Saturday, June 02, 2007

Should CEO's salary be capped?

The Prime Minister's call to India Inc to trim salaries of top executives has got thumbs down from industry, even as CPM celebrated it as a validation of its critique of Manmohanomics.

Salaries are a product of demand dynamics, said Sunil Bharti Mittal, the just-elected head of the corporate club, the Confederation of Indian Industries. A head hunter pointed out that CEO compensation in India is nowhere the global standards. If the median pay of US CEO’s is $6.5 million per annum, Indian CEO’s only earn about $0.5 million per annum. Head hunters say that it is a seller’s market.


This brings us to the real question. “Is there a skill shortage at the top that is influencing the price of CEO?” Mittal categorically claims that there is shortage of skill at the top level and more specifically in the service sector, which is why pay packages of senior executives are high.

But if you look at an organization with an eye of an HR researcher, who is from organisational behavior lineage, this claim may not be justifiable.


If you look at an organization from inside, it comprises of hard architecture ( 3 S -strategy, structure and systems) and soft architecture ( that enables people to coordinate, prioritise, and decide). As hard architecture alone cannot alone respond to internal and external demands, organization needs soft architecture to absorb the ‘residual variety’.

If the ‘residual variety’ to be absorbed is high, then you require more integrators (euphemistically called as managers whom we hire at middle level, senior level and very senior level) to absorb this variety. It is senior level’s responsibility to design this hard architecture or adopt/adapt the right one.

If they do not adapt/adopt right architecture, then the entire ‘residual variety’ has to be absorbed by the soft architecture. For instance, take the example of Japanese. They ‘simplified’ the ‘complex’ manufacturing system (the Toyota way) so well that they could afford a flat ‘managerial structure’, because the entire variety was absorbed by the ‘first level’.

On the other hand, senior management in India (who are brought up on the staple diet of western management principles) do not spend time on designing the right hard architecture of the organization. Instead, they are more than likely to ‘pass’ the entire burden of ‘residual variety management’ to the soft architecture. They hire more middle managers to absorb the residual variety who essentially become ‘highly paid coordinators’. They work ‘overtime’ to sit in meetings to tie loose ends. They have to say ‘yes’ to all decisions, because people below do not have the ‘bandwidth’ to take those decisions. And naturally, because they work so long and so hard, often at the cost of their personal time, they justify higher salaries. Because they themselves are senior management, there is no one who can ‘challenge’ this logic.

This virtuous or vicious cycle (depending on which side you belong) is then nurtured and fostered by everyone. Juniors pass up all the decisions to the higher ups assuming that they do not know enough. Seniors keep on taking those decisions to justify their higher salaries. As juniors do not develop because of ‘passing up’, seniors feel even more righteous in not allowing juniors to take those decisions.

Board and shareholders want one head to be responsible. They therefore want ‘accountability’. This further nurtures centralised decision taking. New Systems are installed to establish this control. For instance, instead of ERP enabling front line people to absorb the residual variety, senior people use ERP to develop dashboards to get even more control over their first level. The cycle continues to be nurtured.

If you closely watch these top-heavy organizations you will find other symptoms: hero worshipping fosters high handed behavior of few, front line people feel more and more disempowered thus making the organization prone to slow reaction time, band-aid solutions that allow seniors to save face or produce immediate results are in demand, serious long term initiatives are run by mavericks in small divisions far away from central office, politics is nurtured because some decisions are bound to look ‘partisan’ even when taken in the best interest of the organisation.

When this soft architecture still cannot absorb the residual variety, the organization loses slowly and surely, like what is happening in the auto industry, or is taken over by another organization. Because everyone in the industry is facing the same ‘issues’, organization does not see any solution to this problem. When Jim Collins in his research of Good to great found that only 12 organisations managed to perform well over 75 years, and the leaders of these organizations were not the usual types, he found it intriguing. An organisational researcher would not be too surprised.

Surprisingly, designing hard architecture is not supposed to be a job of a leader even today. We love to have leaders who are flamboyant speakers who look great. We believe that leaders are those who take ‘quick action’ instead of deliberating on it. When our seniors take ten hours to meet us for ten minutes for an important meeting, we justify that they are very busy. When our seniors lack of timely decision delays our project, we take the blame on ourselves. Unwittingly, we foster this vicious cycle. This allows us to blame ministers and others for the ills and fortunes of our industry.

And if we belong to HR, whose job is to bring this to the light of all, we blame that HR is not getting its due respect.

Friday, May 25, 2007

How understanding career-development will be useful for organisations

After the book release of 'The five great myths of career building', one of the friend asked me how this will be useful for organisations.

One of the immediate area of application seems to be leadership development. The concept of leadership is so 'loosely' used in management research and books, and that too by well known researchers, that one is surprised.

If you look at a typical organisation, you will realise that individuals play two distinct functions. One is that of a doer ( programmer, salesman, accountant) and another is an integrator. Integrator integrates the doers to produce a 'marketable' and sustainable output. At the worst, an integrator can be a coordinator, at the best he is , what we all like to believe, a leader. The choice is not completely in the hands of the 'person' who is performing that function; it is also the design of the job position. If a job position is designed like a coordinator, a person will have very little lattitude to become a 'leader'.
But unmindful to this, organisations have 'leadership development programmes' for all managers. Even though some managers cannot perform a bigger role than coordinators, the organisation expects them to be a leader. Every manager is put through the leadership development program, and then expected to display 'leadership' qualities. When most of them cannot do so, they are blamed for not taking the initiative, for not thinking out of the box. Managers also stop taking 'leadership development' seriously. They attend these programs only when they are at exotic locations or when they are at Harvard.
Managers are expected to learn from these programs and become leaders. Some companies become even more aggressive. They run competency tests, identify the gaps to become a leader, and conduct programs to fill the gaps. Although we know that no 'leader' is a perfect person, every manager is 'moulded' to become a perfect leader. Some twist themselves to change, some just show that they have learnt. No one can question the wisdom of a company which is spending huge amounts on 'developing them'.
One way to come out of the this conundrum is to understand human development, or what i call career development. Every individual has a different trajectory of development. An individual may or may not be able to develop the required leadership qualities in a given timeline. Luckily, organisations also require 'leadership' qualities on a wide range of spectrum, because each job position of manager is different. Organistions can therefore easily assimilate them.

Saturday, May 19, 2007

Training managers need to focus on operational development

Training managers, not so surprisingly, focus on developing the leaders ( which are supposed to be managers), while ignoring the development of their operational staff who actually do the work.

I guess that this 'studied ignorance' could be happening out of two reasons; one accidental and another deliberate. Accidental reason is that developing operational executives is boring because they only 'do' the work. That is 'content download' and can be delegated to the juniors. On the other hand, leadership development is interesting and involves direct interaction with superiors and managers who ultimately 'navigate' the company.

Therefore, in a learning and development plan of an organisation, you will not find any mention of how operational executives should be developed.

On the other hand, operational staff are the staff who do the actual work, whether the work is of programming, selling, or support work like quality control. Because they require expertise to do their work, development of this expertise is a constant 'challenge' for them. More so, when the expertise sharing is not easy.

Imagine a new batsman like Wasim Jaffer entering in a cricket team. Do you think other established batsman help him/share their experience and wisdom? In 4 out of 5 cases, the answer is no. Manoj Prabhakar has mentioned in his interviews his difficulty in learning from seniors when he entered the team. Experts, by their nature, face a constant dilemma: Am i competing or collaborating? Without resolving this paradox, no sharing of expertise can happen.

I have seen organisations have excellent salesman and non-performing salesman. Do excellent saleman share their experience with non performing salesman? You know the answer. Some companies 'actively' evoke competition, while some do it 'subtely'. Every company talks about the team work, but no one shares their pearls of wisdom so easily. Mckinsey, a company of management consultants, also faced this dilemma. And a software company also faces this dilemma.

Until one carefully answers the difficult questions, and resolves them through policies, direct and indirect incentives, a company cannot develop the expertise of operational staff on which the 'work' essentially depends.

This is just the first challenge in developing the operational capability of an organisation. There are others. Did you encounter any?

Thursday, August 24, 2006

Use 4-step process to solve business 'problems'

Business executives often come to you with a problem in their mind (say team building or communication) and ask you to look for a trainer to help them ‘solve’ the problem.

If you take their ‘problem’ at the face value, you are taking two risks. One, if nothing happens after the ‘solution’ is imparted; your credibility is at stake. You cannot say that ‘you did what was told’. A business executive expects you to be an expert in these maters. Two, you may miss a golden opportunity to solve a ‘deeper problem’ that is hidden behind the ‘superficial problem’. With the business executive’s permission, you could have hit the right button.

In order to act as a HR expert and increase your credibility, you need to follow a four-step process to determine if the problem is to be solved and how.

Business executives, because of their action orientation, often live in the mode of ‘Ready, fire, aim’. When they come to you, they have not only ‘labeled’ a problem, but also found a solution. They come to you with a problem of ‘team building’ and expect you to organize or conduct a program on ‘team building’. As a HR expert, firstly, you are better off if you ask questions about the problem situation at hand, so that you do not miss the ‘leverage’ when you are thinking of a solution. For instance, you may investigate why the problem of ‘team building’ has cropped up now. Is it due to a new project that a company has got? Or is it due to a new recruit in the team?

You may understand the ‘problem symptoms’ through which the business executive has identified the ‘problem’. Are there conflicts on the substantive issues of the project? Or are the team members showing ‘covert’ resistance by not staying behind after office hours? What other symptoms have been linked with ‘team building’ problem? This will help you understand what the ‘true problem’ is.

Secondly, you would also do some analysis to find that you are not hastily linking the ‘problem’ with ‘cause’? For instance, are the problem symptoms surfacing because the boss is trying to suppress ‘overt’ resistance? Or is the problem surfacing because of the hidden competition between two contenders for a possible post? Or is the conflict between two functions a ‘normal’ manifestation of the two ‘purposes’ of the function?

Third question is whether the problem is worth the time and effort required to resolve. To understand this, you may have to understand the performance parameters of the organization/department that get influenced by ‘team building’. The typical performance parameters are quality, cost, productivity and customer service. Depending on what objective is being pursued at that time, you can decide if the problem is worth pursuing. This will determine if the problem is important and/or urgent? And how much time and effort should you spend on solving it?

This will pave way for you to explore the solutions, the fourth step of the process. Training on team building may not be the right solution. It could just be training the boss who does not know how to allow team members to express resistance overtly without toppling the cart. Even if training is a better solution, you will know the major causes of team building that will have to be tackled by the trainer. This will not only ensure that the ‘solution’ will indeed solve the problem at hand.

Summary: Step one is differentiating ‘problem’ and problem symptom to understand the true problem. Step two is analysis to find possible causes, because problem symptoms may reflect deeper causes than are obvious to an inexperienced eye. Step three is linking the ‘problem’ with the critical performance parameters of the organization to find if the ‘problem’ is worth solving. Step 4 is exploring possible solutions and ensuring that the problem is indeed solved effectively and efficiently.

On the website www.seveneighths.in, we help HR executives use this four-step process in diagnosing a problem in their organisation, through Free diagnostics.

Saturday, August 12, 2006

Diagnose the weak link in a performance management system

My friend was called by a very big multinational German firm to train their executives and managers in a new PAS ( Performance management system) system. The firm had designed a PAS system with the help of a consulting firm. They installed PAS in SAP. They designed a good training program of a day to train their large work force in the new PAS system. More than 20 odd trainers were brought in to train the workforce all over India. More than few millions were spent on the entire exercise. Do you think that the company achieved its objective of changing their performance system?


The success of a performance appraisal system (PAS) does not depend on the 'brilliance' of the form designed, KRA's designed, goals set or the quality of training. It depends on the 'spirit' in which the performance appraisal is conducted. If the 'spirit' is right, everything works right in a performance appraisal system. Even if the design of performance system is wrong, the people involved in PAS discover problems 'incrementally' and, slowly but surely, reach the final destination. However, if the spirit is not put in place, then no amount of design can correct the flaws.

As a HR professional, your job is to 'ensure' that the right spirit is brought in the performance appraisal (preventive care) and 'sustained' throughout the years (corrective care). Both preventive and corrective strategies have to be designed appropriately to ensure that the right spirit is in place.

For instance, in installing a PAS one needs to take care of how goals are set in an organisation. One of the companies, i knew of, had set the goals based on last year with a 40% increase. With nothing to support such high goals, the goals cannot be met in the first place itself. How can employees achieve such 'ambitious' but unsupported goals? HR executives have to intervene and ensure that the PAS system is objective and not biased towards 'organisational bosses'. If they fail to intervene, either because HR is not taken seriously in an organisation or because HR executives does not have a conviction to stand up to, the PAS system is bound to fail because of this 'weak link'.

Other such 'weak links' in a PAS are inappropriate contextualisation of the KRA's, 'mismatch' of resources provided visavis the KRA's, lack of requisite skills of reviewing the performance of a junior, linkage of PAS with annual increments and so on.

If PAS is linked with annual increments ( as is being done by many companies), the system becomes 'over laden' with emotions due to the dynamics involved. If PAS is linked with annual increments, and because bosses have to choose whom and what to offer, they make these 'choices' first due to the high 'variety' involved. Employees loose faith in PAS because they perceive it as a means to justify lower ‘increments’. Relevance of PAS system has to be ‘reconfigured’.

Skills of managing the performance evaluation review are not innate. Without these skills, bosses find it difficult to 'assert' without pointing 'fingers'. They find it difficult to handle the outburst of emotions that are inherent in such a review. Bosses, unable to manage this high emotional interaction, are often known to avoid such interactions. This can put the entire PAS system at risk.

Corrective strategies to ensure that PAS is working as per the intended design are equally important. For instance, HR executives have to assume that 'junior' is more handicapped than the 'boss' and therefore has to be supported with something 'extra' to negotiate the handicap. Corrective strategies are monitoring strategies. For instance, HR executives may have to install a system of feedback so that every junior's feedback is received and responded.

A PAS system can become a useless 'ritual' or can become a highly active system to spot and nurture performers. Be it PAS or any other HR system, HR executives need to first diagnose the weak link in the system. Without diagnosing the weak link, PAS system can fail to make any impact.

Only after one diagnoses the weak link in one's PAS system, can one devise appropriate preventive and corrective strategies to ensure that the PAS system is self-sustainable and can achieve its desired objective.

Wednesday, August 09, 2006

HR managers should use non-linear thinking to get more mileage from training

In a conference, HR manager of a pharmaceutical company was explaining his dilemma. Their research department had undertaken a 3-day training program six months back, which was an instant hit. Participants rated the program highly. They were in a 'high' for a long period of a month or so. After that, the initial enthusiasm died down slowly. And now they were looking for another trainer with another training program.

He was asking the audience if 'training should be treated as a tonic'. Tonic acts as an energiser, vitalises people, but slowly looses its effect. Or should training be seen as an intervention that needs to be 'sustained'?

According to non-linear thinking paradigm, a training of a new skill/mindset, to be useful, has to be contextualised in the 'system' of participants. This is the first requirement. Contextualisation does not mean just using the 'jargon and words' of the industry. Contextualisation means understanding the variables affecting the 'problem symptom' in a specific case.

For instance, if team building workshop has to be done for a team, say for pharma research unit, the challenges of functioning as a 'team' has to be understood before a workshop has to be designed to help them. For instance, why do intelligent PHD professionals in pharma research unit do not cooperate? Why don't they see the benefits of cooperating? What policies and factors prevent them for coming together? Which of these variables can be impacted by training? Which of them are beyond the scope of training, and therefore required to be put into place, for sustained 'team building'?

An off-the-shelf program of team building, howsoever brilliant it may be, will not contextualise their issues, the challenges they face. Without appropriate understanding of the 'problem symptom', the program design will not incorporate the real-life questions and the dilemmas the team members face. Due to the brilliance of a trainer, the program may become a hit; but it will fail to produce any visible result.

The second reason, why programs do not sustain the behavioural change, is the effect of threshold limit. Until the team learning the skill, crosses the threshold skill levels, they need support, both emotional and physical. If you remember your driving experience of learning a four-wheeler you will remember the time you took till you reached your threshold limit. Until you reached the threshold limit, you were scared of taking the vehicle for drive. You were worried of the incline that will create a driving problem for you. You were worried about the u-turn that had to be taken, or the difficulty of parking in a lane. Until threshold limit is reached, you avoided the chance of driving.

No sooner you reached the threshold limit, your entire outlook of driving changed. You found situations where you could drive. After threshold was reached, the virtuous cycle helped you become a good driver; but until then, you required support from your friend, spouse and others.

The same threshold effect also works in the case of training. For instance, as soon as a team learns 'team-building', they learn to engage with each other freely. But no sooner they face a complex issue of 'conflict between two functions', the team requires support, hand-holding and even some skills to talk to each other. Once the team crosses a threshold limit, they can tackle even tougher conflicts by themselves. Until they reach threshold level, they need to be consciously supported. In short, HR managers need to tackle these issues, contextualisation and threshold limit, to make training 'effective' for their companies.

Without tackling these two thorns, money spent on training just goes down the drain. On the other hand, after negotiating these two issues, the money spent on training produces positive and sustained results.

Role of a modern HR professional

With an advent of internet and 'blogging' freedom, the relation between an employee and organisation is undergoing a 180 degree shift. An employee, who was earlier dependent on the organization as an intermediary, to sell his/her service has now more ‘channels’ to deploy his skills and resources.

An employee, who was only a resource like material to help an organization to meet its objectives, has now become a driver ‘who’ can determine the very objectives of the organization. With internet as a resource, an employee can create an open source code like ‘Linux’ and compete with a 300 billion Microsoft. With a publicly visible blog on internet, an employee can voice his thoughts and ideas to find like minded ‘community’ and choose his own path.

Such a human being cannot be ‘managed’. More than tools and techniques, companies needs a different mindset and philosophy, not just to ‘bound’ the energy, but instead channelise the boundless energy of an individual. Instead of using ‘systems and procedures’ to ‘limit the freedom’ of an employee, a company has to learn to use it to help an employee gain more options. Instead of worrying about ‘capping’ the freedom of an employee, a company has to utilise the freedom of an employee to design new business models on the new knowledge and trends.

To enable a company move towards to this, a HR executive has to take an initiative. Not only should he lead this initiative, but he should change his ‘support’ role to becoming a ‘lead’ role. This blog will help a HR executive with the tools, mindsets, and insights in undertaking this role.