LEARNING JOURNAL (Session 24,25,26,27)

STRATEGIC LEADERSHIP

Submitted by:
C K ANAND
Roll No. 010
PGDM-EM
Dated -12.12.2019

Case: Murugappa Group (1st Day Discussion)

• With restructuring, allotting each of the board members of MCB with additional tasks, the
Chairman has created a time for them so that they can spend their time meaningfully.
Spending one’s time meaningfully is very important, rather than spending in useless
activities.

Challenges:
• The family’s values are - respect for the elders, but still Mr Subbiah is being challenged by
his nephew – “You are just a trusted of tradition & custodian of heritage”.
• As the number of people in the family increases, there could be difference of opinions /
rivalries between the family members. When there is a dispute between the family
members, ability of exercising authority by the Chairman is very low.
• Sibling Rivalry – A person wishes his sibling to be successful, but less than himself.
Sometimes unwilling to help each other. So as a Kartha of the family, managing these sibling
rivalries is very difficult, because it hurts the relationships in the family.
• There could also be conflicting relationship between the family and non-family
professionals.

Solutions:
• Now that the family has become too large, what can be done to manage the situation?
When businesses grow, beyond manageable reach, then there are 2 options
1. Divide them into different functions
2. Divide them into different divisions
• Similarly, in this family also, there are different people from 4 generations with different
aspirations, so managing them is becoming increasingly difficult. The solution is to create a
charter for the family to provide a structure for the family organization. This is possible by
creating a charter, where the ROLES & RULES are strictly assigned.
• Survival percentage of family business up to 2nd generation is 30% and for 3rd generation is
10 %.
• One more option is to create a board like structure for the family organization, to have
discussions, and involve third party non-family advisors similar to independent directors, to
provide outsider views to the family discussions.
 • FAMILY RUN ORGANISATIONS: In these organizations, the family organization and the
business organizations move together. Problems in one always impacts the functioning of
the other. A non-family professional will remain influenced by family organization, one has
to be sensitive to the parallel organization structure.

Case: GE’s Two-Decade Transformation: Jack Welch’s Leadership (1st Day Discussion)

• GE was the bellwether of management practices. Practices followed by GE were

Institutionalized.
– By mimicking – cognitive miser ( 1/3rd of corporates) – follow and implement similar
programs immediately
– By coerce (next 1/3rd ) – follow sometime later due to pressure from their top
management
– By advocacy route (rest 1/3rd) – pressurizes others to follow the practices which are set
by market leader – like KPMGs

• 1930s – Centralized & controlled business

• 1950s – Decentralization
– Delegation became the name of the world
– Experienced profitless growth at that time
– This was done in order to make decision making process faster as specific are experts can
look into the matter and take faster decision.

• AGENCY THEORY
Organizations consists of 2 sets of people – Principal and Agents
Principal : Sets the agenda
Agents : Works on the agenda of the principle and maximize the welfare of principal and
principal will pay whatever agents can negotiate it for.
• But agents make their own agenda about their own growth and their own priority.
Therefore, principal may suffers --- So to protect themselves they start monitoring the
agents.
• These monitoring is done on the basis of Information and Information also comes from
agents. These Information can get delayed, Manipulated and confused.

• Challenge: How these agents keeps behaving in favor of the principal?

• 1960s – Strategic planning system – What does it shows from the agency perspective?
– Budget constraints allocated to the business gives limited freedom to agents – (43
presentation for 43 SBUs with 43 sector heads i.e. 2 months). And also the Review of
budget after approval (1 month and 4 times a year therefore, 4 months) ---- Total 0.5
year gone in this process So it prevents me from doing other things)
• So, 4 Sector heads were created in order to reduce this wastage but it lead to formation of
pyramid – 200 person years were added to save 0.5 year.
• If position gets created at lower level it remains as a position but same is not true for
positions at higher level as it leads to formation of pyramid.
• In company’s surplus manpower is a issue and it creates issue for people who are actually
working. -- Usually all the surplus people are highly qualified with very high salary and it
needs to justify their salary, therefore they start questioning the working of SBU’s and
create issues.
• Every business must have a corporate strategy i.e. Arena has to be fixed -- (Cash Cow, Stars
for this case) and business strategy i.e. Sustainable Differentiator (competitive advantage)
for its growth.
• In this case of GE, Jack Welch forced his managers to either be #1, #2 in market share, Fix,
Sell or Close. The message was very clear and he was only interested in output. Therefore,
He forced his managers of different business to create their own differentiators and be in
the competition.
• When a company acquires a very high performing company, it comes at a premium and the
shareholders of acquiring company lose money, since scope for improvement is very low.
Such companies lose out money since they have to pay a very high premium for buying such
assets.
• Since Nomenclature is very important and nobody likes to be called them as cash cows
therefore, GE defined its business as Core for cash cows and Hi tech for stars.

BCG Matrix
• Dogs- Sell – Takes a lot of time and ask for more money and don’t deliver.
• Cash Cow – Gives cash without much investment
• BCG Matrix is basically classification of business not companies