Renaissance of ITeS Companies.

 

ITeS industry is witnessing dramatic changes. From initial years of voice based support it evolved to support non-voice requirements of many a Fortune 500’s. They brought process efficiencies and cost advantages to their client organizations.  However, in last few quarters, these companies are witnessing a double whammy on customer and technology fronts. With increasing automation, emergence of AI and ML on the corner many of these firms are worried about the likely drop in revenues. On the other hand, customers are seeking out a partner to manage and deliver business excellence, not just cost arbitrage advantages. Companies outsourcing are looking beyond cost arbitrage and buyer-vendor relationships but one that sustains long term value and flexibility. Many contracts are becoming more flexible, with more leeway to buyer changing needs. According to IAOP research 80% of customers are looking at outsourcing to improve business performance and their overall business models.  A major shift is also coming from segments that hitherto did not outsource much, mid rung players.  In coming years, about 2/3rd of requirements is expected to be driven by midsize companies. Unlike their large counterparts, midsize companies are not just seeking scale efficiencies, but instead to import functional expertise from outsourced partners to remain competitive. ITeS markets is moving away from a transactional cost focussed relationship to a multi-term outcome focussed ownership driven managed service play.

What is therefore needed is look beyond voice and non-voice support centres, but becoming functional support partners who can manage revenues and costs and offering omnichannel customer engagement. Transformation journey of ITeS companies can happen if they pursue a 8 steps journey as described below.

On the lines of Chinese proverb, all long journeys start with small step, the first step required to consider what is required to position them from a FTE based company to non-FTE based company. First step is to envision the offerings beyond FTE model and define the elements of the offerings that address the pain areas of the customers.  Automated services, augmented management routines or standardized processes that can eliminate the “friction” in the client organization, whether on the revenue side or the cost side or both are the keys to enriched offering. Realign complete service delivery, HR, training and support for transformation. This would mean identifying existing contracts where optimization of resources can happen, codification of SOP and routines can happen, and recruitment options that offer continuous stream of low cost resources with right attitude.  Define service offerings that may extend beyond the process and that can impact financial or non-financial aspects of client business.  While FTE continue to be a revenue stream, extend the offerings to cover solutions that impact revenue, cost, asset utilization or customer experience using technology.  Design services that exploit the elasticity of cloud and automation of benefits of RPA, analytics and other tools. Once relevant offerings are identified it is important to rearrange organizational units so that some can prepare the ground work in terms of definition, validation, structuring and packaging of the offering. RPA helps companies to automate repetitive manual tasks so that attrition and knowledge management challenges can also be better addressed. From a delivery side, RPA eliminate human variance, help standardize process routines, and reuse of process components. Automation helps companies move from pain vanilla services to high value “production”.  The offering becomes highly scalable, knowledge intensive and opens consulting opportunities for ITES companies.

Invest in a tightly joined at hip sales and marketing motions so that repositioning is consistently and continuously managed. Develop a smart marketing team that consistently conveys the change and reinforces new positioning. Sales organization has to be revised to ensure segments are appropriately covered by complementing inside sales and direct sales resources. High touch direct sales resources are key to drive transformation and appropriate sales enablement activities including training, marketing assets and walkthroughs is required. Finally, the key is to manage the transformation while being asset and investment light. For this, ITeS companies need to exploit the ecosystem of partners who can offer complementary advantages.

There is no silver bullet for effective transformation and positive outcomes. Along with multiple actions, mind-set changes, behavioural corrections, transformations are successful when resources and initiatives complement each other. For transformation to be successful, management must follow a comprehensive approach. Transformation requires high intensity of both intent and follow up.  Intensity can be sustained with dedicated outcome driven reviews. Finally, no transformation is possible without adequate ownership and self-management of teams and people.

Dr TR Madan Mohan

 

Expansion and diversification of Family business

Family run businesses are a significant segment of any nation’s industrial structure. In India 95% of business are family run, and 30% of BSE listed companies are family owned. Anecdotal data indicate just about 20% family businesses survive a first generation transfer and 95% of them become defunct within two decade of demise of founder. Unlike a corporation, family members and their extended relations may exercise different rights, expectations and responsibilities in the business.  This sometime can lead to conflict and jeopardize the sustainability of the business, especially when the families decide the expansion and diversion of family business.

It is not uncommon to see well entrenched family businesses to pursue risky and unrelated expansions. A Bengaluru based real estate focussed family wanted to jump on the IT bandwagon because it was considered the best things to talk to in their circle. They invested in a healthcare product company, where the pay backs happen after 4 years at least and a strong ecosystem built to drive the product. With a complete contrast in the revenue generation engines between their primary business and the IT product company, it was anathema for them try out build to grow business while their experience has always been of built to sell business. It is not just revenue cycles, but also the management of human resources that is an Achilles heel for many family businesses when they expand, especially to an area that requires different work routines, knowledge structures and coordination.

Another family owned business wanted to expand to defence and space to ride on the Make in India program.  Unfortunately within 2 quarters both these families realized their folly. Sometimes it is best to stick doing what you do wee and do well.  Family businesses thrive whenever they pursue low degree of product diversification with a broader degree of geographic diversification or into complementary products.  Families benefit from learning curve when they pursue geographic diversification and can quickly fine tune the last mile frills if required.  For a family business in real estate expansion into complementary services such as school or outpost medical facilities or facilities management or even into interiors work well.   Expansion into complementary services that can bundle with the primary offerings or improve the attractiveness of primary offerings or can offer annuity revenues when the primary business is transactional or one-time makes lot of sense.

Family businesses must pursue expansion from three considerations, viz., consolidation, portfolio enlargement or innovation. Consolidation must be pursued when economies of scale opportunities emerge.  Portfolio enlargement may be pursued to acquire skills & talents or in the interest of next generation. Finally innovation expansion can happen when access to IP or newer technologies can be gained.

A little known fact is that similar to the experience of professional run organizations, not all family business diversifications bear expected outcomes. Bereft of a board, in many family business diversification decisions may be centralized with the founder or one of the influential family member. Expansion risks, mitigation plans, roll outs are often not addressed in detail. Diversification may also happen from estate taxation perspective only with limited sustained benefits to the family. Whatever the rationale, family business expansion success hinders on few common criteria: planning, quality of human resources, task complexity, market structure and coordination mechanisms.  Higher variation in any of these increases the cost and efforts of assimilation.  Hiring and retaining right people is the biggest challenge family business face when they expand.  A key bottleneck is the “Go to person” who is mandated from the family side to manage post-merger integration and growth. Often these persons are chosen because of their loyalty and may not carry relevant industry experience or strong network links. Worst happens when the persons with a core rigidity attitude are entrusted to manage the integration and growth of business. In a proverbial sense many of them may actually end up killing the duck for being pennywise. For a family owned business that expanded from industrial trading business to a IP led healthcare business, the goose was boiled as the go to person did not appreciate the “invest (product development, ecosystem levels) and harvest” logic against his experience of “procure and supply” approach.

Family owned business expansion and diversification must start with an evaluation, merger plan and post-merger management. Sufficient time must be invested to address people issues and cultural integration. Unlike a professional run organization, family business expansion experience higher attrition at top and middle level and hence conscientious efforts must be made to communicate and build bridges at all levels. Selection of go to person must be based on industry experience and affability. Family businesses may also consider a time bound integration team to ensure the transition and track progress.

Similar to their professional run counterparts, family business must plan and drive expansion. Family business must set aside diversification or innovation fund to explore newer and high growth areas that derisk their businesses in future.  More importantly, family business must also realize not all diversification can yield results.  Smarter family business use diversification of a low cost but highly relevant asset to expose their next generation to business.  Family business must set aside a second chance kitty to support the experimentation. Key to successful family business continuity is in limiting the fear of failure and sustaining the joy of learning from failures.

Dr T R Madan Mohan

 

Enduring Sibling Business partnerships.

Working with a sibling can be an exciting or nerve-racking experience depending on the pairing.  Unlike other working relationships where the boundaries often start and end at the office itself, working with sibling is an omnipotent journey. One has to cherish and sustain the relationships not just at office, but at home and even on holidays and social events. From my limited personal experience and observation of businesses where siblings work together, I have gleaned six principles that are keys to sustaining a sibling led business.

  • Define shared purpose:

Commit to a shared purpose and actively seeking common ground is keys to sibling business. Singling must have clarity of the purpose of their coming together and what business ownership means to each of them. Sibling businesses success requires siblings to focus on something larger than their individual focus. A superordinate focus makes it easier for siblings to accommodate loss of autonomy and collaboration rent each of them pays to drive the priorities and concerns of the business.

  • Choose to play strength

Sibling businesses thrive when siblings complement each other and each plays to their strength. Someone could be strong with numbers and other with people or sales. Recognizing that perspective may be different from different functional view improves acceptance and tolerance of each other’s differences and avoid being judgemental. Zones of work for each allows room for specialization and space for “law of minimum distance” that is key to each sibling enjoying their value addition. Check your ego, and realize what is best for the business.

  • Set expectations ahead of time

Clarity of who does what and how would decision happen is important to eliminate ambiguity and blame game. Successful business relationships have explicit business rules regarding who will fill what areas, how responsibilities are delegated and who is accountable to whom?. It is also important to define what kind of performance review will happen and who owns the outcomes?.

  • Communicate frequently and openly

Communication is key to all relationships and sibling relations more so. Some siblings may prefer informal 10 minutes stand-up meetings each day, while others may hold weekly lunch meetings. Contrary to expectations, do not expect your siblings to read your mind. For partnerships to work let go of these assumptions and communicate clearly and openly, just as you would with a non-family business associate. Express feelings, ideas, disagreement openly in a respectful and consistent method. Frequent, open communications and good listening skills cement the fissures and keep the sibling relationships strong.

  • Make participative decisions

For sibling business relationships to stay together, all strategic decisions including investments, on boarding relatives in business, diversification or partnerships must be thoroughly thrashed out collectively.  Sibling businesses can also use extended platforms such as family court to keep away undue influence, improve transparency and collaboration.  For large sibling business, a good approach is to have sibling code of conduct. This is a formal document that clearly details how exceptions will be handled, what financial information and decisions will be shared, relatives in business and succession.

  • Clear compensation policies

An area that derails most sibling partnership is compensation. While as kids the siblings may have got same allowances, their compensation in business must be based on job performance. It helps to have a clear compensation policy to avoid unpleasant situations in future. It is possible to equal profit bonuses while salaries may differ across siblings, so that people do not feel exploited and underpaid.

Dr TR Madan Mohan

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WhatsApp for B2B marketing

With over 42 billion messages sent daily across 109 countries, WhatsApp is a veritable platform for marketing. Recent State of Inbound Report states that 30% of the respondents have used messaging aps like WhatsApp or WeChat or Hike as a business communication channel. Many B2C businesses have started to market and promote their products and services through WhatsApp. Unlike email or SMS, it has high delivery incidence and less restriction on the format. One can send not only messages, but Images, videos, and audio files. As marketing trends become more personalized and user controlled, aps like WhatsApp lend themselves to promotion and lead nurturing.

Where can B2B businesses use WhatsApp?. It is an effective platform for managing internal communications. Sales teams can build an effective channel to discuss the best practices, share novel approaches or just keep sharing the status. Multi-functional groups may find a common WhatsApp group lining disparate information silos and bring in transparency across the organization. Personal, Group and Broadcast can be used to share information across pre-sales, sales and delivery groups. SME can use WhatsApp as Knowledge management tool to disseminate status around key projects or learn form an order. Companies can use WhatsApp as an alternative channel for helpdesk or complaint logging. Customer support team can also use toll free number or WhatsApp live chat for online queries.  WhatsApp can be used as a CRM tool to retain the customers. Once the WhatsApp group is formed follow-up with the customers by asking feedback on products and services. WhatsApp can be used to offer discounts and coupons as enticements for loyalty or even recognizing and rewarding brand ambassadors. B2B can also be used for after sale service support including service bulletins and recall information.  B2B can use WhatsApp to reconfirm and persuade required attendees who have confirmed their participation for a conference or a workshop. Personalized WhatsApp can help event organizers plan the activities better and reduce wastage.

However, these aps have few limitations on community reach and expansion. In order for a company to communicate with its prospects on WhatsApp, phone numbers of these people must be stored in the company’s phone address book. The catch is that prospects must also have the company’s contact number stored in their respective address books. WhatsApp is a non-starter of the company’s phone number is not actively promoted and is available on the website and other media. Second challenge in the limitation on size of the group limited to 256. Companies with national foot print face the challenge of managing several local groups within a region. Simply the cost of coordination and control of common messaging and effective response is prohibitive. Like many other social platforms, WhatsApp groups also have lurkers, passive guineas and active bulls. Challenge for B2B companies is ensuring their content engine is robust and creative enough to keep the community active.  Pedantry messaging of good morning, happy holidays can only flies for some time. Form a marketing perspective, measuring the ROI from WhatsApp is difficult. You can only measure the numbers of people who have seen or sharing buttons or UTM tagging of the post links.

WhatsApp and other aps are powerful and low cost communication tools. Their biggest advantage is their simplicity and quick roll out.  In an internet world that is algorithmic and controlled by Google’s of the world, app messaging services support organic reach without having to pay to play the community game.  The app message alerts are instantaneous and have a high probability of engagement. Importantly though limited to 256 people, these apps provide scalable yet private platform.

Sai Vinoth TR

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Promoting alternate platforms of MSME Finance

The Small and Medium Enterprise sector (SME) contributes to more than 45% of the GDP besides 45% to the total manufacturing output and 40% to the exports. The Annual Repo of Ministry of MSME 2015-16 states that MSME require about INR 44 trillion of which 35 trillion is debt demand and 9 trillion for equity. The 4th All Indian survey of MSME’s indicates about 90% of their financial requirements is met through informal sources. Public sector reach and access to finance for MSME is limited..  Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) set up by Govt. of India and SIDBI, was expected to drive credit based on the viability of the project rather than on collateral. However, data indicates that less than 6% of the loans were disbursed to start-ups and Small and tiny businesses. Many a needy entrepreneurs could not access the credit as on several parameters such as DSCR, leverage, etc, their business plans fell short of the traditional lending norms.

Government’s latest initiative like Startup India and Standup India need more pronounced support for IP, scaling up and capacity building. Amongst alternate platforms of SME finance, Peer-to-peer (P2P) lending and merchant finance show huge promise. Peer to peer lending platforms have succeeded growing rapidly by using technologies, eliminating the middlemen and allowing the borrowers and lenders to communicate directly. P2P institutions adopt an online reverse auction approach.  Most marketplace lending platforms do not require collateral which is a boon especially for service-oriented businesses. SMEs can also benefit from the fact that their performance on these platforms can be driven by various non-conventional data points. What regulatory changes are required to drive development of P2P lending. US administration under President Obama has implemented Regulation A+ route for crowdfunding. Regulation A+ provides an exemption for US and Canadian issuers seeking up to USD 50 Million in a 12-month period from filing reports with the SEC. Since these securities are unrestricted they can be traded in the secondary market. Listing on India’s SME Exchange would cost about 0.49 per cent of the total offered amount which is one of the cheapest for SME Exchanges worldwide. It is likely that an Indian adoption of Regulation A+ could prove to be even more economical for SMEs. To encourage P2P lending spread governments across the globe are pursuing innovative changes on personal tax front. UK laws now allow earnings to be treated as personal savings allowance and exemption from tax up to GBP 1000 for basic tax payers and GBP 500 for higher tax payers is allowed. This allows them to net off losses from loans if any.

E-commerce giants in India such as Amazon, Flipkart, ShopClues and so on have been aiming at expanding their sellers base by providing a range of services, including financial support. SMEs who supply for e-commerce platforms can now receive loans for working capital requirements either from financial institutions or sometimes from the e-commerce platform itself. To promote India GI and cultural products government can consider special purpose programs by rerouting marketing subsidies offered at various level to all major platforms. Such an initiative would help increase the reach and profitability of many India centric product companies.

Aishwarya Nair, BCom (Professional), CIMA, Junior Consultant (Finance)

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Are your sales and marketing aligned across Segments?

Robert De Nero and Anne Hathway starer “The Intern” has a particular scene wherein the sales analysis shows the company has been spending more marketing dollars on low value segments and practically nothing at all on high margin low volume segment.  Does not this sound familiar? While companies realize Sales and marketing need to be tightly aligned, but that seldom is the case.  A senior marketing director in a recent conversion blurted out that while her marketing budget has increased YoY, the ROI seems to be elusive. What was bothering her was the fact the company spends substantially in curated events managed by respected analysts, and yet sales find the coverage insufficient.

Companies spend a fortune on the conferences and events but the outcomes belie expectations. It is not surprising for many corporates to find 75% of the participants who attended their events came for free lunch or a swanky dinner. Many of the participants may not be the decision maker or influencers, but pretty junior in their organization. Corporate gifts, industry exhibitions cost a dime, and yet ineffective. Albeit companies continue to pursue many of these acts they are afraid to pause and question fundamentals. What is the objective of the event?. Why this city and this hour?, How this format will help sell their ware?. Unfortunately, many leaders want to just follow the herd. Therefore it is not surprising when studies across industry indicate:

  • 50% of marketing budget is totally wasted
  • Only 34% of feel their content marketing works
  • 25% had no marketing strategy
  • 44% had no alignment between various marketing media

So how can companies ensure their marketing dollars are well spent and drive intended sales outcome. On the outset, it is important to realize marketing function serves three objectives. These are inform, influence and advocacy.  Any marketing activity is to help consumers associate with the brand, help differentiate its offerings and seek higher revenues. Companies use various marketing assets to communicate to the interest group their unique existence, product/service offering set, pricing and other advantages. The objective is maximize reach at an affordable cost. Companies use several approaches to drive influence. Awards, citations, sponsored industry events, directed online community forums, endorsements are all effective mediums of influencing consumers. Advocacy is to enlist willing individuals who would eschew the role of brand ambassadors and drive positive word of mouth.

Different marketing assets serve different purpose and effective at different stages of sales cycle. Assets such as breakfast meeting facilitates more personalized one on one discussion that may be more effective in later stages of sales cycle. On the other hand,   assets like newsletter or blog may be more useful in the early stages of sales cycle. Marketing assets also vary by their cost and impact. Some of these cost a dime and more effective to lock-in, while some may be low cost approaches to increase reach only.

Companies can realize better return on investments in their sales and marketing when these functions are congruent and well-coordinated. Congruency can be gained by ensuring same goals drive their quarterly activities, common goals entwine both functions at various levels and incentives encourage them to support each other. Coordination improves when event plans, promos, content marketing and other assets are aligned with sales motions. It is important to realize sales motions differ across segments within a company. Segments vary on the “value” of purchase and the number of customers in that particular segment. It is common to have a segment A that has few numbers of customers with a high purchase value. B and C segments are those with lower values of purchase and incumbent sizes. Each of these segments exhibit different sales behaviour. Purchasing cycles may be longer and more formal in Segment A, while the decision making could be shorter in Segment C.  Sales may have to interact and influence multiple owners in enterprise segment. Order qualifying criteria may not be just enough in Segment A. Marketing must be able to push the company over to order winning plateau.

Segment A requires an enterprise sales approach where formal decision structures and vendor registration and assessments exist. Customers in this segment may be well informed about the happenings in the markets, and well-endowed to invest high ticket investment. Many customers in this segment may already been served by your competitors and would only move if there is a compelling value proposition in terms of cost, or innovation advantage. Sales function is completely managed by direct sales as relationships and continuous coverage matter to enter and grow the revenues. While inside sales functions support the direct sales with deeper profiling of people and secondary data analysis, direct sales has a key role in engagement of the segment.

Customers in segment A place a high premium on scalable and proven solutions. Prior experience and in depth expertise of the vendor play a key role in awarding the project. Marketing platforms must facilitate experience sharing and credibility reinforcing functions for direct sales to influence and close deals in this segment.  Thought leadership vehicles including standards, industry frameworks and innovation ideas fly well in face to face meetings with the customers.  Breakfast meetings, Industry association, standard setting bodies, and Knowledge sharing conferences serve as valuable platforms for direct sales to position the company at state of art knowledge.  These platforms allow discussions to be personalized and centred on solving the problems the clients face, hence meeting service immediacy.

On the other hand, segment C, which has large number of customers with low ticket value may need a marketing and sales approach where the total transaction costs are optimised.  It is practical to have inside sales as the champion to host and on board customers in segment C. Marketing functions role for this segment is to improve the reach across the market and reuse the content to improve the richness of various marketing assets.  Companies can improve the reach and engagement with Segment C by adopting a consistent campaign blast policy. Mail them a newsletter, case studies and customer wins to increase awareness about your brand. Emphasize on content creation, curation and extension to reduce investments in content development. Content can be text, video and other formats. Use social media platforms to connect owners and decision makers and also to run campaigns.  Figure 1 presents the alignments between Segments and Marketing assets.

Figure 1: Alignment between segments and marketing assets.

pict

Sales efficiencies can be gained only when direct sales team are running after few accounts with a deeper insight and ownership. Also, how the inside and partner (indirect) sales team complement the direct sales matters for Segments B and C. What works best is when companies know how to mesh mash both sales and marketing functions for each segment. Have a quarter-wise marketing plan aligned to sales expectations. Content development and curation can happen in stages and stronger stories and messaging will emerge with each asset to engage and influence customer. Having a common Head of Sales and marketing or marketing aligned with sales in another structural approach that can be tried. Cross functional teams tasked with joint activities across sales and marketing will also be useful.

Dr TR Madan Mohan

 

 

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Setting up partnership firms for success

What is the common thread amongst HP, Apple, eBay, Twitter, Berkshire Hathaway, Microsoft, Home Depot, Infosys, Dolce & Gabbana, and Valentino?  These are all fine examples of partnership companies that have lasted for a long time and some continue to grow stronger even now. Unfortunately, a whopping 70% of partnership firms end in divorce or closure in first 5 years of founding itself.

Partnerships like marriages stay stronger when they embrace following elements.  Most successful partnership recognises individual limitations and builds their enterprise capability and growth around the strengths of each partner. Successful partnership requires respecting differences in traits & personality of each partner without making it uncomfortable or vulnerable for any of the partners. Successful partnership, borrowing from Ballantine’s advertisement, let each partner be unflinchingly and unapologetically who they are.  Berkshire and Apple are classic cases where partners with completely different personalities work to direct, protect and correct the company’s investments and growth options. Successful partnership exhibits a healthy dose of ‘yes’ and ‘nay’ discussions that clear the cobwebs of assumptions and self-doubts.

An important element of successful partnership companies is the high intensity of trust between partners. Successful partnership requires unquestionable belief in the reliability and consistency of other partners. It is important to address disagreements, disapprovals and frustration at early stage. Acknowledging the contributions of other partners in shareholder meetings and media interactions is a key element to cement stronger bonds, especially in the initial stages of partnership. Procrastination and avoidance are not best for retaining trust between partners and sustaining the organization. Consistent follow through of details and taking time to remind each other of what they like about each other reinforces trust.

Successful partnership requires at early stage of founding complementarity in skills and assets. Partners choose to own and drive areas where each of them has interest, experience and passion. Well defined job roles for each and accountability eliminates opportunities for any friction between them. Execution ownership and expectation alignment are key to sustaining business partnerships. Many successful partnerships also see a rotation of roles amongst partners. Partners move from backend or production to customer facing, and those working on the client side move to product development or production. Such role changes help to bring a comprehensive view of the business to each of the partner and close any gaps.  High mutual respect for contributions and appreciate the outcomes from each partner without iota of envy keeps the partnership going strong.

A key ingredient that sustains partnership in business is common goals and shared dreams. In fact many partnerships fall apart when intermediate goals are met and the other partner(s) loose appetite for the long haul.  Successful partner companies need to have a superordinate goal that can remain relevant even with the growth of the company and greying of the partners.  Alignment of personal values acts as a glue holding partners as company and individuals mature.

Open communications and partner rituals play an important role in cementing trust and longevity of relationships. Successful partners have a no holds barred communication policy that completely eliminates “opportunism” for other parties. On the lighter side, some partners are known to confide in each other than their spouses.  Institutionalizing partner sojourns and partner only rituals provides uncluttered space for partners to discuss and realign continuously, even when life goals are changing. Whenever you or partners feel uncomfortable or vulnerable or feel a little envious, check your ego and open the doors of communication.

If you are partners of a startups or an established SME, remember to bring in some elements of institutionalization to sustain the partnership.

  1. First, create a company board. Ensure your board represents partner’s role and rights. Spousal representation is a touchy area and must be handled in an inclusive manner. As far as possible avoid bringing in relationship from one side of partners. Bring in outside professionals who can offer unbiased directions and zealously protect the assets and reputation of your company.
  2. Professionalize your organization by bringing in experienced professionals to support you and partners so that a leadership chain gets developed quickly.
  3. Adopt best practices for accounting and finance. Ensure petty cash handling is minimized.
  4. Ensure each partner directs and reviews areas of his passion and interest. Align departments to the interest and capabilities of the partner.
  5. Institutionalize some corporate events wherein not just the partners, but their spouses and children participate. Founder’s day, Annual day, Christmas Dinner events are some examples.
  6. Formalize performance review mechanisms and ensure the FOCUS is on results and outcomes, not personalities.
  7. Decide who amongst you would don “basking in the sun” role, while other would play Greta Garbo away from the Arclight role.

If your company has survived the golden years of partnership, the next gate of death may actually occur when ownership transition need to happen to the next level. Like a family business, partner run business do need a charter detailing how the succession will happen, how the representation across the owners is fair and the continuity of business is preserved.  Partner led companies can thrive across generations when they can successfully “demarcate” ownership from the executives.  Partner led companies need to have a formal process of succession planning.  Success of succession planning depends on the planning and execution. Partnership companies can explore multiple mechanisms including rotational chairmanship, creation of an investment arm, board representations across units, and trustee positons, etc. to preserve multigenerational partnerships.

Working together is never simple.

Successful partnership like a marriage requires a little bit of serving, counter-balancing, and occasional mending of edges.

That is the secret recipe of enduring business partnerships.

Dr TR Madan Mohan and D Balasubramaniam

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Are you measuring your start up performance rightly???

Do you know the most common reasons for failure of startups? CB Insights report (July 2016) based on 166 startups reveal some interesting insights including running out of runway and poor finance management as primary reasons. These startups could have survived had they implemented effective performance management system to keep their heads up. Running a startup is akin to successfully landing an aircraft. The pilot needs to have right information about length of the runway, visibility, height and should know when he should switch to fly by wire. A plethora of measures only adds to complexity and confusion. What is needed is a simple set of integrative financial and non-financial measures (leading not just lag) to avoid a crash.

What are the key financial aspects every startup must track? Do you know which lead measures can help you decide immediate corrective actions? The most important financial measures include revenue growth and revenue indicators such as bookings which your customer is obliged to pay over the course of your contract, billings which are collected in advance at the time of booking, and gross merchandise value of transactions. Another key element to be tracked is cash in the form of net cash burned as well as cash earned. Your startup could be a brilliant idea but wouldn’t be able to survive long enough to become profitable if you can’t manage cash efficiently. Due to this reason, it is equally important to monitor account payables and reduce pressure on your cash balance. As a startup, tracking the maximum earnings decline ratio for each quarter is the most effective signal to save the business before it drowns. Finally, as important as it is for your startup to build traction and deepen revenue streams, be aware of how much you’re spending to attract more customers. Monitor the customer acquisition cost as well as the customer acquisition payback period so that you don’t end up burning a hole in your pocket.

Do you know the non-financial metrics that would help you in making better sense of the financial measures? The Pirate Metrics devised by McClure is a powerful customer-centric tool that could be used. Rate of Acquisition, Activation, Retention, Referrals, and Revenue are good measures of dynamism of your startup. Measure customers acquired through discounts as well as freebies as these tell you about your customer acquisition. Knowing the percentage of active users will provide better insight into your business performance by eliminating the accidental one time users or first time users. Percentage of orders that required rework, the delivery time per order and percentage of deliveries achieved on time are key measures you must have to capture operational excellence. How does your business measure customer satisfaction and loyalty? The net promoter score is an excellent tool to gauge customer satisfaction. It measures how likely it is that your customers would recommend your product or service to others. Make sure you bean count time to hire, cost to hire and quality of hire to know how good your HR team is supporting your startup dreams.

Finally, remember the measurement must be to drive managerial effectiveness, ownership and accountability at different levels. Remember to keep your cost of running the measurement system low. What you do not need for a startup is a superfine measurement system that comes with a huge cost of collecting, collating and making sense of data. What you need is simple guideposts that tell you whether your direction is right and the speed is right. Keep it simple and stupid (KISS!!).

Aishwarya Nair, Junior Consultant (Finance) and Sai Vinoth T R, Asst Consultant (Sales and Marketing)

To or Not to On board heir into family business NOW!.

Every family business owners goes through this tough decision. Whether to on board the progeny into the family business or let her pick knuckled hard outside and join later is a tough call.  The decision to bring in the successor is contingent upon factors including education, scale of business, incumbent qualified professionals, maturity of the business, and alignment of dreams and commitment.  Wherever the educational background is directly relevant to the existing business and the heir could comprehend the nuances of the business and contribute on boarding could be useful, more so if the heir is going to manage and direct line roles.  If the educational background is unrelated and the heir can manage staff roles the decision would be contingent on other factors. A ward with prior industry experience, exposed to the intricacies of how business work may perform well even if she has no family business related industry experience. Scale and maturity of the organization play also play a crucial role in the decision to on board. Early stage growth firm may find on boarding a ward beneficial if she can own and independently drive some key initiatives and functions. Having a trusted family member to share the responsibilities and pace up growth can work if the outcome ownership and governance are well defined.  If the family business maturity in terms of process and resources is low, an experienced heir can come handy, while a freshly minted heir may add to inefficiencies if expectations are not matched early during induction and constantly reinforced.   Incumbent professionals in terms of bench strength and commitment also impact whether you could on board your ward and set her to win.

Amongst all the factors impacting the decision to whether to on board or not, two important ones have a huge impact. These are alignment of dreams across generations and commitment of the ward. Wherever the dreams of the heir are well etched out and in tune with the previous generation, the on boarding may yield better results. If the dreams are not completely aligned in the long run, but the immersion may leads to merging of the dreams succession may end fruitful if industry and markets remains attractive and the heir drives more value creating engines. Finally, what matters is the commitment of the ward. Does he join the business out of desire or obligation or opportunism determines the commitment and likely outcome of the directions. When the heir join out of interest and passion to the business, and have goal fueled by many enchanting discussions about family business at family dinner table, on boarding prove to be beneficial. If the progeny joins the family business out of obligation, the low commitment can hurt the family business if they are caught at the cusp of growth or market changes.  Investing in professional managers to run the business can mitigate the potential risk when heirs join due to obligation.  Whenever the heir joins due to opportunism (lack of other alternatives or the family business experience equips him with better capabilities), such an on boarding is due to opportunism. Such an arrangement can work when results are passable and market benevolent. Summing up, whether to on board or not a heir depends upon:

  • Ward wants to join because of desire or obligation or opportunism
  • Ward has related industry prior experience or wants to learn on the job
  • Has Education is related to you business, or unrelated to your business
  • Scale and maturity of the company
  • Emergent Economic and business opportunities
  • Number of qualified professionals
  • Alignment of dreams and actions

Dr TR Madan Mohan

Obtaining leadership commitment

A German manufacturing organization with offices in Pune and Bangalore has unique problem. Their highly talented engineers don’t want to move the management ladder and transition from developers to managers. With limited next line of leadership, and challenges on culture fit of resources from market the company was challenged to scale up quickly.  Management realized the crux of the resistance lied in transforming the technical staff to imbibe and practice a sense of outcomes, urgency and above all review and direct peers and colleagues. The technical staff hated to move out of the comforts of the comradery position which did not require ownership of others. Despite abundant availability of individuals with experience and managerial capabilities the company found its leadership development floundering. The company had tried push of an employee early into a leadership position when he/she was not sure and the haul has been a failure.  It was not the capabilities or the administrative support that mattered, but simply the change commitment of the employee to transform from an individual role to team management role that required planning, directing, reviewing and owning others that determined the success of internal leadership development.  Here we are not talking about the Meyer and Allen models of organizational commitment of the individual and its major components (affective, continuous and normative).   What we are addressing is the emotional commitment an employee invests to implement a new strategy. Passion, excitement, pride and energy are the signs of a committed employee.  To attain this dramatic change of attitude to occur, people must not only accept and agree with the strategy, they must buy into it. Without emotional commitment, even the most brilliant strategies will fail. Growing leaders internally is a process that requires planning, high intensity of follow through, and freedom to emerge from failures What is the best approach to gain acceptance, support and commitment of an associate?.

Based on our experience we propose a six stage model for employee commitment buying process. The process includes: identification, goal enumeration, assessment, alignment, reiteration, and formalization.

First and foremost, one should assess an employee’s interest and passion towards his/her work. As the famous saying states, “Choose a job you love, and you will never have to work a day in your life, but celebrate each moment”. Identify and develop them early: Most successful internal leadership programs quickly identify leadership potentials and others very quickly. Look for obvious signs of quality of work, sense of ownership of team, quality of feedbacks to colleagues, initiative for breaks with team, etc

Once the employee is identified her manager may provide bird eye view of the organization’s goals, and immediate concerns, and different team members strengths that are required to reach the goals. The objective of the session is to enumerate the immediate future, how the individual can contribute to the cause and what would be the impact at organizational, team and individual level.  The employee is involved in ideation of the goal, the impact it would create at different levels and what resources may be required at each level. At this stage, the objective is to create vibrant imagery of possible state and acceptance by recipient similar to “to broaden and build theory” of Fredrickson. Manager’s only focuses on strength, latent potential and how fuel it. Communication is selective, articulation is directed laden with vibrant imagery. Positive emotion and sense of excitation changes the individual’s conscious and unconscious drives for better long-term outcomes.

Next step is role visualization and capability assessment. The manager and the associate dwell deeper into the roles. The manager innocuously steers the discussions towards individual’s assessment  of her strengths, capabilities and gaps. Manager directs the flow based on a certain frame that of allows for self-evaluation without the burden of guilt and incapability. Communications are deliberate, are “frame” based thus allowing ruminations in a collaborative environment.  Evaluations are deliberated towards role rather than a person centric.

Next stage is alignment, wherein the manager discusses how the individual can contribute to the organizational goal and fitment of the job and capabilities.. Manager emphasizes the latent capabilities of the employee, reposes confidence in the ability to catch up and expands the role horizon of the employee. The discussion would be open, and transparent to discuss the role expectations, how the role dimensions would impact the short term and medium term, what may be the training and skills sets and sharing of apprehension and experiences. External validation and internal acceptance by the associate is the main objective of this stage. Manager, in this stage, leads the associate with directions towards organizational, team and individual goals as well as supports him in moving forward to achieve the goals. Manager proposes a deliberate break of days to allow the employee to do introspection, carry out minor changes towards the goals and receive internal and external validation of the transformation.

Manager and the employee meet up to recapture the goals, the activities that may be required at organizational, and team level to drive the performance and the individual contributions. Manager digs deeper into the change attempts made by the associate, and appreciates all achievements, however minor they may be. Manager’s focus would be to emphasize the value the associate can bring to the goals and what would be the changes the role mandates.   He also makes the employee reassess oneself to own possibilities of attaining the desired goals and activities. He repaints employee’s motivation to own and drive the desired goal. Once the associate is convinced, the duo need to revisit the drawing board to evaluate the fitment of schemas, assets, roles and acts. In this stage, manager refines and repaints organizational, team and individual goals and describes the best suitable approach for the individual.

The final stage is commitment formalization stage where, goals at various levels are tied, action plans are discussed and detailed, training and support are documented, platforms for information sharing and support are detailed and review mechanisms are accepted. Formalization stage must ensure while the outcomes are important, the pace and tactics are owned by the associate, there is plenty of room for failures and learn without stigma so that continuity commitment is not affected. Formalization stage must also detail informal self-review mechanisms where the individual can elicit the feedback, discuss and digest and push the agenda of improvement by themselves.

Ashwini K. S

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