NOTES FROM THE BOOK MANAGING RADICAL CHANGE BY SUMANTRA GHOSHAL, GITA PIRAMAL

ANDC.A.BARTLETTi
Publisher:PenguinBooks,2002edition
Contents:

1.
2.
3.
4.
5.

Part1::Thechallengesofradicalperformanceimprovement
Chapter1:RADICALPERFORMANCEIMPROVEMENTIsPOSSIBLE
Chapter2:Learningtocooksweetandsour
Chapter3:INTOTHEVALLEYOFDEATH
PartII:Shapingandmanagingfuture
Chapter4:Thethreestagesofcompetition
Chapter5:Aligningforgrowth

6. Chapter6:Managingacquisitiveexpansion
7. Chapter7:DiversificationandDiversifact
8. Chapter8:Goingglobal
PartIII:RevitalizingPeople,OrganizationandRelationship
9. Capter9:Changingthesmelloftheplace
10. Chapter10:TheCompanyasaUniversity
11. Chapter11:BuildinganentrepreneurialOrganization
12. Chapter12:Newmanagementrolesandtask
13. Chapter13:Buildingshareddestinyrelationships
PartIV:Transformingmanifestoforleadership
14. Chapter14:Anewmanifestoforleadership

Part1::Thechallengesofradicalperformanceimprovement

1. SATISFACTORYUNDERPERFORMANCE

Itisapervasivediseaseconfrontedincompaniesallovertheworld.Itisadiseasethatiseasy
tocatch,findingawaytoavoidisdifficult.

Often their competitive strength erodes rapidly. The company continues to make money
becauseofalltheresourcesthatithas,intermsofanestablishedcustomerbase,ahistorically
developeddistributionchannel,strongbrands,andsoon.Alltheseresourceswouldhavebeen
builtbyearliergenerationofmanagers,yettheincumbentmanagementtakescreditforallthe
returnstheseresourcesgenerate,neveraskingquestions..Whatarewedoingtoaddvalue?
The crisis ultimately comes, but before the crisis hits there is often a long period when the
company can coast along in a state of satisfactory underperformance, assigning all
uncomfortablesignstofactorsintheexternalenvironment,beyondmanagementcontrolsand

findingrationalizationononehandandreducingambitionontheotherhand,soastomaintain
satisfactioninthefaceofdecliningfortunes.

2. Chapter1:RADICALPERFORMANCEIMPROVEMENTISPOSSIBLE

This is the first and essential prerequisite for creating and managing change. Senior manager
havetodevelopthebeliefthatradicalchangeispossible.

It is certainly possible for small and medium sized firms, but it is also possible for large and
established companies. And it is possible such nonincremental improvements within a
reasonablyshortperiodoftimenotaquarterorevenayearbutnottenyearseither.

Thereisareligioninthefieldofmanagement,itiscalledincrementalism.Itisbasedonthe
belief that everything in companies happen slowly and incrementally. It comes with it own
ritualsandmetaphors,likeanalogyofsupertankers.Supertankersturnslowlyinlongturning
circles. Dettoforcompanies, particularlylargecompanieswiththousands ofemployees . You
cantpushthemtoomuchtoofast.Youhavetohavepatience,youhavetobepragmatic.Inbig
companiesthingssimplydonothappenthatquickly.

TherearethoseDhirubhaiAmbaniatRelianceforexamplewhohaveneverbelievedinthis
religion but most Indian managers practice them knowingly or unknowingly. They have been
broughtupinaneraofcrippling regulations, beauracratic dominance,and poorsystemsand
infrastructureswhenthetenetsofthisreligiontendedtobevalidmostofthetime.Thisishow
theygotconvertedtothisfaith.
A) Highperformanceincompaniesexistinunattractiveindustriese.g.IspatInternational.
B) Acompanycanachieveoutstandingperformanceevenitsindustryissinkinge.g.Richards&
Sheffield,HastingsJuteMills.
C) Outstandingperformancecanbeachievedevencompetitorsaremuchbiggerandstronger
e.g.XeroxversusCanon.
D) Radical performance improvement is possible even when you are already very successful
e.g.GE,HindustanLever.
E) Charismatic leadership is not a prerequisite for radical performance improvement e.g.
NarayanMurthyandDeSimonof3M.

Chapter2:Learningtocooksweetandsour
In1993IndianOxygenwashailedasoneofthebiggercomebackstoriesoftheIndianCorporate
in recent times. The company had rationalized its portfolio, selling if the electrode business
restructureditsmanufacturingbase,closinganumberofinefficientplantsandreplacingthem
withafewhighscaleunitswithsubstantiallylowercoststructure,reducingitsworkforcefrom
5400in1989to2100in1993.ThecompanysprofitsjumpedfromRs25Lakhsin1990toRs705
Lakhsin1993,enhancingitsmarketvaluefromRs45CrorestoRs480Crores.


FiveyearslaterthemarketvaluewasdownagaintoRs191Crores.Sowhatwentwrong?The
companyhadlearnttocut,torestructure,torationalizebutithadnotlearnttogrow.Asaresult
despitecontrolledbudgets,squeezedcostsandimprovedproductivity,itlackedtheenergyand
courage required for creating and exploiting new opportunities. It got caught in a dangerous
negativespiraleverycostcutledtoatemporaryimprovementbutultimatelyonlycreatedthe
needforanothercut.

Theunderlyinglessonisbothsimpleandrational.Sustainedsuperiorcorporateperformanceis
basedontheabilitytomanagethetensionbetweentwosymbioticforces.Theneedforongoing
improvementinoperationalperformanceandproductivitythroughconstantrationalizationin
existingactivitiesandtheneedforgrowthandexpansionthroughcontinuousrevitalizationof
strategyorganizationandpeople.

The problem is that most managers see the process of rationalization and revitalization as
mutually exclusive. Rationalization is often unpleasant Sour. Few managers enjoy closing
plants, selling businesses, sacking people. Revitalization on the other hand is Sweet. Most
managerslovegrowth,theylovedreamingupavisionanddrivingtheirorganizationtomatch
theirdreams.Andmostgoforeitheroneortheother,hopingtoeithercutorgrowintothehigh
performanceleague.

The continuous rationalizationprocess provides the resources, including money andpeople,

neededforgrowth,andthecontinuousrevitalizationprocessgeneratesthehopeandenergy
required to sustain the grueling challenge of relentless productivity improvement. Growth
without productivity improvement is like building castles on sand. Most companies cook only
souroronlysweet,sustainedsuperiorperformancerequiresamanagementthathaslearntto
dotheboth.

A. Creatinggrowthopportunitiescookingsweet

Downwardspiralofrationalization
Poorperformance
Cutresource,sellbusiness,closefactories,sackpeople
Temporaryimprovementinresults
Underlyingproblemnotsolved
Performancedeclinedagain
Cutagain

e.g.WastingHouseisnonexistenttoday.

B. CookingsweetandsourforBajajAuto
InviewoftheseverecompetitionfromHonda,Suzuki,Piaggo:BajajAutowhichwasalreadythelowest
costproducerintheworldchangeditsstrategy.
ThemindsetofBajajAutowasthatonceweintroducedaproductthepeoplebuyinvolumes.In1980,
RahulBajajhadsaidMymarketingdepartment?Idontrequireit.Ihaveadispatchdepartment.
In1998,theyaddedvarieties,fundedtheinvestmentsrequiredfornewtechnologiesandequipmentsas
wellastomeettheenhancedneedformarketingbroadenedtheproductportfolio.Atthesametimea
numberofprogrammesforradicallyreducingthecostweretaken.AnewagreementwhichShivSena
controlled union led to a mutual commitment for 810% productivity improvement per annum. In
exchangeforsignificantincreasetheemployeespayandfacilities.
Between 1995 and 1998, the company achieved a remarkable 38% improvement in the number of
vehiclesproducedperemployee.
VirtuousSpiralofprofitablegrowth

Growprofitability

Generateinternalcashforgrowth

Increasefinancialdegreeoffreedom

Increaseabilitytosupportgrowththatisinvestmentpotentialandstrategicfreedom

Increaseattractivenesstoinvestors

Viciousspiralofunprofitablegrowth

Growunprofitability

Increasedebttogeneratecash

Decreasefinancialdegreeoffreedom

Decreaseabilitytosupportgrowth


Decreaseattractivenesstoinvestors

3. Chapter3:INTOTHEVALLEYOFDEATH

All our metaphors of transformational change are highly romantic. From a caterpillar to
butterflysoundsandfeelssogood.Fromanuglyblackcaterpillartoabright,colorfulbutterfly
thesymboloffantasy,ofloveofgoodcheer!Butimaginewhatishappeningtothecaterpillar
asitgoesthroughthismetamorphosis.Firstitgoesblind.Thenitsarmandlegsfalloff.Finally,
itsbodysplitsopen,toallowitsbeautifulwingstoemerge.Thinkofthefearandthepainitgoes
throughwhichcaterpillar,willinglyofitsownvolition,willsignupfortransformation?

Precisely,thesameistrueofcorporatetransformation.Theprocessoftransformationalchange
involves a greatdealoffear,andintensepain.Thatis whyitissomucheasiertotalk about
transformationthanitistogothroughtheprocess.

Many Indian top level managers have picked up the rhetoric of corporate transformation. In
thecurrentcontextofrapideconomic,technologicalandcompetitivechange,morethat,afew
of them do require radical change in strategy, organization and culture to prosper, perhaps
even to survive. But, most of these managers have only an intellectual understanding of the
changesthatarenecessarytheyhavenoexperienceoftheemotionalrollercoasterthatsuch
transformational processes involve. To lead such change, they have to manage both the
intellectualandtheemotionalaspects.Thelatterbyfarthemoredifficultandmoredraining.

Transformationalchangeisajourneythroughthevalleyofdeath.Indifferentphasesofthe
journey, the organization will experience some very different kind of emotions from
complacence,denial,fingerpointing,resistance,throughangeranddepressiontoexploration,
enthusiasmandcommitment.Toleadajourneythroughthis,toplevelmanagersmustlearnto
anticipatetheseemotionsandhavethecourageandthewisdomtocopewiththem.Ateach
phase, the leadership task is very different and the role the leaders play must, therefore,
radicallychangeinthecourseofthejourney.

As a discussion about transformational change first enter the agenda of a company, most
managersfeelenergized.Itisaheadyfeelingofmachismoandtheillustrationsonlyaddtothe
excitement.Thisisthecomplacencystage,theeuphoriaoftheignorant.

Then,asthebenchmarkingprocessrevealsdeepgapsbetweenthecompanyscapabilitiesand
performance and those of its best in class rivals, the complacency (satisfied with one self or
onesachievement)giveswaytorationalizationanddenial.Thenasthetruthofperformance
gapbecomesimpossibletodeny,valiantrationalizationensues.

Astheselayersofrationalizationgraduallymeltawayandtheobviousconclusionofmanagerial
mediocritystarespeopleintheface,denialgiveswaytofingerpointing.

As deeper analysis begins to show that the gaps are indeed pervasive the outburst finally
happens.Seniormanagerstendtoleadthisoutburst.Longusedtothedeferenceandadulation
appropriateforthesizeoftheirchambersandexposedforthefirsttimetotherealityoftheir
feeblecontributionsandmanifestmanagerialineffectiveness,angerbecomestheirsoledefense
mechanism.

Leadersstrongenoughtopushtheorganizationbeyondthestageofoutburstfinallyarriveat
the lowest point of the valley depression. The toughest phase to plough through, this,
however,isalsothefirstsightoftheendofthetunnel.

Persist beyond the downing of tools, and you begin to get the first glimpse of exploration, of
curiosity,ofessenceofpossibility.Noteverythingisreallyrotten.Therearenuggetsofhighclass
resource in the company, of strong competencies and interesting opportunities. As a few
instancesofsuccessfulchangebegintofilterthrough,atleastsomepeoplebegintobelievein
thepromisesofafuture.

Nurture thesebelieves, support and celebrate these successes, and gradually theenergy will
riseagain.Curiosityaboutthefuturewillleadtocommitmentandthesenseofpossibilitieswill
expand intotheexcitementofcreation.Gradually, thebutterflywill emerge,and willlearn to
fly.

A. Changeversustransformation

Not all companies need transformation. In a context of changing economic and social
landscape,mostcompaniesmusthavethecapacitytoevolveandchange.Butincremental
changeisdifferentfromtransformation.Typically,companiesneedtorealignsomeaspect
oftheirstrategy,organizationorculture,whileretainingtheothers.Thatischange.

Transformationincontrast,isthesystematicandsimultaneousattackacrossmanyfronts
thatfundamentallyaltersthebasicrhythmandcharacterofacompany.

There are a handful of companies in India that have faced severe crisis and have worked
theirwayoutofit.Inthatprocess,theyhavetakenalotofpain,oftenwithgreatcourage
andgrit.

B. Leadingthetransformationprocess

Managers of troubled companies have three alternatives to choose from. First, they can
denytheneedfortransformationandcontinuewithbusinessasusual.Atsomepoint,the

companywillfallofftheprecipicebutthistheyhope,willbeaftertheirtime.Theirsecond
opinionistogatherupthecouragetoinitiatorthetransformationtheprocessandtolive
throughthistrauma.Eveniftheysucceed,theywill,inalllikelihood,bedeeplyscarredby
thatexperience.Orthelastalternativetheycanstepoutnowandallowsomeoneelse
withmorecourageandgritthanthemtotakeonthemantelofleadershipandinitiatethe
journeyintothevalleyofdeath.

What makes matter even worse is the different key individuals and different parts of the
companywillgothroughthisemotionaljourneyatdifferentspeeds.Therewillbeafewwho
willavoidthevalleyandgostraighttotheexcitementandcommitment.Therewillbeothers
whowillnotrecovertheywillplungeintodespairandtheonlyactofmercywillputthem
out of their misery as gently as possible. Most groups will go through some of all these
phases,butnotinsynch.

Ateachphase,thetaskofleadershipisverydifferent.Intheearlypartofthejourneyin
thecomplacenceanddenialphasesleadersmustbebrutalintheirchallenge.Theymust
confront with information, project the consequences of business as usual, and provide
illustrationsoftheseconsequences.Thisisthephaseinwhichcomparativedatacompetitor
bench marks, internal employee feedback and customer satisfaction surveys, e.g. are
essentialtoruthlesslyexposethetruth.Thetaskofmakingagroupofcomplacentmanagers
confronttherealitiesofthecompanies,mediocrityneedsaheavyhand.Firstofall,inthis
phase,theleadersmustalsoconfrontandpubliclyacknowledgetheirownfailures.After
all,theymorethananyoneelseinthecompanymusttakemostoftheblameforthepast
inertiathathasleadtotheneedfortransformation.

In the next phases of anger and depression, however, a heavy hand will merely destroy.
Theneed,inthisphase,isforempathy,understanding,anda collectivesharingofgrief.
Theleadersmustlearntolisten,notonlytowhatisbeingsaid,butalsotowhatisnotbeing
said. They need to show personal commitment. And, ofcourse, this is also the period of
mercykillingtheymustcutlosseswhenunavoidable.

As the organization turns the corner into the first signs of curiosity and exploration the
symptoms change. Downi ng the tools gives way to overpreparation, the feeling that the
companydoesnotcareisreplacedbyincoherentenergy.Thereistheconfusionofmultiple
initiatives, the chaos of diverse projects and divergent local leadership. At this stage, the
taskoftopmanagementchangestooneofguidingpriorities,ofeducatingtoimprovethe
qualityofanalysis,ofpresentingshorttermgoalstodirecttheprocess.

Finally,asthebutterflyemerges,theroleofleadershipevolvesintosettinglongtermsgoals
andofrebuildingteamsandtrust.Gradually,thosewhohaveleadtheprocesssofarmust
step back from the frontline, letting others take on visible leadership roles while they

retreatintothebackgroundroleofembodyingandprojectingthevisionandvaluesofthe
companyandcoachingthenewleaderstoplaythenewroles.

PHASE
SYMPTOMS
LEADERSHIPROLES
Denial
Rationalization
Confront
with
information
Focusonthepast
Project
Withdrawal
consequences
of
Withdrawal
businessasusual

Provideillustrations
Resistance
Anger,blame
Listentowhatissaid
andnotsaid
Downingoftools
Sharedmourning
Thecompanydoesnot
care
Show
personal
commitment
Cut losses when
unavoidable
Exploration
Overpreparation
Guidepriorities
Incoherentenergy
Educate to improve
qualityofanalysis
Confusion,chaos
Setshorttermgoals
Commitment
Cooperation and co
Setlongtermgoals
ordination
Celebratesuccess
Frustration
about
Focus on team
speed
building
Looking for new
Step back let the
challenges
next
tier
of

leadershipemerge

PartII:Shapingandmanagingfuture

Chapter4:Thethreestagesofcompetition

1. CompetitionfromMarkets:Itstartswithastructuralanalysisoftheindustry,basedon
adetailedevaluationoftherelativepowersofthesupplierandcustomers,todiagnose
thedynamicsofprofitabilityandtoidentifythedifferentstrategicsegments.Thereis
needtocoalignfunctionalstrategies:alowcoststrategy,marketingandfinancing.
Reliancewinsinthemarketplaceeverytimebecausecustomersliketobuyitsproducts.
ThecontinuingcapacitygrowthallowedReliancetoemergeasthelowestcostpolyester
producer in the world, it was 18 cents per pound against 28 cents approx
internationally.
2. Competition for competencies : the competition for resources and capabilities.
Reliancesstrategy workedinasetofcompetenciese.g.itsprojectmanagementskills
are unsurpassed (careful planning to quantify tasks and then saturating tasks with

resources) and among the best in the world, in mobilizing large amount of low cost
finance,companiesremarkableoperatingefficiencies
3. Competitionfordreams:DhirubhaiAmbanihadwithShellatEdenandtherehedreamt
ofcreatingacompanylikeShell,toexploreforoil,refineitandsellallovertheworld.
The dreams was backed up with enormous courage and faith . His first foray was
backward integration from textiles to polyester filament yarn. His two well educated
sons Anil and Mukesh had fire in belly and used to say kuch kar ke dikhana hai.
Strategy by definition, requires distinctiveness , it is about being different. Strategic
innovations come about when a company often lacking the resources and capability
thataredemandedbytheindustryreceipefindsawaytocreateanewbusinesssystem
byusingwhatithas.
4. FromFrameworktoAction:AsperMichelPortarcarefulanalysisofcoststructuresand
customerneedsremainvitaltoarriveatcostleadership.Makehonestassessmentof
companys resources (such as brands, facilities, distribution infrastructure, etc) brand
building, project management, new product development. The challenge would lie in
beinginsightful,creativeyetlogicalanddisciplinedenoughtothesekeyresourcesand
strengths. Next step 2 review your business with quick analysis of the market to
evaluateyourpositionvisavisthosekeycompetitors.Trytoasseswheretheindustry
isgoing,howdifferentsegmentsevolving.Instep3 reviewwhatnewbusinessesand
opportunities can you exploit on the strength of your existing competencies. This is
essence of successful diversification. Finally review the needs for improving your
strategicarchitectureanddecideonnewbusinessesrequiringcompetenciesthatyoudo
not have. Now, test the vision , arrived at through a creative process. Try to find a
coherentapatternthatwouldlinkyourvisionandstrategythrougheachofthesethree
stagesofcompetition.

Chapter5:Aligningforgrowth
Nowwemayfocusonimplementation;onwhattheyneedtodointernallytofacilitate
the growth process. To manage sustainable growth , a company needs to create an
effectivealignmentamongthreekeyelements:itsvaluecreationlogic,itsorganizing
principlesanditspeopleprocesses.

ValueCreationLogic:Valuecreationisallaboututilityandfunctionalityandrefersto
those the company serves, rather than to those who own. Create value through
continuous innovation, maintaining profitability and growth by developing and
introducingnewproducts,throughoperationalexcellence,backedbyhighqualityand
highefficiencyplantsandinfrastructures,bybuildingcloserelationshipswithcustomers
,providingtailormadesolutionsthatuniquelymeetindividualcustomerneeds

OrganizingPrinciples:Thechoicesforthecompanymaybefollowing
1. Autonomy versus Synergy: principle is nauncing trade off between autonomy and
synergy.

2. Control versus initiative: planning is essentially an exercise in disaggregation; it

decomposestheorganizationintocomponentpartssoastoaggregateuptothewhole
.Adaptingontheotherhand,islessamenabletosuchdisaggregation,itdealsinideas
andperspectives
3.LeadershipversusCulture:Strongleadershipcanpartiallymakeupforaweakculture
holding the company together by the sheer force of its ideas and will and strong
culture established beliefs , deeply rooted traditions can sometimes sustain a
companythroughperiodsofweakleadership..Buttheseforcesactoneachothertoo.
Turnaroundismostdifficultincompaniesthatstagnatewithstrongculture.Leadership
andculturemustcomplementeachother.HDFChasdevelopedawonderfulsymbiosis
betweenstrongleadershipandapowerfulculturebasedonwellenhancedsetofcore
values.ThegrowthofHDFChasbeendrivenbytheinitiativeandentrepreneurshipofits
front line employees and they have been granted exception levels of autonomy and
large responsibilities much earlier in their careers compared to other financial
institutions.
PeopleProcesses:
Tocompeteonhumancapital,managershavetofocusonallaspectsofhumanresource
management system e.g. Recruitment, development, compensation, career planning
andperformancemanagement.JackWelchofGE,committedhugeresourcestocreate
worlds best training anddevelopment facility. What reliance values and looks for the
capacitiesforentrepreneurship,risktakingandthewilltowin.
Thefailureofsuccess:Tocreateaeffectivegrowthpath,acompanyneedstoaligna
clear value creation logic with its organizing principles and people processes. The
danger arises when the environment changes , and historical valuecreation logic
becomesinvalid.Overtimethecompanybecomesvictimofitspastsuccess.Thegreater
the past success , the tighter the links between a companys value creation logic ,
organizingprinciplesandpeopleprocesses.
Combining alignment withevolution:To successfully grow , a company must align its
strategy ,organization and people processes.In a dynamic environment , no success
formula can last for ever . A key challenge for top management in creating growth
opportunities in turbulent and highly competitive environments is to continuously
remain alert to the problem of ossification (cease developing), and to challenge the
organizationintochangingthestrategyorganizationpeopleconfigurationwithchanges
in the external environmental demands, e.g. Infosys did it.In first ten years its seven
founderslivedveryfrugally(economically)abroad,onlessthan$500amonth,saving
rest for the company and since 1991 it pioneered concept of offshore software
developmentcentersinBangalore.Infosysrecruitedpeoplewithhighlearnability,not
always from IIT/IIMs. Its young workforce with middle class values started this
organization to reflect these values of honesty, transparency and high ethical
standards. The core value of modesty was constantly reinforced through behavior of
seniormanagementteam.Insoftwarebusiness,peoplewereultimatecommodityand
theonlydiscriminatorincommoditybusinessisprice.Acostbasedmodelofsoftware

development was best supported by a technologically adequately , culturally

homogeneous and highly disciplined professional workforce. A value based model
wouldcontinuetoneedthatstrength,butwouldalsorequireintellectualleadershipand
entrepreneurship at least at the front end. In structural terms Infosys has already
created Proximity development centers around the world, to build and support close
relationshipwithlocalcustomers

Chapter6:Managingacquisitiveexpansion
Electroluxs dramatic transformation was an aggressive expansion , between
1962 and 1988, it made over 200 acquisitions in 40 countries. In India Ajay
PiramalacquiredNicholasLaboratoriesandincreasedrevenuefromRs19Crto
543Cr.MrLaksmiNiwasMittalhasspectacularlyexpandedthecompanyfroma
wire rod manufacturer in Indonesia to the fourth largest steel producer in the
world.
1. Thepostacquisitionintegrationprocess,example
The story of Ispat Mexicana (Imexsa) is good example how actions changed
fromlossmakingunittoworldscheapeststeelmaker.AsperMrLNMIttalwe
sat down with each of departments to understand their problems and view
points and together we set very aggressive targets based on international
standards.Ifthemanagementofacquiredcompanyiswillingtocommittothese
targets,theystayotherwisetheytogo.
Adailymeetingofheadsofeachdepartmentwasinstitutedafterthedayshift
endedat5pmandgenerallyranuntil9or10pm.Theideaofthemeetwasto
cutredtapeandasameansofcoordinatingandresolvingdaytodayproblems
andtotakedecisionthenandthere.Onceweagreedontherightthingstodo,itwas
easy to get approval of CEO and any resources you need . But you had to commit to
improvementshowmuchandbywhen.Costaccountingsystemchangedfrommonthly
reporting tpo daily reporting system , which provided over all figures for each days
operationsbynextmorning.
Quality improvement programs were undertaken leading to winning many
internationalawards.Forcontinuousimprovementtheyintroducedbenchmarking,Top
10s and internal agreements. In the top 10 programme , each department identified
projects to either costs or improvequality, quantifiedeach projects financial impact ,
andrankorderedtheprojectsfromonetotenbasedontheirbottomline.eachproject
was assigned to a project owner charged with selecting a multidisciplinary team to
quantify the benefits of the project, develop an action plan and monitor progress
againstagreedprocessmilestones
Knowledgeintegrationprogram:KIPhadfewrepresentativesfromeachoperatingand
stafffunctiontomeettwiceayear,whichlastedtwotofourdaysandrotateamongthe
plants

Stretch Goals annual meeting for production volume, productivity and costs: lot of
questionsareaskedontheplansthatwerepresentede.g.youachievedthislevellast
year , why can not you do it again?They can achieve the level the level at another
factory , what prevents you from doing the same? What can we can do to help you
achieve more? At the end of such discussions , while targets were demanding , they
wereownedbythedepartmentsinsteadofbeingcoercedfromabove
2. A blue print for managing acquisitions : includes preacquisition negotiation
process and three phases of post integration process , phase 1 cleaning up and
buildingfoundation,phase2strategicandorganizationrevitalization,integrationof
peopleandoperations(throughERPetc)
Chapter7:Diversificationanddiversifact
1. Managing integrated diversity: This is an organization that combines three key
functions(i) strong, entrepreneurial business units , with their own resources and
capabilities, managed with high levels of strategic and operational autonomy (ii)

rich, horizontal flows of knowledge , best practices and other resources

across those unitsi in an environment of mutual trust; and (iii) a corporate
engine that creates and maintains an exciting sense of purpose a shared
ambition, a set of values and sense of identitywhich acts as the glueto
integratetheorganizationalidentity.
2. Casestudy:ManagingdiversityatWIPRO
Wipro Corporation was split in 1990 into eight minicompanies , each with its
separate equity in consumer products, lighting, fluid power, financial services,
infotech and IT systems, Wipro GE, Biomed. As per Mr Azim Premji, Founder
described it as a diversified integrated corporation. The integration is achieved
throughasetofsharedbeliefsandleadershipvalues;throughpeople;andthrough
awelldefinedmanagementprocesses.
(i)
Integration through shared beliefs and leadership values: Premji in 1973
articulatedasetofbeliefsthatsincethenhavegovernedthemanagement
of Wipro, which provides a common cause and a sense of purpose across
thebusinesses.Wiprobeliefsare
Respectfortheindividual.Peopleareourbiggestasset
Achieveandmaintainapositionofleadershipineachofthebusinesseswe
arein
Persuealltaskstoaccomplishtheminasuperiormanner
Governindividualandcompanyrelationshipswiththehigheststandardsof
conductandintegrity
Beclosetothecustomerinaction,exampleandspirit,andensuresuperior
qualityproductsandservices(addedin1982)
Measure our effectiveness by long term profits we achieve for our
enterprise

(ii)

(iii)

Conceptuallyinthepyramidofwiprosmanagementpractices,beliefsare
atthetop,fromthemflowfiveyeargoals,threeyear/annualobjectivesfor
the corporation and business units, departmental objectives, individual
position objectives. If any deal requires practices that compromise their
integrity,theywill notdoit.They haveblacklisteda numberofcustomers
who seek favors while entering into business deal. Every Wipro issues
noticestothirtyfortyemployeessuspectedtobeshortinintegrityfrontand
many are sacked. Allthe employees are Wipro Leaders. The company had
articulatedasetofWiproleadershipqualities.Allemployeeswereexpected
topossesoracquirethesequalities
Integration through people: Wipro had a strong , powerful team of
professionals, recognizing, developing and supporting talented executives.
Culturewasopenandsharingone
IntegrationthroughmanagementProcesses:Wiprocorporateofficepowers
andresponsibilitieswere
a) Settings: Beliefs, goals and policies, select plan drivers,and other
standardsofmeasurements
b) Approving:Plansandbudgets,appointmentatmiddlemanagementand
above, employee salary structures, benefits and incentive plans,
appointment of advertising agencies, interaction with government on
keypolicyissues,charityandothercontributions
c) Responsibility for: selecting statutory auditors and counsel, corporate
auditacrossthecorporation
Each business prepares its own business plan for the year . One of its
strengthisitsstrongplanningandreviewculture.Monthlyreviewsarewith
theChairmanandquarterlyreviewswithcorporateexecutivecouncil.Each
businessisrequiredtodefinekeyresultobjectives(KRO)fortheyear,which
isrestrictedtosix.Outofsixcorporateofficehasdefinedfourviz.speedand
customersatisfactionandwerevalidfornextfiveyears.Eachbusinesswas
expectedtoreduceallcurrentcycletimeby20%eachyearandincreaseby
fivepointseachyearby5pointseachyearthewhoratedWiprooveralla
5and4ina1to5points.Othertwovariablesdefinedbycorporateoffice
,individual businesses had to define employee morale( through employee
perception survey, attrition rates and internal growth) and were financial
objectivesweretocoverSales,salesgrowthandmarketshare,profitbefore
tax, cash flow, return on average equity( say 29%), and return on capital
employed(say 22%), additionally debtequity norm for each businesses. At
WFS,forinstanceD/Eratiowas6:1,eventhoughthecompanyisentitled
for 10:1.In 1994 to change mindset PRIDE program was launched.PRIDE
acronym stands for Productivity improvement, a responsive organization,

involved people,by driving change and empowering them, is a method of

problemresolution
iv) L everaging opportunities: The attitude to diversification varies from
management to management. There is a lesson for family groups. In
extensively diversified family groups, splits and divorces are automatically
broughtinfocus

Chapter8:GoingGlobal
Going global is an extremely difficult and challenging process, it is not impossible for small
companies from developing economies to succeed in global market. Acer grew from a tiny
startup electronics consulting company in Taiwan to become number 2 personal computer
manufacturer.Brazilswaghasemergedasthefifthlargestproducerofelectricmotorsinthe
world., with operations in fifty one countries. There are many more such examples. The
globalizationstrategiesofthese companies shareonecommon characteristic:they haveseen
globalization not in terms of expanding their market , but alsoand more so as a learning
opportunitythatwouldimprovetheiroverallcompetitivenessbymovingupinvaluecurve.
Movingupthevaluecurve:Thevaluecurveisasimplebutpowerfulconceptthathasbroad
applications across a variety of industries . Almost any business consists of a hierarchy of
product market segments each of which generates profits roughly in proportion to the
technicaland/ormarketingcomplexityofthesegment.CasestudyofRabaxypharmaceuticals
isfollowing:Whenitfirstbrokeintotheglobalmarketplacebyproducingandsellingthebulk
substances and intermediates that defined the bottom end of pharmaceutical value curve,
gross margins were 510%. It first made the leap to commodities generics, then branded
generics,bothmuchtougherglobalbusinessesthatrequiredthedevelopmentofnewcustomer
relationships,differentdistributionchannels,andeventuallyastrongbrandimage.Discovering
newdrugswheremarginsof100%ormoreareavailable.Itinvested46%revenueinR&D.
The same phenomenon of a value curve also exists in the IT services, where successes of an
companieslikeInfosys,WiproandTCSwillbeshortlivedunlesstheytoo,likeRanbaxy,make
determinedeffortstoclimbtohigherlevels.Somehavemovedupastepbydoingmoreworkin
theirbackofficeslocatedinIndia.ThesalaryofsoftwareprofessionalsinIndiaisrisingannually
by1525%,othercosts,suchasinternationaltravel,arealsogoingupatanalarmingrate.To
maintain and enhance their margins these companies need to move up to a value based
modelofbusinessinwhichcustomerspayfortheirproductsandservicesbasedonperceivedor
realizedvalue,andnotoncoststhatareincurred.Movingupthevaluecurveiseasiersaidthan
done.Theprocessisbothroughtoughandriskyandneedsenormousamountsofmanagerial
vision,courageandgrit.Thetreecorechallengesare

FirsttheyhavetoovercometheliabilitiesoftheirIndianness
Secondtheyhavetodeveloporcapturearangeofnewcompetenciesthatarevitalfor
internationalsuccess
Third,theyhavetoprotecttheirpastwhilebuildingtheirfuture

OvercomingtheliabilitiesoftheirbeingIndian:Theliabilityhasmanydifferentdimensions
. First most international customers expect the products of unknown companies from
emergingcountriesto beinferioranditisextremelydifficult tochangethisperception.A
secondliabilityistheprisonoflocalstandards.ForexampleincaseofBoilersIndianBoiler
Regulations are much different from British Standards (BS) and US Standards (ASME).
Finally, perhaps the most constraining liability of origin lies in minds of senior corporate
managers.Deepintheirhearts,mostofthemdonotbelievethattheycansucceedabroad,
particularly in developed markets. This lack of belief acts as self fulfilling prophesy: half
hearted measures are quickly seen by both insiders and outsiders to be what they are ,
leadingtonegativespiralofineffectivesmallsteps.Toovercomeitfollowingstrategymay
beadopted:
Pullingfromabroad:Ranbaxydividedtheworldinfourregions,ofwhichIndiawasoneand
postedequallystrongmanagerstoheadeachregion.Asaresult,internationaloperations
eased to be peripheral appendage to a dominant domestic business. Ranbaxy hired a
leading pharmaceutical multinational to head the region. His background and seniority in
theindustrywasanenormoussourceofcredibilityandconfidence.
Pushingfromhome:i.e.pushfromcorporatecenterlikeRanbaxy
Developing new competencies : for moving up the value curve , the new buzz word in
Infosys is value based selling. The most crucial new competencies required are, first , to
buildinternationalbrandstrengthand,secondly,tobuildlocationwisedomainknowledge
withinthehomecountries ofthecustomers,togethertheabilitytodevelopandmaintainclose
customer relationships. Objective should be to develop world class skills and capabilities.
Companiesmaypursuethisgoalintwoways:theycandevelopnewcorecompetenciesinternally;
or they can choose to gain control over new capabilities through alliances, partnership, or
acquisitions.Mostmayrequireacombinationofbothapproaches.

Protectingthepast,buildingthefuture
Ifyoudonotseekouttheglobalcompetitiveenvironment,itwillsoonenoughseekyou,
e.g. Bajaj Auto is now competing agains every major twowheeler manufacturer in the
worldinitsownhomemarket.Managementmustnotonlyfocusonwhereitisgoingto,it
mustrecognizewhereitiscomingfrom.Itmustmaintainastrictdisciplineofbuildingthe
futureonsolidfoundationsofprotectingthepast.

New tasks, new units: through Strategic business units(SBU), may be regional basis or on
specificindustrysegments,soastobuildandexploitdomainknowledge,i.e.,knowledge
abouttheclientsbusinesses.LinkagesacrossSBUsandclientneedsindifferentmarketsare
maintainedboththroughfluidmovementofpeopleacrossthedifferentorganizationalunits
andalsothroughinstitutionalizedmechanismsuchasinternetbasedbodyofknowledge
database that allows everyone in the organization to access information acquired by the
companyondifferentcustomers,technologies,methodologiesandprojects
New roles, new skills: To represent the diverse needs of foreign markets and to develop
strategiesappropriatefor businesses further up the valuecurve, newmanagers are often
neededandtheymustbestrongenoughtorepresentthedifferentpointofviewthatwill
emergeastheylearntoservenewproductsegmentsinnewgeographicmarkets.Thesekey
individuals must be accommodative team players . They must have credibility to capture
resourcesfrom thecore andinvestthem profitablyinthe periphery.Andtheymusthave
the skill to take the knowledge and experience accumulated in the new business and
transferthelearningtotheold
Part3:Revitalizingpeople,organizationandrelationships
Chapter9:Changingthesmelloftheplace
Revitalizing people: No company can achieve radical improvement in business without
revitalizing people. Every company has an internal behavioral context that shapes how
peoplewithinthecompanythink,feelandact.Tochangebehavior,thatcontexthastobe
changed. The responsibility for creating the behavioral context lies at the level of senior
managers, who should change their views about management and their actions in the
workplaceforonlythenwillthepeoplelowerdownchangetheirownbehavior.Formany
years author Prof. Sumantra taught at ISEAD,a business School at France, and lived at
Fountainbleau.EveryyearheusedtovisitCalcuttainthesummerinJulyduringchildrens
vacation. In July he felt tired most of the time, exhausted by heat and humidity, thus he
spent most of the times indoors, and a lot on bed. In Fountainbleau he felted and acted
differently.Itiswasawonderfulplacetoliveinduetomagnificentforestthatsurrounded
it.Hereliestheessencetheissueofrevitalizingthepeople
The smell of the place in most traditional Indian Companies: When we walk a office, a
factory,wegetasmellin1520minutes,inqualityofthehum,,inthelookinpeopleseyes,
howtheywalk.Typicallytheirinternalcontextssufferfromfourdebilitatingcharacteristics,
i.e.constraint,compliance,controlandcontract.Toplevelmanagersofcompaniestakeall
decisionsandworkveryhardandcreatewonderfulstrategies.Forpeopleatshopfloor,and
lowerlevelsitisconstraintsontheirchoicestheycanmake,itisconstraintonhowthey

canuse theirinitiative,creativity,and thinking.Secondcharacteristic iscompliance.Top

level managers create all kinds of systemsHRM,Planning, budgetingsystems. Collectively
feelingsatemployeelevel,thesesystemshanglikeablackcloudoverthemthatmustbe
complied . Third characteristic is control. As far as the humble employee at eight level
below the top, boss exists to control them, to ensure they do not do the wrong things.
Finally job contract . The budget is personal contract, transfer prices are contracts.
Relationshipsbetweencolleaguesanddepartmentsanddivisionsareallcontracts.Andyet
whatisthebehaviorthatcompanieswantfromtheirpeople?Theywantinitiative,tolearn
continuouslyandbringthebenefitsofthatlearningtothecompany,tosupportitssuccess.
Theywantpeopletocollaboratetoshare,tohelpeachother,feelasenseofcommitment
tothecompany.Howcanmanagerselicittheseresponsesiftheycreateacontextdefined
byconstraint,compliances,controlandcontractaroundtheirpeople.
Thesmelloftheplacefororganizationrenewal:
Thecompaniesveryhighperformancelevel,inIndiaandabroad,onstrengthofbehaviorof
theirpeoplehavesmelllikefontainbleauforestinspring.Exampleare3m,ABB,Infosysand
HDFC. In all these companies, internal behavioral context was characterized by four very
differentattributes:constrainttransformedtostretch,compliancetodiscipline,controlto
support and contract to trust. Stretch is antithesis of satisfactory under performance, in
this process each individual is continuously pushing himself/herself, everybody is pushing
everyonearoundthem,pushingthemanagement,pushingthecompanytodomore,todo
bettere.g.companiesofMrLNMittal,whicharelowestcostproducer. Second change in
context is from compliance to discipline. People comply with something that is external,
outside of themselves. Discipline , in contrast is internal, ingrained in the day to day
behavior of individual of individuals and in all management processes. Discipline is
managementbycommtitment.Itimpliesthateveryonedoeswhatispromised.
Third , the behaviroral context replaces control with the norm of support. In it people
perceptionaboutbossesisthattheyexisttohelpthemwinbypersonalcoaching,guidance,
mentoring,helpthemingainaccessresourcesofrestoforganization.Thatcreatescontext
ofsupport.
Finally there is shift from contract to trust.It says You know we are part of the same
organizationandItrustyou,tillyouuntrustworthy,andnottheotherwayround.
Fromcontexttobehavior
TocreateThesmelloftheplacefororganizationrenewalisveryhardtodo,evenforbest
managements. Senior mangers find very difficult to delegate responsibility and

accountability,tilltheyhaveconfidencethattheywilltakecompanyforward.ManyIndian
companies,particularlyfamilymanagedbusiness,sufferfrompreciselythisproblem.
An invigorating forest in Mumbai , example HDFC : An extra ordinary company , run for
ordinaryIndiansisHDFC.Thecultureandhiringpracticeofthecompanydiscouragedstars
andhiredpeoplefromnexttierinstitutionswhotendedtohavesubduedpersonalitiesand
were able to work jointly with others. It has been voted as most competitive company in
India, havingAAAratedfinancialservices.Initiallyallloanapplicationstookfourweeksto
approvealoan.Itreducedto25daysandfurtherstartedsanctionacrossthetablesame
day.PurposeofthecompanystatesToHDFC,businessisnotmerelyaboutearningprofit,
butawaythroughwhichweprovideessentialservicetothesociety
Extraordinaryresultsthroughordinarypeople:
Theintensifyingspiralofcompetitionbeingfacedbythecompaniesinascendingorderhas
followingfactors
1.Noonemakesanymoney,2.competitorscopy,everyonehassametechnology,costbase,
servicelevels3.Innovatetogettechnology4.Allcompetitorshavesametechnology5.Feel
good for a while 6. Reduce cycle time, 7.stem market share loss 8. Reengineer 9.
Restructure,reducecost
Tobreakoutnegativespiralandtoovercomeemployeecynicism(motivatedpurelybyself
interest), frustration and exhaustion, managers need to recognize that while corporate
renewal may be initiated by strategic, structural, technological or operational changes, it
enduresonlyifitissupportedbyfundamentalchangesinpeoplesbehavior.
Toplevelmanagersmustrecognizethattheirkeytaskinbuildingcompetitiveadvantagelies
in stimulating the companys most valuable resource its people to be more motivated ,
creative and entrepreneurial thanemployees of its competitor. Only when they librate and
challenge their people to develop and leverage their knowledge, skills, imagination and
couragewilltheyhavecreatedadynamic,selfrenewingcompany

Chapter10:TheCompanyasaUniversity
People are innately curious and, as social animals, are naturally motivated to interact and
learnfromoneanother.Thinkorganizationsnotjustasaportfolioofbusinesses,theirpeople
not as mere factors of production, they have to view the company as an educational
institutionandrecognizethatcompetitiveadvantageflowsfrompeoplesabilitytoconstantly
enhancetheirknowledgeandskills.Intelhasitsownuniversitywithplethoraofcoursesthat
employeescanselfnominatethemselvestoandofferssabbaticalschemealso.InmostIndian
companies,continuingeducationisstilltreatedasaluxuryandadiversion.Guilta,Hindustan
LeversspacioustrainingcenterinMumbai,hostscoursesattendedbyparticipantsfromforty
countriesthataretaughtbythemostrenownedexpertsnotonlyinIndiabutalsofrombest
international B Schools . Reliance pays a great deal of attention to formal training at IIT

Mumbai and IIMB, special modules designed for it.There are structured programs for
mechanicsandoperators.GroupofEngineersarefrequentlysentabroadfortraininginplants
selectedbycompanieswhoprovidetechnologiestoit.Thisensuresthattechnologytransfer
andoperationstakeplacewithoutanylossoftime.
In such organizations education is structured as a continuing process, not as an event or a
seriesofunrelatedevents.Theprocessisalsobuiltaroundpeople,notprograms.Whileaimed
at individual development , the process is also focused on organization development by
explicitlylinkingthecontentwithcompanysbusinessandstrategy
Redesigning Work: To get every worker to become a passionate collector of skills and
qualifications,asawaytoreducehisboredomandtoenhancehisemploymentsecuritylistthe
skills that are associated with eachof the different jobs in a factory . At the same time, it
structures these skills in a set of hierarchies the pathswith each preceding skill facilitating
workersabilitytoacquirethenextskillinthepath.Likemanyinfotechcompanies,HCLrotates
employees between on site (software developed at overseas customers site) and off site (at
thesoftwarecontractorssiteathome)job.AtypicalHCLengineertravelsupthevaluecurve.
Democratizinginformation:DrYoshioMaruta,KaosChairman,describedlearningasframeof
mind , a daily matter in which truth had to be sought through discussions, by testing and
investigating concrete business ideas until something was learned, often without the leaner
realizingit.Herepeatedlyremindedhismanagersthatintodaysworld,informationistheonly
source of competitive advantage. In order to make it effective to discuss subjects freely, it is
necessarytoshareallinformation.InKao,everymanagerandmostworkmenhadfaxmachines
in their homes to receive results and news, a biweekly newspaper kept them informed of
competitors moves, new product launches, overseas developments and outcomesof key
meetings
SeniormanagersasFaculty:AsperDrMaruta,theorganizationhastobedesignedtorunasa
flowing system which would stimulate interaction and the spread of ideas in every direction
andeverylevel.AtKao,nooneownsanidea,Ideasaretobesharedinordertoenhancetheir
valueandachieveenlightenmentinordertomakerightdecision.Thiswasvitalrequirementfor
people to play their role as teachers. At GE Welch replaced formal complex and multi step
planning process with a more personal , informal and intense process of direct manager to
manager discussions that focus on key strategic issues faced by each business. The multi
volume planning documents have been replaced by slim playbooks that provide concrete
answers to questions about each businesss global market dynamics, key competitive
activities, major risks, and proposed GE responses. Beyond reducing corporate bureaucracy,
speeding up decision processes and enhancing the quality of the final decisions, the new
process has also become a key instrument for Welch and his colleagues to directly and
personallycoachmanagerswhoarethreeorfourlevelbelowthem.

AtHaziraandJamnagarofRIL,thecompanyhadtoidentify,recruit,trainanddevelopalarge
numberofpeopleandthewholeprocesshadtostartfromscratch.Thestrategywastorecruit
a core group of experience senior managers from both India and abroad and simultaneously
initiate a program of recruiting a large number of fresh graduates from Engineering, Science,
management, finance and accounting colleges. The core group took on the responsibility of
bothsettingupthebusinessaswellastraininganddevelopingtheyoungerpeople.
Helping People become the best they can be : case study of Infosys As per Sri NR Narayan
Murthy,founderChairmanofInfosys,corefeatureofthecompany,hasbeenitsunwavering
commitment to helping people become the best they can be. It is perhaps , the most
outstandingexampleinIndiaofacompanythatviewsitselfquiteexplicitlyasaUniversity.The
campus of Infosys at Electronics city which is its Head Office, at Bangalore . Walking through
reception,leadavistortoabridgeandwalkingoverthebridgewouldleadtocanteen,thelittle
kiosk which sells cold drinks and snacks and the basketball court. At any time of the day ,
individuals or groups can be seen here either deeply involved in heated debate about the
project on which the team is working or simply lying on the grass. As in colleges , except for
scheduledmeetings,therearenofixedtimesforanything.Infoscianscanworkthehoursthat
suit them, just as they can play the hours that suit them. All professional recruits have to
undertakea105daytrainingcourse,designedtocreatestandardequivalenttoGraduateinthe
USwithaBacholersdegreeinInformationSystems.BeyondthisinitialtrainingInfoscians,take
coursescontinuously,toupdatetheirknowledge,tohoneupnewtechnologiesandemerging
ideas.,andtobroadentheirmanagementskills.Attheendofeveryprojectthereisaclosure
analysis report which examines both what well done and what was not in terms of meeting
customer requirement, quality, deliverables and processes. Infosys generously spends almost
5% of revenues on education. Knowledge management is a funny business. No body reads.
Theyhaveahugeportalwherepeopleuploadtheirexperiences,butthisisstatic.Whatdoes
workaretheirBestpracticessessions.Asfortrainingdelivery65%facultyisinhousewhile10%
is outsourced and for rest line managers take classes.The faculty also spend some time on
projects,otherwisetheywouldbeoutdated.AsperHemaRavichandar,SrVP,HRDEducationis
a true business partner. By giving high value training to individuals, by making them
managementconsultantsandnotjustsoftwareengineers,weareeinventingfuture
Chapter11:BuildinganEntrepreneurialOrganization
Over the last decade many companies around the world have succeeded in creative spark of
theirpeople,andinignitingthecreativesparkoftheirpeople,andinprotectingandfanningthe
resulting entrepreneurial flame. In Japan , Toyota has cut two layers from its organization to
createmoreentrepreneurialspaceforitsfrontlinemanagers.IBM,spunoffindependentunits
toprotectspecificprojectsfromroutinebureaucracyandcorporateinterventions.

Evenaftermajororganizationalchanges,toplevelmanagershavecontinuedtoseetheirjobas
onesettingthecorporatestrategyandimplementingitthroughtheirroleasresourceallocator.
Middle level managers too have remained focused on proper fulfillment of the demand of
checkandbalances,playingtheirfamiliarroleofadministrativecontrollers.Andswampedby
direction and control from above, front line managers have continued to play role of
operational implementers, responding to the demands of internal organizational processes
ratherthanfocusingonexternalopportunities.
BuildingtheEntrepreneurialProcesses:Threekeyorganizationalcharacteristicsare

They create small and disaggregated performance units and make them primary
buildingblocksoftheirorganization.
They drive performance in these units through simple , flexible but highly disciplined
planning,control,andresourceallocationsystem
They articulate a clear strategic mission and operationalize it for each unit through
unambiguousorganizationalnormsandperformancestandards.

Disaggregatedperformanceunits:Intheprocessofbuildingtheclassicmoderncorporation,a
centralobjectivehasbeentoimprovecoordinationacrossmulitiplefunctional,businessand
geographicboundaries.Insodoing,smalloperatingunitshavebeenrolledupintolarger
integratedgroupingstofacilitatethedesiredcrossunitintegration.Inthisprocess,however,
individualinitiativeandflexibilitythatflourishedinthesmallerunitsusuallysuffered.Neof
thebasicrequirementsforacompanytryingtobecomemoreentrepreneurialisforits
managementtofundamentallychangethewayitlooksattheorganizations.Ratherthan
viewingitprimarilyintermsofgroupsordivision,withoperationsbeingrunbydepartments
oroperatingunits,itneedstoconsciously,focusonsmalldisaggregatedunitsastheprimary
elementsoftheorganizations.KekiDadisethhasspearheadedwithinHindustanLever
conceptToretaintheaggressivenessandagility(abletomovequicklyandeasily)ofa
smallercompanyaswegetlarger,createsmallprofitcenters.Thiswillalsooffergrowth
opportunitiesforourkeymanagers.
Performance driven system : Process is a set of systems that reinforce the focus and
accountability of the performance units. Rather than driven by informational needs of top
management , the systems in these organizations are designed and managed to be more
sensitivetooperationalrealitiesfacingfrontlinemanagersandtomaintaintheirmotivation.
Another main pillar of corporate systems is annual budgeting process, and many companies
findthatthiscoresystemistooinflexibleandimpersonaltosupportthekindofentrepreneurial
valuestheywanttocultivate.Companiesthathopetocreateanentrepreneurialorganization
process must developbudgeting systems that are seen as legitimate , and manage them in a
way that is motivating. For most, this approach implies a budget system in which front line
managers not only take more responsibility but are also held accountable. Corporate

managementsprimaryroleistosetbroadobjectivesandclearstandardstoelicithonestand
ambitious operating objectives from these units, and to measure and evaluate performance
againstthoseobjectives.Indoingso,Corporatemanagementfindthattheycangreatlyreduce
theneedforstiflingcontrolandoverbearinginterferencethatkillsfrontlineinitiative.
Clear Mission and standards: without a clearly defined and broadly communicated strategic
mission,frontlinemanagershavenobasisforselectingamongthediverseopportunitiesthey
might confront, and bottom up entrepreneurship soon degenerates into frustrating guessing
game.Themosteffectiveobjectivestobepreciseenoughtoclearlyruleoutactivitiesthatdo
not support the companys strategic mission, and yet broad enough to prevent undue
constraintsonthecreativityandopportunismoffrontlinemanagers
Entrepreneurship is often mistakenly thought of as the antithesis of operational discipline.In
contrastitisfoundtheentrepreneurialcompaniestohaveunusuallyhighlevelofdisciplinein
theirmanagementprocesses,builtthroughacombinationofstretchedperformancestandards
andrigorousmanagementreporting.Theybuildasymbiotic(an interaction between two different
organisms living in close physical association, especially to the advantage of both) relationship
betweencorporateambitionandcurrentresults,witheachfuellingandstretchingeachother.
AsdescribedbyAnilLahiri,Director,HR,HindustanLeverOneofthegreatestthingsaboutthe
companyisthatafterthedebate,onceadecisionistaken,everyonefallsinlineandworksto
achieve the objective. This happens across the organization and all the way down to the
worker.Oncetheyagreeonatarget,thatisacontract.,hesaid,referringhisexpectationfrom
virtualCEOs
Aprofoundshiftinsocialvalues:
Theclosingyearsofthetwentiethcenturyhavetriggeredafundamentalshiftinsocialvalues,
frombureaucratictoentrepreneurialideal.Theidealofbureaucracyhaslostitsclaimasa
sourceofeconomicprogress,justasentrepreneurisemergingastheherointhedramaof
creativedestruction.Thebureaucracyenteredthelastcenturyasaconqueringhero,itexited
thecenturyasaspentforce.Itsfundamentalstrengthofdepersonalizationprovedtoalsobe
itsfatalflaw.Whileitcouldmaintaintheexistingorderwithefficiency,itcouldnotrespond
toenvironmentalshocksthatcreatedtheneedforaneworder.Itcouldrationalize,butnot
revitalize.Itcouldcontrolpeoplebutnotinspirethem.AnearliergenerationofIndians
enjoyedhonourthestatusandlegitimacythatcamefromworkingwithestablished
companieslikeTata,Birla,IndianOil,IASasbadgesofhonor.Employeeswhocameofagein
1990s,however,felttheconstraintsofbeingcogs(awheelorbarwithaseriesofprojections
onitsedge,whichtransfersmotionbyengagingwithprojectionsonanotherwheelorbar)in
giantmachines.Theyresentedthestifling(preventorconstrain,anactivityoridea)oftheir
initiativebytheneedofendlessapprovals.Theyweredisheartenedtoseetheresultsoftheir
actionsobscured(notclearlyexpressedoreasilyunderstood)bycompanyslargesize,and

politicsreplaceperformanceasbasisforrecognitionandreward.Whilethedryrothadsetin
inadecadeorago,thefinaltippingpointindethroningofbureaucracycameinthelate1990s
,withtheriseofnewsetofinstitutions,mostlyinITsector.CompanieslikeInfosys,satyam
Computers,NIITandothersblewthemyththatIndianculturecherishedhierarchyand
paternalism.Thesenewupstartsnotonlysurprisedandshockedtheoldfeudal(the dominant
social system in medieval Europe)businessMahrajasbyovertakingtheircompaniesmarket
valuesandtheirpersonalwealth,theyalsodeprivedtheestablishedbureaucratic
organizationsoftheirlegitimacyandpublicrespect.Managerswhocannotgatherupthe
couragetorebuildtheirorganizationsintoentrepreneurialmodelmayleavetheircompanies
strandedonthewrongsideofchasmseparatingoldcorporateIndiaandnew,emerging
economy

Chapter12:NewManagementrolesandtasks
Toplevelmanagerstoseetheirjobasonesettingthecorporatestrategyandimplementingit
throughtheirroleasresourceallocator.Middlelevelmanagerstoohaveremainedfocused
onproperfulfillmentofthedemandofcheckandbalances,playingtheirfamiliarroleof
administrativecontrollers
Incontrast,inentrepreneurialorganizations,therolesofthesemanagersareradicallydifferent
Frontlinemanagers,headingsmall,disaggregatedandinterdependentunitsfocusedon
specificopportunities,arecompanysentrepreneurs.Theyarebuildersofthe
companysbusinessesandtheydrivethecompanysperformancebycontinuously
strengtheningthosebusinesses
Likecoacheswholeveragestrengthofindividualplayerstobuildawinningteam,senior
levelmanagerslinktheseseparatebusinessesintoacoherent,winningcompany.Their
valueaddedliesincreatingthestrategicandorganizationalframeworkwithinwhichthe
diversecapabilitiesoffrontlineunitscanbeintegratedacrossbusinesses,functions,
andgeographicregions
Topmanagementinfusesthecompanywithanenergizingpurposetodevelopitasan
enduringinstitutionthatcanoutliveitsexistingoperations,opportunitiesand
executives.Likesocialleaders,theycreatethechallengeandcommitmentnecessaryto
drivechangesothatcompanycanrenewitself
Howdoesonebuildsuchanorganization?
Casestudy1:TransformationofmanagementatABB.PercyBarnevikhasemergedas
oneofthemorevisiblerevolutionary,revenuegrowfrom$18bto$35bfrom1988to
1997,whileimprovingreturnoncapitalemployedfrom13to17%.HehasbuiltABBas
afederationofsmall1200companies,eachemployingonly200people,onaverage,and
generatingbetween$25m200mannualrevenue,asseparatelegalentity.The
companiesinturn,havecreated4500profitcenters,eachprofitcenteremployingan
average50people.Thereisonlyonelevelofmanagementbetweenthecorporate
executivecommitteechairedbyBarnevikandheadsof1200companies.Thecorporate
hqof$35bcompanyhaslessthan100people.Attheintermediatelevel,businessarea
mangersaresupportedbyastaffofthreetofive.Bothstrategicplanningannual
budgetingsystemsaredesignedtoinvolve,motivateandsupportfrontlinemanagers.
Thestrategicplanofeachbusinessareaarediscussedbytheconcernedmanagerwith

thegroupexecutivesandareapprovedbyBarnevikwithoutanyinvolvementofthe
corporatestaffgroups.Budgetsaresetbottomup,basedonagreedstrategies,andare
seenaspersonalagreementsbetweentheheadofoperatingcompaniesandthetop
management,whichtheformermustfulfillandthelatercannotchangearbitrarily.
Barnevikhassetfinancialperformancestandardsas10%operatingprofitand25%
returnoncapitalemployed.
Frontlinemanagersasentrepreneurs:
CasestudyofDonJans,theheadofABBsrelaycompany,whichwaspartof
Westinghousesbusiness.AstheheadoftheUSrelaybusiness,Janshadbecome
accustomedtothefivelayersofmanagementbetweenhimselfandWestinghouses
CEO.InWestinghousehehadtodealwithbureaucracyimposedby3000strong
headquarters;inABBhehadtobecomemoreselfsufficientinanorganizationinan
organizationwith100peopleatcorporate;inWestinghouse,decisionshadbeentop
downandshapedbypoliticalnegotiations;inABBhisunitwasstructuredasaseparate
companyandwasexpectedtotakeresponsibilityfordecisionsbasedondataand
results.ABBshighlysophisticatedandfullyautomatedinformationandreportingsystem
allowedmanagementtoanalyzedatainaggregatinganddisaggregatingitacrossany
businessorgeographicdimension.Jansregularlyreceivedadetailedproductby
productanalysisofhiscompanysperformance,notonlycomparedtoitspastresults
butalsorangedagainsttheperformanceofothercompaniesinhisbusinessareaand
geographicregion
Itisbelievedthatinsideeverycorporatehierarchy,anumberofentrepreneurialhostages
likeJansarestrivingtobreakfree.Likehim,theyhaveareservoiroflatentideas,energyand
commitmentwaitingtobetapped.Therisk,howeveristhatsuchafocusonfrontline
entrepreneurshipwillnotonlycreatetheundisciplinedexpansionexperiencebythe
conglomeratesof1960s,butthatitwouldalsolocalizeandfragmentthecompanys
resourcesandcapabilities
Senior Managers as coaches:
Historically , senior managers , situated between front line operating units and top
management , enjoyed a central position in a companys decision processes,
because of their intermediary roles, disaggregating corporate objectives in to
business unit results for corporate review. They had controller role, giving them
enormous status with in the company and they had influence in vital information
flow across the hierarchy.
Recent complimentary trends of de-layering the middle levels of organization
,empowerment of front line positions, and the increasing use of information
systems for communication have threatened to render obsolete all these traditional
roles
Case study on new roles for senior managers: Mr Ulf Gundemark, as head of world
wide relay business and Mr Jans boss played crucial role in managing the tensions
inherent in the companys ambition to be global and local, big and small ,radically
decentralized with central reporting and control. He focused on three core tasks
He was business strategist, building the overall strategic and organizational
framework within which the mandates of front line managers were defined

He was the organizational integrator linking and leveraging the resources and
competencies developed in the front line units
He was the key support and guidance for the front line entrepreneurs, helping
them not only with personal counseling , but also with his broader knowledge
of access to required corporate resources
The above tasks were in addition to traditional divisional managers responsibility
for operating performance
ABB formally describes a business area head as the business strategist and global
optimizer.
Companies that dismantle their vertical integration mechanism , without
simultaneously creating horizontal coordination processes, quickly loose the
benefits of both large company power and front line entrepreneurship . At the
same time , such intense horizontal flows can also paralyse the organization. It is
the senior managers who make inverting the pyramid operational both by
developing the front line entrepreneurs and providing them support so that they
are not overwhelmed by the ambiguity, complexity and potential conflicts in such
horizontal, networked organizations
Top managers as Leaders : To capture the commitment and creativity of their
people , top level managers in the entrepreneurial companies , top managers has
begun replacing the hard edged assumptions of the traditional model with a set of
corporate roles that were less directive and constraining. From being the
formulators of corporate strategy , they have become the shapers of an
organizational context in which strategic initiative could emerge. Instead of
creating formal structures that gave them control over firms financial resource ,
they devoted their most of the efforts to developing the organizations resources.
And , rather than using the management systems to monitor and control
operations , they got back in touch people deep in the organization and began to
refocus on the individual as the primary unit of analysis. The new framework also
defined four strong values to guide management action: the importance of quality,
a commitment to technological excellence, a dedication to productivity and
performance , and a strong belief in people. In selecting key managers for the
organization , look not only a track record of broad experience and proven
performance , look personal characteristics (flexibility ,integrity, statesmanship)
that suggested a willingness to learn and operate in new ways thus creating a self
driven,self renewing organization.
To reignite the spark plugs of managerial entrepreneurship that were the original
source of their success, large hierarchical corporation need a fundamental
reshaping of their organizational main stream. And to lead such a radical change ,
top managements have to first reorient how they think about organizations
Chapter 13: Building shared destiny relationship
There are two kinds of relationships viz. Power based relationships and Shared
destiny relationships, correspond to a very different management philosophy
Power based relationships

Shared destiny relationships

Win-loose
transactional
Short term
Your problem
My benefit
Maximize autonomy

Win-win
Relationship based
Long term
Our problem
Our benefit
Maximize interdependence

Fundamental choice on above relationship is with regard to supplier relationships,

inside the organization, with employees and trade unions, and outside firms, with
vendors, dealers, customers , regulators, joint venture partners, even competitors.
The reason for developing shared destiny relationships is exactly the opposite-to
continuously and radically improve business performance. It is all about maximizing
share holder value. As people like John Niell of Uniparts CEO and HT Parekh of HDFC
understood, long term , open and trust based relationships with employees,
customers, suppliers and others do not come at cost of shareholder value , they are
the means for achieving that end. Case study in the book of Hero Honda Motors in
India proves validity of above theory
Part IV: Transforming the corporate philosophy
Chapter 14: A new manifesto for leadership
To respond to the multidimensional changes in their environment, they will need a
much more broadly based and more closely integrated systemic change the way
they are organized and run. In defending importance the importance of theory for
good practice, Lord Keynes once said that every living practitioner is a prisoners of
ideas of dead theorist Obsessed as they are with real world and focused as they
are on pragmatism (Philosophy an approach that evaluates theories or beliefs in terms of
the success of their practical application.) and actions rather than on theory or
concepts, managers are actually no exception to Keynes doctrine.
Beyond Strategy, Structure, Systems to Purpose, Process and People
Strategy, Structure, Systems: Simulated by the enormous success of its pioneers,
strategy-structure systems doctrine spread around the world . It came to India in
the 1970s and 1980s, under the grab of professional management. Structure
follows strategy, it claimed and systems support structure. Within two decades,
these aphorisms (a vigorous and concise expression which contains a general truth)
deeply penetrated Indian Management thinking. Soon, a generation of senior
managers came to the fore in corporate India who saw these three powerful tools
for establishing the direction and leveraging the performance of their corporation.
As a result, they defined their own roles as the companys designers of strategy,
architects of structure and builders of systems. In a highly restrictive and regulated
economy characterized by wide spread shortages of most products , the key
management task was to allocate the companys limited financial resources among
competing opportunities in different divisions and then monitor the performance of

divisional managers against their plans through a tight control system. By providing
discipline, focus and control, the strategy-structure-systems management doctrine
suited this context very well.
Change: Over the 1990s , Indian economy has undergone some profound changes.
Overcapacity and intense competition are the norm in most businesses. The lines separating
businesses have blurred as technologies and markets have converged , creating new growth
opportunities at the intersection of traditional industries. And, most notably , ideas and
knowledge have increasingly replaced capital as the scare resource and key resource of
competitive advantage. In this new world hiring an excellent manager or scientist can
often a bigger triumph than bagging a big bank loan, thus strategy-structure systems model
has become obsolete

In the emerging knowledge and service intensive economy , the key challenge is not
to establish control over people so as to run a company as if it were a machine; it is
to be able to attract, develop and retain the best talent and to link , diffuse and
leverage their knowledge , skills and initiative to create innovations and new
opportunities.
Instead of trying to be designers of strategy , people like HT Parekh and NR Narayan
Murthy took the role of establishing a sense of purpose within the company ,
defined in terms of how the company will create value for all its constituents, and
strategy emerged within their organizations, from the energy and alignment created
by that sense of purpose.
As opposed to constantly playing with boxes and lines that represented their
companys formal structure in an organogram , they focused on building core
organizational processes that would support the entrepreneurship of front line
managers, integrate the resources and knowledge across the front line units to
develop new capabilities, and create the stretch and sense of challenge that would
drive the whole company into continuously striving for renewal through new value
creation.
And instead of being builders of systems , they took on the role of being developers
of people , creating a context in which each individual in the company could
become the best he or she could be.
In essence, they replaced three Ss of strategy, structure and system by the three Ps
of Purpose, Process and People. It is important to emphasize that new philosophy
does not imply rejection of the old doctrine. Although this change in philosophy
pervades the entire organization, its starting point rests with top management.
It is their managers who have to lead their companies transition.
Beyond strategy to Purpose: Most top-level managers find this notion of softening
the strategic focus at the top very hard to accept. They fear that unless they
provide a clear strategic direction, they may lose the respect and admiration of
employees. Today, the corporate leaders greatest challenge is to create a sense of
meaning with which the companys employees can identify and in which they share
a feeling of pride.
What does it take to create a sense of purpose ? One key element is to establish a
shared ambition or vision. H.T. Parekh of HDFC established a profound sense of
purpose by focusing every ones attention on an important social need-to solve the
crippling housing problem in India. Helping middle class Indians own a home was
innately a wholesome goal, one to which employees could relate with a sense of

pride and created customer service orientation. To create purpose , it is equally

important to also shape and embed in the company a set of shared values, a
description of what kind of it wants to be. Objectives and strategies do not get you
there, values and people do, said GEs jack Welch. We defined a set ofvaluesand

those values then determined who would be in management team. People are not loyal to a
company or to an individual but to a set of values they believe in and find satisfying.
Finally for the purpose to become an active management process at all levels of the
company, it is necessary to bring the vision and values down to the level of each individual.
They have to be translated so that, to quote old saying, each stone cutter can see his job as
part of building of a temple.
Beyond structure to processes : Perhaps even more than strategy, structure is a highly
seductive lever for top level managers, and most of them see their control over the
companys structural configuration as a powerful tool to shape the broad direction of the
organization and to influence the actions of managers lower down the hierarchy. The shift
from structure to processes as the primary organizing device was initially built around
agendas such as TQM, time to market, and supply chain management, which all focused on
horizontal processes cutting across the organization, rather than the vertical processes of
control and command that lay at the heart of structural thinking. The gradual shift finally
became a tidal wave as the process re-engineering movement swept through the corporate
world in the mid -90s.In India the trend has largely been opposite. While Jack Welch was
tearing out old structure in GE, Indian business schools were teaching outdated GE cases to
MBA students and executive program participants, however companies like Hindustan lever
, HCL, Infosys , and Ispat have been blazing a different trail, focused on developing
processes rather than elaborating structures, to concentrate on how organization would
create value. The focus on processes is manifest in these companies at many different
levels. All have them have significantly improved their operational processes- how to pay
bills or how to assemble parts in the factory, by re-designing workflow, often with support
from new IT mediated methods. They have built their organization on three core
processes: an entrepreneurial process to drive the externally oriented opportunity-seeking
seeking behavior of their companies; an integration process to link and leverage their
diverse resources and diverse resources and competencies lodged in different business,
regional or functional areas, and a renewal process to constantly challenge the existing
ways, to prevent past success formulae from ossifying (cease developing; become inflexible)
into a recipe (something likely to lead to a particular outcome: a recipe for disaster) for future
disaster. A focus on entrepreneurial , integration and renewal processes leads managers to
view an organization not just a portfolio of activities but a social system built on roles
people play, and the relationships that connect them. Front line managers role is
transformed from that operational implementers to entrepreneurial spark plugs, they
spread entrepreneurial process , supported by coaching role of senior managers and the
framework building role of top level managers. Beyond this support role in entrepreneurial
process , the senior managers in the middle act as the lynchpins ( an indispensable person or
thing) in the integration process, linking the front line initiative into coherent strategic
thrusts and leveraging the companys competencies by transferring best pest practices and
sharing and coordinating the use of resources. Finally, the corporate leaders drive the
renewal process , establishing stretch goals and performance standards, shaping vision and
values of the company, and constantly challenging the organization to prevent ossification
to maintain performance momentum.
Beyond Systems to People: While top-level managers see systems-planning system,
budgeting systems, control systems and so on- as the lifelines that provide their information
link to the operations, to people in operating units the same systems feel like ropes that

bind them, chains that tug them to heel when problem arise, and as puppet strings that
control their actions from above. Besides this ,consequences of de-motivating and
disempowering people, the elaborate infrastructures of systems have led to another set of
debilitating (make very weak and infirm) problems in large companies. Companies like Infosys,
Ranbaxy, Reliance, HDFC, Hero Honda etc developed philosophy like GE. Instead of
imposing elaborate and strict control systems to ensure compliance , Dhiru Ambani and
Narayan Murthy- both in their own different ways used interpersonal relationships and
direct interactions to shape to shape peoples behavior . And rather than relying on
abstract and aggregated information systems, Keki Dadiseth and Azim premji developed
alignment through rich and intense personal communication with those who have vital
intelligence and expertise. In each company , the senior management worked hard to
delegate authority but also to provide support and they matched their demands people with
investments on them, to build their capabilities. The one message that came out was their
firm faith in people as most important source of competitive advantage.
In the new management model emerging in India , chief executives recognize that the
diversity of human skills that the unpredictability of the human spirit make initiative,
creativity, and entrepreneurship possible. The most basic task of corporate leaders is to
recapture these valuable human attributes and to do so, they need to abandon nad
constraining strategy-structure- systems doctrine and embrace the librating philosophy of
purpose, processes and people
Creating Value for the society: Companies create new value for society by continuously
creating new products and services, by finding better ways to make and offer existing ones;
markets on other hand , relentlessly force the same companies to surrender over time ,
most of value to other companies. Dynamic efficiency comes from innovations and
improvements that create new options altogether moving the system to a higher level.
Instead of merely appropriating value, companies serve as societys main engine of
discovery; they progress by continuously creating new value out of societys resource
endowments, thus stimulating both social and economic progress. Narayan Murthy had come
to realization that distribution of wealth must be prceded by creation of wealth.This was
the goal behind his founding the new company with six other Patni computer collegues- to
create one hundred rupee millionaires in India, via the establishment of an ethical business
firm based on highly competent and skilled workforce in the area of software development
technology. By making Indians rich, he would make India rich.
Regaining corporate Legitimacy; There is a clear lesson from history-institutions decline
when they lose their social legitimacy. This is what happened to zamindars , and this is
what happened to companies unless managers accord same priority to the collective task of
rebuilding the credibility and legitimacy of their institutions as they do to the individual
task of enhancing their companys economic performance. Individuals like HT Parekh,
Narayan Murthy Azim Premji collectively , they are Indias role models demonstrating the
spirit, passion and moral commitment of which entrepreneurs and managers are capable
.Ideas matter. In practical discipline like management , they matter even more.The time
has come to throw out the old paradigm of management, and to make a jump to the new
one. Otherwise , the fatal gap between companies economic power and social legitimacy
will continue to grow , stunning the growth potential of Indians, Indian companies and
India.