The Telegraph
Since 1st March, 1999
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- Value addition in companies is essential for performance

Corporate training and development is a major activity conducted by business schools, consulting firms, human resource departments of companies, management associations and others. It is a major source of revenue for management schools and consultants. The last time the annual expenditure on training was estimated was over twenty years ago. Though there is no estimate available, the amount today must be well over Rs 1,000 crore.

The Indian Society for Training and Development is over thirty years old, as is the International Federation of Training and Development Organizations. The federation met a few weeks back in Delhi for the third time in India in three decades at a conference inaugurated by the president of India and attended by almost 2,000 people. In his inimitable conversational style, the president pointed to some important factors in adding value through human resources: technology and its absorption, accepting and learning from failures, understanding the implications of change for attitudes and habits, recognizing the implications of being competitive in an open economy and society, the traits of leadership as enabler rather than aggressor and the fundamental importance of unchangeable core values and ethics.

At the national level, value addition is reflected by figures of gross domestic product growth and the indicators of human development such as life expectancy by gender and age, literacy, infant mortality, maternal mortality, and so on. In recent years, other measures such as the 'transparency' index as a measure of corruption, the 'freedom' index that tries to measure the extent of different types of freedom in countries and other such measures have begun to give a fuller view of development than economic growth measures by themselves. The strictly economic and more easily measurable indicators are being moderated by qualitative measures.

Until recently, numbers out of the annual accounts such as net profit, profit before interest depreciation and tax, economic value added, various accounting ratios measuring indebtedness and earnings, apart from measures such as market shares and the credit-rating, indicated the current and future health and growth potential of companies. These were therefore indicators of the value addition that was taking place. There are now other measures as well. These are not as easily measurable since they do not come out of the accounts or from sample audits of trade and consumers.

A recent measure is the rating for good governance practices in companies. Good governance is important for the shareholder (and others as well) since it is an indicator that the processes of decision- making in the company enhance shareholder value in a fair and honest manner. There is a measure for the corporate social responsibility of the company that measures the involvement of the company with the community at large. A company focussed entirely on its operations is a good thing for the shareholder but the absence of a larger social involvement may not earn it the public respect that companies need.

These qualitative factors are now being supplemented by a more intangible measure. That is the emotional quotient of the company. While there are companies that measure the 'climate' within, the emotional quotient is a larger idea.

Qualitative measures of value addition have coincided with the growing importance of 'knowledge' and 'intellectual capital' for companies that want to excel in performance. The rapid advances in technology and the opening up of markets with the lowering of national barriers to entry of goods, ideas and people, have brought about a paradigm shift in the operations of many companies. Increasingly, collaborations are entered into across international borders. They are globally distributed between teams working for common goals. They are located in different countries, with teams from different organizations and belonging to different nationalities. With little face-to-face contact, technology ' email, teleconferencing, video conferencing, net meetings, chatting and so on ' enable interactions and coordination. Technology is transforming the work of and between organizations. To adapt to this change, organizations have to identify in advance the knowledge needs for changing technologies, the gaps in knowledge that need to be filled among its people, expose their people to frequent training and retraining, and create an environment that is receptive to all ideas. The ability to innovate demands constant learning.

Value creation in and by organizations has to be perceived as much as it is so in reality. It is also a result of the emotional connection of people with products and organizations. Marketing people call this loyalty of consumers for products, 'brand loyalty'. Similarly, there are shareholders who are so loyal that they will hold on to a company's share irrespective of its market performance. Organizations today try to create such emotional bonds with their knowledge workers not only to get their loyalty but also their best performance.

Leaders of organizations today recognize that strong core values and ethical standards help develop such emotional bonding. The employee respects the leader who will not dilute his and the organization's core values even under pressure of markets or environment. Such companies emerge stronger as they adhere to their fundamental values.

For those who work with an organization to develop emotional bonds with it, their work must be made interesting, challenging and their performance must be recognized. Leaders in such organizations are approachable, fair, active listeners, provide enablers for better performance and celebrate successes of their people. They accept failures as their own but delegate the successes to subordinates. They share their vision for the organization and are good communicators who frequently share their hopes and aspirations. Their object is to create closely-knit units of people who recognize that they have to work together. Individual excellence is not enough to achieve organizational goals. It has to be a team effort.

The new economy that began in the Nineties is witness to increasing mergers and amalgamations. It is tempting to condemn an organization and its people and to change many of the existing people. However, leaders who have successfully turned around weak organizations or absorbed others in takeovers are unanimous in saying that the potential in people is invariably more than their performance. Bridging this gap is the leader's task. The real challenge lies in getting ordinary people to do extraordinary things. Wholesale condemnation of existing people and replacing them with new ones is a policy that rarely produces the desired better results.

Indian companies are beginning to operate in other countries and to recruit from them. Western writers keep warning that companies going overseas need to understand and manage cross-cultural differences. Perhaps such warnings are least necessary for Indians who are accustomed to dealing with people who are different from them in language, religion, race and so on. But we might need to be more cautious in dealing with cultures where 'connection' and 'contact' are not as important as they are in India.

Successful organizations are able to combine the knowledge of all their people and share knowledge and experiences of today as well as the past. Leaders have to identify and manage talent to produce excellent results. This calls for many actions. But at the core is respect and confidence that leaders inspire in their people. This by itself is not enough. Organizations whose leaders are willing to accept unethical practices or demonstrate a lack of core values and beliefs find that at some time this lack affects the confidence of employees and the community in the organization. A company built on a weak ethical and value base will find that it boomerangs on them.

These fundamental values comprise integrity, respect for the individual, trust, team spirit, cost and time consciousness and commitment to total quality. These are not esoteric ideas far removed from the organizations' needs. They are necessary for excellent performance.

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