kohinoor diamond was discovered in Karnataka mines and the first mention is in 13^th century. It is one of the most well known diamonds in the world. Presently, it is set the in the British crown of Queen Elizabeth and is displayed in Tower of London.

The British acquired the diamond from India in 1850. Raja Ranjit Singh of Punjab owned the diamond and in his will bestowed it to Jagannath Puri temple. However, on his death in 1839 British administrators did not execute his will. In March 1849, British formally proclaimed Punjab as part of British Empire in India.  In terms of the treaty they mentioned that the “gem shall be surrendered to Queen of England”.  Lord Dalhousie treated it as spoil of war. He made the 13-year-old conquered prince Dulip Singh, to travel to England to present the diamond to the Queen.

India was a rich country when British arrived in the 17-century AD. They took away precious jewels from the kingdoms they captured. Most of them cannot be directly identified; however, Kohinoor is part of Indian heritage.

My question is – Is it ethical for a country to keep other countries national treasures? What if the roles were reversed? What would the world expect from India then?

Closing Thoughts

India is catching up with the developed countries and now ranks 9^th in the world in respect to Gross Domestic Product. Indians are confident of doing better in the 21^st century. Hence, they are not looking for rehashing history, as it can never be changed. Indian religions teach forgiveness as the greatest virtue. However, it does not mean Indians have forgotten the past and are gullible enough to be taken for a ride. Now as more world leaders visit India to take advantage of the large consumer market, they need to do far better. A new world order is establishing and India is in a position to choose the best partners.

References:

1. List of Most Wanted Nazi War Criminals according to the Simon Wiesenthal Center
2. Nuremberg Trials
3. Kohinoor Diamond
4. Britain GDP

Employee Selection and Background Screening in Ancient India

Would it be fair to assume most of us believe that employee selection and background screening processes were formed in the 20^th century? Do you think soft skill evaluation of employees is the latest management mantra? Will it come as a surprise that in India these were formed in 4^th Century BC?

Kautilya’s Arthshastra, written in 4^th  century BC, lays down rigorous process for selection and background screening for ministers, priests and government employees. It is more extensive than that employed in the present-day corporate world. I am doing a comparison of the two below. After reading, tell me whether we have progressed or deteriorated in 25 centuries.

1.      Selection Process

Let us first see the qualities senior level people require according to Kautilya:

“Native, born of high family, influential, well trained in arts, possessed of foresight, wise, of strong memory, bold, eloquent, skilful, intelligent, possessed of enthusiasm, dignity, and endurance, pure in character, affable, firm in loyal devotion, endowed with excellent conduct, strength, health and bravery, free from procrastination and fickle mindedness, affectionate, and free from such qualities as excite hatred and enmity–these are the qualifications of a ministerial officer (amátyasampat).”

If you look at them, he covers intelligence, professional capability, personal character, strategic thinking, emotional intelligence, social and business connections, soft skills and physical fitness. In the 21^st century words and terminologies are different, but attributes are the same. Hence, not much change.

2. Background Verification Process

Now I am giving a table below comparing the two period’s process of background verification. For detailed methodology of the current period refer to my article – Pre-employment Background Verification.

Doesn’t it make you think? Over 25 centuries, the basic concept and process of selection and background verification has remained more or less the same. However, Kautilya’s selection process doesn’t stop here. He mentions a few additional processes and I am amazed at the insight.

3. Detailed Character Verification

In the Arthshastra, Kautilya asks to ascertain the character of employees by offering temptations and instigating them against the king. Senior level ministers and priests should attempt to lure the employee to test him for four allurements- religious, monetary, love and fear. He suggests creating situations to test whether the employee will defy the king for the sake of religion, money, sex or under threat. Then he states, that whosoever is lured by a certain aspect, should not be in-charge of it. For example, if someone fails the test of monetary allurement, he should not be responsible for managing finance. The tests were conducted to ensure that people in critical positions were incorruptible.

In present times, we select senior managers on various aspects but their loyalty and character aren’t as thoroughly checked as in the ancient times. In my view, quite a significant number will fail Kautilya’s tests for “purity of character”. How many CEOs check whether their direct reports will betray them for bribes and rewards?

Closing thoughts

In India, around 25% candidates submit false or inaccurate resumes. The background screening processes aren’t fully established in most of the organizations. With high risks of hiring terrorists, hackers and fraudsters the organizations are susceptible to financial, legal and reputation risks. Isn’t it surprising that even after 25 centuries the process and procedures aren’t fully implemented.

We now say we are living in a fast changing world. So, do you think background-screening processes will become efficient in this century, if they haven’t changed in 25 centuries?

Indian Attitude Towards Time – A Strength In Future

We Indians jokingly refer arriving late for a meeting as arriving ISD (Indian Standard Time). However, if you, my reader, are an Indian, you would have heard a question from a western colleague – “Why are Indians late for meetings?” If you are a westerner, you desperately want to know the answer to bring your stress down and figure out whether the Indians actually want to do business with you. However, whether you are an Indian or a westerner, have you ever thought of Indian attitude to time as a strength in the future chaotic world?

Let me delve into a little bit of detail before I answer that. The attitude towards time divides people into two cultures – monochronic people and polychronic people. According to Wikipedia the definitions are:

Monochronic – A monochronic time system, people do things one at a time and segment time into precise, small units. Under this system, time is scheduled, arranged and managed.

Polychronic – In polychronic time system, people do several things simultaneously, and take a more fluid approach to scheduling time.

Indians follow the polychronic time system whereas most of the western countries believe in monochronic time systems. The general perception is that people following monochronic time system are better organized. Hence, monochronic system is superior.

1. Attributes of the two cultures

Below is a table of attributes the people of two cultures show with the current business buzzwords and applicability to Indians. Check it out and tell me whether Indians attitude towards time is going to be strength in future?

No	Monochronic People	Polychronic People	Buzzwords	Applicability to Indians
1	Do one thing at a time	Do many things at once	Single task v/s Multitasking	Multitasking
2	Concentrate on the job	Can be easily distracted and manage interruptions well	Single task v/s Multitasking	Multitasking
3	Take time commitments seriously	Consider an objective to be achieved, if possible	Task oriented v/s goal oriented	Goal oriented
4	Are low context and need information	Are high context and already have information	Direct orders V/s Subtle communication	Subtle communication
5	Are committed to the job	Are committed to people and human relationships	Task oriented v/s people oriented,	People oriented
6	Adhere religiously to plans	Change plans often and easily	Predicted & scheduled v/s Chaotic & complex(Fixed project schedules v/s Flexible planning)	Chaotic & complex
7	Are concerned about not disturbing others; follow rules of privacy and consideration	Are more concerned with those who are closely related than privacy	Individual V/s social communities(Privacy and security v/s social networks and internet)	Social communities
8	Show great respect for private property; seldom borrow or lend	Borrow and lend things often and easily	Ownership v/s credit lending	Credit lending
9	Emphasize promptness	Base promptness on the relationship	Time v/s relationship	Relationship
10	Are accustomed to short-term relationships	Have strong tendency to build lifetime relationships	Transactional relationships v/s Long-term relationships	Long-tern relationship

2. Link with current management trends

Now let us discuss the latest management mantras:

a)    Impact of  technology

Advancement in technology and telecommunications has globally connected the world with little segregation possible in work and home life. Managers do multiple tasks now and Gen Y are mentally geared to do so from childhood.

Advantage – India: Indians traditionally do multiple tasks and have a huge population of Gen Y.

b)    Effect of  globalization

Globalization and outsourcing has ensured that managers are not physically available on site to monitor tasks. Secondly, work-life balance is encouraging more people to work from home. Hence, success depends on delivering results and not on completing tasks.

Advantage – India: Indians do not have mindset for process adherence and adopt flexible approaches to achieve targets.

3)    Influence of social networking

In the age of social networking, communication is taking center stage.  Senior managers face the challenge of communicating with a global workforce of different cultures.

Advantage - India: Indian communication style is subtle, layered and non-aggressive.

4)    Demands due to complexity of business 

The space of change in the world has increased due to technology and globalization. The business environment has become complex and chaotic. The long-term planning is not possible because parameters change in a short time.

Advantage – India: Indians managers are used to dealing with adversity and chaos. They are comfortable working delivering results with minimum infrastructure and support.

5)    Finding meaning in relationships

The western organizations have realized that in the long run transactional relationships result in dysfunctional organization culture and reduce customer loyalty.

Advantage – India: Indians believe in long-term relationships even in business. They conduct business after establishing trust and respect in the relationship.

Closing thoughts

I do not know whether I am on the right track. Nevertheless, in my opinion we definitely need to relook, as the risks are high. For instance, presently the western organizations are developing their organization structure, processes and framework according to monochronic thinking. On the other hand, as the business environment requires polychronic behaviour, there is going to be clash in the system. Employees will be confused and unnecessary conflicts will occur. That results only in one thing – lower profits and higher risks.

In Indian organizations, we need to be clear that we do not adopt behavior patterns and change the culture according to our perceptions. We need data and analysis to assess the culture that will be suitable in future. It is possible, that a polychronic culture is better.